Amended Current Report Filing (8-k/a)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K/A

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported): July 15, 2014

Adaptive Medias, Inc.

(Exact name of registrant as specified in its charter)

000-54074

(Commission File Number)

Nevada	26-0685980
(State or other jurisdiction	(I.R.S. Employer
of Incorporation)	Identification No.)

16795 Von Karman Ave., #240

Irvine, CA 92606

(Address of principal executive offices)

949-525-4466

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)

Explanatory Note

On July 15, 2014, Adaptive Medias, Inc., a Nevada corporation (the “Company”), executed a Stock Purchase Agreement (the “Original Agreement”) with OneScreen, Inc., a Delaware corporation (“OneScreen”), Media Graph, Inc., a Nevada corporation and OneScreen’s spun-off former subsidiary (“Media Graph”), and the shareholders of Media Graph as set forth on Exhibit A thereto, effective June 30, 2014, as amended by that certain First Amendment to the Original Agreement dated concurrently therewith (together with the “Original Agreement”, the “Agreement”), whereby the Company acquired certain assets of OneScreen, which immediately prior thereto were held by Media Graph, in exchange for 5,000,000 shares of the Company’s Common Stock on a post-reverse stock split basis (the “Acquisition”). The Company disclosed the Acquisition on its July 17, 2014 Current Report on Form 8-K (SEC Accession No. 0001144204-14-043556) (the “Initial 8-K”); however, OneScreen’s Audited Consolidated Financial Statements and Unaudited Interim Financial Information (together, the “Financials”) were not then available. This filing is hereby made in order to amend the Initial 8-K to provide the Financials.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements of Business Acquired

The Audited Consolidated Financial Statements of OneScreen Inc. for the fiscal years ended December 31, 2013 and 2012 and the Interim Consolidated Financial Statements for the six months ended June 30, 2014 (Unaudited) are filed as Exhibits 99.1 and 99.2, respectively, to this Form 8-K and are incorporated herein by reference.

(b) Pro Forma Financial Information

The unaudited pro forma condensed consolidated balance sheet as of June 30, 2014 and the statements of operations for the six months ended June 30, 2014 and the year ended December 31, 2013 to reflect the acquisition of the business operations of OneScreen, Inc. are filed as Exhibit 99.3 to this Form 8-K and are incorporated herein by reference.

(d) Exhibits:

Exhibit Number		Description
99.1		Audited Consolidated Financial Statements for the fiscal years ended December 31, 2013 and 2012.
99.2		Interim Consolidated Financial Statements for the six months ended June 30, 2014 and 2013 (Unaudited).
99.3		Unaudited pro forma condensed consolidated balance sheet as of June 30, 2013 and the statements of operations for the six months ended June 30, 2013 and for the year ended December 31, 2013.

SIGNATURE

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 hereunto duly authorized.

Date: September 26, 2014

	ADAPTIVE MEDIAS, INC.

	/s/ Qayed Shareef
	Qayed Shareef
	Chief Executive Officer

Exhibit 99.1

ONESCREEN, INC. AND SUBSIDIARY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-1

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2013 AND 2012	F-2

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012	F-3

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012	F-4.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012	F-5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of

OneScreen, Inc.

Santa Monica, California

We have audited the accompanying consolidated financial statements of OneScreen, Inc. and Subsidiary (the Company), which comprise the consolidated balance sheets as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of OneScreen, Inc. and Subsidiary as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Emphasis-of-matter Regarding Going Concern

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 incurred a net loss of $7,131,867 for the year ended December 31, 2013, had a negative cash flow from operations of $896,583 and $65,583 for the years ended December 31, 2013 and 2012, respectively, and negative working capital of $1,595,700 and a net stockholders’ deficit of $850,562 as of December 31, 2013. These conditions raise substantial doubt about its 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. Our opinion is not modified with respect to that matter.

/s/ Ramirez Jimenez International CPAs

Irvine, California

September 25. 2014

F-1

ONESCREEN, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	December 31,			December 31,
	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	927,853		$	580,201
Accounts receivable, net		1,938,946			6,281,259
Prepaid expenses		3,000			24,582
Total current assets		2,869,799			6,886,042

Property and equipment, net		110,896			62,172

Other assets:
Intangible assets, net		604,820			676,690
Investment		20,000			20,000
Deposits		17,683			15,698
Total other assets		642,503			712,388
Total assets	$	3,623,198		$	7,660,602

Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable	$	3,231,469		$	3,672,110
Accrued expenses		1,234,030			326,085
Total current liabilities		4,465,499			3,998,195

Other liabilities		8,261			3,326
Total liabilities		4,473,760			4,001,521
Stockholders' equity:
Preferred stock $0.001 par value; 5,000,000 shares authorized; none issued and outstanding		-			-
Common stock $0.001 par value; 150,000,000 shares authorized; 83,998,138 and 71,203,695 shares issued and outstanding, respectively		83,998			71,204
Additional paid-in capital		32,973,246			30,113,816
Subscription receivable		(250,000	)		-
Accumulated deficit		(33,657,806	)		(26,525,939	)
Total stockholders' equity (deficit)		(850,562	)		3,659,081
Total liabilities and stockholders' equity (deficit)	$	3,623,198		$	7,660,602

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

F-2

ONESCREEN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the years ended
	December 31,
	2013			2012

Revenue	$	13,097,263		$	15,857,883
Cost of revenue		10,434,729			9,110,657

Gross profit		2,662,534			6,747,226

Operating expenses:
Legal and professional fees		418,511			123,676
General and administrative expenses		7,297,201			3,788,432
Research and development		1,417,465			576,816
Selling expenses		214,803			508,551
Depreciation and amortization		428,911			489,057
Total operating expenses		9,776,891			5,486,532

Income (loss) from operations		(7,114,357	)		1,260,694

Other (income) expense:
Other income		(6	)		(1,750	)
Other expense		17,516			367
Total other (income) expense		17,510			(1,383	)

Net income (loss)	$	(7,131,867	)	$	1,262,077

Net income (loss) per common share - basic and diluted	$	(0.10	)	$	0.02

Weighted average number of common shares outstanding
Basic		71,488,353			63,390,445
Diluted		71,488,353			63,413,861

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

F-3

ONESCREEN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

					Common Stock and
	Preferred Stock				Common Stock Subscribed				Additional			Subscription			Accumulated
	Shares		Amount		Shares		Amount		Paid-in Capital			Receivable			Deficit			Total
Balance, January 1, 2011		-	$	-		59,614,808	$	59,615	$	29,121,186		$	-		$	(27,788,016	)	$	1,392,785
Common stock issued under subscription agreement		-		-		5,000,000		5,000		995,000			-			-			1,000,000
Stock-based compensation		-		-		-		-		4,219			-			-			4,219
Common stock issued under anti-dilution provisions		-		-		6,588,887		6,589		(6,589	)		-			-			-
Net income		-		-		-		-		-			-			1,262,077			1,262,077
Balance, December 31, 2012		-		-		71,203,695		71,204		30,113,816			-			(26,525,939	)		3,659,081
Common stock issued under subscription agreement		-		-		12,794,443		12,794		1,887,206			(250,000	)		-			1,650,000
Stock-based compensation		-		-		-		-		972,224			-			-			972,224
Net loss		-		-		-		-		-			-			(7,131,867	)		(7,131,867	)
Balance, December 31, 2013		-	$	-		83,998,138	$	83,998	$	32,973,246		$	(250,000	)	$	(33,657,806	)	$	(850,562	)

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

F-4

ONESCREEN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the years ended
	December 31,
	2013			2012
Cash flows from operating activities:
Net income (loss)	$	(7,131,867	)	$	1,262,077
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation		45,184			21,518
Provision for bad debts		1,626,050			140,227
Amortization of intangibles		383,727			467,539
Stock-based compensation		972,224			4,219
Change in operating assets and liabilities:
Accounts receivable		2,716,263			(4,240,163	)
Prepaid expenses		21,582			(15,827	)
Other assets		-			3,259
Deposits		(1,985	)		-
Accounts payable		(440,641	)		2,120,023
Accrued expenses		907,945			171,684
Other liabilities		4,935			(139	)
Net cash flows used in operating activities		(896,583	)		(65,583	)

Cash flows from investing activities:
Purchase of property and equipment		(93,908	)		(50,417	)
Purchase of intangible assets		(311,857	)		(528,475	)
Net cash flows used in investing activities		(405,765	)		(578,892	)

Cash flows from financing activities:
Proceeds from issuance of common stock		1,650,000			1,000,000
Net cash flows provided by financing activities		1,650,000			1,000,000

Net increase in cash and cash equivalents		347,652			355,525

Cash and cash equivalents, beginning of period		580,201			224,676

Cash and cash equivalents, end of period	$	927,853		$	580,201

Supplemental cash flow disclosures:
Interest paid	$	-		$	298
Income taxes paid	$	10,459		$	-

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

F-5

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIATED FINANCIAL STATEMENTS

December 31, 2013and 2012

NOTE 1 – NATURE OF OPERATIONS

OneScreen, Inc. and subsidiary ("OneScreen" or the “Company”) is a digital media software company that offers to stakeholders in the television industry a comprehensive video platform, a business-to-business marketplace, and professional services.

OneScreen provides audiences with greater access to video content, as well as, when, where, and how they want to receive that content. The Company partners with key stakeholders in the industry: producers and aggregators, publishers and networks, and advertisers and agencies, powering them with the digital video technologies and partnerships they need to thrive. OneScreen has created Media Graph, which is a platform of built-in relationships, adaptable technology, and creative services for every role and need across the digital ecosystem. From publishers that need playout tools, producers who need content and rights management, and advertisers looking to enhance their media buying capabilities, OneScreen offers technologies and services for every stakeholder. The Company also enables aggregators, networks and agencies to connect and share video, manage daily operations, and transact in the marketplace. The Company’s current revenue streams include digital media software and display advertising.

On February 7, 2013, the Board of Directors approved the merger of OneScreen Inc., a California corporation, and OneScreen Inc., a Delaware corporation, whereby OneScreen, Inc., a Delaware corporation became the surviving corporation of the merger.

NOTE 2 – GOING CONCERN

The Company had a net loss of $7,131,867 for the year ended December 31, 2013, and further losses are anticipated during 2014. The Company had a negative cash flow from operations of $896,583 and $65,583 for the years ended December 31, 2013 and 2012, respectively and negative working capital of $1,595,700 and a net stockholders’ deficit of $850,562 as of December 31, 2013. The Company’s ability to continue as a going concern is uncertain without additional debt or equity financing from outside investors. Management plans to continue to implement its business plan and to fund operations by raising additional capital through the issuance of debt and equity securities (See Note 14). However, there can be no assurance that the Company will be able to raise additional capital or generate enough cash from operating activities as needed, which could have a materially adverse effect on the Company’s business, consolidated financial position, results from operations, or cash flows. Actual results could differ from management’s assessment.

The consolidated financial statements have been presented on the basis that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary, should the Company be unable to continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements as of and for the years ended December 31, 2013 and 2012 include the accounts of OneScreen, Inc., a Delaware corporation, and its wholly-owned subsidiary VSIP, Inc., a Delaware corporation. All significant intercompany balances and transactions have been eliminated in consolidation.

F-6

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

Accounting Method

The Company maintains its accounting records on an accrual method of accounting in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).

Use of Estimates

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include the allowance for doubtful accounts, recoverability of property and equipment, valuation of software development costs, accrued expenses and other current liabilities, stock-based compensation, income taxes and the valuation on deferred tax assets and contingent liabilities. Actual results from the resolution of such estimates and assumptions may vary from the estimates and assumptions used in the preparation of the consolidated financial statements.

Cash and Cash Equivalents

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

Revenue Recognition

As required by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification “ASC”) Topic 605, Revenue Recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is probable. Credits or refunds are recognized when they are determinable and estimable.

Marketplace revenue consists of fees paid by advertisers in order to display their advertisements on a publisher’s website. The Company’s proprietary technology platform is used to connect advertisers and content providers with publishers. The Company collects fees from the advertisers, retains a fee for services provided, and distributes the balance to the content providers and publishers. Revenue is recognized in the period that the advertising impressions, click-throughs or actions occur.

Platform services revenue consists of fees charged to customers for access to OneScreen hosted software application services, which provide customers with features and functionality for uploading, managing, distributing, and monetizing their video assets. Revenue is derived from three primary sources: (1) the subscription to its technology, (2) bandwidth services and (3) professional services. Contracts for customers generally have an open term and are cancellable by either party by providing at least 30 days prior written notice to the other party.

In accordance with FASB ASC Subtopic 605-45-45, Reporting Revenue Gross as a Principal versus Net as an Agent, the Company evaluates whether it is appropriate to record revenue on a gross basis and related costs or the net basis earned as commissions. Generally, if the Company is primarily obligated in a transaction, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has several but not all of these indicators, revenue is recorded on a gross basis. Based on this evaluation, the Company recorded all revenue on a gross basis for the years ended December 31, 2013 and 2012.

F-7

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

Accounts Receivable

Accounts receivable are recorded at the invoiced amounts and are non-interest bearing. The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. The Company estimates its allowance for doubtful accounts by evaluating specific accounts where information indicates the customers may have an inability to meet its financial obligations, such as bankruptcy proceedings and receivable amounts outstanding for an extended period beyond contractual terms. In these cases, the Company uses assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due in order to reduce the receivable to the amount expected to be collected. These specific allowances are reevaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. The Company may also record a general allowance as necessary. Accounts deemed uncollectible are written off, as appropriate, typically after 120 days. Previously written-off accounts receivable subsequently collected are recognized as a reduction of bad debt expense when funds are received. The allowance for doubtful accounts was $301,626 and $193,136 as of December 31, 2013 and 2012, respectively.

Cost of Revenue

Cost of marketplace revenue consists of amounts paid to publishers and video content providers each time a display advertisement (i.e., a video with a pre-roll advertisement) runs on a publisher’s website. The Company becomes obligated to make payments related to the above costs in the period the advertising impressions, click-throughs, and click per actions are delivered or occur. Such costs are classified as cost of revenue in the corresponding period in which the revenue is recognized in the accompanying consolidated statements of operations.

Cost of platform services revenue includes cost of storage of the digital assets, cost of ad serving optimization, cost of encoding, and the cost of bandwidth and are recognized in the month that the services are provided.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are provided for using the straight-line method over the estimated useful lives of the related assets as follows:

Category		Useful Lives
Furniture and fixtures		5 years
Office and computer equipment		3 years
Software		3 years

Betterments, renewals and extraordinary repairs that materially extend the useful life of the asset are capitalized; other repairs and maintenance charges are expensed as incurred. The cost and related accumulated depreciation applicable to assets retired are removed from the accounts, and the gain or loss on disposition, if any, is recognized in the consolidated statement of operation for that period.

Capitalized Website Costs

In accordance with FASB ASC Subtopic 350-50, Intangibles-Goodwill and Other – Website Development Costs, costs for developing website application and infrastructure, creating the initial graphics of the website, and adding upgrades and enhancements are capitalized, whereas costs for planning, adding content and operating the website are expensed as incurred. Capitalized website costs are stated at cost less accumulated amortization. Amortization is provided for on a straight-line basis over an estimated useful life of two years.

F-8

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

Software Development Costs

In accordance with FASB ASC Subtopic 350-40, Intangibles-Goodwill and Other – Internal-Use Software, costs incurred to develop internal-use software during the preliminary project stage are expensed as incurred. Internal-use software development costs are capitalized during the application development stage, which is after: (i) the preliminary project stage is completed; and (ii) management authorizes and commits to funding the project and it is probable the project will be completed and used to perform the function intended. Capitalization ceases at the point the software project is substantially complete and ready for its intended use, and after all substantial testing is completed. Upgrades and enhancements are capitalized if it is probable that those expenditures will result in additional functionality. Amortization is provided for on a straight-line basis over an estimated useful life of three years. When existing software is replaced with new software, the unamortized costs of the old software are expensed when the new software is ready for its intended use.

Patents and Trademarks

The Company relies principally on the intellectual property laws of the United States, including seeking patent and trademark protections through the United States Patent and Trademark Office, and has adopted confidentiality procedures and contractual provisions in vendor and client service agreements in order to protect its proprietary technology, confidential information, business strategies, brands, and other trade secret information. The Company enters into confidentiality and invention assignment agreements with its employees and consultants. OneScreen rigorously controls access, whether internal or external, to the Company’s proprietary technology.

The Company has various patent and trademark applications either pending or issued by the United States Patent and Trademark Office. The Company has one registered trademark in four classifications of services for the “ONESCREEN” mark, and three pending trademarks currently in prosecution review.

The Company also has five patent applications in various stages of completion, with three non-provisional applications filed and either awaiting review or currently in prosecution review, one non-provisional application awaiting completion to be filed, and one provisional application that has been filed, but is pending conversion to non-provisional status. The Company does not have any patent applications pending in any international jurisdictions, however the Company may seek coverage in additional jurisdictions to the extent the Company determines such coverage is appropriate and cost-effective.

In accordance with FASB ASC Topic 350, Intangibles-Goodwill and Others, costs incurred for the registration of patents and trademarks are capitalized as incurred. Amortization is provided for on a straight-line basis over an estimated useful life of 20 years. The trademark is considered to have an indefinite life and, therefore, is not subject to amortization. The Company reviews the carrying value of the trademark for impairment annually and whenever events or changes in circumstances indicate that the carrying value of the trademark may exceed its fair value.

Impairment of Long-lived Assets

The Company is subject to the provisions of FASB ASC Topic 360, Property, Plant and Equipment – Impairment or Disposal of Long Lived Assets, which requires impairment losses to be recorded on long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of the assets. In such cases, the carrying value of assets to be held and used are adjusted to their estimated fair value and assets held for sale are adjusted to their estimated fair value less selling expenses. No impairment losses were recognized for the year ended December 31, 2013.

F-9

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

Investment

Investment represents a 5% minority interest in an unrelated private company and is accounted for under the cost method in accordance with FASB ASC Subtopic 325- 20, Investments – Others – Cost Method Investments. The Company periodically reviews its investments in nonmarketable securities and impairs any security whose decline in value is considered other than temporary. The Company's determination of whether a security is other than temporarily impaired incorporates both quantitative and qualitative information. US GAAP requires the exercise of judgment in making this assessment for qualitative information, rather than the application of fixed mathematical criteria. The Company considers a number of factors including, but not limited to, the length of time and the extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, the reason for the decline in fair value, changes in fair value subsequent to the balance sheet date, and other factors specific to the individual investment. The Company's assessment involves a high degree of judgment and accordingly, actual results may differ materially from the Company's estimates and judgments.

Non-Cancellable Leases

The Company enters into various lease agreements in conducting its business. At the inception of each lease, the Company evaluates the lease agreement to determine whether the lease is an operating or capital lease. Leases may contain initial periods of free rent and/or periodic escalations. When such items are included in a lease agreement, the Company records rent expense on a straight-line basis over the initial term of a lease. The difference between the rent payment and the straight-line rent expense is recorded as a deferred rent liability. The Company expenses any additional payments under its operating leases for taxes, insurance or other operating expenses as incurred.

Advertising

The Company conducts advertising for the promotion of its products and services. In accordance with FASB ASC Subtopic 720-35, Other Expenses – Advertising Costs, advertising costs are charged to operations when incurred. Advertising costs aggregated $48,424 and $3,436 for the years ended December 31, 2013 and 2012, respectively.

Research and Development Cost

In accordance with FASB ASC Topic 730, Research and Development, expenditures for research and development of the Company's products are expensed when incurred, and are included in operating expenses. The Company recognized research and development costs of $1,417,465 and $576,816 for the years ended December 31, 2013 and 2012, respectively.

Stock-Based Compensation

Compensation expense associated with the granting of stock-based awards to employees and directors is recognized in accordance with FASB ASC Topic 718, Compensation – Stock Compensation.

FASB ASC Topic 718 requires companies to estimate and recognize the fair value of stock-based awards to employees and directors on the date of grant. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. Stock-based compensation for non-employees is accounted for at fair value using the measurement date and recognition criteria under FASB ASC Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees.

F-10

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

The Company recorded stock-based compensation expense under FASB ASC Topic 718 attributable to stock options of $972,224 and $4,219 for the years ended December 31, 2013 and 2012, respectively (see note 12).

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Subtopic 740-10, Income Taxes (“ASC 740-10”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amount of existing assets and liabilities and their respective tax bases and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company provides a valuation allowance against its deferred tax assets when circumstances indicate that it will more likely than not, no longer be realized.

The Company follows the provisions for uncertain tax positions as addressed in ASC 740-10. The Company did not recognize a liability for unrecognized tax benefits. The Company has no tax positions at December 31, 2013 for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the years presented. The Company had no accruals for interest and penalties at December 31, 2013. The Company is subject to examination by U.S. federal tax authorities for returns filed for the prior three years and by state tax authorities for returns filed for the prior four years.

Financial Instruments and Concentrations of Business and Credit Risk

FASB ASC Topic 825, Financial Instruments, requires disclosure of fair value information about financial instruments. Management believes the fair value of its financial instruments approximates their carrying amounts.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities.

The Company maintains cash and cash equivalents balances that at times exceed amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk in this area. The Company’s accounts receivable, which are unsecured, expose the Company to credit risks, such as collectability and business risks, such as customer concentrations. The Company controls credit risk by investigating the creditworthiness of all customers prior to establishing relationships with them, performing periodic reviews of the credit activities of those customers during the course of the business relationship, regularly analyzing the collectability of accounts receivable and recording an allowance for doubtful accounts when these receivables become uncollectible.

Customer concentrations for the years ended December 31, 2013 and 2012 consist of two and three significant customers that accounted for approximately 40% and 50% of net revenue, respectively. Amounts outstanding from these customers represent approximately 18% and 45% of total accounts receivable at December 31, 2013 and 2012, respectively.

F-11

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

The Company’s accounts payable can expose the Company to business risks, such as vendor concentrations. Vendor concentrations for the years ended December 31, 2013 and 2012 consist of four and three significant vendors that accounted for approximately 51% and 56% of total purchases, respectively. Amounts due to these vendors represent approximately 54% and 55% of total accounts payable at December 31, 2013 and 2012, respectively.

Recently Issued Accounting Pronouncements

In January 2013, the FASB amended its guidance on the presentation of comprehensive income. Under the amended guidance, an entity must present information regarding reclassification adjustments from accumulated other comprehensive income in a single note or on the face of the financial statements. This is required for both annual and interim reporting. The amendment became effective for reporting periods beginning after December 15, 2012 and is to be applied prospectively. Early adoption is permitted. The Company has elected to adopt this guidance during the year ended December 31, 2012. This guidance did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In July 2013, the FASB issued 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. ASU 2013-11 requires that unrecognized tax benefits be presented in the consolidated 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 consolidated financial statements as a liability and should not be combined with deferred tax assets. The Company adopted this guidance effective January 1, 2014 and the adoption did not have a significant impact on the Company’s consolidated financial statements.

In May 2014, the FASB and the International Accounting Standards Board jointly issued ASU No. 2014-9, Revenue from Contracts with Customers, which clarifies the principles for recognizing revenue and develops a common revenue standard for US GAAP and International Financial Reporting Standards. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The ASU is effective for public entities for annual and interim periods beginning after December 15, 2016 and for private companies in periods beginning after December 15, 2017. Early adoption is not permitted under US GAAP and retrospective application is permitted, but not required. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial position and results of operations.

NOTE 4 – ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at December 31, 2013 and 2012:

	2013			2012

Accounts receivable	$	2,240,572		$	6,474,395
Less: allowance for doubtful accounts		(301,626	)		(193,136	)
Accounts receivable, net	$	1,938,946		$	6,281,259

Bad debt expense was $1,626,050 and $140,227 for the years ended December 31, 2013 and 2012, respectively.

F-12

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2013 and 2012:

	2013			2012

Furniture and fixtures	$	31,805		$	20,594
Office and computer equipment		154,731			115,307
Software		43,473			200
		230,009			136,101
Less: accumulated depreciation and amortization		(119,113	)		(73,929	)
Property and equipment, net	$	110,896		$	62,172

Depreciation expense for the years ended December 31, 2013 and 2012 was $45,184 and $21,518, respectively.

NOTE 6 – CAPITALIZED WEBSITE COSTS

Capitalized website expenditures were $0 for the years ended December 31, 2013 and 2012. Capitalized website costs consisted of the following at December 31, 2013 and 2012:

	2013			2012

Capitalized website costs	$	289,617		$	289,617
Less: accumulated amortization		(289,617	)		(287,961	)
Capitalized website costs, net	$	-		$	1,656

Amortization expense of capitalized website costs for the years ended December 31, 2013 and 2012 was $1,656 and $8,473, respectively.

NOTE 7 – SOFTWARE DEVELOPMENT COSTS

During the years ended December 31, 2013 and 2012, the Company capitalized $298,128 and $510,400, respectively, relating to the development of a new media platform of software products. These software products were developed internally and had passed the preliminary project stage prior to capitalization.

Software development costs consisted of the following at December 31, 2013 and 2012:

	2013			2012

Software development costs	$	2,364,563		$	2,066,435
Less: accumulated amortization		(1,810,191	)		(1,429,973	)
Software development costs, net	$	554,372		$	636,462

Amortization expense of software development costs for the years ended December 31, 2013 and 2012 was $380,217 and $457,885, respectively.

F-13

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

The following is a schedule of estimated future amortization expense of capitalized software development costs at December 31, 2013:

For the year ending December 31,

2014	$	324,935
2015		173,168
2016		56,269
Total	$	554,372

NOTE 8 – PATENTS AND TRADEMARK

Patents and trademark are as follows as of December 31, 2013:

	Gross						Net
	Carrying		Useful	Accumulated			Carrying
	Amount		Life	Amortization			Amount
Trademarks	$	10,275	Indefinite		N/A		$	10,275
Patents		43,559	20 years		(3,386	)		40,173
Total	$	53,834		$	(3,386	)	$	50,448

Patents and trademark are as follows as of December 31, 2012:

	Gross						Net
	Carrying		Useful	Accumulated			Carrying
	Amount		Life	Amortization			Amount
Trademarks	$	6,275	Indefinite		N/A		$	6,275
Patents		33,829	20 years		(1,532	)		32,297
Total	$	40,104		$	(1,532	)	$	38,572

The estimated future amortization expense on patents and trademark at December 31, 2013 is as follows:

For the year ending December 31,

2014	$	2,232
2015		2,232
2016		2,232
2017		2,232
Thereafter		31,245
	$	40,173

Amortization expense for patents and trademark was $1,854 and $1,181 for the years ended December 31, 2013 and 2012, respectively.

F-14

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

NOTE 9 – INVESTMENT

In May 2007, the Company acquired a 5% minority interest in MyNuMo, LLC (which changed its name to PlayScreen, LLC in 2008), an unrelated company, for a $50,000 investment. The investment was impaired by $30,000 during the year ended December 31, 2009. The Company does not have any contractual obligations to fund PlayScreen, LLC’s operations or obligations.

During 2013, the investment in in PlayScreen, LLC of $20,000 was not evaluated for impairment because management did not identify any events or changes in circumstances that might have a significant adverse effect on the value of the investment.

NOTE 10 – NET EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share (“EPS”) are computed using the weighted average number of shares of common stock outstanding during each year. Diluted earnings (loss) per share are computed using the weighted average number of common shares and potentially dilutive securities outstanding during each year. Potentially dilutive securities consist of the incremental shares of common stock issuable upon the exercise of stock options (using the treasury stock method). The options are considered to be common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.

	For the Year Ended December 31, 2012
	Net					Per-Share
	Income			Shares		Amount

Net income	$	1,262,077

Basic EPS
Income available to common stockholders	$	1,262,077			63,390,445	$	0.02

Effect of dilutive securities
Stock options		-			23,416		-

Diluted EPS
Income available to common stockholders
+ assumed conversions	$	1,262,077			63,413,861	$	0.02

	For the Year Ended December 31, 2013
	Net					Per-Share
	Loss			Shares		Amount

Net loss	$	(7,131,867	)

Basic EPS
Income available to common stockholders	$	(7,131,867	)		71,488,353	$	(0.10	)

Effect of dilutive securities
Stock options		-			-		-

Diluted EPS
Income available to common stockholders
+ assumed conversions	$	(7,131,867	)		71,488,353	$	(0.10	)

F-15

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

Options to purchase 11,704,378 common shares were outstanding during the year ended December 31, 2013, but were not included in the computation of diluted earnings (loss) per share because the effects would have been anti-dilutive.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company is obligated under various operating leases, primarily for the rental of buildings and office space. The leases expire at various dates through March 2017 and the monthly payments for the leases range from approximately $300 to $16,000.

Future minimum lease payments under noncancelable, long-term operating leases as of December 31, 2013 are as follows:

For the year Ending December 31,	Amount

2014	$	132,600
2015		136,500
2016		140,400
2017		36,075
	$	445,575

Rental expense totaled $181,373 and $88,570 for the years ended December 31, 2013 and 2012, respectively.

Litigation

The Company is involved in certain claims that have arisen in the normal course of business. In the opinion of management, any liabilities that may arise as a result of such claims will not have a material adverse effect, individually or in the aggregate, on the Company’s consolidated financial statements.

Minimum Fees

On June 1, 2012, the Company entered into an agreement to purchase bandwidth for a period of 12 months with a minimum amount of $19,083 due per month. This agreement superseded the previous agreement entered into on June 1, 2011. Under the new agreement, the Company expensed and paid $318,340 during the year ended December 31, 2012.

On July 1, 2012, the Company entered into an additional agreement to purchase bandwidth for a period of 12 months with a minimum amount of $235,929 due during the entire term of the agreement. Under the additional agreement, the Company expensed $117,964 during the year ended December 31, 2012, of which $0 was paid and $117,964 is included in accounts payable at December 31, 2012.

On July 1, 2013, the Company entered into an additional agreement to purchase bandwidth for a period of 12 months with a minimum amount of $450,000 due during the entire term of the agreement. Under the additional agreement, the Company exceeded the minimum bandwidth requirements and expensed $688,715 during the year ended December 31, 2013, which was paid in its entirety.

NOTE 12 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 5,000,000 shares of preferred stock. As of December 31, 2013, there were no shares of preferred stock issued or outstanding.

F-16

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

Common Stock

The Company is authorized to issue 150,000,000 shares of common stock. As of December 31, 2013 and 2012, there were 83,998,138 and 71,203,695, shares, respectively, of common stock at par value of $0.001 per share issued and outstanding.

On March 5, 2012, (as amended on July 8, 2013) the Company’s majority stockholder entered in a subscription agreement to purchase 5,000,000 restricted common shares at $0.20 per share for total proceeds of $1,000,000. As a result, certain anti-dilution provisions of investments made by three other existing stockholders were triggered. Accordingly, the Company issued an aggregate of 6,588,887 shares of common stock to these three stockholders.

On July 15, 2013, the Company’s majority stockholder entered in a subscription agreement to purchase 5,794,443 restricted common shares at $0.09 per share for total proceeds of $500,000.

On October 30, 2013, several investors entered in a subscription agreement to purchase 7,000,000 restricted common shares at $0.20 per share for total proceeds of $1,400,000. During the year ended December 31, 2013, the Company received $1,150,000 under this subscription agreement and recorded the remaining $250,000 as a subscription receivable. This amount was paid subsequent to December 31, 2013 (See Note 14).

2012 Stock Plan

On November 5, 2012, the Company established the 2012 Stock Plan (the “2012 Plan”), which was approved by the Board of Directors on the same date and is effective for ten years. The 2012 Plan provides for a total of 33,228,732 shares to be allocated and reserved for the purpose of offering incentive stock options to employees and non-qualified stock options, restricted shares and unrestricted shares to officers, employees, directors and consultants. If any stock option expires, terminates or is terminated or canceled for any reason prior to exercise in full, the shares subject to the unexercised portion shall be available for future options granted under the 2012 Plan. Options become exercisable over various vesting periods depending on the nature of the grant. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the 2012 Plan). As of December 31, 2013, there were 362,232 shares that remained reserved for future issuance under the 2012 Plan. As of December 31, 2012, all outstanding stock options issued prior to January 1, 2012 are non-2012 Plan stock options.

Between January 16, 2013 and January 31, 2013, the Company issued stock options to several employees granting the right to acquire up to 31,677,500 common shares at an exercise price of $0.077 per share. The fair value of these options was $2,425,312. These options have a life of 9.8 years and vest as follow: 7,290,250 shares on July 1, 2013 and 1/48 of the remaining 24,387,250 shares each month thereafter.

On July 8, 2013, the Company issued stock options to several employees granting the right to acquire up to 472,500 common shares at an exercise price of $0.25 per share. The fair value of these options was $118,108. These options have a life of 9.3 years and vest as follow: 16,625 shares immediately and 1/48 of the remaining 455,875 shares each month thereafter.

Stock Option Forfeitures

Between March 7, 2013 and December 31, 2013, 38 employees forfeited 18,943,000 of previously granted stock options. In the same period, 1,960,000 previously granted stock options expired for 16 employees.

F-17

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

Stock Incentive Plan and Stock Option Grants

The Company estimates the fair value of stock options granted utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected term, expected dividend yield rate over the expected term, and an estimate of expected forfeiture rates. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and consultants which are subject to FASB ASC Topic 718 requirements. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. There were 32,850,000 and 16,500 stock options granted to employees during the years ended December 31, 2013 and 2012, respectively.

Other Stock-Based Awards to Nonemployees

On November 2, 2012, the Company granted to a former employee non-statutory stock options to purchase 16,500 shares of common stock having a fair value of $825 for services previously rendered. The stock options have an exercise price of $0.07 per share, were granted under the 2012 Plan, vest in entirety two years from the grant date, and expire ten years from the grant date. The fair market value of the options was $825 and since the options are non-forfeitable, the entire $825 was recognized as stock-based expense upon issuance on November 2, 2012.

On July 8, 2013, the Company granted to a consultant non-statutory stock options to purchase 700,000 shares of common stock having a fair value of $174,971 for services to be rendered. The stock options have an exercise price of $0.25 per share, were granted under the 2012 Plan, vest in entirety two years from the grant date, and expire ten years from the grant date.

The Company recorded compensation expense of $972,224 and $4,219 for the years ended December 31, 2013 and 2012, respectively. The fair value of options granted was estimated on the grant dates using the following weighted-average assumptions:

	For the
	Year Ended
Assumptions	December 31, 2013	December 31, 2012

Expected volatility	117% - 122%	68.1%
Weighted-average volatility	120.0%	68.1%
Expected dividend yield	0.0%	0.0%
Expected term (years)	4.70	7.5%
Risk-free rate	0.75% - 2.19%	1.0%

When determining expected volatility, the Company considers the historical performance of the Company’s stock as well as implied volatility. Expected dividend yield is based on historical trends. The expected term represents the period of time that the options granted are expected to be outstanding, which is the contractual term of the related stock option. The risk-free interest rate is based on the U.S. Treasury yield curve at the time of grant, based on the options’ expected term. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected term was increased, a higher expected volatility was used, or if the expected dividend yield increased.

F-18

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

A summary of Company’s stock option activity for employees and directors during the years ended December 31, 2013 and 2012 is presented below:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Options			Price		Term (Years)		Value

Balance outstanding, January 1, 2011		440,878		$	0.95
Granted		16,500			0.07
Exercised		-			-
Forfeited		-			-
Expired		(300,000	)	$	0.11
Balance outstanding, December 31, 2012		157,378		$	0.41		1.5	$	871

Granted		32,850,000		$	0.91
Exercised		-		$	-
Forfeited		(18,943,000	)	$	0.08
Expired		(1,960,000	)	$	0.08
Balance outstanding, December 31, 2013		12,104,378		$	0.43		8.7	$	871

NOTE 13 – INCOME TAXES

The Company files a consolidated U.S. income tax return that includes its U.S. subsidiary. The amounts provided for income taxes are as follows:

	For the		For the
	Year Ended		Year Ended
	December 31, 2013		December 31, 2012

Income tax (benefit) consist of:
Current	$	-	$	-
Deferred		-		-
Provision (benefit) for income taxes	$	-	$	-

A reconciliation of the expected income tax expense (benefit) differs from the statutory federal income tax rate of 34% as follows:

	For the			For the
	Year Ended			Year Ended
	December 31, 2013			December 31, 2012
Expected income tax expense (benefit)	$	(2,424,835	)	$	416,962
Non-deductible expenses		14,052			14,883
State and local income taxes		(413,962	)		70,836
Change in valuation allowance		2,824,745			(502,681	)
Provision (benefit) for income taxes	$	-		$	-

F-19

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

Significant items making up the deferred tax assets and deferred tax liabilities as of December 31, 2013 and 2012 are as follows:

	December 31, 2013			December 31, 2012

Deferred tax assets:
Net operating loss carryforward	$	7,066,263		$	4,136,956
Depreciation and amortization		(1,384	)		52,546
Other		20,793			71,425
Stock based compensation		5,801,807			5,801,807
Total deferred tax assets		12,887,479			10,062,734

Deferred tax liabilities:		-			-
Net deferred tax assets		12,887,479			10,062,734

Valuation allowance:

Beginning of period		(10,062,734	)		(10,565,415	)
Increase during period		(2,824,745	)		502,681
Ending balance		(12,887,479	)		(10,062,734	)
Net deferred taxes	$	-		$	-

The Company had net operating loss carry forwards of approximately $17.7 million for federal income tax purposes and approximately $14.5 million for state income tax purposes as of December 31, 2013, available for use on its future corporate income tax returns. These net operating loss carry forwards expire from 2028 to 2031. Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of any of the Company’s net operating loss and credit carry forwards may be limited if cumulative changes in ownership of more than 50% occur during any three year period.

The Company believes that based upon its projection of future taxable operating income for the foreseeable future, it is more likely than not that the Company will not be able to realize the tax benefit associated with deferred tax assets and, therefore, a full valuation allowance has been established on those assets as of December 31, 2013. The net change in the valuation allowance during the year ended December 31, 2013 was an increase of $2,824,745.

NOTE 14 – SUBSEQUENT EVENTS

In January 2014, the Company entered into a license agreement with an unrelated party (“Party A”). According to the agreement, the majority of the Company’s net revenues between December 2013 through March 2014 will be paid to Party A. This license agreement sets a minimum payable amount of $50,000 per month. Through August 2014, approximately $336,000 was earned by Party A. Through August 2014, the amount due to Party A was approximately $405,000.

On February 28, 2014, the Company received an installment of $100,000 related to the stock purchase agreement signed on October 30, 2013, thereby reducing the subscription receivable by $100,000.

On May 6, 2014, the Company received the remaining $150,000 related to the stock purchase agreement signed on October 30, 2013, thereby reducing the subscription receivable to $0.

During May 2014, the Company spun-off a division (the “Division”) to which it assigned its platform technology, other intellectual property, all the fixed assets, approximately 70 of its publisher customer relationships/agreements and approximately 5 of its advertiser relationships.

F-20

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013 and 2012

As of May 1, 2014, all the Company’s employees were assigned to Party A. As a result of this transaction, the Company recognized a cost of $151,938 payable to Party A for the advance of the payroll costs of the Company’s employees.

On July 15, 2014, the Company and its Division executed a Stock Purchase Agreement with Party A, to be effective on June 30, 2014, whereby the Company sold certain assets in exchange for 5,000,000 shares of Party A’s common stock.

The assets sold pursuant to the Stock Purchase Agreement consisted of intellectual property, equipment, selected customer agreements and talent. This includes video storage and hosting, video encoding, content management, HTML5/Flash video players, and advertising inventory management.

OneScreen shareholders received consideration equal to approximately $16,500,000, which reflects the Company’s estimate of the value of the assets sold. This estimated value is based on the number of shares issued to OneScreen’s shareholders, the ongoing relationship between Party A and OneScreen, Party A’s expected use of the assets acquired, OneScreen’s operating assets and revenues in relation to valuations of several similar companies, and a 2013 third party valuation of OneScreen.

F-21

Exhibit 99.2

ONESCREEN, INC. AND SUBSIDIARY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

		Page
CONSOLIDATED BALANCE SHEETS:
AS OF JUNE 30, 2014 AND DECEMBER 31, 2013 (Unaudited)		2

CONSOLIDATED STATEMENTS OF OPERATIONS:
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (Unaudited)		3

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT:
FOR THE SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)		4

CONSOLIDATED STATEMENTS OF CASH FLOWS:
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013 (Unaudited)		5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)		6

ONESCREEN, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2014			December 31, 2013
Assets
Current assets:
Cash and cash equivalents	$	129,833		$	927,853
Accounts receivable, net		195,176			1,938,946
Prepaid expenses		2,509			3,000
Total current assets		327,518			2,869,799

Property and equipment, net		84,242			110,896

Other assets:
Intangible assets, net		422,064			604,820
Investment		20,000			20,000
Deposits		-			17,683
Total other assets		442,064			642,503
Total assets	$	853,824		$	3,623,198

Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable	$	2,894,441		$	3,231,469
Accrued expenses		525,049			1,234,030
Total current liabilities		3,419,490			4,465,499

Other liabilities		10,311			8,261
Total liabilities		3,429,801			4,473,760
Stockholders' deficit:
Preferred stock $0.001 par value; 5,000,000 shares authorized;
none issued and outstanding
Common stock $0.001 par value; 150,000,000 shares authorized;		-			-
86,798,138 and 83,998,138 shares issued and outstanding, respectively		86,798			83,998
Additional paid-in capital		33,684,884			32,973,246
Subscription receivable		-			(250,000	)
Accumulated deficit		(36,347,659	)		(33,657,806	)
Total stockholders' deficit		(2,575,977	)		(850,562	)
Total liabilities and stockholders' deficit	$	853,824		$	3,623,198

See accompanying notes to financial statements.

ONESCREEN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the six months
	ended
	June 30, 2014			June 30, 2013

Revenue	$	630,897		$	8,028,006
Cost of revenue		1,005,133			6,798,557

Gross profit (loss)		(374,236	)		1,229,449

Operating expenses:
Legal and professional fees		116,264			234,515
General and administrative expenses		2,221,867			2,855,890
Research and development		-			695,183
Selling expenses		14,262			160,016
Depreciation and amortization		209,410			200,357
Total operating expenses		2,561,803			4,145,961

Loss from operations		(2,936,039	)		(2,916,512	)

Other (income) expense:
Other income		(246,186	)		(367	)
Total other (income) expense		(246,186	)		(367	)

Net loss	$	(2,689,853	)	$	(2,916,145	)

Net loss per common share - basic and diluted	$	(0.03	)	$	(0.04	)

Weighted average number of common shares outstanding:
Basic		84,384,878			71,203,695
Diluted		84,384,878			71,203,695

See accompanying notes to financial statements.

ONESCREEN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

					Common Stock and
	Preferred Stock				Common Stock Subscribed				Additional		Subscription			Accumulated
	Shares		Amount		Shares		Amount		Paid-in Capital		Receivable			Deficit			Total
Balance, December 31, 2013		-	$	-		83,998,138	$	83,998	$	32,973,246	$	(250,000	)	$	(33,657,806	)	$	(850,562	)
Common stock issued under subscription agreement		-		-		-		-		-		250,000			-			250,000
Common stock issued for services		-		-		2,800,000		2,800		557,200		-			-			560,000
Stock-based compensation		-		-		-		-		154,438		-			-			154,438
Net loss		-		-		-		-		-		-			(2,689,853	)		(2,689,853	)
Balance, June 30, 2014		-	$	-		86,798,138	$	86,798	$	33,684,884	$	-		$	(36,347,659	)	$	(2,575,977	)

See accompanying notes to financial statements.

ONESCREEN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the six months
	ended
	June 30, 2014			June 30, 2013
Cash flows from operating activities:
Net loss	$	(2,689,853	)	$	(2,916,144	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		26,654			17,089
Provision for bad debts		77,920			155,833
Amortization of intangibles		182,756			183,268
Stock-based compensation		714,438			405,576
Change in operating assets and liabilities:
Accounts receivable		1,665,850			1,394,241
Prepaid expenses		491			22,483
Other assets		-			-
Deposits		17,683			(2,683	)
Accounts payable		(337,028	)		99,287
Accrued expenses		(708,981	)		352,279
Other liabilities		2,050			4,855
Net cash flows used in operating activities		(1,048,020	)		(283,916	)

Cash flows from investing activities:
Purchase of property and equipment		-			(88,279	)
Purchase of intangible assets		-			(21,889	)
Net cash flows used in investing activities		-			(110,168	)

Cash flows from financing activities:
Proceeds from issuance of common stock		250,000			-
Net cash flows provided by financing activities		250,000			-

Net decrease in cash and cash equivalents		(798,020	)		(394,084	)

Cash and cash equivalents, beginning of period		927,853			580,201

Cash and cash equivalents, end of period	$	129,833		$	186,117

Supplemental cash flow disclosures:
Interest paid	$	18,023		$	-
Income taxes paid	$	-		$	268

See accompanying notes to financial statements.

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2014

Note 1 – Summary of Significant Accounting Policies and Basis of Presentation

Nature of Business

As of May 1, 2014, all the Company’s employees were assigned to Party A.

Principles of Consolidation

The unaudited consolidated financial statements include the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Accounting Method

The Company maintains its accounting records on an accrual method of accounting in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates and assumptions include the allowance for doubtful accounts, recoverability of property and equipment, valuation of software development costs, accrued expenses and other current liabilities, stock-based compensation, income taxes and the valuation on deferred tax assets and contingent liabilities. Actual results from the resolution of such estimates and assumptions may vary from the estimates and assumptions used in the preparation of the consolidated financial statements.

Cash and Cash Equivalents

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

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2014

Revenue Recognition

Accounts Receivable

Accounts receivable are recorded at the invoiced amounts and are non-interest bearing. The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. The Company estimates its allowance for doubtful accounts by evaluating specific accounts where information indicates the customers may have an inability to meet its financial obligations, such as bankruptcy proceedings and receivable amounts outstanding for an extended period beyond contractual terms. In these cases, the Company uses assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due in order to reduce the receivable to the amount expected to be collected. These specific allowances are reevaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. The Company may also record a general allowance as necessary. Accounts deemed uncollectible are written off, as appropriate, typically after 120 days. Previously written-off accounts receivable subsequently collected are recognized as a reduction of bad debt expense when funds are received. The allowance for doubtful accounts was $92,605 and $301,626 as of June 30, 2014 and December 31, 2013, respectively.

Cost of Revenue

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are provided for using the straight-line method over the estimated useful lives of the related assets as follows:

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2014

Category		Useful Lives
Furniture and fixtures		5 years
Office and computer equipment		3 years
Software		3 years

Capitalized Website Costs

Software Development Costs

Patents and Trademarks

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2014

Net Loss Per Share Calculation

Net loss per share is provided in accordance with FASB ASC 260-10, Earnings per Share. Basic net loss per common share ("EPS") is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding for the periods. Diluted earnings per share is computed by dividing net loss by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive.

The weighted average number of common shares outstanding for computing basic and diluted EPS for the six months ended June 30, 2014 and 2013 were 84,384,878 and 71,203,695, respectively.

Options to purchase 32,679,500 and 5,099,500 common shares were outstanding during the six months ended June 30, 2014 and 2013, respectively, but were not included in the computation of diluted loss, per share because the effects would have been anti-dilutive.

Recently Issued Accounting Pronouncements

Note 2 – Going Concern

The Company had a net loss of $2,689,853 for six months ended June 30, 2014, and further losses are anticipated during the remainder of 2014. The Company had a negative cash flow from operations of $1,048,020 and $283,916 for six months ended June 30, 2014 and 2013, respectively, and negative working capital of $3,091,972 and a net stockholders’ deficit of $2,575,977 as of June 30, 2014. The Company’s ability to continue as a going concern is uncertain without additional debt or equity financing from outside investors. Management plans to continue to implement its business plan and to fund operations by raising additional capital through the issuance of debt and equity securities (See Note 7). However, there can be no assurance that the Company will be able to raise additional capital or generate enough cash from operating activities as needed, which could have a materially adverse effect on the Company’s business, consolidated financial position, results from operations, or cash flows. Actual results could differ from management’s assessment.

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2014

The unaudited consolidated financial statements have been presented on the basis that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The unaudited consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary, should the Company be unable to continue as a going concern.

Note 3 – Intangible Assets

The following table summarizes the intangible assets as of June 30, 2014 and December 31, 2013.

	Useful Lives	June 30, 2014			December 31, 2013

Software Development Cost	3		2,364,563			2,364,563
Patents	20		43,559			43,559
Trademarks	N/A		10,275			10,275
			2,418,397			2,418,397
Less: accumulated amortization			(1,996,333	)		(1,813,577	)

Intangible assets, net		$	422,064		$	604,820

For the six months ended June 30, 2014 and 2013, the amortization of intangible assets was $182,756 and $183,268 respectively.

Note 4– Income Taxes

The Company had net operating loss carryforwards (“NOLs”) as of December 31, 2013 of approximately $17.7 million for federal income tax purposes and approximately $14.5 million for state income tax purposes, portions of which are expiring at various years through 2031. The Company may be able to utilize its NOLs to reduce future federal and state income tax liabilities. However, these NOLs are subject to various limitations under Internal Revenue Code (“IRC”) Section 382. IRC Section 382 limits the use of NOLs to the extent there has been an ownership change of more than 50 percentage points. In addition, the NOL carryforwards are subject to examination by the taxing authority and could be adjusted or disallowed due to such exams. Although the Company has not undergone an IRC Section 382 analysis, it is possible that the utilization of the NOLs could be significantly limited.

The Company has no tax provision for the six month periods ended June 30, 2014 and 2013 due to losses incurred and full valuation allowances against its net deferred tax assets.

Note 5 – Stockholders’ Equity

Issuance of Common Stock

During the six months ended June 30, 2014, the Company issued 2,800,000 shares of its common stock to a consultant in exchange for services rendered with an aggregate fair value of $560,000 or $0.20 per share on average during the six months ended June 30, 2014. The Company received the remaining $250,000 related to the stock purchase agreement signed on October 30, 2013, thereby reducing the subscription receivable to $0. The total number of shares outstanding as of June 30, 2014 was 86,798,138.

Note 6 – Commitments and Contingencies

Litigation

ONESCREEN, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2014

Note 7 – Subsequent Events

Exhibit 99.3

Adaptive Medias, Inc.

Unaudited Pro Forma Condensed Consolidated Financial Statements

On July 15, 2014, Adaptive Medias, Inc., a Nevada corporation (the “Company”), executed a Stock Purchase Agreement (the “Agreement”) with OneScreen, Inc., a Delaware corporation (“OneScreen”), Media Graph, Inc., a Nevada corporation and OneScreen’s spun-off former subsidiary (“Media Graph”), and the shareholders of Media Graph (the “Selling Shareholders”), effective June 30, 2014, whereby the Company acquired certain assets of OneScreen, which immediately prior thereto were held by Media Graph, in exchange for 5,000,000 shares of the Company’s common stock (the “Acquisition”). On July 15, 2014, the parties to the Agreement executed the First Amendment to the Stock Purchase Agreement (the “Amendment”), which (i) amends the effective date of the Agreement to July 15, 2014, (ii) limits the scope of Section 5.04 of the Agreement to apply only to Restricted Selling Shareholders, as defined in the Amendment, and (iii) adds the Selling Shareholders as a signatory to the Agreement.

The following Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2014 combines the historical consolidated balance sheets of Adaptive Medias, Inc. and OneScreen, Inc., giving effect to the acquisition as if it had been consummated on June 30, 2014. The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 2014 and for the year ended December 31, 2013 combines the historical consolidated statements of operations of Adaptive Medias, Inc. and OneScreen, Inc., giving effect to the acquisition as if it had occurred on January 1, 2013.

The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the:

•

Accompanying notes to the unaudited pro forma condensed consolidated financial statements;

•

Adaptive Medias, Inc.’s separate historical unaudited condensed consolidated financial statements and the related notes included in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014;

•

Adaptive Medias, Inc.’s separate historical audited consolidated financial statements and the related notes for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013;

•

OneScreen, Inc.’s separate historical unaudited consolidated financial statements and related notes as of and for the six months ended June 30, 2014, included in this Current Report on Form 8-K as exhibit 99.2; and

•

OneScreen, Inc.’s separate historical audited consolidated financial statements and related notes as of and for the year ended December 31, 2013, included in this Current Report on Form 8-K as exhibit 99.1.

The unaudited pro forma condensed consolidated financial statements have been prepared for informational purposes only. The historical financial information has been adjusted to give effect to pro forma events that are: (1) directly attributable to the acquisition and (2) factually supportable and reasonable under the circumstances.

The unaudited pro forma adjustments represent management’s estimates based on information available at this time. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what the financial position or results of operations actually would have been had the acquisition been completed at the dates indicated. In addition, the unaudited pro forma condensed consolidated financial statements do not purport to project the future financial position or operating results of the consolidated company. The unaudited pro forma condensed consolidated financial statements do not give consideration to the impact of possible revenue enhancements, expense efficiencies, future underwriting decisions or changes in the business that may result from the acquisition.

Unaudited Pro Forma Condensed Consolidated Balance Sheets

	June 30, 2014
	Historical						Proforma
	Adaptive Medias, Inc.			OneScreen, Inc.			Adjustments			Combined
ASSETS
Current assets:
Cash and cash equivalents	$	146,995			$ 129,833	(a)	$	(129,833	)	$	146,995
Accounts receivable, net		1,496,770			195,176	(a)		(75,552	)		1,344,840
						(f)		(271,554	)
Prepaid expenses		202,502			2,509	(a)		(2,509	)		202,502
Total current assets		1,846,267			327,518			(479,448	)		1,694,337
Property and equipment, net		5,393			84,242			-			89,635
Other assets:
Intangible assets, net		62,172			422,064	(c)		(422,064	)		62,172
Investment		-			20,000	(a)		(20,000	)		-
Content and publishers relationships		-			-	(c)		246,000			246,000

Developed technology, net		335,561			-	(c)		6,074,000			6,409,561

Goodwill		2,270,585			-	(c)		8,634,759			10,905,344
Deposits		60,468			-						60,468
Total other assets		2,728,786			442,064			14,512,695			17,683,545
Total assets	$	4,580,446		$	853,824		$	14,033,247		$	19,467,517

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	2,398,160			$ 3,419,490	(a)		(3,260,865	)	$	2,285,231
						(f)		(271,554	)

Total current liabilities		2,398,160			3,419,490			(3,532,419	)		2,285,231

Other liabilities		38,433			10,311	(a)		(10,311	)		38,433
Total liabilities		2,436,593			3,429,801			(3,542,730	)		2,323,664

Stockholders' equity (deficit):
Preferred stock		-			-						-
Common stock		6,412			86,798	(b)		(86,798	)		11,412
						(c)		5,000
Additional paid-in capital		26,599,749			33,684,884	(a)		3,043,282			41,594,749
						(b)		(36,260,861	)
						(c)		14,995,000
						(c)		(467,305	)
Accumulated deficit		(24,462,308	)		(36,347,659	) (b)		36,347,659			(24,462,308	)
								-
Total stockholders' equity (deficit)		2,143,853			(2,575,977	)		17,575,977			17,143,853

Total liabilities and stockholders' equity	$	4,580,446		$	853,824		$	14,033,247		$	19,467,517

See notes to unaudited pro forma condensed consolidated financial statements.

Unaudited Pro Forma Condensed Consolidated Statements of Operations

	For the Six Months Ended June 30, 2014
	Historical						Proforma
	Adaptive Medias, Inc.			OneScreen, Inc.			Adjustments			Combined

Revenue	$	1,844,788		$	630,897	(f)	$	(311,282	)	$	2,164,403
Cost of revenue		1,168,038			1,005,133	(f)		(311,282	)		1,861,889

Gross profit (loss)		676,750			(374,236	)		-			302,514

Operating expenses:
Legal and professional fees		308,287			116,264						424,551
General and administrative expenses		2,240,236			2,221,867						4,462,103
Research and development		454,861			-						454,861
Selling expenses		533,924			14,262						548,186
Depreciation and amortization		239,872			209,410	(d)		1,135,332			1,584,614
Total operating expenses		3,777,180			2,561,803			1,135,332			7,474,315

Loss from operations		(3,100,430	)		(2,936,039	)		(1,135,332	)		(7,171,801	)

Other (income) expense:
Other income		(6,283	)		(246,186	)					(252,469	)
Loss on extinguishment of debt		43,636			-						43,636
Interest expense		1,535			-						1,535
Total other (income) expense		38,888			(246,186	)		-			(207,298	)

Net loss	$	(3,139,318	)	$	(2,689,853	)	$	(1,135,332	)	$	(6,964,503	)

Net loss per common share - basic and diluted	$	(0.56	)	$	(0.03	)				$	(0.65	)

Weighted average number of common shares outstanding
Basic		5,647,959			84,384,878	(e)		(79,384,878	)		10,647,959
Diluted		5,647,959			84,384,878	(e)		(79,384,878	)		10,647,959

See notes to unaudited pro forma condensed consolidated financial statements.

Unaudited Pro Forma Condensed Consolidated Statements of Operations

	For the Year Ended December 31, 2013
	Historical						Proforma
	Adaptive Medias, Inc.			OneScreen, Inc.			Adjustments			Combined

Revenue	$	1,030,267		$	13,097,263	(f)	$	(158,146	)	$	13,969,384
Cost of revenue		743,959			10,434,729	(f)		(158,146	)		11,020,542

Gross profit		286,308			2,662,534			-			2,948,842

Operating expenses:
Legal and professional fees		1,121,661			418,511						1,540,172
General and administrative expenses		6,558,865			7,297,201						13,856,066
Research and development		255,745			1,417,465						1,673,210
Selling expenses		-			214,803						214,803
Depreciation and amortization		342,610			428,911	(d)		2,270,664			3,042,185
Total operating expenses		8,278,881			9,776,891			2,270,664			20,326,436

Loss from operations		(7,992,573	)		(7,114,357	)		(2,270,664	)		(17,377,594	)

Other (income) expense:
Other income		-			17,510						17,510
Gain on extinguishment of debt		(15,988	)		-						(15,988	)
Other expense		486,396			-						486,396
Total other (income) expense		470,408			17,510			-			487,918

Net loss	$	(8,462,981	)	$	(7,131,867	)	$	(2,270,664	)	$	(17,865,512	)

Net loss per common share - basic and diluted	$	(2.52	)	$	(0.10	)				$	(2.14	)

Weighted average number of common shares outstanding
Basic		3,355,003			71,488,353	(e)		(66,488,353	)		8,355,003
Diluted		3,355,003			71,488,353	(e)		(66,488,353	)		8,355,003

See notes to unaudited pro forma condensed consolidated financial statements.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

The unaudited pro forma condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and certain footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations; however, management believes that the disclosures are adequate to make the information presented not misleading.

The acquisition method of accounting under U.S. GAAP requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values at the acquisition date. Fair value is defined under U.S. GAAP 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.” Market participants are assumed to be buyers and sellers in the principal (or most advantageous) market for the asset or liability. Fair value measurements for an asset assume the highest and best use by these market participants. Fair value measurements can be highly subjective and it is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

Note 2 – Pro Forma Condensed Consolidated Financial Statements

The accompanying unaudited pro forma condensed consolidated financial statements present the pro forma condensed consolidated financial position and results of operations of the consolidated company based upon the historical consolidated financial statements of Adaptive Medias, Inc. and OneScreen Inc., after giving effect to the acquisition and adjustments described in the following footnotes, and are intended to reflect the impact of the acquisition on Adaptive Medias, Inc. on a pro forma basis.

The accompanying unaudited pro forma condensed consolidated balance sheet as of June 30, 2014 combines the historical consolidated balance sheets of Adaptive Medias, Inc. and OneScreen, Inc., giving effect to the Acquisition as if it had been consummated on June 30, 2014 and included pro forma adjustments for valuations by management of certain tangible and intangible assets as of the acquisition date. These adjustments are subject to further revision upon finalization of the fair value determinations.

The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2014 and for the year ended December 31, 2013 combine the historical consolidated statements of operations of Adaptive Medias, Inc. and OneScreen, Inc., giving effect to the acquisition as if it had occurred on January 1, 2013.

Given that Adaptive Medias, Inc. acquired all of OneScreen, Inc.’s key operating assets, elimination of specified assets and liabilities not acquired or assumed by the Company is depicted in the accompanying unaudited pro forma condensed consolidated financial statements presenting the effects of the Acquisition.

The accompanying unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only.

Note 3 – Acquisition

The Acquisition is being accounted for as an “acquisition”, in which Adaptive Medias, Inc. is deemed to be the acquirer and accounting predecessor and OneScreen, Inc. is deemed to be the acquiree, under the acquisition method of accounting in accordance with the Financial Accounting Standards Board’s Accounting Standard Codification (“ASC”) Topic 805, Business Combinations using the fair value concepts defined in ASC Topic 820, Fair Value Measurement and Disclosures. The acquisition method of accounting requires, among other things, that all assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.

Under the acquisition method of accounting, the total estimated purchase price is allocated to Adaptive Medias, Inc.’s tangible and intangible assets and liabilities based on their estimated fair values at the date of the completion of the acquisition (July 15, 2014). The following table summarizes the preliminary allocation of the purchase price:

Asset Acquired:	($ in thousands)
Net other assets	$	-
Fixed assets		82
Assembled workforce		596
Developed technology		6,074
Content and publisher relationships		246
Goodwill (excluding assembled workforce)		8,017
Total consideration, including assumed liabilities	$	15,015

Assets acquired and liabilities assumed are recognized based on an estimate of their fair value as of the Acquisition date. The estimated fair values were determined based on management’s best estimates at the time of this filing. Estimates and assumptions are subject to change upon the receipt of management’s review of the final amounts and final tax returns. Any deferred taxes or deferred tax liabilities will be recognized upon the completion of these valuations, if applicable. This final evaluation of net assets acquired is expected to be completed as soon as a final accounting is performed but no later than one year from the Acquisition date. Any future changes in the value of the net assets acquired will be offset by a corresponding change in goodwill.

Note 4 - Pro Forma Adjustments

Pro forma adjustments are necessary to reflect the allocation of the estimated purchase price and to reflect amounts related to Adaptive Medias, Inc.’s net tangible and intangible assets and liabilities at an amount equal to the preliminary estimate of their fair values.

The pro forma adjustments included in the unaudited pro forma condensed consolidated financial statements are as follows:

To remove assets not acquired and liabilities not assumed in the Acquisition.

To eliminate remaining equity (deficit) of OneScreen, Inc.

To record issuance of 5,000,000 shares of Adaptive Medias, Inc.’s common stock at $3.00 per share, less removal of existing equity (deficit) of OneScreen, Inc., allocated to write-up assets to fair value based on preliminary purchase price allocation.

To record amortization on fair value of intangible assets acquired: content and publisher relationships over 1 year and developed technology over 3 years.

To adjust the weighted average shares outstanding to reflect the elimination of OneScreen, Inc. common shares and the issuance of the 5,000,000 common shares of Adaptive Medias, Inc. from the Acquisition.

To eliminate transactions between Adaptive Medias, Inc. and OneScreen, Inc.

Note 5 – Loss per Share

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for all periods presented in these unaudited pro forma condensed consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

The consolidated entity’s financial statements are prepared as if the transaction had been completed at the beginning of each period presented. The net loss and shares used in computing the net loss per share for the year ended December 31, 2013 and the six months ended June 30, 2014 is based on weighted average common shares of Adaptive Medias, Inc. outstanding during the respective periods. The effect of the additional shares of common stock issued as part of the Acquisition has been included for purposes of presenting the unaudited pro forma net loss per share.

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