Annual Report (10-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014

[ ] 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: 333-141676

ALLDIGITAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Nevada		20-5354797
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

6 Hughes, Suite 200 Irvine, California 92618

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (949) 250-7340

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES [ ] NO [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES [ ] NO [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Report or any amendment to this Report. [X]

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 definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

[ ] Large Accelerated Filer	[ ] Accelerated Filer

[ ] Non-accelerated Filer	[X] Smaller reporting Company
(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 Act): YES [ ] NO [X]

The aggregate market value of the voting common equity held by non-affiliates of the registrant computed by reference to the closing sale price of such stock, was approximately $1,396,496 as of June 30, 2014, the last business day of the registrant’s most recently completed second fiscal quarter. The registrant has no non-voting common equity.

As of April 17, 2015, the registrant had 38,254,959 shares of common stock, $0.001 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None.

CAUTIONARY STATEMENT

All statements included or incorporated by reference in this Annual Report on Form 10-K (this “Report”), other than statements or characterizations of historical fact, are “forward-looking statements.” Examples of forward-looking statements include, but are not limited to, statements concerning projected sales, costs and expenses; our accounting estimates, assumptions and judgments; the demand for our products; the competitive nature of and anticipated growth in our industry; and our prospective needs for additional capital. These forward-looking statements are based on our current expectations, estimates, approximations and projections about our industry and business, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by such words as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions and variations or negatives of these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors, some of which are set forth in the “Risk Factors” section of this Report, which could cause our financial results, including our net income or loss or growth in net income or loss to differ materially from expected results, which in turn could, among other things, cause the price of our common stock to decrease. These forward-looking statements speak only as of the date of this report. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.

TABLE OF CONTENTS

	PART I

Item 1.	Business	4
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	20
Item 3.	Legal Proceedings	21
Item 4.	Mine Safety Disclosures	21

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities	22
Item 6.	Selected Financial Data	23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 8.	Financial Statements and Supplementary Data	32
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	32
Item 9A.	Controls and Procedures	32
Item 9B.	Other Information	34

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance	35
Item 11.	Executive Compensation	38
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	40
Item 13.	Certain Relationships and Related Transactions, and Director Independence	41
Item 14.	Principal Accounting Fees and Services	44

	PART IV

Item 15.	Exhibits, Financial Statements Schedules	45
	Index to Consolidated Financial Statements and Supplemental Information	48
	Signatures	49

Exhibits Filed with this Report		50

PART I

Item 1. Business

Throughout this Report, AllDigital Holdings, Inc. and AllDigital, Inc., as a consolidated entity, are referred to as “AllDigital”, the “Company”, “we” or “us.” To the extent we need to distinguish AllDigital Holdings, Inc. from AllDigital, Inc., we refer to AllDigital Holdings, Inc. as “AllDigital Holdings” and to AllDigital, Inc. as “AllDigital, Inc.” We have registered or are in the process of registering the following trademarks: AllDigital® and Cablebox™. Any other trademarks and service marks used in this Report are the property of their respective holders.

Certain Technical Terms

In this Report, we use certain technical terms to describe our business, which terms are important in understanding our business, including the following:

	●	“Apps” are software applications that operate on a device, and which can act as the front-end of a remotely hosted, cloud-based digital service.

	●	“Content Management System” (“CMS”) is a Software as a Service (“SaaS”) platform that allows for the management of digital media assets, data exchange with digital services and data management.

	●	“devices” are Internet-connected devices, including without limitation smartphones, tablet computers, desktop and laptop computers, gaming consoles, digital televisions, home theatre systems, streaming players, “smart” appliances and digital signage.

	●	“digital broadcasting workflow” is a series of interconnected processes to ingest, store, prepare, secure, manage, monetize, convert and distribute live media feeds and video-on-demand and pay-per-view assets, as well as real-time data and other information to and from Apps on devices.

	●	“digital services” are hosted, cloud-based software applications intended for use on, interactivity with, and the delivery of digital media to or from, one or more devices, through a digital broadcasting workflow. Examples of well-known digital services include NetFlix’s Movies On-Demand, Hulu, Pandora Radio, YouTube and Facebook.

	●	“graphics display resolution” is the width and height dimensions of an electronic visual display device, such as a computer monitor, in pixels. Certain combinations of width and height are standardized and typically given a name that is descriptive of its dimensions. A higher display resolution in a display of the same size means that displayed content appears sharper. Video dimensions with width 1280 pixels and height 720 are considered high definition.

	●	“machine virtualization and multi-tenancy” refer to the act of creating a virtual (rather than actual) version of something, including (but not limited to) a virtual computer hardware platform, operating system (OS), storage device, or computer resources. Multi-tenancy allows these platform resoruces to be defined and allocated via software.

	●	“pairing” is the process of setting-up, managing and maintaining the ongoing data exchange between a digital service and a device through the applicable digital broadcasting workflow. Pairing includes not only the initial process of ensuring the compatibility of the digital service with one or more devices operating on one or more device platforms, but may also include any or all of the following:

	●	Managing various elements of and processes related to the ongoing data exchange between a digital service and a device, including device compatibility, security, quality of service, data and signal flows, and dynamic updates;

	●	Applying business rules (e.g., subscriber eligibility and authentication) and processing to live media feeds, video-on-demand (e.g., converting master video files into formats compatible with the target devices), real-time data and other data assets, and digital services; and

	●	Acting as the origin for data exchange between the digital services, through the digital broadcasting workflow, to the devices.

●

“video compression” uses modern coding techniques to reduce redundancy in video data. Most video compression algorithms and codecs combine spatial image compression and temporal motion compensation. Video compression is a practical implementation of source coding in information theory. In practice, most video codecs also use audio compression techniques in parallel to compress the separate, but combined data streams as one package.

General Overview

AllDigital engineers software and hardware based digital broadcasting solutions to accelerate and optimize the distribution of digital video over the Internet. Our digital broadcasting solutions are built around proprietary product and service offerings. AllDigital Brevity uses our patented technology to simultaneously transcode digital video files to multiple formats and to multiple destinations while transporting them at super-accelerated speeds over the Internet. AllDigital Cloud is a unified digital broadcasting and cloud services platform dedicated to ingesting, storing, preparing, securing, managing, monetizing, converting and distributing digital media and other forms of data across devices. AllDigital Integration Services provides consultation and software development services that enable our customers to integrate AllDigital Brevity and AllDigital Cloud into existing digital workflows, with services ranging from transition planning from competitive offerings to designing, building and hosting complete digital workflows.

General Outlook

We expect that the need for digital broadcasting solutions will accelerate significantly over the next 2-3 years, which acceleration we anticipate will be driven by the convergence of the following two key market dynamics: (i) the market for devices is substantial and rapidly growing and (ii) digital services are increasingly critical to enterprise core business applications, are implemented to achieve a wide variety of objectives, and are rapidly proliferating. We believe that the growth of the digital services market will not be sustainable without the support from third party service providers that offer the digital broadcasting solutions required to successfully develop, operate, and support digital media workflows.

Our ability to successfully generate future revenues is dependent on a number of factors, including: (i) access to capital, and our success at growing our recurring revenues and operating cash flows to continue developing, operating and maintaining our proprietary AllDigital Brevity and AllDigital Cloud platforms and services, including our completing the development of a highly scalable and multitenant variant of AllDigital Brevity, which we believe will serve as our platform for recurring revenue growth and cash flow profitability in the future, (ii) the ability to commercialize our portfolio of digital broadcasting solutions, and (iii) our ability to attract and retain key sales, business and product development, and other personnel as our business and offerings continue to mature. We may encounter setbacks related to these activities.

Market Opportunity

We believe digital services are: rapidly proliferating; implemented to achieve a wide variety of objectives; driving new business models and strategies; increasingly critical to enterprise core business applications; and changing the way organizations store, originate, and distribute digital media and software applications.

Some of the challenges facing our target market that we address with our products, services, and technologies include:

	●	Transporting digital media assets, including high and ultra high definition video files quickly and efficiently

	●	Transcoding digital media assets from one to another or many different codecs;

	●	Storing and retrieving digital media assets at different stages of a digital media workflow;

	●	Providing digital media workflow tools to popular cloud services such as Microsoft Azure and Amazon AWS.

Industry Overview

The Internet plays a crucial role in the way organizations and individuals conduct business and communicate internally and externally. The development of various Internet-based technologies has enabled fundamental and structural changes in the way digital media services are being delivered. We expect that the need for digital broadcasting solutions will continue to accelerate significantly over the next 2-3 years, which we anticipate will be driven by the demand for high quality digital content.

The market for digital content is substantial and rapidly growing

	●	According to Forbes, analysts are predicting that connected devices worldwide could top 50 billion in the next ten years.

	●	According to Digital TV Research, the estimated number of TVs connected to the Internet exceeded 300 million and is expected to exceed 750 million by 2018.

	●	According to Google, Android devices have exceeded 1 billion activations.

	●	Juniper Research predicts that Mobile Smart Wearable Devices will be a $19 Billion industry by 2018.

Target Market Segments

We have targeted several industry segments that we believe to be responsive to a comprehensive offering of digital broadcasting solutions. Our business strategy is to provide the products, technologies and services that enable our target customers to distribute, with a high quality of service, a wide range of digital services without requiring significant in-house technical resources.

Examples of our targeted industry segments include:

	●	Media and Entertainment (broadcasting, pre-post production)

	●	Education

	●	Enterprise/Government/Nonprofit

	●	Faith-Based Organizations

	●	Hardware Manufacturers

Products and Services

Our product and service offerings include: AllDigital Brevity, AllDigital Cloud, and AllDigital Integration Services.

AllDigital Brevity

AllDigital Brevity is a solution for transporting large, digital media files over the Internet. With its patented technology, it reduces the transport payload while simultaneously transcoding files being sent from one to many locations in one to many formats from the convenience of a highly intuitive control panel.

AllDigital Cloud

AllDigital Cloud is a unified digital broadcasting and cloud services platform dedicated to ingesting, storing, preparing, securing, managing, monetizing, converting and distributing digital media across devices. It enables and supports a variety of complex digital broadcasting workflow and digital service implementations. AllDigital Cloud also maximizes the performance of, and offers significant scale and pricing advantages related to, the cloud-based storage, cloud processing and origin transit of digital media to and from devices.

AllDigital Integration Services

AllDigital Integration Services refers to the varying levels of professional services required to customize and integrate the AllDigital Cloud and AllDigital Brevity platforms to support a digital service with a customer’s proprietary systems and/or other specific requirements. This is sometimes referred to as “platform on-boarding.”

Sales and Marketing

We have provided and/or we are actively providing services to a variety of media and entertainment, enterprise, and organization (government/non-profit) customers since we began our current operations in August 2009. To date, we have obtained our customers as a result of direct sales, word of mouth and/or partner referrals.

The following lists some of the types of accounts that we engage on through our direct sales team and reseller channel.

Enterprise

Producers and distributors of digital video content are increasingly adopting public cloud computing services to avoid costly infrastructure build-out and to bring added efficiencies to SaaS-based business models among others. As video applications are migrated off sophisticated and expensive networks onto hybrid broadcast environments in the cloud, they are exposed to an often-unpredictable public Internet.

AllDigital Brevity, with its video workflows to the cloud, provides the performance, availability, scalability and security expected of an enterprise-level solution along with the anticipated cost savings of a cloud deployment.

Small and Medium Business

Primarily for video professionals, AllDigital replaces the need to deliver video projects on DVD or hard-drive and enables the sending of files optimized for consumer and corporate video users on mobile, desktop and connected television platforms.

OEM / Reseller

AllDigital Brevity for Video OEMs enables camera manufacturers and video software suppliers to license and bundle features of AllDigital Brevity into their products. These resellers expose the AllDigital Brevity to potentially large sets of users.

Dependence on Certain Customers

We have served and/or we are actively serving a variety of media and entertainment, enterprise, and government/non-profit customers since we began our current operations in August 2009. As of December 31, 2014, we had 22 direct customers. We also act as a subcontractor for certain of these customers, servicing and supporting a total of 19 accounts. Through the year ending December 31, 2014, our four largest billing relationships accounted for approximately 68% of our total billings. Rogers Communications accounted for 30%, Cox Media Group accounted for 21%, and both Chideo and Zodiac Interactive each accounted for 8%, respectively.

Intellectual Property

We acquired two issued U.S. patents when we purchased the assets of Brevity Ventures, Inc. in 2014, including:

	●	United States Patent No. 8,533,166 B1 – Methods and systems for encoding/decoding files and transmission thereof, issued September 10, 2013

	●	United States Patent No. 8,874,531 B2 – Methods and systems for encoding/decoding files and transmission thereof, issued October 28, 2014

Both issued patents address technological solutions involving transferring very large files (e.g., megabytes to terabytes) from a sending computer to a recipient computer(s) over a computer network in a concurrent manner such as to result in an optimum synchronization (i.e., the synchronized pipeline between the sender and recipient computers) of all involved operations: segmenting, compressing, transmitting of the initial file having initial format at the sending computer to receiving, decompressing, transcoding, and assembling segments into a final file having a different format at the recipient computer(s).

In addition, we have a pending U.S. patent application (Serial No. 14/524,610).

We depend on our ability to develop and maintain the proprietary aspects of our technology. We also seek to protect our copyrights, trade secrets and other proprietary information through a combination of contractual provisions, confidentiality procedures and common law copyright and trademark principles.

We have not sought or obtained registered copyright or patent protection for our other intellectual property. We have applied for federal registration of certain trademarks in order to develop a trademark portfolio and protect our brand. Two applications related to the registration of the word mark for ALLDIGITAL were filed on October 16, 2009. As of April 2012, both of our applications were approved as registered marks. We plan to explore applying for additional trademarks in 2014.

We believe that additional elements of AllDigital Brevity and elements of AllDigital Cloud, certain components of our advanced App frameworks, and certain new technologies under development may have patent potential. As we raise additional capital, we expect to investigate such potential, and if appropriate, commence a provisional patent application filing process.

Competition

The market for our services is growing and evolving as rapid technological advancements and changing industry standards are driving the demand for digital content.

We compete with companies offering products and services that enable a more effective use of the Internet in a digital media workflow. These companies have offerings that are designed to address one or many needs, which include high-speed file transport, cloud storage, transcoding, and content distribution. We compete primarily on the basis of:

	●	ease of implementation and use of service

	●	product features and capabilities

	●	reduced infrastructure complexity

	●	return on investment in terms of cost savings and new revenue opportunities for our customers

	●	scalability

	●	our knowledge and expertise, and our ability to design unique solutions to solve digital media complexities

	●	price

We believe that we compete favorably with other companies in our industry through our patented technologies, platform designs, and industry knowledge and expertise.

Employees

We have fifteen full time employees. None of our employees are represented under a collective bargaining agreement.

Corporate History

Aftermarket Enterprises, Inc. was incorporated in August 2006 in the State of Nevada. On July 29, 2011, AllDigital, Inc., which was incorporated in August 2009 in California, merged with and into a subsidiary of Aftermarket Enterprises, Inc. and became a wholly owned subsidiary of Aftermarket Enterprises, Inc. Shares issued in the transaction constituted approximately 74% of the outstanding shares of common stock post-closing, and the officers and directors of AllDigital, Inc. became the officers and directors of Aftermarket Enterprises, Inc. In August 2011, we changed the name of Aftermarket Enterprises, Inc. to AllDigital Holdings, Inc.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, and all of the other information set forth in this Report before deciding to invest in shares of our common stock. In addition to historical information, the information in this Report contains forward-looking statements about our future business and performance. Our actual operating results and financial performance may be different from what we expect as of the date of this Report. The risks described in this Report represent the risks that management has identified and determined to be material to our company. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also materially harm our business operations and financial condition.

We have a limited operating history and cannot ensure the long-term successful operation of our business or the execution of our business plan.

We have a limited operating history, and our digital broadcasting solutions, including our new AllDigital Brevity platform, are an evolving business offering. As a result, investors have no meaningful track record by which to evaluate our future performance. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by growing companies in new and rapidly evolving markets. We may be unable to accomplish any of the following, which would materially impact our ability to implement our business plan:

●

establishing and maintaining broad market acceptance of our products, technology, services, and platform, and converting that acceptance into direct and indirect sources of revenue;

	●	establishing and maintaining adoption of our products, technology, services, and platforms on a wide variety of devices and device platforms;

	●	timely and successfully developing new products, technology, services, service and platform features, and increasing the functionality and features of our existing products, services, platform and technology;

	●	developing products, technology, services, and platforms that result in a high degree of customer satisfaction and a high level of end-customer usage;

	●	successfully responding to competition, including competition from emerging technologies and solutions;

	●	developing and maintaining strategic relationships to enhance the distribution, features, content and utility of our products, technology, services, and platforms; and

	●	identifying, attracting and retaining talented technical services, engineering, and creative services staff at reasonable market compensation rates in the markets in which we employ.

Our business strategy may be unsuccessful and we may be unable to address the risks we face in a cost-effective manner, if at all. If we are unable to successfully accomplish these tasks, our business will be harmed.

We have a history of only nominal revenues, have incurred losses, expect continued losses and may never achieve profitability. If we continue to incur losses, we may have to curtail our operations, which may prevent us from successfully selling our products and services as well as operating and expanding our business.

We have a history of only nominal revenues, have not been profitable and expect continued losses. Historically, we have relied upon cash from financing activities to fund substantially all of the cash requirements of our activities and have incurred significant losses and experienced negative cash flow. As of December 31, 2014, we had an accumulated deficit of $4,832,476. For the years ended December 31, 2014 and 2013, we incurred net losses of $1,858,923 and $552,311, respectively. We cannot predict when we will become profitable or if we ever will become profitable. We may continue to incur losses for an indeterminate period of time and may never achieve or sustain profitability. Even if we are able to achieve profitability, we may be unable to sustain or increase our profitability on a quarterly or annual basis. An extended period of losses and negative cash flow may prevent us from successfully selling our products and services and operating or expanding our business. As a result of our financial condition, our independent auditors have issued a report questioning our ability to continue as a going concern.

We are seeking additional financing to meet our liquidity and capital expenditure requirements and may be unable to obtain this financing on a timely basis, in sufficient amounts, on terms acceptable to us or at all. Any financing we are able to obtain may be available only on burdensome terms that may cause significant dilution to our stockholders and impose onerous financial restrictions on our business.

We are seeking additional financing to meet our liquidity and capital expenditure requirements. Management believes that without additional financing, our current cash on hand and expected cash flow from operations will be sufficient to fund our liquidity and capital expenditure requirements only into the third quarter of 2015. Future financing may not be available on a timely basis, in sufficient amounts, on terms acceptable to us or at all. Any equity financing may cause significant dilution to existing stockholders. Any debt financing or other financing of securities senior to our common stock will likely include financial and other covenants that will restrict our flexibility. At a minimum, we would expect these covenants to include restrictions on our ability to pay dividends on our common stock. Any failure to comply with these covenants could have a material adverse effect on our business, prospects, financial condition and results of operations because we could lose any then-existing sources of financing and our ability to secure new financing may be impaired. In addition, any prospective debt or equity financing transaction will be subject to the negotiation of definitive documents and any closing under those documents will be subject to the satisfaction of numerous conditions, many of which could be beyond our control. We may be unable to obtain additional financing from one or more lenders or equity investors, or if funding is available, it may be available only on burdensome terms that may cause significant dilution to our stockholders and impose onerous financial restrictions on our business.

Our independent auditors have issued a report questioning our ability to continue as a going concern. This report may impair our ability to raise additional financing and adversely affect the price of our common stock.

The report of our independent auditors contained in our financial statements for the years ended December 31, 2014 and 2013 includes a paragraph that explains that we have incurred significant losses and negative cash flows from operations. This report raises substantial doubt about our ability to continue as a going concern. Reports of independent auditors questioning a company’s ability to continue as a going concern are generally viewed unfavorably by analysts and investors. This report may make it difficult for us to raise additional debt or equity financing necessary to continue the development of AllDigital Brevity. We urge potential investors to review this report before making a decision to invest in AllDigital Holdings.

Our disclosure controls and procedures and internal control over financial reporting are not effective, which may cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.

Our management evaluated our disclosure controls and procedures as of December 31, 2014 and concluded that as of those dates, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to (i) insufficient resources, (ii) inadequate segregation of duties for key financial reporting functions, and (iii) insufficient segregation of duties for executive officers of the Company.

As of the date of this annual report on Form 10-K, we believe that these material weaknesses continue to exist and our disclosure controls and procedures and internal control over financial reporting are not effective. If such material weaknesses and ineffective controls are not promptly corrected in the future, our ability to report quarterly and annual financial results or other information required to be disclosed on a timely and accurate basis may be adversely affected. Also such material weaknesses and ineffective controls could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.

We are in the early stages of the full production version of our AllDigital Brevity platform and we cannot be certain that AllDigital Brevity will perform as expected and/or be accepted by our current and potential customers.

We have only recently deployed the full production version of AllDigital Brevity. Accordingly, our AllDigital Brevity platform may not perform as expected and we may not be able to address some or all of the early stage production challenges that may occur. Even if our AllDigital Brevity platform performs as expected, we may not be successful in marketing and selling the platform to current or potential customers. Any failure to address early production or market acceptance challenges would significantly harm our results of operations and financial condition

Because of our early stage of operations and limited resources, we may not have in place various processes and protections common to more mature companies and may be more susceptible to adverse events.

We are in an early stage of operations and have limited resources. As a result, we may not have in place systems, processes and protections that many of our competitors have or that may be essential to protect against various risks. For example, we have in place only limited resources and processes addressing human resources, timekeeping, data protection, business continuity, personnel redundancy, and knowledge institutionalization concerns. As a result, we are at risk that one or more adverse events in these and other areas may materially harm our business, balance sheet, revenues, expenses or prospects.

The platform architecture and data tracking technology underlying our services is complex and may contain unknown errors in design or implementation that could result in incorrect billings to our customers.

The platform architecture and data tracking technology underlying our product offerings, including our AllDigital Brevity and AllDigital Cloud platforms, broadcasting network services, and cloud services software tools and back-end services is complex and includes software and code used to generate customer invoices. This software and code is either developed internally or licensed from third parties. Any of the system architecture, system administration, software or code may contain errors, or may be implemented or interpreted incorrectly, particularly when they are first introduced or when new versions or enhancements to our tools and services are released. In addition, with respect to certain usage-based billing, the data used to bill the customer for usage is an estimate, based upon complex formulas or algorithms developed by and included in third party applications that we use. We or the customer may subsequently believe that such formulas or algorithms overstate or understate actual usage. In any such case, a design or application error could cause overbilling or under-billing of our customers, which may:

	●	adversely impact our relationship with those customers and others, possibly leading to a loss of affected and unaffected customers;

	●	lead to billing disputes and related legal fees, and diversion of management resources;

	●	increase our costs related to product development; and/or

	●	adversely affect our revenues and expenses, either prospectively or retrospectively, potentially requiring restatement of financial statements.

Our continued growth could be adversely affected by the loss of several key customers.

Through the year ending December 31, 2014, our four largest billing relationships accounted for approximately 62% of our total billings. Our agreements with many of these key customers and/or partners expire in any given year unless renewed by the customer and/or partner, are terminable at any time upon short-term notice, or are otherwise generally terminable during 2015. Decisions by one or more of these key customers and/or partners to not renew, terminate or substantially reduce their use of our products, technology, services, and platform could substantially slow our revenue growth and lead to a decline in revenue. Our business plan assumes continued growth in revenue, and it is unlikely that we will become profitable without an increase in revenue.

We are dependent upon key personnel who may leave at any time and may be unable to attract qualified personnel in the future.

We are highly dependent upon on a small number of senior executives and other members of management to work effectively as a team, to execute our business strategy and business plan, and to manage our employees, independent contractors, consultants and vendors. Certain of our senior executives have limited public company experience. Any of our senior executives, managers and employees can terminate his or her employment relationship at any time, and the loss of the services of such individuals could have a material adverse effect on our ability to execute our business plan and otherwise have a material adverse effect on our business, financial condition and results of operations.

We may incur substantial operating and net losses due to substantial expenditures.

Since the commencement of our current operations, we have invested significant time and expense towards developing our products, technology and services in order to capitalize on current market opportunities. If we are successful at raising additional capital, we intend to increase our operating expenses and capital expenditures in order to further the development and distribution of our AllDigital Brevity platform and other product offerings. If we are to increase our operating expenses and capital expenditures and are not successful at selling AllDigital Brevity at projected levels, we may incur substantial operating and net losses in the foreseeable future. There can be no assurance that we will achieve or sustain profitability or positive cash flow from our operations.

Our resources may not be sufficient to manage our expected growth; failure to properly manage our potential growth would be detrimental to our business.

We may fail to adequately manage our anticipated future growth. Any growth in our operations will place a significant strain on our administrative, financial and operational resources. It will also increase demands on our management and on our operational and administrative systems, controls and other resources. Our existing personnel, systems, procedures and controls may be inadequate to support our operations in the future, such that we will be unable to successfully implement appropriate measures consistent with our growth strategy. As part of any growth, we may have to implement new operational and financial systems, procedures and controls to expand, train and manage our employee base and maintain close coordination among our technical, accounting, finance, marketing and sales staff. We may be unable to do this. To the extent we acquire or merge with other businesses, we will also need to integrate and assimilate new operations, technologies and personnel. We may not have the experience or resources to do this. If we are unable to adequately manage future growth, our operating results may suffer.

Because our technology, products, platform, and services are complex and are deployed in and across complex environments, they may have errors or defects that could seriously harm our business.

Our technology, products, platform, and services are highly complex and are designed to operate in and across data centers, numerous large and complex networks, and other elements of the digital broadcasting workflow that we do not own or control. From time to time, we have needed to correct errors and defects in our software. In the future, there may be additional errors and defects in our software that may adversely affect our services. We may not have in place adequate quality assurance procedures to ensure that we detect errors in our software in a timely manner. If we are unable to efficiently and cost-effectively fix errors or other problems that may be identified, or if there are unidentified errors that allow persons to improperly access our services, we could experience loss of revenues and market share, damage to our reputation, increased expenses and legal actions by our customers.

We may have insufficient transmission and server capacity, which could result in interruptions in our services and loss of revenues.

Our operations are dependent in part upon transmission capacity provided by third-party telecommunications network providers. In addition, our distributed network must be sufficiently robust to handle all of our customers’ web-traffic, particularly in the event of unexpected surges in high-definition video traffic. We may not be adequately prepared for unexpected increases in bandwidth demands by our customers. In addition, the bandwidth we have contracted to purchase may become unavailable for a variety of reasons, including payment disputes or network providers going out of business. Any failure of these network providers to provide the capacity we require, due to financial or other reasons, may result in a reduction in, or interruption of, service to our customers, leading to an immediate decline in revenue and possible additional decline in revenue as a result of subsequent customer losses.

We may have insufficient human resources in software development, project management, quality control to manage large customer projects.

Our operations are dependent in part upon the availability of adequate human resources to manage and develop our various platforms, including AllDigital Brevity and AllDigital Cloud, and specific customer development projects. We may not be adequately prepared for unexpected increases in integration service development efforts required by prospective or existing customers. Software development is a human resource intensive process in an increasingly competitive environment for talented people, a lack (or loss) of which could result in an immediate decline in revenue and possible additional decline in revenue as a result of subsequent customer losses. The loss of developers and related staff can also create delays in providing development services to our customers also potentially resulting in a loss of revenue.

We do not have sufficient capital to engage in material research and development, which may harm our long term growth.

In light of our limited capital, we have made no material investments in research and development over the past several years. This may conserve capital in the short term. In the long term, as a result of our failure to invest in research and development, our technology and product offerings may not keep pace with the market and we may lose any existing competitive advantage. Over the long term, this may harm our revenue growth and our ability to become profitable.

We may acquire businesses or assets, or enter into other business combination transactions, that may be difficult to integrate.

As part of our growth strategy, we plan to enter into transactions to acquire companies or a portion of their assets, or to combine our business with theirs. These acquisitions or business combinations involve numerous risks, including each of the following:

●

that the combined entity will not perform as well as the separate businesses performed prior to the transaction;

	●	that anticipated cost savings, cross-marketing to new customers or other anticipated synergies will not be achieved;

	●	that management resources will be diverted towards negotiating and effecting the acquisition and then integrating the operations and personnel of the acquired business, instead of focusing on our existing business plan and operations;

	●	that the stock and/or other consideration paid in the transaction will exceed the value of the assets or business acquired;

	●	that the use of cash as consideration for the transaction will reduce cash that may be needed for operations below necessary levels;

	●	that if we enter into a transaction, such transaction may delay our ability to raise needed capital on a stand-alone basis while the transaction is underway and not yet consummated, and/or impair the combined company’s ability to raise capital in the event the transaction is consummated, and/or accelerate our need for capital as a combined company in the event the transaction is consummated, and the terms of any such capital raise may be onerous, if we are even successful at being able to raise needed capital;

	●	that we may be assuming potential unknown liabilities of the acquired business; and

	●	that if we do not consummate such a transaction, we will have expended substantial costs and resources without achieving the anticipated benefit.

Acquisitions or business combinations (or attempted transactions) could have an adverse, rather than a positive, effect on our business, operations and financial results for the reasons set forth above or otherwise.

The markets in which we operate are rapidly emerging, and we may be unable to compete successfully against existing or future competitors to our business.

The markets in which we operate are becoming increasingly competitive. Our current competitors generally include software developers, who offer digital media workflow solutions, transcoding, and high-speed file transfer services, operators within the digital media stack, who offer subcomponents of our digital broadcasting solutions (e.g., CDN providers, CMS companies, hosting, utility computing companies), or integrators and vertical solution providers who develop single implementations of content or digital media distribution, and related digital services, to a target device platform. These competitors, including future new competitors that may emerge, may be able to develop a comparable or superior platform, and/or technology stack, and/or series of products and services that provide a similar or more robust set of features and functionality than the technology, products and services we offer. If this occurs, we may be unable to grow as necessary to make our business profitable.

Regardless of whether we have superior products, many of these current and potential future competitors have a longer operating history in their current respective business areas and greater market presence, brand recognition, engineering and marketing capabilities, and financial, technological and personnel resources than we do. Existing and potential competitors with an extended operating history, even if not directly related to our business, have an inherent marketing advantage because of the reluctance of many potential customers to entrust key operations to a company that may be perceived as unproven. In addition, our existing and potential future competitors may be able to use their extensive resources:

●

to develop and deploy new products and services more quickly and effectively than we can;

	●	to develop, improve and expand their platforms and related infrastructures more quickly than we can;

	●	to reduce costs, particularly transport, storage and processing costs, because of discounts associated with large volume purchases;

	●	to offer less expensive products, technology, platform, and services as a result of a lower cost structure, greater capital reserves or otherwise;

	●	to adapt more swiftly and completely to new or emerging technologies and changes in customer requirements;

	●	to offer bundles of related services that we are unable to offer;

	●	to attract and retain qualified staff more effectively than we can;

	●	to take advantage of acquisition and other opportunities more readily; and

	●	to devote greater resources to the marketing and sales of their products, technology, platform, and services.

If we are unable to compete effectively in our various markets, or if competitive pressures place downward pressure on the prices at which we offer our products and services, our business, financial condition and results of operations may suffer.

Our networks handle personal data, and we may be subject to liability for any loss of such data.

As part of our product offering, we facilitate the billing by our customers of their end customers, including end customers that may purchase products using credit cards or otherwise provide personal financial and other information over our network. Unauthorized access to our platform and underlying infrastructure, including certain servers for example, may jeopardize the security of the personal information stored in our computer systems and our customers’ computer systems. If this occurs, we may be liable to our customers beyond any insured levels, which on its own or combined with the potential loss of current customers or future customers as a result of the reputational harm associated with such a breach could have a material adverse effect on our business, financial condition and results of operations.

Our business operations are susceptible to interruptions caused by events beyond our control.

Our business operations are susceptible to interruptions caused by events beyond our control. We are vulnerable to the following potential problems, among others:

●

Our platform, technology, products, and services and underlying infrastructure, or that of our key suppliers, may be damaged or destroyed by events beyond our control, such as fires, earthquakes, floods, power outages or telecommunications failures. Our operations are particularly susceptible to interruption from any of the foregoing because many of our servers and much of our infrastructure is located in Southern California, which is prone to the occurrence of the foregoing events.

	●	We and our customers and/or partners may experience interruptions in service as a result of the accidental or malicious actions of Internet users, hackers or current or former employees.

	●	We may face liability for transmitting viruses to third parties that damage or impair their access to computer networks, programs, data or information. Eliminating computer viruses and alleviating other security problems may require interruptions, delays or cessation of service to our customers.

	●	Failure of our systems or those of our suppliers may disrupt service to our customers (and from our customers to their customers), which could materially impact our operations (and the operations of our customers), adversely affect our relationships with our customers and lead to lawsuits and contingent liability.

The occurrence of any of the foregoing could result in claims for consequential and other damages, significant repair and recovery expenses and extensive customer losses and otherwise have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Intellectual Property

If the protection of our intellectual property is inadequate, our competitors may gain access to our technology, and our business may suffer.

We acquired two patents in connection with our purchase of the assets of Brevity Ventures, Inc. These patents secure our rights to specific processes and underlying algorithms that differentiate AllDigital Brevity from other competitive offerings. Our inability to protect and defend these patents could have a material adverse impact upon our business, including our ability to reach cash flow profitability.

For products and services other than AllDigital Brevity, we depend on our ability to develop and maintain certain proprietary aspects of our products and services. To protect these proprietary products and services, we rely primarily on a combination of contractual provisions, confidentiality procedures, trade secrets and common law copyright and trademark principles. Adequate protection of our intellectual property is subject to the following risks:

	●	We have not applied for a copyright registration or patents with respect to our proprietary rights, and, as a result, we may have limited legal recourse against others who use our technology or similar technology.

	●	Our claims of proprietary ownership (and related common law copyright assertions) may be challenged or otherwise fail to provide us with the ability to prevent others from copying our technology.

	●	Our existing trademarks or any future trademarks may be canceled or otherwise fail to provide meaningful protection.

	●	Counterparties to nondisclosure agreements disclose or use our intellectual property in breach of governing agreements, and our ability to prevent or obtain damages for such breach may be limited by our financial situation, legal restrictions or other issues.

	●	If we use open source technology, with or without our knowledge, we may become subject to “copyleft” agreements requiring us to license proprietary technology to third parties.

Despite our efforts to protect our proprietary products, technology, platform, and services, unauthorized parties may attempt to copy, obtain or use certain aspects of it for their own benefit or for purposes of damaging our business or reputation. Policing unauthorized use of our products, technology, platform, and services is difficult, and although we are unable to determine the extent to which piracy of our products, technology, platform, and services exists, we expect software piracy to be an ongoing problem.

Third party claims that we infringe upon their intellectual property rights could be costly to defend and/or settle.

Litigation regarding intellectual property rights is common in the Internet and software industries. We expect that Internet technologies and software products and services may be increasingly subject to third-party infringement claims as the number of competitors in our industry grows and the functionality of products, technology, platform, and services in different industry segments overlaps. We may from time to time encounter disputes over rights and obligations concerning intellectual property that we developed ourselves, use or license from third parties, including open source software. Third parties may bring claims of infringement against us, which may be with or without merit. We could be required, as a result of an intellectual property dispute, to do one or more of the following:

	●	cease selling, incorporating or using services, technology, platform or products that rely upon the disputed intellectual property;

	●	obtain from the holder of the intellectual property a license to sell or use the disputed intellectual property, which license may not be available on terms acceptable to us or at all;

	●	redesign services, technology, products, platform or portions of services, technology or products, that incorporate disputed intellectual property;

	●	pay increased license fees for certain implementations of open source or other third party software licenses which were not anticipated under an existing license or agreement; and

	●	pay monetary damages to the third party adjudged to be the rightful holder of the intellectual property right.

The occurrence of any of these events could result in substantial costs and diversion of resources or could severely limit the products and/or services we offer, which may seriously harm our business, operating results and financial condition.

In addition, we have agreed, and may agree in the future, to indemnify certain of our customers against claims that our products, technology or services infringe upon the intellectual property rights of others. We could incur substantial costs in defending our customers against infringement claims and ultimately be required to pay substantial monetary damages attributable to the indemnification of our customers in the event of a successful claim of infringement against us or them.

We may be subject to legal liability for providing third-party content.

We have certain arrangements to offer third-party content via certain of our customers’ websites. We may be subject to claims concerning this content by virtue of our involvement in marketing, branding, broadcasting or providing access to it, even if we do not ourselves directly host, operate or provide access to these products, services, content or advertising. While our agreements with these parties most often provide that we will be indemnified against such liabilities, such indemnification may not be adequate or available. Investigating and defending any of these types of claims can be expensive, even if the claims do not result in liability. While to date we have not been subject to material claims, if any potential claims do result in liability, we could be required to pay damages or other penalties, or result in other adverse impacts to our business, which could harm our operating results and financial condition.

Risks Related to Our Industry

Certain of our service delivery and content handling services are subject to industry regulations, standards, certifications and/or approvals.

The commercialization of certain of the service delivery and content handling services we provide at times require or are made more costly due to industry acceptance and regulatory processes, such as ISO certification and strict content security handling standards, including rights management and other requirements mandated by media and entertainment studios. If we are unable to obtain or retain these or other formal and informal studio approvals for particular digital service implementations, certifications and standards compliance in a timely manner, or at all, our operating results could be adversely affected.

General global market and economic conditions may have an adverse impact on our operating performance and results of operations.

Our business has been and could continue to be affected by general global economic and market conditions. Weakness in the United States and worldwide economy has had and could continue to have a negative effect on our operating results, including a decrease in revenue and operating cash flow. To the extent our customers are unable to profitably monetize the digital services and content we deliver on their behalf, they may reduce or eliminate their purchase of our products and services. Such reductions in traffic would lead to a reduction in our revenues. Additionally, in a down-cycle economic environment, we may experience the negative effects of increased competitive pricing pressure, customer loss, slowdown in commerce over the Internet and corresponding decrease in traffic delivered over our network and failures by our customers to pay amounts owed to us on a timely basis or at all. Suppliers on which we rely for servers, bandwidth, co-location and other services could also be negatively impacted by economic conditions that, in turn, could have a negative impact on our operations or revenues. Flat or worsening economic conditions may harm our operating results and financial condition.

The market for digital broadcasting solutions may not grow at a pace that we anticipated or at levels that allow us to continue to grow.

The market for digital broadcasting solutions is relatively new and evolving. As a result, we cannot be certain that a viable market for our products and services will be sustainable. Factors that may inhibit the growth of this market include:

●

our customers may limit their distribution of digital media and related digital services to devices because of issues related to protection of copyrights, media and entertainment company studio approvals related to content protection, royalty payments to artists and publishers, illegal copying and distribution of data and other intellectual property rights issues;

	●	congestion of data networks, or consumer reluctance to purchase high-speed Internet connectivity for their device, may limit the growth of the distribution of content and related digital services to devices;

	●	consumers may determine not to view or access digital services on their devices because of, among other factors, poor reception of the broadcast or other delivery of the services, or the creation or expansion of competing technologies, that provide a similar service at lower cost or with better features; and

	●	new laws and regulations may negatively affect consumers’ and businesses’ use of the Internet or devices, thereby reducing demand.

If the market for digital broadcasting solutions does not continue to grow, or grows more slowly than expected, our business, results of operations and financial condition will be significantly harmed.

Risks Related to Our Capital Stock and Capitalization

We cannot predict the extent to which an active public trading market for our common stock will develop or be sustained. If a public trading market does not develop or cannot be sustained, you may be unable to liquidate your investment in AllDigital.

We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares of common stock until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a public trading market for our common stock will be sustained. If such a market cannot be sustained, you may be unable to liquidate your investment in AllDigital.

In addition, the market price for our common stock may be particularly volatile given our status as a relatively small company with a small and thinly-traded “public float” that could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.

Our common stock may be subject to significant price volatility which may have an adverse effect on your ability to liquidate your investment in our common stock.

The market for our common stock may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number of factors. First, our common shares may be sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price. Secondly, an investment in us is a speculative or “risky” investment due to our lack of meaningful revenues or any profits to date and uncertainty of future market acceptance for current and potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.

We are subject to various regulatory requirements, and may be adversely affected by inquiries, investigations and allegations that we have not complied with governing rules and laws.

In light of our status as a public company and the early stage of our business, we are subject to a variety of laws and regulatory requirements in addition to those applicable to all businesses generally. For example, we are subject to the reporting requirements applicable to United States reporting issuers, such as the Sarbanes-Oxley Act of 2002, and certain state and provincial securities laws. In addition, because we are in an early stage of development and intend on issuing securities to raise capital and use acquisitions for growth, our actions will be governed by state and federal securities laws and laws governing the issuance of securities, which are complex. In connection with such laws, we may be subject to periodic audits, inquiries and investigations. Any such audits, inquiries and investigations may divert considerable financial and human resources and adversely affect the execution of our business plan.

Through such audits, inquiries and investigations, a regulator or we may determine that we are out of compliance with one or more governing rules or laws. Remedying such non-compliance diverts additional financial and human resources. In addition, in the future, we may be subject to a formal charge or determination that we have materially violated a governing law, rule or regulation. We may also be subject to lawsuits as a result of alleged violation of the securities laws or governing corporate laws. Any charge or allegation, and particularly any determination, that we had materially violated a governing law would harm our ability to enter into business relationships, recruit qualified officers and employees and raise capital.

The market price of our common stock may be harmed by our need to raise capital.

We need to raise additional capital in the near future and expect to raise such capital through the issuance of equity and equity-linked securities including common stock, preferred stock, warrants and convertible debt. Because securities in private placements and other transactions by a company are often sold at a discount to market prices, this need to raise additional capital may harm the market price of our common stock, to the extent that a market develops. In addition, the re-sale of securities issued in such capital-raising transactions, whether under Rule 144 or otherwise, may harm the market price of our common stock.

Our ability to issue preferred stock and additional shares of common stock may significantly dilute ownership and voting power, negatively affect the price of our common stock and inhibit hostile takeovers.

Under our Articles of Incorporation, we are authorized to issue up to 10,000,000 shares of preferred stock and 90,000,000 shares of common stock without seeking stockholder approval. Any issuance of preferred stock or additional shares of common stock would dilute the ownership and voting power of existing holders of our common stock and may have a negative effect on the price of our common stock. The issuance of preferred stock without stockholder approval may also be used by management to stop or delay a change of control, or might discourage third parties from seeking a change of control of our company, even though some stockholders or potential investors may view possible takeover attempts as potentially beneficial to our stockholders.

Our common stock is a “low-priced stock” and subject to regulations that limits or restricts the potential market for our stock.

Shares of our common stock are “low-priced” or “penny stock,” resulting in increased risks to our investors and certain requirements being imposed on some brokers who execute transactions in our common stock. In general, a low-priced stock is an equity security that is:

	●	priced under five dollars;

	●	not traded on a national stock exchange, such as NASDAQ or the NYSE;

	●	issued by a company that has less than $5 million in net tangible assets (if it has been in business less than three years) or has less than $2 million in net tangible assets (if it has been in business for at least three years); and

	●	issued by a company that has average revenues of less than $6 million for the past three years.

We believe that our common stock is presently a “penny stock.” At any time the common stock qualifies as a penny stock, the following requirements, among others, will generally apply:

	●	Certain broker-dealers who recommend penny stock to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to a transaction prior to sale.

	●	Prior to executing any transaction involving a penny stock, certain broker-dealers must deliver to certain purchasers a disclosure schedule explaining the risks involved in owning penny stock, the broker-dealer’s duties to the customer, a toll-free telephone number for inquiries about the broker-dealer’s disciplinary history and the customer’s rights and remedies in case of fraud or abuse in the sale.

	●	In connection with the execution of any transaction involving a penny stock, certain broker-dealers must deliver to certain purchasers the following:

	●	bid and offer price quotes and volume information;

	●	the broker-dealer’s compensation for the trade;

	●	the compensation received by certain salespersons for the trade;

	●	monthly account statements; and

	●	a written statement of the customer’s financial situation and investment goals.

We have never paid, and do not intend to pay in the future, dividends on our common stock.

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. It is unlikely that investors will derive any current income from ownership of our stock. This means that the potential for economic gain from ownership of our stock depends on appreciation of our stock price and will only be realized by a sale of the stock at a price higher than the purchase price.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate headquarters are located in Irvine, California in a leased facility of approximately 3,769 square feet. This facility contains all of our operations, including sales and marketing, finance, administration, and software development. The facility is leased under a non-cancelable operating lease agreement expiring December 31, 2017, with possible renewal upon the agreement of both parties at the current market rate. Monthly rent will be $3,731 through December 31, 2015, and will increase to $6,407 and $6,784 on January 1, 2016 and January 1, 2017, respectively.

We believe this facility is adequate for our anticipated business purposes for the foreseeable future. We have leased servers in colocation facilities in Denver, Colorado and Irvine, California.

Item 3. Legal Proceedings

We are subject to legal proceedings, claims and litigation arising in the ordinary course of business. While the amounts claimed may be substantial, the ultimate liability cannot presently be determined because of considerable uncertainties that exist. Therefore, it is possible that the outcome of those legal proceedings, claims and litigation could adversely affect our quarterly or annual operating results or cash flows when resolved in a future period. However, based on facts currently available, management believes such matters will not adversely affect in any material respect our financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities

Market Information

Our common stock is quoted on the OTC Bulletin Board under the symbol “ADGL.” The table below sets forth the high and low bid quotations for our common stock as reported on the OTC Bulletin Board for the periods indicated.

	Price Range
	High		Low
Fiscal Year Ended December 31, 2014
Quarter ended March 31, 2014	$	0.40	$	0.12
Quarter ended June 30, 2014	$	0.23	$	0.10
Quarter ended September 30, 2014	$	0.13	$	0.07
Quarter ended December 31, 2014	$	0.11	$	0.05

Fiscal Year Ended December 31, 2013
Quarter ended March 31, 2013	$	1.01	$	0.18
Quarter ended June 30, 2013	$	0.20	$	0.11
Quarter ended September 30, 2013	$	0.17	$	0.10
Quarter ended December 31, 2013	$	0.48	$	0.10

The quotations set forth above reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.

Security Holders

As of April 17, 2015, we had 38,254,959 shares of common stock outstanding held by 117 owners of record, with an owner of record defined as a security holder, an institution holding common stock on behalf of one or many security holders, and partnerships, trusts, and other investment structures that hold shares on behalf of security holders.

Dividends

We have not paid dividends on our common stock to date. We currently intend to retain future earnings, if any, to fund our operations and the development and growth of our business and, therefore, do not anticipate paying cash dividends on our common stock within the foreseeable future. Any future payment of dividends on our common stock will be determined by our board of directors and will depend on our financial condition, results of operations, contractual obligations and other factors deemed relevant by our board of directors.

Equity Compensation Plan Information

The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under all of our only existing equity compensation plan as of December 31, 2014.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options,		Number of securities remaining available for future issuance under equity compensation plans (excluding securities
Plan Category	(a)		warrants and rights		reflected in column (a))
Equity compensation plans approved by security holders:
2011 Stock Incentive Plan (1)		7,650,364	$	0.13		1,059,636
Total		7,650,364	$	0.13		1,059,636

(1)

The AllDigital Holdings, Inc. Amended and Restated 2011 Stock Incentive Plan, or 2011 Plan, is administered by our Board of Directors and provides for the granting of securities to employees, officers, directors and our other service providers. Our stockholders have approved the 2011 Plan.

Recent Sales of Unregistered Securities

Not Applicable.

Item 6. Selected Financial Data

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion contains statements that constitute forward-looking statements. Such statements can be identified by the use of the forward-looking words “anticipate,” “estimate,” “project,” “likely,” “believe,” “intend”, “expect” “will” or similar words. When considering such forward-looking statements, you should keep in mind the risk factors noted in the section of this Report entitled “Risk Factors” and other cautionary statements throughout this Report. You should also keep in mind that all forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. The forward-looking statements and associated risks may include, relate to or be qualified by other important factors, including, without limitation: our business strategy for expanding, maintaining or contracting our presence in these markets and anticipated trends in our financial condition and results of operations We do not undertake to update, revise or correct any forward-looking statements. Any of the factors described above, elsewhere in this Report or in the “Risk Factors” section of this Report could cause our financial results, including our net income or loss or growth in net income or loss to differ materially from prior results, which in turn could, among other things, cause the price of our common stock to fluctuate substantially.

Overview of our Business

Our business faced a number of challenges in 2014 that impacted our financial results. From late 2013 through the first quarter of 2014, we experienced a significant business interruption due, in part, to the turnover of numerous key employees, including project managers, developers, and certain executives, which inhibited our ability to focus on new sales opportunities. In an effort to stabilize our company and quickly return it to more normal business levels, we added more expensive contract resources which, combined with lower sales, significantly impacted our overall profitability through the end of the second quarter when our operations returned to more normal business levels. Our business experienced a further setback in August 2014 with the unexpected passing of our CEO and co-founder, Paul Summers.

In the fourth quarter of 2014, we raised $750,000 through the issuance and sale of an aggregate of $750,000 in principal of our 5% Senior Secured Convertible Notes, or Notes. We used $400,000 of the proceeds in October 2014 to purchase the assets out of bankruptcy of Brevity Ventures, Inc, the company that founded and developed Brevity, a software and hardware based service that transcodes digital video files to multiple formats and to multiple destinations while transporting them at super-accelerated speeds over the Internet. Our purchase included hardware and various intangible assets largely comprised of software code and two related patents that secure our rights to specific processes and underlying algorithms that differentiate it from other competitive offerings. We rebranded this offering as AllDigital Brevity.

We have invested substantial resources into further developing and enhancing the AllDigital Brevity code in order to bring it to market. By January 2015 we put a direct sales team in-place and announced the global launch of AllDigital Brevity. We will require additional working capital to complete our development of a highly scalable and multitenant variant of AllDigital Brevity, which we believe will serve as our platform for recurring revenue growth and cash flow profitability in the future.

Results of Operations

The following selected financial information should be read in conjunction with our consolidated financial statements and notes to our consolidated financial statements included elsewhere in this Report, and the other sections of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this Report.

The tables presented below, which compare our results of operations from one period to another, present the results for each period and the change in those results from one period to another in both dollars and percentage change. The first two data columns in each table show the dollar results for each period presented.

The columns entitled “Dollar variance” and “% variance” show the change in results, both in dollars and percentages. These two columns show favorable changes as positive and unfavorable changes as negative. For example, when net sales increase from one period to the next, that change is shown as a positive number in both columns. Conversely, when expenses increase from one period to the next, that change is shown as a negative in both columns.

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

	For the years ended December 31,						Dollar variance favorable (unfavorable)			% variance favorable (unfavorable)
	2014			2013
Net sales	$	3,841,767		$	4,327,227		$	(485,460	)		(11.2	)%
Cost of sales		2,713,074			2,505,925			(207,149	)		(8.3	)%
Gross profit		1,128,693			1,821,302			(692,609	)		(38.0	)%
Operating expenses:
Selling, marketing and advertising		642,799			537,496			(105,303	)		(19.6	)%
General and administrative		2,362,449			1,898,493			(463,956	)		(24.4	)%
Total operating expenses		3,005,248			2,435,989			(569,259	)		(23.4	)%
Loss from continuing operations		(1,876,555	)		(614,687	)		(1,261,868	)		(205.3	)%
Other income (expense):
Interest income		754			728			26			3.6	%
Interest expense		(16,103	)		(636	)		(15,467	)		(2,431.9	)%
Other income		35,381			63,884			(28,503	)		(44.6	)%
Other income (expense)		20,032			63,976			(43,944	)		(68.7	)%

Loss before provision for income taxes		(1,856,523	)		(550,711	)		(1,305,812	)		(237.1	)%
Provision for income taxes		2,400			1,600			800			(50.0	)%
Net Loss	$	(1,858,923	)	$	(552,311	)	$	(1,306,612	)		(236.6	)%

Net Sales. Net sales decreased by $485,460, or 11% in 2014 as compared to 2013 due to changes in our customer mix, resulting from net declines in total nonrecurring and deferred revenue recognized for the year of $262,654 and $351,305, respectively, and a net decline in recurring revenue for the year of $222,806. The net decrease in recurring revenue for the year includes our loss of $478,188 in recurring revenue attributed to one customer that receives outsourced data center management services from us, a legacy service offering that has low margins and that is not core to the business of providing digital broadcast solutions. Approximately 53% of the annual recurring revenue associated with this one customer was recovered through new incremental business that has higher margins and that is core to the business. Nonrecurring revenue declined due to a significant business interruption (“business interruption”) experienced during late 2013 and early 2014, in part, due to the turnover of numerous employees including project managers, developers, and certain executives, inhibiting the ability to focus on new sales opportunities. Deferred revenue declined in the absence of new development projects as we focused our development resources on completing longer-term projects that were already under contract. Our sales activity started to recover from the business interruption by late second quarter 2014.

Cost of Sales. Cost of sales increased by $207,149 or 8%, in 2014 as compared to 2013 due to the following expense increases: $196,064 in third party contracted resources (for AllDigital Integration projects), $81,017 in data center and facilities operating costs (principally related to AllDigital Cloud hosting capacity), which includes $64,558 in operating lease expense for related data center equipment, and $16,459 in other data center-related charges. The net change in Cost of Sales includes a $69,932 decrease in salary expense associated with the ongoing development of AllDigital Brevity and AllDigital Cloud, which we record as a Research and development expense.

Gross Profit. We recorded a gross profit of $1,128,693 in 2014, a decrease of $692,609, or 38%, compared to a gross profit of $1,821,302 in 2013. The decrease in gross profit resulted from a $207,149 increase in cost of sales and a $485,460 decrease in net sales.

Selling, Marketing and Advertising Expenses. Selling, marketing and advertising expenses increased $105,303 or 20% in 2014 compared to 2013. The increase resulted from increases in salary expense ($10,414), outside services ($70,660), advertising expense ($12,679), and travel-related expenses ($11,550). These expenses were in large part incurred shortly after the business interruption to return us to more normal sales levels.

General and Administrative Expenses. General and Administrative expenses increased by $463,956 or 24% in 2014 compared to 2013. The net increase was primarily attributed to the following expense increases: Salary expense ($224,742), which includes a one-time charge of $157,187 for salary and benefits continuance, and $67,555 in research and development expense related to the ongoing internal development of AllDigital Brevity and AllDigital Cloud; Legal expense ($171,543), which includes $95,034 in one-time charges related to purchasing the assets of Brevity Ventures, Inc.; and a net increase of $67,671 from the other General and administrative expense categories reflected in the table below.

The table below shows each type of General and Administrative expense total in 2014 compared to that incurred in the prior year, with the amount of increase or (decrease) and the percentage increase (decrease).

	2014		2013		Difference ($)		Change (%)
Salary & Expense	$	1,207,911	$	983,169	$	224,742		22.9	%
Legal Fees		357,476		185,933		171,543		92.3	%
Rent		130,247		129,374		873		0.7	%
Accounting Fees		73,232		105,823		-32,591		-30.8	%
Consulting/Outside Services		104,599		91,431		13,168		14.4	%
Office Expenses/Supplies		61,368		68,582		-7,215		-10.5	%
Depreciation and Amortization Expense		78,178		55,370		22,808		41.2	%
Business Insurance		58,557		48,458		10,098		20.8	%
Recruiting		12,827		45,693		-32,865		-71.9	%
Travel & Entertainment		26,905		35,624		-8,719		-24.5	%
Public Reporting		61,028		24,258		36,770		151.6	%
Utilities		29,394		22,091		7,303		33.1	%
Phone		19,588		21,500		-1,912		-8.9	%
Other G&A Expenses		141,138		81,187		59,951		73.8	%
Total General & Administrative	$	2,362,449	$	1,898,492	$	463,956		24.4	%

Other Income. Other income decreased by $43,944, or 69%, in 2014 compared to 2013. In 2014 Other income ($20,032) was comprised of a $46,765 favorable financial settlement with a former supplier, and an offset of $21,595 of prepaid cost for software that was determined to be without value. In 2013 Other income ($63,976) was comprised of a settlement with a former customer.

Liquidity and Capital Resources

In 2014, we funded our operations primarily with cash provided from the sale of Common Stock and Secured Convertible Notes. Working capital as of December 31, 2014 and December 31, 2013 was $55,968 and $918,330, respectively. We had accumulated losses of $4,832,476 and $2,973,553 at December 31, 2014 and December 31, 2013, respectively. Our available capital resources at December 31, 2014, consisted primarily of $485,761 in cash and cash equivalents. As of December 31, 2014, we had current assets of $897,891, including $485,761 in cash and cash equivalents.

In October and November 2014, we raised $750,000 through the sale of an aggregate of $750,000 in principal of our 5% Senior Secured Convertible Notes, or Notes. The Notes are convertible at a conversion price of $0.15 per share into an aggregate of up to 5,000,000 shares of our common stock. The Notes are secured by all of our assets. We used $400,000 of the proceeds from the sale of the Notes to acquire the assets of Brevity Ventures, Inc. and anticipate using the remaining proceeds for working capital purposes. In February 2015 we received $230,000 from the sale of $230,000 in principal of Notes, and in February 2015 and April 2015, we sold $135,000 and $28,461, respectively, in principal of Notes to two of our vendors in a non—cash transaction, which resulted in the aggregate pay down of $163,461 in trade payables that were owed as of December 31, 2014. We expect that our future available capital resources will consist primarily of cash on hand, cash generated from our business, if any, and future debt and/or equity financings, if any.

Cash decreased $815,171 from $1,300,932 at December 31, 2013 to $485,761 at December 31, 2014, due primarily to the net cash used in operating activities of $1,520,039 during 2014. A net loss of $1,858,923 was the largest component of net cash used in operating activities for the period. This loss was offset by non-cash expenses during the period, including $78,178 for depreciation and amortization, $121,480 for stock based compensation, $128,027 in common stock issued to service providers, $93,457 in accounts receivable, and $245,129 in accounts payable and accrued expenses. Net cash used in operating activities also reflected a increase of $2,323 in prepaid expenses and other current assets, and a decrease of $351,305 in deferred revenue.

Cash used in investing activities in 2014 was $442,467, which included purchased acquisitions of property and equipment ($78,052), and purchased intangibles ($364,415). Cash of $1,147,336 was provided by financing activities in 2014, comprised of $412,500 raised in May 2014 in connection with the sale of shares of our common stock to two accredited investors, ($15,164) attributable to the financing of purchased property and equipment through capital leases, and $750,000 raised in October and November 2014 in connection with the sale of 5% secured convertible notes through our Note offering.

Our future success depends, in part, upon our ability to manage our expanded business after acquiring substantially all of the assets of Brevity Ventures, Inc. in October 2014. Our acquisition may pose substantial challenges for management, including challenges related to integrating, selling, implementing, and supporting the service offering. There can be no assurances that we will realize the expected operating efficiencies, revenue enhancements or other benefits currently anticipated as a result of our acquisition.

We monitor our financial resources on an ongoing basis and may adjust planned business activities and operations as needed to ensure that we have sufficient operating capital. We evaluate our capital needs, and the availability and cost of capital on an ongoing basis and expect to seek capital when and on such terms as deemed appropriate based upon an assessment of then-current liquidity, capital needs, and the availability and cost of capital. Given our early stage of operations, we do not expect that bank or other institutional debt financing will be available. We expect that any capital we raise will be through the issuance of equity or equity-linked securities (such as warrants, convertible notes or similar securities). We believe that we will be able to obtain financing when and as needed, but may be required to pay a high price for capital. We do not have any commitments to provide capital.

We believe that current and future available working capital resources and revenues generated from operations will be adequate to meet our anticipated working capital and capital expenditure requirements into the third quarter of 2015. Thus, we require additional financing. Our failure to raise capital could prevent our ability to continue as a going concern.

No assurances can be given that we will be successful in obtaining additional financing in the future. Any future financing that we may obtain may cause significant dilution to existing stockholders. Any debt financing or other financing of securities senior to our common stock that we are able to obtain will likely include financial and other covenants that will restrict our flexibility. At a minimum, we expect these covenants to include restrictions on our ability to pay dividends on our common stock. Any failure to comply with these covenants would have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows. See “Risk Factors.”

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

Revenue Recognition

We recognize recurring and nonrecurring service revenue in accordance with the authoritative guidance for revenue recognition, including guidance on revenue arrangements with multiple deliverables. In general, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

Revenue from certain design and development contracts, where a solution is designed, developed or modified to a customer’s specifications, is recognized on a percentage of completion basis in accordance with ASC 605-35 based on the cost-to-cost method, provided such costs can be reasonably estimated. Our revenue recognition practices related to such contracts include: developing an approved budget; comparing actual period costs to the budget as a percentage; recognizing revenue for the period based upon the percentage of actual costs incurred compared to total estimated costs, and; performing monthly budget-actual reviews, updates, and adjustments as needed. The impact on revenues as a result of these revisions is included in the periods in which the revisions are made. For contracts for which we are unable to reasonably estimate total contract costs, we wait until contract completion to recognize the associated revenue.

Nonrecurring revenues also include “on-boarding” professional services that involve the development or integration of a customer’s software application, digital service, system, or Application Programming Interface (“API”) to connect with the AllDigital platform. On-boarding professional services projects are typically of a short duration and smaller revenue amounts. We recognize revenue for on-boarding professional services upon project completion and acceptance.

Monthly recurring revenues are recognized ratably over the period in which they are delivered and earned. We typically charge monthly recurring platform fees, as well as monthly recurring charges for our back-end storage, cloud processing, origin transit, and maintenance and support services. These fees are generally billed based on a minimum commitment plus actual usage basis, and the term of such customer contracts vary typically from 12 to 24 months.

Rarely, a customer contract will include revenue arrangements that consist of multiple product and service deliverables. Such contracts are accounted for in accordance with ASC 605-25, as amended by ASU 2009-13. For our multiple-element arrangements, deliverables are separated into more than one unit of accounting when (i) the delivered element(s) have value to the customer on a stand-alone basis, and (ii) delivery of the undelivered element(s) is probable and substantially in our control. Revenue is then allocated to each unit of accounting based on the estimated selling price determined using a hierarchy of evidence based first on Vendor-Specific Objective Evidence (“VSOE”) if it exists, based next on Third-Party Evidence (“TPE”) if VSOE does not exist, and finally, if both VSOE and TPE do not exist, based on our best estimate of selling price (“BESP”). If deliverables cannot be separated into more than one unit, then we do not recognize revenue until all deliverables have been delivered and accepted.

Accounts Receivable

Accounts receivable are recorded at their face amount less an allowance for doubtful accounts. The allowance for doubtful accounts reflects management’s best estimate of probable losses in the accounts receivable balance. Management determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. The allowance for doubtful accounts was $0 at December 31, 2014 and $10,000 at December 31, 2013. We generally requires a deposit or advance services payments from its customers for certain contracts involving upfront capital investment, on-boarding, or development contracts to facilitate its working capital needs.

Earnings and Loss per Share

We compute net earnings (loss) per share in accordance with ASC 260-10 that establishes standards for computing and presenting net earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

At December 31, 2014, options to purchase 7,440,364 shares of our common stock and warrants to purchase 210,000 shares of our common stock were outstanding. At December 31, 2013, options to purchase 2,070,597 shares of our common stock and warrants to purchase 3,892,274 shares of our common stock were outstanding.

Fair Value of Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value in the accompanying consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level Input:		Input Definition:
Level 1		Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level 2		Inputs, other than quoted prices included in Level 1, that are observable for the asset or liability through corroboration with market data at the measurement date.

Level 3		Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

Assets subject to this classification at December 31, 2014 and December 31, 2013 were cash and cash equivalents that are considered Level 1 assets.

For certain of our financial instruments, including accounts receivable, prepaid expenses, and accounts payable, the carrying amounts approximate fair value due to their short maturities. The carrying amount of our notes payable approximates fair value based on prevailing interest rates.

Income Taxes

We account for income taxes in accordance with ASC 740-10, Income Taxes. We recognize deferred tax assets and liabilities to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. We record a valuation allowance related to a deferred tax asset when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.

ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues.

We follows guidance issued by the FASB with regard to its accounting for uncertainty in income taxes recognized in the financial statements. Such guidance prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be examined by taxing authorities.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Repairs and maintenance of equipment are charged to expense as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows:

Leasehold improvements		shorter of 3 years or remaining useful life
Furniture and fixtures		5 years
Computer equipment		3 years
Software		3 years
Signs		3 years

Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Gains or losses on dispositions of property and equipment are included in the results of operations when realized.

Impairment of Long-Lived and Intangible Assets

We account for long-lived assets, that include property and equipment and identifiable intangible assets with infinite useful lives, in accordance with FASB ASC 350-30, that requires us to review long-lived assets for impairment whenever events or changes in circumstances indicate that we may not recover the carrying amount of an asset. We measure recoverability by comparing the carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If we determine that the asset may not be recoverable, then we recognize an impairment charge to the extent of the difference between the asset’s fair value and the asset’s carrying amount. We had no impairment charges during the twelve months ended December 31, 2014 or 2013.

Stock-Based Compensation

We account for share-based compensation arrangements in accordance with FASB ASC 718, which requires the measurement and recognition of compensation expense for all share-based payment awards to be based on estimated fair values. We use the Black-Scholes option valuation model to estimate the fair value of our stock options at the date of grant. The Black-Scholes option valuation model requires the input of subjective assumptions to calculate the value of stock options. We use historical data among other information to estimate the expected price volatility and the expected forfeiture rate.

Recent Accounting Pronouncements

In August 2014, the FASB issued FASB ASU2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. FASB ASU 2014-15 changes to the disclosure of uncertainties about an entity’s ability to continue as a going concern. Under GAAP, continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Even if an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. Because there is no guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related note disclosures, there is diversity in practice whether, when, and how an entity discloses the relevant conditions and events in its financial statements. As a result, these changes require an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that financial statements are issued. Substantial doubt is defined as an indication that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that financial statements are issued. If management has concluded that substantial doubt exists, then the following disclosures should be made in the financial statements: (i) principal conditions or events that raised the substantial doubt, (ii) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations, (iii) management’s plans that alleviated the initial substantial doubt or, if substantial doubt was not alleviated, management’s plans that are intended to at least mitigate the conditions or events that raise substantial doubt, and (iv) if the latter in (iii) is disclosed, an explicit statement that there is substantial doubt about the entity’s ability to continue as a going concern. These changes become effective for us for the 2016 annual period. Management has determined that the adoption of these changes will not have an impact on the Consolidated Financial Statements. Subsequent to adoption, this guidance will need to be applied by management at the end of each annual period and interim period therein to determine what, if any, impact there will be on the Consolidated Financial Statements in a given reporting period.

In May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2016. Early adoption is not permitted. The revenue recognition standard is required to be applied retrospectively, including any combination of practical expedients as allowed in the standard. We are evaluating the impact, if any, of the adoption of ASU 2014-09 to our financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.

In July 2014, the FASB issued ASU 2014-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (Topic 740). ASU 2014-11 requires that unrecognized tax benefits be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except in certain circumstances. When those circumstances exist, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. We will adopt this guidance effective January 1, 2014. We do not expect the adoption of ASU 2014-11 to significantly impact our consolidated financial statements.

In July 2013, the FASB issued ASU 2014-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (Topic 740). ASU 2014-11 requires that unrecognized tax benefits be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except in certain circumstances. When those circumstances exist, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. We adopted this guidance effective January 1, 2014. We do not expect the adoption of ASU 2014-11 to significantly impact our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data

Reference is made to the consolidated financial statements and accompanying notes included in this report, which begin on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, our principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2014 that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

In light of the material weaknesses described below, additional analyses and other procedures were performed to ensure that our consolidated financial statements included in this Annual Report on Form 10-K were prepared in accordance with GAAP. These measures included expanded year-end closing procedures, the dedication of significant internal resources and reconciliations and management’s own internal reviews and efforts to remediate the material weaknesses in internal control over financial reporting described below. As a result of these measures, management concluded that our consolidated financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows as of the dates, and for the periods, presented in conformity with GAAP.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency (within the meaning of Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5) or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2014 based on the framework in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of management’s assessment and evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2014 our internal control over financial reporting were not effective and identified the following material weaknesses in our internal control over financial reporting as of December 31, 2014:

	●	We have an insufficient quantity of dedicated resources and experienced personnel involved in reviewing and implementing internal controls. As a result, a material misstatement of the interim and annual financial statements could occur and not be prevented or detected on a timely basis.

	●	We have insufficient resources to achieve the optimal level of segregation of duties relative to key financial reporting functions.

	●	Our entire board performs the functions generally performed by an audit committee, and none of the members of our board of directors qualifies as an audit committee financial expert. While not being legally obligated to have an audit committee or independent audit committee financial expert, it is management’s view that to have an audit committee, comprised of independent board members, and an independent audit committee financial expert is an important entity-level control over our financial statements.

	●	We have insufficient resources to achieve an optimal segregation of duties for executive officers of AllDigital.

	●	We did not have sufficient quantity of qualified personnel to manage a timely period-end financial reporting

The foregoing material weaknesses contributed to a delay in the filing of our annual report with the SEC. In addition, these material weaknesses could result in misstatements of our consolidated financial statement accounts and disclosures which would result in material misstatements of future annual or interim consolidated financial statements that would not be prevented or detected on a timely basis.

As a result of these material weaknesses, management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2014, based on the criteria established in the Internal Control — Integrated Framework issued by the COSO.

Our annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting and management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report.

Management'sRemediation Initiatives and Interim Measures

In response to the identified material weaknesses, we have dedicated significant resources to improve our control environment. Management believes that actions taken beginning in December 2014, along with other improvements not yet fully implemented, will address the material weaknesses in our internal control over financial reporting noted above. Our management plans to continue to review and make changes to the overall design of our control environment, including the roles and responsibilities within the organization and reporting structure, as well as policies and procedures to improve the overall internal control over financial reporting. In particular, we have implemented, or plan to implement, the measures described below to remediate the material weaknesses described above.

	●	Assessing the current duties of existing personnel, assigning additional duties to existing personnel, and, in a cost effective manner, potentially hiring additional personnel to assist with the preparation of our financial statements to allow for proper segregation of duties, as well as additional resources for control documentation.

	●	Assessing the duties of our officers, diversifying duties and responsibilities of such executive officers where needed.

	●	Reviewing our internal controls and controls design with outside consultants that are experts in designing internal controls over financial reporting based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (as revised).

	●	Evaluating the composition of the Board of Directors, with particular focus on issues of independence. The Board of Directors will consider nominating an audit committee and audit committee financial expert, which may or may not consist of independent members.

We expect that these improvements and procedures will be substantially implemented by December 31, 2015 and we intend to continue to monitor the effectiveness of these actions and will make changes that management determines are appropriate.

Inherent Limitations on the Effectiveness of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are 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. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control over Financial Reporting

There has been change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), resulting from insufficient resources, during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

The following table sets forth the name, age and position of each of our executive officers and directors as of April 17, 2015:

Name	Age	Position

Michael Linos	56	Chief Executive Officer, President and Director

Steve Smith	47	Vice President of Network Services and Director

Timothy Napoleon	40	Chief Strategist

Brad Eisenstein	44	Chief Financial Officer and Chief Operating Officer

David Williams	51	Director

Mark Walsh	54	Director

Board of Directors

The following paragraphs set forth certain biographical information about our board of directors, including their specific qualifications to serve on our board of directors in light of our business and structure.

Michael Linos was appointed as a Director and Executive Vice President of Sales on Jan 27, 2014, and was subsequently promoted to President on August 15, 2014. On August 29, 2014, we announced the sudden passing of Paul Summers, our then Chief Executive Officer, Chairman of the board of directors, and co-founder. On his passing, our board of directors appointed Mr. Linos, who at the time was our President, to assume the additional duties of Interim Chief Executive Officer. On October 23, 2014, our board of directors appointed Mr. Linos, as President and Chief Executive Officer AllDigital Holdings. Mr. Linos has worked with several technology companies helping them to drive revenue and add significant scale through strategic partnerships and acquisitions. With a broad range of experience in content delivery, enterprise hosting, IP transit and colocation, he has held senior sales and business development positions including Vice President of Business Development at Internap, Executive Vice President of Sales at VitalStream and Vice President of Sales at Verio. Mr. Linos earned his B.S. degree from the University of Daytona and his M.B.A. degree from Northwestern University-Kellogg School of Management.

Steve Smith has served as our Vice President of Network Services and a director since July 2011. Mr. Smith is a co-founder of AllDigital, Inc. and has served as the Vice President of Network Services and a Director of AllDigital, Inc. since September 2009. Mr. Smith has over 25 years of highly specialized experience in a wide variety of storage technologies, hosting applications and digital broadcasting solutions delivery technologies. From October 2006 to September 2009, Mr. Smith was the Founder and President of HCI, which provided specialized technical and security-intensive management services for a variety of Internet-based companies. Prior to HCI, Mr. Smith served as the CTO of VitalStream Holdings, Inc.'s integrated content services business unit, where he worked from 2000 through October 2006. Mr. Smith was appointed as a director in light of his experience in the industry and his knowledge of our business, markets and products.

David Williams has been a director since September 2011. Mr. Williams is presently the president and owner of Advanced Dental Designs, a specialty manufacturer of precision dental equipment, where he has worked since 2009. Prior to this, from 2006 to 2009, he was the Manager of Affiliate Operations for Google, where he oversaw a national team managing 1,600 radio stations as part of Google’s ad network. From 2005 to 2006, Mr. Williams was the Manager of Affiliate Operations at dMarc Broadcasting (which was acquired by Google in 2006). From 2001 to 2005, he was the VP of Operations at VitalStream, where he managed several teams responsible for solutions deployment, customer service and network operations. Before VitalStream, Mr. Williams had co-founded SiteStream along with Mr. Smith; SiteStream was later acquired by VitalStream. Mr. Williams received his M.B.A. in Finance from Wharton Business School and received his B.S. in Business Administration with an accounting major from the University of Southern California. Mr. Williams was appointed as a director in light of his experience in the industry.

Mark Walsh was appointed as a Director on February 12, 2014. He previously held the position of Executive Vice President of Sales and Chief Customer Officer for Hostess Brands, LLC from March 2009 to December 2014. Prior to Hostess Brands, Mr. Walsh worked in numerous international divisions of Pepsico for approximately 20-years in senior executive positions gaining significant experience in global brand building, operations, and sales management. Mr. Walsh earned his B.S. degree from Oregon State University in industrial engineering.

Executive Officers

The following paragraphs set forth certain biographical information about our executive officers (other than Michael Linos and Steve Smith, whose information is provided above):

Brad Eisenstein was appointed as our Chief Financial Officer and Chief Operating Officer on September 8, 2014. Prior to this date he served as our Chief Operating Officer, overseeing our operations and administrative services, initially as a consultant from November 5, 2013 until January 7, 2014 when he became an employee. Mr. Eisenstein returned to consulting for us on August 8, 2014 and was re-hired on September 8, 2014 to his current roles as Chief Financial Officer and Chief Operating Officer. Mr. Eisenstein previously served as Chief Financial Officer of EZE Trucking Holdings, Inc., a private equity backed multi-state specialty hauling and logistics operator with 16 terminals and over 200 employees, from January 2014 to August 2014. From September 2008 to December 2013, he was Chief Financial Officer of TwinMed LLC, a private equity backed nationwide distributor of medical supplies with 9 distribution centers and over 300 employees. From May 2006 to September 2008, he was Chief Financial Officer of Hirsch Pipe & Supply Company, Inc., a distributor of plumbing materials to trade professionals with 17 locations and over 200 employees. From October 2004 to May 2006, he was Corporate Controller of HD Supply White Cap, a nationwide distributor of building materials to professional contractors with more than 165 locations and over 3,000 employees. Prior to joining HD Supply White Cap, he held several senior management positions, including Director of Sales Operations – Enterprise Hosting of XO Communications from January 2000 to October 2004, Director of Sales Operations of Concentric Network Corporation from August 1998 to January 2000, and Site Controller of AnaServe, Inc. from May 1997 to August 1998. Mr. Eisenstein started his career as an auditor with Arthur Andersen LLP, where he worked from 1994 to 1997 and obtained his CPA. He earned his B.S. degree in Accounting from the University of Southern California Leventhal School of Accounting and his M.B.A. degree from the Paul Merage School of Business at the University of California, Irvine.

Timothy Napoleon has served as our Chief Strategist since February 2012. Mr. Napoleon is a co-founder of our company and also served on our board of directors from our inception in August 2009 until January 2014. Prior to AllDigital, Mr. Napoleon was the Chief Strategist, Media and Entertainment, for Akamai Technologies, Inc. (NYSE: AKAM), where he worked from 2005 until August 2009. Prior to Akamai, Mr. Napoleon was the Vice President of Business Development at VitalStream Holdings, Inc., where he worked from 2000 to 2005. Mr. Napoleon is seen as a Digital Media expert with diverse background in architecting digital media products and solutions, and he has held executive level roles in marketing and business development in the online media and entertainment industries for the past decade. Mr. Napoleon earned his B.A. in Communications from the California State University at Fullerton andr his M.B.A. degree from the University of Southern California’s Marshall School of Business.

Corporate Governance

Our board of directors has responsibility for our overall corporate governance and meets regularly throughout the year. Our directors are kept informed of our business through discussions with our executive officers, by reviewing materials provided to them and by participating in meetings of our board of directors and its committees. Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family relationships among our executive officers and directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Our common stock is not registered under Section 12 of the Securities Exchange Act of 1934; as a result, our directors and executive officers are not subject to the requirements of Section 16(a) of the Exchange Act.

Code of Ethics

Our board of directors adopted a Code of Ethics and Conduct in March 2012 that applies to our principal executive officer, principal financial officer and principal accounting officer. The Codes of Ethics, as applied to our principal executive officer, principal financial officer and principal accounting officer constitutes our “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002.

Committees

We do not presently have a standing audit committee, nominating committee or compensation committee, and we do not have a charter for any such committees. Our entire board of directors performs the functions generally performed by such committees.

Audit Committee

Our entire board of directors presently performs the functions generally performed by an audit committee. Our board of directors has determined that David Williams and Mark Walsh are the only members of our board of directors who are “independent” under the NASDAQ Marketplace Rules and that satisfies the other requirements under Securities and Exchange Commission rules regarding audit committee membership. None of the members of our board of directors qualify as an “audit committee financial expert” under applicable Securities and Exchange Commission rules and regulations governing the composition of an audit committee, or satisfies the “financial sophistication” requirements of the NASDAQ Marketplace Rules.

Stockholder Communications with our Board of Directors

Security holders and other interested parties may contact any member or all members of the board of directors by mail. To communicate with the board of directors, any individual director or any group or committee of directors, correspondence should be addressed to the board of directors or any such individual director or group or committee of directors by either name or title. All such correspondence should be sent “c/o Secretary” at 6 Hughes, Suite 200, Irvine California 92618.

All communications received as set forth in the preceding paragraph will be opened by the Secretary for the sole purpose of determining whether the contents represent a message to one or more directors. Any contents that are related to us will be forwarded to the addressees other than content that is (a) unrelated to us, (b) similar to something received from the same sender during the preceding 90 days, (c) in the nature of advertising, promotions of a product or service, or (d) patently offensive material.

Item 11. Executive Compensation

Compensation Processes and Procedures

Because of our early stage of operations and limited resources, our process for determining compensation is informal. We do not have a compensation committee or a compensation committee charter. We have not, and in the near future do not expect to, engage a compensation consultant with respect to compensation. Compensation decisions are made by the entire board of directors, including Michael Linos, our Chief Executive Officer, based upon the board of directors’ subjective determination of what salaries we can afford with our limited resources and what level of equity-based compensation is necessary to attract and retain key personnel. Based upon the subjective knowledge of the industry and other public companies, we believe that our salaries currently in place or proposed for our executive officers are below market. In the future, particularly as we hire outside personnel without significant equity stakes, we expect that the cash portion of the compensation for new, and possibly existing, executives will increase.

Summary Compensation Table

The following table provides information concerning the compensation for the two individuals who served as our principal executive officer during the year ended December 31, 2014 and our two highest paid executive officers who were serving as an executive officer on December 31, 2014. These four individuals are collectively referred to in this Report as the “named executive officers.”

		Salary		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation		All Other Compensation ($)		Total
Name and Principal Position	Year	($)		(4)		(1)		($)(2)		(3)		($)

Paul Summers	2014		103,117		-		-		36,000		22,695		161,812
Former Chief Executive Officer (5)	2013		144,000		-		-		54,000		27,117		225,117

Michael Linos	2014		120,200		540,000		89,812		11,730		14,713		776,455
Chief Executive Officer	2013		-		-		-		-		-		-
President

Timothy Napoleon	2014		144,000		-		89,812		36,000		30,487		300,299
Chief Strategist	2013		144,000		-		-		54,000		28,207		226,207

Steve Smith	2014		144,000		-		89,812		36,000		8,200		278,012
Vice President of Network Services	2013		144,000		-		-		54,000		8,085		206,085

(1) The amounts shown are the aggregate grant date fair values of grants of stock options to the named executive officers pursuant to the provisions of Accounting Standards Codification (“ASC”) 718. For a discussion of valuation assumptions used in ASC 718 calculations, see “Note 7—Stockholders Equity—Stock Options” of the Notes to Financial Statements included in Part IV, Item 15 of our Annual Report on Form 10-K for the year ended December 31, 2014. The options were issued under our 2011 Plan. Information regarding the vesting schedules of options held by our named executive officers is included in the footnotes to the “Outstanding Equity Awards at Fiscal Year-End−2014” table below.

(2) Represents bonuses earned under the executives employment agreement upon achievement of certain performance measures on a quarterly basis.

(3) Represents a reimbursement of standard health insurance costs.

(4) The amounts shown are the aggregate grant date fair values of grants of stock to the named executive officers pursuant to the provisions of Accounting Standards Codification (“ASC”) 718.

(5) Mr. Summers is our former Chief Executive Officer who passed away on August 28, 2014. We owe Mr. Summers’ estate $27,500 in unpaid salary and bonus earned during 2009, 2010 and 2011. This amount will be paid to his estate.

Executive Employment Agreements, Termination of Employment and Change of Control Arrangements

We have entered into employment agreements with each of Mr. Summers, Mr. Napoleon and Mr. Smith as of June 28, 2013, and with Mr. Linos on January 27, 2014, and an Amended and Restated employment agreement that replaces the January 27, 2014 employment agreement on September 8, 2014, which employment agreements have the terms described below. Except as described below, each of the employment agreements is in the same form.

The employment agreements provide for a minimum salary of $144,000 per annum for each of the executive officers. Each executive officer’s base salary will be increased by our Board by an amount not less than the amount obtained by multiplying the executive’s then current base salary by fifteen percent (15%) within sixty (60) days of the date that we first achieve a minimum of cash and accounts receivable of at least $3.5 million.

Pursuant to each employment agreement, each executive officer is also entitled to an annual bonus target opportunity equal to 50% of his base salary upon achievement of certain performance measures on a quarterly basis. In addition, the executive officer is entitled to standard health and other benefits. The executive officer’s employment relationship is “at-will.” The employment agreements include a provision relating to the protection of confidential information, a covenant by the executive officer to work and reside in Orange County, California, a non-competition covenant during the term of his employment and a 12-month non-solicitation covenant. Under the employment agreement, if the executive officer’s employment is terminated by him for good reason, which includes, (a) a material change in the terms and conditions of his employment, (b) a change in the principal place of employment materially increasing his commute time, or (c) any other event that is a functional equivalent of an involuntary termination and which falls within the safe-harbor provisions related to termination for good reason set forth in the regulations implementing Section 409A of the Internal Revenue Code, he is entitled to a severance benefit equal to his base salary and health benefits for one year. “Cause” is defined in the employment agreements to include (a) the employee’s conviction of, or plea of guilty, nolo contendere or the equivalent, in any criminal action involving a felony, (b) the employee’s misappropriation of any of our material funds or property, (c) the employee’s willful misconduct in the performance of his duties for the company, and (c) the employee’s breach of certain covenants set forth in the employment agreement. If the executive officer is terminated by us without cause, he is entitled to a severance benefit equal to his base salary and health benefits for one year. None of the executive officers are entitled to any severance if his employment is terminated at any time by us with cause or by the executive officer without good reason.

Non-Equity Incentive Plans

Under their employment agreements, each of our named executive officers are entitled to an annual bonus target opportunity equal to 50% of their base salary upon achievement of certain corporate-level performance criteria. The criteria are set in advance of each calendar quarter, and an independent director of the board of directors determines following each quarter whether the criteria have been met and bonuses should be paid. Amounts earned in 2014 and 2013 are shown above under the column, “Non-Equity Incentive Plan Compensation”, in the Summary Compensation Table above.

Our board of directors determined that 2014 quarterly bonuses would be given at the broad discretion of the independent director on our board of directors, upon review of our Management Bonus Opportunity, or MBO, programs established with targets related to achievement of current ratio, cash and equivalents, and other performance measures.

The board of directors approved MBO programs for the first, second, and third quarters of 2013 for our four named executive officers. The MBO targets for the first quarter of 2013 were based upon current assets and current ratio targets to be realized at the end of the quarter. The MBO targets for the second and third quarters of 2013 were based upon cash equivalents and current ratio targets to be realized at the end of each quarter. The MBO targets were met for the first quarter of 2013, but were not met for the second and third quarters of 2013. MBO targets were not set for the fourth quarter of 2013.

Outstanding Equity Awards at Fiscal Year-End−2014

The following table sets forth information about outstanding equity awards held by our named executive officers as of December 31, 2014.

	Option Awards
Name (1)	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date
Michael Linos		-		1,000,000	$	0.09	09/07/2024
Timothy Napoleon		-		1,000,000	$	0.09	09/07/2024
Steve Smith		-		1,000,000	$	0.09	09/07/2024

(1)

These options were each issued on September 8, 2014 under our 2011 plan. The options vest over 48 months, with the first vesting (25% or 250,000 shares of underlying common stock) at twelve months following the grant date. All future vesting occurs monthly at the rate of one-thirty-sixth of the total number of shares of underlying common stock.

Compensation of Directors

The following table shows information regarding the compensation earned or paid during 2014 to Non-Employee Directors who served on the Board during the year.

Name	Fees earned or paid in cash ($)(2)(3)		Stock awards ($)		Option awards ($)(1)		Non-equity incentive plan compensation ($)		Nonqualified deferred compensation earnings ($)		All other compensation ($)		Total ($)
Mark Walsh		5,000		-		28,440		-		-		-		33,440
Dave Williams		5,000		-		-		-		-		-		5,000

(1) The amounts shown are the aggregate grant date fair values of grants of stock options to the non-employee directors who served on our board during the year pursuant to the provisions of Accounting Standards Codification (“ASC”) 718. For a discussion of valuation assumptions used in ASC 718 calculations, see “Note 7—Stockholders Equity—Stock Options” of the Notes to Financial Statements included in Part IV, Item 15 of our Annual Report on Form 10-K for the year ended December 31, 2014. The options were issued under our 2011 Plan.

(2) Mr. Walsh received payment upon his joining the board in 2014 in accordance with our Director’s Compensation Plan.

(3) On September 7, 2014, Mr. Williams earned $5,000 as a board fee in accordance with our Director compensation plan. This fee remained unpaid at December 31, 2014 and has since been forgiven by Mr. Williams upon the board’s April 2, 2015 unanimous decision to amend the February 12, 2015 Director Compensation Plan as discussed further below.

During 2013, none of our directors received compensation for their services on our board.

On February 12, 2014, our board of directors adopted a Director Compensation Plan (the “Director Plan”) for independent directors. The Director Plan provides for each newly appointed independent director to receive on appointment (i) an option to purchase 150,000 shares of common stock at an exercise price equal to the closing bid price on the date immediately prior to the appointment date, subject to accelerated vesting upon a change of control of AllDigital Holdings, and (ii) a cash payment of $5,000. On the twelve month anniversary from their appointment and every twelve months thereafter, the plan provides for each independent director to receive an option to purchase 75,000 shares of common stock, at an exercise price equal to the closing bid price on the date immediately prior to the appointment date, subject to accelerated vesting upon a change of control of AllDigital Holdings, and (ii) a cash payment of $5,000. During 2014 Mr. Walsh received compensation for his services, including a cash payment of $5,000 and the option to purchase 150,000 shares of our common stock.

On April 2, 2015, the our board met and unanimously approved changing the Director Plan to align with our objective to achieve positive cash flow by (i) reducing the cash payment from $5,000 to $0 for the first and all future anniversaries, and (ii) reducing all stock option grants to 50,000 shares of common stock. These changes took place immediately, and the independent board members agreed to forego any past cash payments that were earned and not paid as of April 2, 2015 under the Director Plan, which amounted to $5,000. We have not accrued for any director compensation liability as of December 31, 2014.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth information with respect to the beneficial ownership of our voting securities as of April 17, 2015, the date of the table, by:

	●	each person known by us to beneficially own more than 5% of the outstanding shares of our common stock;

	●	each of our directors;

	●	each of our named executive officers; and

●

all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, and includes voting or investment power with respect to the securities. To our knowledge, except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Shares of common stock underlying derivative securities, if any, that currently are exercisable or convertible or are scheduled to become exercisable or convertible for or into shares of common stock within 60 days after the date of the table are deemed to be outstanding in calculating the percentage ownership of each listed person or group but are not deemed to be outstanding as to any other person or group. Except as indicated by footnote, percentage of beneficial ownership is based on 38,254,959 shares of common stock outstanding as of the date of the table.

Name and Address of Beneficial Owner⁽¹⁾	Title of Class	Amount and Nature of Beneficial Ownership			Percent of Class
Paul Summers	Common Stock		6,214,028	⁽²⁾		16.24	%
Steve Smith	Common Stock		6,076,115	⁽³⁾		15.88	%
Michael Linos	Common Stock		5,150,000			13.46	%
David Williams	Common Stock		150,000	⁽⁴⁾		*
Mark Walsh	Common Stock		37,500	⁽⁸⁾		*
Timothy Napoleon	Common Stock		5,000,000			13.07	%
Donald Harris⁽⁵⁾	Common Stock		3,932,954			10.28	%
ACT Capital Management, LLLP and Amir L. Ecker and Carol G. Frankenfield⁽⁶⁾	Common Stock		2,621,969			6.85	%
All executive officers and directors as a group (6 persons)	Common Stock		22,627,643	⁽⁷⁾		59.14	%

Less than 1.00%

(1)	Messrs. Smith, Linos, Williams and Walsh are directors of AllDigital . Mr. Napoleon is an executive officer of All Digital. Mr. Summers was a director of AllDigital before his passing. The address of each of these persons is c/o AllDigital Holdings, Inc., 6 Hughes, Suite 200, Irvine, CA 92618.

(2)	All securities are held of record in the Kristen Summers & William Lang Co. Trustees of the Decedent’s Trust under the Paul & Kristen Summers Family Trust DTD 4/22/02. Due to the passing of Mr. Summers, Kirsten Summers has authority to vote and dispose of such shares. Includes 107,014 shares of common stock underlying warrants.

(3)	All securities are held of record by the Stephen James Smith Trust Dated October 24, 2002. Mr. Smith has the authority to vote and dispose of such shares. Includes 106,959 shares of common stock underlying warrants.

(4)	Includes 150,000 shares of common stock underlying options.

(5)	The address for the security holder is 101 South Fort Lauderdale Beach Blvd., # 2703, Ft. Lauderdale, Florida 33316

(6)	The address for the security holders is 2 Radnor Corporate Center, Suite 111, Radnor, Pennsylvania 19087.

(7)	Includes 213,973 shares of common stock underlying warrants and 185,000 shares of common stock underlying options.

(8)	Includes 35,000 shares of common stock underlying options.

On August 29, 2014, we announced the sudden passing of Paul Summers, our then Chief Executive Officer, Chairman of the board of directors, and co-founder.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Director Independence

On an annual basis, each of our directors and executive officers is obligated to complete a Director and Officer Questionnaire that requires disclosure of any transactions with AllDigital in which a director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest. Following completion of these questionnaires, our board of directors makes an annual determination as to the independence of each director using the current standards for “independence” established by the Securities and Exchange Commission and NASDAQ and consideration of any other material relationship a director may have with AllDigital. Our board of directors has two independent directors, Mr. Walsh and Mr. Williams, with all other directors not being independent as they serve as executive officers of AllDigital Holdings.

Related Party Transactions

Other than as described below or elsewhere in this report, since January 1, 2013, there has not been a transaction or series of related transactions to which we were or are a party and in which any director, executive officer, holder of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest. No such transactions are currently proposed. All of the below transactions were separately approved by our Board.

Senior Convertible Secured Note issued to Steve Smith

On February 10, 2015, we entered into a Securities Purchase Agreement with Steve Smith, Vice President of Network Services and board member, pursuant to which we issued and sold our 5% Senior Secured Convertible Note (the “Steve Smith Note”) with a principal of $230,000 to Mr. Smith for an aggregate purchase price of $230,000. The Steve Smith Note is convertible into an aggregate of up to 1,533,333 shares of the Company’s common stock. In connection with the sale of the Steve Smith Note, the Company entered into a Security Agreement with Mr. Smith and Richard P. Stevens, II., as collateral agent.

The Steve Smith Note has a maturity date of December 31, 2016. The Steve Smith Note will bear interest at the rate of five percent (5%) per annum payable quarterly on the fifth (5th) day after the last business day of each calendar quarter beginning with the quarter ended December 31, 2014. After the maturity date, and until the outstanding principal and accrued interest on the Steve Smith Note has been paid, the Steve Smith Note will bear interest at a rate of 1.0% per month. The outstanding principal under the Steve Smith Note is convertible at any time prior to repayment, in whole or in part, into shares of our common stock at a conversion price of $0.15 per share, subject to adjustment for stock splits, stock dividends and recapitalizations. All accrued interest on the Steve Smith Note shall be paid in cash upon any conversion of the Steve Smith Note. The Steve Smith Note is secured under the terms of the Security Agreement by a first priority lien on all of our tangible and intangible assets.

Senior Convertible Secured Note issued to Jean Bateson Summers

On October 16, 2014, we entered into a Securities Purchase Agreement with Jean Bateson Summers, mother of our late Chief Executive Officer, Paul Summers, pursuant to which we issued and sold our 5% Senior Secured Convertible Note (the “Jean Summers Note”) with a principal of $500,000 to Jean Bateson Summers for an aggregate purchase price of $500,000. The Jean Summers Note is convertible into an aggregate of up to 3,333,333 shares of our common stock. In connection with the sale of the Jean Summers Note, we entered into a Security Agreement with Jean Bateson Summers and Richard P. Stevens, II., as collateral agent.

The Jean Summers Note has a maturity date of December 31, 2016. The Jean Summers Note will bear interest at the rate of five percent (5%) per annum payable quarterly on the fifth (5th) day after the last business day of each calendar quarter beginning with the quarter ended December 31, 2014. After the maturity date, and until the outstanding principal and accrued interest on the Jean Summers Note has been paid, the Jean Summers Note will bear interest at a rate of 1.0% per month. The outstanding principal under the Jean Summers Note is convertible at any time prior to repayment, in whole or in part, into shares of our common stock at a conversion price of $0.15 per share, subject to adjustment for stock splits, stock dividends and recapitalizations. All accrued interest on the Jean Summers Note shall be paid in cash upon any conversion of the Jean Summers Note. The Jean Summers Note is secured under the terms of the Security Agreement by a first priority lien on all of our tangible and intangible assets.

Payments to Kristen Summers

On August 29, 2014, we announced the sudden passing of Paul Summers, our then Chief Executive Officer, Chairman of the board of directors, and co-founder. Following the death of Mr. Summers, we commenced paying health benefits and salary continuance to his widow, Kristen Summers, and which we plan to continue for twelve months. As of December 31, 2014, we had accrued $128,853, which anticipates salary continuance of $12,000 per month through October 31, 2015, and benefits continuance approximating $1,050 per month thru August 31, 2015.

Michael Linos

On January 27, 2014, we entered into an Employment Agreement (the “Employment Agreement”) with Michael Linos, in connection with his appointment as Executive Vice President Sales. Under the terms of this agreement, Mr. Linos will receive a base salary of $144,000 per annum, an opportunity to earn an annual bonus equal to 50% of his base salary upon achievement of certain performance measures on a quarterly basis. He will be eligible to receive a stock grant of 1,000,000 shares of Common Stock on each of the first and second anniversaries of the Effective Date of the Employment Agreement (January 27, 2014) provided his continued employment, with a provision to accelerate any outstanding stock grants upon sale of the company for cash consideration in excess of ten million U.S. Dollars ($10,000,000). He will also be entitled to participate in our benefit plans on terms consistent with those generally applicable to our other executives. Mr. Linos also signed our standard confidentiality, proprietary information and invention assignment agreement.

Mr. Linos’ employment relationship is “at-will.” The Employment Agreement includes a provision relating to the protection of confidential information, a covenant by the executive officer to work and reside in Orange County, California, a non-competition covenant during the term of his employment and a 12-month non-solicitation covenant. Under the terms of the Employment Agreement, if Mr. Linos’ employment is terminated by him for good reason, which includes, (i) a material change in the terms and conditions of his employment, (ii) a change in the principal place of employment materially increasing his commute time, or (iii) any other event that is a functional equivalent of an involuntary termination and which falls within the safe-harbor provisions related to termination for good reason set forth in the regulations implementing Section 409A of the Internal Revenue Code, he is entitled to a severance benefit equal to his base salary and health benefits for one year. If the executive officer is terminated by us without cause, he is entitled to a severance benefit equal to one year of his base salary and health benefits for one year. Mr. Linos will not be entitled to any severance if his employment is terminated at any time by us with cause or by Mr. Linos without good reason. Upon Mr. Linos’ termination by us for certain enumerated reasons, we will have the right to repurchase any shares of our common stock beneficially owned by Mr. Linos on the effective date of his termination at a per share purchase price of $0.15.

On January 27, 2014, we issued and sold 2,250,000 shares of common stock to Mr. Linos at a purchase price of $0.15 per share

On September 8, 2014, we entered into the Amended and Restated Employment Agreement (Employment Agreement) with Mr. Linos. Pursuant to the employment agreement, Mr. Linos will receive a base salary of $144,000, an annual bonus target opportunity equal to 50% of his base salary upon achievement of certain performance measures on a quarterly basis, and standard health and other benefits. Mr. Linos’ employment relationship is “at-will.” His employment agreement includes a provision relating to the protection of confidential information, a covenant by the executive officer to work and reside in Orange County, California, and a non-competition covenant during the term of his employment and a 12-month non-solicitation covenant. Under the employment agreement, if the executive officer’s employment is terminated by him for good reason, which includes, (a) a material change in the terms and conditions of his employment, (b) a change in the principal place of employment materially increasing his commute time, or (c) any other event that is a functional equivalent of an involuntary termination and which falls within the safe-harbor provisions related to termination for good reason set forth in the regulations implementing Section 409A of the Internal Revenue Code, he is entitled to a severance benefit equal to his base salary and health benefits for one year. “Cause” is defined in the employment agreements to include (a) the employee’s conviction of, or plea of guilty, nolo contendere or the equivalent, in any criminal action involving a felony, (b) the employee’s misappropriation of any of our material funds or property, (c) the employee’s willful misconduct in the performance of his duties for the company, and (c) the employee’s breach of certain covenants set forth in the employment agreement. If the executive officer is terminated by us without cause, he is entitled to a severance benefit equal to his base salary and health benefits for one year. None of the executive officers are entitled to any severance if his employment is terminated at any time by us with cause or by the executive officer without good reason. He will be eligible to receive a stock grant of 1,000,000 shares of Common Stock on each of the first and second anniversaries of the Effective Date of his original Employment Agreement (January 27, 2014) provided his continued employment, with a provision to accelerate any outstanding stock grants upon the company’s sale that is no longer conditioned by the company’s being sold for cash consideration in excess of ten million U.S. Dollars ($10,000,000).

Mark Walsh

As provided by the Director Plan, at the date of his appointment to the board of directors on February 12, 2014, Mark Walsh received a cash payment and was issued an option to purchase 150,000 shares of our common stock under our 2011 Stock Incentive Plan (the “Walsh Option”). The Walsh Option will vest over a period of 4 years, subject to Walsh’s continued employment. Twenty-five percent (25%) of shares underlying the Walsh Option vested on February 12, 2015, and then 1/36 of the shares underlying the Walsh Option will vest each month thereafter until fully vested. Upon a change of control, any unvested portion of the Walsh Option will immediately vest in full.

Executive Officers

On December 2, 2014, our board of directors appointed Barbara Crofts as our Chief Financial Officer. Ms. Crofts did not have a written employment agreement but had been offered a salary at the rate of $144,000 per year and issued options to purchase 250,000 shares of our common stock under the 2011 Plan vesting over four years. Upon a change of control, any unvested portion of the option would immediately vest in full. Ms. Crofts resigned from her position on September 12, 2014.

On January 7, 2014, our board of directors appointed Brad Eisenstein as our Chief Operating Officer. Mr. Eisenstein did not have a written employment agreement. Mr. Eisenstein received a base salary of $184,000 and was granted an option to purchase 750,000 shares of common stock under our 2011 Stock Incentive Plan. Subject to the terms of a Stock Option Agreement, the option is exercisable over a term of 10 years at an exercise price of $0.12 per share, which is equal to the grant-date closing price of our common stock. The option vested over a period of 4 years, subject to Mr. Eisenstein’s continued employment. Twenty-five percent (25%) of shares underlying the option would vest on the first anniversary of the grant date, and then 1/36 of the shares underlying the option would vest each month thereafter until fully vested. Upon a change of control, any unvested portion of the option would immediately vest in full.

Prior to his appointment, beginning November 5, 2014, Mr. Eisenstein was providing operations and administrative services to us as a consultant during which time he received an aggregate cash compensation of $33,000 and warrants to purchase 35,000 shares of our common stock at an exercise price of $0.20 per share.

On August 8, 2014, Mr. Eisenstein resigned from his position and returned to consulting for our company. On resigning Mr. Eisenstein entered into an Agreement and Mutual General Release (release agreement) with our company. As consideration for his signing the release agreement, our board granted Mr. Eisenstein an option to purchase 187,500 shares of common stock under our 2011 Stock Incentive Plan. The option vested in full upon grant and is exercisable over a term of 10 years at an exercise price of $0.10 per share, which is equal to the grant-date closing price of our common stock.

On September 8, 2014, we hired Mr. Eisenstein as the Company’s Chief Financial Officer and Chief Operating Officer under an employment agreement.

Pursuant to the employment agreement, Mr. Eisenstein will receive a base salary of $144,000, an annual bonus target opportunity equal to 50% of his base salary upon achievement of certain performance measures on a quarterly basis, and standard health and other benefits. Mr. Eisenstein’s employment relationship is “at-will.” His employment agreement includes a provision relating to the protection of confidential information, a covenant by the executive officer to work and reside in Orange County, California, and a non-competition covenant during the term of his employment and a 12-month non-solicitation covenant. Under the employment agreement, if the executive officer’s employment is terminated by him for good reason, which includes, (a) a material change in the terms and conditions of his employment, (b) a change in the principal place of employment materially increasing his commute time, or (c) any other event that is a functional equivalent of an involuntary termination and which falls within the safe-harbor provisions related to termination for good reason set forth in the regulations implementing Section 409A of the Internal Revenue Code, he is entitled to a severance benefit equal to his base salary and health benefits for one year. “Cause” is defined in the employment agreements to include (a) the employee’s conviction of, or plea of guilty, nolo contendere or the equivalent, in any criminal action involving a felony, (b) the employee’s misappropriation of any of our material funds or property, (c) the employee’s willful misconduct in the performance of his duties for the company, and (c) the employee’s breach of certain covenants set forth in the employment agreement. If the executive officer is terminated by us without cause, he is entitled to a severance benefit equal to his base salary and health benefits for one year. None of the executive officers are entitled to any severance if his employment is terminated at any time by us with cause or by the executive officer without good reason.

On September 8, 2014, Mr. Eisenstein was granted an option to purchase 1,000,000 shares of common stock under our 2011 Stock Incentive Plan. Subject to the terms of a Stock Option Agreement, the option is exercisable over a term of 10 years at an exercise price of $0.09 per share, which is equal to the grant-date closing price of our common stock. The option vests over a period of 4 years, subject to continued employment.

Item 14. Principal Accounting Fees and Services

The following table presents the aggregate fees paid by us for professional audit services rendered by Rose, Snyder & Jacobs LLP for the years ended December 31, 2014 and 2013, and professional tax services rendered by Squar, Milner, Peterson, Miranda & Williamson, LLP for the years ended December 31, 2014 and 2013.

	2014		2013
Audit Fees	$	56,000	$	63,850
Audit-Related Fees		-		-
Tax Fees		14,522		13,780

Total	$	70,522	$	77,630

Audit Fees. Audit Fees consist of amounts billed for professional services rendered for the audit of our annual consolidated financial statements included in our Annual Report on Forms 10-K, and reviews of our interim consolidated financial statements included in our Quarterly Reports on Forms 10-Q and related matters.

Audit-Related Fees. Audit-Related Fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our consolidated financial statements but are not reported under “Audit Fees.”

Tax Fees. Tax Fees consist of fees billed for professional services for tax compliance activities, including the preparation of federal and state tax returns and related compliance matters.

Our board of directors has determined that all non-audit services provided by Rose, Snyder & Jacobs LLP were compatible with maintaining that firm’s audit independence.

The board of directors, functioning as the audit committee, has established pre-approval policies and procedures requiring that the board of directors, functioning as the audit committee, approve in advance any engagement of the independent auditors to render audit or non-audit services. As a result, all engagements during 2014 and 2013 of the independent auditors to render audit or non-audit services were approved by the board of directors, functioning as the audit committee.

PART IV

Item 15. Exhibits, Financial Statements Schedules

(a) Documents Filed

1. Financial Statements. The following Consolidated Financial Statements of the company and Auditors’ report are filed as part of this Annual Report on Form 10-K:

	●	Report of Independent Registered Public Accounting Firm

	●	Consolidated Balance Sheets for the periods ended December 31, 2014 and 2013

	●	Consolidated Statements of Operations for the periods ended December 31, 2014 and 2013

	●	Consolidated Statements of Cash Flows for the periods ended December 31, 2014 and 2013

	●	Consolidated Statement of Stockholders Equity as of December 31, 2014

	●	Notes to the Consolidated Financial Statements

2. Financial Statements Schedule. Not applicable.

3. Exhibits. The information required by this item is set forth on the exhibit index that follows.

Index to Exhibits

		Where Located
Exhibit Number	Description^#	Form	File Number	Exhibit Number	Filing Date	Filed Herewith
2.1	Agreement and Plan of Merger dated July 29, 2011 among AllDigital, Inc., AllDigital Acquisition Corp. and the Registrant	8-K	333-141676	2.1	8/5/2011

2.2	Asset Purchaser Agreement dated October 17, 2014 among AllDigital Holdings,Inc. and Brevity Ventures, Inc.	8-K	333-141676	2.1	10/22/2014

3.1	Articles of Incorporation, as amended	8-K	333-141676	3.1	8/25/2011

3.2	Amended and Restated By-laws	8-K	333-141676	3.1	7/2/2013

4.1	Form of Common Stock Certificate	SB-2	333-141676	4.1	3/30/2007

10.1	Form of Series 2011A Warrant	8-K	333-141676	4.1	8/5/2011

10.2	Form of Series 2011B Warrant	10-Q	333-141676	4.3	11/14/2011

10.3	Form of Series 2011C Warrant	10-Q	333-141676	4.4	11/14/2011

10.4	Amended and Restated 2011 Stock Option Plan*					X

10.5	Form of Stock Option Agreement*	8-K	333-141676	4.3	8/5/2011

10.6	Form of Employment Agreement dated June 28, 2013 between the Registrant and each of Summers, Smith and Napoleon*	8-K	333-141676	10.5	7/2/2013

10.7	Employment Agreement, dated June 28, 2013, between the Registrant and John Walpuck*	8-K	333-141676	10.4	7/2/2013

10.8	Master Lease Agreement between the Registrant and Technology Finance Corporation	8-K/A	333-141676	10.3	8/29/2011

10.9	Lease Schedule to Master Lease Agreement with Technology Finance Corporation dated March 29, 2011	8-K/A	333-141676	10.3.1	8/29/2011

10.10	Lease Schedule to Master Lease Agreement with Technology Finance Corporation dated April 8, 2011	8-K/A	333-141676	10.3.2	8/29/2011

10.11	Standard Industrial/Commercial Multi-Tenant Lease — Net American Industrial Real Estate Association dated August 25, 2009 between the Registrant Olen Commercial Realty Corp.	8-K/A	333-141676	10.4	8/29/2011

10.12	Executive Search Agreement between the Registrant and John C. Wallin dated May 19, 2011	8-K/A	333-141676	10.5	8/29/2011

Where Located

Exhibit
Number

Description^#

Form

File Number

Exhibit Number

Filing Date

Filed Herewith

10.13

Agreement and Plan of Merger and Reorganization, dated as of January 6, 2012, between the Registrant and Broadcast International, Inc. and Alta Acquisition Corporation

8-K

333-141676

2.1

1/7/2013

10.14

Form of Voting Agreement, dated January 6, 2013, between the Registrant and certain stockholders of Broadcast International, Inc.

8-K

333-141676

10.1

1/7/2013

10.15

Professional Services Agreement dated January 6, 2013 with Broadcast International, Inc.

8-K

333-141676

10.3

1/7/2013

10.16

First Amendment to Agreement and Plan of Merger, dated as of April 9, 2013, between the Registrant and Broadcast International, Inc. and Alta Acquisition Corporation

10-Q

333-141676

10.1

8/13/2013

10.17

Second Amendment to Agreement and Plan of Merger, dated as of June 30, 2013, between the Registrant and Broadcast International, Inc. and Alta Acquisition Corporation

8-K

333-141676

10.1

7/2/2013

10.18

Third Amendment to Agreement and Plan of Merger, dated as of August 26, 2013, between the Registrant and Broadcast International, Inc. and Alta Acquisition Corporation

8-K

333-141676

10.1

8/28/2013

10.19

Employment Agreement, dated June 28, 2013, between the Registrant and Konstantin Wilms*

8-K

333-141676

10.2

7/2/2013

10.20

Escrow and Contribution Agreement, dated June 28, 2013 among the Registrant, the Stephen James Smith Trust dated 10/24/02, Tim Napoleon and Parr Brown Gee & Loveless, PC

8-K

333-141676

10.3

7/2/2013

10.21

Director Compensation Plan*

10-K

333-141676

10.21

3/31/2014

10.22

Employment Agreement between the Registrant and Brad Eisenstein*

10.23

Offer Letter between the Registrant and Barbara Crofts

10-K

333-141676

10.23

3/31/2014

10.24

Amended and Restated Employment Agreement between the Registrant and Michael Linos*

10.25

Form of Convertible Promissory Notes issued in August and September 2013

8-K

333-141676

10.2

8/28/2013

10.26

Form of 5% Senior Secured Convertible Notes issued in October 2014, November 2014, and February 2015

10.27

Form of Security Agreement regarding the 5% Senior Secured Convertible Notes

Code of Ethics and Conduct

10-K

333-141676

3/31/2014

Subsidiaries of the Registrant

10-K

333-141676

3/31/2014

23.1

Consent of Independent Registered Public Accounting Firm

31.1

Section 302 Certification of Chief Executive Officer

31.2

Section 302 Certification of Chief Financial Officer

32.1

Section 906 Certification of Chief Executive Officer

32.2

Section 906 Certification of Chief Financial Officer

101.INS

XBRL Instance Document**

101.SCH

XBRL Taxonomy Extension Schema**

101.CAL

XBRL Taxonomy Extension Calculation Linkbase**

101.DEF

XBRL Taxonomy Extension Definition Linkbase **

101.LAB

XBRL Taxonomy Extension Label Linkbase**

101.PRE

XBRL Taxonomy Extension Presentation Linkbase**

* A contract, compensatory plan or arrangement to which a director or executive officer is a party or in which one or more directors or executive officers are eligible to participate.

** Pursuant to applicable securities laws and regulations, we are deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and are not subject to liability under any anti-fraud provisions of the federal securities laws as long as we have made a good faith attempt to comply with the submission requirements and promptly amend the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.

# Certain of the agreements filed as exhibits contain representations and warranties made by the parties thereto. The assertions embodied in such representations and warranties are not necessarily assertions of fact, but a mechanism for the parties to allocate risk. Accordingly, investors should not rely on the representations and warranties as characterizations of the actual state of facts or for any other purpose at the time they were made or otherwise.

ALLDIGITAL HOLDINGS, INC. AND SUBSIDIARY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-1

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets as of December 31, 2014 and 2013		F-2

Consolidated Statements of Operations for the Years Ended December 31, 2014 and 2013		F-3

Consolidated Statements of Cash Flows for the Years Ended December 31, 2014 and 2013		F-4

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2014 and 2013		F-6

Notes to Consolidated Financial Statements		F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

AllDigital Holdings, Inc.

We have audited the accompanying balance sheets of AllDigital Holdings, Inc. (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AllDigital Holdings, Inc. as of December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred significant operating losses and negative cash flows from operations during the years ended December 31, 2014 and 2013. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty

Rose, Snyder & Jacobs LLP

Encino, California

April 20, 2015

F-1

ALLDIGITAL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2014			2013
ASSETS

Current assets:
Cash and cash equivalents	$	485,761		$	1,300,932
Accounts receivable, net of allowance of $0 and $10,000		361,276			454,733
Prepaid expenses and other current assets		50,944			82,324
Total current assets		897,981			1,837,989
Property and equipment, net		176,194			86,648
Purchased intangible assets, net		386,415			22,000
Other assets		18,626			11,164
Total assets	$	1,479,216		$	1,957,801

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	809,018		$	563,889
Deferred revenue		4,465			355,770
Other current liabilities		28,530
Total current liabilities		842,013			919,659

Long-term liabilities:
Long-term debt		750,000			-
Other liabilities		45,978			-
Total long-term liabilities		795,978			-

Commitments and Contingencies (Note 6)

Stockholders’ (Deficit) Equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none and none issued and outstanding, respectively		-			-
Common stock, $0.001 par value, 90,000,000 shares authorized, 37,170,959 and 33,231,977 issued and outstanding, respectively		37,171			33,233
Additional paid-in capital		4,636,530			3,978,462

Accumulated deficit		(4,832,476	)		(2,973,553	)

Total stockholders’ (deficit) equity		(158,775	)		1,038,142
Total liabilities and stockholders’ (deficit) equity	$	1,479,216		$	1,957,801

See accompanying notes to these consolidated financial statements.

F-2

ALLDIGITAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2014			2013
Net sales	$	3,841,767		$	4,327,227
Cost of sales		2,713,074			2,505,925
Gross profit		1,128,693			1,821,302
Operating expenses
Selling, marketing, and advertising		642,799			537,496
General and administrative		2,362,449			1,898,493

Total operating expenses		3,005,248			2,435,989

Operating loss		(1,876,555	)		(614,687	)

Other income (expense)
Interest income		754			728
Interest expense		(16,103	)		(636	)
Other income		35,381			63,884

Total other income (expense)		20,032			63,976
Loss before provision for income taxes		(1,856,523	)		(550,711	)
Provision for income taxes		2,400			1,600
Net loss	$	(1,858,923	)	$	(552,311	)
Basic and diluted net loss per share	$	(0.05	)	$	(0.02	)
Basic and diluted weighted-average shares outstanding		36,329,854			26,642,459

See accompanying notes to these consolidated financial statements.

F-3

ALLDIGITAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2014			2013
Cash Flows From Operating Activities
Net loss	$	(1,858,923	)	$	(552,311	)
Adjustments to reconcile net profit (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		78,178			55,370
Stock based compensation		121,480			223,122
Stock issued for services		128,027			-
Loss on write off of prepaid asset		21,595			-
Provision for doubtful accounts		-			10,000
Changes in operating assets and liabilities:
Accounts receivable		93,457			(342,669	)
Deferred costs
Prepaid expenses and other current assets		2,323			(28,962	)
Deferred revenue		(351,305	)		7,997
Accounts payable and accrued expenses		245,158			43,581
Net cash provided by (used in) operating activities		(1,520,010	)		(583,872	)

Cash Flows From Investing Activities
Purchase of property and equipment		(78,082	)		(61,707	)
Purchase of intangible assets		(364,415	)		(2,250	)
Net cash used in investing activities		(442,497	)		(63,957	)

Cash Flows From Financing Activities
Capital lease financing, net of payments		(15,164	)		-
Proceeds from issuance of notes payable – bridge		-			1,485,000
Proceeds from issuance of secured notes payable		750,000
Issuance of common stock		412,500			-
Proceeds from exercise of stock options		-			1,000
Net cash provided by financing activities		1,147,336			1,486,000
Net Increase (Decrease) in Cash and Cash Equivalents		(815,171	)		838,171
Cash and Cash Equivalents – beginning of year		1,300,932			462,761
Cash and Cash Equivalents – end of year	$	485,761		$	1,300,932

Supplemental disclosures of cash flow information:
Interest paid	$	16,103		$	636
Income taxes paid	$	2,400		$	1,600

See accompanying notes to these consolidated financial statements.

F-4

SUPPLEMENTAL INFORMATION OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the twelve months ended December 31, 2014, the Company entered into the following noncash transactions:

●

Issued 1,188,982 shares of common stock for services value at $128,027.

During the twelve months ended December 31, 2013, the Company entered into the following noncash transactions:

●

Issued 7,787,249 shares of common stock due to the conversion of $1,485,000 of Convertible Promissory Notes.

See accompanying notes to these consolidated financial statements.

F-5

ALLDIGITAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

	Preferred Stock				Common Stock				Additional		Accumulated
	Shares		Amount		Shares		Amount		Paid-in Capital		Deficit			Total

BALANCE – December 31, 2012		-	$	-		25,440,728	$	25,441	$	2,277,132	$	(2,421,242	)	$	(118,669	)

Issuance of common stock for exercise of options		-		-		4,000		4		996		-			1,000

Conversion of Convertible Notes Payable to common stock		-		-		7,787,249		7,788		1,477,212		-			1,485,000

Stock based compensation		-		-		-		-		223,122		-			223,122

Net loss		-		-		-		-		-		(552,311	)		(552,311	)
BALANCE – December 31, 2013		-	$	-		33,231,977	$	33,233	$	3,978,462	$	(2,973,553	)	$	1,038,142

Issuance of common stock for cash received		-		-		2,750,000		2,750		409,750		-			412,500

Issuance of common stock for past services		-		-		1,188,982		1,188		126,838		-			128,026

Stock based compensation		-		-		-		-		121,480		-			121,480
Net loss		-		-		-		-		-		(1,858,923	)		(1,858,923	)
BALANCE – December 31, 2014		-	$	-		37,170,959	$	37,171	$	4,636,530	$	(4,832,476	)	$	(158,775	)

See accompanying notes to these consolidated financial statements.

F-6

ALLDIGITAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND BUSINESS

AllDigital, Inc. (“AllDigital” or the “Company”) was incorporated in the State of California on August 3, 2009, with the primary purpose of providing digital broadcasting solutions dedicated to managing the complex pairing of cloud-based digital media and digital services with Internet—connected devices.

AllDigital Brevity, AllDigital Cloud, and AllDigital Integration services are the cornerstones of our offering, enabling us to build highly scalable and efficient digital broadcasting solutions to meet unique customer requirements, serve as technology and services required to develop, operate and support a variety of complex digital service and digital broadcasting workflow implementations across a diverse market of devices. We accomplish this by enabling, and maximizing the performance of, the cloud-based storage, processing, and transit of digital media and digital services to multiple devices simultaneously. Our business model targets a variety of entities and existing providers of digital services that need to develop, operate and support a cost—effective, high quality and secure digital service, through a digital broadcasting workflow, across a large and diverse market of devices.

Our ability to successfully generate future revenues is dependent on a number of factors, including: (i) the availability of capital to continue to develop, operate and maintain our proprietary AllDigital Brevity and AllDigital Cloud platform and services, (ii) the ability to commercialize our portfolio of digital broadcasting solutions to media and entertainment companies, enterprises, government agencies, and nonprofits, and (iii) our ability to attract and retain key sales, business and product development, and other personnel as our business and offerings continue to mature. We may encounter setbacks related to these activities.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. The use of estimates may also affect the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by management include, among others, estimates of costs used in the calculation of percentage of completion contracts, realization of capitalized assets, valuation of equity instruments and other instruments indexed to the Company’s common stock, and deferred income tax valuation allowances. Actual results could differ from those estimates. Following is a discussion of the Company’s significant accounting policies.

Liquidity

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of its liabilities in the normal course of conducting its business. Accordingly, the financial statements do not include any adjustments to reflect the possible future effects on the recoverability or classification of assets and liabilities that may result from the outcome of this uncertainty. The Company has to date incurred recurring losses and has accumulated losses aggregating approximately $4.8 million as of December 31, 2014. The Company’s business strategy includes attempting to increase its revenue through investing further in its product development, sales, and marketing efforts of AllDigital Brevity. The Company intends to finance this portion of its business strategy through available working capital resources and raising additional funds to provide a long enough horizon for the Company to achieve cash flow profitability. Without further investment capital, management believes that current cash on-hand and cash flow from operations will finance the Company into the third quarter of 2015.

F-7

Principles of Consolidation

The consolidated financial statements include the accounts of AllDigital, Inc. that are consolidated in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). AllDigital, Inc. is wholly-owned by AllDigital Holdings, Inc. There are no intercompany transactions as all accounts are in the name of AllDigital, Inc.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Revenue Recognition

The Company recognizes recurring and nonrecurring service revenue in accordance with the authoritative guidance for revenue recognition, including guidance on revenue arrangements with multiple deliverables. In general, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

Revenue from certain design and development contracts, where a solution is designed, developed or modified to a customer’s specifications, is recognized on a percentage of completion basis in accordance with ASC 605-35 based on the cost-to-cost method, provided such costs can be reasonably estimated. The Company’s revenue recognition practices related to such contracts include: developing an approved budget; comparing actual period costs to the budget as a percentage; recognizing revenue for the period based upon the percentage of actual costs incurred compared to total estimated costs, and; performing monthly budget-actual reviews, updates, and adjustments as needed. The impact on revenues as a result of these revisions is included in the periods in which the revisions are made. For contracts for which the Company is unable to reasonably estimate total contract costs, the Company waits until contract completion to recognize the associated revenue.

Nonrecurring revenues also include “on-boarding” professional services that involve the development or integration of a customer’s software application, digital service, system, or Application Programming Interface (“API”) to connect with the AllDigital Cloud platform. On-boarding professional services projects are typically of a short duration and smaller revenue amounts. The Company recognizes revenue for on-boarding professional services upon project completion and acceptance.

Monthly recurring revenues are recognized ratably over the period in which they are delivered and earned. The Company typically charges monthly recurring platform fees, as well as monthly recurring charges for our back-end storage, cloud processing, origin transit, and maintenance and support services. These fees are generally billed based on a minimum commitment plus actual usage basis, and the term of such customer contracts vary typically from 12 to 24 months.

Rarely, a customer contract will include revenue arrangements that consist of multiple product and service deliverables. Such contracts are accounted for in accordance with ASC 605-25, as amended by ASU 2009-13. For the Company’s multiple-element arrangements, deliverables are separated into more than one unit of accounting when (i) the delivered element(s) have value to the customer on a stand-alone basis, and (ii) delivery of the undelivered element(s) is probable and substantially in the control of the Company. Revenue is then allocated to each unit of accounting based on the estimated selling price determined using a hierarchy of evidence based first on Vendor-Specific Objective Evidence (“VSOE”) if it exists, based next on Third-Party Evidence (“TPE”) if VSOE does not exist, and finally, if both VSOE and TPE do not exist, based on the Company’s best estimate of selling price (“BESP”). If deliverables cannot be separated into more than one unit, then the Company does not recognize revenue until all deliverables have been delivered and accepted.

F-8

Accounts Receivable

Accounts receivable are recorded at their face amount less an allowance for doubtful accounts. The allowance for doubtful accounts reflects management’s best estimate of probable losses in the accounts receivable balance. Management determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. The allowance for doubtful accounts was $0 at December 31, 2014, and $10,000 at December 31, 2013. The Company generally requires a deposit or advance services payments from its customers for certain contracts involving upfront capital investment, on-boarding, or development to facilitate its working capital needs.

Earnings and Loss per Share

The Company computes net earnings (loss) per share in accordance with ASC 260-10 that establishes standards for computing and presenting net earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

At December 31, 2014, the Company had 210,000 warrants and 7,440,364 options that could potentially increase the number of shares outstanding. At December 31, 2014, the Company had sold $750,000 of its Secured Convertible Notes that if converted at the note conversion price of $.15 per share, this could potentially increase the number of shares outstanding by 5,000,000 shares. At December 31, 2013, the Company had 3,892,274 warrants and 3,065,917 options that could potentially increase the number of shares outstanding. These instruments were excluded from the computation of the diluted loss per share as their impact is anti-dilutive.

Fair Value of Measurements

Level Input:		Input Definition:
Level 1		Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level 2		Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.

Level 3		Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

F-9

Assets subject to this classification at December 31, 2014, and December 31, 2013, were cash and cash equivalents and are considered Level 1 assets.

For certain of the Company’s financial instruments, including accounts receivable, prepaid expenses, and accounts payable, the carrying amounts approximate fair value due to their short maturities. The carrying amount of the Company’s notes payable approximates fair value based on prevailing interest rates.

Income Taxes

The Company follows guidance issued by the FASB with regard to its accounting for uncertainty in income taxes recognized in the financial statements. Such guidance prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be examined by taxing authorities.

Property and Equipment

Furniture and fixtures	5 years
Leasehold improvements	Shorter of remaining lease term or up to 3 years
Fixed assets under capital lease	3 years
Computer equipment	3 years
Software	3 years
Signs	3 years

F-10

Impairment of Long-Lived and Intangible Assets

The Company accounts for long-lived assets, that include property and equipment and identifiable intangible assets with infinite useful lives, in accordance with FASB ASC 350-30, that requires that the Company review long-lived assets for impairment whenever events or changes in circumstances indicate that the Company may not recover the carrying amount of an asset. The Company measures recoverability by comparing the carrying amount of an asset to the expected future undiscounted net cash flows generated by the asset. If the Company determines that the asset may not be recoverable, the Company recognizes an impairment charge to the extent of the difference between the asset’s fair value and the asset’s carrying amount. The Company had no impairment charges during the twelve months ended December 31, 2014 and 2013.

Stock-Based Compensation

The Company accounts for share-based compensation arrangements in accordance with FASB ASC 718, which requires the measurement and recognition of compensation expense for all share-based payment awards to be based on estimated fair values. We use the Black-Scholes option valuation model to estimate the fair value of our stock options at the date of grant. The Black-Scholes option valuation model requires the input of subjective assumptions to calculate the value of stock options. We use historical data among other information to estimate the expected price volatility and the expected forfeiture rate.

Recent Accounting Pronouncements

In August 2014, the FASB issued FASB ASU2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. FASB ASU 2014-15 changes to the disclosure of uncertainties about an entity’s ability to continue as a going concern. Under GAAP, continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Even if an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. Because there is no guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related note disclosures, there is diversity in practice whether, when, and how an entity discloses the relevant conditions and events in its financial statements. As a result, these changes require an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that financial statements are issued. Substantial doubt is defined as an indication that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that financial statements are issued. If management has concluded that substantial doubt exists, then the following disclosures should be made in the financial statements: (i) principal conditions or events that raised the substantial doubt, (ii) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations, (iii) management’s plans that alleviated the initial substantial doubt or, if substantial doubt was not alleviated, management’s plans that are intended to at least mitigate the conditions or events that raise substantial doubt, and (iv) if the latter in (iii) is disclosed, an explicit statement that there is substantial doubt about the entity’s ability to continue as a going concern. These changes become effective for the Company for the 2016 annual period. Management has determined that the adoption of these changes will not have an impact on the Consolidated Financial Statements. Subsequent to adoption, this guidance will need to be applied by management at the end of each annual period and interim period therein to determine what, if any, impact there will be on the Consolidated Financial Statements in a given reporting period.

In May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2016. Early adoption is not permitted. The revenue recognition standard is required to be applied retrospectively, including any combination of practical expedients as allowed in the standard. We are evaluating the impact, if any, of the adoption of ASU 2014-09 to our financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

F-11

In July 2013, the FASB issued Accounting Standards Updates (“ASU”) 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (Topic 740). ASU 2013-11 requires that unrecognized tax benefits be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except in certain circumstances. When those circumstances exist, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The Company adopted this guidance effective January 1, 2014. The Company does not believe the adoption of ASU 2013-11 has significant impact on its consolidated financial statements.

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2014, and December 31, 2013, consisted of the following:

	December 31, 2014			December 31, 2013

Furniture and fixtures	$	16,328		$	13,568
Leasehold improvements		3,772			-
Fixed assets under capital lease		89,672			-
Computer equipment		213,154			139,584
Software		45,833			45,833
Signs		2,050			2,050
Purchased intangible assets		384,365			-
Less accumulated depreciation and amortization		(192,565	)		(114,387	)

	$	562,609		$	86,648

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses as of December 31, 2014, and December 31, 2013, consisted of the following:

	December 31, 2014		December 31, 2013

Accounts payable	$	413,700	$	316,096
Accrued personnel costs		308,135		188,866
Accrued professional fees		76,825		6,800
Other		10,358		52,127

	$	809,018	$	563,889

F-12

NOTE 5 – NOTES PAYABLE

5% Senior Secured Convertible Notes

In October and November 2014, the Company raised $750,000 through the sale of an aggregate of $750,000 in principal of its 5% Senior Secured Convertible Notes, (“Secured Notes”). The Secured Notes pay quarterly interest and are convertible at a conversion price of $0.15 per share into an aggregate of up to 5,000,000 shares of common stock, and they are secured by all of the Company’s assets. Principle is due December 31, 2016 on all outstanding notes.

Convertible Promissory Notes

The Company offered and sold an aggregate of $1,485,000 in Convertible Promissory Notes (the “Notes”) in August and September, 2013. The Notes provided that, if the Merger Agreement (discussed further in Note 9 below) was terminated prior to closing, the Notes would automatically convert into shares of common stock of the Company. Upon the November 4, 2013 occurrence of termination of the Merger Agreement, the Notes were converted into 7,787,249 shares of common stock of the Company.

The Company evaluated the embedded conversion feature of the Notes pursuant to ASC 470, “Debt”, ASC 480, “Distinguishing Liabilities from Equity”, and ASC 815, “Derivatives and Hedging”. In performing this evaluation, the Company determined that the embedded conversion feature did not meet the criteria of a derivative liability pursuant to ASC 815, as such the conversion feature was not bifurcated. In addition, the conversion feature was not assessed to be beneficial, as such there was no note discount recorded on the accompanying financial statements.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Lease Commitments

In 2014, the Company entered into a Lease Agreement for office space at 6 Hughes, Suite 200, Irvine, California, 92618, which is used as its corporate office. The initial three-year term expires December 31, 2017, and lease renewal is possible upon mutual agreement of the parties. Rent for the remaining lease term is $10,717 per month. Rent expense for the twelve months ended December 31, 2014 and 2013 was $130,247 and $129,374, respectively.

The Company has entered into various non-cancelable operating leases for computer servers and phone equipment. At December 31, 2014, future minimum rental commitments under these operating leases are:

Year ended December 31,

2015	$	112,427
2016		131,353
2017		81,410
Total	$	325,190

Legal Matters

F-13

NOTE 7 – STOCKHOLDERS’ EQUITY

Preferred Stock

Our Board of Directors has the authority to issue Preferred Stock in one or more series and to, within the limits set forth by Nevada law and without stockholder action:

	●	designate in whole or in part, the powers, preferences, limitations, and relative rights, of any class of shares before the issuance of any shares of that class;

	●	create one or more series within a class of shares, fix the number of shares of each such series, and designate, in whole or part, the powers, preferences, limitations, and relative rights of the series, all before the issuance of any shares of that series;

	●	alter or revoke the powers, preferences, limitations, and relative rights granted to or imposed upon any wholly unissued class of shares or any wholly unissued series of any class of shares; or

	●	increase or decrease the number of shares constituting any series, the number of shares of which was originally fixed by the Board of Directors, either before or after the issuance of shares of the series; provided that, the number may not be decreased below the number of shares of the series then outstanding, or increased above the total number of authorized shares of the applicable class of shares available for designation as a part of the series.

The issuance of Preferred Stock by our Board of Directors could adversely affect the rights of holders of our common stock. The potential issuance of Preferred Stock may:

	●	Have the effect of delaying or preventing a change in control of the Company;

	●	Discourage bids for the common stock at a premium over the market price of the common stock; and

	●	Adversely affect the market price of, and the voting and other rights of the holders of our common stock.

Common Stock

The exercise of stock options resulted in issuance of 4,000 shares of common stock in January 2013.

As referred to in Note 5 above, 7,787,249 shares of common stock of the Company were issued upon conversion of convertible promissory notes (the “Notes” as earlier defined).

Stock Options

In 2011 the Company established the 2011 Stock Option and Incentive Plan (the “Plan”) for directors, employees, consultants and other persons acting on behalf of the Company, under which 8,500,000 shares of common stock are authorized for issuance. Options granted under the Plan vest on the date of grant, over a fixed period of time, or upon the occurrence of certain events and have a contractual term of up to ten years.

During the twelve months ended December 31, 2014, the Company issued options to purchase 9,398,000 shares of common stock under the Plan to certain employees, no shares of common stock were issued upon exercise of options, and options to purchase 8,607,136 shares of common stock were forfeited by employees who resigned from the Company. At December 31, 2014, there were options to purchase 7,440,364 shares of common stock outstanding under the Plan.

F-14

As of December 31, 2014, there were 1,059,636 shares of common stock available for grant under the Plan.

A summary of the status of the options granted is as follows:

	Shares			Weighted-average exercise price		Average remaining contractual term- years		Aggregate Intrinsic value

Outstanding, December 31, 2012		4,610,000		$	0.26		8.71		-
Granted		2,475,500		$	0.15		9.32		-
Exercised		(4,000	)	$	0.25		9.63
Forfeited		(431,000	)		0.32
Outstanding, December 31, 2013		6,649,500		$	0.22		8.39		-
Granted		9,398,000		$	0.12		9.57		-
Exercised		0		$	0.00
Forfeited		(8,607,136	)	$	0.19
Outstanding, December 31, 2014		7,440,364		$	0.13		9.33		-
Exercisable: December 31, 2014		911,556		$	0.21		7.84		-
Expected to vest: December 31, 2014		5,607,083		$	0.12		9.54		-

As of December 31, 2014, there was $584,263 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over the remaining weighted-average vesting period of 3.54 years. The total fair value of options vested during the twelve months ended December 31, 2014 was $146,481. The aggregate intrinsic value of the options expected to vest in the future was $0.

Stock-based compensation expense for the years ended December 31, 2014 and 2013 was $121,480 and $223,122, respectively.

The fair value of the options granted by AllDigital Holdings, Inc., for the years ended December 31, 2014 and 2013 is estimated at $1,147,049 and $365,420, respectively.

F-15

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. The determination of the fair value of each stock option is affected by our stock price on the date of grant, as well as assumptions regarding a number of highly complex and subjective variables. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The assumptions used to value stock options are as follows:

Year Ended December 31,
	2014			2013
Dividend yield		—			—
Risk-free interest rate		1.60% to 1.65	%		1.66% to 3.04	%
Volatility		193	%		196	%
Expected life (in years)		7			6.5
Weighted average grant date fair value per share of options granted	$	0.12		$	0.15

The dividend yield is zero as the Company currently does not pay a dividend.

The risk-free interest rate is based on the U.S. Treasury bond.

Volatility is estimated based on comparable companies in the industry.

Warrants

A summary of the status of the warrants outstanding is as follows:

	Shares			Weighted-average exercise price

Outstanding – December 31, 2012		3,892,274		$	0.49
Granted		-			-
Forfeited		-			-
Exercised		-			-
Outstanding – December 31, 2013		3,892,274		$	0.49
Forfeited		(3,682,274	)		0.50
Exercised		-			-
Outstanding – December 31, 2014		210,000		$	0.26

Exercisable – December 31, 2014		210,000		$	0.26

The following table summarizes information about warrants outstanding at December 31, 2014:

Outstanding								Exercisable
Range of exercise prices		Number of warrants outstanding		Weighted-average remaining contractual life (in years)		Weighted-average exercise price		Number of warrants exercisable		Weighted-average exercise price
$	0.25		150,000		1.66	$	0.25		150,000	$	0.25
$	0.275		60,000		1.58	$	0.275		60,000	$	0.275
$	0.25 - $0.275		210,000		1.64	$	0.26		210,000	$	0.26

F-16

NOTE 8 – INCOME TAXES

The components of the income tax provision for the years ended December 31, 2014 and 2013 were as follows:

	December 31,
	2014		2013
Current	$	2,400	$	1,600
Deferred		-		-
Total	$	2,400	$	1,600

Income tax expense (benefit) for the years ended December 31, 2014 and 2013 differed from the amounts computed applying the federal statutory rate of 34% to pre-tax income as a result of:

	December 31,
	2014			2013

Computed “expected” tax provision (benefit)	$	(583,957	)	$	(187,200	)
Income taxes resulting from expenses not deductible for tax purposes		3,953			5,600
Stock compensation		43,012			75,900
Change in the valuation allowance for deferred tax assets net of return to provision adjustment		537,808			106,300
State and local income taxes, net of tax benefit		1,584			1,000
Total	$	2,400		$	1,600

Significant components of the Company’s deferred tax assets and liabilities for federal income taxes at December 31, 2014 and 2013 consisted of the following:

	December 31,
	2014			2013
Current deferred tax assets
Accrued expenses	$	137,724		$	44,400
Deferred compensation		10,953			11,000
Other		(3,117	)		3,200
Valuation allowance		(145,560	)		(58,600	)
Net current deferred tax assets	$	-		$	-

Long-term deferred tax assets
Net operating loss carryforward	$	1,188,268		$	644,700
Depreciation and amortization		13,407			13,700
Other		451			-
Valuation allowance		(1,202,126	)		658,400
Net deferred tax assets	$	-		$	-

The Company establishes a valuation allowance when it is more likely than not that the Company’s recorded net deferred tax asset will not be realized. In determining whether a valuation allowance is required, the Company must take into account all positive and negative evidence with regard to the utilization of a deferred tax asset. As of December 31, 2014 and December 31, 2013, the valuation allowance for deferred tax assets totaled approximately $1.3 million and $0.7 million, respectively. For the year ended December 31, 2014, the increase in the valuation allowance was $0.6 million.

F-17

The Company plans to continue to provide a full valuation allowance on future tax benefits until it can sustain an appropriate level of profitability and until such time, the Company would not expect to recognize any significant tax benefits in its future results of operations.

As of December 31, 2014, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $3.0 million, respectively, which begin to expire in 2027. The utilization of net operating loss carryforwards may be limited under the provisions of Internal Revenue Code Section 382 and similar state provisions due to a change in ownership.

The Company has not recognized any liability for unrecognized tax benefits. The Company expects any resolution of unrecognized tax benefits, if created, would occur while the full valuation allowance of deferred tax assets is maintained; therefore the Company does not expect to have any unrecognized tax benefits that, if recognized, would affect the effective tax rate.

The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2014 and December 31, 2013, the Company had no accrual for the payment of interest or penalties. For Federal purposes, the years subject to examination are 2011-2014. For California purposes, the years subject to examination are 2010-2014.

NOTE 9 – SIGNIFICANT AGREEMENTS AND CONCENTRATIONS

Terminated Merger Agreement

On January 6, 2013, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Broadcast International, Inc., a Utah corporation (“Broadcast”) and Alta Acquisition Corporation, a Nevada corporation and wholly-owned subsidiary of Broadcast International (“Merger Sub”).

On November 4, 2013, the Merger Agreement was terminated. Broadcast sent notice of termination without cause following the occurrence of the October 31, 2014 “end date” without closing having occurred. The Company rejected the purported termination under this provision. The Company then sent a notice terminating the Merger Agreement for cause due to Broadcast’s breach of the non-solicitation covenants in the Merger Agreement, which the Company believes triggers a termination fee of $100,000 and 4% of the equity of Broadcast on a non-diluted basis, and due to various other misrepresentations and breaches. The Company has reserved the right to pursue damages for breach, in addition to any applicable termination fee, from Broadcast.

As referred to in Note 5 above, during August and September, 2013, the Company sold an aggregate of $1,485,000 in convertible promissory notes to individual and institutional investors. The Notes provided that upon the earlier to occur of (a) November 30, 2014, if the Merger has not closed, or (b) the termination of the Merger Agreement, amounts owed under the Notes automatically converted into shares of common stock of the Company at a conversion price equal to the quotient of $6,750,000, divided by number of shares of common stock of the Company issued and outstanding.

As a result of a termination of the Merger Agreement prior to closing, on November 4, 2013, 7,787,249 shares of common stock were issued, and the Notes aggregating $1,485,000 were canceled.

F-18

Major Customers

At December 31, 2014 and December 31, 2013, two and two customers accounted for 68% and 71% of the outstanding accounts receivable, respectively.

For the twelve months ended December 31, 2014 and 2013, four and four customers accounted for 62% and 82% of total revenue, respectively.

Major Vendors

At December 31, 2014 and December 31, 2013, three and three vendors accounted for 68% and 62% of the outstanding accounts payable, respectively.

For the twelve months ended December 31, 2014 and 2013, three and four vendors accounted for 24% and 17% of total purchases, respectively.

Concentrations of Credit Risk

Financial instruments that may subject the Company to credit risk include uninsured cash-in-bank balances. The Company places its cash with high quality financial institutions located in Southern California. From time to time, such balances exceed amounts insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to its cash balances. As of December 31, 2014, the Company’s uninsured cash was $239,199.

NOTE 10 – SEGMENT INFORMATION

The Company currently operates in one business segment, digital broadcasting solutions. All fixed assets are located at the Company’s headquarters and data centers located in the United States. All sales for the twelve months ended December 31, 2014, were in the United States and Canada.

NOTE 11 – SUBSEQUENT EVENTS

Senior Convertible Secured Notes issued to vendors

On February 2015 and April 2015, we sold $135,000 and $28,461, respectively, in principal of Notes to two of our vendors in a non—cash transaction, which resulted in the aggregate pay down of $163,461 in trade payables that were owed as of December 31, 2014. Pursuant to this transaction the company issued and sold its 5% Senior Secured Convertible Note (the “Note”) with a principal of $163,461 to its vendors for an aggregate purchase price of $230,000. The underlying Notes are convertible into an aggregate of up to 1,089,740 shares of our common stock. In connection with the sale of the Note, the company entered into a Security Agreement with Mr. Smith and Richard P. Stevens, II., as collateral agent.

The Note has a maturity date of December 31, 2016. The Note will bear interest at the rate of five percent (5%) per annum payable quarterly on the fifth (5th) day after the last business day of each calendar quarter beginning with the quarter ended December 31, 2014. After the maturity date, and until the outstanding principal and accrued interest on the Note has been paid, the Note will bear interest at a rate of 1.0% per month. The outstanding principal under the Note is convertible at any time prior to repayment, in whole or in part, into shares of our company’s common stock at a conversion price of $0.15 per share, subject to adjustment for stock splits, stock dividends and recapitalizations. All accrued interest on the Note shall be paid in cash upon any conversion of the Note. The Note is secured under the terms of the Security Agreement by a first priority lien on all of our company’s tangible and intangible assets.

Senior Convertible Secured Note issued to Steve Smith

On February 10, 2015, we entered into a Securities Purchase Agreement with Steve Smith, Vice President of Network Services and board member, pursuant to which the company issued and sold its 5% Senior Secured Convertible Note (the “Note”) with a principal of $230,000 to Mr. Smith for an aggregate purchase price of $230,000. The Note is convertible into an aggregate of up to 1,533,333 shares of our common stock. In connection with the sale of the Note, the company entered into a Security Agreement with Mr. Smith and Richard P. Stevens, II., as collateral agent.

Option grant to Mr. Eisenstein

On January 29, 2015, our board granted Mr. Eisenstein an option to purchase 277,500 shares of common stock under our 2011 Stock Incentive Plan. Subject to the terms of a Stock Option Agreement, the option is exercisable over a term of 10 years at an exercise price of $0.09 per share, which is equal to the grant-date closing price of our common stock. The option vested over a period of 4 years, subject to Mr. Eisenstein’s continued employment. Twenty-five percent (25%) of shares underlying the option would vest on the first anniversary of the grant date, and then 1/36 of the shares underlying the option would vest each month thereafter until fully vested.

F-19

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	ALLDIGITAL HOLDINGS, INC.

April 20, 2015	By:	/s/ Michael Linos
Date		Michael Linos
		Chief Executive Officer, President and Director

April 20, 2015	By:	/s/ Brad Eisenstein
Date		Bradley A. Eisenstein
		Chief Financial Officer Chief Operating Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Michael Linos	Chief Executive Officer, President and Director	April 20, 2015
Michael Linos	(Principal Executive Officer)

/s/ Brad Eisenstein	Chief Financial Officer and Chief Operating Officer	April 20, 2015
Brad Eisenstein	(Principal Financial and Accounting Officer)

/s/ Stephen Smith	Vice President and Director	April 20, 2015
Stephen Smith

/s/ Mark Walsh	Director	April 20, 2015
Mark Walsh

/s/ David Williams	Director	April 20, 2015
David Williams

EXHIBITS FILED WITH THIS REPORT

Exhibit Number		Description
10.4		Amended and Restated 2011 stock plan
10.22		Employment Agreement between Registrant and Brad Eisenstein
10.24		Amended and Restated Employment Agreement between Registrant and Michael Linor.
10.26		Form of 5% Senior Secured Convertible Notes issued in October 2014, November 2014, and February 2015.
10.27		Form of Security Agreement regarding the 5% Senior Secured Convertible Notes
23.1		Consent of Independent Registered Public Accounting Firm
31.1		Section 302 Certification of Chief Executive Officer
31.2		Section 302 Certification of Chief Financial Officer
32.1		Section 906 Certification of Chief Executive Officer
32.2		Section 906 Certification of Chief Financial Officer
101.INS		XBRL Instance Document**
101.SCH		XBRL Taxonomy Extension Schema**
101.CAL		XBRL Taxonomy Extension Calculation Linkbase**
101.DEF		XBRL Taxonomy Extension Definition Linkbase **
101.LAB		XBRL Taxonomy Extension Label Linkbase**
101.PRE		XBRL Taxonomy Extension Presentation Linkbase**

Exhibit 10.4

AllDIGITAL HOLDINGS, INC.

Amended and Restated 2011 STOCK INCENTIVE PLAN

1. Purpose. The purpose of this Amended and Restated 2011 Incentive Stock Plan (the “Plan”) is to enable AllDigital Holdings, Inc. (the “Company”) to attract and retain the services of (i) selected employees, officers and directors of the Company or any parent or subsidiary of the Company and (ii) selected nonemployee agents, consultants, advisers and independent contractors of the Company or any parent or subsidiary of the Company. For purposes of this Plan, a person is considered to be employed by or in the service of the Company if the person is employed by or in the service of any entity (an “Employer”) that is the Company or any parent or subsidiary of the Company.

2. Shares Subject to the Plan. Subject to adjustment as provided below and in Section 9, the shares to be offered under the Plan shall consist of Common Stock of the Company, and the total number of shares of Common Stock that may be issued under the Plan shall be 8,500,000. If an option or Performance-based Award (as defined below) granted under the Plan expires, terminates or is canceled, the unissued shares subject to that option or Performance-based Award shall again be available under the Plan. If shares awarded as a bonus pursuant to Section 7 under the Plan are forfeited to or repurchased by the Company, the number of shares forfeited or repurchased shall again be available under the Plan.

3. Effective Date and Duration of Plan.

3.1 Effective Date. The initial 2011 Stock Incentive Plan became effective on July 28, 2011 (the “Effective Date”). Any awards may be granted and shares may be issued with respect to such awards at any time after the Effective Date and before termination of the Plan (and any awards with respect to shares of common stock added to the Plan as a result of an amendment may be granted after the effective date of such amendment).

3.2 Duration. The Plan shall continue in effect until the earliest to occur of (a) July 1, 2021, (b) the date all shares available for issuance under the Plan have been issued and all restrictions on the shares have lapsed, and (c) the date set by the Board of Directors. The Board of Directors may suspend or terminate the Plan at any time except with respect to options, Performance-based Awards and shares subject to restrictions then outstanding under the Plan. Termination shall not affect any outstanding options, Performance-based Awards, any right of the Company to repurchase shares or the forfeitability of shares issued under the Plan.

4. Administration.

4.1 Board of Directors. The Plan shall be administered by the Board of Directors of the Company, which shall determine and designate the individuals to whom awards shall be made, the amount of the awards and the other terms and conditions of the awards. Subject to the provisions of the Plan, the Board of Directors may adopt and amend rules and regulations relating to administration of the Plan, advance the lapse of any waiting period, accelerate any exercise date, waive or modify any restriction applicable to shares (except those restrictions imposed by law) and make all other determinations in the judgment of the Board of Directors necessary or desirable for the administration of the Plan. The interpretation and construction of the provisions of the Plan and related agreements by the Board of Directors shall be final and conclusive. The Board of Directors may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner and to the extent it deems expedient to carry the Plan into effect, and the Board of Directors shall be the sole and final judge of such expediency.

4.2 Committee. The Board of Directors may delegate to any committee of the Board of Directors (the “Committee”) any or all authority for administration of the Plan. If authority is delegated to the Committee, all references to the Board of Directors in the Plan shall mean and relate to the Committee, except (i) as otherwise provided by the Board of Directors and (ii) only the Board of Directors may amend or terminate the Plan as provided in Sections 3, 9 and 10.

5. Types of Awards; Eligibility; Limitations. The Board of Directors may, from time to time, take the following actions, separately or in combination, under the Plan: (i) grant options that are Incentive Stock Options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) (“Incentive Stock Options”); (ii) grant options that are not Incentive Stock Options (“Non-Statutory Stock Options”); (iii) award stock bonuses and restricted shares as provided in Section 7; and (iv) award Performance-based Awards as provided in Section 8. Awards may be made to employees, including employees who are officers or directors, and to other individuals described in Section 1 selected by the Board of Directors; provided, however, only employees of the Company or any parent or subsidiary of the Company (as defined in Sections 424(e) and 424(f) of the Code) are eligible to receive Incentive Stock Options under the Plan. The Board of Directors shall select the individuals to whom awards shall be made and shall specify the action taken with respect to each individual to whom an award is made. At the discretion of the Board of Directors, an individual may be given an election to surrender an award in exchange for the grant of a new award.

6. Option Grants.

6.1 General Rules Relating to Options.

6.1-1 Terms of Grant. The Board of Directors may grant options under the Plan. Subject to the provisions of subsections (a), (b) and (c) of this Section 6.1-1, from which the Board of Directors is not authorized to deviate, with respect to each option grant, the Board of Directors shall determine the number of shares subject to the option, the exercise price, the period of the option, the time or times at which the option may be exercised and whether the option is an Incentive Stock Option or a Non-Statutory Stock Option. At the time of the grant of an option or at any time thereafter, the Board of Directors may provide that an optionee who exercised an option with Common Stock of the Company shall automatically receive a new option to purchase additional shares equal to the number of shares surrendered and may specify the terms and conditions of such new options.

6.1-1(a) Limitations on Grants to 10 Percent Shareholders. An option may be granted to a person possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or any parent or subsidiary (as defined in subsections 424(e) and 424(f) of the Code) only if the exercise price is at least 110 percent of the fair market value of the Common Stock subject to the option on the date it is granted and the option by its terms is not exercisable after the expiration of five years from the date it is granted. Unless otherwise specified, for purposes of any award granted under the Plan, the fair market value of the Common Stock shall be the closing price of the Common Stock last reported before the time the award is granted (or the time as of which the determination must be made), if the stock is publicly traded, or another value of the Common Stock as specified by the Board of Directors.

6.1-1(b) Duration of Options. Subject to Sections 6.1-2, 6.1-4 and 6.1-1(a), options shall continue in effect for the period fixed by the Board of Directors, which period shall be no more than 10 years from the date the option is granted.

6.1-1(c) Exercise Price. The exercise price of an option shall not be less than 100% of the fair market value of the Common Stock covered by the option at the date the option is granted.

6.1-1(d) Nontransferability. Except as approved by the Board of Directors to the extent permitted by governing law, each stock option shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the optionee’s domicile at the time of death, and during the optionee’s lifetime, shall be exercisable only by the optionee.

6.1-2 Exercise of Options. Except as provided in Section 6.1-3 or as determined by the Board of Directors, no option granted under the Plan may be exercised unless at the time of exercise the optionee is employed by or in the service of an Employer and shall have been so employed or provided such service continuously since the date the option was granted. Except as provided in Sections 6.1-3 and 9 and in this paragraph, options granted under the Plan may be exercised from time to time over the period stated in each option in amounts and at times prescribed by the Board of Directors. Options may not be exercised for fractional shares. Unless otherwise determined by the Board of Directors, if an optionee does not exercise an option in any one year for the full number of shares to which the optionee is entitled in that year, the optionee’s rights shall be cumulative and the optionee may purchase those shares in any subsequent year during the term of the option.

6.1-3 Termination of Employment or Service.

6.1-3(a) General Rule. Unless the Board of Directors determines to extend the period of exercise for an option (either at or following the grant date), if an optionee’s employment or service with the Employer terminates for any reason other than because of total disability or death as provided in Sections 6.1-3(b) and (c), his or her option may be exercised at any time before the expiration date of the option or the expiration of 90 days after the date of termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of termination.

6.1-3(b) Termination Because of Total Disability. Unless the Board of Directors determines to extend the period of exercise for an option (either at or following the grant date) if an optionee’s employment or service with the Employer terminates because of total disability, his or her option may be exercised at any time before the expiration date of the option or before the date 12 months after the date of termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of termination. The term “total disability” means a medically determinable mental or physical impairment that is expected to result in death or has lasted or is expected to last for a continuous period of 12 months or more and that, in the opinion of the Company and two independent physicians, causes the optionee to be unable to perform his or her duties as an employee, director, officer or consultant of the Employer and unable to be engaged in any substantial gainful activity. Total disability shall be deemed to have occurred on the first day after the two independent physicians have furnished their written opinion of total disability to the Company and the Company has reached an opinion of total disability.

6.1-3(c) Termination Because of Death. Unless the Board of Directors determines to extend the period of exercise for an option, (either at or following the grant date), if an optionee dies while employed by or providing service to an Employer, his or her option may be exercised at any time before the expiration date of the option or before the date 12 months after the date of death, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of death and only by the person or persons to whom the optionee’s rights under the option shall pass by the optionee’s will or by the laws of descent and distribution of the state or country of domicile at the time of death.

6.1-3(d) Amendment of Exercise Period Applicable to Termination. The Board of Directors may at any time extend the 90-day and 12-month exercise periods any length of time not longer than the original expiration date of the option. The Board of Directors may at any time increase the portion of an option that is exercisable, subject to terms and conditions determined by the Board of Directors.

6.1-3(e) Failure to Exercise Option. To the extent that the option of any deceased optionee or any optionee whose employment or service terminates is not exercised within the applicable period, all further rights to purchase shares pursuant to the option shall cease and terminate.

6.1-3(f) Leave of Absence. Absence on leave approved by the Employer or on account of illness or disability shall not be deemed a termination or interruption of employment or service. Unless otherwise determined by the Board of Directors, vesting of options shall continue during a medical, family or military leave of absence, whether paid or unpaid, and vesting of options shall be suspended during any other unpaid leave of absence.

6.1-4 Purchase of Shares.

6.1-4(a) Notice of Exercise. Unless the Board of Directors determines otherwise, shares may be acquired pursuant to an option granted under the Plan only upon the Company’s receipt of written notice from the optionee of the optionee’s binding commitment to purchase shares, specifying the number of shares the optionee desires to purchase under the option and the date on which the optionee agrees to complete the transaction, and, if required to comply with the Securities Act of 1933 and/or governing state securities laws or laws of foreign countries with jurisdiction, containing a representation that it is the optionee’s intention to acquire the shares for investment and not with a view to distribution.

6.1-4(b) Payment. Unless the Board of Directors determines otherwise (either at or following the grant date), on or before the date specified for completion of the purchase of shares pursuant to an option exercise, the optionee must pay the Company the full purchase price of those shares in cash or by check or, with the consent of the Board of Directors, in whole or in part, in Common Stock of the Company valued at fair market value, restricted stock or other contingent awards denominated in either stock or cash, promissory notes (to the extent permitted by governing law) and other forms of consideration. Unless otherwise determined by the Board of Directors (either at or following the grant date), any Common Stock provided in payment of the purchase price must have been previously acquired and held by the optionee for at least six months. The fair market value of Common Stock provided in payment of the purchase price shall be the closing price of the Common Stock last reported before the time payment in Common Stock is made or, if earlier, committed to be made, if the Common Stock is publicly traded, or another value of the Common Stock as specified by the Board of Directors. No shares shall be issued until full payment for the shares has been made, including all amounts owed for tax withholding. With the consent of the Board of Directors, an optionee may request the Company to apply automatically the shares to be received upon the exercise of a portion of a stock option (even though stock certificates have not yet been issued) to satisfy the purchase price for additional portions of the option.

6.1-4(c) Tax Withholding. Each optionee who has exercised an option shall, immediately upon notification of the amount due, if any, pay to the Company in cash or by check amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If additional withholding is or becomes required (as a result of exercise of an option or as a result of disposition of shares acquired pursuant to exercise of an option) beyond any amount deposited before delivery of the certificates, the optionee shall pay such amount, in cash or by check, to the Company on demand. If the optionee fails to pay the amount demanded, the Company or the Employer may withhold that amount from other amounts payable to the optionee, including salary, subject to applicable law. With the consent of the Board of Directors, an optionee may satisfy this obligation, in whole or in part, by instructing the Company to withhold from the shares to be issued upon exercise or by delivering to the Company other shares of Common Stock; provided, however, that the number of shares so withheld or delivered shall not exceed the minimum amount necessary to satisfy the required withholding obligation.

6.1-4(d) Reduction of Reserved Shares. Upon the exercise of an option, the number of shares reserved for issuance under the Plan shall be reduced by the number of shares issued upon exercise of the option (less the number of any shares surrendered in payment for the exercise price or withheld to satisfy withholding requirements).

6.1-5 Limitations on Grants to Non-Exempt Employees. Unless otherwise determined by the Board of Directors (either at or following the grant date), if an employee of the Company or any parent or subsidiary of the Company is a non-exempt employee subject to the overtime compensation provisions of Section 7 of the Fair Labor Standards Act (the “FLSA”), any option granted to that employee shall be subject to the following restrictions: (i) the exercise price shall be at least 100 percent of the fair market value of the Common Stock subject to the option on the date it is granted; and (ii) the option shall not be exercisable until at least six months after the date it is granted; provided, however, that this six-month restriction on exercisability will cease to apply if the employee dies, becomes disabled or retires, there is a change in ownership of the Company, or in other circumstances permitted by regulation, all as prescribed in Section 7(e)(8)(B) of the FLSA.

6.2 Incentive Stock Options. Incentive Stock Options shall be subject to the following additional terms and conditions:

6.2-1 Limitation on Amount of Grants. If the aggregate fair market value of stock (determined as of the date the option is granted) for which Incentive Stock Options granted under this Plan (and any other stock incentive plan of the Company or its parent or subsidiary corporations, as defined in subsections 424(e) and 424(f) of the Code) are exercisable for the first time by an employee during any calendar year exceeds $100,000, the portion of the option or options not exceeding $100,000, to the extent of whole shares, will be treated as an Incentive Stock Option and the remaining portion of the option or options will be treated as a Non-Statutory Stock Option. The preceding sentence will be applied by taking options into account in the order in which they were granted. If, under the $100,000 limitation, a portion of an option is treated as an Incentive Stock Option and the remaining portion of the option is treated as a Non-Statutory Stock Option, unless the optionee designates otherwise at the time of exercise, the optionee’s exercise of all or a portion of the option will be treated as the exercise of the Incentive Stock Option portion of the option to the full extent permitted under the $100,000 limitation. If an optionee exercises an option that is treated as in part an Incentive Stock Option and in part a Non-Statutory Stock Option, the Company will designate the portion of the stock acquired pursuant to the exercise of the Incentive Stock Option portion as Incentive Stock Option stock by issuing a separate certificate for that portion of the stock and identifying the certificate as Incentive Stock Option stock in its stock records.

6.2-2 Exercise price. The exercise price shall not be less than 100 percent of the fair market value of the Common Stock covered by the Incentive Stock Option at the date the option is granted (with fair market value to be determined by any method designated by the Board of Directors that is consistent with the Code).

6.2-3 Early Dispositions. If within two years after an Incentive Stock Option is granted or within 12 months after an Incentive Stock Option is exercised, the optionee sells or otherwise disposes of Common Stock acquired on exercise of the Option, the optionee shall within 30 days of the sale or disposition notify the Company in writing of (i) the date of the sale or disposition, (ii) the amount realized on the sale or disposition and (iii) the nature of the disposition (e.g., sale, gift, etc.).

6.2-4. Nontransferability. Each Incentive Stock Option shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the optionee’s domicile at the time of death, and during the optionee’s lifetime, shall be exercisable only by the optionee.

7. Stock Bonuses and Restricted Stock. Subject to any restrictions imposed by applicable law, the Board of Directors may award shares under the Plan as stock bonuses or as restricted stock. Shares awarded as a bonus or as restricted stock shall be subject to the terms, conditions and restrictions, if any, determined by the Board of Directors. The restrictions may, subject to any limitations imposed by applicable law (including California Code of Regulations Rule 260.140.42, if applicable), include restrictions concerning transferability and forfeiture of the shares awarded, together with any other restrictions determined by the Board of Directors. The Board of Directors may require the recipient to sign an agreement as a condition of the award, but may not require the recipient to pay any monetary consideration other than amounts necessary to satisfy tax withholding requirements. The agreement may contain any terms, conditions, restrictions, representations and warranties required by the Board of Directors. The certificates representing the shares awarded shall bear any legends required by the Board of Directors. The Company may require any recipient of a stock bonus or restricted stock to pay to the Company in cash or by check upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the recipient fails to pay the amount demanded, the Company or the Employer may withhold that amount from other amounts payable to the recipient, including salary, subject to applicable law. With the consent of the Board of Directors, a recipient may satisfy this obligation, in whole or in part, by instructing the Company to withhold from any shares to be issued or by delivering to the Company other shares of Common Stock; provided, however, that the number of shares so withheld or delivered shall not exceed the minimum amount necessary to satisfy the required withholding obligation. Upon the issuance of a stock bonus or restricted stock, the number of shares reserved for issuance under the Plan shall be reduced by the number of shares issued, less the number of shares withheld or delivered to satisfy withholding obligations.

8. Performance-based Awards. To the extent counsel for the Company determines that the applicable grants qualify, the Board of Directors may grant awards intended to qualify as qualified performance-based compensation under Section 162(m) of the Code and the regulations thereunder (“Performance-based Awards”). Performance-based Awards shall be denominated at the time of grant either in Common Stock (“Stock Performance Awards”) or in dollar amounts (“Dollar Performance Awards”). Payment under a Stock Performance Award or a Dollar Performance Award shall be made, at the discretion of the Board of Directors, in Common Stock (“Performance Shares”), or in cash or in any combination thereof. Performance-based Awards shall be subject to the following terms and conditions:

8.1 Award Period. The Board of Directors shall determine the period of time for which a Performance-based Award is made (the “Award Period”).

8.2 Performance Goals and Payment. The Board of Directors shall establish in writing objectives (“Performance Goals”) that must be met by the Company or any subsidiary, division or other unit of the Company (“Business Unit”) during the Award Period as a condition to payment being made under the Performance-based Award. The Performance Goals for each award shall be one or more targeted levels of performance with respect to one or more of the following objective measures with respect to the Company or any Business Unit: earnings, earnings per share, stock price increase, total shareholder return (stock price increase plus dividends), return on equity, return on assets, return on capital, economic value added, revenues, operating income, inventories, inventory turns, cash flows or any of the foregoing before the effect of acquisitions, divestitures, accounting changes, and restructuring and special charges (determined according to criteria established by the Board of Directors). The Board of Directors shall also establish the number of Performance Shares or the amount of cash payment to be made under a Performance-based Award if the Performance Goals are met or exceeded, including the fixing of a maximum payment (subject to Section 8.4). The Board of Directors may establish other restrictions to payment under a Performance-based Award, such as a continued employment requirement, in addition to satisfaction of the Performance Goals. Some or all of the Performance Shares may be issued at the time of the award as restricted shares subject to forfeiture in whole or in part if Performance Goals or, if applicable, other restrictions are not satisfied.

8.3 Computation of Payment. During or after an Award Period, the performance of the Company or Business Unit, as applicable, during the period shall be measured against the Performance Goals. If the Performance Goals are not met, no payment shall be made under a Performance-based Award. If the Performance Goals are met or exceeded, the Board of Directors shall certify that fact in writing and certify the number of Performance Shares earned or the amount of cash payment to be made under the terms of the Performance-based Award.

8.4 Maximum Awards. No participant may receive in any fiscal year Stock Performance Awards under which the aggregate amount payable under the awards exceeds the equivalent of 500,000 shares of Common Stock or Dollar Performance awards under which the aggregate amount payable under the awards exceeds $1,000,000.

8.5 Tax Withholding. With respect to Dollar Performance Awards, the Company or the Employer may withhold any amounts necessary to satisfy any applicable federal, state or local tax withholding requirements from the Dollar Performance Award. Each participant who has received Performance Shares shall, upon notification of the amount due, pay to the Company in cash or by check amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If the participant fails to pay the amount demanded, the Company or the Employer may withhold that amount from other amounts payable to the participant, including salary, subject to applicable law. With the consent of the Board of Directors, a participant may satisfy this obligation with respect to Performance Shares, in whole or in part, by instructing the Company to withhold from any shares to be issued or by delivering to the Company other shares of Common Stock; provided, however, that the number of shares so delivered or withheld shall not exceed the minimum amount necessary to satisfy the required withholding obligation.

8.6 Effect on Shares Available. The payment of a Performance-based Award in cash shall not reduce the number of shares of Common Stock reserved for issuance under the Plan. The number of shares of Common Stock reserved for issuance under the Plan shall be reduced by the number of shares issued upon payment of an award, less the number of shares delivered or withheld to satisfy withholding obligations.

9. Changes in Capital Structure.

9.1 Stock Splits, Stock Dividends. If the outstanding Common Stock of the Company is hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares, dividend payable in shares, distribution, reverse stock split, recapitalization or reclassification, appropriate adjustment shall be made by the Board of Directors in the number and kind of shares available for grants under the Plan and in all other share amounts set forth in the Plan. In addition, the Board of Directors shall make appropriate adjustment in the number and kind of shares as to which outstanding options or other awards, or portions thereof then unexercised, shall relate, so that the holder’s proportionate interest before and after the occurrence of the event is maintained. Notwithstanding the foregoing, the Board of Directors shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Board of Directors. Any such adjustments made by the Board of Directors shall be conclusive.

9.2 Mergers, Reorganizations, Etc. For purposes of this Section, a “Transaction” shall mean (a) a transaction (or a related series of transactions not in the ordinary course of business) in which a majority of the assets or business of the Company is transferred, by merger, lease, sale, consolidation, plan of exchange, split-up, split-off, spin-off, reorganization, liquidation or other transfer, to a person or entity that is not a parent of the Company, a wholly-owned subsidiary of the Company or another entity in which the shareholders of the Company immediately prior to such transaction (or the first of a series of related transaction) receive in the transaction on a pro rata basis and own immediately after the transaction (or the last of a series of related transactions) a majority of the issued and outstanding shares of capital stock, or (b) a transfer by one or more shareholders, in one transfer or several related transfers (such as in response to a tender offer or in a collectively negotiated sale), of 50% or more of the Common Stock outstanding on the date of such transfer (or the first of such related transfers) to persons, other than wholly-owned subsidiaries or family trusts, who were not shareholders of the Company prior to the first such transfer.

In the event of a Transaction, the Board of Directors shall, in its sole discretion and to the extent possible under the structure of the Transaction, select one of the following alternatives for treating outstanding options and other awards under the Plan prior to the consummation of the Transaction:

9.2-1 Outstanding options and other awards shall remain in effect in accordance with their terms.

9.2-2 Outstanding options and other awards shall be converted into options to purchase stock or awards with respect to stock in one or more of the corporations, including the Company, that are the surviving or acquiring corporations in the Transaction. The amount, type of securities subject thereto and exercise price of the converted options or other awards shall be determined by the Board of Directors of the Company, taking into account the relative values of the companies involved in the Transaction and the exchange rate, if any, used in determining shares of the surviving corporation(s) to be held by holders of shares of the Company following the Transaction. Unless otherwise determined by the Board of Directors, the converted options or other awards shall be vested only to the extent that the vesting requirements relating to options or other awards granted hereunder have been satisfied. The Board of Directors may, in its sole discretion, accelerate the exercisability of options so that they are exercisable in full prior to being converted into options to purchase stock of the surviving or acquiring corporations in the Transaction.

9.2-3 With respect to options, the Board of Directors shall provide a period of at least 10 days before the completion of the Transaction during which outstanding options may be exercised, to the extent then exercisable, and upon the expiration of that period, all unexercised options shall immediately terminate. The Board of Directors may, in its sole discretion, accelerate the exercisability of options so that they are exercisable in full during that period.

9.2-4 With respect to awards other than options, the Board of Directors may, in its sole discretion and subject to applicable law, terminate or waive the application of all forfeiture provisions, performance thresholds and similar restrictions at any time prior to the consummation of the Transaction.

9.3 Dissolution of the Company. In the event of the dissolution of the Company, options and other awards shall be treated in accordance with Section 9.2-3.

9.4 Rights Issued by Another Corporation. The Board of Directors may also grant options and stock bonuses and Performance-based Awards and issue restricted stock under the Plan with terms, conditions and provisions that vary from those specified in the Plan, provided that any such awards are granted in substitution for, or in connection with the assumption of, existing options, stock bonuses, Performance-based Awards and restricted stock granted, awarded or issued by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a Transaction.

10. Amendment of the Plan. The Board of Directors may at any time modify or amend the Plan in any respect (except that the Board of Directors may not make any amendment that would cause the Plan to cease to comply with governing law). Except as provided in Section 9, however, no change in an award already granted shall be made without the written consent of the holder of the award if the change would adversely affect the holder.

11. Approvals. The Company’s obligations under the Plan are subject to the approval of state and federal authorities or agencies with jurisdiction in the matter. The Company will use its best efforts to take steps required by state or federal law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange on which the Company’s shares may then be listed, in connection with the grants under the Plan. The foregoing notwithstanding, the Company shall not be obligated to issue or deliver Common Stock under the Plan if such issuance or delivery would violate state or federal securities laws. Unless the Company determines, with advice of counsel that such legend is not necessary, certificates representing all shares of Common Stock issued in connection with the Plan will contain a legend indicating that such shares of Common Stock are “restricted securities,” as defined under Rule 144 promulgated under the Securities Act of 1933, as amended, and that such shares may not be transferred unless such transfer is registered under the Securities Act and governing state securities laws or exempt from the registration requirements of the same.

12. Employment and Service Rights. Nothing in the Plan or any award pursuant to the Plan shall (i) confer upon any employee any right to be continued in the employment of an Employer or interfere in any way with the Employer’s right to terminate the employee’s employment at will at any time, for any reason, with or without cause, or to decrease the employee’s compensation or benefits, or (ii) confer upon any person engaged by an Employer any right to be retained or employed by the Employer or to the continuation, extension, renewal or modification of any compensation, contract or arrangement with or by the Employer.

13. Rights as a Shareholder. The recipient of any award under the Plan shall have no rights as a shareholder with respect to any shares of Common Stock until the date the recipient becomes the holder of record of those shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date occurs before the date the recipient becomes the holder of record.

14. Compliance with Section 409A of the Code. This Plan is intended to comply and shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent. To the extent that an award or the payment, settlement or deferral thereof is subject to Section 409A of the Code, the award shall be granted, paid, settled or deferred in a manner that will comply with Section 409A of the Code, including regulations or other guidance issued with respect thereto, except as otherwise determined by the Committee. Any provision of this Plan that would cause the grant of an award or the payment, settlement or deferral thereof to fail to satisfy Section 409A of the Code shall be amended to comply with Section 409A of the Code on a timely basis, which may be made on a retroactive basis, in accordance with regulations and other guidance issued under Section 409A of the Code.

15. Compliance with Certain California Code Sections.

15.1 Maximum Number of Options. At any time the Company or the Plan is subject to the requirements of Rule 260.140.45 of the California Code of Regulations, the total number of securities issuable upon the exercise of outstanding options and the total number of shares provided for under any stock bonus or similar plan or agreement shall not exceed the Applicable Percentage, as defined below, as calculated in accordance with such rule. The Applicable Percentage, approved by the holders of at least two-thirds of the outstanding shares of common stock of the Company, is 35% of the outstanding shares of capital stock of the Company (including convertible preferred securities on an as converted basis) as of the respective determination date.

15.1 Delivery of Financial Statements. At any time the Company or the Plan is subject the requirements of Rule 260.140.46 of the California Code of Regulations, the Company shall, at least annually, deliver financial statements required by such rule to the holders of securities granted or issued pursuant to the Plan.

Initial 2011 Stock Incentive Plan adopted by Board and shareholders on July 28, 2011. Amended and Restated 2011 Stock Incentive Plan adopted by the Board and shareholders on January 3, 2012.

Exhibit 10.22

EMPLOYMENT AGREEMENT

BRAD EISENSTEIN

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of September 8, 2014 (the “Effective Date”), by and between AllDigital, Inc., a California corporation (the “Company”), and Brad Eisenstein (“Employee”). In consideration of the mutual covenants set forth below, the Company and Employee hereby agree as follows:

1. Employment Offer Contingencies. Employee will be required, as a condition of employment with the Company, to: (a) successfully complete a background check; (b) execute the Company’s Confidential, Proprietary Information and Invention Assignment Agreement, (c) execute the Company’s Security Training Acknowledgement Form, (d) provide, as required by law, legal proof of identity and authorization to work in the United States, and (e) if applicable, obtain a written consent or release from Employee’s current employer to join Company in the form of the Company’s Release Agreement. The above documents will be provided in advance and Employee will have adequate time to review them, but the documents must be completed and submitted to Employer no later than Employee’s first day of employment with the Company. Upon commencement of employment, Employee will be provided a copy of the Company’s Employee Handbook, which Employee will be required to review and submit an executed written acknowledgement thereof within 30 days of beginning employment with the Company.

2. At Will Employment. The Company hereby employs Employee, and Employee hereby accepts employment by the Company. The parties acknowledge and agree that the Employee’s employment relationship is “at-will,” meaning that either party may terminate the employment relationship for any reason (or no reason at all) at any time, with or without cause and with or without prior notice. Any termination of Employee by the Company shall be by action of the Board of Directors of the “Parent Company.” “Parent Company” shall mean any entity that wholly owns the Company and, if that entity is wholly owned by another entity, shall include the entity that wholly-owns the entity that owns the Company. The ultimate Parent Company and its consolidated direct and indirect subsidiaries are collectively referred to herein as the “Consolidated Company.”

3. Services. Employee shall serve as Chief Financial Officer and Chief Operating Officer of the Company (or Consolidated Company, as the case may be) and perform such services for the Company as are customary for such position and as may be assigned to him from time to time by the President of the Company (or, in his/her absence, the Board of Directors of the Parent) which, generally, shall include the following:

	(i)	Serving as a key business partner to the executive team to jointly develop and execute upon weekly, monthly, quarterly and annual priorities for the Company;

	(ii)	Managing and continuing to develop the accounting, finance, administration and operations functions of the business, including the development and implementation of practices and procedures to strengthen and streamline operations;

	(iii)	Supporting the successful completion of financing transactions, including working with investment bankers in the development of investor documents, participating in and attending road show presentations, coordinating and communicating with the Company’s financial partners and agents, working with counsel, interacting with potential investors, and facilitating the closing;

	(iv)	Developing, maintaining, and updating as required the Company’s marketing collateral materials for potential investors, including the one page executive summary, overview presentation, and forecast model;

	(v)	Deal desk support, including contract administration and vendor and customer management matters related to new contracts and modifications to existing contracts;

	(vi)	M&A – work with the executive team to plan, coordinate, and conduct due diligence and integration of target acquisitions; and

	(vii)	Performing other related duties as assigned.

4. Outside Activities. During the term of this Agreement, or any extensions thereof, Employee agrees to not engage in any other gainful employment, business or activity that is competitive to, or in conflict (directly, indirectly, actual or potential) with the Consolidated Company, without the written consent of the Company. While Employee renders services to the Consolidated Company, Employee will not assist any person or organization in competing with the Consolidated Company, in preparing to compete with the Consolidated Company, or in hiring any employees of the Consolidated Company.

5. Work and Reside in Orange County. Employee agrees that he will work full time at the Company’s main office in Irvine, California, and be required to reside (in a primary residence) in the immediate Irvine or greater Orange County, California metropolitan area for the duration of Employee’s employment.

6. Restrictive Covenants During Term.

(a) During his employment by the Company, Employee shall devote his full time and services exclusively to the Consolidated Company and will not, without the prior written consent of the Board of Directors of the Parent Company, own, either directly or indirectly, any interest in any privately-held business or commercial enterprise which is competitive with the business conducted by the Consolidated Company. Furthermore, Employee shall not, without the prior written consent of the Board of Directors of the Parent Company, serve as a partner, officer, director, advisor or employee of, or act in any other similar capacity for, any business or commercial enterprise which is competitive with the business conducted by the Consolidated Company. However, nothing contained in this Section 6 shall be construed to prohibit Employee from purchasing the stock or other securities of any corporation or other business entity whose stock or securities are traded on any national or regional securities exchange or in the national over-the-counter market.

(b) During his employment by the Company, Employee shall comply with all employee manuals, handbook, and policies and procedures adopted by the Board of Directors of the Company, unless such manual, handbook, policy or procedure expressly provides that it is not applicable to Employee or a person holding Employee’s position. Without limiting the generality of the foregoing, and whether or not included in any manual, handbook, policy or procedure, Employee shall not enter into any agreement (written or verbal) or other instrument that includes a financial, service or other obligation on the part of any Consolidated Company unless the Board of Directors of the Company or another executive officer of the Company has reviewed and approved such agreement or instrument.

7. Compensation.

a. Base Salary. As compensation for the services to be performed hereunder, Employee shall receive an annual base salary (“Base Salary”) of $144,000. The Base Salary shall be subject to adjustment upward, but not downward, in the sole and absolute discretion of the Board of Directors of the Parent Company. All Base Salary hereunder shall be payable in accordance with the Company’s customary payroll practices and subject to federal and state withholding requirements.

b. Bonuses. Employee will have the ability to earn an amount equal to 50% of the annual Base Salary as a “Management by Objective Bonus” (“MBO Bonus”). The MBO Bonus will be deemed earned by the Employee following the successful achievement of quarterly objectives approved in writing by the Board of Directors of the Parent Company. The MBO Bonus will be payable in quarterly payments. The MBO Bonus, if earned, will be paid within 45 days of the end of the fiscal quarter, except for any bonus due and payable at the Company’s year-end, which will then be due no later than March 15 of the following year. If Employee’s employment is terminated for any reason during any bonus term, the Employee will receive the payment of his pro-rated share of the MBO Bonus within 45 days of the end of the fiscal quarter provided that the written objectives for that quarter were in the process of being achieved (as reasonably determined by the Parent Company’s Board and Directors) or were actually achieved during that fiscal quarter.

c. Payment Upon Termination.

(i) Subject to the following paragraph and the last sentence of this paragraph, upon any termination of Employee’s employment by the Company (other than a termination for “Cause” as that term is defined below), the Company shall pay to Employee, in addition to any accrued but unpaid compensation and accrued but unused Paid Time Off (as defined below) pay earned by Employee through the effective date of the termination of employment, the following “Severance Amount”: (A) an amount equal to one year’s Base Salary being paid to Employee as of the effective date of the termination of employment and payable in six equal monthly installments less any applicable taxes, and (B) an amount equal to 100% of Employee’s group health and dental insurance premiums with the Company (or, at the election of the Company, 100% of the amount payable under COBRA necessary to maintain Employee’s health and dental insurance) for a period of one year following Employee’s date of termination. Notwithstanding anything in this Agreement to this contrary, (Y) any obligation of the Company to pay any portion of the Severance Amount shall immediately and automatically cease, without notice or opportunity to cure, upon Employee’s breach of Section 9 or 10 of this Agreement during, or following termination of, Employee’s employment with the Consolidated Company, and (Z) any obligation of the Company to pay any portion of the severance amount shall be suspended (but not terminated) at the option of the Company (1) during any period that the Parent Company’s independent public accountants require the Consolidated Company to include a going concern qualification in the financial statements, until such going concern qualification is removed or eliminated, (2) during any calendar month in which the Consolidated Company’s current ratio (i.e. ratio of current assets to current liabilities) as of the last day of the prior calendar month was less than 2.5, or (3) during any period in which the Consolidated Company has current assets of less than $650,000; provided, however, none of (1), (2) or (3) shall apply if the Consolidated Company has cash or cash equivalents in excess of $1 million.

Payments of the cash portion of the Severance Amount shall be made to Employee in six equal monthly installments less any applicable taxes, except as set forth below in this paragraph. Notwithstanding anything in this subsection (c) (i) to the contrary: (A) no base salary continuation or bonus amount otherwise payable to the Employee under this subsection (i) shall be paid unless and until the Employee incurs a “separation from service” (as defined in Treasury Regulation Section 1.409A-1(h)) from the Company (a “Separation from Service”) (with any amounts deferred as a result of this subsection (A) being payable promptly following such Separation from Service and as permitted by subsection (B)); and (B) any base salary and bonus amounts that are otherwise due or payable under this subsection (c)(i) during the six-month period following the Employee’s Separation from Service shall instead be deferred and paid to the Employee within five business days after, but in no instance prior to, the six-month anniversary of Employee’s Separation from Service (or, if earlier, the date of Employee’s death) if and to the extent that such amounts (1) do not constitute “separation pay due to involuntary separation from service” (as defined in Treasury Regulation Section 1.409A-1(b)(9)(iii); and (2) are subject to Section 409A of the Internal Revenue of 1986, as amended (the “Code”). The foregoing restrictions on the payment of continuing base salary and bonus are intended to comply with the requirements of Section 409A of the Code and shall be interpreted consistently with that intent.

(ii) Upon any termination of Employee’s employment by the Company for “Cause”, the Company shall pay to Employee any accrued but unpaid Base Salary and accrued but unused Paid Time Off earned by Employee through the effective date of the termination of his employment. As used herein, the term “Cause” shall mean (a) Employee’s conviction of, or plea of guilty, nolo contendere or the equivalent, in any criminal action involving a felony, (b) Employee’s misappropriation of any material funds or property of the Company, (c) Employee’s willful misconduct in the performance of his duties for the Company, (d) Employee’s breach of any of the covenants set forth in Sections 4, 5, 6, 9 or 10, or (e) the continuation of any breach, or repeat of any breach, by Employee of any covenant not designated in subsection (c) of this paragraph after the Company has given Employee written notice identifying such breach.

(iii) If Employee elects to terminate his employment with the Company for “Good Reason,” Employee shall be entitled to the same Severance Amount as set forth in subsection (c)(i) above, including the modifying restrictions set forth in the last sentence of the first paragraph, and the second paragraph, of subsection (c)(i). “Good Reason” shall mean (A) a material reduction of Employee’s compensation, responsibilities or duties; (B) a change in the principal place of Employee’s employment such that it causes Employee to relocate or materially increases Employee’s commute time; or (C) any other event that is a functional equivalent of an involuntary termination and which falls within the safe-harbor provisions related to termination for good reason set forth in the regulations implementing Section 409A of the Code.

(iv) The payments described in this Section 7(c) shall constitute the entirety of the compensation payable to Employee by any Consolidated Company upon a termination of his employment with the Company.

8. Employee Benefits.

a. Paid Time Off. Employee shall be entitled to Paid Time Off (“PTO”) plus company holidays in accordance with the PTO and Holiday policies set forth in the Company’s Employee Handbook. Initially, it is understood that Employee shall be entitled to a maximum of 20 days per year, accruing at a rate of 1.67 days per month, and a maximum accrual of 20 days at any one point in time, excluding paid holidays, the scheduling of which will be approved in advance (generally at least one month in advance) by Employee providing notice to the senior human resource contact in the Company and one other executive officer of the Company.

b. Group Health Insurance Benefits. The Company shall provide for Employee and his dependents, at the Company’s expense, participation in such health, accident and dental insurance plans as are made available generally to the Company’s senior executive management level employees (i.e. officers party to substantially similar written employment agreements) from time to time.

c. Business Expenses. Employee shall be entitled to reimbursement by the Company for any ordinary and necessary expenses reasonably incurred by Employee in the performance of his duties and in acting for the Company, provided that:

i. Each such expenditure over $1,000.00 is pre-approved in writing by the Employee’s supervisor in accordance with Company policy.

ii. Employee furnishes to the Company such documentation regarding such expenses as is required by the rules and policies relating to expense reimbursements that the Company shall from time to time establish in order to permit such reimbursement payments to be taken as proper deductions by the Company under applicable state and federal tax laws.

Repeated violations of this provision shall be deemed cause for termination as defined in Section 7(c)(ii)(e).

d. Indemnification. Employee shall have the full benefit of all provisions of the Company’s limits of liability as may be provided to an employee of the Company in the Company’s articles of incorporation, bylaws, and California Labor Code Section 2802 providing for indemnification of Employee in the circumstances described therein.

9. Confidential Information.

a. Access to Confidential and Trade Secret Information. Employee acknowledges that during the course of Employee’s retention by the Consolidated Company, Employee will be exposed to and provided documents and other information regarding the confidential business and technical affairs of the Consolidated Company, whether reduced to writing, maintained on any form of electronic media or maintained in the mind or memory and whether compiled by Employee or the Consolidated Company, including, without limitation, information about the Consolidated Company’s past, present and future financial condition, the markets for its products, key personnel, past, present or future actual or threatened litigation, trade secrets, current and prospective customer lists, operational methods, acquisition plans, prospects, plans for future development, pricing information, cost information, sources of supply, sources of customers, customer lists, identities and purchasing characteristics and histories, business plans, models, projections or prospects, actual and/or projected expenses, actual and/or projected revenues, actual and/or projected profits, financial information, data, know-how, formulae, processes, designs, specifications, drawings, contract rights, and other information concerning the Consolidated Company’s organization, business operations, business affairs, marketing plans, clients, customers, partners, suppliers, vendors, licensees, or licensors, of a confidential, proprietary, or secret nature not readily available to the public (the “Confidential Information”).

Employee expressly acknowledges that this Confidential Information has independent economic value from not being readily known, disclosed to or ascertainable by proper means by the public and/or others in the industry and business of the Consolidated Company, and that reasonable efforts have been made by the Consolidated Company to maintain the secrecy of such Confidential Information, and this Confidential Information shall be considered and deemed the Consolidated Company’s trade secrets and confidential, proprietary information.

b. No Disclosure or Use of Confidential Information. At no time during Employee’s employment or thereafter shall Employee ever divulge, disclose, or otherwise use any Confidential Information for any purpose other than to do and perform the business and activities of the Consolidated Company, unless and until such information is readily available in the public domain by reason other than Employee’s disclosure or use thereof in violation of this Section 9, or unless such disclosure is required by law. Employee specifically acknowledges that the Confidential Information derives independent economic value from not being readily known, disclosed to or ascertainable by proper means by the public or the industry or business of the Consolidated Company, that reasonable efforts have been made by the Consolidated Company to maintain the secrecy of such Confidential Information, that such Confidential Information is the sole property of the Consolidated Company, is considered the Consolidated Company’s trade secrets, and that any retention, use or disclosure of such Confidential Information by Employee (except in the course of performing duties hereunder) shall constitute a misappropriation of trade secrets of the Consolidated Company and/or unfair competition.

10. Non-Solicitation. Employee shall not, for a period of 12 months following the termination of his employment with the Consolidated Company, for any reason whatsoever, directly or indirectly, for himself or for, on behalf of or in conjunction with any other person or entity, solicit or induce any employee, agent, independent contractor or consultant of or to the Consolidated Company to terminate his, her or its employment or other relationship with the Consolidated Company for the purpose of associating with any competitor of the Consolidated Company or otherwise encourage any such person to leave or sever his, her or its employment or other business relationship with the Consolidated Company.

11. Damages and Injunction. Because of the difficulty of measuring economic losses to the Consolidated Company as a result of a breach by Employee of the provisions of Sections 9 and 10 hereof, and because of the immediate and irreparable damage that could be caused for which it would have no other adequate remedy, Employee agrees that the provisions of Sections 9 and 10 hereof may be enforced by the Consolidated Company in the event of breach or threatened breach by Employee, by injunctions and restraining orders without having to post a bond or other security. Such actions may be taken in state or federal court notwithstanding the inclusion of an arbitration provision in this Agreement. Nothing herein shall be construed as prohibiting the Consolidated Company from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages as provided for in this Agreement.

12. Agency and Authority. Employee agrees that his employment by the Company shall deem him an agent for the Company only for such purposes as are customary for his position. Employee agrees that he will not act or purport to act in any way for the Company, except as to matters directly related to his employment or as may otherwise be authorized by the Board of Directors of the Parent Company.

13. Severability. Nothing contained in this Agreement shall be construed as requiring the commission of any act contrary to law, and wherever there is any conflict between any provision of this Agreement and any present or future statute, law, ordinance or regulation contrary to which the parties have no legal right to contract, the latter shall prevail, but in such event, the provision of this Agreement thus affected shall be curtailed and limited only to the extent necessary to bring it within the requirements of the law. In the event that any part, article, paragraph, section or clause of this Agreement shall be held to be indefinite or invalid, the entire Agreement shall not fail on account thereof, and the balance of the Agreement shall continue in full force and effect.

14. Notices. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon personal delivery or three (3) days after deposit in the U.S. mail, postage prepaid and properly addressed to the party entitled to such notice, at the address indicated beside such party’s signature line on this Agreement or at such other address as such party may designate by ten (10) days advance written notice under this paragraph to all other parties to this Agreement.

15. Amendment. Any waiver, alteration or modification of any of the provisions of this Agreement or cancellation or replacement of this Agreement shall not be valid unless made in writing and signed by the parties hereto.

16. Governing Law. This Agreement shall be construed and governed in accordance with the laws of the State of California applicable to contracts executed and to be wholly performed within the State of California, with venue and jurisdiction for any dispute in the County of Orange.

17. Waiver. Waiver by either party of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

18. Arbitration. In the event of any dispute or any claim arising out of this agreement, the termination of Employee’s employment, or the employment relationship between the Employee and the Company (including, but not limited to, any claims of wrongful termination or claims for discrimination based on race, age, sex, disability, creed, color, religion, sexual orientation, marital status, or any other protected category, under California Fair Employment and Housing Act, Title VII of the Civil Rights Act, Age Discrimination in Employment Act, or Americans with Disabilities Act), Employee and the Company agree that all such disputes shall be fully and finally resolved by binding arbitration conducted under the rules of the California Arbitration Act, Code of Civil Procedure Section 1280 et seq. (the “Arbitration Act”). The parties shall (1) select a neutral arbitrator from a panel obtained from Orange County Superior Court (or some other source mutually agreed upon between the parties), (2) be permitted adequate and reasonable discovery necessary to arbitrate or resolve all issues in dispute in the arbitration, and (3) direct the arbitrator to render a written award setting forth his findings of fact and conclusions of law which shall be afforded appropriate judicial review as permitted by and provided for in the Arbitration Act and state laws interpreting the Arbitration Act. Each party shall bear his or its own expenses incurred in connection with the arbitration, including attorneys’ fees and costs, except that the Company will pay all the arbitrator’s costs and fees unique to the arbitration. This arbitration provision shall not apply to claims for unemployment insurance benefits filed with the Employment Development Department or to claims for normal workers compensation benefits filed with the Workers Compensation Appeals Board. In the event Employee prevails in the resolution of any dispute arising out of this agreement, Company shall reimburse Employee for all expenses Employee incurred in connection with the arbitration, including attorneys fees and costs, and any other costs, fees or attorneys fees as may otherwise be provided under state or federal law.

19. Entire Agreement. This Agreement, along with the other documents and agreements executed contemporaneously herewith by the parties, which includes the Confidential, Proprietary Information and Invention Assignment Agreement, the Offer Letter, New Hire Information Form, and the Security Training Acknowledgement Form, and any Stock Option Agreements (incorporating the Amended and Restated 2011 Stock Incentive Plan), contains all the terms and conditions agreed upon by the parties hereto and sets forth the entirety of the consideration to which Employee shall be entitled hereunder. No other agreements, oral or otherwise, shall be deemed to exist or to bind any of the parties hereto in any manner related to this Agreement. No officer or employee of the Company has any authorization to make any representation or promise in any manner related to this Agreement not contained in this Agreement, and Employee agrees that he has not executed this Agreement in reliance upon any such representation or promise. This Agreement cannot be modified or changed except by written instrument, signed by both parties hereto.

20. Employee Handbook. Employee shall be governed by the personnel rules and regulations set forth in the Company’s employee handbook and related documents, which may be modified from time to time. To the extent there exists a conflict between this Agreement and the personnel rules and regulations of the Company, this Agreement shall be the controlling document and supersede any conflicting policy.

21. Section Headings. The headings of this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

22. Counterparts. This Agreement may be executed in a number of counterparts, each of which shall be construed as an original for all purposes.

[Signature Page Follows.]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

	ALLDIGITAL HOLDINGS, INC.

	By:	/s/ Michael Linos
	Name:	Michael Linos
	Its:	President

	Date:

	Address:	220 Technology Drive, Suite 100
		Irvine, CA 92618

	EMPLOYEE

	/s/ Brad Eisenstein
	Brad Eisenstein
	Date:

	Address:

Exhibit 10.24

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

MICHAEL LINOS

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of September 8, 2014, by and between AllDigital, Inc., a California corporation (the “Company”), and Michael Linos (“Employee”). This Agreement replaces the Employment Agreement, dated January 27, 2014 (the “Initial Effective Date”), by and between the Company and Employee. In consideration of the mutual covenants set forth below, the Company and Employee hereby agree as follows:

3. Services. Employee shall serve as President and Interim CEO of the Company (or Consolidated Company, as the case may be) and perform such services for the Company as are customary for such position and as may be assigned to him from time to time by the Board of Directors of the Parent Company.

6. Restrictive Covenants During Term.

a. During his employment by the Company, Employee shall devote his full time and services exclusively to the Consolidated Company and will not, without the prior written consent of the Board of Directors of the Parent Company, own, either directly or indirectly, any interest in any privately-held business or commercial enterprise which is competitive with the business conducted by the Consolidated Company. Furthermore, Employee shall not, without the prior written consent of the Board of Directors of the Parent Company, serve as a partner, officer, director, advisor or employee of, or act in any other similar capacity for, any business or commercial enterprise which is competitive with the business conducted by the Consolidated Company. However, nothing contained in this Section 6 shall be construed to prohibit Employee from purchasing the stock or other securities of any corporation or other business entity whose stock or securities are traded on any national or regional securities exchange or in the national over-the-counter market.

b. During his employment by the Company, Employee shall comply with all employee manuals, handbook, and policies and procedures adopted by the Board of Directors of the Company, unless such manual, handbook, policy or procedure expressly provides that it is not applicable to Employee or a person holding Employee’s position. Without limiting the generality of the foregoing, and whether or not included in any manual, handbook, policy or procedure, Employee shall not enter into any agreement (written or verbal) or other instrument that includes a financial, service or other obligation on the part of any Consolidated Company unless the Board of Directors of the Company or another executive officer of the Company has reviewed and approved such agreement or instrument.

7. Compensation.

c. Payment Upon Termination.

8. Employee Benefits.

a. Paid Time Off. Employee shall be entitled to Paid Time Off (“PTO”) plus company holidays in accordance with the PTO and Holiday policies set forth in the Company’s Employee Handbook. Initially, it is understood that Employee shall be entitled to a maximum of 20 days per year, accruing at a rate of two days per month, and a maximum accrual of 20 days at any one point in time, excluding paid holidays, the scheduling of which will be approved in advance (generally at least one month in advance) by Employee providing notice to the senior human resource contact in the Company and one other executive officer of the Company.

i. Each such expenditure over $1,000.00 is pre-approved in writing by the Employee’s supervisor in accordance with Company policy.

Repeated violations of this provision shall be deemed cause for termination as defined in Section 7(c)(ii)(e).

9. Confidential Information.

17. Waiver. Waiver by either party of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

21. Section Headings. The headings of this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

22. Counterparts. This Agreement may be executed in a number of counterparts, each of which shall be construed as an original for all purposes.

23. Stock Grants. Provided that the Employee is employed by the Company on the applicable issuance date, the Company shall grant and issue 1,000,000 shares of Common Stock on each of the first anniversary and the second anniversary of the Initial Effective Date. Immediately prior to the consummation of a “Transaction” as defined in Section 9.2 of the Amended and Restated 2011 Stock Incentive Plan of AllDigital Holdings, Inc. (as the same may be amended and/or restated from time to time), provided that the Employee is employed by the Company immediately prior to the consummation of the Transaction, upon the Employee’s written demand in accordance with this section, the Company shall issue to Employee the number of unissued shares of Common Stock to which the Employee would be entitled to under this Section 23. The Company shall give Employee at least 5 business days notice prior to the consummation of any Transaction and, within 2 business days of receiving such notice, Employee shall provide the Company with written notice stating whether or not Employee elects to exercise his rights under this Section 23.

[Signature Page Follows.]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

	ALLDIGITAL, INC.

	By:	/s/ Brad Eisenstein
	Name:	Brad Eisenstein
	Its:	Chief Financial Officer and Chief Operating Officer
	Date:

	Address:

	EMPLOYEE

	/s/ Michael Linos
	Michael Linos
	Date:

	Address:

Exhibit 10.26

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OR CONVERSION OF THESE SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THE SECURITIES REPRESENTED HEREBY MAY NOT BE EXERCISED, CONVERTED, OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED (EACH A “TRANSFER”) EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSFER NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (B) TO THE EXTENT THE TRANSFER DOES NOT CONSTITUTE AND WILL NOT RESULT IN A VIOLATION OF APPLICABLE FEDERAL OR STATE SECURITIES LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT (TO THE EXTENT REQUESTED BY COUNSEL OF THE COMPANY), THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THE HOLDER HEREOF AGREES THAT IT WILL DELIVER, OR CAUSE TO BE DELIVERED, TO EACH PERSON TO WHOM THE SECURITIES HEREBY REPRESENTED ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OR CONVERSION OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

5% SENIOR SECURED CONVERTIBLE NOTE

Note No.: N-[__]	Original Issue Date: [________], 2014
$[___],000	Irvine, California

FOR VALUE RECEIVED, ALLDIGITAL HOLDINGS, INC., a Nevada corporation (“Company”), promises to pay to [_______________] (“Holder”), or its registered assigns, the principal sum of [__________________] THOUSAND DOLLARS ($[___],000), or such lesser amount as shall equal the outstanding principal amount hereof, together with interest from the date of this 5% Senior Secured Convertible Note (this “Note”) on the unpaid principal balance at a rate equal to 5% per annum, computed on the basis of the actual number of days elapsed and a year of three hundred sixty-five (365) days. Interest on the outstanding principal balance of this Note shall be payable quarterly as described in Section 2. Subject to Section 4, all unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and payable on the Note Maturity Date (as defined below). Subject to Section 6, any unpaid principal and accrued and unpaid interest on the Note Maturity Date shall be payable in cash. Upon payment in full of all principal and interest payable hereunder, this Note shall be surrendered to the Company for cancellation. Upon conversion of this Note in full or the payment of outstanding amounts specified in this Note, the Company shall be released from all its obligations and liabilities under this Note.

This Note is being issued pursuant to the terms and conditions contained in that certain Securities Purchase Agreement between the original Holder and the Company (the “Securities Purchase Agreement”) and pursuant to the terms and conditions contained in the Company’s Confidential Private Placement Memorandum dated October 3, 2014 (the “Offering Memorandum”). This Note, together with the similar 5% Senior Secured Convertible Notes issued pursuant to the Memorandum, are collectively referred to herein as the “Notes.”

This Note is secured by a security interest in all of the assets of the Company, pursuant to the terms of a Security Agreement by and between the Company, the Holder and the Agent (as defined therein).

The following is a statement of the rights of the Holder and the conditions to which this Note is subject, and to which the Holder, by the acceptance of this Note, agrees:

1. Certain Definitions. For purposes of this Note, the following terms shall have the following respective meanings:

“Common Stock” means shares of the common stock, $0.001 par value per share, of the Company.

“Common Stock Equivalents” shall mean Options and Convertible Securities.

“Conversion Shares” means the shares of Common Stock issuable upon conversion of this Note.

“Convertible Securities” shall mean any stock or securities (other than Options) convertible into or exchangeable for Common Stock.

“Event of Default” means any of the events specified as such in Section 4.1.

“Holder” means the person or entity specified in the introductory paragraph of this Note or any transferee that is at the time the registered holder of this Note. The Holder or any transferee is an “accredited investor” as defined under U.S. federal securities laws or otherwise will qualify to allow this offering to take place as a private placement under applicable securities laws.

“Note Maturity Date” shall mean the earlier of (i) December 31, 2016, and (ii) the date as of which the outstanding principal and accrued interest on this Note and all other payments payable hereunder are due and payable to the Holder pursuant to Section 4.2.

“Options” shall mean any outstanding rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

Other capitalized terms not defined in this Note have the same meaning as in the Securities Purchase Agreement.

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2. Interest. Until the Note Maturity Date, this Note will bear interest at a rate of 5% per annum, computed on the basis of the actual number of days elapsed and a year of three hundred sixty-five (365) days. After the Note Maturity Date and until the outstanding principal and accrued interest on this has been paid, this Note will bear interest at a rate of 1% per month, computed on the basis of the actual number of days elapsed and a year month of thirty (30) days. Accrued interest on this Note shall be due and payable quarterly on the fifth (5^th) day after the last business day of each calendar quarter beginning with the quarter ended December 31, 2014, with a final installment due on the Note Maturity Date, whether by acceleration, scheduled maturity or otherwise. Subject to Section 5, any accrued interest on this Note shall be payable in cash.

3. Prepayment. At any time after the Original Issue Date, upon fifteen (15) days prior written notice to the Holder, the Company may prepay this Note in whole or in part; provided, however, that: (i) any prepayment of this Note may only be made in connection with the prepayment of all Notes issued under the Memorandum on a pro rata basis, based on the respective aggregate outstanding principal amounts of each such Note, (ii) the Company pays all accrued and unpaid interest on the date of such prepayment, and (iii) any such prepayment will be applied first to the payment of expenses due under this Note, and second, if the amount of prepayment exceeds the amount of all such expenses and accrued interest, to the payment of principal of this Note.

4. Default.

4.1 Events of Default. If any of the following events (each, an “Event of Default” and collectively, “Events of Default”) shall occur:

(a) the Company shall default in the payment of any part of the principal of this Note;

(b) the Company shall default in the payment of any installment of interest on this Note for more than thirty (30) days after the same shall become due and payable;

(c) the Company shall breach or default in the performance of any covenant or warranty of the Company in this Note, and continuance of such breach for a period of thirty (30) days after there has been given, by registered or certified mail, to the Company by the holder of this Note or the Agent, a written notice specifying such breach or default and requiring it to be remedied;

(d) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive days; or

(e) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall take any corporate action in furtherance of any of the foregoing;

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then and in any such event the Holder of this Note may at any time (unless all defaults theretofore or thereupon shall have been remedied) at its option, by written notice to the Company, declare this Note to be due and payable, whereupon the same shall forthwith mature and become due and payable without presentment, demand, protest or other notice, all of which are hereby waived.

4.2 Remedies on and Notices of Default. In case any one or more Events of Default shall occur, the Holder may proceed to protect and enforce the rights of such holder by a suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any agreement contained in this Note, or for an injunction against a violation of any of the terms or provisions hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law. In case of default under this Note, the Company will pay to the Holder such further amount as shall be sufficient to cover the reasonable cost and expense of enforcement, including, without limitation, reasonable attorneys’ fees. If the Holder shall give any notice or take any other action in respect of a claimed default, the Company shall forthwith give written notice thereof to all other holders of Notes at the time outstanding, describing the notice or action and the nature of the claimed default. No course of dealing and no delay on the part of any Holder of this Note in exercising any right shall operate as a waiver thereof or otherwise prejudice such Holder’s rights or the rights of the holder of any similarly subordinated Notes. No remedy conferred by this Note upon the Holder shall be exclusive of any other remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise.

5. Conversion.

5.1 Voluntary Conversion. The Holder may, at any time before this Note has been repaid in full, elect to convert all or any portion of the outstanding principal into shares of Common Stock at the Conversion Price (as defined below).

5.2 Conversion Procedure.

(a) Each voluntary conversion of this Note shall be effected by the surrender of this Note at the principal office of the Company at any time during normal business hours, together with a written notice by the Holder stating that the Holder desires to convert the entire, or a specified increment of, principal of this Note into Common Stock. Each conversion of a Note will be deemed to have been effected as of the close of business on the date on which this Note has been surrendered and the notice has been received, and at that time, the rights of the Holder of this Note will cease and the person or persons in whose name or names any certificate or certificates for Common Stock are to be issued upon conversion will be deemed to have become the Holder or Holders of record of the shares of Common Stock represented thereby.

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(b) Within five (5) trading days after a conversion has been effected, the Company will deliver to the converting Holder:

(i) a certificate or certificates representing the number of shares of Common Stock issuable by reason of conversion (i.e., the principal amount of the Note being converted divided by the Conversion Price) in such name or names and such denomination or denominations as the converting Holder has specified (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to the Company); and

(ii) a replacement Note representing the principal amount of this Note delivered to the Company in connection with the conversion but which was not converted.

5.3 Fractional Shares. No fractional shares shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to Holder upon the conversion of this Note, the Company shall pay to Holder an amount in cash equal to the product obtained by multiplying the Conversion Price (as defined below) applied to effect such conversion by the fraction of a share not issued pursuant to the previous sentence.

5.4 Conversion without Charge to Holder. The issuance of certificates for Common Stock upon conversion of this Note will be made without charge to the Holder for any tax in respect thereof or other cost incurred by the Company in connection with conversion and the related issuance of Common Stock. Upon conversion of any portion of this Note, the Company will take all actions as are necessary in order to ensure that the Common Stock issuable with respect to conversion will be validly issued, fully paid and nonassessable.

5.5 Transfer Books. The Company will not close its books against the transfer of this Note or of the shares of Common Stock issued or issuable upon conversion of this Note in any manner which interferes with the timely conversion of this Note.

5.6 Conversion Price. The “Conversion Price” shall initially be $0.15 per share of Common Stock and shall be subject to adjustment as described in Section 6.

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6. Certain Adjustments. The Conversion Price is subject to adjustment from time to time as set forth in this Section 6.

6.1 Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Notes); (B) subdivides outstanding shares of Common Stock into a larger number of shares; (C) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (D) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

6.2 Fundamental Transaction. If, at any time while this Note is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one (1) share of Common Stock (the “Alternate Consideration”). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new note consistent with the foregoing provisions and evidencing the Holder’s right to convert such note into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 6.2 and insuring that this Note (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

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6.3 Cash Distributions. No adjustment on account of cash dividends or interest on the Company’s Common Stock or other securities purchasable hereunder will be made to the Conversion Price.

6.4 Calculations. All calculations under this Section 6 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 6, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

6.5 Notice to the Holder.

(a) Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 6, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(b) Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least ten (10) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Note during the 10-day period commencing on the date of such notice through the effective date of the event triggering such notice.

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7. Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock for the purpose of effecting the conversion of this Note such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of this Note; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the entire outstanding principal amount of this Note, without limitation of such other remedies as shall be available to the Holder of this Note, the Company will use its best efforts to take such corporate action as may, in the opinion of counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.

8. Successors and Assigns. Subject to the restrictions on transfer described in Sections 10 and 11, the rights and obligations of Company and the Holder shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

9. Waiver and Amendment. Any provision of this Note may be amended, waived or modified upon the written consent of Company and the holders of a majority in principal amount of the Notes.

10. Transfer of this Note or Securities Issuable on Conversion Hereof. With respect to any offer, sale or other disposition of this Note or securities into which such Note may be converted, the Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of the Holder’s counsel, or other evidence if reasonably satisfactory to the Company, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Upon receiving such written notice and reasonably satisfactory opinion, if so requested, or other evidence, the Company, as promptly as practicable, shall notify the Holder that the Holder may sell or otherwise dispose of this Note or such securities, all in accordance with the terms of the notice delivered to Company. If a determination has been made pursuant to this Section 11 that the opinion of counsel for the Holder, or other evidence, is not reasonably satisfactory to the Company, the Company shall so notify the Holder promptly after such determination has been made. Each Note thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. Subject to the foregoing transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company as provided in the Securities Purchase Agreement. Prior to presentation of this Note for registration of transfer, the Company shall treat the registered Holder hereof as the owner and the Holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Company shall not be affected by notice to the contrary.

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11. Assignment by the Company. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by Company without the prior written consent of the Holder.

12. Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing and shall be given in accordance with Section 5.4 of the Securities Purchase Agreement and shall be deemed effectively given as described in Section 5.4 of the Securities Purchase Agreement.

13. Pari Passu Notes. The Holder acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Notes issued pursuant to the Securities Purchase Agreement or pursuant to the terms of such Notes. In the event the Holder receives payments in excess of its pro rata share of the Company’s payments to the holders of all of the Notes, then the Holder shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.

14. Payment. Payment shall be made in lawful tender of the United States.

15. Usury. In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

16. Waivers. The Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.

17. Governing Law. This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of California, without regard to the conflicts of law provisions of the State of California, or of any other state.

[signature page follows]

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IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first written above.

	ALLDIGITAL HOLDINGS, INC.,
	a Nevada corporation

	By:
		Michael Linos, President & Interim CEO

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Exhibit 10.27

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Agreement”), is among AllDigital Holding, Inc., a Nevada Corporation (the “Company”), the holders of the Company’s 5% Senior Secured Convertible Notes due December 31, 2016 (collectively, the “Notes”) each a signatory hereto, their endorsees, transferees and assigns (collectively, the “Secured Parties”), and Rick Stevens as Collateral Agent (the “Agent”), effective as of the date this Agreement is executed by the Company (the “Effective Date”) as evidenced by the date affixed to the signature pages annexed hereto.

R E C I T A L S :

A. Pursuant to that certain Securities Purchase Agreement dated as of the date hereof among the Company and holders of the Notes (the “Purchase Agreement”), the Secured Parties have severally agreed to extend the loans to the Company evidenced by the Notes.

B. In order to induce the Secured Parties to extend the loans evidenced by the Notes, the Company has agreed to execute and deliver to the Secured Parties this Agreement and to grant the Secured Parties, pari passu with each other Secured Parties and through the Agent, a security interest in certain property of the Company to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under the Notes.

NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. Certain Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1. Terms used but not otherwise defined in this Agreement that are defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”, “investment property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have the respective meanings given such terms in Article 9 of the UCC. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to them in the Notes or the Purchase Agreement, as the case may be.

(a) “Collateral” means the collateral in which the Secured Parties are granted a security interest by this Agreement and which shall include the following real and personal property of the Company, whether presently owned or existing or hereafter acquired or coming into existence, wherever situated, and all additions and accessions thereto and all substitutions and replacements thereof, and all proceeds, products and accounts thereof, including, without limitation, all proceeds from the sale or transfer of the Collateral and of insurance covering the same and of any tort claims in connection therewith, and all dividends, interest, cash, notes, securities, equity interest or other property at any time and from time to time acquired, receivable or otherwise distributed in respect of, or in exchange for, any or all of the Pledged Securities (as defined below):

(i) All goods, including, without limitation, (A) all machinery, equipment, computers, motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special and general tools, fixtures, test and quality control devices and other equipment of every kind and nature and wherever situated, together with all documents of title and documents representing the same, all additions and accessions thereto, replacements therefor, all parts therefor, and all substitutes for any of the foregoing and all other items used and useful in connection with the Company’s businesses and all improvements thereto; and (B) all inventory;

(ii) All contract rights and other general intangibles, including, without limitation, all partnership interests, membership interests, stock or other securities, rights under any of the Organizational Documents, agreements related to the Pledged Securities, Intellectual Property (as defined below and more fully described herein) licenses, distribution and other agreements, computer software (whether “off-the-shelf”, licensed from any third party or developed by the Company), computer software development rights, leases (including the Real Property Leases), franchises, customer lists, quality control procedures, grants and rights, goodwill, trademarks, service marks, trade styles, trade names, patents, patent applications, copyrights, and income tax refunds;

(iii) All accounts, together with all instruments, all documents of title representing any of the foregoing, all rights in any merchandising, goods, equipment, motor vehicles and trucks which any of the same may represent, and all right, title, security and guaranties with respect to each account, including any right of stoppage in transit;

(iv) All documents, letter-of-credit rights, instruments and chattel paper;

(v) All commercial tort claims;

(vi) All deposit accounts and all cash (whether or not deposited in such deposit accounts);

(vii) All investment property;

(viii) All supporting obligations;

(ix) All files, records, books of account, business papers, and computer programs; and

(x) the products and proceeds of all of the foregoing Collateral set forth in clauses (i)-(ix) above.

Without limiting the generality of the foregoing, the “Collateral” shall include all investment property and general intangibles respecting ownership and/or other equity interests in any direct or indirect subsidiary of the Company obtained in the future, including any Pledged Securities, and, in each case, all certificates representing such shares and/or equity interests and, in each case, all rights, options, warrants, stock, other securities and/or equity interests that may hereafter be received, receivable or distributed in respect of, or exchanged for, any of the foregoing and all rights arising under or in connection with any of the foregoing, including, but not limited to, all dividends, interest and cash.

Notwithstanding the foregoing, nothing herein shall be deemed to constitute an assignment of any asset which, in the event of an assignment, becomes void by operation of applicable law or the assignment of which is otherwise prohibited by applicable law (in each case to the extent that such applicable law is not overridden by Sections 9406, 9407 and/or 9408 of the UCC or other similar applicable law); provided, however, that to the extent permitted by applicable law, this Agreement shall create a valid security interest in such asset and, to the extent permitted by applicable law, this Agreement shall create a valid security interest in the proceeds of such asset.

(b) “Intellectual Property” means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, (ii) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof, and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, (iii) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade dress, service marks, logos, domain names and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common law rights related thereto, (iv) all trade secrets arising under the laws of the United States, any other country or any political subdivision thereof, (v) all rights to obtain any reissues, renewals or extensions of the foregoing, (vi) all licenses for any of the foregoing, and (vii) all causes of action for infringement of the foregoing.

(c) “Majority in Interest” means, at any time of determination, the Secured Parties holding 51% of then-outstanding principal amount of the Notes.

(d) “Necessary Endorsement” means undated stock powers endorsed in blank or other proper instruments of assignment duly executed and such other instruments or documents as the Agent (as that term is defined below) may reasonably request.

(e) “Obligations” means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or that are now or may be hereafter contracted or acquired, or owing to, of the Company to the Secured Parties, including, without limitation, all obligations under this Agreement, the Notes and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith, in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from any of the Secured Parties as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (i) the principal amount of, and interest on the Notes and the loans extended pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations and liabilities of the Company from time to time under or in connection with this Agreement, the Notes and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith; and (iii) all amounts (including but not limited to post-petition interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company.

(f) “Organizational Documents” means the Company’s articles of incorporation and bylaws.

(g) “Permitted Indebtedness” means (a) the indebtedness evidenced by the Notes, and (b) the indebtedness existing on the Effective Date and set forth on Schedule 4(c) of the Disclosure Schedules.

(h) “Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, (c) Liens securing financing obtained in the ordinary course of the Company’s operations, including financing with respect to the acquisition or lease of equipment or other assets; provided, that such Liens are solely upon and confined solely to the equipment or other assets, being acquired by such financing, and (d) Liens incurred in connection with Permitted Indebtedness.

(i) “Pledged Interests” shall have the meaning ascribed to such term in Section 4(j).

(j) “Pledged Securities” means all the capital stock and other equity interests in any direct or indirect subsidiary of the Company obtained after the date of this Agreement.

(k) “UCC” means the Uniform Commercial Code of the State of California and or any other applicable law of any state or states which has jurisdiction with respect to all, or any portion of, the Collateral or this Agreement, from time to time. It is the intent of the parties that defined terms in the UCC should be construed in their broadest sense so that the term “Collateral” will be construed in its broadest sense. Accordingly if there are, from time to time, changes to defined terms in the UCC that broaden the definitions, they are incorporated herein and if existing definitions in the UCC are broader than the amended definitions, the existing ones shall be controlling.

2. Grant of Security Interest in Collateral. As an inducement for the Secured Parties to extend the loans as evidenced by the Notes and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations, the Company hereby unconditionally and irrevocably pledges, grants and hypothecates to the Agent, as representative of the Secured Parties, for the ratable benefit of the Secured Parties a security interest in and to, a lien upon and a right of set-off against all of their respective right, title and interest of whatsoever kind and nature in and to, the Collateral (a “Security Interest” and, collectively, the “Security Interests”).

3. Delivery of Certain Collateral. Contemporaneously or prior to the execution of this Agreement, the Company shall deliver or cause to be delivered to the Agent any and all certificates and other instruments or documents representing any of the Collateral, in each case, together with all Necessary Endorsements, as may be reasonably required by Agent.

4. Representations, Warranties, Covenants and Agreements of the Company. Except as set forth under the corresponding section of the disclosure schedule delivered to the Secured Parties concurrently herewith (the “Disclosure Schedule”), which Disclosure Schedule shall be deemed a part hereof, the Company represents and warrants to, and covenants and agrees with, the Secured Parties, as of the Effective Date, as follows:

(a) The Company has the requisite corporate power and authority to enter into this Agreement and otherwise to carry out its obligations hereunder. The execution, delivery and performance by the Company of this Agreement and the filings contemplated therein have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company. This Agreement has been duly executed by the Company. This Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting the rights and remedies of creditors and by general principles of equity.

(b) The Company has no place of business or offices where their respective books of account and records are kept (other than temporarily at the offices of its attorneys or accountants) or places where Collateral is stored or located, except the Company’s principal executive offices. None of such Collateral is in the possession of any consignee, bailee, warehouseman, agent or processor.

(c) Upon the Effective Date, except for Permitted Liens or as set forth on Section 4(c) of the Disclosure Schedule, the Company is the sole owner of the Collateral (except for non-exclusive licenses granted by the Company in the ordinary course of business), free and clear of any liens, security interests, encumbrances, rights or claims, and is fully authorized to grant the Security Interests. Upon the Effective Date, except as set forth on Section 4(c) of the Disclosure Schedule, to the actual knowledge of the executive officers of the Company, there shall not be on file in any governmental or regulatory authority, agency or recording office an effective financing statement, security agreement, license or transfer or any notice of any of the foregoing (other than those that will be filed in favor of the Secured Parties pursuant to this Agreement) covering or affecting any of the Collateral. Except as set forth on Section 4(c) of the Disclosure Schedule and in this Agreement, as long as this Agreement shall be in effect, the Company shall not execute and shall not knowingly permit to be on file in any such office or agency any other financing statement or other document or instrument (except to the extent filed or recorded in connection with Permitted Liens or in favor of the Secured Parties pursuant to the terms of this Agreement) and except as may otherwise be permitted under the terms of the Notes.

(d) No written claim has been received that any Collateral or the Company’s use of any Collateral violates the rights of any third party. There has been no adverse decision to the Company’s claim of ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to the Company’s right to keep and maintain such Collateral in full force and effect, and there is no proceeding involving said rights pending or, to the best knowledge of the Company, threatened before any court, judicial body, administrative or regulatory agency, arbitrator or other governmental authority.

(e) The Company shall at all times maintain its books of account and records relating to the Collateral at its principal place of business and its Collateral at its principal places of business and may not relocate such books of account and records or tangible Collateral unless it delivers to the Secured Parties at least 30 days prior to such relocation (i) written notice of such relocation and the new location thereof (which location must be within the United States) and (ii) evidence that appropriate financing statements under the UCC and other necessary documents have been filed and recorded and other steps have been taken to perfect the Security Interests created in favor of the Secured Parties as a valid, perfected and continuing perfected first priority lien (except for such instances where Permitted Liens exist as a perfected first priority lien) in the Collateral.

(f) This Agreement creates in favor of the Secured Parties a valid security interest in the Collateral, subject only to Permitted Liens securing the payment and performance of the Obligations. Upon making the filings described in the immediately following paragraph, all security interests created hereunder in any Collateral which may be perfected by filing Uniform Commercial Code financing statements shall have been duly perfected. Except for the filing of the Uniform Commercial Code financing statements referred to in the immediately following paragraph, the recordation of the Intellectual Property Security Agreement (as defined below) if required, the execution and delivery of deposit account control agreements satisfying the requirements of Section 9104(a)(2) of the UCC with respect to each deposit account of the Company within 60 days after the Effective Date, and the delivery of the certificates and other instruments provided in Section 3, no action is necessary to create, perfect or protect the security interests created hereunder. Without limiting the generality of the foregoing, except for the filing of said financing statements, the recordation of said Intellectual Property Security Agreement, and the execution and delivery of said deposit account control agreements, no consent of any third parties (except for consents that have been received) and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for (i) the execution, delivery and performance of this Agreement, (ii) the creation or perfection of the Security Interests created hereunder in the Collateral or (iii) the enforcement of the rights of the Agent and the Secured Parties hereunder.

(g) The Company hereby authorizes the Agent to file or record one or more financing statements under the UCC and any document giving notice of the Secured Parties’ rights in the Real Property Leases (as defined in Section 4(p) below), with respect to the Security Interests, with the proper filing and recording agencies in any jurisdiction deemed proper by it.

(h) The execution, delivery and performance of this Agreement by the Company does not (i) violate any of the provisions of any Organizational Documents of the Company or any judgment, decree, order or award of any court, governmental body or arbitrator or any applicable law, rule or regulation applicable to the Company or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing the Company’s debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected. If any, all required consents (including, without limitation, from stockholders or creditors of the Company) necessary for the Company to enter into and perform its obligations hereunder have been obtained.

(i) Except as set forth on Section 4(i) of the Disclosure Schedule, as of the Effective Date, the Company has no subsidiaries, no Pledged Securities and no Pledged Interests.

(j) The ownership and other equity interests in partnerships and limited liability companies, if any, obtained after the Effective Date and included in the Collateral (the “Pledged Interests”) by their express terms will not provide that they are securities governed by Article 8 of the UCC and will not be held in a securities account or by any financial intermediary.

(k) Except for Permitted Liens and except as set forth in Section 4(k) of the Disclosure Schedule, the Company shall at all times maintain the liens and Security Interests provided for hereunder as valid and perfected first priority liens and security interests in the Collateral in favor of the Secured Parties until this Agreement and the Security Interest hereunder shall be terminated pursuant to Section 14. The Company hereby agrees to defend the same against the claims of any and all persons and entities. The Company shall safeguard and protect all Collateral for the account of the Secured Parties. Upon the request of the Agent, the Company will sign and deliver to the Agent on behalf of the Secured Parties at any time or from time to time one or more financing statements pursuant to the UCC and will pay the cost of filing the same in all public offices wherever filing is, or is deemed by the Agent to be, necessary or desirable to effect the rights and obligations provided for herein. Without limiting the generality of the foregoing, the Company shall pay all fees, taxes and other amounts necessary to maintain the Collateral and the Security Interests hereunder, and the Company shall obtain and furnish to the Agent from time to time, upon demand, such releases and/or subordinations of claims and liens which may be required to maintain the priority of the Security Interests hereunder.

(l) The Company will not transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral (except for non-exclusive licenses granted by the Company in its ordinary course of business and sales of inventory by the Company in its ordinary course of business) without the prior written consent of the Agent.

(m) The Company shall keep and preserve its equipment, inventory and other tangible Collateral in good condition, repair and order and shall not operate or locate any such Collateral (or cause to be operated or located) in any area excluded from insurance coverage.

(n) The Company shall maintain with financially sound and reputable insurers, insurance with respect to the Collateral, including Collateral hereafter acquired, against loss or damage of the kinds and in the amounts customarily insured against by entities of established reputation having similar properties similarly situated and in such amounts as are customarily carried under similar circumstances by other such entities and otherwise as is prudent for entities engaged in similar businesses but in any event sufficient to cover the full replacement cost thereof. The Company shall cause each insurance policy issued in connection herewith to provide that (a) the Agent will be named as lender loss payee and additional insured under each such insurance policy and (b) if such insurance be proposed to be cancelled or materially changed for any reason whatsoever, such insurer will promptly notify the Agent and such cancellation or change shall not be effective as to the Agent for at least 30 days after receipt by the Agent of such notice, unless the effect of such change is to extend or increase coverage under the policy. Copies of such policies or the related certificates, in each case, naming the Agent as lender loss payee and additional insured shall be delivered to the Agent at least annually and at the time any new policy of insurance is issued. The Agent shall have no obligation or liability for determining whether insurance coverage is appropriate or in effect.

(o) The Company shall, within 10 days of obtaining knowledge thereof, advise the Agent promptly, in sufficient detail, of any material adverse change in the Collateral, and of the occurrence of any event which would have a material adverse effect on the value of the Collateral or on the Secured Parties’ security interest.

(p) The Company shall promptly execute and deliver to the Agent such further deeds, mortgages, assignments, security agreements, financing statements or other instruments, documents, certificates and assurances and take such further action as the Agent, may deem necessary to perfect, protect or enforce the Secured Parties’ security interest in the Collateral including, without limitation, if applicable, the execution and delivery of a separate security agreement with respect to the Company’s Intellectual Property (“Intellectual Property Security Agreement”) in which the Secured Parties have been granted a security interest hereunder, substantially in a form attached as Annex B hereto, which Intellectual Property Security Agreement, other than as stated therein, shall be subject to all of the terms and conditions hereof. In addition, upon the written request of Agent, the Company shall, within 180 days after the date of such written request, obtain the written confirmation from any landlord of the pledge of the Company’s interest in any real property lease to which the Company is a party, a true and complete listing of which is set forth in Section 4(p) of the Disclosure Schedule (each, a “Real Property Lease” and collectively, the “Real Property Leases”).

(q) The Company shall permit the Agent and its representatives and agents to inspect the Collateral during normal business hours and upon reasonable prior notice, and to make copies of records pertaining to the Collateral as may be reasonably requested by the Agent from time to time.

(r) The Company shall take all steps reasonably necessary to diligently pursue and seek to preserve, enforce and collect any rights, claims, causes of action and accounts receivable in respect of the Collateral.

(s) The Company shall promptly notify the Agent in sufficient detail upon becoming aware of any attachment, garnishment, execution or other legal process levied against any Collateral and of any other information received by the Company that may materially affect the value of the Collateral, the Security Interest or the rights and remedies of the Secured Parties hereunder.

(t) All information heretofore, herein or hereafter supplied to the Secured Parties by or on behalf of the Company with respect to the Collateral is accurate and complete in all material respects as of the date furnished.

(u) The Company shall at all times preserve and keep in full force and effect its valid existence and good standing and any rights and franchises material to its business.

(v) The Company will not change its name, type of organization, jurisdiction of organization, organizational identification number (if it has one), legal or corporate structure, or identity, or add any new fictitious name unless it provides at least 30 days prior written notice to the Agent of such change and, at the time of such written notification, the Company provides any financing statements or fixture filings necessary to perfect and continue the perfection of the Security Interests granted and evidenced by this Agreement.

(w) Except in the ordinary course of business, the Company may not consign any of its inventory or sell any of its inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale without the consent of the Agent which shall not be unreasonably withheld.

(x) The Company may not relocate its chief executive office to a new location without providing 30 days prior written notification thereof to the Agent and so long as, at the time of such written notification, the Company provides any financing statements or fixture filings necessary to perfect and continue the perfection of the Security Interests granted and evidenced by this Agreement.

(y) The Company is organized under the laws of the state of Nevada and is in good standing in that jurisdiction.

(z) At any time and from time to time that any Collateral consists of instruments, certificated securities or other items that require or permit possession by the secured party to perfect the security interest created hereby, the Company shall inventory and deliver such Collateral to the Agent.

(aa) The Company, in its capacity as issuer, hereby agrees to comply with any and all orders and instructions of the Agent regarding the Pledged Interests consistent with the terms of this Agreement without the further consent of the Company as contemplated by Section 8106 (or any successor section) of the UCC. Further, the Company agrees that it shall not enter into a similar agreement (or one that would confer “control” within the meaning of Article 8 of the UCC) with any other person or entity.

(bb) Upon the request of the Agent, the Company shall cause all tangible chattel paper constituting Collateral to be delivered to the Agent, or, if such delivery is not possible, then to cause such tangible chattel paper to contain a legend noting that it is subject to the security interest created by this Agreement. To the extent that any Collateral consists of electronic chattel paper, the Company shall cause the underlying chattel paper to be created, stored and assigned in accordance with Section 9105 of the UCC (or successor section thereto).

(cc) If there is any investment property or deposit account included as Collateral that can be perfected by “control” through an account control agreement, the Company shall cause such an account control agreement to be entered into and delivered to the Agent for the benefit of the Secured Parties upon the request of the Agent.

(dd) To the extent that any Collateral consists of letter-of-credit rights, the Company shall cause the issuer of each underlying letter of credit to consent to an assignment of the proceeds thereof to the Secured Parties.

(ee) To the extent that any Collateral is in the possession of any third party, the Company shall notify such third party of the Secured Parties’ security interest in such Collateral and shall use its best efforts to obtain an acknowledgement and agreement from such third party with respect to the Collateral, in form and substance reasonably satisfactory to the Agent.

(ff) If the Company shall at any time hold or acquire a commercial tort claim, the Company shall promptly notify the Agent in a writing signed by the Company of the particulars thereof and grant to the Secured Parties in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing in form and substance reasonably satisfactory to the Agent.

(gg) The Company shall immediately provide written notice to the Agent of any and all accounts which arise out of contracts with any governmental authority and, to the extent necessary to perfect or continue the perfected status of the Security Interests in such accounts and proceeds thereof, shall execute and deliver to the Agent an assignment of claims for such accounts and cooperate with the Agent in taking any other steps required, in its judgment, under the Federal Assignment of Claims Act or any similar federal, state or local statute or rule to perfect or continue the perfected status of the Security Interests in such accounts and proceeds thereof.

(hh) The Company shall cause each subsidiary of the Company, if any, to immediately become a party hereto (an “Additional Obligor”), by executing and delivering an Additional Obligor Joinder in substantially the form of Annex A attached hereto and comply with the provisions hereof applicable to the Company. Concurrent therewith, the Additional Obligor shall deliver to each Secured Party and the Agent a replacement Disclosure Schedule for, or supplements to the Disclosure Schedule to (or referred to in) this Agreement, as applicable, which replacement Disclosure Schedule shall supersede, or supplements shall modify, the Disclosure Schedule then in effect. The Additional Obligor shall also deliver such opinions of counsel, authorizing resolutions, good standing certificates, incumbency certificates, organizational documents, financing statements and other information and documentation as the Agent may reasonably request. Upon delivery of the foregoing to the Agent, the Additional Obligor shall be and become a party to this Agreement with the same rights and obligations as the Company, for all purposes hereof as fully and to the same extent as if it were an original signatory hereto and shall be deemed to have made the representations, warranties and covenants set forth herein as of the date of execution and delivery of such Additional Obligor Joinder, and all references herein to the “Company” shall be deemed to include each Additional Obligor.

(ii) The Company shall vote the Pledged Securities, if any, to comply with the covenants and agreements set forth herein, in the Notes.

(jj) The Company shall register the pledge of the applicable Pledged Securities, if any, on the books of the Company. Further, except with respect to certificated securities delivered to the Agent, the Company shall deliver to the Agent an acknowledgement of pledge (which, where appropriate, shall comply with the requirements of the relevant UCC with respect to perfection by registration) signed by the issuer of the applicable Pledged Securities, which acknowledgement shall confirm that: (a) it has registered the pledge on its books and records; and (b) at any time directed by the Agent during the continuation of an Event of Default, such issuer will transfer the record ownership of such Pledged Securities into the name of any designee of the Agent, will take such steps as may be necessary to effect the transfer, and will comply with all other instructions of the Agent without the further consent of the Company.

(kk) In the event that, upon an occurrence of an Event of Default, the Agent shall sell all or any of the Pledged Securities to another party or parties (herein called the “Transferee”) or shall purchase or retain all or any of the Pledged Securities, the Company shall, to the extent applicable: (i) deliver to the Agent or the Transferee, as the case may be, the articles or certificate of incorporation, bylaws, minute books, stock certificate books, corporate seals, deeds, leases, indentures, agreements, evidences of indebtedness, books of account, financial records and all other Organizational Documents and records of the Company and its direct and indirect subsidiaries; (ii) use its best efforts to obtain resignations of the persons then serving as officers and directors of the Company and its direct and indirect subsidiaries, if so directed by the Agent; and (iii) use its best efforts to obtain any approvals that are required by any governmental or regulatory body in order to permit the sale of the Pledged Securities to the Transferee or the purchase or retention of the Pledged Securities by the Agent and allow the Transferee or the Agent to continue the business of the Company and its direct and indirect subsidiaries.

(ll) Without limiting the generality of the other obligations of the Company hereunder, the Company shall promptly (i) cause the security interest contemplated hereby with respect to all Intellectual Property registered at the United States Copyright Office or United States Patent and Trademark Office to be duly recorded at the applicable office, (ii) give the Agent notice whenever it files an application to register any copyrights, trademarks or patents, and (iii) supplement any Intellectual Property Security Agreement to grant a security interest in such new or additional Intellectual Property registered at the United States Copyright Office or United States Patent and Trademark Office.

(mm) The Company will from time to time, at the expense of the Company, promptly execute and deliver all such further instruments and documents, and take all such further action as may be necessary or desirable, or as the Agent may reasonably request in writing, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Secured Parties to exercise and enforce their rights and remedies hereunder and with respect to any Collateral or to otherwise carry out the purposes of this Agreement.

(nn) Section 4(nn) of the Disclosure Schedule lists all of the patents, patent applications, trademarks, trademark applications, registered copyrights, and domain names owned by any of the Company as of the date hereof. Section 4(nn) of the Disclosure Schedule lists all material licenses in favor of the Company for the use of any patents, trademarks, copyrights and domain names as of the date hereof.

(oo) Except as set forth on Section 4(oo) of the Disclosure Schedule, none of the account debtors or other persons or entities obligated on any of the Collateral is a governmental authority covered by the Federal Assignment of Claims Act or any similar federal, state or local statute or rule in respect of such Collateral.

5. Effect of Pledge on Certain Rights. If any of the Collateral subject to this Agreement consists of nonvoting equity or ownership interests (regardless of class, designation, preference or rights) that may be converted into voting equity or ownership interests upon the occurrence of certain events (including, without limitation, upon the transfer of all or any of the other stock or assets of the issuer), it is agreed that the pledge of such equity or ownership interests pursuant to this Agreement or the enforcement of any of the Agent’s rights hereunder shall not be deemed to be the type of event which would trigger such conversion rights notwithstanding any provisions in the Organizational Documents or agreements to which the Company is subject or to which the Company is party.

6. Defaults. The following events shall be “Events of Default”:

(a) The occurrence of an Event of Default (as that term is defined in the Notes) under the Notes;

(b) Any representation or warranty of the Company in this Agreement shall prove to have been incorrect in any material respect when made;

(c) Except as otherwise provided in Section 6(d), the failure by the Company to observe or perform any of its obligations hereunder for 10 days after delivery to the Company of notice of such failure by or on behalf of a Secured Party unless such default is capable of cure but cannot be cured within such time frame and the Company is using best efforts to cure same in a timely fashion;

(d) If any provision of this Agreement shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by the Company, or a proceeding shall be commenced by the Company, or by any governmental authority having jurisdiction over the Company, seeking to establish the invalidity or unenforceability thereof, or the Company shall deny that the Company has any liability or obligation purported to be created under this Agreement; or

(e) The failure by the Company to obtain written confirmation from any landlord under any Real Property Lease of the pledge of the Company’s interest in any such Real Property Lease within 180 days after the date of Agent’s written request that such confirmation be obtained.

(f) The termination by the Company of any Real Property Lease without Agent’s prior written consent.

7. Duty To Hold In Trust.

(a) Upon the occurrence of any Event of Default and at any time thereafter, the Company shall, upon receipt of any revenue, income, dividend, interest or other sums subject to the Security Interests, whether payable pursuant to the Notes or otherwise, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same in trust for the Secured Parties and shall forthwith endorse and transfer any such sums or instruments, or both, to the Secured Parties, pro-rata in proportion to their respective then-currently outstanding principal amount of the Notes for application to the satisfaction of the Obligations (and if any Note is not outstanding, pro-rata in proportion to the initial purchases of the remaining Notes).

(b) If the Company shall become entitled to receive or shall receive any securities or other property (including, without limitation, shares of Pledged Securities or instruments representing Pledged Securities acquired after the date hereof, or any options, warrants, rights or other similar property or certificates representing a dividend, or any distribution in connection with any recapitalization, reclassification or increase or reduction of capital, or issued in connection with any reorganization of the Company or any of its direct or indirect subsidiaries) in respect of the Pledged Securities (whether as an addition to, in substitution of, or in exchange for, such Pledged Securities or otherwise), the Company agrees to (i) accept the same as the agent of the Secured Parties; (ii) hold the same in trust on behalf of and for the benefit of the Secured Parties; and (iii) to deliver any and all certificates or instruments evidencing the same to the Agent on or before the close of business on the fifth business day following the receipt thereof by the Company, in the exact form received together with the Necessary Endorsements, to be held by the Agent subject to the terms of this Agreement as Collateral.

8. Rights and Remedies Upon Default.

(a) Upon the occurrence of any Event of Default and at any time thereafter, the Secured Parties, acting through the Agent, shall have the right to exercise all of the remedies conferred hereunder and under the Notes, and the Secured Parties shall have all the rights and remedies of a secured party under the UCC. Without limitation, the Agent, for the benefit of the Secured Parties, shall have the rights and powers listed below and shall act in accordance with such rights and powers:

(i) The Agent shall have the right to take possession of the Collateral and, for that purpose, enter, with the aid and assistance of any person, any premises where the Collateral, or any part thereof, is or may be placed and remove the same, and the Company shall assemble the Collateral and make it available to the Agent at places which the Agent shall reasonably select, whether at the Company’s premises or elsewhere, and make available to the Agent, without rent, all of the Company’s premises and facilities for the purpose of the Agent taking possession of, removing or putting the Collateral in saleable or disposable form and the Company hereby waives its right to notice of such actions.

(ii) All rights of the Company to exercise the voting and other consensual rights which it would otherwise be entitled to exercise and all rights of the Company to receive the dividends and interest which it would otherwise be authorized to receive and retain, shall cease. Upon such notice, the Agent shall have the right to receive, for the benefit of the Secured Parties, any interest, cash dividends or other payments on the Collateral and, at the option of the Agent, to exercise all voting rights pertaining thereto. Without limiting the generality of the foregoing, the Agent shall have the right (but not the obligation) to exercise all rights with respect to the Collateral as it were the sole and absolute owner thereof, including, without limitation, to vote and/or to exchange any or all of the Collateral in connection with a merger, reorganization, consolidation, recapitalization or other readjustment concerning or involving the Collateral or the Company or any of its direct or indirect subsidiaries.

(iii) The Agent shall have the right to operate the business of the Company using the Collateral at the Company’s premises and shall have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the Collateral, at public or private sale or otherwise, either with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or parcels and at such time or times and at such place or places, and upon such terms and conditions as the Agent may deem commercially reasonable, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand upon or notice to the Company or right of redemption of the Company, which are hereby expressly waived. Upon each such sale, lease, assignment or other transfer of Collateral, the Agent, for the benefit of the Secured Parties, may, unless prohibited by applicable law which cannot be waived, purchase all or any part of the Collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities of the Company, which are hereby waived and released.

(iv) The Agent shall have the right (but not the obligation) to notify any account debtors and any obligors under instruments or accounts to make payments directly to the Agent, on behalf of the Secured Parties, and to enforce the Company’s rights against such account debtors and obligors.

(v) The Agent may (but is not obligated to) direct any financial intermediary or any other person or entity holding any investment property to transfer the same to the Agent, on behalf of the Secured Parties, or its designee.

(vi) The Agent may (but is not obligated to) transfer any or all Intellectual Property registered in the name of the Company at the United States Patent and Trademark Office and/or Copyright Office into the name of the Secured Parties or any designee or any purchaser of any Collateral, including that of the Agent for the benefit of the Secured Parties.

(b) The Agent shall comply with any applicable law in connection with a disposition of Collateral and such compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. The Agent may sell the Collateral without giving any warranties and may specifically disclaim such warranties. If the Agent sells any of the Collateral on credit, the Company will only be credited with payments actually made by the purchaser and received by the Agent or party acting on behalf of the Agent. In addition, the Company waives any and all rights that it may have to a judicial hearing in advance of the enforcement of any of the Agent’s rights and remedies hereunder, including, without limitation, its right following an Event of Default to take immediate possession of the Collateral and to exercise its rights and remedies with respect thereto.

(c) For the purpose of enabling the Agent to further exercise rights and remedies under this Section 8 or elsewhere provided by agreement or applicable law, the Company hereby grants to the Agent, for the benefit of the Secured Parties, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Company) to use, license or sublicense following an Event of Default, any Intellectual Property now owned or hereafter acquired by the Company, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof.

9. Applications of Proceeds. The proceeds of the sale, lease or other disposition of the Collateral hereunder or from payments made on account of any insurance policy insuring any portion of the Collateral shall be applied first, to the expenses and costs of the Agent in connection with the Agent’s performance hereunder in connection with the transactions contemplated hereunder (including, without limitation, any taxes, fees and other costs incurred in connection therewith and any reasonable attorneys’ fees and expenses incurred by the Agent), and then to satisfaction of the Obligations pro rata among the Secured Parties (based on then-outstanding principal amounts of the Notes at the time of any such determination), and then to the payment of any other amounts required by applicable law, after which the Agent shall pay to the Company any surplus proceeds. If, upon the sale, license or other disposition of the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Agent and the Secured Parties are legally entitled, the Company will be liable for the deficiency, together with interest thereon, at the rate of 12% per annum or the lesser amount permitted by applicable law (the “Default Rate”), and the reasonable fees of any attorneys employed by the Agent or the Secured Parties to collect such deficiency. To the extent permitted by applicable law, the Company waives all claims, damages and demands against the Secured Parties and the Agent arising out of the repossession, removal, retention or sale of the Collateral, unless due solely to the gross negligence or willful misconduct of the Secured Parties as determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction.

10. Securities Law Provision. The Company recognizes that the Agent may be limited in its ability to effect a sale to the public of all or part of the Pledged Securities by reason of certain prohibitions in the Securities Act of 1933, as amended, or other federal or state securities laws (collectively, the “Securities Laws”), and may be compelled to resort to one or more sales to a restricted group of purchasers who may be required to agree to acquire the Pledged Securities for their own account, for investment and not with a view to the distribution or resale thereof. The Company agrees that sales so made may be at prices and on terms less favorable than if the Pledged Securities were sold to the public, and that the Agent has no obligation to delay the sale of any Pledged Securities for the period of time necessary to register the Pledged Securities for sale to the public under the Securities Laws. The Company shall cooperate with the Agent in its attempt to satisfy any requirements under the Securities Laws (including, without limitation, registration thereunder if requested by the Agent) applicable to the sale of the Pledged Securities by the Agent.

11. Costs and Expenses. The Company agrees to pay all reasonable out-of-pocket fees, costs and expenses incurred in connection with any filing required hereunder, including without limitation, any financing statements pursuant to the UCC, continuation statements, partial releases and/or termination statements related thereto or any expenses of any searches reasonably required by the Agent. The Company shall also pay all other claims and charges which in the reasonable opinion of the Agent is reasonably likely to prejudice, imperil or otherwise affect the Collateral or the Security Interests therein. The Company will also, upon demand, pay to the Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Agent, for the benefit of the Secured Parties, may incur in connection with the protection, satisfaction, foreclosure, collection or enforcement of the Security Interest and the preparation, administration, continuance, amendment or enforcement of this Agreement and pay to the Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Agent, for the benefit of the Secured Parties, and the Secured Parties may incur in connection with (i) the enforcement of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, or (iii) the exercise or enforcement of any of the rights of collection of the Secured Parties under the Notes. Such fees shall be paid within 15 days of submission of a request by the Agent to the Company and the Company shall promptly notify the Secured Parties of the payment of such fees.

12. Responsibility for Collateral. The Company assumes all liabilities and responsibility in connection with all Collateral, and the Obligations shall in no way be affected or diminished by reason of the loss, destruction, damage or theft of any of the Collateral or its unavailability for any reason. Without limiting the generality of the foregoing, (a) neither the Agent nor any Secured Party (i) has any duty (either before or after an Event of Default) to collect any amounts in respect of the Collateral or to preserve any rights relating to the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the Collateral for sale, and (b) the Company shall remain obligated and liable under each contract or agreement included in the Collateral to be observed or performed by the Company thereunder. Neither the Agent nor any Secured Party shall have any obligation or liability under any such contract or agreement by reason of or arising out of this Agreement or the receipt by the Agent or any Secured Party of any payment relating to any of the Collateral, nor shall the Agent or any Secured Party be obligated in any manner to perform any of the obligations of the Company under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by the Agent or any Secured Party in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract, insurance policy or agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to the Agent or to which the Agent or any Secured Party may be entitled at any time or times.

13. Security Interests Absolute. All rights of the Secured Parties and all obligations of the Company hereunder, shall be absolute and unconditional, irrespective of: (a) any lack of validity or enforceability of this Agreement, the Notes or any agreement entered into in connection with the foregoing, or any portion hereof or thereof; (b) any change in the time, manner or place of payment or performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Notes or any other agreement entered into in connection with the foregoing; (c) any exchange, release or nonperfection of any of the Collateral, or any release or amendment or waiver of or consent to departure from any other collateral for, or any guarantee, or any other security, for all or any of the Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and cancel in its sole discretion any insurance claims or matters made or arising in connection with the Collateral; or (e) any other circumstance which might otherwise constitute any legal or equitable defense available to the Company, or a discharge of all or any part of the Security Interests granted hereby. Until the Obligations shall have been paid and performed in full, the rights of the Secured Parties shall continue even if the Obligations are barred for any reason, including, without limitation, the running of the statute of limitations or bankruptcy. The Company expressly waives presentment, protest, notice of protest, demand, notice of nonpayment and demand for performance. In the event that at any time any transfer of any Collateral or any payment received by the Secured Parties hereunder shall be deemed by final order of a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due to any party other than the Secured Parties, then, in any such event, the Company’s obligations hereunder shall survive cancellation of this Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this Agreement, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof. The Company waives all right to require the Secured Parties to proceed against any other person or entity or to apply any Collateral which the Secured Parties may hold at any time, or to marshal assets, or to pursue any other remedy. The Company waives any defense arising by reason of the application of the statute of limitations to any obligation secured hereby.

14. Term of Agreement. This Agreement and the Security Interests shall terminate on the date on which all payments under the Notes have been indefeasibly paid in full and all other Obligations have been paid or discharged; provided, however, that all indemnities of the Company contained in this Agreement shall survive and remain operative and in full force and effect regardless of the termination of this Agreement or the resignation or removal of the Agent.

15. Power of Attorney; Further Assurances.

(a) The Company authorizes the Agent, acting on behalf of the Secured Parties, as set forth herein, and does hereby make, constitute and appoint the Agent and his agents, successors or assigns with full power of substitution, as the Company’s true and lawful attorney-in-fact, with power, in the name of the Agent or the Company, to, after the occurrence and during the continuance of an Event of Default, (i) endorse any note, checks, drafts, money orders or other instruments of payment (including payments payable under or in respect of any policy of insurance) in respect of the Collateral that may come into possession of the Agent; (ii) to sign and endorse any financing statement pursuant to the UCC or any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts, and other documents relating to the Collateral; (iii) to pay or discharge taxes, liens, security interests or other encumbrances at any time levied or placed on or threatened against the Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral; (v) to transfer any Intellectual Property or provide licenses respecting any Intellectual Property; and (vi) generally, at the option of the Agent, and at the expense of the Company, at any time, or from time to time, to execute and deliver any and all documents and instruments and to do all acts and things which the Agent deems necessary to protect, preserve and realize upon the Collateral and the Security Interests granted therein in order to effect the intent of this Agreement and the Notes all as fully and effectually as the Company might or could do; and the Company hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding. The designation set forth herein shall be deemed to amend and supersede any inconsistent provision in the Organizational Documents or other documents or agreements to which the Company is subject or to which the Company is a party. Without limiting the generality of the foregoing, after the occurrence and during the continuance of an Event of Default, the Agent is specifically authorized to execute and file any applications for or instruments of transfer and assignment of any patents, trademarks, copyrights or other Intellectual Property with the United States Patent and Trademark Office and the United States Copyright Office.

(b) On a continuing basis, the Company will make, execute, acknowledge, deliver, file and record, as the case may be, with the proper filing and recording agencies in any jurisdiction, including, without limitation, the jurisdictions indicated on Section 15(b) of the Disclosure Schedule, all such instruments, and take all such action as may reasonably be deemed necessary or advisable, or as reasonably requested by the Agent, to perfect the Security Interests granted hereunder and otherwise to carry out the intent and purposes of this Agreement, or for assuring and confirming to the Agent the grant or perfection of a perfected security interest in all the Collateral under the UCC.

(c) The Company hereby irrevocably appoints the Agent as the Company’s attorney-in-fact, with full authority in the place and instead of the Company and in the name of the Company, to take any action and to execute any instrument which the Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including the filing of one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of the Company where permitted by law, which financing statements may (but need not) describe the Collateral as “all assets” or “all personal property” or words of like import, and ratifies all such actions taken by the Agent. This power of attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding.

16. Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto or by electronic mail at the e-mail address set forth on the signature pages attached hereto prior to 5:30 p.m. (California time) on a Business Day, (b) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto or by electronic mail at the e-mail address set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (California time) on any Business Day, (c) the 2nd Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto or such other address as the recipient party to whom notice is to be given may have furnished to the other party in writing in accordance herewith.

17. Other Security. To the extent that the Obligations are now or hereafter secured by property other than the Collateral or by the guarantee, endorsement or property of any other person, firm, corporation or other entity, then the Agent shall have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of the Secured Parties’ rights and remedies hereunder.

18. Collateral Agent.

(a) Appointment. The Secured Parties, by their acceptance of the benefits of the Agreement, hereby designate Rick Stevens as the Agent to act as specified herein. Each Secured Party shall be deemed irrevocably to authorize the Agent to take such action on its behalf under the provisions of this Agreement and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Agent may perform any of its duties hereunder by or through his agents or employees at the expense of the Company as set forth in this Agreement.

(b) Nature of Duties. The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement. Neither the Agent nor any of his partners, employees or agents shall be liable for any action taken or omitted by him as such under this Agreement or hereunder or in connection herewith or therewith, be responsible for the consequence of any oversight or error of judgment or answerable for any loss, unless caused solely by him or his gross negligence or willful misconduct as determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction. The duties of the Agent shall be mechanical and administrative in nature; the Agent shall not have by reason of this Agreement or any other related agreement a fiduciary relationship in respect of the Company or any Secured Party; and nothing in the Agreement or any other related agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Agreement or any other related agreement except as expressly set forth herein and therein.

(c) Lack of Reliance on the Agent. Independently and without reliance upon the Agent, each Secured Party, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Company and its subsidiaries in connection with such Secured Party’s investment in the Company, the creation and continuance of the Obligations, the transactions contemplated by the Transaction Documents, and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of the Company and its subsidiaries, and of the value of the Collateral from time to time, and the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Party with any credit, market or other information with respect thereto, whether coming into its possession before any Obligations are incurred or at any time or times thereafter. The Agent shall not be responsible to the Company or any Secured Party for any recitals, statements, information, financial statements, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith, or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectability, priority or sufficiency of this Agreement or any other related agreement or any contracts or insurance policies, or for the financial condition of the Company or the value of any of the Collateral, or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other related agreement, or the financial condition of the Company, or the value of any of the Collateral, or the existence or possible existence of any default or Event of Default under this Agreement, Notes or any of the other related agreement.

(d) Certain Rights of the Agent. The Agent shall have the right to take any action with respect to the Collateral, on behalf of all of the Secured Parties. Whenever reference is made in this Agreement to any action by, consent, designation, specification, requirement or approval of, notice, request or other communication from, or other direction given or action to be undertaken or to be (or not to be) suffered or omitted by the Agent to any amendment, waiver or other modification of this Agreement to be executed (or not to be executed) by the Agent or to any election, decision, opinion, acceptance, use of judgment, expression of satisfaction or other exercise of discretion, rights or remedies to be made (or not to be made) by the Agent, it is understood that in all cases the Agent shall be fully justified in failing or refusing to take any such action under this Agreement as it deems appropriate. This provision is intended solely for the benefit of the Agent and its successors and permitted assigns and is not intended to and will not entitle the other parties hereto to any defense, claim or counterclaim under or in relation to any Transaction Document, or confer any rights or benefits on any party hereto. If such instructions are not provided despite the Agent’s request therefor, the Agent shall be entitled to refrain from such act or taking such action, and if such action is taken, shall be entitled to appropriate indemnification from the Secured Parties in respect of actions to be taken by the Agent; and the Agent shall not incur liability to any person or entity by reason of so refraining. Without limiting the foregoing, (a) no Secured Party shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting hereunder in accordance with the terms of the Agreement or any other related agreement, and the Company shall have no right to question or challenge the authority of, or the instructions given to, the Agent pursuant to the foregoing and (b) the Agent shall not be required to take any action which the Agent believes (i) could reasonably be expected to expose it to personal liability, or (ii) require it to expend or risk its own funds, or (iii) is contrary to this Agreement, the Notes, any other related agreement or applicable law.

(e) Reliance. The Agent shall be entitled to conclusively rely, and shall be fully protected in relying, upon any writing, facsimile, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper person or entity, and, with respect to all legal matters pertaining to the Agreement, the Notes and any other related agreement and its duties thereunder, upon advice of counsel selected by it and upon all other matters pertaining to this Agreement, the Notes and any other related agreement and its duties thereunder, upon advice of other experts selected by it. Anything to the contrary notwithstanding, the Agent shall have no obligation whatsoever to any Secured Party to assure that the Collateral exists or is owned by the Company or is cared for, protected or insured or that the liens granted pursuant to this Agreement have been properly or sufficiently or lawfully created, perfected, or enforced or are entitled to any particular priority.

(f) Indemnification. To the extent that the Agent is not reimbursed and indemnified by the Company, the Secured Parties will jointly and severally reimburse and indemnify the Agent, in proportion to the outstanding amount of their respective principal amounts of the Notes at the time of determination, from and against any and all claims, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent in performing its duties hereunder or under this Agreement, the Notes and any other related agreement, or in any way relating to or arising out of this Agreement, the Notes and any other related agreement except for those determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction to have resulted solely from the Agent’s own gross negligence or willful misconduct. Prior to taking any action hereunder as the Agent, the Agent may require each Secured Party to deposit with it sufficient sums as it determines in good faith is necessary to protect the Agent for costs and expenses associated with taking such action. The provisions of this Section 18(f) shall survive the termination of this Agreement and the resignation or removal of the Agent.

(g) Resignation by the Agent.

	(i)	The Agent may resign from the performance of all its functions and duties under this Agreement and the other Transaction Documents at any time by giving 30 days’ prior written notice (pursuant to Section 16) to the Company and the Secured Parties. Such resignation shall take effect upon the appointment of a successor the Agent pursuant to clauses (ii) and (ii) below.

	(ii)	Upon any such notice of resignation, the Secured Parties, acting by a Majority in Interest, shall appoint a successor collateral agent hereunder.

	(iii)	If a successor collateral agent shall not have been so appointed within said 30-day period, the Agent shall then appoint a successor collateral agent who shall serve as collateral agent until such time, if any, as the Secured Parties appoint a successor collateral agent as provided above. If a successor collateral agent has not been appointed within such 30-day period, the Agent may petition any court of competent jurisdiction or may interplead the Company and the Secured Parties in a proceeding for the appointment of a successor collateral agent, and all fees, including, but not limited to, extraordinary fees associated with the filing of interpleader and expenses associated therewith, shall be payable by the Company on demand.

(h) Rights with respect to Collateral. Each Secured Party agrees with all other Secured Parties and the Agent (i) that it shall not, and shall not attempt to, exercise any rights with respect to its security interest in the Collateral, whether pursuant to any other agreement or otherwise (other than pursuant to this Agreement), or take or institute any action against the Agent or any of the other Secured Parties in respect of the Collateral or its rights hereunder (other than any such action arising from the breach of this Agreement) and (ii) that such Secured Party has no other rights with respect to the Collateral other than as set forth in this Agreement, the Notes and any other related agreements. Upon the acceptance of any appointment as collateral agent hereunder by a successor collateral agent, such successor collateral agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring collateral agent and the retiring collateral agent shall be discharged from its duties and obligations under this Agreement. After any retiring collateral agent’s resignation or removal hereunder as collateral agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was collateral agent.

19. Miscellaneous.

(a) No course of dealing between the Company and the Secured Parties, nor any failure to exercise, nor any delay in exercising, on the part of the Secured Parties, any right, power or privilege hereunder or under the Notes shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

(b) All of the rights and remedies of the Secured Parties with respect to the Collateral, whether established hereby or by the Notes or by any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently.

(c) This Agreement, together with the exhibits and Disclosure Schedule hereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into this Agreement and the exhibits and Disclosure Schedule hereto. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Agent, or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.

(d) If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(e) No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

(f) This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Agent (other than by merger). Any Secured Party may assign any or all of its rights under this Agreement to any Person (as defined in the Purchase Agreement) to whom such Secured Party assigns or transfers any Obligations, provided such transferee agrees in writing to be bound, with respect to the transferred Obligations, by the provisions of this Agreement that apply to the Secured Parties.

(g) Each party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order to carry out the provisions and purposes of this Agreement.

(h) Except to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, all questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Except to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, the Company agrees that all proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and the Notes (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in Orange County, California. Except to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, the Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Orange County, California for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

(i) This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.

(j) The Company shall indemnify, reimburse and hold harmless the Agent and the Secured Parties and their respective partners, members, shareholders, officers, directors, employees and agents (and any other persons with other titles that have similar functions) (collectively, “Indemnitees”) from and against any and all losses, claims, liabilities, damages, penalties, suits, costs and expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from this Agreement or the Collateral, except any such losses, claims, liabilities, damages, penalties, suits, costs and expenses which result from the gross negligence or willful misconduct of the Indemnitee as determined by a final, nonappealable decision of a court of competent jurisdiction.

(k) Nothing in this Agreement shall be construed to subject the Agent or any Secured Party to liability as an officer or director of the Company or a partner in any of the Company’s direct or indirect subsidiaries that is a partnership or as a member in any of the Company direct or indirect subsidiaries that is a limited liability company, nor shall the Agent or any Secured Party be deemed to have assumed any obligations under any partnership agreement or limited liability company agreement, as applicable, of any the Company or any of its direct or indirect subsidiaries or otherwise, unless and until any such Secured Party exercises its right to be substituted for the Company as a partner or member, as applicable, pursuant hereto.

(l) To the extent that the grant of the security interest in the Collateral and the enforcement of the terms hereof require the consent, approval or action of any partner or member, as applicable, of the Company or any direct or indirect subsidiary of the Company or compliance with any provisions of any of the Organizational Documents, the Company hereby grants such consent and approval and waive any such noncompliance with the terms of said documents.

(m) The Company and each Secured Party is subject to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”) and the Agent (for itself and not on behalf of any Secured Party), hereby notifies all future Secured Parties, including subsequent assignees or transferees, that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Secured Party, which information includes the name and address of the Secured Party and other information that will allow the Agent, to identify the Secured Party in accordance with the Patriot Act. The Secured Parties shall provide such information and take such actions as are requested by the Agent in order to maintain compliance with the Patriot Act.

(n) In no event shall the Agent be responsible or liable for any failure or delay in the performance of its obligations hereunder directly or indirectly caused by events beyond its control, including general labor disputes, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, losses or malfunctions of utilities, communications or computer (software and hardware) services; provided, however, that lack of funds or other financial circumstances and labor disputes only by the personnel of the affected party shall not constitute an event beyond its control hereunder and provided, further, that the Agent, as the case may be, shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performances as soon as practicable under the circumstances.

[SIGNATURE PAGES FOLLOW]

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed on the dates set forth below.

COMPANY	AllDigital Holdings, Inc., a Nevada corporation

	By:
		Michael Linos, President & Interim CEO

	Dated: _______, 2014

	Address:	220 Technology Drive, Suite 100
		Irvine, CA 92618

	Facsimile:	(949)250-0730

AGENT
	Richard P. Stevens, II.

	Dated: _______, 2014

	Address:	c/o AllDigital Holdings, Inc.
		220 Technology Drive, Suite 100
		Irvine, CA 92618

	Facsimile:	(949)250-0730

[SIGNATURE PAGE OF SECURED PARTIES FOLLOWS]

[SIGNATURE PAGE OF SECURED PARTIES TO SECURITY AGREEMENT]

Name of Secured Party:

Signature of Secured Party (or Authorized Signatory if an entity):

Name of Authorized Signatory (if an entity):

Title of Authorized Signatory (if an entity):

Address of Secured Party:

Email Address of Secured Party:

Facsimile Number of Secured Party:

Dated:

ANNEX A
to
SECURITY AGREEMENT

FORM OF ADDITIONAL OBLIGOR JOINDER

Security Agreement made by
AllDigital Holdings, Inc.
dated the date thereof to and in favor of
the Secured Parties identified therein (the “Security Agreement”)

Reference is made to the Security Agreement as defined above; capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in, or by reference in, the Security Agreement.

The undersigned hereby agrees that upon delivery of this Additional Obligor Joinder to the Secured Parties referred to above, the undersigned shall (a) be an Additional Obligor under the Security Agreement, (b) have all the rights and obligations of the Company under the Security Agreement as fully and to the same extent as if the undersigned was an original signatory thereto and (c) be deemed to have made the representations and warranties set forth therein as of the date of execution and delivery of this Additional Obligor Joinder. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.

Attached hereto are supplemental and/or replacement Disclosure Schedule to the Security Agreement, as applicable.

An executed copy of this Additional Obligor Joinder shall be delivered to the Agent, and the Secured Parties and the Agent may rely on the matters set forth herein on or after the date hereof. This Additional Obligor Joinder shall not be modified, amended or terminated without the prior written consent of the Agent.

A-1

IN WITNESS WHEREOF, the undersigned has caused this Additional Obligor Joinder to be executed in the name and on behalf of the undersigned.

[Name of Additional Obligor]

	By:
	Name:
	Title:

	Dated:

	Address:

	Facsimile:
	Email:

A-2

ANNEX B
to
SECURITY AGREEMENT

INTELLECTUAL PROPERTY SECURITY AGREEMENT

This INTELLECTUAL PROPERTY SECURITY AGREEMENT (“IP Security Agreement”), dated as of the date set forth below, is made by AllDigital Holdings, Inc., a Nevada corporation (“Grantor”), in favor of Rick Stevens (“Agent”), as collateral agent for the holders (the “Secured Parties”) of the Company’s 5% Senior Secured Convertible Note due December 31, 2016 (the “Notes”).

R E C I T A L S

A. The Grantor has issued the Notes in favor of the Secured Parties.

B. As a condition precedent to the making of loans by the Secured Parties under the Notes, Grantor has executed and delivered that certain Security Agreement dated as of the same day herewith, made by and among Grantor, the Agent, and the Secured Parties (the “Security Agreement”).

C. Under the terms of the Security Agreement, Grantor has granted to Agent, for the benefit of the Secured Parties, a security interest in, among other property, certain intellectual property of Grantor, and has agreed to execute and deliver this IP Security Agreement, for recording with national, federal and state government authorities including but not limited to, with respect to individual patents, registered trademarks and registered copyrights, and applications for the foregoing, recording with the United States Patent and Trademark Office and the United States Copyright Office.

A G R E E M E N T

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor agrees as follows:

1. Grant of Security. Grantor hereby grants to Agent for the benefit of the Secured Parties a security interest in all of Grantor’s right, title and interest in and to the following (the “IP Collateral”):

(a) All copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office;

(b) All letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof, and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof;

(c) All trademarks, common law trademarks, trade names, corporate names, company names, business names, fictitious business names, trade dress, service marks, logos, domain names and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common law rights related thereto;

B-1

(d) All trade secrets arising under the laws of the United States, any other country or any political subdivision thereof;

(e) All rights to obtain any reissues, renewals or extensions of the foregoing;

(f) All licenses for any of the foregoing;

(g) All causes of action for infringement of the foregoing;

(h) Any and all royalties, fees, income, payments and other proceeds now or hereafter due or payable with respect to any and all of the foregoing; and

(i) Any and all claims, with respect to any of the foregoing, for damages and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse, breach or default, with the right but no obligation to sue for such legal and equitable relief and to collect, or otherwise recover, any such damages.

2. Recordation. Grantor authorizes the Commissioner for Patents, the Commissioner for Trademarks and the Register of Copyrights and any other government officials to record and register this IP Security Agreement upon request by the Agent.

3. Loan Documents. This IP Security Agreement has been entered into pursuant to and in conjunction with the Security Agreement, which is hereby incorporated by reference. The provisions of the Security Agreement shall supersede and control over any conflicting or inconsistent provision herein. The rights and remedies of the Agent with respect to the IP Collateral are as provided by the Security Agreement and annexes thereto, and nothing in this IP Security Agreement shall be deemed to limit such rights and remedies.

4. Execution in Counterparts. This IP Security Agreement may be executed in counterparts, each of which shall constitute an original, and all of which when taken together shall constitute one and the same IP Security Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.

5. Governing Law. This IP Security Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to the principles of conflicts of law thereof.

IN WITNESS WHEREOF, the parties have caused this IP Security Agreement to be duly executed and delivered by its officers thereunto duly authorized as of _______________, 2014.

GRANTOR	AllDigital Holdings, Inc.,
	a Nevada corporation

	By:
		Michael Linos,
		President & Interim CEO

AGREED TO AND ACCEPTED:


AGENT	Richard P. Stevens, II.

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Disclosure Schedules

Section 4(c)

Purchase money liens against AllDigtial, Inc. relating to certain equipment as reflected in the following UCC-1 Financing Statements, together with any future purchase money equipment liens of AllDigital Holdings, Inc. and AllDigital, Inc.:

Filing No.		Secured Party

11-7273013762		U.S. Bancorp Equipment Finance, Inc.

11-7273149813		U.S. Bancorp Equipment Finance, Inc.

11-7290199756		U.S. Bancorp Equipment Finance, Inc.

12-7297127997		U.S. Bank Equipment Finance

12-7328630729		Data Sales, Inc.

12-7337677407		Data Sales, Inc.

13-7390617926		Data Sales, Inc.

14-7407621739		U.S. Bank Equipment Finance

14-7412642556		U.S. Bank Equipment Finance

Section 4(i)

AllDigital Inc.

AllDigital, LLC

Section 4(k)

See Section 4(c) of these Disclosure Schedules

Section 4(p)

Standard Industrial/Commercial Multi-Tenant Least – Net American Industrial Real Estate Association with Olen Commercial Realty dated August 25, 2009, and expiring December 31, 2014.

Section 4(nn)

Cablebox.com

Lynkfx.com

Alldigital.com

Section 4(oo)

None

Section 15(b)

California

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8, File No. 333-179385, of AllDigital Holdings, Inc. of our report dated April 20, 2015, with respect to the consolidated financial statements of AllDigital Holdings, Inc. in the company’s annual report on Form 10-K for the years ended December 31, 2014 and 2013. Our report relating to the consolidated financial statements contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.

/s/ ROSE, SNYDER & JACOBS LLP

Encino, California
April 20, 2015

Exhibit 31.1

CERTIFICATION

I, Michael Linos, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Alldigital Holdings, Inc. for the year ended December 31, 2014.

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: April 20, 2015	/s/ Michael Linos
	Michael Linos
	Chief Executive Officer and President

Exhibit 31.2

CERTIFICATION

I, Brad Eisenstein, certify that:

1.	I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2014 of AllDigital Holdings, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: April 20, 2015	/s/ Brad Eisenstein
	Brad Eisenstein
	Chief Financial Officer Chief Operating Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of AllDigital Holdings, Inc. (the “Company”) for the year ended December 31, 2014 (the “Report”), I, Michael Linos, Chief Executive Officer and President of the Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.	The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 20, 2015	/s/ Michael Linos
	Michael Linos
	Chief Executive Officer and President

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of AllDigital Holdings, Inc. (the “Company”) for the year ended December 31, 2014 (the “Report”), I, Brad Eisenstein, Chief Financial Officer and Chief Operating Officer of the Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.	The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 20, 2015	/s/ Brad Eisenstein
	Brad Eisenstein
	Chief Financial Officer Chief Operating Officer

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