COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Leases

The Company has been residing in its current building at 228 W. Main Street, Tustin, California since 2006.  Since that time, the Company has paid rent on a month-to-month basis. As such, the Company is free to leave the current premises at any time with 30 days courtesy notice but the Company does not have a lease agreement with the property owner.  This is the Company’s preference since it is the Company’s desire to be able to quickly expand to alternative office space should the Company’s growth require additional square footage than the current offices.  The Company or Company employees or contractors own all of the computer and office equipment that is used in the course of business.  The Company does not have any lease agreements for any office equipment.

Technology Payable

On June 22, 2011, the Company entered into a technology transfer agreement with an unaffiliated third party which included a liability in the amount of $36,000 and 96,000 shares of common stock (Note 11) in exchange for the right, title, and interest in the Marishco Game Engine.  The liability is payable in 24 installments of $1,500 per installment and there is no stated interest rate.  Therefore the balance of $36,000 was recorded as a liability, net of a discount of $2,834 with the discount to be amortized over the life of the liability using the effective interest method.  As of September 30, 2012, and December 31, 2011, the Company recognized a current liability of $13,044 and $18,000, respectively, and a long-term liability of $0 and $7,299, respectively.  During the nine-month periods ended September 30, 2012 and 2011, the Company amortized the related debt discount amounts of $1,245 and $0, respectively.  As of September 30, 2012, and December 31, 2011, the remaining debt discounts were $456 and $1,701, respectively.