UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
   FORM
10-Q
   x
                QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For
the quarterly period ended March 31, 2009
 
 OR
   ̈
                TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For
the Transition Period From ___________   to 
_____________
  Commission
File Number: 333-143695
   ADEX
MEDIA, INC.
 (Exact
name of registrant as specified in its charter)
   Delaware
                
                20-8755674(State
      or other jurisdiction of
                  incorporation
      or organization)
                
                (I.R.S
      Employer Identification No.)883
      N. Shoreline Blvd. Suite A-200, Mountain View, CA 94043(Address
      of principal executive
offices)
 
 (650) 967-3040
 (Registrant’s
telephone number, including area code)
 
   Indicate
by check mark whether the Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    Yes  x    No   ̈
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes    ̈   No   ̈
  Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
  Large accelerated filer
              
               ̈
              
              Accelerated filer
              
               ̈Non-accelerated
      filer
              
               ̈  (Do
      not check if a smaller reporting company)
              
              Smaller reporting company
              
              x
  Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes   ̈    No  x
  At May
10, 2009, 31,632,386 shares of Common Stock, par value $0.0001, of the
registrant were outstanding.
 
 
 
 
 
 
 ADEX
MEDIA, INC.
 
 QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31,
2009
 
 TABLE
OF CONTENTS
  
 PagePart
      I.     Financial InformationItem
      1.
                Financial
      Statements(a)
                Condensed
      Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008
      (unaudited)
                3(b)
                Condensed
      Consolidated Statements of Operations for the Three Months Ended March 31,
      2009    and 2008 (unaudited)
                4(c)
                Condensed
      Consolidated Statements of Cash Flows for the Three Months Ended March 31,
      2009 and 2008 (unaudited)
                5(d)
                Notes
      to Unaudited Condensed Consolidated Financial Statements
                6Item 2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                24Item
      3.
                Quantitative
      and Qualitative Disclosures about Market Risk
                31Item
      4T.
                Controls
      and Procedures
                31Part
      II.     Other InformationItem
      1.
                Legal
      Proceedings
                32Item 1A.
                Risk
      Factors
                32Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                47Item
      3.
                Defaults
      Upon Senior Securities
                47Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                47Item
      5.
                Other
      Information
                47Item
      6.
                Exhibits
                48Signatures
                49
 
 
 
   PART
      I.
                  FINANCIAL
      INFORMATIONITEM 1.
                  FINANCIAL
      STATEMENTS
 
 ADEX
MEDIA, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (Unaudited)
  March
      31,
                            
                            
                            December
      31,2009
                            
                            
                            2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                            
                            $
                            807,744
                            
                            
                            $
                            683,576Short-term
      investments
                            
                            
                            1,215,817
                            
                            
                            
                            2,502,670Accounts
      receivable, net of allowance for doubtful accounts of
    $33,981
                            
                            
                            767,019
                            
                            
                            
                            521,004and
      $19,737Credit
      card holdbacks, net of allowance of $225,672 and $167,363
                            
                            
                            414,529
                            
                            
                            
                            300,493Inventory
                            
                            
                            112,939
                            
                            
                            
                            57,087Prepaid
      expenses and other current assets
                            
                            
                            208,559
                            
                            
                            
                            97,878Total
      current assets
                            
                            
                            3,526,607
                            
                            
                            
                            4,162,708Property
      and equipment, net
                            
                            
                            44,965
                            
                            
                            
                            43,606Intangible
      assets, net
                            
                            
                            1,285,281
                            
                            
                            
                            1,367,330Goodwill
                            
                            
                            8,448,789
                            
                            
                            
                            8,448,789Total
      assets
                            
                            $
                            13,305,642
                            
                            
                            $
                            14,022,433LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                            
                            $
                            1,694,885
                            
                            
                            $
                            929,807Accrued
      liabilities
                            
                            
                            884,956
                            
                            
                            
                            593,907Deferred
      revenue
                            
                            
                            66,815
                            
                            
                            
                            25,709Promissory
      notes
                            
                            
                            301,993
                            
                            
                            
                            401,806Total
      current liabilities
                            
                            
                            2,948,649
                            
                            
                            
                            1,951,229Promissory
      notes
                            
                            
                            -
                            
                            
                            
                            150,000Deferred
      tax liability
                            
                            
                            386,331
                            
                            
                            
                            404,817Total
      liabilities
                            
                            
                            3,334,980
                            
                            
                            
                            2,506,046Commitments
      and Contingencies (Note 16)Stockholders' Equity:Common
      stock, $0.0001 par value; 150,000,000 shares authorized,
      31,632,386
                            
                            
                            3,163
                            
                            
                            
                            3,120and
      31,202,347 shares issued and outstanding at March 31, 2009
    andDecember
      31, 2008, respectivelyAdditional
      paid-in capital
                            
                            
                            13,987,279
                            
                            
                            
                            13,808,966Accumulated
      deficit
                            
                            
                            (4,019,780
                            )
                            
                            
                            (2,295,699
                            )Total
      stockholders' equity
                            
                            
                            9,970,662
                            
                            
                            
                            11,516,387Total
      liabilities and stockholders' equity
                            
                            $
                            13,305,642
                            
                            
                            $
                            14,022,433
  The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  -3-
   ADEX MEDIA, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)For
      The Three Months EndedMarch
      31,
                        
                        
                        March
      31,2009
                        
                        
                        2008Revenues:Marketing platform services
                        
                        $
                        2,512,500
                        
                        
                        $
                        690,553Products
                        
                        
                        981,396
                        
                        
                        
                        -Total
      revenues
                        
                        
                        3,493,896
                        
                        
                        
                        690,553Cost
      of revenues:Marketing platform services
                        
                        
                        2,103,893
                        
                        
                        
                        543,660Products
                        
                        
                        376,626
                        
                        
                        
                        -Amortization
      of acquired product licenses
                        
                        
                        35,000
                        
                        
                        
                        -Total
      cost of revenues
                        
                        
                        2,515,519
                        
                        
                        
                        543,660Gross
      profit
                        
                        
                        978,377
                        
                        
                        
                        146,893Operating
      expenses:Sales
      and marketing
                        
                        
                        2,150,513
                        
                        
                        
                        32,490General and administrative
                        
                        
                        538,390
                        
                        
                        
                        8,496Amortization of intangible assets
                        
                        
                        47,049
                        
                        
                        
                        -Total
      operating expenses
                        
                        
                        2,735,952
                        
                        
                        
                        40,986Operating
      (loss) income
                        
                        
                        (1,757,575
                        )
                        
                        
                        105,907Interest
      and other income, net
                        
                        
                        15,008
                        
                        
                        
                        2,558(Loss)
      income before provision for income taxes
                        
                        
                        (1,742,567
                        )
                        
                        
                        108,465(Benefit)
      provision for income tax
                        
                        
                        (18,486
                        )
                        
                        
                        800Net
      (loss) income
                        
                        $
                        (1,724,081
                        )
                        
                        $
                        107,665(Loss)
      earning per common share, basic and diluted
                        
                        $
                        (0.05
                        )
                        
                        $
                        0.43Weighted
      average common shares used in computingbasic
      and diluted (loss) income per share
                        
                        
                        31,431,923
                        
                        
                        
                        250,000
  The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  -4-
  ADEX
MEDIA, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 For
      The Three Months EndedMarch
      31,
                            
                            
                            March
      31,2009
                            
                            
                            2008Cash
      flows from operating activities:Net (loss)
      income
                            
                            $
                            (1,724,081
                            )
                            
                            $
                            107,665Reconciliation of
      net (loss) income to net cash (used in) provided by operating
      activities:Depreciation
                            
                            
                            11,167
                            
                            
                            
                            346Amortization of
      intangibles
                            
                            
                            82,049
                            
                            
                            
                            -Share-based
      compensation
                            
                            
                            178,356
                            
                            
                            
                            -Interest from
      accretion of promissory notes
                            
                            
                            (4,813
                            )
                            
                            
                            -Deferred income
      tax adjustment
                            
                            
                            (18,486
                            )
                            
                            
                            -Inventory
      provision for obsolescence
                            
                            
                            25,141
                            
                            
                            
                            -Bad
      debt recovery
                            
                            
                            (1,446
                            )
                            
                            
                            -Allowance for
      charge backs
                            
                            
                            58,309
                            
                            
                            
                            -Changes
      in current assets and liabilities:Accounts
      receivable
                            
                            
                            (244,569
                            )
                            
                            
                            (22,464
                            )Inventory
                            
                            
                            (80,993
                            )
                            
                            
                            -Prepaid expenses
      and other current assets
                            
                            
                            (110,681
                            )
                            
                            
                            -Credit card
      holdbacks
                            
                            
                            (172,345
                            )
                            
                            
                            -Accounts
      payable
                            
                            
                            765,078
                            
                            
                            
                            32,756Accrued
      liabilities
                            
                            
                            291,049
                            
                            
                            
                            (32,107
                            )Deferred
      revenue
                            
                            
                            41,106
                            
                            
                            
                            -Net
      Cash (used in) provided by operating activities
                            
                            
                            (905,159
                            )
                            
                            
                            86,196Cash
      flows from investing activities:Purchase of
      short-term investments
                            
                            
                            (1,464,777
                            )
                            
                            
                            -Proceeds from sale
      of short-term investments
                            
                            
                            2,751,630
                            
                            
                            
                            17,797Purchase of
      property, plant and equipment
                            
                            
                            (12,526
                            )
                            
                            
                            -Net
      cash provided by investing activities
                            
                            
                            1,274,327
                            
                            
                            
                            17,797Cash
      flows from financing activities:Repayment of
      promissory notes
                            
                            
                            (245,000
                            )
                            
                            
                            -Net
      cash used in financing activities
                            
                            
                            (245,000
                            )
                            
                            
                            -Net
      increase in cash and cash equivalents
                            
                            
                            124,168
                            
                            
                            
                            103,993Cash
      and cash equivalents at beginning of period
                            
                            
                            683,576
                            
                            
                            
                            5,379Cash
      and cash equivalents at end of period
                            
                            $
                            807,744
                            
                            
                            $
                            109,372
  The accompanying notes are an
integral part of thesecondensedconsolidated
financial statements.
 
 -5-
  ADEX
MEDIA, INC
  NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 Note
1.      Organization and Basis of
Presentation
  Description
of Business
 
 Adex
Media, Inc. (“we”, “us”, “our”, the “Company” or “Adex”) is the parent company
of Abundantad, Inc. (“Abundantad”).  Adex was incorporated under the
laws of Delaware in April 2008.  It was formed as a subsidiary of
SupportSpan, Inc., a public reporting Nevada corporation (“SupportSpan”). On
April 25, 2008, SupportSpan was consolidated into Adex for the purposes of
changing its name to Adex and its place of incorporation to Delaware (the
“Merger”).
 
 Abundantad
was formed on February 4, 2008 for the purpose of creating, operating and/or
acquiring publishers of Internet content whose properties are deemed desirable
to generate paid-for dissemination of internal or third-party direct advertising
and revenues derived from agency and advertising network-directed advertising on
the Internet. Abundantad creates, acquires, owns and operates content websites
which may include promotions, sweepstakes, mobile offers, and other Internet
websites in furtherance of its purposes. On May 14, 2008, Abundantad
acquired substantially all the assets and liabilities of Kim and Lim, LLC, d/b/a
Pieces Media (“Pieces”). Also on May 14, 2008, Abundantad, via a reverse merger,
became a wholly-owned subsidiary of Adex.
 
 Adex is
an early-stage integrated Internet marketing and lead generation publisher with
a focus on offering advertising customers a multi-channel Internet
advertising network and broader solutions for direct advertisers and agencies.
Adex’s marketing platform provides a range of services including (i) search
marketing; (ii) display marketing; (iii) lead generation; and (iv) affiliate
marketing. In addition, through its acquisition of the membership interests of
Digital Instructor, LLC on August 12, 2008, Adex is a licensor and marketer of
consumer products.  Adex’s Digital Instructor subsidiary currently
sells and markets seven products: (i) Overnight Genius – a comprehensive
computer learning course in mastering MS Windows, MS Office, eBay, and others;
(ii) Rising Star Learning – a math and language arts educational product for
children; (iii) Debt Snap – an audio seminar designed to help consumers manage
their debt and restore credit standing; (iv) Lucky At Love – a relationship
strategy product; (v) EasyWhite Labs – a teeth whitening kit; (vi) Acai Alive –
a dietary supplement; and (vii) RezActiv – a dietary supplement.
  Basis
of Presentation and Use of Management Estimates
 
 As stated
above, Adex acquired Abundantad and Abundantad simultaneously purchased the
assets and liabilities of Pieces, Pieces was deemed the acquirer for accounting
purposes and Adex is deemed the acquired company.  Accordingly,
Pieces’ historical financial statements for periods prior to the acquisition
become those of Adex retroactively restated for, and giving effect to, the
number of shares received in the merger with Abundantad.  The
historical retained earnings of Pieces are carried forward after the
acquisition.
 
 The
December 31, 2008 condensed consolidated balance sheet was derived from the
audited financial statements at that date, but does not include all disclosures
required by GAAP. Earnings per share prior to the merger with Abundantad are
restated to reflect the equivalent number of shares received by Pieces. The
results of operations presented for the period ended March 31, 2008 included the
results of operations for Pieces as a standalone entity. The results of
operations presented for the period ended March 31, 2009 included the three
months results of Adex and Abundantad. The condensed consolidated financial
statements include the accounts as described above as well as the
Company’s additional subsidiaries, all of which are wholly owned. All
significant inter-company balances and transactions have been eliminated in
consolidation.
 
 The
financial statements include management’s estimates and assumptions that affect
the reported amounts of assets and liabilities as of the date of the financial
statements and the reported amounts of sales and expenses during the reporting
periods. Actual results could differ from those estimates, and material effects
on operating results and financial position may result. These condensed
consolidated financial statements should be read in conjunction with our audited
consolidated financial statements for the fiscal year ended December 31, 2008
included in our Annual Report on Form 10-K, as amended by Amendment No. 1
on Form 10-K/A and No. 2 on Form 10-K/A, each as filed with the Securities and
Exchange Commission (“SEC”) on April 2, 2009 and April 30, 2009, respectively.
The results of operations for the three months ended March 31, 2009 are not
necessarily indicative of the results to be expected for any future
period.
 
 Certain
amounts in prior year financial statements have been reclassified to conform to
the current year presentation.
   -6-
 
 Note
2.      Significant Accounting
Policies
 
 Revenue
Recognition
 
 The
Company’s revenues consist of (i) marketing platform service revenue generated
from on-line marketing, advertising, and lead generation; and (ii) revenue
generated from selling and marketing consumer products. The Company evaluates
revenue recognition using the following basic criteria and recognizes revenue
when all four criteria are met:
 
 (i)
Evidence of an arrangement: Evidence of an arrangement with the customer that
reflects the terms and conditions for delivery of services must be present in
order to recognize revenue.
 
 (ii)
Delivery: Delivery is considered to occur when the service is performed and the
risk of loss and reward has been transferred to the customer.
 
 (iii)
Fixed or determinable fee: If a portion of the arrangement fee is not fixed or
determinable, we recognize that amount as revenue when the amount becomes fixed
or determinable.
 
 (iv)
Collection is deemed probable: We conduct a credit review of each customer
involved in a significant transaction to determine the creditworthiness of the
customer. Collection is deemed probable if we expect the customer to be able to
pay amounts under the arrangement as those amounts become due. If we determine
that collection is not probable, we recognize revenue when collection becomes
probable (generally upon cash collection).
 
 The
Company’s marketing platform service revenue consists mostly of revenue derived
world-wide from direct advertisers, affiliate networks, ad networks, list
managers, financial advisors, and other financial services companies. The
Company’s consumer product revenue consists mostly of revenue derived from
on-line consumers in the United States and Canada.
  The
Company’s marketing platform service revenue is mostly derived on a
cost-per-action (“CPA”) basis, also known as pay-per-action (“PPA”) basis. Under
this pricing model, advertisers, affiliate networks, ad networks, list managers,
and financial advisors pay the Company when a specified action (a purchase, a
form submission, or other action linked to the advertisement) has been
completed.
 
 The
Company ships its consumer products on a free trial subscription basis. Title to
all products shipped pass to the consumer upon receipt by the consumer. Upon
receipt by the consumer, the Company records non-refundable shipping and
handling revenue. The consumer has 10 to 11  days in which they can
notify the company of their intent to return the product shipped in which case
the consumer’s credit card will not be billed for the product sales price. If
the customer chooses to keep the product beyond the free trial period, the
customer’s credit card will be billed and the customer’s subscription will begin
automatically once the free trial period has expired. Accordingly, the Company
does not record revenue until acceptance occurs which is deemed to be after the
free trial period has expired without notification of rejection of the
product.
 
 The
Company’s revenues are subject to material seasonal fluctuations. In particular,
revenues in the fourth fiscal quarter will ordinarily be significantly higher
than other fiscal quarters. Revenues recorded in the current quarter are
not necessarily indicative of what reported revenues will be for an entire
fiscal year.
 
 Classification
of Affiliates Cost
 
 Payments
made or accrued to our sales and marketing affiliates that relate to leads
delivered for our product segment are recorded as sales and marketing expenses.
Payments made or accrued to our sales and marketing affiliates that relate to
leads delivered for third-party offers that we broker are recorded as cost of
revenue.
 
 Note
3. Fair Value Measurement
 
 Effective
January 1, 2008, we adopted the Statement of Financial Accounting Standards
(“SFAS”) No. 157,Fair
Value Measurements (“FAS 157”), which defines fair value,
establishes a framework and provides guidance regarding the methods used for
measuring fair value, and expands disclosures about fair value measurements. The
adoption of FAS 157 for financial assets and financial liabilities had no
material impact on our financial position, results of operations and
liquidity.  FAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants.
   -7-
  The
fair-value hierarchy established in FAS 157 prioritizes the inputs used in
valuation techniques into three levels as follows:
  Level-1
              Observable
      inputs – quoted prices in active markets for identical assets and
      liabilities;
 
 Level-2
              Observable
      inputs other than the quoted prices in active markets for identical assets
      and liabilities – such as quoted prices for similar instruments, quoted
      prices for identical or similar instruments in inactive markets, or other
      inputs that are observable or can be corroborated by observable market
      data;
 
 Level-3
              Unobservable
      inputs – includes amounts derived from valuation models where one or more
      significant inputs are unobservable and require us to develop relevant
      assumptions.
 
 The
Company used Level 1 inputs in measuring the fair market value of its short-term
investments at March 31, 2009.
  Relative
to FAS 157, the FASB issued Staff Position No. FAS 157-1 and FAS 157-2 in
February 2008 and FAS 157-3 in October 2008.
  FAS
157-1,Application of FASB
Statement No. 157 to FASB Statement No. 13 and Its Related
Interpretive Accounting Pronouncements That Address Leasing Transactions,
did not impact us as it amends FAS 157 to exclude Statement of Financial
Accounting Standards No. 13, Accounting for Leases,and
its related interpretative accounting pronouncements that address leasing
transactions.
  FAS
157-2,Effective Date of FASB
Statement No. 157,delays the effective date of FAS 157 for all
non-financial assets and non-financial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually) until fiscal years beginning after November 15,
2008. We adopted the FAS 157-2 as of January 1, 2009. The adoption had no
material impact on the Company’s’ financial position, results of operations and
liquidity.
  FAS
157-3,Determining the Fair
Value of a Financial Asset When the Market for That Asset Is Not Active,
clarifies the application of FAS 157 as it relates to the valuation of financial
assets in a market that is not active and is effective immediately. As of March
31, 2009, we did not have any financial assets that were valued using inactive
markets, and as such, we were not impacted by FAS 157-3.
 
 In
February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159,The Fair Value
Option for Financial Assets and Financial Liabilities (“FAS 159”). FAS
159 permits companies to choose to measure certain financial instruments and
certain other items at fair value. The standard requires that unrealized gains
and losses on items for which the fair value option has been elected be reported
in earnings. FAS 159 was effective for financial statements issued for fiscal
years beginning after November 15, 2007, although earlier adoption was
permitted. FAS 159 is effective for years beginning after November 15, 2007. We
adopted FAS 159 and have elected not to measure additional financial instruments
and other items at fair value. As such, the adoption had no material impact on
the Company’s financial position, results of operations and
liquidity.
  The fair
value of cash and cash equivalents, accounts receivable and accounts payable for
all periods presented approximates their respective carrying amounts because of
the short maturity of these financial instruments.
 
 Note
4.  Credit Card Holdbacks
 
 Credit
card holdbacks are reserves maintained by the credit card processors for any
potential charge-backs related to the Company’s on-line sales of consumer
products.  As of March 31, 2009 and December 31, 2008, the balance of
credit card holdbacks was $414,529 and $300,493, respectively.  The
Company maintains a separate accrual for credit card charge-backs and customer
return refunds which are both netted against the balance in credit card
holdbacks.  The balance of this accrual at March 31, 2009 and December
31, 2008 was $202,349 and $144,040, respectively. The Company also maintains an
allowance for uncollectible credit card holdbacks.  The balance of
accrual for both March 31, 2009 and December 31, 2008 was $23,323.
  Note
5.  Inventory
 
 Inventories
consist of finished goods purchased from third parties, and freight-in.
Inventories are stated at the lower of cost or market, using the first-in,
first-out method.  The Company performs periodic assessments to
determine the existence of obsolete, slow moving and non-saleable inventories,
and records necessary provisions to reduce such inventories to net realizable
value.  At March 31, 2009 and December 31, 2008, the balance in the
provision for obsolete slow moving and non-saleable inventory was $49,496 and
$24,354, respectively. All inventories are produced by third-party
manufacturers, and all inventories are located at the Company’s facility in
Boulder, Colorado.
 
 
 -8-
 
 
 Note
6.  Prepaid Expenses and Other Current Assets
 
 Prepaid
expenses and other current assets consist primarily of prepaid insurance
premiums, prepaid media buys and leads, and prepaid deposits on inventory and
the Company’s operating leases. At March 31, 2009 and December 31, 2008, the
balance was $208,559 and $97,878, respectively.
 
 Note
7. Property and Equipment, net
 
 Property
and equipment as of March 31, 2009 and December 31, 2008 are comprised of the
following:
  March
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008Computers
      and other office equipment
                        
                        $
                        84,834
                        
                        
                        $
                        75,721Office
      furniture
                        
                        
                        47,957
                        
                        
                        
                        44,544Software
      licenses
                        
                        
                        2,530
                        
                        
                        
                        2,530Total
      property and equipment, net
                        
                        
                        135,321
                        
                        
                        
                        122,795Accumulated
      depreciation
                        
                        
                        (90,356
                        )
                        
                        
                        (79,189
                        )Property
      and equipment, net
                        
                        $
                        44,965
                        
                        
                        $
                        43,606
 The
Company depreciates its property and equipment using the straight line method
over useful lives ranging from two to five years.  For the three months
ended March 31, 2009, we recorded $11,167 in depreciation expenses and none for
the three months ended March 31, 2008.
  Note 8.  Goodwill and Intangible
Assets
 
 The
Company has adopted SFAS No. 142,Goodwill and Other Intangible
Assets (“FAS 142”). Under FAS 142, goodwill is to be reviewed at least
annually for impairment. The Company has elected to perform this review annually
on December 31 of each calendar year. As of March 31, 2009, the goodwill balance
is $8,448,789, of which $1,945,366 is attributable to the marketing platform
services segment and $6,503,423 is attributable to the product
segment.
 
 Intangible
Assets
  The
components of acquired intangible assets as of March 31, 2009 and December 31,
2008 are as follows:
  March
      31,
                          
                          
                          December
      31,2009
                          
                          
                          2008Intangible
      assets acquired
                          
                          $
                          1,800,000
                          
                          
                          $
                          1,800,000Accumulated
      amortization
                          
                          
                          (204,719
                          )
                          
                          
                          (122,670
                          )Subtotal
                          
                          
                          1,595,281
                          
                          
                          
                          1,677,330Impairment
                          
                          
                          (310,000
                          )
                          
                          
                          (310,000
                          )Intangible
      assets, net
                          
                          $
                          1,285,281
                          
                          
                          $
                          1,367,330
 
 For the
three months ended March 31, 2009 and 2008, $82,049 and $0, respectively, of
intangible asset amortization was recorded and included in amortization of
intangible assets in the condensed consolidated statement of operations, of
which, $35,000 and $0, respectively, of intangible asset amortization was
recorded and included in cost of revenues in the condensed consolidated
statement of operations.
 
 
 -9-
 
 The
estimated future amortization expenses for our purchased intangible assets are
summarized below:
  Amortization
      Expense(by
      fiscal year)Remainder
      of 2009
                        
                        $
                        246,1422010
                        
                        
                        319,7652011
                        
                        
                        290,7392012
                        
                        
                        268,9772013
                        
                        
                        159,658Total
                        
                        $
                        1,285,281
 
 The total
weighted average life of all of the intangibles is approximately 4.74
years.
  There
were no amounts of in process research and development assets acquired during
the three months ended March 31, 2009, nor any written-off in the
period.
  During
the year ended December 31, 2008, the Company determined that certain of the
assets acquired in connection with the acquisition of Vibrantads were impaired.
Accordingly, the Company recorded a $310,000 impairment charge.  This
charge related to the Company’s marketing platform services
agreement.
  Note
9.  Accrued Liabilities
 Accrued
liabilities as of March 31, 2009 and December 31, 2008 are comprised of as
follows:
 March
      31,
                          
                          
                          December
      31,2009
                          
                          
                          2008Accrued
      franchise taxes
                          
                          $
                          5,000
                          
                          
                          $
                          15,500Accrued
      payroll and payroll  related expenses
                          
                          
                          298,583
                          
                          
                          
                          259,358Accrued
      professional fees
                          
                          
                          109,501
                          
                          
                          
                          130,001Accrued
      dividends to Pieces Media 1
                          
                          
                          100,000
                          
                          
                          
                          100,000Accrued
      payment to affiliates
                          
                          
                          30,685
                          
                          
                          
                          -Accrued
      credit card charge-back fees
                          
                          
                          50,204
                          
                          
                          
                          57,280Accrued
      payment to Pieces Media 1
                          
                          
                          263,836
                          
                          
                          
                          -Other
                          
                          
                          27,147
                          
                          
                          
                          31,768Total
                          
                          $
                          884,956
                          
                          
                          $
                          593,907(1)
      Payments due to former members of Pieces Media.
 
    -10-
 
 Note
10.    Promissory Notes
 
 Promissory
notes as of March 31, 2009 and December 31, 2008 are comprised of the
following:
  March
      31,
                          
                          
                          December
      31,2009
                          
                          
                          2008$60,000
      promissory note; non-interest bearing, due
                            July
      21, 2009; shown net of imputed interest of
                            $1,352
      and $2,388, respectively
                          
                          $
                          58,648
                          
                          
                          $
                          57,612$255,000
      promissory note; non-interest bearing,
                            $52,500
      due May 12, 2009; $52,500 due August 12, 2009;
                            $150,000
      due February 12, 2010; shown net of imputed
                            interest
      of $11,655 and $5,806, respectively
                          
                          
                          243,345
                          
                          
                          
                          494,194Total
      promissory notes
                          
                          $
                          301,993
                          
                          
                          $
                          551,806Note:
      At March 31, 2009, both promissory notes were classified as short-term
      liabilities; At December 31, 2008,$401,806
      was classified as short-term liabilities and $150,000 was classified as
      long-term liabilities.
 
 In
connection with the Company’s acquisition of the assets of Vibrantads, LLC, on
July 21, 2008, the Company entered into a promissory note with the sole selling
member of Vibrantads in the principal amount of $60,000. The principal amount of
the promissory note bears no interest. The unpaid principal amount of the
promissory note shall be due and payable in its entirety on July 21, 2009. The
promissory note contains customary events of default that entitle the holder
thereof to accelerate the due date of the unpaid principal amount of the
promissory note. The present value of the promissory note at March 31, 2009 and
December 31, 2008 was $58,648 and $57,612, respectively. The promissory note is
being accreted to the value of its principal amount over a period of twelve
months.
 
 In
connection with the Company’s acquisition of the membership interests of Digital
Instructor, LLC, on August 12, 2008, the Company issued a senior secured
promissory note in the principal amount of five hundred thousand dollars
($500,000) which was payable on February 12, 2009 (subsequently amended as set
forth below). The note was issued to Digital Equity Partners, LLC, a Colorado
limited liability company and wholly-owned by the selling members of Digital
Instructor, which was formed for the purpose of holding the promissory note. The
principal amount of the promissory note bears no interest and contains customary
events of default that entitle the holder thereof to accelerate the maturity
date of the unpaid principal amount. As part of the transaction, the Company
entered into a security agreement with Digital Equity Partners, LLC for purposes
of collateralizing the note. Under the security agreement, Digital Equity
Partners, LLC was given a first priority security interest in the membership
interests purchased by the Company.
 
 On March
6, 2009, the Company, Digital Equity Partners, and the Members entered into an
Agreement (the “Agreement”) pursuant to which:
 
 (i)
              Digital
      Equity Partners surrendered the $500,000 note and the Company issued to
      Digital Equity Partners in exchange for such note (a) a new note payable
      to Digital Equity Partners in the principal amount of $255,000 (the “New
      Note”) and (b) a cash payment of $245,000 on the Effective Date (the “Cash
      Payment”) of the Agreement; and(ii)
              the
      Security Agreement under the $500,000 note was amended to reflect Digital
      Equity Partners’ amended security interest in the principal amount of
      $255,000 under the New Note.
 
 Pursuant
to the New Note, the Company agreed to pay Digital Equity Partners the following
amounts on the following dates:
 
 (i)
              $52,500
      on the earlier of (i) ninety days from February 12, 2009 and (ii) when
      such amount is declared due and payable by the holder upon or after the
      occurrence of an Acceleration Event (as defined in the New
      Note);
 
 (ii)
              $52,500
      on the earlier of (i) one hundred eighty days from February 12, 2009 and
      (ii) when such amount is declared due and payable by the holder upon or
      after the occurrence of an Acceleration Event (as defined in the New
      Note); and
 
 (iii)
              $150,000
      on the earlier of (i) February 12, 2010, (ii) when such amount is declared
      due and payable by the holder upon or after the occurrence of an
      Acceleration Event and (iii) when such amount is declared due and payable
      by holder upon or after the occurrence of the Company’s termination of the
      managing member of Digital Instructor’s employment other than for Cause
      (as defined in the Agreement) prior to February 12,
  2010.
 
  -11-
  The
present value of the promissory note at March 31, 2009 and December 31, 2008 was
$243,345 and $494,194, respectively. The promissory note is being accreted to
the value of its principal amount over a period of three to twelve
months.
 
 During
the three months ended March 31, 2009, we recovered $4,813 of imputed interest
expense due to the amendment on the payment term of the promissory note. We had
no such interest expense in the three months ended March 31, 2008.
  Note
11.    Earning (Loss) per Share
 
 We
compute basic and diluted net income (loss) per share amounts pursuant to SFAS
No. 128,Earnings per Share(“FAS 128”). Basic income (loss) per share is computed using the weighted
average number of common shares outstanding during the year.
  Diluted
income (loss) per share is computed using the weighted average number of common
and potentially dilutive securities outstanding during the period. Potentially
dilutive securities consist of the incremental common shares that could be
issued upon exercise of stock options (using the treasury stock method).
Potentially dilutive securities are excluded from the computation if their
effect is anti-dilutive.
  The
following tables summarize the weighted average shares outstanding and earnings
(loss) per share for the three months ended March 31, 2009 and March 31,
2008:
 
  March
      31,
                                
                                
                                March
      31,2009
                                
                                
                                2008Basic
      weighted average shares outstanding
                                
                                
                                31,431,923
                                
                                
                                
                                250,000Add:
      effect of dilutive stock options
                                
                                
                                -
                                
                                
                                
                                -Diluted
      weighted average shares outstanding
                                
                                
                                31,431,923
                                
                                
                                
                                250,000Anti-dilutive
      stock options not included in the above calculation
                                
                                
                                4,680,000
                                
                                
                                
                                -Anti-dilutive
      warrants not included in the above calculation
                                
                                
                                75,000
                                
                                
                                
                                -Net
      (loss) income
                                
                                $
                                (1,724,081
                                )
                                
                                $
                                107,665(Loss)
      earnings per share, basic and diluted
                                
                                $
                                (0.05
                                )
                                
                                $
                                0.43
  During
the three months ended March 31, 2009, as the Company incurred a net loss, the
weighted average number of common shares outstanding equaled the weighted
average number of common shares and share equivalent assuming dilution. During
the three months ended March 31, 2008, the Company had no potentially dilutive
common shares equivalents assuming dilution, as such, the basic and diluted
weighted average shares were the same.
 
 In
connection with the Company’s acquisitions of the assets of Pieces and
Vibrantads, and the membership interests of Digital Instructor, under share
reset provisions in each of the respective acquisition agreements, a potential
maximum number of shares issuable to each of the above are 250,000, 262,500, and
1,400,000, respectively.
  In
connection with the Company’s acquisition of the assets of Bay Harbor, 150,000
shares are currently held in escrow and are subject to release from escrow based
upon the Bay Harbor assets achieving certain revenue and profit
milestones.
 
 Note
12.    Comprehensive (Loss) Income
 
 We report
comprehensive (loss) income in accordance with SFAS No. 130,Reporting Comprehensive Income(“FAS 130”), which established the standard for reporting and displaying
other comprehensive (loss) income and its components within financial
statements. For the three months ended March 31, 2009 and 2008, the Company’s
comprehensive (loss) income was the same as net (loss) income.
 
 -12-
 
 Note
13.   Commitment and
Contingencies
 
 Lease
Commitments
 
 The
Company leases 2,825 square feet for its corporate office headquarters in
Mountain View, California under an 18-month lease agreement. This lease expires
on October 31, 2009 with a monthly base rental of $6,780 per month through April
2009 and then increasing to $7,119 until the end of the lease term.
 
 In
connection with the acquisition of Digital Instructor, LLC on August 12, 2008,
the Company assumed an additional two leases representing an aggregate of 7,746
square feet expiring on June 30, 2012 in Boulder, Colorado. Monthly aggregate
base rentals of these two leases are $6,397 to June 2009, increasing to $6,623
to June 2010, increasing to $6,855 to June 2011, and increasing to $7,101 to
June 2012.
 
 Total
rent expense for the three months ended March 31, 2009 and 2008 was $39,887 and
$0, respectively.
  We
believe that if we lost any of the foregoing leases, we could promptly relocate
within ten miles of each lease on similar terms.
  Approximate
future minimum lease payments under non-cancelable office lease agreements are
as follows:
  Years
                        
                        AmountRemainder
      of 2009
                        
                        $
                        108,5182010
                        
                        
                        80,9672011
                        
                        
                        83,8382012
                        
                        
                        42,603Total
                        
                        $
                        315,926
  Contingencies
 
 From time
to time, we might be involved in various claims, legal actions and complaints
arising in the normal course of business. As of March 31, 2009, we are not party
to any pending legal proceedings that management believes will result in a
material adverse effect on our financial condition or results of
operations
 
 Note
14.  Stock Options, Restricted Stock, Warrants, and Share-Based
Compensation Expense
 
 We
currently have one equity compensation plan, the Adex Media, Inc. Employee Stock
Option Plan (the “Plan”) which permits the Board of Directors to grant to
officers, directors, employees and third parties incentive stock options
(“ISOs”), non-qualified stock options, and restricted stock.
 
 Under the
Plan, options for 5,000,000 shares of common stock are reserved for
issuance.  At March 31, 2009, 320,000 options were available for
grant.
 
 
 -13-
 
 
 Stock
Options
 
 Option
activity under the Plan was as follows for the first quarter of
2009:
  Weighted
                        
                        
                        WeightedAverage
                        
                        
                        AverageExercise
                        
                        
                        Remaining
                        
                        
                        AggregatePrice
      per
                        
                        
                        Contractual
                        
                        
                        IntrinsicOutstanding
                        
                        
                        Share
                        
                        
                        Life
      (in Years)
                        
                        
                        ValueOutstanding
      at December 31, 2008
                        
                        
                        4,680,000
                        
                        
                        $
                        1.62
                        
                        
                        
                        9.41
                        
                        
                        $
                        5,159,900Granted
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Exercised
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Forfeited
      or expired
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Outstanding
      at March 31, 2009
                        
                        
                        4,680,000
                        
                        
                        $
                        1.62
                        
                        
                        
                        9.16
                        
                        
                        $
                        4,984,400Vested
      and exercisable at March 31, 2009
                        
                        
                        45,833
                        
                        
                        $
                        0.75
                        
                        
                        
                        4.13
                        
                        
                        $
                        66,458
  The
aggregate intrinsic value in the table above represented the total pre-tax
intrinsic value, which was based on the closing price of our common stock at the
end of the periods. These were the value which would have been received by
option holders if all option holders exercised their options on that
date.
 
 The fair
value of options granted is recognized as an expense over the requisite service
period.  As of March 31, 2009, the fair value of options issued by the
Company was $4,069,726 of which $0 has been forfeited. The unamortized cost of
stock options issued remaining at March 31, 2009 was $3,325,398 with a weighted
average expected term for recognition of 3.14 years. At the time of grant, the
estimated fair values per option were from $0.24 to $4.46.
 
 During
the first quarter of 2009, an aggregate of 500,000 options to purchase common
stocks held by two employees were repriced. The repricing of the underwater
options was accounted for under SFAS No. 123 (revised 2004),Share-Based Payment (“FAS
123R”) as modification. The modification resulted in an incremental compensation
cost of $88,033, of which, $1,547 was recognized in the first quarter of 2009.
The remaining unrecognized incremental cost will be recognized over the
remaining service period.
  Restricted
Stock
 
 The fair
value of restricted stock granted is recognized as an expense over the requisite
service period.  As of March 31, 2009, the fair value of restricted
stock issued by the Company was $287,581. The unamortized cost of restricted
stock issued remaining at March 31, 2009 was $209,317 with a weighted average
expected term for recognition of 3.06 years. At the time of grant, the fair
values per share were from $1.75 to $5.80.
 
 We
accounted for non-employee shares of restricted stocks in accordance to Emerging
Issues Task Force (“EITF”) Abstract 96-18, Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services(“EITF 96-18”). Under the provisions
of EITF 96-18, because none of our agreements has a disincentive for
nonperformance, we record a charge for the fair value of the portion of the
restrict stocks earned from the point in time when vesting of the restricted
stock becomes probable. Final determination of fair value of the restricted
stock occurs upon actual vesting. As such, non-employees’ shares were revalued
and marked-to-market at the stock price on March 31, 2009.
 
 During
the first quarter of 2009, we modified one terminated employee’s original grant.
Of the 50,000 shares of restricted stock that such employee was originally
granted, 40,000 shares were canceled and the remaining 10,000 shares were
accelerated as part of the separation agreement. Under FAS 123R, the change in
the vesting term of the restricted stock is considered as modification. As such,
we reversed $22,134 compensation expense related to the original grant and
recorded $16,000 compensation expense based on the fair value of the 10,000
shares on the modification date.
 
 Warrants
 
 We
accounted for warrants issued to third-party service providers in accordance to
EITF 96-18, because none of our agreements has a disincentive for
nonperformance, we record a charge for the fair value of the portion of the
warrants earned from the point in time when vesting of the warrants becomes
probable. Final determination of fair value of the warrants occurs upon actual
vesting. As such, the warrants were revalued and marked-to-market at March 31,
2009. During the first quarter of 2009, there was no issuance or cancellation of
warrants.We recorded $18,310 in
warrants expense during the period.
  -14-
  Warrants
have been issued with exercise prices of between $2.00 and $3.00 per share as
follows:
 
  WeightedWeighted
                        
                        
                        AverageAverage
                        
                        
                        Remaining
                        
                        
                        AggregateExercise
                        
                        
                        Contractual
                        
                        
                        IntrinsicShares
                        
                        
                        Price
                        
                        
                        Life
      (in Years)
                        
                        
                        ValueOutstanding
      at December 31, 2008
                        
                        
                        75,000
                        
                        
                        $
                        2.50
                        
                        
                        $
                        5.00
                        
                        
                        $
                        6,250Granted
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        -Exercised
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        -Forfeited
      or expired
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        -Outstanding
      at March 31, 2009
                        
                        
                        75,000
                        
                        
                        $
                        2.50
                        
                        
                        
                        4.76
                        
                        
                        $
                        5,000Exercisable
      at March 31, 2009
                        
                        
                        -
                        
                        
                        $
                        -
                        
                        
                        
                        -
                        
                        
                        $
                        -
  Share-based
Compensation Expenses
 
 We
recognize our share-based payment compensation cost under
FAS 123R for employees' shares and under EITF 96-18 for non-employees' shares.
The following table sets forth the total share-based compensation expense
for the periods indicated:
  March
      31,
                          
                          
                          March
      31,2009
                          
                          
                          2008Sales
      and marketing - stock options to employees
                          
                          $
                          81,913
                          
                          
                          $
                          -Sales
      and marketing - restricted stocks to employees
                          
                          
                          1,847
                          
                          
                          
                          -General
      and administration - stock options to employees
                          
                          
                          62,301
                          
                          
                          
                          -General
      and administration - restricted stocks to employees
                          
                          
                          (10,355
                          )
                          
                          
                          -General
      and administration - restricted stocks to non-employees
                          
                          
                          24,340
                          
                          
                          
                          -General
      and administration - warrants to non-employees
                          
                          
                          18,310Total
      share-based compensation expense
                          
                          $
                          178,356
                          
                          
                          $
                          -
  Note
13.   Concentrations
  Concentration
of Credit Risk
 
 Financial
instruments which potentially subject the Company to concentration of credit
risk consists of short-term investments and accounts receivable.  At
March 31, 2009, the Company had deposits in excess of the Federal Deposit
Insurance Corporation (FDIC) limit at one U.S. based financial
institution.  We had uninsured bank balances and certificates of
deposit totaling $1,495,923 and $2,626,088, respectively at March 31, 2009 and
December 31, 2008.  The Company maintains its bank accounts at three
financial institutions.
  Customer
Base
 
 At March
31, 2009, 31% of our revenue was generated from two customers with each
accounting for 17% and 14%, respectively; and 49% of our revenue was generated
from our top five customers during the three months ended March 31, 2009. One of
the aforementioned customers accounted for 27% and the other accounted for 16%,
respectively, of our March 31, 2009 accounts receivable. The two customers
together accounted for an aggregate of 43% of our total accounts
receivables.
   -15-
 
 As of
December 31, 2008, three customers accounted for an aggregate of 35% of
consolidated accounts receivable.
 
 Major
customers are defined as those having revenues which exceed 10% of the Company’s
annual revenues.
  The
Company does not require collateral or other security for accounts
receivable.  However, credit risk is mitigated by the Company’s
ongoing evaluations and the reasonably short collection
terms.  Accounts receivable are stated net of allowances for doubtful
accounts.  An allowance for doubtful accounts has been provided at
March 31, 2009 and December 31, 2008, based on historic trends and the Company’s
expectation of collectability.  Allowance for doubtful accounts at
March 31, 2009 and December 31, 2008 was $33,981 and $19,737,
respectively.
  Vendor
Base
 
 During
the three months ended March 31, 2009, one vendor accounted for more than 10% of
our total expenditures. During the three months ended March 31, 2008, none of
the vendors accounted for more than 10% of our total expenditures.
 
 Major
vendors are defined as those vendors having expenditures made by the Company
which exceed 10% of the Company’s total expenditures.
  Operations
by Geographic Area
 
 The
Company’s operations are domiciled in the United States. The Company does not
have international subsidiaries. Revenue is attributed to a geographic region
based upon the country from which the customer relationship is maintained. As of
March 31, 2009, all of our customer relationships were maintained from the
United States although our customers include advertising and affiliate networks
which are based both in the United States and internationally. In addition, the
direct advertiser who places offers through an advertising or affiliate network
may be located internationally as could be the end consumer who is ultimately
completing the final action which triggers the action for how the Company
generates revenue. However, because the customer relationships are maintained in
the United States, all revenue and income from operations is allocated to the
United States.
  Location
of Assets
 
 Our
tangible assets are located at our corporate offices in Mountain View,
California and our offices in Boulder, Colorado. Our servers for hosting our
platforms are located at third-party locations.
  Note
15.    Segment Reporting
 
 Segments
are defined by SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information (“FAS
131”), as components of a company in which separate financial information is
available and is evaluated by the chief operating decision maker, or a decision
making group, in deciding how to allocate resources and in assessing
performance.
  Until the
Company’s acquisition of Digital Instructor, LLC on August 12, 2008, the Company
was comprised of a single segment which was the marketing platform services
segment. As of August 12, 2008, in connection with the acquisition of Digital
Instructor, LLC, the Company added a second segment, which is the products
segment.
  Segment
operating income (loss) consists of the revenues generated by a segment, less
the direct costs of revenue and selling and general and administrative costs
that are incurred directly by the segment. Unallocated corporate costs include
costs related to administrative functions that are performed in a centralized
manner that are not attributable to a particular segment. These administrative
function costs include costs for corporate office support, all office facility
costs, costs relating to accounting and finance, human resources, legal,
marketing, information technology and Company-wide business development
functions, as well as costs related to overall corporate
management.
 
 
 -16-
 
 
 The
following table presents information about reported segments along with the
items necessary to reconcile the segment information to the totals reported in
the accompanying condensed consolidated financial statements for the periods
indicated:
   MarketingPlatformFor
      the Three Months Ended
                                  
                                  Services
                                  
                                  
                                  Products
                                  
                                  
                                  TotalMarch
      31, 2009Revenues
                                  
                                  $
                                  2,512,500
                                  
                                  
                                  $
                                  981,396
                                  
                                  
                                  $
                                  3,493,896Cost
      of revenues
                                  
                                  
                                  2,103,893
                                  
                                  
                                  
                                  411,626
                                  
                                  
                                  
                                  2,515,519Gross
      profit
                                  
                                  $
                                  408,607
                                  
                                  
                                  $
                                  569,770
                                  
                                  
                                  $
                                  978,377Gross
      margin
                                  
                                  
                                  16
                                  %
                                  
                                  
                                  58
                                  %
                                  
                                  
                                  28
                                  %Unallocated
      operating expenses
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  2,735,952Operating
      loss
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  (1,757,575
                                  )March
      31, 2008Revenues
                                  
                                  $
                                  690,553
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  690,553Cost
      of revenues
                                  
                                  
                                  543,660
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  543,660Gross
      profit
                                  
                                  $
                                  146,893
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  146,893Gross
      margin
                                  
                                  
                                  21
                                  %
                                  
                                  
                                  -
                                  
                                  
                                  
                                  21
                                  %Unallocated
      operating expenses
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  40,985Operating
      income
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  105,908
  For the
three months ended March 31, 2009, there was $902,851 in intersegment revenue
recognized by the marketing platform services segment from the products segment.
This amount has been eliminated in the condensed consolidated financial
statements. There was no such intersegment revenue elimination in the three
months ended March 31, 2008.
  Note
16.    Acquisitions
 
 Acquisition
of the Assets of Vibrantads, LLC
 
 On July
21, 2008, the Company entered into an Asset Purchase Agreement, pursuant to
which the Company acquired substantially all the assets of Vibrantads, LLC
(“Vibrantads”), and a California limited liability company. Vibrantads was
engaged in on-line promotions and affiliate network marketing. The purchase
price for the Vibrantads assets consisted of the following: (i) $70,000 at
closing; (ii) 112,500 unregistered restricted shares of Adex common stock at
closing; and (iii) a promissory note in favor of the sole selling member of
Vibrantads, in the principal amount of $60,000 with no interest thereon, and
having a maturity date that is twelve months from July 21, 2008, the closing
date. The purchase price for the Vibrantads assets was determined based on arm’s
length negotiations. Prior to the acquisition, there were no material
relationships between Adex and Vibrantads or with any of company’s affiliates,
directors, officers, or any associate of such directors or
officers.
 
 The
principal amount of the promissory note bears no interest. The unpaid principal
amount of the promissory note is due and payable in its entirety on July 21,
2009. The promissory note contains customary events of default that entitle the
holder thereof to accelerate the due date of the unpaid principal amount of the
promissory note. The present value of the promissory note at March 31, 2009 and
December 31, 2008 was $58,648 and $57,612, respectively. The promissory note is
being accreted to the value of its principal amount over a period of twelve
months.
 
 As part
of the transaction, the Company entered into a lockup and share release
agreement which restricts the sole selling member from selling the shares until
certain prescribed intervals. The lockup begins to lapse twelve months after the
closing date with all restrictions under the lockup lapsing eighteen months
after the closing date.
 
 The
shares are subject to a reset provision that would occur twelve months after the
closing date and would cover the 112,500 shares pursuant to a formula that
compares the volume-weighted average price (the “VWAP”) of Adex common stock for
the ten days preceding the reset to a contractually guaranteed minimum price per
share.  In the event the VWAP was less than $2.50 per share, the
Company would issue an additional number of shares of common stock as necessary
to provide the seller with the benefit of the guaranteed minimum price. The
reset is subject to a maximum floor value for the VWAP of $0.75 per
share.
   -17-
  The
aggregate purchase price was $706,805 which included the following:
   AmountsCash
      paid at closing
                              
                              $
                              70,000Promissory
      note issued net of discount on closing date 1
                              
                              
                              55,844Restricted
      shares of common stock issued
                              
                              
                              531,563Cash
      paid for closing costs
                              
                              
                              27,398Accrued
      closing costs
                              
                              
                              22,000Total
                              
                              $
                              706,805(1)  The principal amount of the promissory
      note is $60,000. The discount isbeing
      accreted over a period of twelve months.
  The fair
value of the 112,500 unregistered common shares issued was determined to be
$531,563 on July 21, 2008.
  The
allocation of the purchase price was based upon management’s estimates and
assumptions:
  AmountsIntangible
      assets
                        
                        $
                        310,000Goodwill
                        
                        
                        396,805Total
      assets acquired
                        
                        $
                        706,805
  
 The
acquisition of the Vibrantads’ assets was accounted for as a business
combination and the operations of Vibrantads were included in the Company’s
results of operations beginning on July 21, 2008, the acquisition date. The
factors resulting in goodwill were Vibrantads’ name, reputation, and established
key personnel. The full amount of goodwill is deductible for tax purposes over a
period of 15 years.
  During
the year ended December 31, 2008, the Company determined that the intangible
assets acquired from Vibrantads were impaired and had no remaining terminal
value to the Company. Accordingly, an impairment charge of $310,000 was taken on
these intangible assets.
  For the
three months ended March 31, 2008, there was no revenue and earnings (loss)
related to the foregoing assets purchased. As such, the proforma results for the
three months ended March 31, 2008 is same as the actual results reported on this
condensed consolidated statement of operations.
  March
      31,
                          
                          
                          March
      31,2009
                          
                          
                          2008Revenues
                          
                          $
                          3,493,896
                          
                          
                          $
                          690,553Net
      (loss) income
                          
                          $
                          (1,724,081
                          )
                          
                          $
                          107,665(Loss)
      income per share, basic and diluted
                          
                          $
                          (0.05
                          )
                          
                          $
                          0.30
  Acquisition
of Digital Instructor, LLC
 
 On August
12, 2008, the Company entered into a Membership Interest Purchase Agreement (the
“MIPA”) with the members of Digital Instructor, LLC (“Digital Instructor”),
pursuant to which the Company purchased all outstanding membership interests of
Digital Instructor.
   -18-
 
 Pursuant
to the MIPA, the Company issued the following payments as part of the Purchase
Price:
 
 (i)
              $1,000,000
      in cash at the closing;
  (ii)
              a
      Senior Secured Promissory Note (the “Note”) in the principal amount of
      $500,000 payable to Digital Equity Partners, LLC, a Colorado limited
      liability company wholly owned by the selling members of Digital
      Instructor and formed for the purpose of holding the Note (“DEP”), on
      February 12, 2009 (subsequently amended to March 9, 2009);
    and
  (iii)
              1,200,000
      restricted shares of the Company’s common
stock.
 
 In
addition, the Company agreed to pay an additional amount up to $500,000 payable
within a certain period of time following August 12, 2009, subject to Digital
Instructor achieving certain gross revenue performance milestones (the “Earn
Out”) as part of the Purchase Price.
 
 On March
6, 2009, the Company, DEP and the former members of Digital Instructor entered
into an Agreement (the “Agreement”) pursuant to which:
 
 (i)
              DEP
      surrendered the Note and the Company issued to DEP in exchange for the
      Note (a) a new note payable to DEP in the principal amount of $255,000
      (the “New Note”) and (b) a cash payment of $245,000 on the Effective Date
      (the “Cash Payment”) of the
Agreement;
 
 (ii)
              the
      Security Agreement under the Note was amended to reflect DEP’s amended
      security interest in the principal amount of $255,000 under the New Note;
      and
 
 (iii)
              certain
      provisions of the MIPA including without limitation, the Earn Out and the
      Earn Out Period, were amended by the Company and the former
      Members.
 
 Pursuant
to the New Note, the Company has agreed to pay DEP the following amounts on the
following dates:
 
 (i)
              $52,500
      on the earlier of (i) ninety days from February 12, 2009 and (ii) when
      such amount is declared due and payable by the holder upon or after the
      occurrence of an Acceleration
Event;
 
 (ii)
              $52,500
      on the earlier of (i) one hundred eighty days from February 12, 2009 and
      (ii) when such amount is declared due and payable by the holder upon or
      after the occurrence of an Acceleration Event;
  and
 
 (iii)
              $150,000
      on the earlier of (i) February 12, 2010, (ii) when such amount is declared
      due and payable by the holder upon or after the occurrence of an
      Acceleration Event and (iii) when such amount is declared due and payable
      by holder upon or after the occurrence of the Company’s termination of the
      managing member’s employment other than for Cause (as defined in the
      Agreement) prior to February 12,
2010.
 
 The New
Note contains customary events of default that entitle the holder thereof to
accelerate the maturity date of the unpaid principal amount.
 
 The
Security Agreement, which was entered into for the purposes of collateralizing
the Note and gave DEP a first priority security interest in the Membership
Interests purchased by the Company was amended to reflect DEP’s amended security
interest in the principal amount of $255,000 under the New Note.
 
 Under the
Agreement, the Company, DEP and the former Members agreed to a mutual release of
claims arising out of the MIPA prior to the Effective Date of the
Agreement.
 
 Under the
MIPA, the Earn Out provision was amended with respect to one of the Members’ pro
rata portion of the Earn Out, which is equal to an amount up to
$150,000.  Such amendment extends the Earn Out Period to include the
period commencing on February 12, 2009 and ending on February 12,
2010.
 
 
 -19-
  
 The
aggregate purchase price was $7,746,990 which included the
following:
   AmountsCash
      paid at closing
                        
                        $
                        1,000,000Promissory
      note issued net of discount issued at closing date (1)
                        
                        
                        482,372Restricted
      shares of common stock issued to selling members
                        
                        
                        5,616,000Cash
      paid for closing costs and finders’ fees
                        
                        
                        139,614Restricted
      shares issued as finders’ fees
                        
                        
                        27,004Accrued
      closing costs
                        
                        
                        40,000Deferred
      tax liability
                        
                        
                        442,000Total
                        
                        $
                        7,746,990(1)  The
      principal amount of the promissory note is $500,000.
  The fair
value of the 1,200,000 unregistered common stock issued was determined to be
$5,616,000 on August 12, 2008.
 
 The
allocation of the purchase price was based upon management’s estimates and
assumptions:
   AmountsCurrent
      assets
                      
                      $
                      451,652Property
      plant and equipment, net
                      
                      
                      27,049Intangible
      assets
                      
                      
                      1,150,000Goodwill
                      
                      
                      6,503,423Total
      assets acquired
                      
                      
                      8,132,124Current
      liabilities
                      
                      
                      385,134Total
      liabilities assumed
                      
                      
                      385,134Net
      assets acquired
                      
                      $
                      7,746,990
  For the
three months ended March 31, 2009, $981,396 in revenue and $118,855 in net loss
was included in the Company’s condensed consolidated statement of
operations.
  The
accompanying consolidated pro forma information gives effect to the Digital
Instructor acquisition as if it had occurred on January 1, 2008 and its results
of operations were included in the three months ended March 31, 2009 and 2008.
The pro forma information is included only for purposes of illustration and does
not necessarily indicate what the Company’s operating results would have been
had the acquisition of the Digital Instructor Membership Interests been
completed on January 1, 2008.
 
  March
      31,
                            
                            
                            March
      31,2009
                            
                            
                            2008Revenues
                            
                            $
                            3,493,896
                            
                            
                            $
                            1,660,912Net
      (loss) income
                            
                            $
                            (1,724,081
                            )
                            
                            $
                            166,895(Loss)
      income per share, basic and diluted
                            
                            $
                            (0.05
                            )
                            
                            $
                            0.09
 
 -20-
 
 Acquisition
of Bay Harbor Marketing, LLC
 
 On August
29, 2008, the Company entered into an asset purchase agreement, pursuant to
which the Company acquired substantially all the assets of Bay Harbor Marketing,
LLC (“Bay Harbor”), a California limited liability company. The asset purchase
was completed on August 29, 2008.
 
 Bay
Harbor is engaged in providing marketing solutions, focusing exclusively on the
financial services market.
  The
purchase price for the Bay Harbor assets consisted of the following: (i) $50,000
paid to Bay Harbor at the closing; (ii) 50,000 unregistered restricted shares of
the Company’s common stock (the “Closing Shares”) issued to Bay Harbor on the
closing date subject to a contractual lock-up and share release agreement (the
“Lock-Up Agreement”); (iii) 152,151 restricted unregistered shares of the
Company’s common stock issued to the managing member of Bay Harbor, on the
closing date; (iv) 147,273 restricted unregistered shares of the Company’s
common stock issued to a creditor of Bay Harbor, on the closing date; and (v) an
additional amount of up to 150,000 restricted unregistered shares of the
Company’s common stock (the “Earn Out Shares”) issued to an escrow agent on the
closing date in the name of Bay Harbor pursuant to an escrow agreement (the
“Escrow Agreement”).  The  Earn Out Shares are subject to
the Lock-Up Agreement and all or part of the Earn Out Shares are subject to
release from escrow within a certain period of time following August 29, 2009,
in accordance with an earn-out formula setting forth certain net revenue and net
profit margin performance targets for the Bay Harbor assets. The aggregate
purchase price was $1,878,562 which included the following:
   AmountsCash
      paid at closing
                      
                      $
                      50,000Restricted
      shares of common stock issued to seller
                      
                      
                      239,850Restricted
      shares of common stock issued to managing member of seller
                      
                      
                      729,868Restricted
      shares of common stock issued to creditor of seller
                      
                      
                      706,469Restricted
      shares issued as finders’ fees
                      
                      
                      47,943Cash
      paid for closing costs
                      
                      
                      36,432Accrued
      closing costs
                      
                      
                      68,000Total
                      
                      $
                      1,878,562
 The
aggregate fair value of the aforementioned unregistered common stock issued was
determined to be $1,676,187 on August 29, 2008.
  The
following table summarizes the estimated fair values of the assets acquired. The
allocation of the purchase price was based upon management’s estimates and
assumptions:
 
  AmountsIntangible
      assets
                        
                        $
                        330,000Goodwill
                        
                        
                        1,548,562Total
      assets acquired
                        
                        $
                        1,878,562
  The
acquisition of the assets was accounted for as a business combination and the
operations of Bay Harbor were included in the Company’s results of operations
beginning on August 29, 2008, the acquisition date. The factors resulting in
goodwill were Bay Harbor’s name, reputation, and established key personnel. The
full amount of the aforementioned goodwill is deductible for tax purposes over a
period of 15 years.
  The
accompanying consolidated pro forma information gives effect to the Bay Harbor
acquisition as if it had occurred on January 1, 2008 and its results of
operations were included in the three months ended March 31, 2009 and 2008. The
pro forma information is included only for purposes of illustration and does not
necessarily indicate what the Company’s operating results would have been had
the acquisition of the Bay Harbor assets been completed on January 1,
2008.
   -21-
  March
      31,
                          
                          
                          March
      31,2009
                          
                          
                          2008Revenues
                          
                          $
                          3,493,896
                          
                          
                          $
                          758,386Net
      (loss) income
                          
                          $
                          (1,724,081
                          )
                          
                          $
                          745(Loss)
      income per share, basic and diluted
                          
                          $
                          (0.05
                          )
                          
                          $
                          -
 Consolidated
Pro Forma
 
 The
accompanying consolidated pro forma information gives effect to the acquisitions
of Vibrantads, Digital Instructor, and Bay Harbor as if all three had occurred
on January 1, 2008 and its results of operations were included in the three
months ended March 31, 2009 and 2008. The pro forma information is included only
for purposes of illustration and does not necessarily indicate what the
Company’s operating results would have been had the foregoing three acquisitions
been completed on January 1, 2008.
 
  March
      31,
                            
                            
                            March
      31,2009
                            
                            
                            2008Revenues
                            
                            $
                            3,493,896
                            
                            
                            $
                            1,728,745Net
      (loss) income
                            
                            $
                            (1,724,081
                            )
                            
                            $
                            59,975(Loss)
      income per share, basic and diluted
                            
                            $
                            (0.05
                            )
                            
                            $
                            0.03
  Note
17.    Income Taxes
 
 During
the three months ended March 31, 2009 and 2008, we recorded an income tax
benefit of $18,486 and an income tax expense of $800, respectively. The 2009
benefit primarily relates to deferred tax liability adjustment related to the
intangible asset amortization of the underlying Digital Instructor assets we
acquired during 2008.
 
 We file
income tax returns in the U.S. federal jurisdiction, California, and various
state jurisdictions in which we have a subsidiary or branch operation. The tax
years 2007 and 2008 remain open to examination by the U.S. and state tax
authorities.
 
 Our
policy is that we recognize interest and penalties accrued on any unrecognized
tax benefits as a component of income tax expense. We had no accrued interest or
penalties associated with unrecognized tax benefits at March 31, 2009 or
December 31, 2008.
  Note
18.   Recent Accounting Pronouncements
  In April
2008, the Financial Accounting Standards Board (“FASB”) issued Staff Position
No. FAS 142-3,Determination
of the Useful Life of Intangible Assets(“FSP 142-3”). FSP 142-3 amends
the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset
under Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible
Assets (“FAS 142”). FSP 142-3 is intended to improve the consistency
between the useful life of a recognized intangible asset under FAS 142 and the
period of expected cash flows used to measure the fair value of the asset under
Statement of Financial Accounting Standards No. 141 (revised 2007),Business Combinations (“FAS
141R”), and other guidance under GAAP. FSP 142-3 is effective for fiscal years
beginning after December 15, 2008 and is to be applied prospectively to
intangible assets acquired after the effective date. We adopted FSP 142-3 on
January 1, 2009 and its effects on future periods will depend on the nature and
significance of any acquisitions of intangible under FAS 142.
  In
December 2007, the FASB issued FAS 141R, which replaces FAS 141. The statement
retains the purchase method of accounting for acquisitions, but requires a
number of changes, including changes in the way assets and liabilities are
recognized under purchase accounting. It also changes the recognition of assets
acquired and liabilities assumed arising from contingencies, requires the
capitalization of in-process research and development at fair value, and
requires the expensing of acquisition-related costs as incurred. FAS 141R is
effective for financial statements issued for fiscal years beginning after
December 15, 2008 and will apply prospectively to business combinations
completed on or after that date. We adopted FAS 141R on January 1, 2009 and its
effects on future periods will depend on the nature and significance of any
acquisitions subject to FAS 141R.
   -22-
 
 In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160, Noncontrolling Interests
in Consolidated Financial Statements — an amendment of ARB No. 51(“FAS
160”).  FAS 160 establishes new accounting and reporting standards for
the noncontrolling interest in a subsidiary (formerly known as minority
interest) and for the deconsolidation of a subsidiary and requires the
noncontrolling interest to be reported as a component of equity.  In
addition, changes in a parent’s ownership interest while the parent retains its
controlling interest will be accounted for as equity transactions, and any
retained noncontrolling equity investment upon the deconsolidation of a
subsidiary will be initially measured at fair value. As we don’t have
noncontrolling interest in a subsidiary, the adoption of the statement by the
Company on January 1, 2009, had no impact on our financial conditions, results
of operations and liquidity.
 
 In May
2008, the FASB issued Statement of Financial Accounting Standards
No. 162,The Hierarchy of
Generally Accepted Accounting Principles (“FAS 162”). The new standard is
intended to improve financial reporting by identifying a consistent framework,
or hierarchy, for selecting accounting principles to be used in preparing
financial statements that are presented in conformity with GAAP for
nongovernmental entities. FAS 162 is effective 60 days following SEC approval of
the Public Company Accounting Oversight Board auditing amendments to AU
Section 411,The Meaning
of Present Fairly in Conformity with Generally Accepted Accounting
Principles. We have evaluated the new statement and have determined that
its adoption did not have a significant impact on our financial conditions,
results of operations and liquidity.
  In April
2009, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly(“FAS
157-4”), which provides
additional guidance for estimating fair value in accordance with FAS 157. This
FSP states that a significant decrease in the volume and level of activity for
the asset or liability when compared with normal market activity is an
indication that transactions or quoted prices may not be determinative of fair
value because there may be increased instances of transactions that are not
orderly in such market conditions. Accordingly, further analysis of transactions
or quoted prices is needed, and a significant adjustment to the transactions or
quoted prices may be necessary to estimate fair value. FAS 157-4 is effective
after June 15, 2009, and shall be applied prospectively. We do not expect the
impact of the adoption of this statement to have a significant impact on our
financial conditions, results of operations and liquidity.
  In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments, which requires disclosures about the fair value
of our financial instruments for which it is practicable to estimate that value,
whether recognized or not recognized in the balance sheets, in the interim
reporting periods as well as in the annual reporting periods. In addition, the
FSP requires disclosures of the methods and significant assumptions used to
estimate the fair value of those financial instruments. This FSP is effective
after June 15, 2009, and shall be applied prospectively. We do not expect the
impact of the adoption of this statement to have a significant impact on our
financial conditions, results of operations and liquidity.
  In April
2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments,which establishes a new method of
recognizing and reporting other-than-temporary impairments of debt securities
and requires additional disclosures related to debt and equity securities. This
FSP does not change existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities. This FSP is effective
after June 15, 2009, and shall be applied prospectively. We do not expect the
impact of the adoption of this statement to have a significant impact on our
financial conditions, results of operations and liquidity.
  Note
19. Subsequent Event
 
 On May
14, 2008 (the “Closing Date”), Abundantad entered into an Asset Purchase
Agreement (the “Agreement”) with Kim and Lim, LLC, d/ba/ Pieces Media
(“Pieces”), James Kim (“Kim”) and Dennis Hom (“Hom”), pursuant to which
Abundantad purchased substantially all assets of the Pieces (“Abundantad
Assets”). Pursuant to the Agreement, Abundantad was to make the following cash
payments as part of the Purchase Price: $550,000, payable $250,000 on the
Closing Date and $300,000 on the first anniversary of the Closing
Date.  In addition, a revenue target-based bonus (the “Bonus”) in the
amount of $100,000 was to be paid in cash to Pieces by Abundantad upon achieving
a minimum of $3,000,000 in annual audited revenues generated by the Abundantad
Assets in calendar year 2008, in accordance with the accounting principles
generally accepted in the United States of America (“GAAP”).  If
earned, the Bonus was to be paid by Abundantad no later than March 31,
2009.
 
 On May
13, 2009, Abundantad, Pieces, Kim, and Hom entered into an amendment to the
Asset Purchase Agreement (the “Amendment”). The Amendment extended the payment
deadline for the second payment of $300,000 due to Pieces, making said payment
due and payable as followings: (i) $100,000 payable on May 14, 2009; (ii)
$100,000 payable on June 14, 2009; and (iii) $100,000 payable on July 14, 2009.
The Amendment also extended the due date of the $100,000 Bonus to August 14,
2009. The Amendment further provides that the foregoing payments shall be
accelerated and due within three days of the Company’s receipt of funds in
connection with a closing of a financing transaction in the net minimum amount
of $3 million. Except for the above-referenced modifications, the terms and
provisions of the Agreement remain in full force and effect.
  -23-
  
 ITEM 2.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
  Management’s
Discussion and Analysis of Financial Condition and Results of Operations contain
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended and Section 27A of the Securities Act of 1933,
as amended, that involve risks and uncertainties. When used in this report, the
words, “intend,”  anticipate,” “believe,” “estimate,” “plan,”
“expect,” “could,” “project,” “may,” “should,” “potential,” “continue” and
similar expressions as they relate to us are included to identify
forward-looking statements. These statements are based on our current beliefs,
expectations, and assumptions and are subject to a number of risks and
uncertainties, many of which are set forth in this Form 10-Q. Our actual results
and events could differ materially from those anticipated in these
forward-looking statements as a result of various factors. These forward-looking
statements are made as of the date of this Form 10-Q, and we assume no
obligation to explain the reason why actual results may differ. In light of
these assumptions, risks, and uncertainties, the forward-looking events
discussed in this Form 10-Q might not occur. These statements are not guarantees
of future performance and involve certain risks and uncertainties that are
difficult to predict. Factors that could cause actual result and events to
differ materially from those state herein include, but not are not limited to
the information contained under the caption “Part I, Item 2 – Management’s
Discussion and Analysis of Financial Condition and Results of Operation” and
“Part II, Item 1A. Risk Factors.” We disclaim any obligation to update
information in any forward-looking statement.
 
 The
following Management’s Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the unaudited condensed
consolidated financial statements and notes thereto, included in this Quarterly
Report on Form 10-Q, and our audited consolidated financial statements for the
fiscal year ended December 31, 2008 included in our Annual Report on Form 10-K,
as amended by Amendment No. 1 on Form 10-K/  and No. 2 on Form
10K/A, each as filed with the Securities and Exchange Commission (“SEC”) on
April 2, 2009 and April 30, 2009, respectively. Our results of operations for
the three months ended March 31, 2009 are not necessarily indicative of results
to be expected for any future period.
  Company
Overview
  Adex
Media, Inc. (“we”, “us”, “our”, the “Company” or “Adex”) is the parent company
of Abundantad, Inc. (“Abundantad”).  Adex was incorporated under the
laws of Delaware in April 2008.  It was formed as a subsidiary of
SupportSpan, Inc., a public reporting Nevada corporation (“SupportSpan”). On
April 25, 2008, SupportSpan was consolidated into Adex for the purposes of
changing its name to Adex and its place of incorporation to Delaware (the
“Merger”).
 
 Abundantad
was formed on February 4, 2008 for the purpose of creating, operating and/or
acquiring publishers of Internet content whose properties are deemed desirable
to generate paid-for dissemination of internal or third-party direct advertising
and revenues derived from agency and advertising network-directed advertising on
the Internet. Abundantad creates, acquires, owns and operates content websites
which may include promotions, sweepstakes, mobile offers, and other Internet
websites in furtherance of its purposes. On May 14, 2008, Abundantad
acquired substantially all the assets and liabilities of Kim and Lim, LLC, d/b/a
Pieces Media (“Pieces”). Also on May 14, 2008, Abundantad, via a reverse merger,
became a wholly-owned subsidiary of Adex.
  Adex is
an early-stage integrated Internet marketing and lead generation publisher with
a focus on offering advertising customers a multi-channel Internet
advertising network and broader solutions for direct advertisers and agencies.
Adex’s marketing platform provides a range of services including (i) search
marketing; (ii) display marketing; (iii) lead generation; and (iv) affiliate
marketing. In addition, through its acquisition of the membership interests of
Digital Instructor, LLC on August 12, 2008, Adex is a licensor and marketer of
consumer products.  Adex’s Digital Instructor subsidiary currently
sells and markets seven products: (i) Overnight Genius – a comprehensive
computer learning course in mastering MS Windows, MS Office, eBay, and others;
(ii) Rising Star Learning – a math and language arts educational product for
children; (iii) Debt Snap – an audio seminar designed to help consumers manage
their debt and restore credit standing; (iv) Lucky At Love – a relationship
strategy product; (v) EasyWhite Labs – a teeth whitening kit; (vi) Acai Alive –
a dietary supplement; and (vii) RezActiv – a dietary supplement.
 
 We do not
manufacture any of our current suites of consumer products. Our products are
either licensed directly from third parties or purchased on a private label
basis from wholesalers or contracted manufacturers and rebranded. Most of our
products are purchased as finished goods components and assembled at our
Boulder, Colorado facility. The formulation, labeling, manufacture, marketing,
promotion and distribution of our EasyWhite Labs and Acai Alive products are
subject to federal laws and regulation by one or more federal agencies,
including the Food and Drug Administration (“FDA”) and the Federal Trade
Commission (“FTC”).  These activities are also regulated by various
state, local, and international laws and agencies in places where these products
are sold.
  
 -24-
  Business
Segments
 
 We
currently maintain two business segments:
 
 (i)
              Marketing
      platform services; and
 
 (ii)
              Consumer
      products
 
 We intend
to grow in the areas of online customer acquisition, diversified multi channel
advertising, tracking, reporting, and conversion enhancing
technologies.
 
 We plan
to expand our customer base of leading third-party direct advertisers, ad
networks, affiliate networks, list managers, financial advisors, and end
consumers, as well as our own wholly-owned properties by continuing to expand
our advertising reach and utilizing cutting edge conversion and tracking
technologies to improve performance.  We intend to service domestic
advertisers and continue to expand into international markets.
 
 We plan
to continue expanding into new advertising channels, both domestically and
internationally, which include, but are not limited to display (banners),
search, email, mobile, and user applications. By continuing to diversify our
reach, we can offer our advertisers a broader platform by which to acquire new
customers.  Our advertisers will be able to leverage a vast and
multi-channel advertising network, as well as leverage new channels as they
become available. We plan to continue to invest in our proprietary conversion,
tracking, and reporting technologies.
  CRITICAL
ACCOUNTING POLICIES AND USE OF ESTIMATES
  The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America (“GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities, and
reported amounts of revenues and expenses during the reporting
period.  The U.S. Securities and Exchange Commission (the “SEC”) has
defined a company’s critical accounting policies as policies that are most
important to the portrayal of a company’s financial condition and results of
operations, and which require a company to make its most difficult and
subjective judgments, often as a result of the need to make estimates of matters
that are inherently uncertain. Based on this definition, we have identified our
most critical accounting policies and estimates to be as follows: (i) provision
for doubtful accounts; (ii) accrued liabilities; (iii) estimates of when
internally developed software is deemed probable to be completed and ready for
intended use; (iv) assumptions on stock option forfeiture rates, expected terms,
and volatility rates of our underlying shares; (v) estimates of useful lives
underlying our depreciable and intangible assets; (vi) reserves for excess and
obsolete inventory; (vii) asset impairments; (viii) income taxes; and (iv)
reserve for credit card charge backs and returns.  Although we believe
that our estimates, assumptions and judgments are reasonable, they are based
upon information presently available. Actual results may differ significantly
from these estimates if the assumptions, judgments and conditions upon which
they are based turn out to be inaccurate. A further discussion can be found
inItem 7, “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations,” of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008, as amended by Amendment No. 1 on Form 10-K/A and No.2 on
Form 10-K/A, each as filed with the SEC on April 2, 2009 and April 30, 2009,
respectively.
  Significant
Accounting Policies
  Revenue
Recognition
 
 The
Company's revenues consist of (i) marketing platform service revenue generated
from on-line marketing, advertising, and lead generation; and (ii) revenue
generated from selling and marketing consumer products. The Company evaluates
revenue recognition using the following basic criteria and recognizes revenue
when all four criteria are met:
 
 (i)
Evidence of an arrangement: Evidence of an arrangement with the customer that
reflects the terms and conditions for delivery of services must be present in
order to recognize revenue.
 
 (ii)
Delivery: Delivery is considered to occur when the service is performed and the
risk of loss and reward has been transferred to the customer.
 
 (iii)
Fixed or determinable fee: If a portion of the arrangement fee is not fixed or
determinable, we recognize that amount as revenue when the amount becomes fixed
or determinable.
 
 (iv)
Collection is deemed probable: We conduct a credit review of each customer
involved in a significant transaction to determine the creditworthiness of the
customer. Collection is deemed probable if we expect the customer to be able to
pay amounts under the arrangement as those amounts become due. If we determine
that collection is not probable, we recognize revenue when collection becomes
probable (generally upon cash collection).
   -25-
 
 The
Company’s marketing platform service revenue consists mostly of revenue derived
world-wide from direct advertisers, affiliate networks, ad networks, list
managers, financial advisors, and other financial services companies. The
Company’s consumer product revenue consists mostly of revenue derived from
on-line consumers in the United States and Canada.
  The
Company’s marketing platform service revenue is mostly derived on a
cost-per-action (“CPA”) basis, also known as pay-per-action (“PPA”) basis. Under
this pricing model, advertisers, affiliate networks, ad networks, list managers,
and financial advisors pay the Company when a specified action (a purchase, a
form submission, or other action linked to the advertisement) has been
completed.
 
 The
Company ships its consumer products on a free trial subscription basis. Title to
all products shipped pass to the consumer upon receipt by the consumer. Upon
receipt by the consumer, the Company records non-refundable shipping and
handling revenue. The consumer has 10 to 11 days in which they can notify the
company of their intent to return the product shipped in which case the
consumer’s credit card will not be billed for the product sales price. If the
customer chooses to keep the product beyond the free trial period, the
customer’s credit card will be billed and the customer’s subscription will begin
automatically once the free trial period has expired. Accordingly, the Company
does not record revenue until acceptance occurs which is deemed to be after the
free trial period has expired without notification of rejection of the
product.
 
 The
Company’s revenues are subject to material seasonal fluctuations. In particular,
revenues in the fourth fiscal quarter will ordinarily be significantly higher
than other fiscal quarters. Revenues recorded in the current quarter are
not necessarily indicative of what reported revenues will be for an entire
fiscal year.
  Classification
of Affiliates Cost
 
 Payments
made or accrued to our sales and marketing affiliates that relate to leads
delivered for our product segment are recorded as sales and marketing expenses.
Payments made or accrued to our sales and marketing affiliates that relate to
leads delivered for third party offers that we broker are recorded as cost of
revenue.
 
 
 
 -26-
  RESULTS
OF OPERATIONS
 
 The
results of operations that follow should be read in conjunction with our
critical accounting policies and estimates summarized above as well as our
consolidated financial statements and notes thereto contained in Item 1 of this
report. The following table sets forth certain consolidated statements of
operations data as a percentage of net revenues for the periods
indicated.
  Three
      Months Ended*
                                    
                                    
                                    March
      31, 2009 vs. 2008*
                                    
                                    
                                    %
      of Revenue*March
      31,
                                    
                                    
                                    March
      31,
                                    
                                    
                                    Change
                                    
                                    
                                    Change
                                    
                                    
                                    March
      31,
                                    
                                    
                                    March
      31,2009
                                    
                                    
                                    2008
                                    
                                    
                                    in
      $
                                    
                                    
                                    in
      %
                                    
                                    
                                    2009
                                    
                                    
                                    2008Revenues:Marketing
      platform services
                                    
                                    $
                                    2,512,500
                                    
                                    
                                    $
                                    690,553
                                    
                                    
                                    $
                                    1,821,947
                                    
                                    
                                    
                                    263.8
                                    
                                    
                                    
                                    72
                                    
                                    
                                    
                                    100Products
                                    
                                    
                                    981,396
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    981,396
                                    
                                    
                                    
                                    n/a
                                    
                                    
                                    
                                    28
                                    
                                    
                                    
                                    -Total
      revenues:
                                    
                                    
                                    3,493,896
                                    
                                    
                                    
                                    690,553
                                    
                                    
                                    
                                    2,803,343
                                    
                                    
                                    
                                    406.0
                                    
                                    
                                    
                                    100
                                    
                                    
                                    
                                    100Cost
      of revenues:Marketing
      platform services
                                    
                                    
                                    2,103,893
                                    
                                    
                                    
                                    543,660
                                    
                                    
                                    
                                    1,560,233
                                    
                                    
                                    
                                    287.0
                                    
                                    
                                    
                                    60
                                    
                                    
                                    
                                    79Products
                                    
                                    
                                    376,626
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    376,626
                                    
                                    
                                    
                                    n/a
                                    
                                    
                                    
                                    11
                                    
                                    
                                    
                                    -Amortization
      of acquired product licenses
                                    
                                    
                                    35,000
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    35,000
                                    
                                    
                                    
                                    n/a
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    -Total
      cost of revenues:
                                    
                                    
                                    2,515,519
                                    
                                    
                                    
                                    543,660
                                    
                                    
                                    
                                    1,971,859
                                    
                                    
                                    
                                    362.7
                                    
                                    
                                    
                                    72
                                    
                                    
                                    
                                    79Gross
      profit
                                    
                                    
                                    978,377
                                    
                                    
                                    
                                    146,893
                                    
                                    
                                    
                                    831,484
                                    
                                    
                                    
                                    566.0
                                    
                                    
                                    
                                    28
                                    
                                    
                                    
                                    21Operating
      expenses:Sales
      and marketing
                                    
                                    
                                    2,150,513
                                    
                                    
                                    
                                    32,490
                                    
                                    
                                    
                                    2,118,023
                                    
                                    
                                    
                                    6,519.0
                                    
                                    
                                    
                                    62
                                    
                                    
                                    
                                    5General
      and administrative
                                    
                                    
                                    538,390
                                    
                                    
                                    
                                    8,496
                                    
                                    
                                    
                                    529,894
                                    
                                    
                                    
                                    6,237.0
                                    
                                    
                                    
                                    15
                                    
                                    
                                    
                                    1Amortization
      of intangible assets
                                    
                                    
                                    47,049
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    47,049
                                    
                                    
                                    
                                    n/a
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    -Total
      operating expenses
                                    
                                    
                                    2,735,952
                                    
                                    
                                    
                                    40,986
                                    
                                    
                                    
                                    2,694,966
                                    
                                    
                                    
                                    6,575.3
                                    
                                    
                                    
                                    78
                                    
                                    
                                    
                                    6Operating
      (loss) income
                                    
                                    
                                    (1,757,575
                                    )
                                    
                                    
                                    105,907
                                    
                                    
                                    
                                    (1,863,482
                                    )
                                    
                                    
                                    (1,759.5
                                    )
                                    
                                    
                                    (50
                                    )
                                    
                                    
                                    16Interest
      and other income, net
                                    
                                    
                                    15,008
                                    
                                    
                                    
                                    2,558
                                    
                                    
                                    
                                    12,450
                                    
                                    
                                    
                                    486.7
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -(Loss)
      income  before provision for income taxes
                                    
                                    
                                    (1,742,567
                                    )
                                    
                                    
                                    108,465
                                    
                                    
                                    
                                    (1,851,032
                                    )
                                    
                                    
                                    (1,706.6
                                    )
                                    
                                    
                                    (50
                                    )
                                    
                                    
                                    16(Benefit)
      provision for income tax
                                    
                                    
                                    (18,486
                                    )
                                    
                                    
                                    800
                                    
                                    
                                    
                                    (19,286
                                    )
                                    
                                    
                                    (2,410.8
                                    )
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    -Net
      (loss) income
                                    
                                    $
                                    (1,724,081
                                    )
                                    
                                    $
                                    107,665
                                    
                                    
                                    $
                                    (1,831,746
                                    )
                                    
                                    
                                    (1,701.3
                                    )
                                    
                                    
                                    (49
                                    )
                                    
                                    
                                    16*
      Numbers might not foot due to rounding.
  Revenues
 
 Revenues
increased 406.0% from $690,553 in the first quarter of 2008 to $3,493,896 in the
first quarter of 2009. The increase was  the result of (1) an increase
of 263.8% in our marketing platform services segment revenue from increasing our
customer base and number of advertising offers, expanding into display-based
marketing, lead generation (from our acquisition of Bay Harbor Marketing, LLC),
and adding affiliates to our distribution network which expanded our publishing
reach, and; (2) $981,396 in revenue generated from our product segment resulting
from our acquisition of Digital Instructor, LLC on August 12, 2008.
 
 Our
revenues are impacted by the mix of advertising offers or products we market,
changes in consumer demand for these offers and products, and changes in our
customer base. Changes in consumer demand and increased competitors in the space
could cause revenue from these types of offers to change
significantly.
 
 The
Company ships its consumer products on a free trial subscription basis. Title to
all products shipped pass to the consumer upon receipt by the consumer. Upon
receipt by the consumer, the Company records non-refundable shipping and
handling revenue. The consumer has 10 to 11 days in which they can notify the
company of their intent to return the product shipped in which case the
consumer’s credit card will not be billed for the product sales price. If the
customer chooses to keep the product beyond the free trial period, the
customer’s credit card will be billed and the customer’s subscription will begin
automatically once the free trial period has expired. Accordingly, the Company
does not record revenue until acceptance occurs which is deemed to be after the
free trial period has expired without notification of rejection of the product.
  We expect
revenues to increase in the remaining quarters of fiscal year 2009 primarily
attributable to our products segment.
 
 -27-
 
 Cost
of Revenues
 
 Marketing
platform services cost of sales in the first quarter of 2009 increased 287.0%
compared to the same quarter of the previous year. The increase primarily
reflected the increased costs of media buys necessary to generate the increased
revenue described above.
 
 Marketing
platform services cost of revenues for the first quarters of 2009 and 2008
consisted of the following:
 
 March
      31,
                      
                      
                      March
      31,2009
                      
                      
                      2008Costs
      of media buys
                      
                      $
                      1,566,822
                      
                      
                      $
                      543,660Costs
      paid to affiliates
                      
                      
                      513,184
                      
                      
                      
                      -Costs
      of affiliate network software
                      
                      
                      5,530
                      
                      
                      
                      -Costs
      of web site development and hosting
                      
                      
                      7,582
                      
                      
                      
                      -Merchant
      service fees
                      
                      
                      4,019
                      
                      
                      
                      -Supplies
                      
                      
                      3,543
                      
                      
                      
                      -Shipping
      and handling
                      
                      
                      3,213
                      
                      
                      
                      -Total
                      
                      $
                      2,103,893
                      
                      
                      $
                      543,660
  Our
products costs of revenues consist of the costs of consumer products from our
Digital Instructor subsidiary that we acquired on August 12, 2008. Products cost
of revenues for the first quarters of 2009 and 2008 consisted of the
following:
 
  March
      31,
                        
                        
                        March
      31,2009
                        
                        
                        2008Cost
      of inventory sold, manufacturing and distribution costs
                        
                        $
                        55,613
                        
                        
                        $
                        -Inventory
      write-downs
                        
                        
                        25,925
                        
                        
                        
                        -Merchant
      service fees
                        
                        
                        163,874
                        
                        
                        
                        -Shipping
      and handling fees
                        
                        
                        104,839
                        
                        
                        
                        -License
      fees
                        
                        
                        43,333
                        
                        
                        
                        -Salaries
      and benefits
                        
                        
                        18,042
                        
                        
                        
                        -Total
                        
                        $
                        411,626
                        
                        
                        $
                        -
 
 During
the first quarter of 2009, we incurred $35,000 in amortization of acquired
product licenses that are included in costs of revenues. This amount represents
the amortization of acquired product license agreements in connection with our
acquisition of Digital Instructor. The value assigned to the acquired product
license agreements is $700,000 and is being amortized straight-line over 5
years.
 
 We expect
our cost of revenue to increase in the remaining quarters of fiscal year 2009 in
relation to the increase in revenue we expect in our products
segment.
  Gross
profit
 
 Marketing
platform services gross profit decreased from 21.3% of revenue in the first
quarter of 2008 to 16.3% of revenue in 2009.  This decrease in gross
profit percentage was the result of increased cost of media buys to support our
growth in revenue. Products gross profit was 58.1% in the first quarter of 2009.
We did not have revenue from this segment during the first quarter of
2008.
   -28-
 
 We
anticipate that gross profit will continue to be impacted by fluctuations in the
volume and mix of our revenue from each of our operating segments. We expect our
gross profit to increase in the remaining quarters of 2009 directly related to
our expectation that our products segment revenue will increase at a higher rate
than our marketing platform services segment.
  Operating
expenses
 
 Sales and marketing expenses
increased $2,118,023 or 6,519.0% in the first quarter of 2009 compared to the
same quarter of the previous year. This increase reflects the changes over the
last year as we structured for growth through increased headcount staffing. In
addition, the increase primarily relates to advertising payments made to
affiliates for sales and marketing of our products. We expect sales and
marketing expenses to increase in order to support our expected growth in sales
of our products.
 
 General and administrative
expenses increased by $529,895 or 6,237.7% in the first quarter of 2009
compared to the same quarter of the previous year. As a result of becoming a
publicly-traded company, we incurred more personnel costs, stock compensation
costs, legal, accounting, auditing, facility costs, and tax planning and
compliance fees in the first quarter of 2009 compared to the same quarter of the
previous year. We expect general and administrative costs to increase in order
to support our expected growth in revenues.
 
 Amortization of intangible
assets represents the amortization of purchased intangibles related to
our acquisitions of the membership interests of Digital Instructor, LLC, and the
assets of Bay Harbor Marketing, LLC.
  Our
future amortization of intangible asset expense is estimated below:
  Amortization
      Expense(by
      fiscal year)Remainder
      of 2009
                        
                        $
                        246,1422010
                        
                        
                        319,7652011
                        
                        
                        290,7392012
                        
                        
                        268,9772013
                        
                        
                        159,658Total
                        
                        $
                        1,285,281
  Interest
and other income (expense), net
  Interest
and other income (expense) during the first quarter of 2009 increased to $15,008
compared to $2,558 recorded during the same quarter of the previous
year.  This increase was primarily the result of the interest we
received on our short-term investments from the gross proceeds of $5.8 million
in private equity we raised in April and May of 2008, partially offset by
interest expense from the accretion of our promissory note.
 
 As a
portion of our revenues are denominated in the Euro and British Pounds, we are
therefore subject to foreign currency exchange rate exposure. Although we have
not experienced significant foreign exchange rate losses to date, we may in the
future, especially to the extent that we do not engage in hedging. We do not
enter into currency derivative financial instruments for trading or speculative
purposes.
  (Benefit)
Provision for income tax
 
 During
the three months ended March 31, 2009 and 2008, we recorded an income tax
benefit of $18,486 and an income tax expense of $800, respectively. The 2009
benefit primarily relates to deferred tax liability adjustment related to the
intangible asset amortization of the underlying Digital Instructor assets we
acquired during 2008.
 
 We file
income tax returns in the U.S. federal jurisdiction, California, and various
state jurisdictions in which we have a subsidiary or branch operation. The tax
years 2007 and 2008 remain open to examination by the U.S. and state tax
authorities.
   -29-
 
 Our
policy is that we recognize interest and penalties accrued on any unrecognized
tax benefits as a component of income tax expense. We had no accrued interest or
penalties associated with unrecognized tax benefits at March 31, 2009 or
December 31, 2008.
  LIQUIDITY
AND CAPITAL RESOURCES
  As of
March 31, 2009, we had unrestricted cash, cash equivalents and short-term
investments of approximately $2.0 million compared to $3.2 million as of
December 31, 2008. The decrease in cash and short-term investments balances
reflect our cash used in operations and the repayment of $245,000 on our
promissory note in the first quarter of 2009.
 
 A summary
of our cash flow activities for the three months ended March 31, 2009 and 2008
are summarized below:
 
 March
      31,
                          
                          
                          March
      31,2009
                          
                          
                          2008Cash
      flows used in  operating activities
                          
                          $
                          (905,159
                          )
                          
                          $
                          86,196Cash
      flows provided  (used) by investing activities
                          
                          
                          1,274,327
                          
                          
                          
                          17,797Cash
      flows (used) provided by financing activities
                          
                          
                          (245,000
                          )
                          
                          
                          -Net
      increase in cash and cash equivalents
                          
                          
                          124,168
                          
                          
                          
                          103,993Cash
      and cash equivalents at beginning of period
                          
                          
                          683,576
                          
                          
                          
                          5,379Cash
      and cash equivalents at end of period
                          
                          $
                          807,744
                          
                          
                          $
                          109,372
  Significant
non-cash charges for the first quarter of 2009 included:
 
 ·
              Depreciation
      expenses and amortization expenses of $11,167 and $82,049, respectively;
      and
 ·
              Share-based
      compensation expenses of $178,356.
 
 Our
working capital was approximately $0.6 million at March 31, 2009 compared to
$2.2 million at December 31, 2008.
 Working
capital changes included:
 
 ·
              an
      increase of $244,569 in accounts receivable primarily due to increased
      receivables from our marketing platform services
  segment;
 ·
              an
      increase of $110,681 in prepaid assets and other current assets primarily
      due to increased payments made for prepayment of
  inventory;
 ·
              an
      increase of $172,345 in credit card holdbacks reflecting increased
      merchant processing from our product
segment;
 ·
              an
      increase of $765,078 in accounts payable due to timing of payment to our
      vendors; and
 ·
              an
      increase of $291,049 in accrued liabilities primarily due to accrued
      payment to Pieces Media.
 
 Our
primary source of liquidity is cash, cash equivalents and short term
investments. We intend to continue to assess our cost structure in
relationship to our revenue levels and to make appropriate adjustments to
expense levels as required. We believe that our existing cash and cash
equivalents and short-term investments plus our expected cash flows from
operating and financing activities will be sufficient to fund operating
activities and capital expenditures, and provide adequate working capital
through the remainder of fiscal year 2009.
 
 In order
for us to execute on our business plan for the remainder of fiscal year 2009, we
may need to raise additional funds through public or private debt or equity
financings.  For example, depending on payment terms with our
marketing affiliates, we may be required to pay our marketing affiliates
commissions on leads generated for our consumer products before we collect the
corresponding funds from the end consumer. To the extent we are required to pay
our marketing affiliates in advance of when we receive payment, this will
negatively impact the amount of cash we have on hand to grow our operations. In
addition, we are often required to pay our marketing affiliates on total leads
delivered which include leads related to our consumer products where the
consumer has cancelled or declined the offer within the free trial period. Our
cash flow balances rely significantly on our ability to ensure that cash
generated from sales of our consumer products exceed the cash paid out to our
marketing affiliates. To the extent we realize high volume of end consumers who
early cancel the orders within the free trial period of our consumer products,
we will still be required to pay our marketing affiliates a commission and this
could have a significant impact on our cash position and liquidity.
   -30-
 
 The sale
of equity or debt securities would likely result in additional dilution to our
stockholders, could require us to pledge our assets to secure the financing, and
could impose restrictive covenants on us.  We cannot be certain that
additional financing will be available in amounts or on terms acceptable to us,
or at all.  If we are unable to obtain this additional financing, we
would be required to reduce the scope of our planned expansion and sales and
marketing efforts, which would harm our business, financial condition and
operating results, and/or cause us to sell assets or otherwise restructure our
business to remain viable.
  Recent
Accounting Pronouncements
  Please
refer to “Part I, Item 1.
Financial Statements” and “Notes to Unaudited Condensed
Consolidated Financial Statements, Note 18 – Recent Accounting
Pronouncements.”
 Contractual
Obligation and Commitments
 
 Not
applicable.
 
 Off-Balance
Sheet Arrangements
  We have
not entered into any other material off-balance sheet arrangements or
transactions as of March 31, 2009.
 
 Item
3.           Quantitative and
Qualitative Disclosures about Market Risk
 
 Not
applicable.
 
 Item 4T.
              Controls
      and Procedures
 
 (a)
Evaluation of disclosure controls and procedures.
 
 We
maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized,
and reported within the required time periods and that such information is
accumulated and communicated to our management, including our Chief Executive
Officer and our Chief Financial Officer (our Principal Accounting Officer), as
appropriate, to allow for timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can only provide reasonable assurance of achieving the desired control
objective, and management is required to exercise its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
 
 Management,
under the supervision and with the participation of our Chief Executive Officer
and Chief Financial Officer, has carried out an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures pursuant
to Exchange Act Rule 13a-15.  Based upon that evaluation and as of
March 31, 2009, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were effective as of March
31, 2009.
 
 We do
not, however, expect that our disclosure controls or internal controls over
financial reporting will prevent all errors or all instances of fraud. A control
system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the control system's objectives will be met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within our company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Because of the inherent
limitation of a cost-effective control system, misstatements due to error or
fraud may occur and not be detected. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people or by
management override of a control. A design of a control system is also based
upon certain assumptions about potential future conditions; over time, controls
may become inadequate because of changes in conditions, or the degree of
compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and may not be detected.
  (b)
Changes in Internal Control Over Financial Reporting
 
 There
have been no changes in the Company’s internal controls over financial reporting
identified in connection with the evaluation of disclosure controls and
procedures discussed above that occurred during the quarter ended March 31, 2009
or subsequent to that date that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial
reporting.
   -31-
 
 PART II.
              OTHER
      INFORMATION
  Item 1.   Legal Proceedings
  None.
 
 Item
1A. Risk Factors
  There
are numerous and varied risks, known and unknown, that may prevent us from
achieving our goals.  If any of these risks actually occur, our
business, financial condition or results of operation may be materially
adversely affected.  In such case, the trading price of our common
stock could decline and investors could lose all or part of their investment.
Our business involves a high degree of risk. Therefore, in evaluating us and our
business you should carefully consider the risks set forth below.
 
 Risks
Relating to the Company
  Our
limited operating history makes evaluation of our business
difficult.
  Abundantad
acquired the assets of Kim and Lim, LLC d/b/a Pieces Media (“Pieces”), which had
been operating since November 2005. Abundantad was incorporated in February,
2008 and Adex was incorporated in April 2008.  Pursuant to the
Abundantad merger, Abundantad has been in business with Adex as the parent
company since May, 2008. We therefore have limited historical financial data
upon which to base planned operating expenses or forecast accurately future
operating results.  Further, our limited operating history will make
it difficult for investors and securities analysts to evaluate our business and
prospects.  You must consider our prospects in light of the risks,
expenses and difficulties we face as an early-stage company with a limited
operating history.  We are completely reliant upon new management
for our future operations and success.
 
 Deterioration
of economic conditions could harm our business.
 
 Current
uncertainty in global economic conditions poses a risk to our business as
consumers may defer discretionary purchases, such as our products, in
response to tighter credit and negative financial news, which could negatively
affect demand for and sales of our products. Weak economic conditions in
our target markets, or a reduction in consumer spending even if economic
conditions improve, would likely adversely impact our business, operating
results, and financial condition in a number of ways.
  We
will likely need additional funding to support our expanding operations and
capital expenditures which may not be available to us and which lack of
availability could adversely affect our business.
  We have
no committed sources of additional capital.  Prior to the Abundantad
Merger, Abundantad raised gross proceeds of approximately $5.8 million (net
proceeds of approximately $5.7 million) in equity from private investors during
March and April 2008.  We will likely need additional funds to
support our growth, fund future acquisitions, pursue business opportunities,
react to unforeseen difficulties, or to respond to competitive
pressures.  There can be no assurance that any financing arrangements
will be available in amounts or on terms acceptable to us, if at
all.  Furthermore, the sale of additional equity or convertible debt
securities may result in further dilution to existing
stockholders.
  If we
raise additional funds through the issuance of debt, we will be required to
service that debt and are likely to become subject to restrictive covenants and
other restrictions contained in the instruments governing that debt, which may
limit our operational flexibility.  If adequate additional funds are
not available, we may be required to delay, reduce the scope of or
eliminate material parts of the implementation of our business strategy,
including the possibility of additional acquisitions or internally developed
businesses.
 
 In the
event that we are unable to execute on our business plan and are unable to
secure additional financing for growth, we will be required to scale back
operations significantly including but not limited to restructuring our work
force.
  We
have incurred net losses in our 2008 fiscal year and the first quarter of 2009
and may not become profitable.
  During
the year ended December 31, 2008, we incurred a net loss of $2.4 million. During
the first quarter of 2009, we incurred a net loss of $1.7 million. Our ability
to generate revenues and to become profitable depends on many factors, including
without limitation, the market acceptance of our products and services, our
ability to control costs and our ability to implement our business strategy.
There can be no assurance that we will become or remain profitable.
   -32-
  
 Five
customers accounted for approximately 62% of our consolidated revenue during
2008 and 49% of our consolidated revenue during the first quarter of 2009; loss
of either of these customers would have a material adverse effect on our
business.
 
 At March
31, 2009, 31% of our revenue were generated from two customers with each
accounted for 17% and 14%, respectively; and 49% of our revenue were generated
from our top five customers during the three months ended March 31, 2009. One of
the same customer accounted for 27% of our March 31, 2009 accounts receivable
and the other accounted for 16% of our accounts receivable. The two customers
accounted for an aggregate of 43% of our total accounts receivable.
 
 For the
year ended December 31, 2008, one customer accounted for 26% of our consolidated
revenue and another customer accounted for 15% of our consolidated
revenue.
 
 The loss
of either of these customers would have a material adverse impact on our
business.
  Mergers
and acquisitions could divert our management’s attention and be difficult to
integrate, and could cause ownership dilution to our stockholders.
  Our
business strategy is focused, in part, on the identification, structuring,
completion and integration of mergers and acquisitions that are complementary to
our business model.  For example, during fiscal 2008, we merged with
Abundantad, we purchased all the membership interests in Digital Instructor,
LLC, the assets of Vibrantads, LLC, and the assets of Bay Harbor Marketing,
LLC.  Future growth and profitability depend, in part, on the success
of such mergers and acquisitions.  Acquisitions, strategic
relationships and investments in the technology and Internet sectors involve a
high degree of risk.
 
 We may be
unable to find a sufficient number of attractive opportunities, if any, to meet
our objectives.  Although many technology and Internet companies have
grown in terms of revenue, relatively few companies are profitable or have
competitive market share.  Our potential acquisitions, relationships
or investment targets and partners may have histories of net losses and may
expect net losses for the foreseeable future.
  Merger
and/or acquisition transactions are accompanied by a number of risks that could
harm us and our business, operating results, and financial
condition:
  ·
              we
      could experience a substantial strain on our resources, including time and
      money, and we may not be successful in completing the
      acquisitions;·
              our
      management’s attention may be diverted from our ongoing business
      concerns;·
              while
      integrating new companies, we may lose key executives or other
      employees;
  ·
              we
      could experience customer dissatisfaction or performance problems with an
      acquired company or technology;·
              we
      may become subject to unknown or underestimated liabilities of an acquired
      entity; or incur unexpected expenses or losses from such acquisitions;
      and·
              We
      may incur impairment charges related to goodwill or other intangible
      assets or other unanticipated events or circumstances, any of which could
      harm our business.
  Consequently,
we might not be successful in integrating any acquired businesses, products or
technologies, and might not achieve anticipated revenue and cost
benefits.
  We
may be unable to effect a merger or acquisition or we may incorrectly ascertain
the merits or risks of an acquired company.
  To the
extent we complete a merger or acquisition, we may be affected by numerous risks
inherent in the business operations of the acquired entity.  Although
our management will endeavor to evaluate the risks inherent in the target
entity’s business or industry, we cannot assure you that we will properly
ascertain or assess all of the significant risk factors.
   -33-
 
 We
may be unable to attract and retain key employees.
  We
presently employ a limited number of persons with Internet, public-company or
consumer products experience.  Failure to attract and retain necessary
technical personnel and skilled management could adversely affect our
business.  The success and growth of our business will depend on the
contributions of our Chief Executive Officer, Scott Rewick, our Chief Operating
Officer, Brian Carrozzi, and our ability to attract, retain and motivate highly
skilled and qualified personnel.  If we fail to attract, train and
retain sufficient numbers of these highly qualified people, our prospects,
business, financial condition and results of operations will be materially and
adversely affected.  Our success will depend on the skills, experience
and performance of key members of our management team.  The loss of
any key employee could have an adverse effect on our prospects, business,
financial condition, and results of operations.  Although we intend to
issue stock options or other equity-based compensation to attract and retain
employees, such incentives may not be sufficient to attract and retain key
personnel.
  Although
we have an experienced senior management team, the lack of depth of our
management team could put us at a competitive disadvantage.  Not all
members of our management team will possess public-company experience, which
could impair our ability to comply with legal and regulatory requirements such
as those imposed by the Sarbanes-Oxley Act of 2002. Such responsibilities
include complying with federal securities laws and making required disclosures
on a timely basis.  We cannot assure you that our management will be
able to implement programs and policies in an effective and timely manner that
adequately responds to such increased legal, regulatory compliance and reporting
requirements.  Our failure to do so could lead to the imposition of
fines and penalties and result in the deterioration of our
business.
  We
may be unable to effectively manage our growth.
  Our
strategy envisions growing our business.  If we fail to effectively
manage our growth, our financial results could be adversely
affected.  Growth may place a strain on our management systems and
resources.  We must continue to refine and expand our business
development capabilities, our systems and processes and our access to financing
sources.  As we grow, we must continue to hire, train, supervise and
manage new employees.  We cannot assure you that we will be able
to:
  ·
              meet
      our capital needs;·
              expand
      our systems effectively or efficiently or in a timely
    manner;·
              allocate
      our human resources optimally;·
              identify
      and hire qualified employees or retain valued employees;
  or·
              incorporate
      effectively the components of any business that we may acquire in our
      effort to achieve growth.
 If we are
unable to manage our growth, our operations and financial results could be
adversely affected.
  The
loss of our management could harm our current and future operations and
prospects.
  We are
heavily dependent on the continued services of the management and employees of
acquired businesses.  We do not expect to have employment agreements
that provide a fixed term of employment with all of the members of senior
management, and members of management will have the right, in certain
circumstances, to terminate their employment.  Each of those
individuals without employment agreements may voluntarily terminate their
employment at any time.  In certain cases, our senior members of
management may be entitled to severance payments for termination by the Company
or their own voluntary termination of their employment.
  If
we are unable to obtain adequate insurance, our financial condition could be
adversely affected in the event of uninsured or inadequately insured loss or
damage.  Our ability to effectively recruit and retain qualified
officers and directors could also be adversely affected if we experience
difficulty in obtaining adequate directors’ and officers’ liability
insurance.
  We may
not be able to obtain insurance policies on terms affordable to us that would
adequately insure our business and property against damage, loss or claims by
third parties. To the extent our business or property suffers any damages,
losses or claims by third parties, which are not covered or adequately covered
by insurance, the financial condition of the Company may be materially adversely
affected.
   -34-
  We may be
unable to maintain sufficient insurance as a public company to cover liability
claims made against our officers and directors.  If we are unable to
adequately insure our officers and directors, we may not be able to retain or
recruit qualified officers and directors to manage the Company.
  Our
founders may have interests that are different than other shareholders and may
influence certain actions.
  Our
founders currently own and may continue to own a majority of the shares of our
common stock and will control a significant amount of shares following further
acquisitions.  Therefore, our founders and directors may be able to
influence the outcome of various actions that require stockholder approval
including the election of our directors; delaying, preventing or approving a
transaction in which stockholders might receive a premium over the prevailing
market price for their shares; and preventing or causing changes in control or
management.  In addition, certain of our founders own interests in or
participate in the management of other businesses, some of which may tend to
compete with us, and there are no restrictions on such activities or affairs of
such persons.
  Risks
Relating to Our Business
  If
we do not maintain and grow a critical mass of advertisers, our operating
results could be adversely affected.
  Our
success depends, in part, on maintenance and growth of a critical mass of
third-party advertisers and a continued interest in performance-based and other
advertising services.  If, alone or through any business acquired by
us, we are unable to achieve a growing base of third-party advertisers, we may
not successfully develop or market technologies, products or services that are
competitive or accepted by merchant advertisers.  Any decline in the
number of merchant advertisers could adversely affect our operating results
generally.
 
 We
depend on several of the major search engines and social networking sites to
continue to provide us traffic that advertisers deem to be of value, and if they
do not, it could have a material adverse effect on the value of our
services.
  We depend
on several of the major Internet search engines, namely Google, Yahoo!, MSN and
AOL, and social media Web sites, namely Facebook, to provide traffic that
merchant advertisers deem to be of value.  We monitor the traffic
delivered to our merchant advertisers in an attempt to optimize the quality of
traffic we will deliver.  We review factors such as non-human
processes, including robots, spiders, scripts (or other software), mechanical
automation of clicking and other sources and causes of low-quality traffic,
including, but not limited to, other non-human clicking agents.  Even
with such monitoring in place, there is a risk that a certain amount of
low-quality traffic will be provided to our merchant advertisers, which, if not
contained, may be detrimental to those relationships.  Low-quality
traffic (or traffic that is deemed to be less valuable by our merchant
advertisers) may prevent us from growing our base of merchant advertisers and
cause us to lose relationships with existing merchant
advertisers.
 
 With
respect to our products segment, we rely on payments made by credit card from
end-users. Failure to maintain or increase our merchant processing lines of
credit, or loss of our credit card acceptance privileges would seriously hamper
our ability to process the sale of our products.
  The
payment by end-users for the purchase of our products is made online by credit
card. As a result, we must rely on banks or payment processors to extend us
merchant processing lines of credit to process these transactions, and we must
pay a fee for this service. From time to time, credit card associations may
increase the interchange fees that they charge for each transaction using one of
their cards. Any such increased fees will increase our operating costs and
reduce our profit margins. Our ability to increase our revenues relies heavily
on our ability to increase our merchant processor lines of credit. There is no
assurance we will be successful in maintaining or increasing our merchant
processing lines of credits which would prevent us from billing consumers of our
products.
 
 We also
are required by our processors to comply with credit card association operating
rules, and we have agreed to reimburse our processors for any fines they are
assessed by credit card associations as a result of processing payments for us.
For example, credit card association rules impose a limit on the maximum number
of credit card chargebacks permitted per month. The credit card associations and
their member banks set and interpret the credit card rules. Visa, MasterCard,
American Express, Discover, or other card associations could adopt new operating
rules or re-interpret existing rules that we or our processors might find
difficult to follow. Any disputes or problems associated with our payment
processors could impair our ability to give customers the option of using credit
cards to fund their payments. If we were unable to accept credit cards, our
business would be seriously damaged. We also could be subject to fines or
increased fees from MasterCard and Visa if we fail to detect that merchants are
engaging in activities that are illegal or activities that are considered “high
risk,” primarily the sale of certain types of product. We may be required to
expend significant capital and other resources to monitor these
activities.
   -35-
 
 Credit
card processors set certain fees for the use of their services.  These fees
may be increased in the future, which would result in additional expense and
lower profitability on credit card transactions handled by these credit card
processors.  Many credit card processors hold an amount in reserve
(typically a six month rolling reserve in the amount of 10% - 20% of revenue),
which is held to protect the credit card processor from any losses sustained if
we cease operations while consumer credits and fees continue.
 
 We
experience a high degree of fraudulent credit card charges, declines, and
charge-backs on credit cards used by end consumers.
 
 VISA and
MasterCard set certain criteria, including but not limited to charge back
ratios, to which we must adhere.  We use third- party services in order to
manage and minimize charge back transactions during the normal course of
business.  If we maintain ratios above the limits set by VISA and
MasterCard, our credit card processing accounts may be limited or terminated and
we may have difficulties finding merchant processors to handle our transactions.
In addition, the processors could also set maximum processing limits per month
on volume of transactions it will process. This would result in a severe
reduction in revenue and hamper our growth potential. To the extent our
chargeback ratios increase, our gross and operating margins will decrease. To
the extent our processors terminate our lines of credit, we will be unable to
bill consumers and therefore unable to continue shipping product.
  Our
products segment operates in a continuity or negative option model.
 
 Our
consumer product offers operate under a free trial period in which the consumer
has the right to cancel the order within a certain amount of time without the
consumer’s credit card being charged. In addition, the consumer typically has
thirty days to return a portion of the product for full or partial
credit.  Changes in consumer spending and general economic conditions
may increase the instance of consumer cancellations during the trial period
resulting in lower revenue.
 
 In
addition, to the extent we use affiliates to market our consumer products, we
are required to pay our affiliates for all leads delivered to us including leads
that have been cancelled by the consumer within the free trial period. If the
consumer product revenue generated from leads not resulting in early
cancellations during the free trial period does not exceed payments made to
affiliates for all leads delivered, we will experience negative gross margins
and operating losses in our consumer products segment.
 
 We
may be subject to litigation for infringing the intellectual property rights of
others.
  Our
success will depend, in part, on our ability to protect our intellectual
property and to operate without infringing on the intellectual property rights
of others.  We cannot guarantee that any of our intellectual property
will be adequately safeguarded, or that our intellectual property will not be
challenged by third parties.  We may be subject to patent infringement
claims or other intellectual property infringement claims that would be costly
to defend and could limit our ability to use certain critical
technologies.
  If we
were to acquire or develop a product or business model that a third party
construes as infringing on a patent, then  the owner of the patent
could demand that we license the patented technology, re-engineer our product(s)
or revise our business model according to terms that may be extremely expensive
and/or unreasonable.
  Any
patent litigation could negatively impact our business by diverting resources
and management attention from other aspects of the business and adding
uncertainty as to the ownership of technology and services that we view as
proprietary and essential to our business.  In addition, a successful
claim of patent infringement against us and our failure or inability to license
the infringed or similar technology on reasonable terms, or at all, could have a
material adverse effect on our business.
  We
may be involved in lawsuits to protect or enforce any patents that we may be
granted, which could be expensive and time consuming.
  If we
acquire patent rights in the future, we may initiate patent litigation to
protect or enforce our patent rights or others may sue us to invalidate patents
on which we rely.  We may also become subject to interference
proceedings conducted in the patent and trademark offices of various
countries to determine the priority of inventions.  The defense and
prosecution, if necessary, of intellectual property suits, interference
proceedings and related legal and administrative proceedings is costly and may
divert our technical and management personnel from their normal
responsibilities.  We may not prevail in any of these
suits.  An adverse determination of any litigation or defense
proceedings could put our patents at risk of being invalidated or interpreted
narrowly and could put our patent applications at risk of not being
issued.
 
  -36-
  Furthermore,
because of the substantial amount of discovery required in connection with
intellectual property litigation, there is a risk that some of our confidential
information could be compromised by disclosure during this type of
litigation.  In addition, during the course of this kind of
litigation, there could be public announcements of the results of hearings,
motions or other interim proceedings or developments in the
litigation.  If securities analysts or investors perceive these
results to be negative, it could have an adverse effect on the trading price of
our common stock.
  It
may become more difficult or expensive for us to license intellectual property,
thereby causing us to market fewer consumer products.
  Our
Digital Instructor subsidiary’s ability to compete and operate successfully
depends in part on our acquiring and controlling proprietary intellectual
property. Our consumer products embody trademarks, trade names, logos, or
copyrights that may be licensed from third parties. If we cannot maintain the
licenses that we currently have, or obtain additional licenses for products that
we plan to market, we will market fewer products and our business will suffer.
We cannot assure that our licenses will be extended on reasonable terms or at
all, or that we will be successful in acquiring or renewing licenses to property
rights with significant commercial value.
 
 Compliance
with new and existing governmental regulations could increase our costs
significantly and adversely affect our results of operations.
 
 Government
regulations may prevent or delay the sale of our products, or require their
reformulation, either of which could result in lost revenues and increased costs
to us.  For instance, the FDA regulates the formulation, labeling,
manufacture, marketing, promotion and distribution of dietary supplements such
as our Acai Alive and RezActiv products and cosmetics, such as our EasyWhite
Labs product. The FDA may determine that either of these products or one of
their ingredients presents an unacceptable health risk, and may determine that a
particular claim or statement that we use is an impermissible drug claim, is not
substantiated, or is an unauthorized version of a “health claim.”  Any
of these actions could prevent us from marketing such products or making certain
claims or statements of nutritional support or efficacy regarding the products.
The FDA could also require us to remove such products from the market. Any
recall or removal would result in additional costs to us, including lost
revenues from any products that we are required to remove from the market, which
could be material. Any product recall or removal could also lead to liability,
substantial costs, and reduced growth prospects.
 
 Additional
or more stringent regulations of cosmetics and dietary supplements have been
considered from time to time and may be enacted in the future. These
developments could require reformulation of products to meet new standards,
recalls or discontinuance of products not able to be reformulated, additional
record-keeping requirements, increased documentation of product properties,
additional or different labeling, scientific substantiation, adverse event
reporting, or other new requirements. Any of these developments could increase
our costs significantly and negatively impact our business. Additionally, our
third-party suppliers or vendors may not be able to comply with such new rules
without incurring substantial expenses.
 Product
liability lawsuits against us could cause us to incur substantial liabilities
and to limit commercialization of any products that we may market and
distribute.
 
 As a
marketer and distributor, we face an inherent risk of product liability exposure
related to the sale of our consumer products. If we cannot successfully defend
against claims that our products or product candidates caused injuries, we could
incur substantial liabilities. Regardless of merit or eventual outcome,
liability claims may result in:
  •
              decreased
      demand for our products or any products that we may
    develop;•
              injury
      to our reputation;•
              the
      withdrawal of a product from the market;•
              costs
      to defend the related litigation;•
              diversion
      of management time and attention;•
              loss
      of revenue; and•
              inability
      to commercialize the products that we may
  develop.
   -37-
 
 Some of
our contracts with wholesalers and other customers require us to carry product
liability insurance.
  We have
product liability insurance coverage with a $4,000,000 million annual aggregate
limit and a $2,000,000 million individual claim limit, and which is subject
to a per-claim deductible and a policy aggregate deductible. The annual cost of
the products liability insurance is based on our level of sales and our
policy coverage began on January 12, 2009.  The amount of insurance
that we currently hold may not be adequate to cover all liabilities that we may
incur. Insurance coverage is increasingly expensive. We may not be able to
maintain insurance coverage at a reasonable cost and may not be able to obtain
insurance coverage that will be adequate to satisfy any liability that may
arise.
  We
rely on contract manufacturers to produce all of the EasyWhite Labs, Acai Alive
and RezActiv branded products we sell. Disruptions in our contract
manufacturers’ systems or losses of manufacturing certifications could adversely
affect our sales and customer relationships.
 
 Our
contract manufacturers produce 100% of our EasyWhite Labs, Acai Alive and
RezActiv branded products. Any significant disruption in those operations for
any reason, such as regulatory requirements and loss of certifications, power
interruptions, fires, hurricanes, war or threats of terrorism could adversely
affect our sales and customer relationships.
 Our
business is subject to economic, political, and other risks associated with
international operations.
  Because
many of the offers we market are offered in foreign countries, our business is
subject to risks associated with doing business internationally.
  Accordingly,
our future results could be harmed by a variety of factors, including less
effective protection of intellectual property, changes in foreign currency
exchange rates, changes in political or economic conditions, trade-protection
measures and import or export licensing requirements. Furthermore, there can be
no assurance that our business will not suffer from any of these other risks
associated with doing business in a foreign country.
 
 Our
corporate compliance and corporate governance programs cannot guarantee that we
are in compliance with all potentially applicable regulations.
 
 The
development, manufacturing, pricing, marketing, sales and reimbursement of our
products and product candidates, together with our general operations, are
subject to extensive regulation by federal, state and other authorities within
the United States. We are a relatively small company and had approximately 42
employees as of March 15, 2009. We rely heavily on third parties to conduct
many important functions and we cannot guarantee that we are in compliance with
all potentially applicable federal and state regulations. If we fail to comply
with any of these regulations, we may be subject to a range of enforcement
actions, including significant fines, litigation or other sanctions. Any action
against us for a violation of these regulations, even if we successfully defend
against such actions, could cause us to incur significant legal expenses, divert
our management’s attention and harm our reputation.
 
 Risks
Relating to Our Industry
  If
we are unable to compete in the highly competitive performance-based advertising
and marketing industries, we may experience reduced demand for our products and
services.
  We expect
to operate in a highly competitive environment.  We will compete with
other companies in the following two main areas:
  ·
              
              sales
      to merchant advertisers of performance-based and other advertising;
      and·
              
              services
      that allow merchants to manage their advertising campaigns across multiple
      networks and monitor the success of these
  campaigns.
   -38-
 
 Although
we expect to pursue a strategy that allows us to potentially partner with all
relevant companies in the industry, there are certain companies in the industry
that may not wish to partner with us.
  We expect
competition to intensify in the future because current and new competitors can
enter our market with little difficulty.  The barriers to entering our
market are relatively low.  In fact, many current Internet and media
companies presently have the technical capabilities and advertiser bases to
enter the industry.  Further, if the consolidation trend continues
among the larger media companies with greater brand recognition, the share of
the market remaining for us and other smaller providers could decrease, even
though the number of smaller providers could continue to
increase.  These factors could adversely affect our competitive
position in the search marketing services industry.
  Some of
our competitors, as well as potential entrants into our market, may be better
positioned to succeed in this market.  They may have:
  ·
              
              longer
      operating histories;·
              
              more
      management experience;·
              
              an
      employee base with more extensive experience;·
              
              a
      better ability to service customers in multiple cities in the United
      States and internationally by virtue of the location of sales
      offices;·
              
              larger
      customer bases;·
              
              greater
      brand recognition; and·
              
              significantly
      greater financial, marketing and other
  resources.
  In
addition, many current and potential competitors can devote substantially
greater resources than we can to promotion, Web site development and systems
development.  Furthermore, there are many established and
well-financed competitors that could acquire or create competing companies or
joint ventures in market segments or countries of interest to us, which could
increase competition and reduce the demand for any of our services.
  Regulation
of continuity or negative option businesses may adversely affect our
operations.
 
 Companies
operating continuity or negative option models operate under guidelines mandated
by state and federal regulatory agencies, including the Federal Trade Commission
(“FTC”).  These guidelines may be changed or amended by the FTC at any
time, requiring us to make changes in our operations which could severely impact
revenue and profitability.
 
 In
addition, the FTC, state agencies and consumer advocacy groups typically monitor
companies like ours to ensure compliance with these guidelines and may challenge
our compliance at any time.  This could lead to increased legal fees
and possible changes to or termination of our continuity programs, all of which
would have a negative impact on our revenues and profitability.
 
 We
are susceptible to general economic conditions, and a downturn in advertising
and marketing spending by merchants could adversely affect our operating
results.
  Our
operating results will be subject to fluctuations based on general economic
conditions, in particular those conditions that impact merchant-consumer
transactions.  If there were to be a general economic downturn that
affected consumer activity in particular, however slight, then we would expect
that business entities, including our merchant advertisers and potential
merchant advertisers, could substantially and immediately reduce their
advertising and marketing budgets.  We believe that during periods of
lower consumer activity, merchant spending on advertising and marketing is more
likely to be reduced, and more quickly, than many other types of business
expenses.  These factors could cause a material adverse effect on our
operating results.
 
  -39-
 
 If
we are unable to respond to the rapid technological change characteristic of our
industry, our products and services may not be competitive.
  The
market for our services is characterized by rapid change in business models and
technological infrastructure, and we will need to constantly adapt to changing
markets and technologies to provide competitive services.  We believe
that our success will depend, in part, on our ability to develop our services
for both our target market and for applications in new
markets.  However, we may not be successful and our competitors may
develop innovations that render our products and services obsolete or
uncompetitive.
  Our
technical systems will be vulnerable to interruption and damage that may be
costly and time-consuming to resolve and may harm our business and
reputation.
  A natural
or man-made disaster or other cause could interrupt our services indefinitely
and severely damage our business, prospects, financial condition and results of
operations.  Our systems and operations will be vulnerable to damage
or interruption from fire, floods, network failure, hardware failure, software
failure, power loss, telecommunications failures, break-ins, terrorism, war or
sabotage, computer viruses, denial of service attacks, penetration of our
network by unauthorized computer users and “hackers,” and other similar
events.
  We
presently may not possess and may not have developed or implemented adequate
protections or safeguards to overcome any of these events.  We also
may not have anticipated or addressed many of the potential events that could
threaten or undermine our technology network.  Any of these
occurrences could cause material interruptions or delays in our business, result
in the loss of data, render us unable to provide services to our customers,
expose us to material risk of loss or litigation and liability, materially
damage our reputation and our visitor traffic may decrease as a
result.  In addition, if a person is able to circumvent our security
measures, he or she could destroy or misappropriate valuable information or
disrupt our operations which could cause irreparable damage to our reputation or
business.  Similar industry-wide concerns or events could also
damage our reputation or business.  Our insurance, if obtained,
may not be adequate to compensate us for all losses that may occur as a result
of a catastrophic system failure or other loss, and our insurers may not be able
or may decline to do so for a variety of reasons.
  If we
fail to address these issues in a timely manner, we may lose the confidence of
our merchant advertisers, our revenue may decline and our business could
suffer.
 
 We
rely on third-party co-location providers, and a failure of service by these
providers could adversely affect our business and reputation.
  We rely
on third-party co-location providers to host our main servers.  If
these providers experience any interruption in operations or cease operations
for any reason or if we are unable to agree on satisfactory terms for continued
hosting relationships, we would be forced to enter into a relationship with
other service providers or assume hosting responsibilities
ourselves.  If we are forced to switch hosting facilities, we
may not be successful in finding an alternative service provider on
acceptable terms or in hosting the computer servers ourselves.  We may
also be limited in our remedies against these providers in the event of a
failure of service.  In the past, short-term outages have occurred in
the service maintained by co-location providers which could recur.  We
also may rely on third-party providers for components of our technology
platform, such as hardware and software providers, credit card processors and
domain name registrars.  A failure or limitation of service or
available capacity by any of these third-party providers could adversely affect
our business and reputation.
  Our
quarterly results of operations might fluctuate due to changes in the search
engine-based algorithms, which could adversely affect our revenue and in turn
the market price of our common stock.
  Our
revenue is heavily dependent on how search engines treat our content in their
indexes.  If search engines determine that our content is not high
quality, they may not rank our content as highly in their indexes resulting in a
reduction in our traffic, which may cause lower than expected
revenues.  We are greatly dependent on a small number of major search
engines, namely Google, Yahoo!, MSN, and AOL.  Search engines tend to
adjust their algorithms periodically and each adjustment tends to have an impact
on how our content ranks in their indexes.  These constant
fluctuations could make it difficult for us to predict future
revenues.
  -40-
 
 We
depend on the growth of the Internet and Internet infrastructure for our future
growth and any decrease or less-than-anticipated growth in Internet usage could
adversely affect our business prospects.
  Our
future revenue and profits, if any, depend on the continued widespread use of
the Internet as an effective commercial and business medium.  Factors
which could reduce the widespread use of the Internet include:
 
 ·
              possible
      disruptions or other damage to the Internet or telecommunications
      infrastructure;·
              failure
      of the individual networking infrastructures of our merchant advertisers
      and distribution partners to alleviate potential overloading and delayed
      response times;·
              a
      decision by merchant advertisers to spend more of their marketing dollars
      in offline areas;·
              increased
      governmental regulation and taxation; and·
              actual
      or perceived lack of security or privacy
  protection.
 
 In
particular, concerns over the security of transactions conducted on the Internet
and the privacy of users may inhibit the growth of the Internet and other online
services, especially online commerce.  In order for the online
commerce market to develop successfully, we, and other market participants, must
be able to transmit confidential information, including credit card information,
securely over public networks.  Any decrease or less than anticipated
growth in Internet usage could have a material adverse effect on our business
prospects.
  Government
regulations and legal uncertainties relating to the Internet and on-line
commerce may adversely affect our business and operating results.
  Companies
engaging in on-line search, commerce and related businesses face uncertainty
related to future government regulation of the Internet.  Due to the
rapid growth and widespread use of the Internet, legislatures at the federal and
state levels are enacting and considering various laws and regulations relating
to the Internet.  Furthermore, applicability to the Internet of
existing laws governing issues such as property ownership, copyrights and other
intellectual property issues, libel, obscenity and personal privacy is
uncertain.  Lawmakers adopted the majority of those laws prior to the
advent of the Internet and related technologies and, as a result, the laws do
not expressly contemplate or address the unique issues presented by the Internet
and related technologies.  Such existing and new laws may negatively
affect our business and operating results, expose us to substantial compliance
costs and liabilities, and impede the growth in use of the
Internet.
  The
following existing and proposed federal laws could negatively impact our
business:
  ·
              the
      Digital Millennium Copyright Act and its related safe harbors, which are
      intended to reduce the liability of online service providers for listing
      or linking to third-party Web sites that include materials that infringe
      copyrights or other rights of others;·
              the
      Federal Trade Commission Act, which requires, among other things, that all
      disclosures in connection with online offers and promotions be “clear and
      conspicuous”;·
              the
      CAN-SPAM Act of 2003 and certain similar state laws, which are intended to
      regulate interstate commerce by imposing limitations and penalties on the
      transmission of unsolicited commercial electronic mail via the Internet;
      and·
              pending
      and adopted consumer protection and privacy
  legislation.
  Courts
may apply these laws in unintended and unexpected ways.  As a company
that provides services over the Internet, we may be subject to an action brought
under any of these or future laws governing online services.  Many of
the services of the Internet are automated and companies such as ours may be
unknowing conduits for illegal or prohibited materials.  We cannot
predict how courts will rule in many circumstances; for example, it
is possible that some courts could find strict liability or impose “know
your customer” standards of conduct in certain circumstances.
  In 1998,
the Internet Tax Freedom Act was enacted, which generally placed a three-year
moratorium on state and local taxes on Internet access and on multiple or
discriminatory state and local taxes on electronic commerce.  This
moratorium was recently extended.  We cannot predict whether this
moratorium will be extended in the future or whether future legislation will
alter the nature of the moratorium.  If this moratorium is not
extended in its current form, state and local governments could impose
additional taxes on Internet-based transactions, and these taxes could decrease
our ability to compete with traditional retailers and could have a material
adverse effect on our business, financial condition, results of operations and
cash flow.
   -41-
 
 We may
also be subject to costs and liabilities with respect to privacy
issues.  Several Internet companies have incurred costs and paid
penalties for violating their privacy policies.  Further, federal and
state governments may adopt new legislation with respect to user
privacy.  Foreign governments may also pass laws which could
negatively impact our business or may prosecute us for our products and services
based on existing laws.  The restrictions imposed by, and costs of
complying with, current and possible future laws and regulations related to our
business could harm our business and operating results.  In addition,
our failure to comply with applicable laws and regulations could result in
fines, sanctions and other penalties and additional restrictions on our
collection, transfer or use of personal data.  These developments
could materially and adversely affect our business, results of operations and
financial condition.
 
 The
increasing use of the Internet and the resulting burden on the
telecommunications infrastructure has prompted telephone carriers to request
that the Federal Communications Commission (“FCC”) regulate Internet service
providers and impose access fees on those providers.  If the FCC
imposes access fees, the costs of using the Internet could increase
dramatically.  This could result in the reduced use of the Internet as
a medium for commerce, which could have a material adverse effect on our
Internet business operations.
 
 We will
also be subject to regulation not specifically related to the Internet,
including laws affecting direct marketing, advertising, and sweepstakes and
other contests.  If courts and regulators interpret current laws
unfavorably, or if additional legislative or regulatory restrictions develop, we
may be forced to revise our business strategy.  We cannot predict
whether alternative strategies would yield favorable results, and our failure to
develop successful alternative strategies could materially and adversely affect
our results of operations and financial condition.
  Future
regulation of search engines may adversely affect the commercial utility of our
search marketing services.
 
 The
Federal Trade Commission (“FTC”) has recently reviewed the way in which search
engines disclose paid placements or paid inclusion practices to Internet
users.  In 2002, the FTC issued guidance recommending that all search
engine companies ensure that all paid search results are clearly
distinguished from non-paid results, that the use of paid inclusion is clearly
and conspicuously explained and disclosed and that other disclosures are made to
avoid misleading users about the possible effects of paid placement or paid
inclusion listings on search results.  Such disclosures if ultimately
mandated by the FTC or voluntarily made by us may reduce the desirability of any
paid placement and paid inclusion services that we offer.  We believe
that some users may conclude that paid search results are not subject to the
same relevancy requirements as non-paid search results, and will view paid
search results less favorably.  If such FTC disclosure reduces the
desirability of paid placement and paid inclusion services, and “click-throughs”
of paid search results decrease, the commercial utility of our search
marketing services could be adversely affected.
 We
may incur liabilities for the activities of users of our services, which could
adversely affect our service offerings.
  The law
relating to the liability of providers of online services for activities of
their users and for the content of their merchant advertiser listings is
currently unsettled and could damage our business, financial condition and
operating results.  Our insurance policies may not provide coverage
for liability arising out of activities of our users or merchant advertisers for
the content of our listings.  Furthermore, we may not be able to
obtain or maintain adequate insurance coverage to reduce or limit the
liabilities associated with our businesses.  We may not
successfully avoid civil or criminal liability for unlawful activities carried
out by consumers of our services or for the content of our
listings.  Our potential liability for unlawful activities of users of
our services or for the content of our listings could require us to implement
measures to reduce our exposure to such liability, which may require us, among
other things, to spend substantial resources or to discontinue certain service
offerings.
  Our
ability to grow will depend on effectively competing against Google and other
competitors that are competing in or about to enter the pay-for-performance
business.
  Our
business plans depend in part on our ability to effectively offer an alternative
pay-for-performance solution to advertisers relative to Google and other
competitive offerings.  If enough advertisers in this new, evolving
business model choose to spend a significant portion of their
pay-for-performance advertising budgets with competitors such as Google, our
ability to grow our revenues will be limited.
  We offer
advertising on Web sites other than our own.  The Web sites that will
list their unsold advertising space with us to include in our offerings are not
bound by contracts that ensure us a consistent supply of advertising
space-inventory. In addition, publishers can change the amount of inventory they
make available to us at any time. If a Web site publisher decides not to make
advertising space from its Web sites available to us, we may not be able to
replace this advertising space with advertising space from other Web sites that
have comparable traffic patterns and user demographics quickly enough to fulfill
our advertisers’ requests. This could result in lost revenues.
   -42-
 
 Our
growth depends on our ability to maintain a predictable inventory of advertising
space on our own and third-party Web sites. To attract new advertising
customers, we must maintain a consistent supply of attractive advertising space.
We intend to expand our advertising inventory by selectively adding to our owned
published content new publishers that offer attractive demographics, innovative
and quality content and growing user traffic.
  The
market for Internet advertising and related services is intensely competitive.
We expect this competition to continue to increase because there are no
significant barriers to entry. Increased competition may result in price
reductions for advertising space, reduced margins and loss of our market share.
We will compete with the following types of companies:
 
 ·
              Internet
      advertising networks that focus on a CPA model, such as Value Click Media
      and CPX Interactive;·
              Internet
      affiliate networks using a performance-based model, such as Media
      Breakaway/CPA Empire, Hydra Media and Media Whiz
  Holdings;
  ·
              e-mail
      publishers and Data/List Management firms that use performance based
      models such as Datran;·
              Internet
      navigational and Web search engine companies moving into the
      pay-for-performance space such as Google; and·
              traditional
      advertising and direct marketing media, such as radio, cable, television,
      print and direct marketing.
 
 We also
compete with traditional advertising media, such as direct mail, television,
radio, cable and print, for a share of advertisers’ total advertising
budgets.  Many of our current and potential competitors enjoy
competitive advantages over us, such as longer operating histories, greater name
recognition, larger customer bases, greater access to advertising space on
high-traffic Web sites, and significantly greater financial, technical and
marketing resources. We may not be able to compete successfully, and competitive
pressures may materially and adversely affect our business, results of
operations and financial condition.
  Risks Relating to the Common
Stock
  The
market price of our common stock is likely to be highly volatile and subject to
wide fluctuations.
  The
market price of our common stock is likely to be highly volatile and could be
subject to wide fluctuations in response to a number of factors, many of which
are beyond our control, including:
  ·
                announcements
      of new products or services by our competitors;·
                fluctuations
      in revenue attributable to changes in the search engine-based algorithms
      that  rank the relevance of our content;·
                quarterly
      variations in our revenues and operating expenses;·
                announcements
      of technological innovations or new products or services by
      us;·
                sales
      of common stock by our founders and directors or other selling
      stockholders;·
                competitive
      pricing pressures;·
                our
      ability to obtain working capital financing;·
                additions
      or departures of key personnel;·
                the
      limited number of people who hold our common
  stock;
   -43-
  ·
                sales
      of large blocks of our common stock when restricted shares become freely
      tradable;·
                our
      ability to execute our business plan;·
                operating
      results that fall below expectations;·
                loss
      of any strategic relationship;·
                regulatory
      developments;·
                period-to-period
      fluctuations in our financial results;·
                the
      potential absence of securities-analyst coverage;·
                conditions
      or trends in the industry; and·
                general
      market conditions.
 In
addition, the securities markets have from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies.  These market fluctuations may also materially
and adversely affect the market price of our common stock.
 Our
operating results may fluctuate significantly, and these fluctuations may cause
the price of our common stock to fall.
  Our
operating results will likely vary in the future primarily as the result of
fluctuations in our revenues and operating expenses.  If our results
of operations do not meet the expectations of current or potential investors,
the price of our common stock may decline.
 
 Our
common stock is controlled by insiders.
 
 Following
the Abundantad merger, the founders and investors of Abundantad now beneficially
own a majority of the outstanding shares of our common stock.  Such
concentrated control of the Company may adversely affect the price of our common
stock.  Our principal security holders may be able to control matters
requiring approval by our security holders, including the election of
directors.  Such concentrated control may also make it difficult for
our stockholders to receive a premium for their shares of our common stock if we
merge with a third party or enter into different transactions which require
stockholder approval.  In addition, certain provisions of Delaware law
could have the effect of making it more difficult or more expensive for a third
party to acquire, or of discouraging a third party from attempting to acquire,
control of us.  Accordingly, these former Abundantad shareholders will
have the power to control the election of all of our directors and the approval
of actions for which the approval of our stockholders is required.  If
you acquire common stock, you may have no effective voice in the management of
the Company.
  Anti-takeover
provisions may limit the ability of another party to acquire us, which could
cause our stock price to decline.
  We are
subject to the Delaware General Corporate Law, which provides, subject to
enumerated exceptions, that if a person acquires 15% or more of our voting
stock, the person is an “interested stockholder” and may not engage in “business
combinations” with us for a period of three years from the time the person
acquired 15% or more of our voting stock.
 
 We
are subject to the reporting requirements of federal securities laws, which can
be expensive and may divert resources from other projects, thus impairing its
ability to grow.
  We are a
public reporting and trading company and, accordingly, subject to the
information and reporting requirements of the Exchange Act and other federal
securities laws, including compliance with the Sarbanes-Oxley Act of 2002
(the “Sarbanes-Oxley Act”).  We expect to incur significant costs of
preparing and filing annual and quarterly reports, proxy statements and other
information with the SEC and furnishing audited reports to
stockholders.
   -44-
  It may be
time consuming, difficult and costly for us to develop and implement the
internal controls and reporting procedures required by the Sarbanes-Oxley
Act.  We may need to hire additional financial reporting, internal
controls and other finance personnel in order to develop and implement
appropriate internal controls and reporting procedures.  If we are
unable to comply with the internal controls requirements of the Sarbanes-Oxley
Act, then we may not be able to obtain the independent accountant certifications
required by such act, which may preclude us from keeping our filings with the
SEC current.
  Because
we became public by means of a reverse merger with Abundantad into a
wholly-owned subsidiary of Adex, we may not be able to attract the attention of
major brokerage firms.
  There may
be risks associated with Abundantad becoming public through a “reverse
merger.”  Securities analysts of major brokerage firms may not provide
coverage of us since there is no incentive to brokerage firms to recommend the
purchase of our common stock.  We can give no assurance that brokerage
firms will, in the future, want to conduct any secondary offerings on behalf of
our Company.
  If
we fail to establish and maintain an effective system of internal controls, we
may not be able to report our financial results accurately or prevent
fraud.  Any inability to report and file our financial results
accurately and timely could harm our reputation and adversely impact the trading
price of our common stock.
  Effective
internal controls are necessary for us to provide reliable financial reports and
prevent fraud.  If we cannot provide reliable financial reports or
prevent fraud, we may not be able to manage our business as effectively as we
would if an effective control environment existed, and our business and
reputation with investors may be harmed.  As a result, our small size
and any current internal control deficiencies may adversely affect our financial
condition, results of operation and access to capital.  We have not
performed an in-depth analysis to determine if historical undiscovered failures
of internal controls exist, and may in the future discover areas of our internal
controls that need improvement.
  Public-company
compliance may make it more difficult for us to attract and retain officers and
directors.
 
 As a
public company, the rules and regulations of the Exchange Act and Sarbanes-Oxley
Act may make it more difficult and expensive for us to obtain director and
officer liability insurance in the future and we may be required to accept
reduced policy limits and coverage or incur substantially higher costs to
obtain the same or similar coverage.  As a result, it may be more
difficult for us to attract and retain qualified persons to serve on our board
of directors or as executive officers.
 
 Persons
associated with securities offerings, including consultants, may be deemed to be
broker-dealers, which may expose us to claims for rescission or
damages.
  If any
person associated with any of our securities offerings is deemed to be a
broker-dealer and is not registered with the SEC, we may face claims for
rescission and other remedies.  We may become engaged in costly
litigation to defend these claims, which would lead to increased expenditures
for legal fees and divert managements’ attention from operating the
business.  If we could not successfully defend these claims, we may be
required to return proceeds of any affected offering to investors, which would
harm our financial condition.
  We
do not expect to pay dividends in the future.  Any return on
investment may be limited to the value of our common stock.
  Aside
from the accounting treatment of the consideration we paid to Kim and Lim, LLC
for the acquisition of the assets which was treated as a dividend, we have never
paid cash dividends on our common stock and do not anticipate doing so in the
foreseeable future.  The payment of dividends on our common stock will
depend on earnings, financial condition and other business and economic factors
affecting us at such time as our board of directors may consider
relevant.  If we do not pay dividends, our common stock may be less
valuable because a return on your investment will only occur if our stock price
appreciates.
  There
is currently no liquid trading market for our common stock and we cannot ensure
that one will ever develop or be sustained.
  To date
there has been no liquid trading market for our common stock.  We
cannot predict how liquid the market for our common stock might
become.  As soon as is practicable, we anticipate applying for listing
of our common stock on the NASDAQ Capital Market or other national securities
exchange, assuming that we can satisfy the initial listing standards for such
exchange.  We currently do not satisfy the initial listing standards,
and cannot ensure that we will be able to satisfy such listing standards or that
our common stock will be accepted for listing on any such
exchange.  Should we fail to satisfy the initial listing standards of
such exchanges, or our common stock is otherwise rejected for listing and
remains quoted on the OTC Bulletin Board or is suspended from the OTC Bulletin
Board, the trading price of our common stock could suffer and the trading market
for our common stock may be less liquid and our common stock price may be
subject to increased volatility.
 
  -45-
  Furthermore,
for companies whose securities are quoted on the OTC Bulletin Board, it is more
difficult to obtain (1) accurate quotations, (2) coverage for significant news
events because major wire services generally do not publish press releases about
such companies, and (3) needed capital.
  Our
common stock may be deemed a “penny stock,” which would make it more difficult
for our investors to sell their shares.
  Our
common stock may be subject to the “penny stock” rules adopted under Section
15(g) of the Exchange Act.  The penny stock rules generally apply to
companies whose stock is not listed on a national securities exchange and trades
at less than $5.00 per share, other than companies that have had average revenue
of at least $6,000,000 for the last three years or that have tangible net worth
of at least $5,000,000 ($2,000,000 if the company has been operating for three
or more years).  These rules require, among other things, that brokers
who trade penny stock to persons other than “established customers” complete
certain documentation, make suitability inquiries of investors and provide
investors with certain information concerning trading in the security, including
a risk disclosure document and quote information under certain
circumstances.  Many brokers have decided not to trade penny stocks
because of the requirements of the penny stock rules and, as a result, the
number of broker-dealers willing to act as market makers in such securities is
limited.  If we remain subject to the penny stock rules for any
significant period, it could have an adverse effect on the market, if any, for
our securities.  If our securities are subject to the penny stock
rules, investors will find it more difficult to dispose of our
securities.
  Offers
or availability for sale of a substantial number of shares of our common stock
may cause the price of our common stock to decline.
  If our
stockholders sell substantial amounts of our common stock in the public market,
it could create a circumstance commonly referred to as an “overhang” and in
anticipation of which the market price of our common stock could
fall.  The existence of an overhang, whether or not sales have
occurred or are occurring, also could make more difficult our ability to raise
additional financing through the sale of equity or equity-related securities in
the future at a time and price that we deem reasonable or
appropriate.  The shares of our common stock issued to certain of the
former stockholders of Abundantad in the Abundantad merger are subject to a
lock-up agreement prohibiting sales of such shares for a period of 15
months following the Abundantad merger.  Following such date, all of
those shares will become freely tradable, subject to securities laws and SEC
regulations regarding sales by insiders.    We note that
recent revisions to Rule 144 may result in certain shares of our common
stock becoming eligible for resale into the public market without registration
in as little as six months after their issuance.
  Because
our directors and executive officers are among our largest stockholders, they
can exert significant control over our business and affairs and have actual or
potential interests that may depart from those of our other
stockholders.
 
 Our
directors and executive officers own or control a significant percentage of our
common stock. Additionally, such persons may hold exercise rights under options
or warrants they may hold now or in the future. The interests of such persons
may differ from the interests of our other stockholders. As a result, in
addition to their board seats and offices, such persons will have significant
influence and control over corporate actions requiring stockholder approval,
irrespective of how the Company’s other stockholders may vote, including the
following actions:
  ·
              to
      elect or defeat the election of our directors;·
              to
      amend or prevent amendment of our Certificate of Incorporation or
      By-laws;·
              to
      effect or prevent a merger, sale of assets or other corporate transaction;
      and·
              to
      control the outcome of any other matter submitted to our stockholders for
      vote.
 Such
persons’ stock ownership may discourage a potential acquirer from making a
tender offer or otherwise attempting to obtain control of the company, which in
turn could reduce our stock price or prevent our stockholders from realizing a
premium over our stock price.
 
 -46-
 
 Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds
 
 In
connection with the Company’s acquisition of the Membership Interests of Digital
Instructor, LLC, under the six month share reset provision, we determined the
VWAP was $1.47 and accordingly, 420,039 additional shares of common stock were
issued to the former members of Digital Instructor, LLC on February 12, 2009. In
connection with this issuance, the Company has relied on the exemption from
registration under the Securities Act of 1933 pursuant to Section 4(2)
thereof.  Such shares of common stock are restricted shares, and the
holders thereof may not sell, transfer or otherwise dispose of such shares
without registration under the Securities Act of 1933 or an exemption
therefrom.
 
 In
connection with the Company’s termination of an employee who was granted 50,000
restricted shares of common stock under the Plan on September 23, 2008, the
Company accelerated the vesting of 10,000 restricted shares of common stock and
cancelled the remaining 40,000 restricted shares of common stock with respect to
such employee on February 10, 2009.  In connection with this issuance,
the Company has relied on the exemption from registration under the Securities
Act of 1933 pursuant to Section 4(2) thereof.  Such shares of common
stock are restricted shares, and the holders thereof may not sell, transfer or
otherwise dispose of such shares without registration under the Securities Act
of 1933 or an exempt therefrom.
 
 Item
3. Defaults Upon Senior Securities
 
 None
 
 Item 4. Submission of Matters to a
Vote of Security Holders
 
 None
 
 Item
5. Other Information
 
 None
 
 -47-
   Item
6.  Exhibits
 
 Exhibit
      No.
                      Description3.1
                      Certificate
      of Incorporation (1)3.2
                      Bylaws
      (1)10.1
                      Agreement,
      dated as of March 6, 2009, by and among Adex Media, Inc., Digital Equity
      Partners, LLC, and the former member of Digital Instructor, LLC
      (2)10.2
                      Senior
      Secured Promissory Note, dated as of March 6, 2009, by and among AdEx
      Media, Inc., and Digital Equity Partners, LLC (2)31.1
                      Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 *31.2
                      Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 *32.1
                      Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002 *32.2
                      Certificate
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002*
 (1)
              The
      Certificate of Incorporation is incorporated by reference herein to the
      Company’s Current Report on Form 8-K filed with the Securities and
      Exchange Commission on April 30, 2008, and a Correction to Certificate of
      Incorporation is incorporated by reference herein to the Company’s Current
      Report on Form 8-K filed with the Securities and Exchange Commission on
      May 16, 2008.
 (2)
              Incorporated
      by reference herein to the Company’s Current Report on Form 8-K filed with
      the Securities and Exchange Commission on March 12,
  2009.*
              filed
      herewith.
    -48-
  SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
  ADEX MEDIA,
      INC.Date:
      MAY 15, 2009
                By:
                /s/
      Scott RewickScott
      RewickChief
      Executive OfficerADEX
      MEDIA, INC.Date:
      MAY 15, 2009
                By:
                /s/
      Ben ZadikBen
      ZadikChief
      Financial Officer
  
  -49-