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ALLDIGITAL HOLDINGS, INC.
0001389217
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--12-31
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<p style="margin: 0pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 1 - ORGANIZATION AND BUSINESS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="color: black">AllDigital, Inc.
(“AllDigital”) was incorporated in the State of California on August 3, </font>2009,<font style="color: black"> with
the primary purpose of developing the first comprehensive offering of software tools and back-end services dedicated to managing
the complex pairing of cloud-based digital media and digital services with Internet-connected devices. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our products and services provide the software
tools and back-end services required by content owners and providers of digital services to manage and optimize the ongoing pairing
of digital media and digital services with an increasingly diverse and complex offering of devices. We accomplish this by enabling,
and maximizing the performance of the cloud-based storage, processing and transit of digital media and digital services to multiple
devices simultaneously. Our business model primarily targets content owners and providers of digital services that need to distribute
their digital media and digital services to a large, increasingly fragmented, and rapidly growing market of diverse devices operating
on a number of different device platforms.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our<font style="color: black"> ability to successfully
generate future revenues is dependent on a number of factors, including (i) the availability of capital to continue to develop,
operate and maintain </font>our<font style="color: black"> proprietary Media i/o platform and other products, (ii) the ability
to commercialize </font>our<font style="color: black"> portfolio of products to content owners, digital services providers, and
other enterprises, and (iii) </font>our<font style="color: black"> ability to develop channel and other partnerships with other
organizations within and outside the digital media services industry. There can be no assurance that </font>we<font style="color: black">
will not encounter setbacks related to these activities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="color: black">In November 2010,
AllDigital commenced an offering of up to $500,000 in convertible promissory notes (the “Notes”) in a bridge financing
in order to raise funds primarily to pay the legal, audit and other transaction costs directly related to a merger (the "Merger")
with Aftermarket Enterprises, Inc. (“Aftermarket”), a fully reporting company quoted on the OTC Bulletin Board (but
not actively traded</font>). Following consummation of<font style="color: black"> the Merger, AllDigital’s shareholders </font>held<font style="color: black">
a majority of the outstanding capital stock of Aftermarket. In connection with the Merger, Aftermarket </font>(<font style="color: black">which
</font>was the surviving company in the Merger and<font style="color: black"> subsequently renamed AllDigital Holdings, Inc.</font>)<font style="color: black">,
also conducted an offering to raise approximately $1,000,000 in aggregate proceeds </font>(<font style="color: black">including
</font>the Notes)<font style="color: black">. As of December 31, 2010, AllDigital raised $500,000 in Notes through the bridge financing.
On July 29, 2011, the Merger </font>was consummated <font style="color: black">and Aftermarket acquired all of the assets and operations
of AllDigital (See Note 10), including the conversion of the $500,000 in Notes plus accrued interest. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="color: black">Effective August
25, 2011, the name of Aftermarket was changed to AllDigital Holdings, Inc (</font>together with AllDigital, “we,” “us”
or <font style="color: black">the “Company”). </font>Immediately following closing<font style="color: black"> of the
Merger, Aftermarket had two business lines: AllDigital’s digital services business and Aftermarket’s automotive accessories
business. On September 27, 2011, the Company sold the automotive accessories business to the former president of Aftermarket.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Although from a legal perspective, Aftermarket
acquired AllDigital in the Merger, from an accounting perspective, the Merger is viewed as a reverse acquisition whereby AllDigital
acquired the assets of Aftermarket. The transaction is equivalent to the issuance of common stock by AllDigital for the net assets
of Aftermarket. The Merger is viewed as a reverse acquisition because post-Merger AllDigital’s shareholders own approximately
73% of the outstanding shares of Aftermarket, AllDigital’s directors and officers now serve as the directors and officers
of the Company, and the operations of AllDigital is the ongoing business of the Company. The statement of stockholders’
deficit has been restated to retroactively reflect the number of shares of AllDigital, using the capital structure of Aftermarket
and to present the accumulated deficit of AllDigital as of the date of the Merger. The value of the consideration transferred
in the Merger ($769,182) was determined using the guidance of ASC 805-40-30. Amounts acquired by the Company were comprised of
$1,700 cash and the assumption of $23,270 of liabilities. The Company determined that the value of the intangible assets identified
and unidentified was $0. As such, the Company recorded a charge of $790,840 to its consolidated statement of operations relating
to the reverse acquisition because the value of the consideration in excess of the value of the assets acquired was akin to organization
costs.</p>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basis of Presentation</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying unaudited condensed
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial information and with Article 8 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally accepted in the United States of America for complete
financial statements. The condensed financial statements reflect all normal recurring adjustments which, in the opinion of management,
are considered necessary for a fair presentation of the results of the periods shown. The results of operations for the periods
presented are not necessarily indicative of the results expected for the full fiscal year or any future period. The information
included in these unaudited condensed financial statements should be read in conjunction with the Company’s audited financial
statements for the fiscal year ended December 31, 2011, included in Form 10-K filed on March 30, 2012.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Liquidity</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company generated negative cash
flows from operations, and has a working capital deficiency at September 30, 2012. During the second quarter of 2012, the Company
began to aggressively take action to generate positive cash flows from operations in future periods and continued to take such
action in the third quarter of 2012. The Company believes that it experienced a temporary slowdown in sales in the second quarter
of 2012, and in the second quarter of 2012 began making significant changes in order to more aggressively increase sales in future
periods. In addition, the Company continues to aggressively manage and monitor its overall operating expenditures in response to
general economic and internet market conditions. Our objective is to balance investment in the Company’s sales, product and
platform development, and operating functions and capabilities, as summarized herein, while conserving our financial resources
to ensure we have sufficient liquidity to fund our planned business operations. Should we not be able to reduce our operating losses
and negative cash flows, we may have to restructure our operations.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company believes that additional
funding will be needed in the short term for it to continue its growth. The Company is currently reviewing options including, but
not limited to, related party loans and private equity placement. The Company currently has no commitment for any additional funding.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying financial statements
are prepared in conformity with U.S. GAAP and require management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. The
use of estimates may also affect the reported amounts of revenues and expenses during the reporting periods. <font style="color: black">Significant
estimates made by management include, among others, realization of capitalized assets, valuation of equity instruments and other
instruments indexed to the Company’s common stock, and deferred income tax valuation allowances. </font>Actual results could
differ from those estimates.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Cash and Cash Equivalents:</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company considers all highly liquid
investments with original maturities of three months or less at the date of purchase to be cash equivalents.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Revenue Recognition</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes recurring and
nonrecurring service revenue in accordance with the authoritative guidance for revenue recognition, including guidance on revenue
arrangements with multiple deliverables. In general, revenue is recognized only when the price is fixed or determinable, persuasive
evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue from certain design and development
contracts, where a solution is designed, developed or modified to a customer’s specifications, is recognized on a percentage
of completion basis in accordance with ASC 605-35 based on the cost-to-cost method, provided such costs can be reasonably estimated.
The Company’s revenue recognition practices related to such contracts include: developing an approved budget; comparing actual
period costs to the budget as a percentage; recognizing revenue for the period based upon the percentage of actual costs incurred
compared to total estimated costs, and performing monthly budget-actual reviews, updates, and adjustments as needed. The impact
on revenues as a result of these revisions is included in the periods in which the revisions are made. For contracts for which
the Company is unable to reasonably estimate total contract costs, the Company waits until contract completion to recognize the
associated revenue.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Nonrecurring revenues also include “on-boarding”
professional services that involve the development or integration of a customer’s software application, digital service,
system, or Application Programming Interface (“API”) to connect with the AllDigital platform. On-boarding professional
services projects are typically of a short duration and smaller revenue amounts. The Company recognizes revenue for on-boarding
professional services upon project completion and acceptance.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Monthly recurring revenues are recognized
ratably over the period in which they are delivered and earned. The Company typically charges monthly recurring platform fees,
as well as monthly recurring charges for our back-end storage, cloud processing, origin transit, and maintenance and support services.
These fees are generally billed based on a minimum commitment plus actual usage basis, and the term of such customer contracts
vary typically from 12 to 24 months.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; color: red"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Rarely, a customer contract will include
revenue arrangements that consist of multiple product and service deliverables. Such contracts are accounted for in accordance
with ASC 605-25, as amended by ASU 2009-13. For the Company’s multiple-element arrangements, deliverables are separated into
more than one unit of accounting when (i) the delivered element(s) have value to the customer on a stand-alone basis, and (ii)
delivery of the undelivered element(s) is probable and substantially in the control of the Company. Revenue is then allocated to
each unit of accounting based on the estimated selling price determined using a hierarchy of evidence based first on Vendor-Specific
Objective Evidence (“VSOE”) if it exists, based next on Third-Party Evidence (“TPE”) if VSOE does not exist,
and finally, if both VSOE and TPE do not exist, based on the Company’s best estimate of selling price (“BESP”).
If deliverables cannot be separated into more than one unit, then the Company does not recognize revenue until all deliverables
have been delivered and accepted.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Accounts Receivable:</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts receivable are recorded at
their face amount less an allowance for doubtful accounts. The allowance for doubtful accounts reflects management’s best
estimate of probable losses in the accounts receivable balance. Management determines the allowance based on known troubled accounts,
historical experience, and other currently available evidence. The allowance for doubtful accounts was $0 at September 30, 2012
and at December 31, 2011. The Company generally requires a deposit or advance services payments from its customers for certain
contracts involving upfront capital investment, on-boarding, or development contracts to facilitate its working capital needs.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Earnings and Loss per Share:</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company computes net earnings (loss)
per share in accordance with ASC 260-10 that establishes standards for computing and presenting net earnings (loss) per share.
Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased
to include the number of additional common shares that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="color: black">At September
30, 2012, the Company had 1,527,431</font><font style="color: red"> </font>options and 3,892,274<font style="color: red"> </font>warrants
that <font style="color: black">could potentially dilute the number of shares outstanding. At September 30, 2011, the Company had
493,056 options and 2,351,866 warrants that could potentially dilute the number of shares outstanding. </font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Fair Value of Measurements:</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. Assets and liabilities recorded at fair value in the accompanying consolidated balance sheets are categorized
based upon the level of judgment associated with the inputs used to measure their fair value. The fair value hierarchy distinguishes
between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs)
and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available
in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable
inputs (Level 3). The three levels of the fair value hierarchy are described below:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="width: 15%; border-bottom: black 1.5pt solid; line-height: 115%; text-align: center">Level Input:</td>
<td style="width: 2%; line-height: 115%; text-align: justify"> </td>
<td style="width: 83%; border-bottom: black 1.5pt solid; line-height: 115%; text-align: justify">Input Definition:</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%; text-align: center">Level 1</td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; text-align: justify">Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%; text-align: center">Level 2</td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; text-align: justify">Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%; text-align: center">Level 3</td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; text-align: justify">Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.</td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Assets subject to this classification
at September 30, 2012 and December 31, 2011 were cash and cash equivalents that are considered Level 1 assets.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">For certain of the Company’s financial
instruments, including accounts receivable, prepaid expenses, and accounts payable, the carrying amounts approximate fair value
due to their short maturities. The carrying amount of the Company’s notes payable approximates fair value based on prevailing
interest rates.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Income Taxes:</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">We account for income taxes in accordance
with ASC 740-10, <i>Income Taxes</i>. We recognize deferred tax assets and liabilities to reflect the estimated future tax effects,
calculated at the tax rate expected to be in effect at the time of realization. We record a valuation allowance related to a deferred
tax asset when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets
and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">ASC 740-10 prescribes a recognition
threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on
recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues.
We classify interest and penalties as a component of interest and other expenses. To date, we have not been assessed, nor have
we paid, any interest or penalties.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company follows guidance issued
by the FASB with regard to its accounting for uncertainty in income taxes recognized in the financial statements. Such guidance
prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it
is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position
and must assume that the tax position will be examined by taxing authorities.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Property and Equipment</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment are recorded
at cost, less accumulated depreciation and amortization. Repairs and maintenance of equipment are charged to expense as incurred.
Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 5%; line-height: 115%"> </td>
<td style="width: 70%; line-height: 115%">Furniture and fixtures</td>
<td nowrap="nowrap" style="width: 25%; line-height: 115%">5 years</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">Computer equipment</td>
<td nowrap="nowrap" style="line-height: 115%">3 years</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">Software</td>
<td nowrap="nowrap" style="line-height: 115%">3 years</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">Signs</td>
<td nowrap="nowrap" style="line-height: 115%">3 years</td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Expenditures for major renewals and
betterments that extend the useful lives of property and equipment are capitalized. Gains or losses on dispositions of property
and equipment are included in the results of operations when realized.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Impairment of Long-Lived and Intangible
Assets</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for long-lived
assets, that include property and equipment and identifiable intangible assets with infinite useful lives, in accordance with FASB
ASC 350-30, that requires that the Company review long-lived assets for impairment whenever events or changes in circumstances
indicate that the Company may not recover the carrying amount of an asset. The Company measures recoverability by comparing the
carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If the Company determines
that the asset may not be recoverable, the Company recognizes an impairment charge to the extent of the difference between the
asset’s fair value and the asset’s carrying amount. The Company had no impairment charges during the nine months ended
September 30, 2012. The Company recorded $790,840 in organization costs writeoff related to the Merger with Aftermarket Enterprises
during the nine months ended September 30, 2011.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for stock-based
employee compensation arrangements in accordance with guidance issued by the FASB, which requires the measurement and recognition
of compensation expense for all share based payment awards made to employees and directors based on the estimated grant date fair
value of the award. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the
requisite service periods in the Company’s statement of operations. Stock-based compensation expense recognized for employees,
directors and consultants for the periods ended September 30, 2012 and 2011 was $181,517 and $85,439, respectively, and is included
in cost of sales and operating expenses.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimates fair value of
share-based awards using the Black-Sholes model. This model requires the Company to estimate the expected volatility and value
of its common stock and the expected term of the stock options, all of which are highly complex and subjective variables. The Company
used an average of historical volatility of similar companies as a basis for its expected volatility. Expected term is computed
using the simplified method provided within Securities and Exchange Commission Staff Accounting Bulletin Topic 14. The Company
has selected a risk-free rate based on the implied yield available on U.S. Treasury securities with a maturity equivalent to the
options’ expected term.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Recent Accounting Pronouncements:</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2011, the Financial Accounting
Standards Board (“FASB”) issued ASU 2011-04, <i>Fair Value Measurement</i> (“ASU 2011-04”), which amended
ASC 820, <i>Fair Value Measurements </i>(“ASC 820”), providing a consistent definition and measurement of fair value,
as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes
certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the disclosure
requirements. ASU 2011-04 will be effective for us beginning January 1, 2012. The adoption of ASU 2011-04 is not expected to have
a material effect on our consolidated financial statements or disclosures.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basis of Presentation</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying unaudited condensed
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial information and with Article 8 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally accepted in the United States of America for complete
financial statements. The condensed financial statements reflect all normal recurring adjustments which, in the opinion of management,
are considered necessary for a fair presentation of the results of the periods shown. The results of operations for the periods
presented are not necessarily indicative of the results expected for the full fiscal year or any future period. The information
included in these unaudited condensed financial statements should be read in conjunction with the Company’s audited financial
statements for the fiscal year ended December 31, 2011, included in Form 10-K filed on March 30, 2012.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying financial statements
are prepared in conformity with U.S. GAAP and require management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. The
use of estimates may also affect the reported amounts of revenues and expenses during the reporting periods. <font style="color: black">Significant
estimates made by management include, among others, realization of capitalized assets, valuation of equity instruments and other
instruments indexed to the Company’s common stock, and deferred income tax valuation allowances. </font>Actual results could
differ from those estimates.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Cash and Cash Equivalents:</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company considers all highly liquid
investments with original maturities of three months or less at the date of purchase to be cash equivalents.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Revenue Recognition</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recognizes recurring and
nonrecurring service revenue in accordance with the authoritative guidance for revenue recognition, including guidance on revenue
arrangements with multiple deliverables. In general, revenue is recognized only when the price is fixed or determinable, persuasive
evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenue from certain design and development
contracts, where a solution is designed, developed or modified to a customer’s specifications, is recognized on a percentage
of completion basis in accordance with ASC 605-35 based on the cost-to-cost method, provided such costs can be reasonably estimated.
The Company’s revenue recognition practices related to such contracts include: developing an approved budget; comparing actual
period costs to the budget as a percentage; recognizing revenue for the period based upon the percentage of actual costs incurred
compared to total estimated costs, and performing monthly budget-actual reviews, updates, and adjustments as needed. The impact
on revenues as a result of these revisions is included in the periods in which the revisions are made. For contracts for which
the Company is unable to reasonably estimate total contract costs, the Company waits until contract completion to recognize the
associated revenue.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Nonrecurring revenues also include “on-boarding”
professional services that involve the development or integration of a customer’s software application, digital service,
system, or Application Programming Interface (“API”) to connect with the AllDigital platform. On-boarding professional
services projects are typically of a short duration and smaller revenue amounts. The Company recognizes revenue for on-boarding
professional services upon project completion and acceptance.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Monthly recurring revenues are recognized
ratably over the period in which they are delivered and earned. The Company typically charges monthly recurring platform fees,
as well as monthly recurring charges for our back-end storage, cloud processing, origin transit, and maintenance and support services.
These fees are generally billed based on a minimum commitment plus actual usage basis, and the term of such customer contracts
vary typically from 12 to 24 months.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; color: red"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Rarely, a customer contract will include
revenue arrangements that consist of multiple product and service deliverables. Such contracts are accounted for in accordance
with ASC 605-25, as amended by ASU 2009-13. For the Company’s multiple-element arrangements, deliverables are separated
into more than one unit of accounting when (i) the delivered element(s) have value to the customer on a stand-alone basis, and
(ii) delivery of the undelivered element(s) is probable and substantially in the control of the Company. Revenue is then allocated
to each unit of accounting based on the estimated selling price determined using a hierarchy of evidence based first on Vendor-Specific
Objective Evidence (“VSOE”) if it exists, based next on Third-Party Evidence (“TPE”) if VSOE does not
exist, and finally, if both VSOE and TPE do not exist, based on the Company’s best estimate of selling price (“BESP”).
If deliverables cannot be separated into more than one unit, then the Company does not recognize revenue until all deliverables
have been delivered and accepted</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Accounts Receivable:</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts receivable are recorded at
their face amount less an allowance for doubtful accounts. The allowance for doubtful accounts reflects management’s best
estimate of probable losses in the accounts receivable balance. Management determines the allowance based on known troubled accounts,
historical experience, and other currently available evidence. The allowance for doubtful accounts was $0 at September 30, 2012
and at December 31, 2011. The Company generally requires a deposit or advance services payments from its customers for certain
contracts involving upfront capital investment, on-boarding, or development contracts to facilitate its working capital needs.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Earnings and Loss per Share:</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company computes net earnings (loss)
per share in accordance with ASC 260-10 that establishes standards for computing and presenting net earnings (loss) per share.
Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased
to include the number of additional common shares that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="color: black">At September
30, 2012, the Company had 1,527,431</font><font style="color: red"> </font>options and 3,892,274<font style="color: red"> </font>warrants
that <font style="color: black">could potentially dilute the number of shares outstanding. At September 30, 2011, the Company
had 493,056 options and 2,351,866 warrants that could potentially dilute the number of shares outstanding. </font></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Fair Value of Measurements:</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. Assets and liabilities recorded at fair value in the accompanying consolidated balance sheets are categorized
based upon the level of judgment associated with the inputs used to measure their fair value. The fair value hierarchy distinguishes
between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs)
and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available
in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable
inputs (Level 3). The three levels of the fair value hierarchy are described below:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="width: 15%; border-bottom: black 1.5pt solid; line-height: 115%; text-align: center">Level Input:</td>
<td style="width: 2%; line-height: 115%; text-align: justify"> </td>
<td style="width: 83%; border-bottom: black 1.5pt solid; line-height: 115%; text-align: justify">Input Definition:</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%; text-align: center">Level 1</td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; text-align: justify">Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%; text-align: center">Level 2</td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; text-align: justify">Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%; text-align: center">Level 3</td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; text-align: justify">Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.</td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Assets subject to this classification
at September 30, 2012 and December 31, 2011 were cash and cash equivalents that are considered Level 1 assets.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">For certain of the Company’s
financial instruments, including accounts receivable, prepaid expenses, and accounts payable, the carrying amounts approximate
fair value due to their short maturities. The carrying amount of the Company’s notes payable approximates fair value based
on prevailing interest rates.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Income Taxes:</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">We account for income taxes in accordance
with ASC 740-10, <i>Income Taxes</i>. We recognize deferred tax assets and liabilities to reflect the estimated future tax effects,
calculated at the tax rate expected to be in effect at the time of realization. We record a valuation allowance related to a deferred
tax asset when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets
and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">ASC 740-10 prescribes a recognition
threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on
recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues.
We classify interest and penalties as a component of interest and other expenses. To date, we have not been assessed, nor have
we paid, any interest or penalties.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company follows guidance issued
by the FASB with regard to its accounting for uncertainty in income taxes recognized in the financial statements. Such guidance
prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it
is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position
and must assume that the tax position will be examined by taxing authorities.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Property and Equipment</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment are recorded
at cost, less accumulated depreciation and amortization. Repairs and maintenance of equipment are charged to expense as incurred.
Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 5%; line-height: 115%"> </td>
<td style="width: 70%; line-height: 115%">Furniture and fixtures</td>
<td nowrap="nowrap" style="width: 25%; line-height: 115%">5 years</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">Computer equipment</td>
<td nowrap="nowrap" style="line-height: 115%">3 years</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">Software</td>
<td nowrap="nowrap" style="line-height: 115%">3 years</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">Signs</td>
<td nowrap="nowrap" style="line-height: 115%">3 years</td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Expenditures for major renewals and
betterments that extend the useful lives of property and equipment are capitalized. Gains or losses on dispositions of property
and equipment are included in the results of operations when realized.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Impairment of Long-Lived and Intangible
Assets</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for long-lived
assets, that include property and equipment and identifiable intangible assets with infinite useful lives, in accordance with
FASB ASC 350-30, that requires that the Company review long-lived assets for impairment whenever events or changes in circumstances
indicate that the Company may not recover the carrying amount of an asset. The Company measures recoverability by comparing the
carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If the Company determines
that the asset may not be recoverable, the Company recognizes an impairment charge to the extent of the difference between the
asset’s fair value and the asset’s carrying amount. The Company had no impairment charges during the nine months ended
September 30, 2012. The Company recorded $790,840 in organization costs writeoff related to the Merger with Aftermarket Enterprises
during the nine months ended September 30, 2011.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Recent Accounting Pronouncements:</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2011, the Financial Accounting
Standards Board (“FASB”) issued ASU 2011-04, <i>Fair Value Measurement</i> (“ASU 2011-04”), which amended
ASC 820, <i>Fair Value Measurements </i>(“ASC 820”), providing a consistent definition and measurement of fair value,
as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes
certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the disclosure
requirements. ASU 2011-04 will be effective for us beginning January 1, 2012. The adoption of ASU 2011-04 is not expected to have
a material effect on our consolidated financial statements or disclosures.</p>
0
0
P3Y
P3Y
P3Y
P5Y
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE 3 - PROPERTY AND EQUIPMENT</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment as of September
30, 2012 and December 31, 2011 consisted of the following:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">September 30, 2012</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">December 31, 2011</td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">(unaudited)</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 4%; background-color: white; line-height: 115%"> </td>
<td style="width: 52%; background-color: #CCFFCC; line-height: 115%; text-align: justify">Furniture and fixtures</td>
<td style="width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="width: 18%; background-color: #CCFFCC; line-height: 115%; text-align: right">11,618</td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="width: 18%; background-color: #CCFFCC; line-height: 115%; text-align: right">5,451</td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">Computer equipment</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">80,771</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">56,332</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: justify">Software</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right">45,833</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right">45,833</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">Signs</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">2,050</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: justify">Less accumulated depreciation and amortization</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%; text-align: right">(48,826</td>
<td style="background-color: #CCFFCC; line-height: 115%">)</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%; text-align: right">(19,149</td>
<td style="background-color: #CCFFCC; line-height: 115%">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: justify"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%; text-align: right">91,446</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%; text-align: right">88,467</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts payable and accrued expenses
as of September 30, 2012 and December 31, 2011 consisted of the following:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">September 30, 2012</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">December 31, 2011</td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">(unaudited)</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 4%; background-color: white; line-height: 115%"> </td>
<td style="width: 52%; background-color: #CCFFCC; line-height: 115%; text-align: justify">Accounts payable</td>
<td style="width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="width: 18%; background-color: #CCFFCC; line-height: 115%; text-align: right">269,937</td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="width: 18%; background-color: #CCFFCC; line-height: 115%; text-align: right">108,222</td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">Accrued personnel costs</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">227,571</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">170,365</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: justify">Accrued professional fees</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right">7,624</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right">6,604</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">Other</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">48,624</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">4,111</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: justify"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">553,756</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">289,302</td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b></b></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Accounts payable and accrued expenses
as of September 30, 2012 and December 31, 2011 consisted of the following:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">September 30, 2012</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">December 31, 2011</td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">(unaudited)</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 4%; background-color: white; line-height: 115%"> </td>
<td style="width: 52%; background-color: #CCFFCC; line-height: 115%; text-align: justify">Accounts payable</td>
<td style="width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="width: 18%; background-color: #CCFFCC; line-height: 115%; text-align: right">269,937</td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="width: 18%; background-color: #CCFFCC; line-height: 115%; text-align: right">108,222</td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">Accrued personnel costs</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">227,571</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">170,365</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: justify">Accrued professional fees</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right">7,624</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right">6,604</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">Other</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">48,624</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">4,111</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: justify"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">553,756</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">289,302</td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b></b></p>
269937
108222
227571
170365
7624
6604
48624
4111
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE 5 - LEASE OBLIGATIONS</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 28, 2009, the Company entered
into a three-year Lease Agreement for the lease of office space at 2821 McGaw Avenue, Irvine, California, 92614, which was used
as corporate offices. The lease commenced on September 15, 2009, and terminated on December 31, 2011, as the Company moved into
another facility owned by the same landlord. Pursuant to the terms of the lease, monthly rent paid was $3,826.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 10, 2011, the Company entered
into a five-year Lease Agreement for the lease of office space at 220 Technology Suite 100, Irvine, California, 92618, which is
used as corporate offices effective January 1, 2012. The lease commenced on January 1, 2012, and terminates on December 31, 2016.
On November 18, 2011, the lease of office space at 220 Technology Drive Suite 100, Irvine, California 92618 was modified from a
five year term to a three year term. All other terms of the October 10, 2011, lease agreement remain the same. Pursuant to the
terms of the lease, monthly rent paid will be $10,297 in year one, $10,504 in year two, and $10,717 in year three.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Below are leases that the Company has
entered into for equipment.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="background-color: white">
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%; text-align: justify">Effective Date</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; border-bottom: black 1.5pt solid; line-height: 115%">Length</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td colspan="2" style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%">Monthly $</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%; text-align: justify">Item(s)</td></tr>
<tr style="background-color: #CCFFCC">
<td style="vertical-align: bottom; width: 34%; line-height: 115%; text-align: justify">May 1, 2011</td>
<td style="vertical-align: bottom; width: 2%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: top; width: 21%; line-height: 115%">3 years</td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 2%; line-height: 115%"> </td>
<td style="vertical-align: top; width: 1%; line-height: 115%">$</td>
<td style="vertical-align: bottom; width: 14%; line-height: 115%; text-align: right">423</td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 2%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 21%; line-height: 115%; text-align: justify">Computer servers</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">June 1, 2011</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">3 years</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">$</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">892</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">Computer servers</td></tr>
<tr style="background-color: #CCFFCC">
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">October 4, 2011</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">3 years</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">$</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">902</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">Computer servers</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">December 21, 2011</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">3 years</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">$</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">940</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">Phone system</td></tr>
<tr style="background-color: #CCFFCC">
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">February 14, 2012</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">3 years</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">$</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">767</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">Computer servers</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">May 4, 2012</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">3 years</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">$</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">921</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">Computer servers</td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Rent expense for the nine months ended
September 30, 2012 and 2011 was $138,025 and $41,596, respectively.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Future minimum lease payments under
operating leases at September 30, 2012 are:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">Year ended</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%; text-decoration: underline">September 30,</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td></tr>
<tr>
<td style="vertical-align: bottom; width: 25%; background-color: white; line-height: 115%"> </td>
<td style="vertical-align: top; width: 54%; background-color: #CCFFCC; line-height: 115%">2013</td>
<td style="vertical-align: bottom; width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="vertical-align: bottom; width: 18%; background-color: #CCFFCC; line-height: 115%; text-align: right">183,581</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">2014</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%">$</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">180,436</td></tr>
<tr>
<td style="vertical-align: bottom; background-color: white; line-height: 115%"> </td>
<td style="vertical-align: top; background-color: #CCFFCC; line-height: 115%">2015</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%; text-align: right">44,403</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">Total</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">408,420</td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Future minimum lease payments under
operating leases at September 30, 2012 are:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">Year ended</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%; text-decoration: underline">September 30,</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td></tr>
<tr>
<td style="vertical-align: bottom; width: 25%; background-color: white; line-height: 115%"> </td>
<td style="vertical-align: top; width: 54%; background-color: #CCFFCC; line-height: 115%">2013</td>
<td style="vertical-align: bottom; width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="vertical-align: bottom; width: 18%; background-color: #CCFFCC; line-height: 115%; text-align: right">183,581</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">2014</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%">$</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">180,436</td></tr>
<tr>
<td style="vertical-align: bottom; background-color: white; line-height: 115%"> </td>
<td style="vertical-align: top; background-color: #CCFFCC; line-height: 115%">2015</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%; text-align: right">44,403</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">Total</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">408,420</td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
183581
180436
44403
408420
3826
41596
138025
10297
10504
10717
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 6 - STOCKHOLDERS’ EQUITY</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Preferred Stock</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Our Board of Directors has the authority
to issue Preferred Stock in one or more series and to, within the limits set forth by Nevada law and without shareholder action:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%; text-align: justify">●</td>
<td style="width: 96%; line-height: 115%; text-align: justify">designate in whole or in part, the powers, preferences, limitations, and relative rights, of any class of shares before the issuance of any shares of that class;</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">●</td>
<td style="line-height: 115%; text-align: justify">create one or more series within a class of shares, fix the number of shares of each such series, and designate, in whole or part, the powers, preferences, limitations, and relative rights of the series, all before the issuance of any shares of that series;</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">●</td>
<td style="line-height: 115%; text-align: justify">alter or revoke the powers, preferences, limitations, and relative rights granted to or imposed upon any wholly unissued class of shares or any wholly unissued series of any class of shares; or</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">●</td>
<td style="line-height: 115%; text-align: justify">increase or decrease the number of shares constituting any series, the number of shares of which was originally fixed by the Board of Directors, either before or after the issuance of shares of the series; provided that, the number may not be decreased below the number of shares of the series then outstanding, or increased above the total number of authorized shares of the applicable class of shares available for designation as a part of the series.</td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The issuance of Preferred Stock by our
Board of Directors could adversely affect the rights of holders of our common stock. The potential issuance of Preferred Stock
may:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%">●</td>
<td style="width: 96%; line-height: 115%">have the effect of delaying or preventing a change in control of the Company;</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">●</td>
<td style="line-height: 115%">discourage bids for the common stock at a premium over the market price of the common stock; and</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">●</td>
<td style="line-height: 115%">adversely affect the market price of, and the voting and other rights of the holders of our common stock.</td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Common Stock</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In August 2009, AllDigital issued 20,000,000
shares of $0.0001 par value common stock to two of AllDigital’s founders for $2,000 cash. In September 2009, AllDigital issued
10,000,000 shares of $0.0001 common stock to another of AllDigital’s founders for $1,000 cash.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2011, AllDigital converted 30,000,000
shares of $0.0001 par value common stock to 18,000,000 shares of $0.001 par value common stock in the Merger with Aftermarket.
Aftermarket had 3,076,996 shares of common stock as of date of the Merger. 190,000 shares of common stock were issued in July 2011
to an officer in payment of an accrued liability to the officer. $500,000 in Notes and $28,582 in related accrued interest expense
were converted to 1,057,166 units in the offering (the “Units”), consisting of 2,114,332 shares of common stock and
1,057,166 warrants, in July 2011 in connection with the offering. 963,300 Units, consisting of 1,926,600 shares of common stock
and 963,300 warrants, were issued in July 2011 in the offering for $481,650 cash in connection with the Merger (see Note 10). 40,000
shares of common stock along with 20,000 warrants were issued in August 2011 for outside services of $10,000. 42,800 shares of
common stock along with 21,400 warrants were issued in September 2011 to the former president of Aftermarket in payment of a note
payable of $10,700.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In September 2012, 50,000 shares of
common stock were issued upon the exercise of options for $12,500 in cash.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock Options</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 28, 2011, AllDigital adopted,
and in the Merger, the Company assumed the 2011 Stock Option and Incentive Plan (the “Plan”) for directors, employees,
consultants and other persons acting on behalf of the Company, under which 4,500,000 shares of common stock are authorized for
issuance. Effective January 3, 2012, a majority of shareholders approved an increase in the number of shares authorized from 4,500,000
to 8,500,000. Options granted under the Plan vest on the date of grant, over a fixed period of time, or upon the occurrence of
certain events and are exercisable for up to ten years.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months ended September
30, 2012, the Company issued 951,000 options under the Plan to certain employees. During the nine months ended September 30, 2012,
635,000 options were forfeited. During the nine months ended September 30, 2012, 50,000 options were exercised.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of September 30, 2012, there were
3,884,000 shares of common stock available for grant under the Plan.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the status of the options
granted is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Shares</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-<br /> average <br /> exercise <br /> price</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Average <br /> remaining contractual <br /> term - years</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Aggregate <br /> intrinsic<br /> value</td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCFFCC">
<td style="width: 38%; line-height: 115%">Outstanding, December 31, 2011</td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; line-height: 115%; text-align: right">4,350,000</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 12%; line-height: 115%; text-align: right">0.25</td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; line-height: 115%; text-align: right">9.63</td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 12%; line-height: 115%; text-align: right">739,500</td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Granted</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">951,000</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.46</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">9.60</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">28,050</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCFFCC">
<td style="line-height: 115%">Forfeited</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">(635,000</td>
<td style="line-height: 115%">)</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.41</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">(39,950</td>
<td style="line-height: 115%">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Exercised</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">(50,000</td>
<td style="line-height: 115%">)</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">(8,500</td>
<td style="line-height: 115%">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCFFCC">
<td style="line-height: 115%">Outstanding, September 30, 2012</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">4,616,000</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.27</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">8.96</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">719,100</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Exercisable:</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCFFCC">
<td style="padding-left: 10pt; line-height: 115%">September 30, 2012</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1,527,431</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">8.86</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">255,413</td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">  </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="color: black">A summary
of the status of the Company’s non-vested options and changes </font>during the nine months ended September 30, 2012<font style="color: black">,
is presented below:</font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Nonvested Options</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Shares</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-<br /> average <br /> grant-date<br /> fair value</td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold; text-align: center"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 2%; background-color: white; line-height: 115%"> </td>
<td style="width: 60%; background-color: #CCFFCC; line-height: 115%; text-align: justify">Nonvested at December 31, 2011</td>
<td style="width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 15%; background-color: #CCFFCC; line-height: 115%; text-align: right">3,679,861</td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="width: 15%; background-color: #CCFFCC; line-height: 115%; text-align: right">0.17</td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">Granted</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">951,000</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.44</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%">Forfeited</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right">(635,000</td>
<td style="background-color: #CCFFCC; line-height: 115%">)</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%">$</td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right">0.38</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">Exercised</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">(50,000</td>
<td style="line-height: 115%">)</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.17</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%">Vested</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%; text-align: right">(857,292</td>
<td style="background-color: #CCFFCC; line-height: 115%">)</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%; text-align: right">0.18</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">Nonvested at September 30, 2012</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">3,088,569</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">0.21</td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of September 30, 2012, there was
$644,187<font style="color: red"> </font>of total unrecognized compensation cost related to nonvested share-based compensation
arrangements granted under the Plan. That cost is expected to be recognized over the remaining weighted-average vesting period
of 2.72 years. The total fair value of options vested during the nine months ended September 30, 2012 was $153,990. The aggregate
intrinsic value of the options expected to vest in the future was $463,687.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">For calculation of fair value for options
granted in 2012, the average volatility used was 196%, the risk-free interest rate used ranged from 1.49% to 2.0%, the weighted
average exercise price was $0.45, the term was ten years, and the average fair value calculated was $0.44.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Warrants </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2011, the Company issued 963,300
warrants as part of the Units sold in a $481,650 offering. In July 2011, the Company issued 1,057,166 warrants as part of the Units
in conversion of $500,000 bridge notes payable and $28,582 related accrued interest expense. In July 2011, the Company issued 95,000
warrants to an officer as part of the Units as payment for $47,500 accrued expenses. In July 2011, the Company issued 60,000 warrants
to a consultant as part of a payment for an accrued expense. In July 2011, the Company issued 45,000 warrants to a consultant as
part of a payment for an accrued expense. In August 2011, the Company issued 20,000 warrants to a consultant as part of a payment
for $10,000 of accrued expenses. In August 2011, the Company issued 45,000 warrants to a consultant as part of a payment for an
accrued expense. In September 2011, the Company issued 21,400 warrants to the former owner of Aftermarket Enterprises as part of
a payment for a $10,700 note payable. In September 2011, the Company issued 45,000 warrants to a consultant as part of a payment
for an accrued expense. In October 2011, the Company issued 1,525,408 warrants to the pre-merger Aftermarket Enterprises stockholders.
In October 2011, the Company issued 15,000 warrants to a consultant as part of a payment for an accrued expense. As of September
30, 2012, no warrants had been exercised, and all warrants were outstanding.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the status of the warrants
granted is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
<td colspan="2" style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Shares</td>
<td style="vertical-align: bottom; line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-<br /> average exercise <br /> price</td>
<td style="vertical-align: bottom; line-height: 115%; font-weight: bold"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td></tr>
<tr>
<td style="vertical-align: top; width: 4%; background-color: white; line-height: 115%"> </td>
<td style="vertical-align: top; width: 59%; background-color: #CCFFCC; line-height: 115%">Outstanding – December 31, 2011</td>
<td style="vertical-align: bottom; width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 15%; background-color: #CCFFCC; line-height: 115%; text-align: right">3,892,274</td>
<td style="vertical-align: bottom; width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="vertical-align: bottom; width: 15%; background-color: #CCFFCC; line-height: 115%; text-align: right">0.49</td>
<td style="vertical-align: bottom; width: 1%; background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">Granted</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">-</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">-</td>
<td style="vertical-align: bottom; line-height: 115%"> </td></tr>
<tr>
<td style="vertical-align: top; background-color: white; line-height: 115%"> </td>
<td style="vertical-align: top; background-color: #CCFFCC; line-height: 115%">Forfeited</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%; text-align: right">-</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%; text-align: right">-</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">Exercised</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td style="vertical-align: bottom; line-height: 115%"> </td></tr>
<tr>
<td style="vertical-align: top; background-color: white; line-height: 115%"> </td>
<td style="vertical-align: top; background-color: #CCFFCC; line-height: 115%">Outstanding – September 30, 2012</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%; text-align: right">3,892,274</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%; text-align: right">0.49</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td></tr>
<tr>
<td style="vertical-align: top; background-color: white; line-height: 115%"> </td>
<td style="vertical-align: top; background-color: #CCFFCC; line-height: 115%">Exercisable – September 30, 2012</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%; text-align: right">3,892,274</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%; text-align: right">0.49</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes information
about warrants outstanding at September 30, 2012:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="14" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Outstanding</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Exercisable</td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Range of exercise prices</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Number of warrants outstanding</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-average remaining contractual life (in years)</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-<br /> average <br /> exercise price</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Number of warrants exercisable</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-<br /> average <br /> exercise price</td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCFFCC">
<td style="width: 1%"> </td>
<td style="width: 13%; line-height: 115%; text-align: center">$0.25</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 13%; line-height: 115%; text-align: right">150,000</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 13%; line-height: 115%; text-align: right">3.91</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 13%; line-height: 115%; text-align: right">0.25</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 13%; line-height: 115%; text-align: right">150,000</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 13%; line-height: 115%; text-align: right">0.25</td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td style="line-height: 115%; text-align: center">$0.275</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">60,000</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">3.83</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.275</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">60,000</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.275</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCFFCC">
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: center">$0.50</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">3,682,274</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">1.93</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%">$</td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">0.50</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">3,682,274</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%">$</td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">0.50</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: center">$0.25 - $0.50</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">3,892,274</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">2.03</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">0.49</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">3,892,274</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">0.49</td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 11pt/115% Calibri, Helvetica, Sans-Serif; margin: 0 0 10pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the status of the options
granted is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Shares</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-<br /> average <br /> exercise <br /> price</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Average <br /> remaining contractual <br /> term - years</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Aggregate <br /> intrinsic<br /> value</td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCFFCC">
<td style="width: 38%; line-height: 115%">Outstanding, December 31, 2011</td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; line-height: 115%; text-align: right">4,350,000</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 12%; line-height: 115%; text-align: right">0.25</td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 12%; line-height: 115%; text-align: right">9.63</td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 12%; line-height: 115%; text-align: right">739,500</td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Granted</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">951,000</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.46</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">9.60</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">28,050</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCFFCC">
<td style="line-height: 115%">Forfeited</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">(635,000</td>
<td style="line-height: 115%">)</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.41</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">(39,950</td>
<td style="line-height: 115%">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Exercised</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">(50,000</td>
<td style="line-height: 115%">)</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">(8,500</td>
<td style="line-height: 115%">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCFFCC">
<td style="line-height: 115%">Outstanding, September 30, 2012</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">4,616,000</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.27</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">8.96</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">719,100</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Exercisable:</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCFFCC">
<td style="padding-left: 10pt; line-height: 115%">September 30, 2012</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">1,527,431</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">8.86</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">255,413</td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="color: black">A summary
of the status of the Company’s non-vested options and changes </font>during the nine months ended September 30, 2012<font style="color: black">,
is presented below:</font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Nonvested Options</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Shares</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-<br /> average <br /> grant-date<br /> fair value</td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold; text-align: center"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 2%; background-color: white; line-height: 115%"> </td>
<td style="width: 60%; background-color: #CCFFCC; line-height: 115%; text-align: justify">Nonvested at December 31, 2011</td>
<td style="width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 15%; background-color: #CCFFCC; line-height: 115%; text-align: right">3,679,861</td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="width: 15%; background-color: #CCFFCC; line-height: 115%; text-align: right">0.17</td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">Granted</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">951,000</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.44</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%">Forfeited</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right">(635,000</td>
<td style="background-color: #CCFFCC; line-height: 115%">)</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%">$</td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right">0.38</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">Exercised</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">(50,000</td>
<td style="line-height: 115%">)</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.17</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%">Vested</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%; text-align: right">(857,292</td>
<td style="background-color: #CCFFCC; line-height: 115%">)</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%; text-align: right">0.18</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">Nonvested at September 30, 2012</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">3,088,569</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">0.21</td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the status of the warrants
granted is as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
<td colspan="2" style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Shares</td>
<td style="vertical-align: bottom; line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-<br /> average exercise <br /> price</td>
<td style="vertical-align: bottom; line-height: 115%; font-weight: bold"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td></tr>
<tr>
<td style="vertical-align: top; width: 4%; background-color: white; line-height: 115%"> </td>
<td style="vertical-align: top; width: 59%; background-color: #CCFFCC; line-height: 115%">Outstanding – December 31, 2011</td>
<td style="vertical-align: bottom; width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 15%; background-color: #CCFFCC; line-height: 115%; text-align: right">3,892,274</td>
<td style="vertical-align: bottom; width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="vertical-align: bottom; width: 15%; background-color: #CCFFCC; line-height: 115%; text-align: right">0.49</td>
<td style="vertical-align: bottom; width: 1%; background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">Granted</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">-</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">-</td>
<td style="vertical-align: bottom; line-height: 115%"> </td></tr>
<tr>
<td style="vertical-align: top; background-color: white; line-height: 115%"> </td>
<td style="vertical-align: top; background-color: #CCFFCC; line-height: 115%">Forfeited</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%; text-align: right">-</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%; text-align: right">-</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">Exercised</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td style="vertical-align: bottom; line-height: 115%"> </td></tr>
<tr>
<td style="vertical-align: top; background-color: white; line-height: 115%"> </td>
<td style="vertical-align: top; background-color: #CCFFCC; line-height: 115%">Outstanding – September 30, 2012</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%; text-align: right">3,892,274</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%; text-align: right">0.49</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td></tr>
<tr>
<td style="vertical-align: top; background-color: white; line-height: 115%"> </td>
<td style="vertical-align: top; background-color: #CCFFCC; line-height: 115%">Exercisable – September 30, 2012</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%; text-align: right">3,892,274</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%; text-align: right">0.49</td>
<td style="vertical-align: bottom; background-color: #CCFFCC; line-height: 115%"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes information
about warrants outstanding at September 30, 2012:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="14" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Outstanding</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Exercisable</td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Range of exercise prices</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Number of warrants outstanding</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-average remaining contractual life (in years)</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-<br /> average <br /> exercise price</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Number of warrants exercisable</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-<br /> average <br /> exercise price</td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCFFCC">
<td style="width: 1%"> </td>
<td style="width: 13%; line-height: 115%; text-align: center">$0.25</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 13%; line-height: 115%; text-align: right">150,000</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 13%; line-height: 115%; text-align: right">3.91</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 13%; line-height: 115%; text-align: right">0.25</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 13%; line-height: 115%; text-align: right">150,000</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 13%; line-height: 115%; text-align: right">0.25</td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td style="line-height: 115%; text-align: center">$0.275</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">60,000</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">3.83</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.275</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">60,000</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.275</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCFFCC">
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: center">$0.50</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">3,682,274</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">1.93</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%">$</td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">0.50</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">3,682,274</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%">$</td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">0.50</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: center">$0.25 - $0.50</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">3,892,274</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">2.03</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">0.49</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">3,892,274</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">0.49</td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 11pt/115% Calibri, Helvetica, Sans-Serif; margin: 0 0 10pt"></p>
4616000
4350000
493056
0.25
255413
951000
0.46
P8Y11M16D
28050
-857292
0.44
0.18
3892274
3892274
150000
60000
3682274
0.49
.49
0.25
0.275
0.50
-635000
3892274
150000
60000
3682274
0.25
0.275
0.50
P2Y11D
P3Y10M28D
P3Y9M29D
P1Y11M5D
0.49
0.25
0.275
0.50
20000000
10000000
0.0001
0.0001
0.001
2000
1000
0.0001
3076996
190000
4500000
500000
500000
28582
28582
10700
10000
10000
790840
790840
47500
47500
195000
195000
2114332
2114332
1057166
1057166
42800
42800
21400
21400
1525408
40000
45000
45000
45000
15000
20000
60000
190000
190000
95000
95000
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>NOTE 7 - INCOME TAXES </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company establishes a valuation
allowance when it is more likely than not that the Company’s recorded net deferred tax asset will not be realized. In determining
whether a valuation allowance is required, the Company must take into account all positive and negative evidence with regard to
the utilization of a deferred tax asset. As of September 30, 2012 and December 31, 2011, the valuation allowance for deferred tax
assets totaled approximately $519,500 and $238,500, respectively. For the nine months ended September 30, 2012, the increase in
the valuation allowance was $281,000.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company plans to continue to provide
a full valuation allowance on future tax benefits until it can sustain an appropriate level of profitability and until such time,
the Company would not expect to recognize any significant tax benefits in its future results of operations.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of September 30, 2012, the Company
had net operating loss carryforwards for federal and state income tax purposes of approximately $1,200,000<font style="color: red">
</font>and $1,100,000, respectively, which expire through 2031. The utilization of net operating loss carryforwards may be limited
under the provisions of Internal Revenue Code Section 382 and similar state provisions due to a change in ownership.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has not recognized any liability
for unrecognized tax benefits. The Company expects any resolution of unrecognized tax benefits, if created, would occur while the
full valuation allowance of deferred tax assets is maintained; therefore the Company does not expect to have any unrecognized tax
benefits that, if recognized, would affect the effective tax rate.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s continuing practice
is to recognize interest and/or penalties related to income tax matters in income tax expense. As of September 30, 2012 and December
31, 2011, the Company had no accrual for the payment of interest or penalties. All years for which income tax returns have been
prepared are subject to examination.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 8 - COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Major Customers</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At September 30, 2012 and December 31, 2011,
three and four customers accounted for 76% and 98% of the outstanding accounts receivable, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the nine months ended September 30, 2012
and 2011, three and three customers accounted for 66% and 79% of total revenue, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Major Vendors</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At September 30, 2012 and December 31, 2011,
two and four vendors accounted for 70% and 87% of the outstanding accounts payable, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the nine months ended September 30, 2012
and 2011, four and three vendors accounted for 79% and 71% of total purchases, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Concentrations of Credit Risk</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="color: black">Financial instruments
that may subject the Company to credit risk include uninsured cash-in-bank balances. The Company places its cash with high quality
financial institutions </font>located in Southern California. From time to time, such balances exceed amounts insured by the Federal
Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses in such accounts and believes it
is not exposed to any significant credit risk related to its cash balances. As of September 30, 2012, the Company’s uninsured
cash was $100,341.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 9 – SEGMENT INFORMATION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company currently operates in one business
segment, digital media services. All fixed assets are located at the Company’s headquarters and data centers located in
the United States. All sales for the nine months ended September 30, 2012 were in the United States and Canada.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 11 - SUBSEQUENT EVENTS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; color: red"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 9, 2012, the Company announced that
it signed an engagement letter with Merriman Capital, Inc., an investment banking firm, to function as its capital markets advisor.
Merriman will advise AllDigital on various strategic matters, including potentially raising capital.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On November 1, 2012, the Company entered into
a three-year Lease Agreement for the lease of computer servers. The lease amount is $333 per month.</p>
519500
238500
1200000
1100000
0.66
0.79
0.79
0.71
100341
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Liquidity</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company generated negative cash
flows from operations, and has a working capital deficiency at September 30, 2012. During the second quarter of 2012, the Company
began to aggressively take action to generate positive cash flows from operations in future periods and continued to take such
action in the third quarter of 2012. The Company believes that it experienced a temporary slowdown in sales in the second quarter
of 2012, and in the second quarter of 2012 began making significant changes in order to more aggressively increase sales in future
periods. In addition, the Company continues to aggressively manage and monitor its overall operating expenditures in response to
general economic and internet market conditions. Our objective is to balance investment in the Company’s sales, product and
platform development, and operating functions and capabilities, as summarized herein, while conserving our financial resources
to ensure we have sufficient liquidity to fund our planned business operations. Should we not be able to reduce our operating losses
and negative cash flows, we may have to restructure our operations.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company believes that additional
funding will be needed in the short term for it to continue its growth. The Company is currently reviewing options including,
but not limited to, related party loans and private equity placement. The Company currently has no commitment for any additional
funding.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Stock-Based Compensation</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for stock-based
employee compensation arrangements in accordance with guidance issued by the FASB, which requires the measurement and recognition
of compensation expense for all share based payment awards made to employees and directors based on the estimated grant date fair
value of the award. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the
requisite service periods in the Company’s statement of operations. Stock-based compensation expense recognized for employees,
directors and consultants for the periods ended September 30, 2012 and 2011 was $181,517 and $85,439, respectively, and is included
in cost of sales and operating expenses.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company estimates fair value of
share-based awards using the Black-Sholes model. This model requires the Company to estimate the expected volatility and value
of its common stock and the expected term of the stock options, all of which are highly complex and subjective variables. The
Company used an average of historical volatility of similar companies as a basis for its expected volatility. Expected term is
computed using the simplified method provided within Securities and Exchange Commission Staff Accounting Bulletin Topic 14. The
Company has selected a risk-free rate based on the implied yield available on U.S. Treasury securities with a maturity equivalent
to the options’ expected term.</p>
1700
23270
48826
19149
45833
45833
80771
56332
11618
5451
2050
3892274
2351866
333
281000
P9Y7M6D
-50000
50000
0.41
0.25
0.27
.25
-39950
719100
739500
951000
-635000
-50000
3088569
3679861
0.38
0.17
0.21
.17
0.49
1057166
<p style="margin: 0pt"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Below are leases that the Company has
entered into for equipment.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="background-color: white">
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%; text-align: justify">Effective Date</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; border-bottom: black 1.5pt solid; line-height: 115%">Length</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td colspan="2" style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%">Monthly $</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt solid; line-height: 115%; text-align: justify">Item(s)</td></tr>
<tr style="background-color: #CCFFCC">
<td style="vertical-align: bottom; width: 34%; line-height: 115%; text-align: justify">May 1, 2011</td>
<td style="vertical-align: bottom; width: 2%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: top; width: 21%; line-height: 115%">3 years</td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 2%; line-height: 115%"> </td>
<td style="vertical-align: top; width: 1%; line-height: 115%">$</td>
<td style="vertical-align: bottom; width: 14%; line-height: 115%; text-align: right">423</td>
<td style="vertical-align: bottom; width: 1%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 2%; line-height: 115%"> </td>
<td style="vertical-align: bottom; width: 21%; line-height: 115%; text-align: justify">Computer servers</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">June 1, 2011</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">3 years</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">$</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">892</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">Computer servers</td></tr>
<tr style="background-color: #CCFFCC">
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">October 4, 2011</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">3 years</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">$</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">902</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">Computer servers</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">December 21, 2011</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">3 years</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">$</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">940</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">Phone system</td></tr>
<tr style="background-color: #CCFFCC">
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">February 14, 2012</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">3 years</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">$</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">767</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">Computer servers</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">May 4, 2012</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">3 years</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: top; line-height: 115%">$</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right">921</td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%; text-align: justify">Computer servers</td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
P3Y
P3Y
P3Y
P3Y
P3Y
P3Y
2011-05-01
2011-06-01
2011-10-04
2011-12-21
2012-02-14
2012-05-04
423
892
902
940
767
921
12500
18000000
30000000
963300
1926600
963300
481650
40000
42800
20000
21400
384000
644187
P2Y8M19D
153990
463687
1.96
.0149
.020
.45
P10Y
.44
P8Y11M16D
P9Y7M17D
0
0
91446
88467
880974
1159088
68920
38999
11680
163422
109556
1003334
1269969
19750
11250
11164
11164
937820
502083
384064
212781
553756
289302
563092
207791
239958
703197
1904140
661165
501600
1130072
2467232
868956
741558
1833269
-1093013
-231871
-278610
-248557
1656105
439662
518568
951754
1167984
339074
449165
815431
488121
100588
69403
136323
25394195
25401054
23099115
19718383
-0.04
-0.00
-0.05
-0.05
-0.00
-0.00
-0.00
-0.00
-0.04
-0.00
-0.05
-0.05
-898939
-36685
-1068963
-1062194
5000
5000
-898939
-36685
-1073963
-1067194
2400
800
2400
-896539
-36685
-1073163
-1064794
196474
195186
-794553
-816237
195521
195000
790840
790840
112
27
3964
26055
1065
213
251
658
1003334
1269969
65514
767886
-2146972
-1248033
2187045
1990528
25441
25391
20700
2550
33150
181517
85439
29677
10099
-321565
466638
264454
131331
171284
384437
-29921
-31183
11680
92824
-41156
-91309
8500
1678
32656
92987
2400
2400
112
438
648632
998853
267981
1324960
-350221
1056979
12500
681650
53867
-11195
1000000
1000000
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment are depreciated
using the straight-line method over the estimated useful lives of the assets as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 5%; line-height: 115%"> </td>
<td style="width: 70%; line-height: 115%">Furniture and fixtures</td>
<td nowrap="nowrap" style="width: 25%; line-height: 115%">5 years</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">Computer equipment</td>
<td nowrap="nowrap" style="line-height: 115%">3 years</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">Software</td>
<td nowrap="nowrap" style="line-height: 115%">3 years</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">Signs</td>
<td nowrap="nowrap" style="line-height: 115%">3 years</td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment as of September
30, 2012 and December 31, 2011 consisted of the following:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">September 30, 2012</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">December 31, 2011</td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">(unaudited)</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center"> </td>
<td style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 4%; background-color: white; line-height: 115%"> </td>
<td style="width: 52%; background-color: #CCFFCC; line-height: 115%; text-align: justify">Furniture and fixtures</td>
<td style="width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="width: 18%; background-color: #CCFFCC; line-height: 115%; text-align: right">11,618</td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 2%; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="width: 18%; background-color: #CCFFCC; line-height: 115%; text-align: right">5,451</td>
<td style="width: 1%; background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">Computer equipment</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">80,771</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">56,332</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: justify">Software</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right">45,833</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: right">45,833</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify">Signs</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">2,050</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: justify">Less accumulated depreciation and amortization</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%; text-align: right">(48,826</td>
<td style="background-color: #CCFFCC; line-height: 115%">)</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; background-color: #CCFFCC; line-height: 115%; text-align: right">(19,149</td>
<td style="background-color: #CCFFCC; line-height: 115%">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: justify"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="background-color: white; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%; text-align: justify"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%; text-align: right">91,446</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; background-color: #CCFFCC; line-height: 115%; text-align: right">88,467</td>
<td style="background-color: #CCFFCC; line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
P3Y
P5Y
P3Y
P3Y
2031
0.76
0.98
0.70
0.87
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 10 - SIGNIFICANT AGREEMENTS </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Reverse Merger</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 29, 2011, Aftermarket entered into
an agreement with respect to, and closed, a merger agreement with AllDigital, pursuant to which AllDigital became a wholly-owned
subsidiary of Aftermarket and AllDigital shareholders became the holders of a majority of the outstanding capital stock of Aftermarket
following the closing. In connection with the Merger, Aftermarket, which would subsequently be renamed AllDigital Holdings, Inc.,
also conducted an offering to raise approximately $1,000,000 in aggregate proceeds, including approximately $500,000 in Notes
that converted into the common stock and warrants in the offering.<font style="color: black"> On July 29, 2011, the Company successfully
completed the proposed Merger and related offering in which Aftermarket acquired all of the assets and operations of AllDigital,
Inc. Effective August 25, 2011, the name of Aftermarket Enterprises was changed to AllDigital Holdings, Inc. As of the date of
the Merger, the Company had two business lines: AllDigital, Inc.’s digital media services business and Aftermarket’s
automotive accessories business. On September 27, 2011, AllDigital Holdings, Inc. sold the automotive accessories business to
the former president of Aftermarket Enterprises.</font></p>
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