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--12-31
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt; text-transform: uppercase"><b>NOTE
1 – DESCRIPTION OF BUSINESS</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Canterbury Resources,
Inc. (“Canterbury”) was organized under the laws of the State of Nevada on September 2, 2008. Canterbury’s initial
business plan was to acquire and explore mineral properties. Canterbury has not generated any revenue from its business operations
to date, and to date, has been unable to raise additional funds to implement its operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Exchange
Agreement</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">On September
21, 2012, Echo Automotive LLC (“Echo”) and DBPJ Stock Holding, LLC, sole member of Echo (the “Echo Member”)
completed an exchange agreement (the “Exchange Agreement”) with Canterbury. At the closing of the Exchange Agreement,
the Echo Member received a total of 52,500,000 shares of common stock of Canterbury in exchange for 100% of the issued and outstanding
units of Echo. In accordance with the terms of the Exchange Agreement, the shares received by the Echo Member represent 70% of
the issued and outstanding common stock of Canterbury. As part of the exchange, Canterbury changed its name to Echo Automotive,
Inc.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Operations</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Echo Automotive,
Inc. (the Company) is developing a set of technologies that it believes will reduce overall fuel expenses in commercial fleet
vehicles by augmenting existing powertrains with highly efficient electrical energy delivered by electric motors powered by Echo’s
modular plug-in battery modules. Echo believes this technology will achieve an immediate return on investment for each individual
vehicle in a fleet.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company’s
operations have previously been funded by advances and subsequent equity conversions by the majority stockholders. Future funding
is expected to be provided in part by equity investments from other accredited investors. There can be no assurance that any of
these strategies will be achieved on terms attractive to us.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt; text-transform: uppercase"><b>NOTE
2 - BASIS OF PRESENTATION</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; text-indent: 0.5in"><font style="font: 10pt Times New Roman, Times, Serif">As
of September 21, 2012 Canterbury merged with Echo, with Echo being the accounting acquirer thus resulting in a reverse merger.
Therefore the accompanying financial statements are on a consolidated basis subsequent to September 21, 2012, but only reflect
the operations of Echo prior to the date of acquisition. The Consolidated Financial Statements and related disclosures as of <font style="color: black">September
30, 2012</font> and for the <font style="color: black">three and nine months ended September 30, 2012</font> and <font style="color: black">2011</font>,
are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”).
The <font style="color: black">December 31, 2011</font>, Consolidated Balance Sheet data was derived from audited financial statements,
but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S.”).
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally
accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations.
In our opinion, these financial statements include all adjustments (consisting only of normal recurring adjustments) necessary
for the fair statement of the results for the interim periods. Such financial information should be read in conjunction with the
consolidated financial statements and related notes thereto as of December 31, 2011 and for the year then ended included in the
Company’s Form 8-K filed on October 15, 2012. The results of operations for the <font style="color: black">three and nine
months ended September 30, 2012</font>, are not necessarily indicative of the results to be expected for the full year. Unless
otherwise noted in this report, any description of “us”, “our” or “we” refers to Echo Automotive,
Inc. and its subsidiary.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
is a development stage company and has incurred significant losses during the nine months ended September 30, 2012 and 2011 and
the period from inception (November 25, 2009) through September 30, 2012. The Company has experienced negative cash flows from
operations since the inception of the Company. These circumstances result in substantial doubt as to the ability of the Company
to continue as a going concern. The Company will need to obtain additional funding in the future in order to finance its business
strategy, operations and growth through the issuance of equity, debt or collaboration. The failure to obtain this additional funding
would be detrimental to the Company. The accompanying financial statements do not include any adjustments relating to the recoverability
and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome
of this uncertainty.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The preparation
of financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities
at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Significant
estimates and assumptions have been used by management throughout the preparation of the condensed consolidated financial statements
including in conjunction with establishing allowances for customer refunds, non-paying customers, dilution and fees, analyzing
the recoverability of the carrying amount of intangible assets, estimating forfeitures of stock-based compensation and evaluating
the recoverability of deferred tax assets. Actual results could differ from these estimates.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt; text-transform: uppercase"><b>NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Principles
of Consolidation</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The consolidated
financial statements include the accounts of the Company and its wholly owned subsidiary, Echo Automotive, LLC, beginning with
the dates of their respective acquisitions. All significant intercompany accounts and transactions have been eliminated.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Use of
Estimates</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Consolidated
Financial Statements have been prepared using management’s best estimates and judgments where appropriate. These estimates
and judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses
during the reporting period. Actual results could differ materially from these estimates and judgments.</font></p>
<p style="font: 10pt/120% Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Cash and
Cash Equivalents</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  At
<font style="color: black">September 30</font>, 2012 and December 31, 2011, respectively, cash and cash equivalents include cash
on hand and cash in the bank. At times, cash deposits may exceed government-insured limits.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Long-lived
Assets </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
accounts for long-lived assets in accordance with the provisions of FASB ASC 360, Property, Plant and Equipment. FASB ASC 360
requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to
sell. The Company did not recognize any impairment charges during the nine months ended September 30, 2012.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Intangibles
</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Finite-lived
intangible assets include intellectual property rights and are amortized on a straight-line basis over their estimated useful
lives, with useful lives of 10 years. We continually evaluate the reasonableness of the useful lives of these assets. Finite-lived
intangibles are tested for recoverability whenever events or changes in circumstances indicate the carrying amounts may not be
recoverable. An impairment loss, if any, would be measured as the excess of the carrying value over the fair value determined
by discounted future cash flows.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Plant,
Property and Equipment </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Plant, property
and equipment are recorded at cost. Depreciation is provided for on the straight-line method over the estimated useful lives of
the assets and begins when the related assets are placed in service. Maintenance and repairs that neither materially add to the
value of the property nor appreciably prolong its life are charged to expense as incurred. Betterments or renewals greater than
$1,000 are capitalized when incurred. Plant, property and equipment are reviewed each year to determine whether any events or
circumstances indicate that the carrying amount of the assets may not be recoverable.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">For the three
and nine months ended September 30, 2012, depreciation and amortization expense was $14,379 and $24,369 respectively. For both
the three and nine months ended September 30, 2011, depreciation and amortization expense was $774.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Depreciation
is provided for on the straight-line method over the following estimated useful lives:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; text-indent: 0.5in"><font style="font-size: 10pt"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 49%; text-align: justify">Equipment</td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 46%; text-align: right"><font style="font-size: 10pt">3 years</font></td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">Vehicles</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">3 years</font></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Computers and electronic equipment</td><td style="color: black"> </td>
<td style="color: black; text-align: left"> </td><td style="color: black; text-align: right"><font style="font-size: 10pt; color: black">3 years</font></td><td style="color: black; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Revenue
Recognition </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Revenue is recognized
when the four criteria for revenue recognition are met: (1) persuasive evidence of an arrangement exists; (2) shipment or delivery
has occurred; (3) the price is fixed or determinable and (4) collectability is reasonably assured. The Company has not recognized
any revenue associated with its mission as stated above in the nature of operations footnote. Miscellaneous revenue relates to
consulting projects and is recorded based on the four criteria for revenue recognition.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Advertising
Expense</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
expenses advertising costs as incurred. Advertising expense charged to operating expenses was $545 and $2,508 for the three and
nine months ended September 30, 2012, respectively. Advertising expense charged to operating expenses was $5,569 and $13,305 for
the three and nine months ended September 30, 2011, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Income
Taxes</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Income taxes
are accounted for using the asset and liability method as prescribed by ASC 740 “Income Taxes”. Under this method,
deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment date. A valuation allowance would be provided for
those deferred tax assets for which if it is more likely than not that the related benefit will not be realized.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt; font-weight: normal; font-style: normal">A
full valuation allowance has been established against all net deferred tax assets as of <font style="color: black">September 30</font>,
2012 based on estimates of recoverability. While the Company has optimistic plans for its business strategy, we determined that
such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to our
ability to generate sufficient profits from our business model. </font></p>
<p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt; font-weight: normal; font-style: normal"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Fair Value
</i></b></font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Fair value is
the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC (“ASC
820-10”), fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value<font style="color: navy">. </font>When determining fair value, the Company considers the principal or most advantageous
market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The three levels
of inputs that may be used to measure fair value are as follows:</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Level 1. Quoted
prices in active markets for identical assets or liabilities.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Level 2. Observable
inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient
volume or infrequent transactions (less active markets), inputs that are other than quoted prices that are observable for the
asset or liability or market corroborated inputs.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Level 3. Unobservable
inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities, which
may include internal data or valuation data received from the security issuer.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The carrying
amounts of the Company’s financial instruments, including cash, accounts payable and accrued liabilities, and notes payable
approximate fair value due to their short nature.</font></p>
<p style="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Basic
and Diluted Net Loss Per Share</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Net loss per
share was computed by dividing the net loss by the weighted average number of common shares outstanding during the period.  The
weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of
time that they were outstanding.  Diluted net loss per share for the Company is the same as basic net loss per share, as
the inclusion of common stock equivalents would be anti-dilutive.  If any warrants were outstanding at the end of the period,
these would be included as common stock equivalents in the determination of the diluted net loss per share.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Recent
Accounting Pronouncements</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">In May 2011,
the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820) (“ASU 2011-04”). This ASU updates certain requirements
for measuring fair value and disclosure regarding fair value measurement. This ASU is effective for reporting periods beginning
after December 15, 2011. Early adoption is not permitted. The Company’s adoption of ASU 2011-04 on January 1, 2012, did
not have an impact on the financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">In June 2011,
the FASB issued ASU 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 requires companies
to present the total of comprehensive income, the components of net income and the components of other comprehensive income either
in a single continuous statement of comprehensive income or in two separate but consecutive statements. The provisions of ASU
2011-05 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company’s
adoption of ASU 2009-13 on January 1, 2012, did not have an impact on the financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 49%; text-align: justify">Equipment</td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 46%; text-align: right"><font style="font-size: 10pt">3 years</font></td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">Vehicles</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">3 years</font></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Computers and electronic equipment</td><td style="color: black"> </td>
<td style="color: black; text-align: left"> </td><td style="color: black; text-align: right"><font style="font-size: 10pt; color: black">3 years</font></td><td style="color: black; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Principles
of Consolidation</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The consolidated
financial statements include the accounts of the Company and its wholly owned subsidiary, Echo Automotive, LLC, beginning with
the dates of their respective acquisitions. All significant intercompany accounts and transactions have been eliminated.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Use of
Estimates</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Consolidated
Financial Statements have been prepared using management’s best estimates and judgments where appropriate. These estimates
and judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses
during the reporting period. Actual results could differ materially from these estimates and judgments.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Cash and
Cash Equivalents</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  At
<font style="color: black">September 30</font>, 2012 and December 31, 2011, respectively, cash and cash equivalents include cash
on hand and cash in the bank. At times, cash deposits may exceed government-insured limits.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Long-lived
Assets </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
accounts for long-lived assets in accordance with the provisions of FASB ASC 360, Property, Plant and Equipment. FASB ASC 360
requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to
sell. The Company did not recognize any impairment charges during the nine months ended September 30, 2012.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Intangibles
</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Finite-lived
intangible assets include intellectual property rights and are amortized on a straight-line basis over their estimated useful
lives, with useful lives of 10 years. We continually evaluate the reasonableness of the useful lives of these assets. Finite-lived
intangibles are tested for recoverability whenever events or changes in circumstances indicate the carrying amounts may not be
recoverable. An impairment loss, if any, would be measured as the excess of the carrying value over the fair value determined
by discounted future cash flows.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Plant,
Property and Equipment </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Plant, property
and equipment are recorded at cost. Depreciation is provided for on the straight-line method over the estimated useful lives of
the assets and begins when the related assets are placed in service. Maintenance and repairs that neither materially add to the
value of the property nor appreciably prolong its life are charged to expense as incurred. Betterments or renewals greater than
$1,000 are capitalized when incurred. Plant, property and equipment are reviewed each year to determine whether any events or
circumstances indicate that the carrying amount of the assets may not be recoverable.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">For the three
and nine months ended September 30, 2012, depreciation and amortization expense was $14,379 and $24,369 respectively. For both
the three and nine months ended September 30, 2011, depreciation and amortization expense was $774.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Depreciation
is provided for on the straight-line method over the following estimated useful lives:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify; text-indent: 0.5in"><font style="font-size: 10pt"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 49%; text-align: justify">Equipment</td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 46%; text-align: right"><font style="font-size: 10pt">3 years</font></td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">Vehicles</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">3 years</font></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Computers and electronic equipment</td><td style="color: black"> </td>
<td style="color: black; text-align: left"> </td><td style="color: black; text-align: right"><font style="font-size: 10pt; color: black">3 years</font></td><td style="color: black; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Revenue
Recognition </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Revenue is recognized
when the four criteria for revenue recognition are met: (1) persuasive evidence of an arrangement exists; (2) shipment or delivery
has occurred; (3) the price is fixed or determinable and (4) collectability is reasonably assured. The Company has not recognized
any revenue associated with its mission as stated above in the nature of operations footnote. Miscellaneous revenue relates to
consulting projects and is recorded based on the four criteria for revenue recognition.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Advertising
Expense</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
expenses advertising costs as incurred. Advertising expense charged to operating expenses was $545 and $2,508 for the three and
nine months ended September 30, 2012, respectively. Advertising expense charged to operating expenses was $5,569 and $13,305 for
the three and nine months ended September 30, 2011, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Income
Taxes</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Income taxes
are accounted for using the asset and liability method as prescribed by ASC 740 “Income Taxes”. Under this method,
deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment date. A valuation allowance would be provided for
those deferred tax assets for which if it is more likely than not that the related benefit will not be realized.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt; font-weight: normal; font-style: normal">A
full valuation allowance has been established against all net deferred tax assets as of <font style="color: black">September 30</font>,
2012 based on estimates of recoverability. While the Company has optimistic plans for its business strategy, we determined that
such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to our
ability to generate sufficient profits from our business model. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Fair Value
</i></b></font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Fair value is
the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC (“ASC
820-10”), fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value<font style="color: navy">. </font>When determining fair value, the Company considers the principal or most advantageous
market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The three levels
of inputs that may be used to measure fair value are as follows:</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Level 1. Quoted
prices in active markets for identical assets or liabilities.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Level 2. Observable
inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient
volume or infrequent transactions (less active markets), inputs that are other than quoted prices that are observable for the
asset or liability or market corroborated inputs.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Level 3. Unobservable
inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities, which
may include internal data or valuation data received from the security issuer.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The carrying
amounts of the Company’s financial instruments, including cash, accounts payable and accrued liabilities, and notes payable
approximate fair value due to their short nature.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Basic
and Diluted Net Loss Per Share</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Net loss per
share was computed by dividing the net loss by the weighted average number of common shares outstanding during the period.  The
weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of
time that they were outstanding.  Diluted net loss per share for the Company is the same as basic net loss per share, as
the inclusion of common stock equivalents would be anti-dilutive.  If any warrants were outstanding at the end of the period,
these would be included as common stock equivalents in the determination of the diluted net loss per share.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Recent
Accounting Pronouncements</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">In May 2011,
the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820) (“ASU 2011-04”). This ASU updates certain requirements
for measuring fair value and disclosure regarding fair value measurement. This ASU is effective for reporting periods beginning
after December 15, 2011. Early adoption is not permitted. The Company’s adoption of ASU 2011-04 on January 1, 2012, did
not have an impact on the financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">In June 2011,
the FASB issued ASU 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 requires companies
to present the total of comprehensive income, the components of net income and the components of other comprehensive income either
in a single continuous statement of comprehensive income or in two separate but consecutive statements. The provisions of ASU
2011-05 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company’s
adoption of ASU 2009-13 on January 1, 2012, did not have an impact on the financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"><b>NOTE 4: OTHER CURRENT ASSETS</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">In the second
quarter of 2012 the Company advanced the landlord in Anderson, Indiana, $50,000 to cover the landlord’s costs for the purchase
of certain building and improvements from the previous tenant. These funds are scheduled to be repaid to the Company by year end.</font></p>
<p style="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt; text-transform: uppercase"><b>ote
5: Property, Plant and Equipment </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt; text-transform: uppercase"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt">As of September 30, 2012 and
December 31, 2011, property, plant and equipment, at cost, consisted of the following:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="padding-left: 11pt; text-indent: -11pt"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2012</td><td style="padding-bottom: 1pt; text-align: center"> </td><td style="padding-bottom: 1pt; text-align: center"> </td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">December 31, 2011</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 60%; padding-left: 11pt; text-indent: -11pt">Equipment</td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 15%; text-align: right">81,206</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 15%; text-align: right">—</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 11pt; text-indent: -11pt">Computers and electronic equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">16,459</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-indent: -11pt; padding-left: 11pt">Vehicles</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">70,873</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">28,000</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 11pt; text-indent: -11pt"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">168,538</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">28,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: -11pt; padding-left: 11pt">Less: Accumulated Depreciation</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(26,213</td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(3,094</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-indent: -11pt; padding-left: 11pt"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">142,325</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">24,906</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> <b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt; text-transform: uppercase"><b>Note
6: Intangibles </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">On June 28,
2012, the Company entered into a license agreement with Bright Automotive, Inc. (“Bright”) which provides Echo a royalty-free,
perpetual, fully-paid up, worldwide, non-exclusive, non-transferable and non-sub-licensable limited license to use Bright’s
Battery Management Software and CAD, and certain other intellectual property to develop, modify and/or sell, offer for sale, market,
distribute, import and export derivative works. In consideration of the granting of the license, the Company paid to Bright a
one-time up-front license fee in the amount of $50,000 which has been capitalized and depreciated on a straight line basis over
its estimated useful life ten (10) years. Management has estimated a 10 year useful life due to the risk of technological obsolescence
of the intellectual property and the applications in which they are putting it in.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="padding-left: 11pt; text-indent: -11pt"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2012</td><td style="padding-bottom: 1pt; text-align: center"> </td><td style="padding-bottom: 1pt; text-align: center"> </td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">December 31, 2011</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 60%; text-align: left; padding-left: 11pt; text-indent: -11pt">Cost basis</td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 15%; text-align: right">50,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 15%; text-align: right">—</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -11pt; padding-left: 11pt">Less: accumulated amortization</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(1,250</td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-indent: -11pt; padding-left: 11pt"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">48,750</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">—</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="padding-left: 11pt; text-indent: -11pt"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2012</td><td style="padding-bottom: 1pt; text-align: center"> </td><td style="padding-bottom: 1pt; text-align: center"> </td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">December 31, 2011</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 60%; text-align: left; padding-left: 11pt; text-indent: -11pt">Cost basis</td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 15%; text-align: right">50,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 15%; text-align: right">—</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; text-indent: -11pt; padding-left: 11pt">Less: accumulated amortization</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(1,250</td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-indent: -11pt; padding-left: 11pt"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">48,750</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">—</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b>NOTE 8: EQUITY</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">At the closing
of the Exchange Agreement, the Company issued a total of 52,500,000 shares of its common stock to the Echo Members in exchange
for 100% of the issued and outstanding units of Echo Automotive, LLC. Immediately prior to the closing of the Exchange Agreement,
the Company had 22,500,000 shares of common stock issued and outstanding. Immediately after the closing of the Exchange Agreement,
the Company had 75,000,000 shares of common stock issued and outstanding.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">In May 2012,
the Company entered into a financing agreement to raise up to $2,000,000 through the sale of shares of its common stock at $0.50
per share and warrants to purchase one share of common stock of the Company with an exercise price of $0.75 per share and a term
of 18 months. Prior to the closing of the Exchange Agreement, $903,000 had been received for the issuance of common stock. The
cash received was advanced to Echo Automotive, LLC to provide working capital to continue its operations. Subsequent to the closing
of the Exchange Agreement, the $903,000 of advances was eliminated in consolidation. The remaining $1,097,000 was treated as a
subscription receivable as of September 30, 2012.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">As of September
30, 2012, there were no warrants outstanding.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"></font></p>
<p style="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0 0 5.1pt; text-align: justify"><font style="font-size: 10pt"><b>NOTE
10: SEGMENT INFORMATION</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
operates only one reporting segment.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b>NOTE 11:
SUBSEQUENT EVENTS</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">In October 2012
the Company received an additional $375,000 for the issuance of 750,000 shares of its common stock as part of its $2,000,000 financing
agreement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">In October 2012,
the Exchange was fully completed and Canterbury was renamed Echo Automotive Inc. (“ECAU”) and its ticker symbol was
revised to ECAU. In connection with the Exchange Agreement, certain debt agreements the Company entered into were transferred
to the Echo Member (see Note 7), with the Echo Member assuming and bearing the obligations of the transferred debt. Mr. Dan Kennedy,
the Company’s Chief Executive Officer, holds the position of Chief Financial Officer, Secretary, and member of the Board
of Directors of the Echo Member. Mr. Jason Plotke, the Company’s Director and President, is the Chief Executive Officer
and Chairman of the Echo Member. The owners of the Echo Member are the Jason Plotke Family Revocable Living Trust, the Dan Kennedy
Family Trust U/A, James Beatty, and the BK Family Trust U/A.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt">As of September 30, 2012 and
December 31, 2011, property, plant and equipment, at cost, consisted of the following:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="padding-left: 11pt; text-indent: -11pt"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">September 30, 2012</td><td style="padding-bottom: 1pt; text-align: center"> </td><td style="padding-bottom: 1pt; text-align: center"> </td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">December 31, 2011</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 60%; padding-left: 11pt; text-indent: -11pt">Equipment</td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 15%; text-align: right">81,206</td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 15%; text-align: right">—</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-left: 11pt; text-indent: -11pt">Computers and electronic equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">16,459</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-indent: -11pt; padding-left: 11pt">Vehicles</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">70,873</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">28,000</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-left: 11pt; text-indent: -11pt"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">168,538</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">28,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; text-indent: -11pt; padding-left: 11pt">Less: Accumulated Depreciation</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(26,213</td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(3,094</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-indent: -11pt; padding-left: 11pt"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">142,325</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">24,906</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> <b> </b></font></p>
26213
3094
48750
48750
50000
1250
2012-03-31
2012-04-11
2012-05-30
2012-05-30
2012-07-13
2012-07-27
2012-08-31
2012-07-13
2012-10-17
523000
25000
.07
.12
.21
.18
.21
.07
.12
.12
.06
.07
.21
.12
2013-03-31
2013-04-11
2013-02-28
2013-05-30
2013-01-09
2012-10-25
2013-02-27
2013-01-09
23060
113896
28681
165637
3 years
3 years
3 years
24369
14379
774
774
1000
2508
545
5569
13305
52500000
1.0
0.70
200000
100000
50000
200000
110000
50000
22500000
44586
31339
.1250
50000
50000
12000
12000
110000
110000
168538
28000
16459
81206
70873
28000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b>NOTE 7: <font style="text-transform: uppercase">RELATED
PARTY PAYABLES </font></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i></i></b></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"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Related party payables relates to no interest,
demand advances made by the former CEO of Canterbury of $91,762 and other legal, accounting, and transaction services of $97,693
related to the Exchange Agreement that were paid for by shareholders of the Company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"></font><br />
</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>NOTE 8:
LONG -TERM DEBT<br /> <br /> Redeemable Convertible Notes</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">On November
10 and 11, 2011, the Company issued two separate notes with a $200,000 aggregate principal amount and interest rates of 12% per
annum (the “12% Notes”). Interest payments are required on a quarterly basis and shall accrue at the election of the
lender with written notice to the borrower. The notes were amended in June 2012 such that the quarterly interest payments are
not required until maturity. The 12% Notes mature on December 31, 2012.</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="font-size: 10pt">As of September
30, 2012, the outstanding balance of $200,000 has not been converted.</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="font-size: 10pt"><b><i>Line of
Credit with Related Party</i></b></font></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify"><font style="font-size: 10pt; letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">On October 1,
2011 the Company entered into a revolving line of credit agreement and promissory note for a $100,000 original principal amount
and an interest rate of 6.0% per annum (the “LOC”). The lender is immediate family of one of the members of the Company
and is considered a related party. Interest was required to be paid quarterly beginning January 1, 2012 through the maturity date
of September 30, 2013. The LOC was amended in June of 2012 such that the quarterly interest payments are not required and interest
is due September 30, 2013. The lender may advance additional amounts in excess of the original principal amount under the same
terms and conditions as the original principal amount.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Upon execution
and delivery of the LOC, as additional consideration, the lender received, at no cost or expense to the lender, a twelve and one-half
percent (12.50%) member interest in the Company. In addition, the lender also has the unconditional right, but not the obligation,
at any time after the loan amount has been fully drawn down by the Company, to convert the existing loan indebtedness into an
additional twelve and one-half (12.50%) member interest in the Company. On September 10, 2012, the outstanding LOC balance of
$110,000 was converted into additional member interest of the Company in accordance with the line of credit agreement.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-indent: 27pt"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Notes
Payable </i></b></font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">On March 30,
2011, the Company entered in to a promissory note for $50,000 with an interest rate of 7.0% per annum. Interest was to accrue
and be paid with the original principal amount 180 days from the date of the promissory note. The parties modified the maturity
date to December 31, 2012, all other terms and conditions remaining the same, with an amendment on June 21, 2012. As of September
30, 2012 there was $50,000 outstanding under this promissory note.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company entered into debt agreements which were to help the Company with timing of cash payments for its
operations until money is received from other investors. The following is a detail of the debt agreements entered into between
March 31, 2012 and September 30, 2012. With the exception of the $12,000 debt agreement entered into on May 30, 2012, which was
repaid prior to September 30, 2012, and the $100,000 debt agreement entered into on March 31, 2012, which was reduced to $50,000,
all amounts were fully outstanding as of September 30, 2012:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">Date</td><td style="padding-bottom: 1pt"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">Amount</td><td style="padding-bottom: 1pt"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">Interest</td><td style="padding-bottom: 1pt"> </td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: center; border-bottom: Black 1pt solid">Due Date</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 1%; text-align: left"> </td><td style="width: 20%; text-align: right"><font style="font-size: 10pt">3/31/2012</font></td><td style="width: 1%; text-align: left"> </td><td style="width: 4%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 21%; text-align: right">100,000</td><td style="width: 1%; text-align: left">(1)</td><td style="width: 4%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 20%; text-align: right">7</td><td style="width: 1%; text-align: left">%</td><td style="width: 4%"> </td>
<td style="width: 21%; text-align: right; padding-left: 5.4pt">3/31/2013</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">4/11/2012</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">100,000</td><td style="text-align: left">(1)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">4/11/2013</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">5/30/2012</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,000</td><td style="text-align: left">(2)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">21</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">2/28/2013</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">5/30/2012</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">60,000</td><td style="text-align: left">(1)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">18</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">5/30/2013</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">7/13/2012</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">65,000</td><td style="text-align: left">(3)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">21</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">1/9/2013</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: right">7/13/2012</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">50,000</td><td style="text-align: left">(2)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">21</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">1/9/2013</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">7/27/2012</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">150,000</td><td style="text-align: left">(1)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">7</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">10/25/2012</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">8/31/2012</font></td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt; text-align: right">11,000</td><td style="padding-bottom: 1pt; text-align: left">(2)</td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: left"> </td><td style="text-align: right">12</td><td style="padding-bottom: 1pt; text-align: left">%</td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: right; padding-bottom: 1pt; padding-left: 5.4pt">2/27/2013</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"> </td><td style="text-align: right">10/17/2012</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">25,000</td><td style="padding-bottom: 1pt; text-align: left">(1)</td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: left"> </td><td style="text-align: right">12</td><td style="padding-bottom: 1pt; text-align: left">%</td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: right; padding-bottom: 1pt; padding-left: 5.4pt">10/17/2013</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: left; padding-left: 10pt"><font style="font-size: 10pt">Total</font></td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">523,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; padding-left: 5.4pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><font style="font-size: 10pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 10%; font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 5%; font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">(1)</font></td>
<td style="width: 85%; font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">This
note contains a conversion feature which enables either the Company or the lender to convert a portion or the entire note
into shares of the Company.  The conversion feature was not exercised by either party as of September 30, 2012.   
  </font></td></tr>
<tr style="vertical-align: top">
<td style="font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">(2)</font></td>
<td style="font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">This note contains
a warrant feature which requires the Company to issue warrants to purchase stock at no more than $0.01 per share within a
certain number of days of the execution of the debt agreement.  The warrants would have an expiration date of 5 years. 
No warrants were issued as of September 30, 2012.</font></td></tr>
<tr style="vertical-align: top">
<td style="font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">(3)</font></td>
<td style="font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">This note contains
a warrant feature which requires the Company to issue warrants to purchase stock at no more than $0.01 per share within a
certain number of days of the execution of the debt agreement. The warrants will have an expiration date of 5 years. No warrants
were issued as of September 30, 2012.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><font style="font-size: 10pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
is in the process of transferring to the Echo Member certain debt agreements that the Company entered into in 2011 and 2012 in
accordance with the terms of the Exchange Agreement, with the Echo Member assuming and bearing the obligations of the notes transferred
and all of their related terms and obligations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Interest expense
incurred on all debt was $21,218 and $43,696 for the three and nine months ended September 30, 2012. Interest expense incurred
on all debt was $905 and $1,974 for the three and nine months ended September 30, 2011.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following is a detail of the debt agreements
entered into between March 31, 2012 and September 30, 2012. With the exception of the $12,000 debt agreement entered into on May
30, 2012, which was repaid prior to September 30, 2012, and the $100,000 debt agreement entered into on March 31, 2012, which
was reduced to $50,000, all amounts were fully outstanding as of September 30, 2012:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">Date</td><td style="padding-bottom: 1pt"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">Amount</td><td style="padding-bottom: 1pt"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid">Interest</td><td style="padding-bottom: 1pt"> </td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: center; border-bottom: Black 1pt solid">Due Date</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 1%; text-align: left"> </td><td style="width: 20%; text-align: right"><font style="font-size: 10pt">3/31/2012</font></td><td style="width: 1%; text-align: left"> </td><td style="width: 4%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 21%; text-align: right">100,000</td><td style="width: 1%; text-align: left">(1)</td><td style="width: 4%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 20%; text-align: right">7</td><td style="width: 1%; text-align: left">%</td><td style="width: 4%"> </td>
<td style="width: 21%; text-align: right; padding-left: 5.4pt">3/31/2013</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">4/11/2012</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">100,000</td><td style="text-align: left">(1)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">4/11/2013</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">5/30/2012</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,000</td><td style="text-align: left">(2)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">21</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">2/28/2013</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">5/30/2012</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">60,000</td><td style="text-align: left">(1)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">18</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">5/30/2013</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">7/13/2012</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">65,000</td><td style="text-align: left">(3)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">21</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">1/9/2013</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: right">7/13/2012</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">50,000</td><td style="text-align: left">(2)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">21</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">1/9/2013</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">7/27/2012</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">150,000</td><td style="text-align: left">(1)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">7</td><td style="text-align: left">%</td><td> </td>
<td style="text-align: right; padding-left: 5.4pt">10/25/2012</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: right"><font style="font-size: 10pt">8/31/2012</font></td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt; text-align: right">11,000</td><td style="padding-bottom: 1pt; text-align: left">(2)</td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: left"> </td><td style="text-align: right">12</td><td style="padding-bottom: 1pt; text-align: left">%</td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: right; padding-bottom: 1pt; padding-left: 5.4pt">2/27/2013</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"> </td><td style="text-align: right">10/17/2012</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">25,000</td><td style="padding-bottom: 1pt; text-align: left">(1)</td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: left"> </td><td style="text-align: right">12</td><td style="padding-bottom: 1pt; text-align: left">%</td><td style="padding-bottom: 1pt"> </td>
<td style="text-align: right; padding-bottom: 1pt; padding-left: 5.4pt">10/17/2013</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: left; padding-left: 10pt"><font style="font-size: 10pt">Total</font></td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">523,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt; padding-left: 5.4pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><font style="font-size: 10pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 10%; font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 5%; font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">(1)</font></td>
<td style="width: 85%; font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">This
note contains a conversion feature which enables either the Company or the lender to convert a portion or the entire note
into shares of the Company.  The conversion feature was not exercised by either party as of September 30, 2012.   
  </font></td></tr>
<tr style="vertical-align: top">
<td style="font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">(2)</font></td>
<td style="font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">This note contains
a warrant feature which requires the Company to issue warrants to purchase stock at no more than $0.01 per share within a
certain number of days of the execution of the debt agreement.  The warrants would have an expiration date of 5 years. 
No warrants were issued as of September 30, 2012.</font></td></tr>
<tr style="vertical-align: top">
<td style="font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">(3)</font></td>
<td style="font-family: Tms Rmn; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">This note contains
a warrant feature which requires the Company to issue warrants to purchase stock at no more than $0.01 per share within a
certain number of days of the execution of the debt agreement. The warrants will have an expiration date of 5 years. No warrants
were issued as of September 30, 2012.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"></font></p>
<p style="font: 10pt/12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b>NOTE
10: COMMITMENTS AND CONTINGENCIES</b></font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Litigation</i></b></font></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
may from time to time be involved in legal proceedings arising from the normal course of business. There are no pending or threatened
legal proceedings as of September 30, 2012.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Building
Lease </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
entered into two lease agreements to occupy lab facilities. The lease terms began on April 2012 and June 2012, respectively and
both leases end on March 2014. The Company also entered into a lease agreement to occupy its corporate headquarters in Scottsdale,
AZ. The lease terms began on July 2012 and ends on November 2012.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Future minimum
rental payments required under the leases are as follows for the years ended December 31:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 50%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="text-align: left"><font style="font-size: 10pt">Year ended</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 1%; text-align: left"> </td><td style="width: 47%; text-align: left"><font style="font-size: 10pt">December 31, 2012</font></td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 46%; text-align: right">23,060</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: left"><font style="font-size: 10pt">December 31, 2013</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">113,896</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"> </td><td style="text-align: left"><font style="font-size: 10pt">December 31, 2014</font></td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">28,681</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: left"><font style="font-size: 10pt">Total</font></td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">165,637</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
has the option to renew the facility leases for five subsequent two year periods. Rent expense amounted to $31,339 and $44,586
for the three and nine months ended September 30, 2012, respectively. The Company did not have any rent expense for the three
and nine months ended September 30, 2011.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>License
Agreements</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">On February
1, 2012, the Company entered into a license agreement with CleanFutures (“CF”), for use of their intellectual property.
For every product sold, a royalty of two to five percent will be paid to CF, depending on the system component sold. Both parties
have the option to reduce the royalty payments after 48 months and annually thereafter by converting their exclusive license agreement
to a non-exclusive license agreement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </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"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">The Company
shall pay no less than the following minimum royalties (such minimum royalties to be prepaid and any unearned prepaid royalties
for any year will carry over to the subsequent year’s prepaid royalties due): $100,000 for year one, $150,000 for year two,
$200,000 for year three, and $250,000 for years four and beyond.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Additionally,
the Company is required to make royalty prepayments according to the following schedule: $10,000 upon execution, $25,000 within
30 days, $40,000 within 120 days, and $75,000 at the time that the Company completes a round of funding of no less than $3,000,000
and in no more than eight months after the completion of the bridge financing. The Company will pay CF $10,000 per month for 18
months as additional prepaid royalties beginning the month following the completion of bridge financing. At the Company’s
option, the Company may make a one-time payment of $1,000,000 and the yearly exclusive license fees will terminate effective the
date such prepayment is made.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Associated with
this agreement the Company entered into an agreement to issue warrants to CF for the right to purchase common stock equal to five
percent (5%) of the outstanding shares of the Company, calculated at the time of execution and issued at the next round of funding
or at the time of the Company’s conversion from an LLC to an S Corp, whichever comes first. The warrant exercise price is
$0.01 and has a term of 10 years. The Company has the right to reduce the warrant amount to four percent (4%) by making royalty
prepayments of $100,000 or to reduce the warrant amount to three percent (3%) by making royalty prepayments of $500,000, anytime
within the first 24 months. No warrants were issued as of September 30, 2012.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">There was no
royalty expense for the three and nine months ended September 30, 2012 and 2011. Prepaid royalty expense was $0 at September 30,
2012 as the Company has not made any payments to CF.</font></p>
<p style="font: 12pt/120% Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">On June 28,
2012, the Company entered into a license agreement with Bright Automotive, Inc. (“Bright”) which provides Echo a royalty-free,
perpetual, fully-paid up, worldwide, non-exclusive, non-transferable and non-sub-licensable limited license to use Bright’s
Battery Management Software and CAD, and certain other intellectual property of t to develop, modify and/or sell, offer for sale,
market, distribute, import and export derivative works. In consideration of the granting of the license, the Company paid to Bright
a one-time up-front license fee in the amount of $50,000 which has been capitalized and depreciated over its estimated useful
life of 10 years.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i>Employment
Agreements</i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><i> </i></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">On April 21,
2012 the Company entered into an executive employment agreement with William Daniel Kennedy (the “Kennedy Agreement”),
in connection with his service as Chief Executive Officer of the Company. In accordance with the Kennedy Agreement, Mr. Kennedy
shall be entitled to a base salary of $220,000 per year.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">On April 21,
2012 the Company entered into an executive employment agreement with Jason Plotke (the “Plotke Agreement”), in connection
with his service as President of Echo. In accordance with the Plotke Agreement, Mr. Plotke shall be entitled to a base salary
of $200,000 per year.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">Future minimum
rental payments required under the leases are as follows for the years ended December 31:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 50%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td><td style="text-align: left"><font style="font-size: 10pt">Year ended</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 1%; text-align: left"> </td><td style="width: 47%; text-align: left"><font style="font-size: 10pt">December 31, 2012</font></td><td style="width: 1%; text-align: left"> </td><td style="width: 3%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 46%; text-align: right">23,060</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: left"><font style="font-size: 10pt">December 31, 2013</font></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">113,896</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left"> </td><td style="text-align: left"><font style="font-size: 10pt">December 31, 2014</font></td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">28,681</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"> </td><td style="text-align: left"><font style="font-size: 10pt">Total</font></td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">165,637</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: left"><font style="font-size: 10pt"> </font></p>
P10Y
50000
97693
91762
0.75
0.01
P1Y6M
P10Y
In October 2012, the Company received an additional $375,000
for the issuance of 750,000 shares of its common stock as
part of its $2,000,000 financing agreement.
In October 2012, the Exchange was fully completed and Canterbury was renamed Echo Automotive Inc. (ECAU)
and its ticker symbol was revised to ECAU. In connection with the Exchange Agreement, certain debt agreements the Company entered
into are in the process of being transferred to the Echo Member (see Note 7), with the Echo Member assuming and bearing the obligations
of the transferred debt. Mr. Dan Kennedy, the Company's Chief Executive Officer, holds the position of Chief Financial Officer,
Secretary, and member of the Board of Directors of the Echo Member. Mr. Jason Plotke, the Company's Director and President,
is the Chief Executive Officer and Chairman of the Echo Member. The owners of the Echo Member are the Jason Plotke Family Revocable
Living Trust, the Dan Kennedy Family Trust U/A, James Beatty, and the BK Family Trust U/A.
100000
150000
200000
250000
10000
1
25000
40000
75000
3000000
220000
200000
2000000
.50
1.00
50000
P2Y
10000
P1Y6M
1000000
0.05
0.04
0.03
100000
500000
This note contains a conversion feature which enables either the Company or the lender to convert a portion or the entire note into shares of the Company. The conversion feature was not exercised by either party as of September 30, 2012.
This note contains a warrant feature which requires the Company to issue warrants to purchase stock at no more than $0.01 per share within a certain number of days of the execution of the debt agreement. The warrants would have an expiration date of 5 years. No warrants were issued as of September 30, 2012.
This note contains a warrant feature which requires the Company to issue warrants to purchase stock at no more than $0.01 per share within a certain number of days of the execution of the debt agreement. The warrants will have an expiration date of 5 years. No warrants were issued as of September 30, 2012.