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 September 30, 2008




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. Mountain View, CA, Suite A-200
            94043(Address
      of principal executive offices)
            (Zip
      Code)




(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 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
               ̈
              Smaller
      reporting company
              x(Do
      not check if a smaller reporting company)




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).    Yes   ̈    No  x




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




Class
            Shares
      outstanding on November 10, 2008Common
      Stock, $0.0001 par value per share
            31,202,347
      shares








Adex
Media, Inc.




FORM
10-Q




For
the Quarter Ended September 30, 2008




PagePart I.
            Financial
      InformationItem
      1.
            Financial
      Statementsa)
            Condensed
      Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007
      (unaudited)
            1b)
            Condensed
      Consolidated Statements of Operations for the Three Months Ended September
      30, 2008 and 2007(unaudited)
            2c)
            Condensed
      Consolidated Statements of Operations for the Nine Months Ended September
      30, 2008 and 2007 (unaudited)
            3d)
            Condensed
      Consolidated Cash Flows Statements for the Nine Months Ended September 30,
      2008 and 2007 (unaudited)
            4e)
            Notes
      to Condensed Consolidated Financial Statements
            5Item 2.
            Management’s
      Discussion and Analysis of Financial Condition and Results ofOperations
            30Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            37Item
      4T.
            Controls
      and
      Procedures
            37Part II.
            Other
      InformationItem
      1.
            Legal
      Proceedings
            38Item 1A.
            Risk
      Factors
            38Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            53Item
      3.
            Defaults Upon Senior
      Securities
            54Item
      4.
            Submission of Matters To a Vote Of Security
      Holders
            54Item
      5.
            Other
      Information
            54Item
      6.
            Exhibits
            54Signature










i













Item
1.  FINANCIAL STATEMENTS




ADEX
MEDIA, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED
BALANCE SHEETS


(Unaudited)





September
      30,
              2008
            
            
            December
      31 , 2007ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            650,099
            
            
            $
            5,379Short-term
      investments
            
            
            2,784,815
            
            
            
            224,308Total
      cash, cash equivalents, and short-term investments
            
            
            3,434,914
            
            
            
            229,687Accounts
      receivable, net of allowance for doubtful accounts of $400 and
      $410
            
            
            444,033
            
            
            
            188,200Credit
      card holdbacks
            
            
            379,035
            
            
            
            -Inventory
            
            
            33,077
            
            
            
            -Other
      receivables
            
            
            43,783
            
            
            
            -Prepaid
      expenses and other current assets
            
            
            60,676
            
            
            
            -Total
      current assets
            
            
            4,395,518
            
            
            
            417,887Property
      and equipment, net
            
            
            55,910
            
            
            
            3,740Intangible
      assets, net
            
            
            1,448,981
            
            
            
            -Goodwill
            
            
            8,448,789
            
            
            
            -Total
      assets
            
            $
            14,349,198
            
            
            $
            421,627LIABILITIES AND STOCKHOLDERS’
      EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            830,206
            
            
            $
            52,817Accrued
      liabilities
            
            
            737,153
            
            
            
            103,911Deferred
      revenue
            
            
            13,412
            
            
            
            -Promissory
      notes
            
            
            541,912
            
            
            
            -Total
      current liabilities
            
            
            2,122,683
            
            
            
            156,728Deferred tax
      liability
            
            
            429,077
            
            
            
            -Total
      liabilities
            
            
            2,551,760
            
            
            
            156,728Stockholders’
      Equity:Common
      Stock, $.0001 par value; 150,000,000 shares authorized, 31,202,347 and
              250,000
      shares issued and outstanding at September 30, 2008 and December 31,
      2007
            
            
            3,120
            
            
            
            25Additional
      paid in capital
            
            
            13,568,799
            
            
            
            187,475Retained
      earnings (accumulated deficit)
            
            
            (1,774,481
            )
            
            
            77,399Total
      stockholders’ equity
            
            
            11,797,438
            
            
            
            264,899Total
      liabilities and stockholders’ equity
            
            $
            14,349,198
            
            
            $
            421,627





The
accompanying notes are an integral part of these condensed consolidated
financial statements











1











ADEX MEDIA, INC. AND
SUBSIDIARIES


CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited)




Three
      Months Ended September 30,2008
              
              
              2007Revenues:Marketing
      platform services
              
              $
              1,340,935
              
              
              $
              511,780Products
              
              
              476,228
              
              
              
              -Total
      revenues
              
              
              1,817,163
              
              
              
              511,780Cost
      of sales:Marketing
      platform services
              
              
              1,219,213
              
              
              
              378,948Products
              
              
              127,526
              
              
              
              -Amortization
      of acquired product licenses
              
              
              18,795
              
              
              
              -Total
      cost of sales
              
              
              1,365,534
              
              
              
              378,948Gross
      profit
              
              
              451,629
              
              
              
              132,832Operating
      expenses:Product
      development
              
              
              17,300
              
              
              
              -Sales
      and marketing
              
              
              1,021,662
              
              
              
              39,075General
      and administrative
              
              
              404,521
              
              
              
              10,618Amortization
      of intangible assets
              
              
              22,224
              
              
              
              -Impairment
      of intangible assets
              
              
              310,000
              
              
              
              -Total
      operating expenses
              
              
              1,775,707
              
              
              
              49,693Income
      (loss) before interest, other income (expense) and provision
      for  income taxes
              
              
              (1,324,078
              )
              
              
              83,139Interest
      and other income, net
              
              
              13,489
              
              
              
              162Income
      (loss) before provision for income taxes
              
              
              (1,310,589
              )
              
              
              83,301Provision
      for income tax expense (benefit)
              
              
              (12,923
              )
              
              
              -Net
      income (loss)
              
              $
              (1,297,666
              )
              
              $
              83,301Net
      income (loss) per common share, basic and diluted
              
              $
              (0.04
              )
              
              $
              0.33Weighted
      average common shares used in computing basic and diluted loss per
      share
              
              
              30,388,079
              
              
              
              250,000




The
accompanying notes are an integral part of these condensed consolidated
financial statements








2











ADEX MEDIA, INC. AND
SUBSIDIARIES


CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited)




Nine
      Months Ended September 30,2008
              
              
              2007Revenues:Marketing
      platform services
              
              $
              2,750,264
              
              
              $
              1,191,604Products
              
              
              476,228
              
              
              
              -Total
      revenues
              
              
              3,226,492
              
              
              
              1,191,604Cost
      of sales:Marketing
      platform services
              
              
              2,299,117
              
              
              
              855,672Products
              
              
              127,526
              
              
              
              -Amortization
      of acquired product licenses
              
              
              18,795
              
              
              
              -Total
      cost of sales
              
              
              2,445,438
              
              
              
              855,672Gross
      profit
              
              
              781,054
              
              
              
              335,932Operating
      expenses:Product
      development
              
              
              52,550
              
              
              
              -Sales
      and marketing
              
              
              1,350,135
              
              
              
              94,332General
      and administrative
              
              
              955,729
              
              
              
              42,656Amortization
      of intangible assets
              
              
              22,224
              
              
              
              -Impairment
      of intangible assets
              
              
              310,000
              
              
              
              -Total
      operating expenses
              
              
              2,690,638
              
              
              
              136,988Income
      (loss) before interest, other income (expense) and provision
      for  income taxes
              
              
              (1,909,584
              )
              
              
              198,944Interest
      and other income, net
              
              
              45,582
              
              
              
              279Income
      (loss) before provision for income taxes
              
              
              (1,864,002
              )
              
              
              199,223Provision
      for income tax expense (benefit)
              
              
              (12,123
              )
              
              
              800Net
      income (loss)
              
              $
              (1,851,879
              )
              
              $
              198,423Net
      income (loss) per common share, basic and diluted
              
              $
              (0.12
              )
              
              $
              0.79Weighted
      average common shares used in computing basic and diluted loss per
      share
              
              
              15,443,218
              
              
              
              250,000






The
accompanying notes are an integral part of these condensed consolidated
financial statements








3





ADEX MEDIA, INC. AND
SUBSIDIARIES


CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)


Nine
      Months Ended September 30,2008
            
            
            2007Cash
      flows from operating activities:Net
      income (loss)
            
            $
            (1,851,879
            )
            
            $
            198,423Adjustments
      to reconcile net income (loss) to net cash (used in) provided by operating
      activities:Depreciation
            
            
            9,872
            
            
            
            180Amortization
      of intangibles
            
            
            41,019
            
            
            
            -Impairment
      of intangibles
            
            
            310,000
            
            
            
            -Stock-based
      compensation
            
            
            323,926
            
            
            
            -Deferred
      rent charges
            
            
            5,649
            
            
            
            -Foreign
      currency transaction loss
            
            
            5,519
            
            
            
            -Interest
      from accretion of promissory notes
            
            
            3,696
            
            
            
            -Income
      tax benefit
            
            
            (12,923
            )
            
            
            -Changes
      in current assets and liabilitiesAccounts
      receivable
            
            
            (261,352
            )
            
            
            (153,790
            )Inventory
            
            
            4,735
            
            
            
            -Other
      receivables
            
            
            (43,783
            )
            
            
            -Prepaid
      expenses and other current assets
            
            
            (58,140
            )
            
            
            809Credit
      card holdbacks
            
            
            (24,163
            )
            
            
            -Accounts
      payable
            
            
            483,374
            
            
            
            90,236Accrued
      liabilities
            
            
            406,475
            
            
            
            -Deferred
      revenue
            
            
            13,412
            
            
            
            -Net
      cash (used in) provided by operating activities
            
            
            (644,563
            )
            
            
            135,858Cash
      flows from investing activities:Purchase
      of short term investments
            
            
            (4,137,205
            )
            
            
            (161,809
            )Proceeds
      from sale of short term investments
            
            
            1,576,698
            
            
            
            37,029Acquisition
      costs and finders’ fees paid
            
            
            (203,445
            )
            
            
            -Cash
      acquired in connection with acquisition of membership interests in Digital
      Instructor, LLC
            
            
            56,431
            
            
            
            -Acquisition
      of membership interests in Digital Instructor, LLC
            
            
            (1,000,000
            )
            
            
            -Acquisition
      of assets of Vibrantads, LLC
            
            
            (70,000
            )
            
            
            -Acquisition
      of assets of Bay Harbor Marketing, LLC
            
            
            (50,000
            )
            
            
            -Purchase
      of intangible assets
            
            
            (10,000
            )
            
            
            -Purchase
      of property and equipment
            
            
            (34,993
            )
            
            
            (2,164
            )Net
      cash flows used in investing activities
            
            
            (3,872,514
            )
            
            
            (126,944
            )Cash
      flows from financing activities:Gross
      proceeds from private placement of common stock
            
            
            5,758,148
            
            
            
            -Costs
      of private placement of common stock
            
            
            (104,920
            )
            
            
            -Dividends
      paid
            
            
            (491,431
            )
            
            
            -Net
      cash flows provided by financing activities
            
            
            5,161,797
            
            
            
            -Net  increase
      in cash
            
            
            644,720
            
            
            
            8,914Cash
      and cash equivalents, beginning of period
            
            
            5,379
            
            
            
            9,201Cash
      and cash equivalents, end of period
            
            $
            650,099
            
            
            $
            18,115




Supplemental
      cash flow information:Cash
      paid for income taxes
              
              $
              800
              
              
              $
              800Promissory
      notes issued in connection with acquisitions
              
              $
              560,000
              
              
              
              -Value
      of common shares issued in connection with acquisition
              
              
              
              
              
              
              -of
      membership interests in Digital Instructor, LLC
              
              $
              5,616,000
              
              
              
              -Value
      of common shares issued in connection with acquisitionof assets
      of Vibrantads, LLC
              
              $
              531,563
              
              
              
              -Value
      of common shares issued in connection with acquisitionof
      assets of Bay Harbor Marketing,
      LLC
              
              $
              1,676,187
              
              
              
              -Discount
      on promissory notes issued
              
              $
              21,784
              
              
              
              -


The
accompanying notes are an integral part of these condensed consolidated
financial statements


4







ADEX
MEDIA, INC




NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





NOTE
1.    NATURE OF OPERATIONS




Overview 
-Adex Media, Inc. (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 publicly 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”).
  On May
14, 2008, Adex entered into an agreement and plan of merger by and among Adex
Media Acquisition, Inc., a wholly-owned subsidiary of Adex and Abundantad, a
privately held Nevada corporation.  Also on May 14, 2008, Abundantad
entered into an agreement with Kim and Lim LLC, DBA Pieces Media (“Pieces”)
whereby Abundantad acquired the business of Pieces as well as certain assets and
liabilities of Pieces.
  Adex is
an 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 developer, manufacturer,
and marketer of consumer learning products. Adex’s Digital Instructor subsidiary
currently sells and markets three products: (i) Overnight Genius – a
comprehensive computer learning course mastering MS Windows, MS Office, eBay,
and others; (ii) Rising Star Learning – a math and language arts educational
product for children; and (iii) Debt Snap – an audio seminar designed to help
consumers manage their debt and restore credit standing.
  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 offer advertisers a compelling
value proposition by offering true pay-per-performance pricing, commonly known
as cost-per-action (CPA) or pay-per-action (PPA).  We intend to service
domestic advertisers and expand into international markets. Additionally, we
plan to expand our own online properties, both internally, and through further
acquisitions. We also plan to expand the number of product offerings through our
Digital Instructor subsidiary.


Acquisition of
certain assets and liabilities of Kim and Lim LLC -On May 14,
2008, Abundantad entered into an Asset Purchase Agreement with Kim and Lim, LLC
d/b/a Pieces Media (“Pieces”) whereby the principals of Pieces agreed to sell
substantially all the assets and liabilities of Pieces, except cash on hand, to
Abundantad and the principals of Pieces agreed to become employees of
Abundantad. The purchase price was comprised of $250,000 in cash, 250,000
shares of restricted common stock of Abundantad, and an additional $300,000
payable on May 14, 2009 (provided the principals of Pieces are employees of Adex
in good standing on such date.)  The agreement also includes a minimum
public market value for the shares after one year, and a performance bonus based
upon meeting certain revenue targets for calendar 2008.





Accounting
Treatment -The merger with Abundantad was accounted for as a reverse
acquisition and recapitalization. In connection with Abundantad’s purchase of
the assets and liabilities of Pieces, Pieces is 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 cash paid to Pieces
has been recorded as a dividend to shareholders in the consolidated financial
statements.Operations reported for periods prior to the merger with
Abundantad are those of Pieces. Earnings per share prior to the merger with
Abundantad are restated to reflect the equivalent number of shares received by
Pieces. Operations reported for the quarter ended September 30, 2008 include the
earnings of Pieces for the full nine months and the earnings of Adex and
Abundantad from May 14, 2008 to September 30, 2008.











5


Merger with
Abundantad -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 will
create, acquire, own and operate content websites which may include promotions,
sweepstakes, mobile offers, and other Internet websites in furtherance of its
purposes.
 
 To fund
this acquisition strategy and future business expansion, Abundantad, prior to
the merger, privately raised approximately $5.8 million in gross proceeds
(approximately $5.7 million in net proceeds) from the sale of common stock to
accredited investors.
 
 Acquisition of
assets of Vibrantads, LLC  -On July 21, 2008, Adex entered
into an Asset Purchase Agreement (“APA”), pursuant to which Adex acquired
substantially all the assets of Vibrantads, LLC (“Vibrantads”), a California
limited liability company. Vibrantads was engaged in on-line promotions and
affiliate network marketing.  The asset purchase was completed on July
21, 2008. The purchase price for the Vibrantads assets consisted of the
following: (i) Seventy Thousand Dollars ($70,000) at closing; (ii) One Hundred
Twelve Thousand Five Hundred (112,500) 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 Sixty Thousand Dollars ($60,000) with no
interest thereon, and having a maturity date that is twelve (12) months from
July 21, 2008, the closing date.


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.





Acquisition of
membership interests  of Digital Instructor, LLC  -On August 12, 2008, Adex entered into a Membership Interest Purchase
Agreement (“MIPA”) with the ten members (the “Members”) of Digital Instructor,
LLC (“Digital Instructor”), a Colorado limited liability company, to purchase
all outstanding membership interests (“Membership Interests”) of Digital
Instructor.





Digital
Instructor is engaged in the business of developing, manufacturing, selling and
marketing consumer learning products through proprietary
technologies.  It distributes its products to customers nationwide on
both physical media and via digital delivery for use with personal computers and
other devices. Digital Instructor is based in Boulder,
Colorado.





The
purchase price for the Membership Interests consisted of the
following:





(i)
            One
      Million Dollars ($1,000,000) in cash at closing;(ii)
            A
      Senior Secured Promissory Note (the “Note”) in the principal amount of
      Five Hundred Thousand Dollars ($500,000) payable on February 12,
      2009;





(iii)
            One
      Million Two Hundred Thousand (1,200,000) restricted shares of
      the Company’s common stock (the “Shares”).  The Shares are
      subject to a lockup and share release agreement which restricts the
      Members from selling the Shares until certain prescribed intervals;
      and(iv)
            An
      additional amount up to Five Hundred Thousand Dollars ($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”).





The
Company issued the Note to Digital Equity Partners, LLC (“Digital Equity
Partners”), a Colorado limited liability company wholly-owned by the Members of
Digital Instructor and formed for the purpose of holding the Note. The Note’s
principal amount of Five Hundred Thousand Dollars ($500,000) bears no interest.
The Note has a maturity date that is six months from the August 12, 2008 closing
date, 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 for purposes of collateralizing the Note (the “Security
Agreement”). Under the Security Agreement, the Members were given a first
priority security interest in the Membership Interests purchased by the
Company.





The
Shares are subject to two reset provisions over twelve months. The first reset
provision shall occur six months after the closing date (the “Six Month Reset”)
and shall adjust the first six hundred thousand (600,000) Shares pursuant to a
formula that compares the volume-weighted average price (the “VWAP”) of the
Company’s common stock for the twenty days preceding the Six Month Reset to a
contractually guaranteed minimum price per Share.  In the event the
VWAP is less than $2.50 per share, the Company shall issue an additional number
of shares of common stock as necessary to provide the Members with the benefit
of the guaranteed minimum price.




The Six
Month Reset is subject to a maximum floor value for the VWAP of $0.75 per share.
The second reset provision shall occur twelve months after the Closing date (the
“Twelve Month Reset”) and shall adjust the second six hundred thousand (600,000)
Shares pursuant to a formula that compares the VWAP of the Company’s stock for
the twenty days preceding the Twelve Month Reset to a contractually guaranteed
minimum price per Share.  In the event the VWAP is less than $2.50 per
share, the Company shall issue an additional number of shares of common stock as
necessary to provide the Members with the benefit of the guaranteed minimum
price. The Twelve Month Reset is subject to a maximum floor value for the VWAP
of $0.75 per share.






6







As part
of the transaction, the Company entered into a lockup and share release
agreement (the “Lockup”) which restricts the Members 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.





Concurrent
with the closing, the Managing Member of Digital Instructor (the “Employee”),
entered into an employment agreement with the Company. Employee will remain the
sole manager of Digital Instructor during the term of his employment with the
Company, subject to the Company’s discretion.





Acquisition of
assets of Bay Harbor Marketing, LLC  -On August 29, 2008, Adex
entered into an asset purchase agreement (the “Asset Purchase Agreement”),
pursuant to which Adex acquired substantially all the assets of Bay Harbor
Marketing, LLC (“Bay Harbor”), a California limited liability
company.





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) Fifty
Thousand Dollars ($50,000) paid to Bay Harbor at the closing; (ii) Fifty
Thousand (50,000) restricted shares of Adex common stock (the “Closing Shares”)
issued to Bay Harbor on August 29, 2008, the closing date, subject to a
contractual lock-up and share release agreement (the “Lock-Up Agreement”); (iii)
one hundred fifty two thousand one hundred fifty one (152,151) restricted shares
of Adex common stock issued to the managing member of Bay Harbor, on the closing
date; (iv) one hundred forty-seven thousand two hundred seventy-three (147,273)
restricted shares of Adex common stock issued to a creditor of Bay Harbor, on
the closing date; and (v) an additional amount of up to one hundred fifty
thousand (150,000) restricted shares of Adex 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.





NOTE
2.    BASIS OF PRESENTATION





The
interim condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission.  In the opinion of the
Company’s management, all adjustments (consisting only of normal recurring
adjustments and reclassifications) necessary to present fairly the results of
operations and cash flows for the three and nine months ended September 30, 2008
and 2007, and our financial position as of September 30, 2008 and December 31,
2007 have been made.  The results of operations for such interim
periods are not necessarily indicative of the operating results to be expected
for the full year.





Certain
information and disclosures normally included in the notes to the annual
financial statements have been condensed or omitted from these interim condensed
consolidated financial statements.  Accordingly, these interim
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes for the fiscal year ended
December 31, 2007, as included in the Current Report on Form 8-K filed with the
Securities and Exchange Commission on May 15, 2008 and the Amendment to that
Form 8-K filed on July 22, 2008.





Abundantad
was formed on February 4, 2008. On May 14, 2008, Abundantad acquired
substantially all the assets and liabilities of Pieces. Also on May 14, 2008,
Abundantad, via a reverse merger, became a wholly-owned subsidiary of Adex. The
financial information presented as of December 31, 2007 and as of September 30,
2007, reflect the balance sheet and results of operations of Pieces as a
standalone entity as of and for these periods. The results of operations
presented for the nine months ended September 30, 2008 include the results of
operations for Pieces for the full nine months and the results of Adex and
Abundantad for the period from May 14, 2008 through September 30,
2008.








7







NOTE
3.    SIGNIFICANT ACCOUNTING POLICES





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.  Such estimates, include but are not limited to, (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) investment impairments; and (viii) income
taxes.  Actual results could differ from those estimates.




Reclassifications - Certain amounts in
prior year financial statements have been reclassified to conform to the current
year presentation.




Cash and Cash
Equivalents -Cash and cash equivalents include all cash balances and
highly liquid investments purchased with an original maturity of three months or
less.





Short-Term
Investments –Short term investments consist of certificates of deposit
with an original maturity date of greater than three months.  All
short-term investments are classified as available for sale and are carried at
their fair market value.




Accounts
Receivable - The majority of the Company’s accounts receivable are due
from direct advertisers, affiliate networks, ad networks, and list managers.
Credit is extended based on evaluation of a customer’s financial condition and,
generally, collateral is not required. Accounts receivable are due within 30 to
60 days and are stated at amounts due from customers net of an allowance for
doubtful accounts if deemed necessary. The Company determines its allowance by
considering a number of factors, including the length of time trade accounts
receivable are past due, the Company’s previous loss history, the customer’s
current ability to pay its obligation to the Company, and the condition of the
general economy and the industry as a whole. The Company writes off accounts
receivable when they become uncollectible, and payments subsequently received on
such receivables are credited to the allowance for doubtful
accounts.




Fair Value of
Financial Instruments - Effective January 1, 2008, we adopted the
provisions of Statement of Financial Accounting Standards (“SFAS”) No. 157,
“Fair Value Measurements”, for our financial assets and liabilities.  The
adoption of this portion of SFAS No. 157 did not have any effect on our
financial position or results of operations and we do not expect the adoption of
the provisions of SFAS No. 157 related to non-financial assets and liabilities
to have an effect on our financial position or results of
operations.  SFAS
No. 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.




The fair-value hierarchy established in
SFAS No. 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.







8




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.





Principles of
Consolidation -The condensed consolidated financial statements include
the accounts of Adex and its wholly-owned subsidiaries.  All
significant inter-company balances and transactions have been eliminated in
consolidation.





Property and
Equipment -Property and equipment are stated at cost.  The
Company depreciates property and equipment using the straight-line method over
the estimated useful lives of the assets ranging from one to five
years.  Salvage values of these assets are not considered
material.  Repairs and maintenance costs that do not increase useful
lives and/or enhance the value of the assets are charged to operations as
incurred.





Revenue
Recognition  -The Company's revenues consist of (i) service
revenue generated from on-line marketing, advertising, and lead generation; and
(ii) revenue generated from selling and marketing consumer learning products.
The Company evaluatesrevenue recognition using the following
basic criteria and recognizesrevenue when all four criteria are
met:





(i) Evidence of an arrangement: Evidence
of an arrangement with the customer that reflects the terms and conditionsfordelivery of servicesmust be present in order to recognize
revenue.





(ii) Delivery: Delivery is considered to
occur when theservice is
performedand 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 service revenue consists mostly of revenue derived from direct
advertisers, affiliate networks, ad networks, list managers, and financial
advisors. The Company’s product revenue consists mostly of revenue derived from
on-line consumers nationwide.




The
Company’s 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, add 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 reduces revenue for payment holdbacks withheld by its customers that are
determined to not be recoverable. At September 30, 2008, these holdbacks were
immaterial.




The Company’srevenues are subject to material
seasonal fluctuations. In particular, revenues inthe fourthfiscal quarter will ordinarily be
significantly higher than other fiscal quarters. Revenues recorded inthefourthfiscal quarter are not necessarily
indicative of what reported revenues will be for an entire fiscal
year.





Income Taxes -The Company uses the asset and liability method of accounting for income
taxes in accordance with SFAS No. 109, “Accounting For Income Taxes.” Under this
method, income tax expense is recognized for the amount of: (i) taxes payable or
refundable for the current year, and (ii) deferred tax consequences of temporary
differences resulting from matters that have been recognized in an entity’s
financial statements or tax returns. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.






9






The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the results of operations in the period that includes the
enactment date. A valuation allowance is provided to reduce the deferred tax
assets reported, if, based on the weight of available positive and negative
evidence, it is more likely than not some portion or all of the deferred tax
assets will not be realized. A liability is established in the consolidated
financial statement to the extent a current benefit has been recognized on a tax
return for matters that are considered contingent upon the outcome of an
uncertain tax position.





Stock-based
compensation  -Compensation expense associated with
the granting of stock-based awards to employees and directors is recognized in
accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123
Revised 2004, “Share Based Payment” (SFAS 123(R)) and related interpretations.
SFAS 123(R) requires companies to estimate and recognize the fair value of
stock-based awards to employees and directors. The value of the portion of an
award that is ultimately expected to vest is recognized as an expense over the
requisite service periods using the straight-line attribution method.
Compensation expense associated with the granting of stock awards to
non-employees is recognized in accordance with Emerging Issues Task Force
(“EITF”) 96-18 “Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services.”





In March 2005, the Securities and
Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 107,
which offers guidance on SFAS 123(R). SAB 107 was issued to assist preparers by
simplifying some of the implementation challenges of SFAS 123(R) while enhancing
the information that investors receive. SABNo.107 creates a framework that is premised
on two overarching themes: (a) considerable judgment will be required by
preparers to successfully implement SFAS 123(R), specifically when valuing
employee stock options; and (b) reasonable individuals, acting in good faith,
may conclude differently on the fair value of employee stock options. Key topics
covered by SABNo.107 include valuation
models, expected volatility and expected term.





In December 2007, the SEC issued SAB No.
110, which expresses the views of the staff regarding the use of a “simplified”
method, as discussed in SAB No. 107 in developing an estimate of expected term
of stock options in accordance with Statement of Financial Accounting Standards
No. 123(R). Under SAB No. 110, the staff will continue to accept, under certain
circumstances, the use of the simplified method permitted under SAB No. 107
beyond December 31, 2007.




Basic and Diluted
Net Income (Loss) per share -Loss Per Share — We compute
basic and diluted net income (loss) per share amounts pursuant to the Statement
of Financial Accounting Standards (“SFAS”) No. 128, “Earnings per Share.” Basic
income (loss) per share is computed using the weighted average number of common
shares outstanding during the period.




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 for the three
and nine months ending September 30, 2008 and 2007:







Three
      Months Ended September 30,2008
            
            
            2007Basic
      weighted average shares outstanding
            
            
            30,388,079
            
            
            
            250,000Less:
      effect of dilutive stock options
            
            
            -
            
            
            
            -Diluted
      weighted average shares outstanding
            
            
            30,388,079
            
            
            
            250,000Anti-dilutive
      stock options not included in above calculation
            
            
            4,580,000
            
            
            
            -








10







Nine
      Months Ended September 30,2008
            
            
            2007Basic
      weighted average shares outstanding
            
            
            15,443,218
            
            
            
            250,000Less:
      effect of dilutive stock options
            
            
            -
            
            
            
            -Diluted
      weighted average shares outstanding
            
            
            15,443,218
            
            
            
            250,000Anti-dilutive
      stock options not included in above calculation
            
            
            4,580,000
            
            
            
            -




Internally
Developed Software Costs — The Company accounts for internally
developed software in accordance with Statement of Financial Accounting Standard
(SFAS) No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased
or Otherwise Marketed”. After technical feasibility has been established, the
Company will capitalize the cost of its software development process. For the
three and nine months ended September  30, 2008, the Company expensed
$17,300 and $52,550, respectively, in product development expenses that the
Company deemed had not yet reached technical feasibility.  At
September 30, 2008, there were no capitalized internally developed software
costs.




Goodwill, Other
Intangible Assets, and Long-Lived Assets-Goodwill represents costs
in excess of fair values assigned to the underlying net assets that have been
acquired. The Company has adopted the provisions of SFAS No. 141, “Business Combinations,” and
SFAS No. 142, “Goodwill and
Other Intangible Assets.” These standards require the use of the purchase
method of accounting for business combinations, set forth the accounting for the
initial recognition of acquired intangible assets and goodwill and describe the
accounting for intangible assets and goodwill subsequent to initial recognition.
Under the provisions of these standards, goodwill is not subject to amortization
and annual review is required for impairment. The impairment test under SFAS No.
142 is based on a two-step process involving (i) comparing the estimated fair
value of the related reporting unit to its net book value and (ii) comparing the
estimated implied fair value of goodwill to its carrying value. Impairment
losses are recognized whenever the implied fair value of goodwill is less than
its carrying value. The company tests its goodwill for impairment annually in
its fourth quarter.




The
Company recognizes an acquired intangible apart from goodwill whenever the
intangible arises from contractual or other legal rights, or when it can be
separated or divided from the acquired entity and sold, transferred, licensed,
rented or exchanged, either individually or in combination with a related
contract, asset or liability. Such intangibles are amortized over their useful
lives. Impairment losses are recognized if the carrying amount of an intangible
subject to amortization is not recoverable from expected future cash flows and
its carrying amount exceeds its fair value.




The
Company reviews its long-lived assets, including property and equipment,
identifiable intangibles, and goodwill annually or whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. To determine recoverability of its long-lived assets, the Company
evaluates the probability that future undiscounted net cash flows will be less
than the carrying amount of the assets.




Off-Balance
Sheet Arrangements-At September 30, 2008,the Companydid not have any transactions,
obligations or relationships that could be considered off-balance sheet
arrangements.





NOTE 4.   
Short Term
Investments





Effective
January 1, 2008, we adopted the provisions of Statement of Financial Accounting
Standards (“SFAS”) No. 157, “Fair Value Measurements”, for our financial assets
and liabilities.  The adoption of this portion of SFAS No. 157 did not have
any effect on our financial position or results of operations and we do not
expect the adoption of the provisions of SFAS No. 157 related to non-financial
assets and liabilities to have an effect on our financial position or results of
operations.  SFAS
No. 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.






11






The fair-value hierarchy established in
SFAS No. 157prioritizes 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.





As of
September 30, 2008, the value of the Company’s short term investments by major
security type is as follows:





Unrealized
            
            
            Unrealized
            
            
            FairCost
            
            
            Gain
            
            
            Losses
            
            
            ValueSeptember
      30, 2008Certificates
      of deposit
            
            $
            2,784,815
            
            
            
            -
            
            
            
            -
            
            
            $
            2,784,815December
      31, 2007Certificates
      of deposit
            
            $
            224,308
            
            
            
            -
            
            
            
            -
            
            
            $
            224,308




The
company used Level 1 inputs in measuring the fair market value of its short term
investments at September 30, 2008.





Short
term investments include certificates of deposit with original maturities of
greater than 90 days.





At
September 30, 2008, all of our short term investments had maturity dates of 9
months from the date of purchase.





NOTE 5.   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 learning products from the Company’s acquisition of Digital
Instructor, LLC.  As of September 30, 2008, and December 31, 2007, the
balance of credit card holdbacks was $379,035 and $0,
respectively.  The Company maintains a separate accrual for returns
and chargebacks as a component of accounts payable.  The balance of
this accrual at September 30, 2008 and December 31, 2007 was $59,934 and $0,
respectively.





NOTE 6.   Inventory -Inventories consist of finished goods
purchasedfrom 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.  All inventories are produced by third party
manufacturers, and substantially all inventories are located atthe Company’s facility in Boulder,
Colorado.





NOTE 7.   Other
Receivables -On May 14, 2008, Abundantad acquired the net business
assets of Kim and Lim, LLC (“Kim and Lim”). Other receivables represent amounts
owed to the Company from Kim and Lim.




NOTE 8.   Goodwill and Intangible Assets –The Company has adopted SFAS No. 142, Goodwill and Other Intangible
Assets. Under SFAS 142, goodwill is to be reviewed at least annually for
impairment. The Company has elected to perform this review annually on October 1
of each calendar year.






12






On July
21, 2008, Adex acquired substantially all the assets of Vibrantads, LLC. The
acquired assets became part of the marketing platform services
segment.




On August
12, 2008, Adex acquired all the membership interests of Digital Instructor, LLC.
The acquired assets became part of the products segment.




On August
29, 2008, Adex acquired substantially all the assets of Bay Harbor Marketing,
LLC. The acquired assets became part of the marketing platform services
segment.




The
purchase price allocations for the foregoing acquisitions at this time are still
preliminary and subject to final adjustments. The Company has engaged an
independent valuation consultant to assist it in its final purchase price
allocation.




The
preliminary purchase price allocation of the components of acquired intangible
assets as of September 30, 2008, is as follows:




Intangible
      Asset
            
            Gross
      Carrying Amount
            
            
            Accumulated
      Amortization
            
            
            Impairment
            
            
            Net
      Carrying AmountDomain
      names
            
            $
            10,000
            
            
            $
            1,390
            
            
            $
            —
            
            
            $
            8,610Produce
      license agreements
            
            
            700,000
            
            
            
            18,795
            
            
            
            —
            
            
            
            681,205Product
      trade names
            
            
            300,000
            
            
            
            8,055
            
            
            
            —
            
            
            
            291,945Customer
      databases
            
            
            280,000
            
            
            
            5,772
            
            
            
            150,000
            
            
            
            124,228Internal
      use software
            
            
            70,000
            
            
            
            1,879
            
            
            
            —
            
            
            
            68,121Internal
      use technology
            
            
            130,000
            
            
            
            2,279
            
            
            
            —
            
            
            
            127,721Marketing
      collateral
            
            
            50,000
            
            
            
            1,096
            
            
            
            —
            
            
            
            48,904Affiliate
      platform
            
            
            30,000
            
            
            
            —
            
            
            
            30,000
            
            
            
            —Incentive
      platform
            
            
            30,000
            
            
            
            —
            
            
            
            30,000
            
            
            
            —Company
      trade name
            
            
            200,000
            
            
            
            1,753
            
            
            
            100,000
            
            
            
            98,247Total
            
            $
            1,800,000
            
            
            $
            41,019
            
            
            $
            310,000
            
            
            $
            1,448,981




For the
three and nine months ended September 30, 2008, $22,224 of intangible asset
amortization was recorded and included in amortization of intangible assets in
the condensed consolidated statement of operations. For the three and nine
months ended September 30, 2008, $18,795 of intangible asset amortization was
recorded and included in cost of sales in the condensed consolidated statement
of operations.




Amortization
of intangible asset expense in our fourth quarter is estimated to be $81,652.
Amortization of intangible asset expense beyond our fourth quarter is estimated
below:




Year
      ended December 312009
            
            $
            327,4982010
            
            
            319,0732011
            
            
            290,0552012
            
            
            268,2882013
            
            
            162,415Total
            
            $
            1,367,329





The
Company’s intangible assets will be fully amortized by 2013.




The total
weighted average life of all of the intangibles is approximately 4.47
years.




There
were no amounts of in process research and development assets acquired during
the quarter ended September 30, 2008, nor any written-off in the
period.








13




For the
three and nine months ended September 30, 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
during the quarter.






The
changes in the carrying amount of goodwill for the quarter ended September 30,
2008 are as follows:




TotalBalance
      as of January 1, 2008
            
            $
            —Goodwill
      acquired
            
            
            8,448,789Goodwill
      impaired
            
            
            —Balance
      as of September 30, 2008
            
            $
            8,448,789





The
goodwill acquired is associated with the foregoing acquisitions, all which took
place during the three months ended September 30, 2008. No impairment of
goodwill was required as of September 30, 2008. Of the $8,448,789 balance in
goodwill, $1,945,366 is deductible for tax purposes over a period of 15
years.





Of the
foregoing balance, $1,945,366 is attributable to the marketing platform services
segment and $6,503,423 is attributable to the products segment.





The
factors resulting in goodwill were the name, reputation, and established key
personnel acquired.




NOTE
9.     Accrued Liabilities




September 30,
              2008
            
            December 31,2007Accrued franchise
      taxes
            
            $
            15,500
            
            
            $
            —Accrued payroll, paid time off,
      and employee expenses
            
            
            109,990
            
            
            
            —Accrued
      bonuses
            
            
            172,500
            
            
            
            —Accrued
      commissions
            
            
            25,000
            
            
            
            —Accrued professional
      fees
            
            
            145,000
            
            
            
            —Accrued payments to
      affiliates
            
            
            112,513
            
            
            
            103,911Accrued acquisition
      expenses
            
            
            130,000
            
            
            
            —Other
            
            
            26,650
            
            
            
            —Total
            
            $
            737,153
            
            
            $
            103,911




NOTE 10.  Promissory Notes -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 sixty thousand dollars
($60,000). The principal amount of the promissory 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
September 30, 2008 was $56,557. 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) payable on February 12, 2009. 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.






14




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, the selling members were given a first priority security
interest in the membership interests purchased by the Company. The present value
of the promissory note at September 30, 2008 was $485,355. The promissory note
is being accreted to the value of its principal amount over a period of six
months.




NOTE 11.  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.





In
connection with the Company’s acquisition of the assets of Bay Harbor Marketing,
LLC on August 29, 2008, the Company assumed a 1,450 square foot lease in Corte
Madera, California, with a monthly base rental of $4,425 expiring in September
2010. This lease was terminated in October 2008.





Total
rent expense for the nine months ended September 30, 2008 and 2007 was $60,650
and $19,829, respectively.




We believe that if we lostany of the foregoingleases, we could promptly relocate within ten
milesof each leaseon similar
terms.




Approximate
future minimum lease payments under non-cancelable office lease agreements are
as follows:




Year ended December
      312008
            
            $
            43,9562009
            
            
            148,0482010
            
            
            80,9672011
            
            
            83,8382012
            
            
            42,603Total
            
            $
            399,412





NOTE 12.  Deferred Tax Liability
-In connection with the Company’s acquisition of Digital Instructor,
LLC, the Company recorded a deferred tax liability in the amount of $442,000
representing the difference in book basis of the net assets acquired and the tax
bases of the underlying membership interests acquired. At September 30, 2008,
the balance in deferred tax liability was $429,077.





NOTE 13.  Stockholders’ Equity -Stockholders’ equity at September 30, 2008, has been adjusted to reflect
the 250,000 shares of common stock received by Kim and Lim LLC
shareholders.  The value of these shares was $187,500 and is reflected
at December 31, 2007 as an increase in common stock of $25, an increase in
additional paid in capital of $187,475, and a corresponding reduction in
retained earnings of $187,500.





Abundantad
was formed in February 2008.  As part of its formation, 21,549,950
shares were sold at par value ($0.0001). Thereafter, in March and April 2008,
Abundantad sold 7,674,703 additional shares to private investors for aggregate
total gross proceeds of approximately $5.8 million (net proceeds of
approximately $5.7 million.) Upon the reverse merger of Abundantad and Adex, all
Abundantad shares were converted to Adex common shares on a one-for-one
basis.






15







In
connection with the reverse merger between Abundantad and Adex, the principal
shareholder of Adex was granted 50,000 common shares.





In
connection with the purchase of substantially all the assets of Vibrantads LLC,
on July 21, 2008, Adex issued 112,500 shares of its common stock to Vibrantads
as part of the purchase price.





In
connection with the purchase of all the membership interests of Digital
Instructor LLC, on August 12, 2008, Adex issued 1.200,000 shares of its common
stock to the members of Digital Instructor as part of the purchase
price.





In
connection with the purchase of substantially all the assets of  Bay
Harbor Marketing, LLC, on August 29, 2008, Adex issued the following: (i) Fifty
Thousand (50,000) restricted shares of its common stock to Bay Harbor Marketing
LLC; (ii) One Hundred Fifty Two Thousand One Hundred Fifty One (152,151)
restricted shares of its common stock to the managing member of Bay Harbor
Marketing LLC; (iii) One Hundred Forty Seven Thousand Two Hundred Seventy Three
(147,273) restricted shares of its common stock to a creditor of Bay Harbor
Marketing LLC; and (iv) One Hundred Fifty Thousand (150,000) restricted shares
of its common stock to an escrow agent.




NOTE 14. Stock Options, Restricted
Stock, and Stock Compensation -In the three and nine months ended
September 30, 2008, the Company recognized total stock-based compensation of
$267,873 and $323,926, respectively, in connection with options and restricted
stock granted under the Company’s stock option and restricted stock
plan.





During
the three and nine months ended September 30, 2008, the Company’s board of
directors authorized the Company to grant 144,000 shares of restricted stock to
employees and contractors of the Company. Of the foregoing number of shares,
69,000 shares of restricted stock were granted to employees of the Company and
75,000 shares were granted to contractors of the Company.





During
the three and nine months ended September 30, 2008, the Company’s board of
directors authorized the Company to grant options to purchase a total of
1,170,000 and 4,580,000, respectively, shares of its common stock. Of the
foregoing number of options, options to purchase 200,000 shares of the Company’s
common stock were issued in the second quarter of 2008 that were exercisable at
less than the fair market value of the common stock on the respective grant
dates. The remaining options issued were exercisable at the fair market value of
the common stock on the respective grant dates.





During
the nine months ended September 30, 2008, options were issued with exercise
prices ranging from $0.75 to $5.50.  The options vest pro-rata over
one to four years and expire over five to ten years after grant
date.  The total value of options granted by the Company of $4,889,866
was computed using a Black-Scholes option pricing method with a volatility
ranging between 80%-100% (based on comparative companies), an expected term of
one to four years (based the expected period that the stock options will be
outstanding), dividend yield of 0% and a risk free interest rate of 2.08% to
3.53%.  The value will be recognized pro- rata over the respective one
to four years requisite service periods. There were no options exercised,
terminated or forfeited during the periods. The forfeiture used is
12%.





The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:







Expected
      term (in years)
              1 -
      4Risk
      free rate of return
              2.08%  -
      3.53%Volatility
              80%
      - 100%Dividend
      yield
              -Forfeiture
    rate
              12%





16









The
following table sets forth the total stock-based compensation expense for the
three months ended September 30, 2008, and 2007 from stock option and restricted
stock grants to employees and contractors.




Three
      Months Ended September 30, 2008
              
              
              Three
      Months
                Ended
                September 30,
                2007Sales
      and marketing costs  - stock options to
employees
              
              $
              174,806
              
              
              $
              —Sales
      and marketing costs  - restricted stock to
    employees
              
              
              16,997
              
              
              
              —General
      and administrative costs  - stock options to
      employees
              
              
              56,167
              
              
              
              —General
      and administrative costs  - restricted stock to
      employees
              
              
              2,758
              
              
              
              —General
      and administrative costs  - restricted stock to
      contractors
              
              
              17,145
              
              
              
              —Total
      stock-based employee and contractor compensation expense after income
      taxes
              
              $
              267,873
              
              
              $
              —


The
following table sets forth the total stock-based compensation expense for the
nine months ended September 30, 2008, and 2007 from stock option and restricted
stock grants to employees and contractors.





Nine
      Months Ended
                September
      30, 2008
              
              
              Nine
      Months
                Ended
                September
      30,
                2007Sales
      and marketing costs  - stock options to
employees
              
              $
              196,151
              
              
              $
              —Sales
      and marketing costs  - restricted stock to
    employees
              
              
              16,997
              
              
              
              —General
      and administrative costs  - stock options to
      employees
              
              
              90,875
              
              
              
              —General
      and administrative costs  - restricted stock to
      employees
              
              
              2,758
              
              
              
              —General
      and administrative costs  - restricted stock to
      contractors
              
              
              17,145
              
              
              
              —Total
      stock-based employee and contractor compensation expense after income
      taxes
              
              $
              323,926
              
              
              $
              —




On May
15, 2008, the Board of Directors approved the Adex Media, Inc. 2008 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 September 30, 2008, 420,000 options were available for
grant.  Options have been issued with exercise prices of between $0.75
and $5.50 per share as follows:








Options
      Outstanding
            
            
            Options
      ExercisableNumber
            
            
            Weighted
      Avg.
            
            
            Weighted
      Avg.
            
            
            Number
            
            
            Weighted
      Avg.Range
      of Exercise Prices
            
            
            Outstanding
            
            
            Remaining
      Life (years)
            
            
            Exercise
      Price
            
            
            Exercisable
            
            
            Exercise
      Price$
            0.75
      - $1.13
            
            
            
            3,400,000
            
            
            
            9.56
            
            
            $
            0.75
            
            
            
            -
            
            
            
            -$
            1.14
      - $1.70
            
            
            
            10,000
            
            
            
            9.68
            
            
            $
            1.26
            
            
            
            -
            
            
            
            -$
            1.71
      - $3.87
            
            
            
            570,000
            
            
            
            9.99
            
            
            $
            3.01
            
            
            
            -
            
            
            
            -$
            3.88
      - $5.50
            
            
            
            600,000
            
            
            
            9.84
            
            
            $
            5.25
            
            
            
            -
            
            
            
            -4,580,000
            
            
            
            
            
            
            
            
            
            
            
            -











17








Option
activity under the Plan was as follows:


Options
            
            Shares
            
            
            Weighted Average Exercise
      Price
            
            
            Weighted Average Remaining
      Contractual Term
            
            Aggregate Intrinsic
      ValueOutstanding atDecember 31, 2007
            
            
            -
            
            
            $
            -
            
            
            
            
            
            $
            -Granted
            
            
            4,580,000
            
            
            $
            1.62Exercised
            
            
            -
            
            
            
            -Forfeited or
      expired
            
            
            -
            
            
            
            -Outstanding atSeptember 30,
      2008
            
            
            4,580,000
            
            
            $
            1.62
            
            
            
            9.65
            
            $
            16,861,950Exercisable atSeptember 30,
      2008
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            -




The fair
value of options granted is recognized as an expense over the requisite service
period.  As of September 30, 2008, the fair value of options issued by
the Company was $4,889,866 of which $0 has been forfeited. The unamortized cost
of stock options issued remaining at September 30, 2008 was $4,602,839 with a
weighted average expected term for recognition of 3.97 years. At the time of
grant, the estimated fair values per option were from $0.24 to
$4.46.





The fair
value of restricted stock granted is recognized as an expense over the requisite
service period.  As of September 30, 2008, the fair value of
restricted stock issued by the Company was $403,524 of which $0 has been
forfeited. The unamortized cost of restricted stock issued remaining at
September 30, 2008 was $366,324 with a weighted average expected term for
recognition of 4.0 years. At the time of grant, the fair values per share were
from $3.01 to $5.80.





NOTE
15.  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 September 30, 2008, the Company had deposits in excess
of the Federal Deposit Insurance Corporation (FDIC) limit at one U.S. based
financial institution.  At September 30, 2008 and December 31, 2007,
Adex had uninsured bank balances and certificates of deposit totaling
approximately $3,235,349 and $129,686.  The Company maintains its cash
accounts at two financial institutions.





Customer Base - In the nine
months ended September 30, 2008, one customer accounted for 33% of consolidated
revenue, and two other customers each accounted for 14% of consolidated
revenue.  As of September 30, 2008, accounts receivable of $73,367 was
due from these customers. As of September 30, 2008, three customers accounted
for an aggregate of 55% of consolidated accounts receivable.




In the
nine months ended September 30, 2007, one customer accounted for 95% of
revenue.  Major customers are defined as those having revenues which
exceed 10% of the Company’s annual revenues.  As of December 31, 2007,
accounts receivable of $177,896 was due from this customer.





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
September 30, 2008 and December 31, 2007, based on historic trends and the
Company’s expectation of collectability.  Allowance for doubtful
accounts at September 30, 2008 and December 31, 2007 was an immaterial
balance.





Operations By Geographic Area -The Company's operations are domiciled in the United States. The Company
does not have any active international subsidiaries. Revenue is attributed to a
geographic region based upon the country from which the customer relationship is
maintained.








18






As of
September 30, 2008, 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. The Company expects to create international subsidiaries in the
next 12 to 18 months to manage customer relationships and accordingly the
Company expects the proportion of revenue and income from international
operations to total revenue and income from operations to be
significant.





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 16.  Segment Reporting -Segments are defined by SFAS No. 131, “Disclosures about Segments of an
Enterprise and Related Information,” 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 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.




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 three
months ended September 30, 2008 and 2007:




Three
      Months Ended September 30,2008
            
            
            2007Marketing
      Platform services
            
            
            Products
            
            
            Total
            
            
            Marketing
      Platform services
            
            
            Products
            
            
            TotalRevenues
            
            $
            1,340,935
            
            
            $
            476,228
            
            
            $
            1,817,163
            
            
            $
            511,780
            
            
            $
            —
            
            
            $
            511,780Cost
      of revenues
            
            
            1,219,213
            
            
            
            146,321
            
            
            
            1,365,534
            
            
            
            378,948
            
            
            
            —
            
            
            
            378,948Gross
      profit
            
            $
            121,722
            
            
            $
            329,907
            
            
            $
            451,629
            
            
            $
            132,832
            
            
            $
            —
            
            
            $
            132,832Gross
      margin
            
            
            9
            %
            
            
            69
            %
            
            
            25
            %
            
            
            26
            %
            
            
            —
            
            
            
            26
            %Unallocated
      operating expenses
            
            
            
            
            
            
            
            
            
            
            1,775,707
            
            
            
            
            
            
            
            
            
            
            
            49,693Income
      (loss) before interest, other income (expense) and provision for
      taxes
            
            
            
            
            
            
            
            
            
            $
            (1,324,078
            )
            
            
            
            
            
            
            
            
            
            $
            83,139




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 nine months
ended September 30, 2008 and 2007:






19











Nine
      Months Ended September 30,2008
            
            
            2007Marketing
      Platform Services
            
            
            Products
            
            
            Total
            
            
            Marketing
      Platform Services
            
            
            Products
            
            
            TotalRevenues
            
            $
            2,750,264
            
            
            $
            476,228
            
            
            $
            3,226,492
            
            
            $
            1,191,604
            
            
            $
            —
            
            
            $
            1,191,604Cost
      of revenues
            
            
            2,299,117
            
            
            
            146,321
            
            
            
            2,445,438
            
            
            
            855,672
            
            
            
            —
            
            
            
            855,672Gross
      profit
            
            $
            451,147
            
            
            $
            329,907
            
            
            $
            781,054
            
            
            $
            335,932
            
            
            $
            —
            
            
            $
            335,932Gross
      margin
            
            
            16
            %
            
            
            69
            %
            
            
            24
            %
            
            
            28
            %
            
            
            —
            
            
            
            28
            %Unallocated
      operating expenses
            
            
            
            
            
            
            
            
            
            
            2,690,638
            
            
            
            
            
            
            
            
            
            
            
            136,988Income
      (loss) before interest, other income (expense) and provision for
      taxes
            
            
            
            
            
            
            
            
            
            $
            (1,909,584
            )
            
            
            
            
            
            
            
            
            
            $
            198,944





For the
three and nine months ended September 30, 2008, there was approximately $13,000
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.





NOTE
17.  Acquisitions





Acquisition Of Vibrantads,
LLC





On July
21, 2008, the Company entered into an Asset Purchase Agreement (“APA”), pursuant
to which the Company acquired substantially all the assets of Vibrantads, LLC
(“Vibrantads”), 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) Seventy Thousand Dollars
($70,000) at closing; (ii) One Hundred Twelve Thousand Five Hundred (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 Sixty Thousand Dollars ($60,000) with no interest thereon,
and having a maturity date that is twelve (12) 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 nor with any of either 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 September 30, 2008
was $56,557. 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
aggregate purchase price was $706,805 which included the following:











20






Cash 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 is being
      accreted over a period of twelve
months.






The value
of the 112,500 unregistered common shares issued was $531,563 and was determined
based on the closing market price of the Company’s common shares on July 21,
2008 of $5.25 per common share less a 10% discount.






The
Company has not yet finalized the allocation of the purchase price and has
engaged an independent valuation consultant to assist it in its final purchase
price allocation. 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:




Intangible
      assets
            
            $
            310,000Goodwill
            
            
            396,805Total
      assets acquired
            
            $
            706,805




The
acquisition of the Vibrantad 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.




For the
three and nine months ended September 30, 2008, the amount of revenue and
earnings/(loss) related to the foregoing assets purchased has not been
separately reported. The Company believes it is impractical to compute the
aforementioned amounts due to the sharing of revenue and expenses amongst the
different assets in the marketing platform services segment.




The
accompanying consolidated pro forma information gives effect to the Vibrantads
acquisition as if it had occurred on January 1, 2007 and its results of
operations were included in the three and nine months ended ended September 30,
2008 and 2007 for the full period. 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
Vibrantads assets been completed on January 1, 2007.




Three
      Months Ended
              September
      30, 2008
            
            
            Three
      Months Ended
              September
      30, 2007Revenue
            
            $
            1,835,807
            
            
            $
            650,938Net
      income
            
            $
            (1,346,729
            )
            
            $
            49,515Income
      (loss) per share, basic and diluted
            
            $
            (0.04
            )
            
            $
            0.14








21








Nine
      Months Ended
              September
      30, 2008
            
            
            Nine
      Months Ended
              September
      30, 2007Revenue
            
            $
            3,414,801
            
            
            $
            1,609,079Net
      income
            
            $
            (2,347,419
            )
            
            $
            97,380Income
      (loss) per share, basic and diluted
            
            $
            (0.15
            )
            
            $
            0.27


Acquisition of Digital
Instructor, LLC





On August
12, 2008, the Company entered into a Membership Interest Purchase Agreement
(“MIPA”) with the ten members (the “Members”) of Digital Instructor, LLC, a
Colorado limited liability company (“Digital Instructor”) to purchase all
outstanding membership interests (“Membership Interests”) of Digital
Instructor.





Digital
Instructor is engaged in the business of developing, manufacturing, selling and
marketing consumer learning products through proprietary technologies. It
distributes its products to customers nationwide on both physical media and via
digital delivery for use with personal computers and other devices. Digital
Instructor is based in Boulder, Colorado.





The
purchase price for the Membership Interests consisted of the
following:





(i)
            One
      Million Dollars ($1,000,000) in cash at closing;(ii)
            A
      Senior Secured Promissory Note (the “Note”) in the principal amount of
      Five Hundred Thousand Dollars ($500,000) payable on February 12,
      2009;





(iii)
            One
      Million Two Hundred Thousand (1,200,000) unregistered restricted
      shares of the Company’s common stock (the “Shares”).  The Shares
      are subject to a lockup and share release agreement which restricts the
      Members from selling the Shares until certain prescribed intervals;
      and(iv)
            An
      additional amount up to Five Hundred Thousand Dollars ($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”).





The
Company issued the Note to Digital Equity Partners, LLC (“Digital Equity
Partners”), a Colorado limited liability company wholly owned by the selling
members of Digital Instructor and formed for the purpose of holding the Note.
The Note’s principal amount of Five Hundred Thousand Dollars ($500,000) bears no
interest. The Note has a maturity date that is six months from August 12, 2008,
the closing date 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 for purposes of collateralizing the Note (the “Security
Agreement”). Under the Security Agreement, the Members were given a first
priority security interest in the Membership Interests purchased by the
Company.





The
Shares are subject to two reset provisions over twelve months. The first reset
provision shall occur six months after the closing date (the “Six Month Reset”)
and shall adjust the first six hundred thousand (600,000) Shares pursuant to a
formula that compares the volume-weighted average price (the “VWAP”) of the
Company’s common stock for the twenty days preceding the Six Month Reset to a
contractually guaranteed minimum price per Share.  In the event the
VWAP is less than $2.50 per share, the Company shall issue an additional number
of shares of common stock as necessary to provide the Members with the benefit
of the guaranteed minimum price.






22








The Six
Month Reset is subject to a maximum floor value for the VWAP of $0.75 per share.
The second reset provision shall occur twelve months after the Closing date (the
“Twelve Month Reset”) and shall adjust the second six hundred thousand (600,000)
Shares pursuant to a formula that compares the VWAP of the Company’s stock for
the twenty days preceding the Twelve Month Reset to a contractually guaranteed
minimum price per Share.  In the event the VWAP is less than $2.50 per
share, the Company shall issue an additional number of shares of common stock as
necessary to provide the Members with the benefit of the guaranteed minimum
price. The Twelve Month Reset is subject to a maximum floor value for the VWAP
of $0.75 per share.





As part
of the transaction, the Company entered into a lockup and share release
agreement (the “Lockup”) which restricts the Members 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.





Concurrent
with the closing, the Managing Member of Digital Instructor (the “Employee”),
entered into an employment agreement with the Company.  Employee will
remain the sole manager of Digital Instructor during the term of his employment
with the Company, subject to the Company’s discretion.




The
aggregate purchase price was $7,746,990 which included the
following:




Cash 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
      assumed
            
            
            
            
            
            442,000Total
            
            
            
            
            $
            7,746,990




(1)
            The
      principal amount of the promissory note is $500,000. The discount is being
      accreted over a  period of six
months.




The value
of the 1,200,000 unregistered common stock issued was $5,616,000 and was
determined based on the closing market price of the Company’s common shares on
August 12, 2008 of $5.20 per common share less a 10% discount.




The
Company has not yet finalized the allocation of the purchase price and has
engaged an independent valuation consultant to assist it in its final purchase
price allocation. The following table summarizes the estimated fair values of
the assets acquired and liabilities assumed. The allocation of the purchase
price was based upon management’s estimates and assumptions:




Current
      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






23






Included
in the current assets above are credit card holdbacks in the gross contractual
amount of $354,872. These amounts represent  receivables to the
Company for reserves maintained by the credit card processors for any potential
chargebacks related to the Company’s on-line sales. The Company believes the
gross contractual amount is equal to the fair market value of the credit card
holdbacks.




The
promissory note issued is being accreted to the value of its principal amount
over a period of twelve months.




The
acquisition of the Membership Interests was accounted for as a business
combination and the operations of Digital Instructor were included in the
Company’s results of operations beginning on August 12, 2008, the acquisition
date. The factors resulting in goodwill were Digital Instructor’s name,
reputation, and established key personnel. No amount of the aforementioned
goodwill is deductible for tax purposes.




For the
three and nine months ended September 30, 2008, $476,228 in revenue and $127,681
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, 2007 and its results
of operations were included in the three months ended September 30, 2008 and
2007 for the full period. 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, 2007.




Three
      Months Ended
              September
      30, 2008
            
            
            Three
      Months Ended
              September
      30, 2007Revenue
            
            $
            2,225,358
            
            
            $
            1,708,483Net
      income
            
            $
            (1,454,194
            )
            
            $
            125,143Income
      (loss) per share, basic and diluted
            
            $
            (0.05
            )
            
            $
            0.09








Nine
      Months Ended
              September
      30, 2008
            
            
            Nine
      Months Ended
              September
      30, 2007Revenue
            
            $
            5,403,532
            
            
            $
            4,781,712Net
      income
            
            $
            (2,686,697
            )
            
            $
            324,610Income
      (loss) per share, basic and diluted
            
            $
            (0.16
            )
            
            $
            0.22





Acquisition of Bay Harbor
Marketing, LLC





On August
29, 2008, the Company entered into an asset purchase agreement (the “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.





Bay
Harbor is engaged in providing marketing solutions,focusing exclusively on the financial
services market.






24







The
purchase price for the Bay Harbor assets consisted of the following: (i) Fifty
Thousand Dollars ($50,000) paid to Bay Harbor at the closing; (ii) fifty
thousand (50,000) unregistered restricted shares of the Company’s common stock
(the “Closing Shares”) issued to Bay Harbor on August 29, 2008, the closing date
subject to a contractual lock-up and share release agreement (the “Lock-Up
Agreement”); (iii) one hundred fifty two thousand one hundred fifty one
(152,151) restricted unregistered shares of the Company’s common stock issued to
the managing member of Bay Harbor, on the closing date; (iv) one hundred
forty-seven thousand two hundred seventy-three (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 one hundred fifty thousand
(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:




Cash 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 value of the aforementioned unregistered common stock issued was
$1,676,187 and was determined based on the simple three day average of closing
market prices of the Company’s common shares from August 27, 2008 through August
29, 2008, less a 10% discount. This value per share was calculated to be
$5.33.




The
Company has not yet finalized the allocation of the purchase price and has
engaged an independent valuation consultant to assist it in its final purchase
price allocation. 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:




Intangible
      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.




For the
three and nine months ended September 30, 2008, the amount of revenue and
earnings/(loss) related to the foregoing assets purchased has not been
separately reported. The Company believes it is impractical to compute the
aforementioned amounts due to the sharing of revenue and expenses amongst the
different assets in the marketing platform services segment.






25






The
accompanying consolidated pro forma information gives effect to the Bay Harbor
acquisition as if it had occurred on January 1, 2007 and its results of
operations were included in the three months ended September 30, 2008 and 2007
for the full period. 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, 2007.




Three
      Months Ended
              September
      30, 2008
            
            
            Three
      Months Ended
              September
      30, 2007Revenue
            
            $
            1,934,189
            
            
            $
            610,854Net
      income (loss)
            
            $
            (1,403,413
            )
            
            $
            21,528Income
      (loss) per share, basic and diluted
            
            $
            (0.05
            )
            
            $
            0.04








Nine
      Months Ended
              September
      30, 2008
            
            
            Nine
      Months Ended
              September
      30, 2007Revenue
            
            $
            3,704,512
            
            
            $
            1,488,826Net
      income
            
            $
            (2,283,829
            )
            
            $
            13,332Income
      (loss) per share, basic and diluted
            
            $
            (0.14
            )
            
            $
            0.02




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, 2007 and its results of operations were included in the quarters
ended September 30, 2008 and 2007 for the full period. 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, 2007.




Three
      Months Ended
              September
      30, 2008
            
            
            Three
      Months Ended
              September
      30, 2007Revenue
            
            $
            2,361,028
            
            
            $
            1,946,715Net
      income (loss)
            
            $
            (1,621,927
            )
            
            $
            29,584Income
      (loss) per share, basic and diluted
            
            $
            (0.05
            )
            
            $
            0.02








Nine
      Months Ended
              September
      30, 2008
            
            
            Nine
      Months Ended
              September
      30, 2007Revenue
            
            $
            6,069,861
            
            
            $
            5,496,408Net
      income
            
            $
            (3,626,310
            )
            
            $
            39,275Income
      (loss) per share, basic and diluted
            
            $
            (0.22
            )
            
            $
            0.02






26







NOTE
18.  New Accounting Pronouncements




SFAS 157




Effective
January 1, 2008, we adopted the provisions of Statement of Financial Accounting
Standards (“SFAS”) No. 157, “Fair Value Measurements”, for our financial assets
and liabilities.  The adoption of this portion of SFAS No. 157 did not have
any effect on our financial position or results of operations and we do not
expect the adoption of the provisions of SFAS No. 157 related to non-financial
assets and liabilities to have an effect on our financial position or results of
operations.  SFAS
No. 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.




The fair-value hierarchy established in
SFAS No. 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.




SFAS 159




On February 15, 2007, the FASB issued
SFAS No. 159,The Fair Value
Option for Financial Assets and Financial Liabilities(SFAS No. 159). Under this Standard,the Companymay elect to report financial
instruments and certain other items at fair value on a contract-by-contract
basis with changes in value reported in earnings. This election is irrevocable.
SFAS No. 159 provides an opportunity to mitigate volatility in reported earnings
that is caused by measuring hedged assets and liabilities that were previously
required to use a different accounting method than the related hedging contracts
when the complex provisions of SFAS No. 133 hedge accounting are not met. SFAS
No. 159 is effective for years beginning after November 15, 2007 anddid nothave a material impact onthe Company’sconsolidated financial
statements.





FIN 48




The Company hasadopted the provisions of FASB
Interpretation No. 48,Accounting for
Uncertainty in Income Taxes — An Interpretation of FASB Statement
No. 109, or
FIN 48. FIN 48 provides detailed guidance for the financial statement
recognition, measurement and disclosure of uncertain income tax positions
recognized in the financial statements in accordance with SFAS No. 109.
Income tax positions must meet a “more-likely-than-not” recognition threshold at
the effective date to be recognized upon the adoption of FIN 48 and in
subsequent periods.




Upon review and analysis,the Company hasconcluded that no FIN 48 effects are
present as ofSeptember 30,
2008.For the year endedDecember31, 2007,the Companydid not identify and record any
liabilities related to unrecognized income tax
benefits.







27








EITF 07-03





In June 2007, the EITF reached a
consensus on EITF No. 07-03, Accounting for Nonrefundable Advance Payments for
Goods or Services to Be Used in Future Research and Development Activities, or
EITF 07-03. EITF 07-03 specifies the timing of expense recognition for
non-refundable advance payments for goods or services that will be used or
rendered for research and development activities. EITF 07-03 was effective for
fiscal years beginning after December 15, 2007, and early adoption is not
permitted. Adoption of EITF
07-has nothad a
material impact onthe
Company’s consolidated financial statements.





EITF 07-01





In December 2007, the EITF reached a
consensus on EITF No. 07-01, Accounting for Collaborative Arrangements Related
to the Development and Commercialization of Intellectual Property, or EITF
07-01. EITF 07-01 discusses the appropriate income statement presentation and
classification for the activities and payments between the participants in
arrangements related to the development and commercialization of intellectual
property. The sufficiency of disclosure related to these arrangements is also
specified. EITF 07-01 is effective for fiscal years beginning after December 15,
2008. As a result, EITF 07-01 is effective forthe Companyin the first quarter of fiscal
2009.The Company does not believeEITF 07-01will have a material impact on its
condensed consolidated financial statements.




SFAS 141(R) and SFAS
160




In December 2007, the Financial
Accounting Standards Board  (“FASB”) issued Statement
No. 141(Revised 2007),Business
Combinations(SFAS 141(R)) and Statement
No. 160,Accounting
and Reporting of Non-controlling Interests in Consolidated Financial
Statements, an amendment
of ARB No. 51 (SFAS 160). These statements will significantly change the
financial accounting and reporting of business combination transactions and
non-controlling (or minority) interests in consolidated financial statements.
SFAS 141(R) requires companies to: (i) recognize, with certain exceptions, 100%
of the fair values of assets acquired, liabilities assumed, and non-controlling
interests in acquisitions of less than a 100% controlling interest when the
acquisition constitutes a change in control of the acquired entity;
(ii) measure acquirer shares issued in consideration for a business
combination at fair value on the acquisition date; (iii) recognize
contingent consideration arrangements at their acquisition-date fair values,
with subsequent changes in fair value generally reflected in
earnings; (iv) with certain exceptions, recognize pre-acquisition loss
and gain contingencies at their acquisition-date fair values; (v) capitalize
in-process research and development (IPR&D) assets acquired;
(vi) expense, as incurred, acquisition-related transaction costs;
(vii) capitalize acquisition-related restructuring costs only if the
criteria in SFAS 146,Accounting
for Costs Associated with Exit or Disposal Activities, are met as of the acquisition date;
and (viii) recognize changes that result from a business combination
transaction in an acquirer’s existing income tax valuation allowances and tax
uncertainty accruals as adjustments to income tax expense. SFAS 141(R) is
required to be adopted concurrently with SFAS 160 and is effective for business
combination transactions for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after
December 15, 2008 (the
Company’sfiscal 2009).
Early adoption of these statements is prohibited.The Companybelievesthe adoption of these statements will
have a material impact on significant acquisitions completed afterDecember 31, 2008.




SFAS 161




In March 2008, the FASB issued SFAS No.
161,Disclosures about Derivative Instruments and Hedging Activities -an amendment of
SFAS 133or SFAS 161. SFAS
161 seeks to improve financial reporting for derivative instruments and hedging
activities by requiring enhanced disclosures regarding the impact on financial
position, financial performance, and cash flows. To achieve this increased
transparency, SFAS 161 requires: (1) the disclosure of the fair value of
derivative instruments and gains and losses in a tabular format; (2) the
disclosure of derivative features that are credit risk-related; and (3)
cross-referencing within the footnotes. This standard shall be effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008 and early application is encouraged.The Company isin the process of evaluating the new
disclosure requirements under SFAS 161 and doesnot expect the adoption to have a
material impact onitsconsolidated financial
statements.






28






SFAS 162




In May 2008, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standard ("SFAS") No. 162, "The Hierarchy of Generally Accepted Accounting
Principles". This 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 US GAAP for non-governmental entities. SFAS No. 162 is effective
60 days following the Securities and Exchange
Commissions's approval of
the Public Company Accounting Oversight Board amendments to AU Section 411, the
meaning of "Present Fairly in Conformity with GAAP". The Company is in the
process of evaluating the impact, if any, of SFAS 162 on its consolidated
financial statements.





FSP APB 14-1





In May 2008, the FASB released FSP APB
14-1 Accounting For
Convertible DebtInstruments That May Be Settled in Cash
Upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1) that alters
the accounting treatment for convertible debt instruments that allow for either
mandatory or optional cash settlements. FSP APB 14-1 specifies that issuers of
such instruments should separately account for the liability and equity
components in a manner that will reflect the entity's nonconvertible debt
borrowing rate when interest cost is recognized in subsequent periods.
Furthermore, it would require recognizing interest expense in prior periods
pursuant to retrospective accounting treatment. This FSP is effective for
financial statements issued for fiscal years beginning after December 15, 2008.The Company iscurrently evaluating the effect the
adoption of FSP APB 14-1 will have onitsconsolidated results of operations and
financial condition.













29










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





FORWARD-LOOKING
STATEMENTS




Most of the matters discussed within
this Form10-Qinclude forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. In some cases you can identify
forward-looking statements by terminology such as "may," "should," "potential,"
"continue," "expects," "anticipates," "intends," "plans," "believes,"
"estimates," and similar expressions. 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. Actual results and events may vary
significantly from those discussed in the forward-looking
statements.





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-Qmight not occur.





These
statements are not guarantees of future performance and involve certain risks
and uncertainties that are difficult to predict. Actual results could vary
materially from the description contained herein due to many factors included
and discussed in “Risk Factors”.





The
information contained in this Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2008 is not a complete description of the Company’s
business or the risks associated with an investment in the Company’s common
stock. Each reader should carefully review and consider the various disclosures
made by the Company in this Quarterly Report on Form 10-Q and in the Company’s
other filings with the Securities and Exchange Commission.





Company
Overview




We are 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.
Our marketing platform provides a range of services including (i) search
marketing; (ii) display marketing; (iii) lead generation; and (iv) affiliate
marketing. In addition, through our acquisition of the membership interesting of
Digital Instructor, LLC, we are also a developer, manufacturer, and marketer of
consumer learning products through acquired proprietary technologies. Digital
Instructor currently sells and markets three products: (i) Overnight Genius – a
comprehensive computer learning course mastering MS Windows, MS Office, eBay,
and others; (ii) Rising Star Learning – a math and language arts educational
product for children; and (iii) Debt Snap – an audio seminar designed to help
consumers manage their debt and restore credit standing.





We intend
to develop internally and/or acquire businesses and 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 offer advertisers a
compelling value proposition by offering true pay-per-performance pricing,
commonly known as cost-per-action (CPA) or pay-per-action (PPA).  We
intend to service domestic advertisers and expand into international markets.
Additionally, we plan to expand our own on-line properties, both internally, and
through further acquisitions.





We will
continue to expand 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.






30







Through
our Digital Instructor subsidiary we plan to expand our current list of product
offerings including products in relationship counseling, teeth whitening, and
weight loss.





We plan
to continue to invest in our proprietary conversion, tracking, and reporting
technology.  Through the use of our reporting infrastructure, we can
utilize real-time data to make better marketing decisions.  Similarly,
through continual testing, from creative to landing pages and beyond, we can
benefit from driving the highest possible conversions.





Through
our acquisition of the assets of Bay Harbor Marketing, we plan to continue to
grow and develop our on-line lead generation technologies and services. We are
currently marketing this service exclusively in the financial advisor vertical
but we plan to expand into several other verticals.





Liquidity
and Capital Resources





During
the first half of fiscal 2008, we raised approximately $5.8 million in gross
proceeds ($5.7 million in net proceeds) from the issuance of approximately
7,675,000 restricted shares of our common stock to 31 accredited
investors.





At
September 30, 2008, we had cash, cash equivalents and short term investments of
approximately $3,434,914. Net cash used in operations for the nine months ended
September 30, 2008 was approximately $644,563. We anticipate continuing negative
cash flow from operations for at least the fourth quarter.





In
addition to financing our cash requirements for operations, a significant
portion of our cash will be used for mergers and acquisitions.





We
believe our current cash on hand plus our short-term investments of
approximately $3.0 million will enable us to continue operations into
2010.





Results
of operations





The
following table sets forth key components of our unaudited condensed
consolidated results of operations for the periods indicated.








Three
months ended September 30, 2008 compared to three months ended September 30,
2007.





2008
            
            
            2007
            
            
            %
      ChangeRevenues:
            
            
            
            
            
            
            
            $Marketing
      platform services
            
            
            1,340,935
            
            
            
            511,780
            
            
            
            162
            %Products
            
            
            476,228
            
            
            
            -Total
      revenues
            
            
            1,817,163
            
            
            
            511,780
            
            
            
            255
            %Cost
      of sales:Marketing
      platform services
            
            
            1,219,213
            
            
            
            378,948
            
            
            
            222
            %Products
            
            
            127,526
            
            
            
            -Amortization
      of acquired product licenses
            
            
            18,795
            
            
            
            -Total
      cost of sales
            
            
            1,365,534
            
            
            
            378,948
            
            
            
            260
            %Gross
      profit:Marketing
      platform services
            
            
            121,722
            
            
            
            132,832
            
            
            
            (8
            %)Products
            
            
            329,907
            
            
            
            -451,629
            
            
            
            132,832
            
            
            
            240
            %Operating
      expenses:Product
      development
            
            
            17,300
            
            
            
            -Sales
      and marketing
            
            
            1,021,662
            
            
            
            39,075
            
            
            
            2,515
            %General
      and administrative
            
            
            404,521
            
            
            
            10,618
            
            
            
            3710
            %Amortization
      of intangible assets
            
            
            22,224
            
            
            
            -Impairment
      of intangible assets
            
            
            310,000
            
            
            
            -Total
      operating expenses
            
            
            1,775,707
            
            
            
            49,693
            
            
            
            3,473
            %Income
      (loss) before interest , other income (expense) and income
      taxes
            
            
            (1,324,078
            )
            
            
            83,139
            
            
            
            (1,693
            %)Interest
      and other income (expense), net
            
            
            13,489
            
            
            
            162
            
            
            
            8,227
            %Income
      (loss) before income tax expense (benefit)
            
            
            (1,310,589
            )
            
            
            83,301
            
            
            
            (1,673
            %)Income
      tax benefit
            
            
            (12,923
            )
            
            
            -Net
      income (loss)
            
            $
            (1,297,666
            )
            
            $
            83,301
            
            
            
            (1,658
            %)




31





Revenues





Marketing
platform services revenue increased approximately $829,000 or 162% as compared
to the three months ended September 30, 2007. This increase was the result of
increasing our customer base, expanding into display based marketing and lead
generation, and adding affiliates to our distribution network which expanded our
publishing reach. We anticipate our revenues to continue increasing quarter over
quarter as we expand our customer base and advertising channels.





Our
Products revenue consists of sales of consumer learning products from our
Digital Instructor subsidiary that we acquired on August 12, 2008. We expect our
Products revenue to increase quarter over quarter as we expand our current list
of product offerings.





Cost of
sales





Marketing
platform services cost of sales for the three months ended September 30, 2008,
increased 222% compared to the three months ended September 30, 2007. The
increase primarily reflected the increased costs of media buys necessary to
generate the increased revenue described above.





Marketing
platform services cost of sales for the three months ended September 30, 2008
and 2007, consisted of the following:




2008
              
              
              2007Costs ofaffiliates
              
              $
              172,277
              
              
              $
              246,355Costs of media
      buys
              
              
              963,407
              
              
              
              127,803Costs of affiliate network
      software
              
              
              5,529
              
              
              
              -Costs of promotional insurance and
      compliance
              
              
              39,600
              
              
              
              -Costs of web site development and
      hosting
              
              
              10,932
              
              
              
              4,790Merchant service
      fees
              
              
              1,940Promotional product fulfillment
      costs
              
              
              21,000Supplies
              
              
              1,953Shipping and
      handling
              
              
              2,575Total
              
              $
              1,219,213
              
              
              $
              378,948




We
anticipate our costs of sales to increase quarter over quarter in order generate
the anticipated revenue increases.





Our
Products costs of sales consists of the costs of consumer learning products from
our Digital Instructor subsidiary that we acquired on August 12, 2008. We expect
our Products costs of sales to increase quarter over quarter as we expand our
current list of product offerings.





Products
cost of sales for the three months ended September 30, 2008 and 2007, consisted
of the following:





2008
              
              2007Cost
      of inventory sold, manufacturing and distribution costs
              
              $
              32,006
              
              $
              -Merchant service
      fees
              
              
              82,977
              
              
              -Salaries and
      benefits
              
              
              12,543
              
              
              -Total
              
              $
              127,526
              
              $
              -




Amortization
of acquired product licenses represents the amortization of acquired product
license agreements in connection with the Company’s acquisition of Digital
Instructor. The value assigned to acquired product license agreements is
$700,000 and is being amortized straight line over 5 years.






32





Gross
profit





Marketing
platform services gross profit decreased from 26% of revenue in our third
quarter of 2007 to 9% of revenue in our third quarter of 2008.  This
decrease in gross profit percentage was the result of increased (i) payments to
affiliates, (ii) costs of our promotional insurance, and (iii) costs of
promotional product fulfillment costs. We expect gross profit percentages to
increase in our fourth quarter of 2008.





Operating
expenses





Product development expenses- During the three months ended September 30, 2008, our product
development expenses were $17,300. There were no product development expenses
incurred in the same quarter of the prior year. Product development costs
consisted primarily of the costs of software projects and platforms for our
promotional advertising and affiliate network initiatives that we determined at
September 30, 2008 were not yet probable to be completed and not ready to
perform the functions they were intended for. These costs of internally
developed software will be capitalized upon our determining the technical
feasibility of the software in accordance with Statement of Financial Accounting
Standard (SFAS) No. 86, "Accounting for the Costs of Computer Software to Be
Sold, Leased or Otherwise Marketed."We anticipate our product development
costs will decrease over the next several quarters reflecting our decision to
stop development of promotional and affiliate network software during the
quarter.





Sales and marketing expenses
increased $982,587 or 2,515% in the three months ended September 30, 2008
compared to the three months ended September 30, 2007. This increase reflects
the changes in the Company over the last year as we structured for growth
through increased headcount staffing. In addition, the increase also relates to
advertising payments made to affiliates by our Digital Instructor subsidiary
that we acquired during our three months ended September 30, 2008. We anticipate
our sales and marketing costs to increase over the next several quarters in
order to generate the anticipated revenue increases.





General and administrative
expenses increased by $393,903 to $404,521 (3,710%) in the three months
ended September 30, 2008 compared to the three months ended September 30, 2007.
This increase reflects moving from a small two person privately-held early stage
start-up company with little overhead to a public reporting and trading
company.  Primarily, we incurred more headcount costs, stock
compensation costs, legal, accounting, and tax planning fees in the three months
ended September 30, 2008 compared to the three months ended September 30, 2007.
Most of these expenses were incurred as a direct result of being a public
reporting and trading company.  We anticipate general and
administrative expenses to slightly increase over the next several quarters
reflecting increased costs of investor relations activities.





Amortization of intangible
assets





Amortization
of intangible assets represents the amortization of purchased intangibles
related to the Company’s acquisitions of the assets of Vibrantads, LLC, the
membership interests of Digital Instructor, LLC, and the assets of Bay Harbor
Marketing, LLC during the quarter.  We expect amortization of
intangible assets to increase in the next quarter reflecting a full quarter of
amortization charges related to each acquisition.





Impairment of intangible
assets





During
the three months ended September 30, 2008, the Company determined that certain
intangible assets acquired from Vibrantads, LLC were impaired and had no
remaining terminal value to the Company. Accordingly, the full purchase cost of
these intangible assets was impaired.





Interest and other income
(expense), net





Interest
and other income (expense) in the three months ended September 30, 2008
increased $13,327 to $13,489 compared to the three months ended September 30,
2007.  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 March and April of 2008.







33






Nine
months ended September 30, 2008 compared to nine months ended September 30,
2007.





2008
            
            
            2007
            
            
            %
      ChangeRevenues:Marketing
      platform services
            
            $
            2,750,264
            
            
            $
            1,191,604
            
            
            
            131
            %Products
            
            
            476,228
            
            
            
            -Total
      revenues
            
            
            3,226,492
            
            
            
            1,191,604
            
            
            
            171
            %Cost
      of sales:Marketing
      platform services
            
            
            2,299,117
            
            
            
            855,672
            
            
            
            169
            %Products
            
            
            127,526
            
            
            
            -Amortization
      of acquired product licenses
            
            
            18,795
            
            
            
            -Total
      cost of sales
            
            
            2,445,438
            
            
            
            855,672
            
            
            
            186
            %Gross
      profit:Marketing
      platform services
            
            
            451,147
            
            
            
            335,932
            
            
            
            34
            %Products
            
            
            329,907
            
            
            
            -781,054
            
            
            
            335,932
            
            
            
            133
            %Operating
      expenses:Product
      development
            
            
            52,550
            
            
            
            -Sales
      and marketing
            
            
            1,350,135
            
            
            
            94,332
            
            
            
            1,331
            %General
      and administrative
            
            
            955,729
            
            
            
            42,656
            
            
            
            2,141
            %Amortization
      of intangible assets
            
            
            22,224
            
            
            
            -Impairment
      of intangible assets
            
            
            310,000
            
            
            
            -Total
      operating expenses
            
            
            2,690,638
            
            
            
            136,988
            
            
            
            1,864
            %Income
      (loss) before interest , other income (expense) and income
      taxes
            
            
            (1,909,584
            )
            
            
            198,944
            
            
            
            (1,060
            %)Interest
      and other income (expense), net
            
            
            45,582
            
            
            
            279
            
            
            
            16,238
            %Income
      (loss) before income tax expense (benefit)
            
            
            (1,864,002
            )
            
            
            199,223
            
            
            
            (1,036
            %)Income
      tax expense (benefit)
            
            
            (12,123
            )
            
            
            800
            
            
            
            (1,615
            %)Net
      income (loss)
            
            $
            (1,851,879
            )
            
            $
            198,423
            
            
            
            (1,033
            %)





Revenues





Marketing
platform services revenue increased approximately $1,558,660 or 131% as compared
to the nine months ended September 30, 2007. This increase was the result of
increasing our customer base, expanding into display based marketing and lead
generation, and adding affiliates to our distribution network which expanded our
publishing reach. We anticipate our revenues to continue increasing quarter over
quarter as we expand our customer base and advertising channels.





Our
Products revenue consists of sales of consumer learning products from our
Digital Instructor subsidiary that we acquired on August 12, 2008. We expect our
Products revenue to increase quarter over quarter as we expand our current list
of product offerings.








34





Cost of
sales





Marketing
platform services cost of sales for the nine months ended September 30, 2008,
increased 169% compared to the three months ended September 30, 2007. The
increase primarily reflected the increased costs of media buys necessary to
generate the increased revenue described above.





Marketing
platform services cost of sales for the nine months ended September 30, 2008 and
2007, consisted of the following:




2008
              
              
              2007Costs ofaffiliates
              
              $
              924,839
              
              
              $
              540,980Costs of media
      buys
              
              
              1,283,541
              
              
              
              299,654Costs of affiliate network
      software
              
              
              7,829
              
              
              
              -Costs of promotional insurance and
      compliance
              
              
              43,100
              
              
              
              -Costs of web site development and
      hosting
              
              
              12,340
              
              
              
              15,038Merchant service
      fees
              
              
              1,940
              
              
              
              -Promotional product fulfillment
      costs
              
              
              21,000
              
              
              
              -                            -Supplies
              
              
              1,953
              
              
              
              -Shipping and
      handling
              
              
              2,575
              
              
              
              -Total
              
              $
              2,299,117
              
              
              $
              855,672




We
anticipate our costs of sales to increase quarter over quarter in order generate
the anticipated revenue increases.





Our
Products costs of sales consist of the costs of consumer learning products from
our Digital Instructor subsidiary that we acquired on August 12, 2008. We expect
our Products costs of sales to increase quarter over quarter as we expand our
current list of product offerings.





Products
cost of sales for the nine months ended September 30, 2008 and 2007, consisted
of the following:





2008
            
            
            2007Cost
      of inventory sold, manufacturing and distribution costs
            
            $
            32,006
            
            
            $
            -Merchant service
      fees
            
            
            82,977
            
            
            
            -Salaries and
      benefits
            
            
            12,543
            
            
            
            -Total
            
            $
            127,526
            
            
            $
            -





Amortization
of acquired product licenses represents the amortization of acquired product
license agreements in connection with the Company’s acquisition of Digital
Instructor. The value assigned to acquired product license agreements is
$700,000 and is being amortized straight-line over 5 years.




Gross
profit





Marketing
platform services gross profit decreased from 28% of revenue in the nine months
ended September 30, 2007 to 16% of revenue in the nine months ended September
30, 2008.  This decrease in gross profit percentage was the result of
(i) increased payments to affiliates, (ii) increased costs of our promotional
insurance, and (iii) increased costs of promotional product fulfillment costs.
We expect gross profit percentages to increase in our fourth
quarter.






35







Operating
expenses





Product development expenses- During the nine months ended September 30, 2008, our product
development expenses were $52,550. There were no product development expenses
incurred in the same quarter of the prior year. Product development costs
consisted primarily of the costs of software projects and platforms for our
promotional advertising and affiliate network initiatives that we determined at
September 30, 2008 were not yet probable to be completed and not ready to
perform the functions they were intended for. These costs of internally
developed software will be capitalized upon our determining the technical
feasibility of the software in accordance with Statement of Financial Accounting
Standard (SFAS) No. 86, "Accounting for the Costs of Computer Software to Be
Sold, Leased or Otherwise Marketed."We anticipate our product development
costs will decrease over the next several quarters reflecting our decision to
stop development of promotional and affiliate network software during the
quarter.





Sales and marketing expenses
increased $1,255,803 or 1,331% in the nine months ended September 30, 2008
compared to the nine months ended September 30, 2007. This increase reflects the
changes in the company over the last year as we structured for growth through
increased headcount staffing. In addition, the increase also relates to
advertising payments made to affiliates by our Digital Instructor subsidiary
that we acquired this quarter. We anticipate our sales and marketing costs to
increase over the next several quarters in order to generate the anticipated
revenue increases.





General and administrative
expenses increased by $913,073 to $955,729 (2,141%) in the nine months
ended September 30, 2008 over the comparable period in 2007. This increase
reflects moving from a small two person privately-held early stage start-up
company with little overhead to a public reporting and trading
company.  Primarily, we incurred more headcount costs, stock
compensation costs, legal accounting, and tax planning fees in the nine months
ended September 30, 2008 compared to the nine months ended September 30, 2007.
Most of these expenses were incurred as a direct result of being a public
reporting and trading company.  We anticipate general and
administrative expenses to slightly increase over the next several quarters
reflecting increased costs of investor relations activities.





Amortization of intangible
assets





Amortization
of intangible assets represents the amortization of purchased intangibles
related to the Company’s acquisitions of the assets of Vibrantads, LLC, the
membership interests of Digital Instructor, LLC, and the assets of Bay Harbor
Marketing, LLC during the quarter.  We expect amortization of
intangible assets to increase in the next quarter reflecting a full quarter of
amortization charges related to each acquisition.




Impairment of intangible
assets





During
the quarter ended September 30, 2008, the Company determined that certain
intangible assets acquired from Vibrantads, LLC were impaired and had no
remaining terminal value to the Company. Accordingly, the full purchase cost of
these intangible assets was impaired.





Interest and other income
(expense), net





Interest
and other income (expense) in the nine months ended September 30, 2008 increased
$45,303 to $45,582 compared to the nine months ended September 30,
2007.  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 March and April of 2008.





Off-Balance Sheet
Arrangements





At
September 30, 2008, we did not have any transactions, obligations or
relationships that could be considered off-balance sheet
arrangements.








36







ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





We do not
normally hold market risk sensitive instruments for trading purposes nor do we
have any foreign currency exchange exposure. We do however recognize market risk
from interest rate fluctuations related to the returns we receive on our short
term investment balances. At September 30, 2008, our cash resources earned
interest at variable rates. Accordingly, our return on these funds is affected
by fluctuations in interest rates.




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 September 30,
2008, our chief executive officer and chief financial officer concluded that our
disclosure controls and procedures were effective as of September 30,
2008.





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 September 30, 2008 or subsequent to that date
that have materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial reporting.









37





PART
II. OTHER INFORMATION





ITEM
1.      LEGAL PROCEEDINGS





We are
not currently a party to any legal proceedings. We may become from time to time
involved in legal proceedings in the ordinary course of business.  We
may not be successful in defending these or other claims. Regardless of the
outcome, litigation can result in substantial expense and could divert the
efforts of our management.





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.




The assets we acquired from Kim and Lim
LLC (“Pieces Assets”) have been operating since November 2005. Abundantad was
incorporated in February, 2008 and we have been in business with Adex Media Inc.
as the parent company since May, 2008. We therefore have had 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.




We may need additional funding to
support our 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.  Our organizational activities were being financed
with credit from vendors and personal funds of our officers and
directors.  We 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 may 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.











38





Three customers accounted for
approximately 61% of our consolidated revenue and loss of either of these
customers would have a material adverse effect on our
business.





For the nine months ended September 30,
2008, one customer accounted for 33% of our consolidated revenue another two
other customers each accounted for 14% of our consolidated revenue. For the nine
months ended September 30 2007, one customer accounted for 95% of our
consolidated revenue. The loss of either of these customers would have a
material adverse impact on our business.




We have consummated mergers and
acquisitions, that could divert our management’s attention and be difficult to
integrate, and has caused ownership dilution to our
stockholders.




Our business strategy depends in part on
our ability to identify, structure and integrate mergers and acquisitions that
are complementary to our business model.  For example, during the
three months ended September 30, 2008, we purchased the membership interests in
Digital Instructor, LLC, the assets of Vibrantads, LLC, and the assets of Bay
Harbor Marketing, LLC. 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, 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.






39






We may be unable to attract and retain
key employees.




We presently employ a limited number of
persons with Internet or public-company 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
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 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 respond to such increased legal,
regulatory compliance and reporting requirements.  Our failure to do
so could lead to the imposition of fines and penalties and further 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.






40






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.




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 and directors may have
interests that are different than other shareholders and may influence certain
actions.




Our founders and  investors
currently own and may continue to own a majority of the shares of common stock
of Adex following the Merger, and will control a significant amount of shares
following further acquisitions.  Therefore, our founders and investors
will 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, each of our
founders own interests in or participates 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 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 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 will depend on several of the major
search engines 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 will 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 will monitor the traffic delivered to our merchant
advertisers in an attempt to optimize the quality of traffic we will
deliver.  We will 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.






41







From
our acquisition of Digital Instructor, we rely on payment by credit card from
end-users of digital products we market. Loss of our credit card acceptance
privileges would seriously hamper our ability to process the sale of
merchandise.




The
payment by end-users for the purchase of digital goods that we process is
typically made by credit card or similar payment method. As a result, we must
rely on banks or payment processors to process transactions, and 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. 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. 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 digital content. We may be required to
expend significant capital and other resources to monitor these
activities.





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.





VISA and
MasterCard also 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 a merchant maintains its ratios above the limits set by VISA
and MasterCard, its credit card processing accounts may be limited or
terminated, resulting in a severe reduction in revenue.





Through
our Digital Instructor subsidiary, we operate in a continuity or negative option
paradigm model.





Our
digital product offers typically come with a ten- to fourteen-day trial period
in which the consumer has the right to cancel the order and 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.





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.






42








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.





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 digital products.




Our Digital Instructor subsidiary’s
ability to compete and operate successfully depends in part on our acquiring and
controlling proprietary intellectual property. Our digital 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.





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.




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:






43








·
            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.





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.




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.






44






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 will rely on third-party co-location
providers, and a failure of service by these providers could adversely affect
our business and reputation.




We will 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 will be 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.




We are susceptible to general economic
conditions, and a downturn in advertising and marketing spending by merchants
could adversely affect our operating results.








45






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.





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:






46






·
            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.





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
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.






47







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.




Regulation
of continuity or negative option paradigm businesses may adversely affect our
operations.





Companies
operating continuity or negative option models operate under guidelines mandated
by the Federal Trade Commission ("FTC").  These guidelines may be
changed or amended by the FTC at anytime, requiring us to make changes in our
operations which could severely impact revenue and profitability.





In
addition, the FTC and state watch groups typically regulate companies like ours
to ensure compliance with these guidelines and may challenge our compliance ay
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 may incur liabilities for the
activities of users of our service, 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 intend to 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.







48








Our growth depends on our ability to
maintain a predictable inventory of advertising space on our owned and other 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
      (Fast Click) 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 investors or other selling
      stockholders;






49








·
            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;·
            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 merger with Abundantad,
the founders and investors of Abundantad now beneficially own a majority of the
outstanding shares of Adex 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.






50






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.





As of the Merger, Abundantad became a
consolidated subsidiary of Adex, a company that is 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.




As a result of the Merger, Abundantad
became a consolidated subsidiary of Adex, a public reporting and trading company
and, accordingly, subject to the information and reporting requirements of the
Securities Exchange Act of 1934 and other federal securities laws, including
compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”).  The costs of preparing and filing annual and quarterly
reports, proxy statements and other information with the SEC (including
reporting of the Merger) and furnishing audited reports to stockholders will
cause the expenses of Abundantad and Adex to be higher than they would have been
if Abundantad had remained privately held and had not consummated the
Merger.




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.




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.





The Sarbanes-Oxley Act and new rules
subsequently implemented by the SEC have required changes in corporate
governance practices of public companies.  As a public reporting and
trading company, we expect these new rules and regulations to increase our
compliance costs in 2008 and beyond and to make certain activities more time
consuming and costly.  As a public company, we also expect that these
new rules and regulations 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.




Because we became public by means of a
reverse merger with Abundantad and the Pieces Assets into Adex, we may not be
able to attract the attention of major brokerage firms.






51






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 post-Merger
company.




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 Pieces
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 either the American Stock
Exchange, 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.




Furthermore, for companies whose
securities are quoted on the OTC Bulletin Board, it is more difficult (1) to
obtain accurate quotations, (2) to obtain coverage for significant news events
because major wire services generally do not publish press releases about such
companies, and (3) to obtain 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.






52






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 Merger will be subject
to a lock-up agreement prohibiting sales of such shares for a period of 15
months following the 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 over and control all
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.





ITEM
2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





In connection with the purchase of
substantially all the assets of Vibrantads LLC, on July 21, 2008, Adex issued
112,500 shares of its common stock to Vibrantads as part of the purchase price.
 The issuance of such shares of common stock was exempt 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.






53







In connection with the purchase of all
the membership interests of Digital Instructor LLC, on August 12, 2008, Adex
issued 1.200,000 shares of its common stock to the members of Digital Instructor
as part of the purchase price.  The issuance of such shares of common
stock was exempt 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 purchase of
substantially all the assets of  Bay Harbor Marketing, LLC, on August
29, 2008, Adex issued the following: (i) Fifty Thousand (50,000) restricted
shares of its common stock to Bay Harbor Marketing LLC; (ii) One Hundred Fifty
Two Thousand One Hundred Fifty One (152,151) restricted shares of its common
stock to the managing member of Bay Harbor Marketing LLC; (iii) One Hundred
Forty Seven Thousand Two Hundred Seventy Three (147,273) restricted shares of
its common stock to a creditor of Bay Harbor Marketing LLC; and (iv) One Hundred
Fifty Thousand (150,000) restricted shares of its common stock to an escrow
agent.   The issuance of such shares of common stock was exempt
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.





ITEM
3.     DEFAULTS UPON SENIOR SECURITIES





None





ITEM
4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS





None





ITEM
5.     OTHER INFORMATION





None





ITEM
6.     EXHIBITS





Exhibit number
            Description2.1
            Asset
      Purchase Agreement dated July 21, 2008 by and between Adex Media, Inc. and
      Vibrantads, LLC (1)2.2
            Membership
      Interest Purchase Agreement dated August 12, 2008 by and among Adex Media,
      Inc. and the Members of Digital Instructor, LLC (2)2.3
            Asset
      Purchase Agreement dated August 29, 2008 by and between Adex Media, Inc.
      and Bay Harbor Marketing, LLC (3)10.1
            Lockup
      and Share Release Agreement dated July 21, 2008 by and between Adex
      Media, Inc. and Vibrantads, LLC (1)10.2
            Promissory
      Note dated July 21, 2008 by Adex Media, Inc. (1)10.3
            Senior
      Secured Promissory Note, dated as of August 12, 2008, by and between Adex
      Media, Inc. and Digital Equity Partners, LLC (2)10.4
            Security
      Agreement, dated as of August 12, 2008, by and between Adex Media, Inc.
      and Digital Equity Partners, LLC (2)10.5
            Form
      of Lockup and Share Release Agreement dated August 12, 2008, by and among
      Adex Media, Inc. and the Members of Digital Instructor, LLC
      (2)10.6
            Employment
      Agreement dated as of August 12, 2008, by and between Adex Media, Inc. and
      Dennis C. Hefter (2)10.7
            Lockup
      and Share Release Agreement dated August 29, 2008 by and between Adex
      Media, Inc. and Bay Harbor Marketing, LLC (3)10.8
            Escrow
      Agreement dated August 29, 2008, by and among Adex Media, Inc., Bay Harbor
      Marketing, LLC, and Bullivant Houser Bailey PC (3)31.1
            Rule
      13a-14 Certification of Chief Executive Officer31.2
            Rule
      13a-14 Certification of Chief Financial Officer32.1
            Section
      1350 Certification of Chief Executive Officer32.2
            Section
      1350 Certification of Chief Financial
Officer




(1)
            Incorporated
      by reference herein to the Company’s Current Report on Form 8-K filed with
      the Securities and Exchange Commission on July 24,
  2008.


(2)
            Incorporated
      by reference herein to the Company’s Current Report on Form 8-K filed with
      the Securities and Exchange Commission on August 18,
  2008.


(3)
            Incorporated
      by reference herein to the Company’s Current Report on Form 8-K filed with
      the Securities and Exchange Commission on September 3,
    2008.




Exhibits
to the above-mentioned Asset Purchase Agreements and Membership Interest
Purchase Agreement have been omitted pursuant to Item 601(b)(2) of Regulation
S-K.  Adex agrees to furnish a supplemental copy of any omitted
exhibit to the SEC upon request.


54


SIGNATURES
   Pursuant
to the requirements of the Securities and Exchange Act of 1934, the Registrant
had duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
  
  
  ADEX
      MEDIA, INC.(Registrant)Date:  
      November 14, 2008
              
              By: /s/
      Ben
      ZadikBen
      ZadikChief
      Financial Officer(Principal Financial
      Officer)