NOTE 1: OVERVIEW AND GOING CONCERN Organization and Business AudioEye,Inc. (the Company) was incorporated on May20, 2005 in the state of Delaware. On March31, 2010, the Company was acquired by CMG Holdings Group,Inc., a Nevada corporation (CMG). Effective August17, 2012, AudioEye Acquisition Corporation, a Nevada corporation (AEAC), acquired 80 % of the Companys then-outstanding common stock from CMG. The Company has developed patented,Internet content publication and distribution software that enables conversion of any media into accessible formats and allows for real time distribution to end users on any Internet connected device. The Companys focus is to create more comprehensive access to Internet, print, broadcast and other media to all people regardless of their network connection, device, location, or disabilities. The Company is focused on developing innovations in the field of networked and device embedded audio technology. The Company owns a unique patent portfolio comprised of six issued patents in the United States, a notice of allowance from the U.S. Patent and Trademark Office for a seventh patent, and two U.S. patents pending with additional patents being drafted for filing with the U.S. Patent and Trademark Office and internationally. On August17, 2012, AEAC acquired 80 % of the Company from CMG. Pursuant to the agreement: 1. CMG would retain 15 % of the Company. 2. CMG would distribute to its stockholders, in the form of a dividend, 5 % of the capital stock of the Company. 3. The Company entered into a Royalty Agreement with CMG to pay to CMG 10 % of cash received from income earned, settlements or judgments directly resulting from the Companys patent enforcement and licensing strategy whether received by the Company or any of its affiliates, net of any direct costs or tax implications incurred in pursuit of such strategy pertaining to the patents. 4. The Company entered into a Services Agreement with CMG whereby CMG will receive a commission of not less than 7.5 % of all revenues