0001144204-08-064556.txt : 20081114 0001144204-08-064556.hdr.sgml : 20081114 20081114165324 ACCESSION NUMBER: 0001144204-08-064556 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20080930 FILED AS OF DATE: 20081114 DATE AS OF CHANGE: 20081114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ForgeHouse, Inc. CENTRAL INDEX KEY: 0001321516 STANDARD INDUSTRIAL CLASSIFICATION: GREETING CARDS [2771] IRS NUMBER: 201903454 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-51465 FILM NUMBER: 081192475 BUSINESS ADDRESS: STREET 1: 4625 ALEXANDER DR STREET 2: SUITE 150, CITY: ALPHARETTA, STATE: GA ZIP: 30005 BUSINESS PHONE: (404) 643-6038 MAIL ADDRESS: STREET 1: 4625 ALEXANDER DR STREET 2: SUITE 150, CITY: ALPHARETTA, STATE: GA ZIP: 30005 FORMER COMPANY: FORMER CONFORMED NAME: Milk Bottle Cards Inc. DATE OF NAME CHANGE: 20050323 10-Q 1 v132146_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

FORGEHOUSE, INC.

(Exact name of registrant as specified in Charter)

Nevada		333-124304		20-1904354
(State or other jurisdiction of incorporation or organization)		(Commission File No.)		(IRS Employee Identification No.)

4625 Alexander Dr, Suite 150

Alpharetta, Georgia 30005

(Address of Principal Executive Offices)

(404) 643-6038

(Issuer Telephone number)

(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 28,289,834 shares of common stock issued and outstanding at November 14, 2008.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one):

Large accelerated filer o	Accelerated filer o

Non-accelerated filer o	Smaller reporting company x

FORGEHOUSE, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008

INDEX

A Note About Forward Looking Statements	3

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

Balance Sheet (Unaudited) - September 30, 2008	F-1

Statement of Operations (Unaudited) - For the three and nine months ended September 30, 2008	F-2

Statement of Cash Flows (Unaudited) - For the nine months ended September 30, 2008	F-3

Notes to Unaudited Financial Statements	F-5

Item 2 – Management's Discussion and Analysis of Financial Condition or Results of Operation	4

Item 4 – Controls and Procedures	9

PART II – OTHER INFORMATION	10

Item 6 – Exhibits	10

Signatures	12

A Note About Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations. These statements may be identified by their use of words like “plans,” “expect,” “aim,” “believe,” “projects,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could” and other expressions that indicate future events and trends. All statements that address expectations or projections about the future, including statements about our business strategy, expenditures, and financial results, are forward-looking statements. We believe that the expectations reflected in such forward-looking statements are accurate. However, we cannot assure you that such expectations will occur.

Actual results could differ materially from those in the forward looking statements due to a number of uncertainties including, but not limited to, those discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations. Factors that could cause future results to differ from these expectations include general economic conditions; further changes in our business direction or strategy; competitive factors; market uncertainties; and an inability to attract, develop, or retain consulting or managerial agents or independent contractors. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives requires the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements. You should not unduly rely on these forward-looking statements, which speak only as of the date of this Quarterly Report. Except as required by law, we are not obligated to release publicly any revisions to these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events.

ForgeHouse, Inc.

Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

ForgeHouse, Inc.

Index to the Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

Combined Financial Statements of ForgeHouse, Inc. (a Nevada Corporation):

Combined Balance Sheet as of September 30, 2008	2

Combined Statements of Operations for Each of the Three- and Nine-Month Periods Ended September 30, 2008 and 2007	3

Combined Statements of Cash Flows for Each of the Nine-Month Periods Ended September 30, 2008 and 2007	4

Notes to Combined Financial Statements	6

ForgeHouse, Inc.

Combined Balance Sheet

September 30, 2008

	As of			As of
	September 30, 2008			December 31, 2007
ASSETS
Current assets:
Accounts receivable - trade	$	35,148		$	42,323
Inventory		7,701			-
Prepaid insurance		7,354			7,052
Escrowed funds		-			7,114
Total current assets		50,203			56,489
Equipment, net of accumulated depreciation of $35,108 and $28,142, respectively		26,067			14,123
Software development costs, net of accumulated amortization of $121,333 and $95,333		52,000			78,000
Deposit		3,623			-
Total assets	$	131,893		$	148,612
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Cash overdraft	$	14,483		$	9,712
Accounts payable - trade		859,198			655,662
Related party payable		28,767			120,559
Accrued payroll and related expenses		145,844			27,198
Accrued expenses		6,654			184,805
Accrued interest on notes payable		56,070			648,029
Current portion of obligations under capital leases		4,676			4,262
Deferred revenue		6,975			-
Related party notes payable - current		-			580,000
Notes payable - current		560,000			149,657
Total current liabilities		1,682,667			2,379,884
Obligations under capital leases		837			4,398
Related party notes payable, less current portion		-			1,120,000
Notes payable, less current portion		781,938			-
Total liabilities	$	2,465,442		$	3,504,282
Commitments and contingencies
Stockholders' deficit:
Preferred stock, par value $0.001 with 10,000,000 shares authorized and 2,000,000 shares issued as Series A Convertible preferred stock		-			-
Series A Convertible Preferred stock, par value $0.001, 2,000,000 shares authorized, 2,000,000 shares issued and outstanding. Senior as to all other equity instruments, voting and with a dividend rate of 4% of the stated liquidation preference amount of $2,000,000	$	2,000			-
Common stock, $.001 par value, 100,000,000 shares authorized, 28,289,834 shares issued and outstanding		28,290		$	15,000
Additional paid in capital		4,487,220			1,248,978
Accumulated deficit		(6,851,059	)		(4,619,648	)
Total stockholders' deficit	$	(2,333,549	)	$	(3,355,670	)
Total liabilities and stockholders' deficit	$	131,893		$	148,612

The accompanying notes are an integral part of the combined financial statements.

F-1

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

	For the Nine Month						For the Three Month
	Period Ended September 30,						Period Ended September 30,
	2008			2007			2008			2007
Service contract revenue	$	139,678		$	123,714		$	53,062		$	46,759
Product revenue		40,078			54,440			7,734			3,958
Net revenues		179,756			178,154			60,796			50,717
Operating expenses:
Costs of revenues		65,801			62,580			20,616			5,163
Software development costs		127,146			248,840			34,682			58,142
Payroll related expenses		666,578			163,533			177,154			65,987
Professional fees		374,472			79,909			47,773			36,782
Depreciation and amortization		32,967			27,382			12,229			9,127
Stock based charges		1,120,937			-			106,826			-
General and administrative		231,003			154,217			58,401			45,280
Total operating expenses		2,618,904			736,461			457,681			220,481
Loss from operations		(2,439,148	)		(558,307	)		(396,885	)		(169,764	)
Other expense:
Interest expense		(157,135	)		(247,706	)		(21,790	)		(81,432	)
Other expense		(161	)		-			(84	)		-
Total other expense		(157,296	)		(247,706	)		(21,874	)		(81,432	)
Loss before extraordinary item		(2,596,444	)		(806,013	)		(418,759	)		(251,196	)
Gain on restructuring of debt		365,834			-			-			-
Net loss before income taxes		(2,230,610	)		(806,013	)		(418,759	)		(251,196	)
State income taxes		800			-			-			-
Net loss after taxes	$	(2,231,410	)	$	(806,013	)	$	(418,759	)	$	(251,196	)
Loss per share - basic and diluted
Loss per share, before extraordinary item	$	(0.10	)	$	(0.05	)	$	(0.01	)	$	(0.02	)
Net loss per share	$	(0.08	)	$	(0.05	)	$	(0.01	)	$	(0.02	)
Weighted average shares outstanding		26,645,788			15,000,000			28,289,384			15,000,000

The accompanying notes are an integral part of the combined financial statements.

F-2

ForgeHouse, Inc.

Combined Statements of Cash Flows

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

	For the Nine Month
	Period Ended September 30,
	2008			2007
Cash flows used in operating activities:
Net loss	$	(2,231,410	)	$	(806,013	)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation		6,967			1,382
Amortization of software development costs		26,000			26,000
Gain on restructure of debt		(365,834	)		-
Contribution of AMEX miles		-			6,652
Amortization of stock based charges		1,120,937			-
Decrease (increase) in assets:
Escrowed funds		7,114			83,167
Accounts receivable - trade		(82,825	)		4,502
Prepaid expenses and other current assets		(302	)		790
Inventory		(7,701	)		(8,812	)
Deposit		(3,623	)		-
Increase (decrease) in liabilities:
Accounts payable - trade		249,336			156,084
Accrued interest on debt		(238,550	)		246,172
Accrued expenses		(178,151	)		124,149
Accrued payroll		118,645			(6,334	)
Deferred revenue		96,975			-
Related party payable		(91,792	)		43,521

Cash used in operating activities		(1,574,214	)		(128,740	)
Cash flows used in investing activities:
30% purchase of ForgeHouse LLC		(171,430	)		-
Recapitalization of Milk Bottle Cards Inc. - reverse merger		(8,860	)		-
Acquisition of equipment		(18,911	)		-

Cash used in investing activities		(199,201	)		-
Cash flows provided by financing activities:
Payments of notes payable		(264,653	)		-
Payments on related party debt		(300,000	)		-
Proceeds from the sale of preferred A stock		2,100,000			-
Issuance of common shares for cash		290,388			-
Proceeds from owners		-			194,291
Purchase and retirement of stock		(50,000	)		-
Payment on capital lease		(3,147	)		-
Dissolution of variable interest entity		(3,944	)		(44,835	)
Net increase (decrease) in bank overdrafts		4,771			(20,716	)

Cash provided by financing activities		1,773,415			128,740

Net increase (decrease) in cash		-			-

Cash at beginning of period		-			-

Cash at end of period	$	-		$	-

The accompanying notes are an integral part of the combined financial statements.

F-3

ForgeHouse, Inc.

Combined Statements of Cash Flows

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

Supplemental Disclosure of Cash Flow Information

	Period Ended September 30,
	2008			2007
Cash paid during the fiscal years for:
Interest	$	-		$	-
Income taxes	$	800			-

Non-Cash Transactions
Contribution of accrued services by owners:
Accrued expenses		-		$	54,000
Additional paid in capital		-		$	(54,000	)

Issuance of shares in satisfaction of accounts payable:
Accounts payable	$	45,800			-
Common stock	$	(46	)		-
Additional paid in capital	$	(45,754	)		-

The accompanying notes are an integral part of the combined financial statements.

F-4

ForgeHouse, Inc.

Notes to the Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

1.	Description of the Company's Business

Nature of Operations

ForgeHouse, Inc. (the “Company”) (formerly Milk Bottle Cards, Inc) is currently engaged in the sale of and development of ongoing enhancement to OneVision®, its proprietary software system. The Company’s OneVision® system is a web based application that offers a virtual command and control system for certain compliance, physical security, and maintenance applications.

Basis of Presentation

The Company was incorporated under the laws of the state of Nevada in November 2004 for the purpose of producing, distributing, and marketing a collection of greeting cards. ForgeHouse, LLC (“ForgeHouse”) (a Georgia LLC) was formed in the state of Georgia in June 2002 for the purpose of developing and selling physical security industry applications and software. ForgeHouse operated through April 2007 as a company in the development stage.

In July 2007, the members (the “Members”) of ForgeHouse, LLC, a Georgia limited liability company (the “Operating Company”), entered into a Nonbinding Letter of Intent with Milk Bottle Cards, Inc. (“Milk Bottle”) (a non-operating public shell corporation), whereby the Members were to exchange their membership interests for Milk Bottle common stock and cash. On January 31, 2008, Milk Bottle and the Members entered certain agreements (the “Exchange Agreement”) that resulted in, among other items, the exchange of all of their membership interests in the Operating Company for 10,500,000 shares of common stock of Milk Bottle (approximately 37.5% of all outstanding common stock of the Company as of the closing of the exchange transaction). As a result of the exchange, the Operating Company became a wholly-owned subsidiary of Milk Bottle, which changed its name to ForgeHouse, Inc. (sometimes referred to as the “Resulting Company”). For accounting purposes, the transaction is considered a “reverse merger” under which ForgeHouse is considered the acquirer of the Company. Accordingly, the purchase price was allocated among the fair values of the assets and liabilities of the Company, while the historical results are those of ForgeHouse, but they were retroactively restated (a recapitalization) for the equivalent number of shares received by the Company in the exchange transaction. Earnings per share for the periods prior to the exchange transaction have been restated to reflect the number of equivalent shares received by the ForgeHouse members. The ForgeHouse members as a result of the exchange transaction own approximately 35% of the Company.

Principles of Combination

The combined financial statements include the accounts of the Company and its wholly owned subsidiary, ForgeHouse. All significant transactions among the combined entities have been eliminated upon combination.

F-5

ForgeHouse, Inc.

Notes to the Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

1.	Description of the Company's Business, Continued

Interim financial Statements

The accompanying unaudited combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Rule S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all material adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2008, are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

For further information, refer to the audited financial statements and footnotes thereto of ForgeHouse as of December 31, 2007, and the results of operations for the two years then ended, which are included as attachments to the Form 8-K/A filed on April 24, 2008.

2.	Summary of Significant Accounting Policies

Transition from Development Stage Operations and the Start of Ongoing Operations

In April 2007, ForgeHouse entered into a licensing agreement with a national physical security industry provider (the "Licensee"). In this licensing agreement, ForgeHouse granted an exclusive license to the Licensee for the use, marketing and distribution rights to OneVision® software for use by the Licensee in its own physical security service operations and the right to sub-lease OneVision® to all non-governmental physical security service entities in the United States. The execution of this agreement marked ForgeHouse’s transition from the development stage to ongoing operations. Accordingly, ForgeHouse’s operations in 2007 do not reflect inception-to-date information nor was it treated as an entity in the development stage.

Revenue Recognition

The Company recognizes revenue only when all of the following criteria have been met:

·	Persuasive evidence of an arrangement exists;

·	Delivery has occurred or services have been rendered;

·	The fee for the arrangement is fixed or determinable; and

·	Collectability is reasonably assured.

F-6

ForgeHouse, Inc.

Notes to the Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

2.	Summary of Significant Accounting Policies, Continued

The Company recognizes revenue from monthly access fees charged to customers for access to the Company's OneVision® software as well as certain related licensee hardware sales, technical support fees, applications programming, and training services.

Service Contract Revenue

The Company recognizes revenue on service contracts ratably over applicable contract periods or as services are performed. Amounts billed and collected before the services are performed are included in deferred revenues.

The agreement with the Licensee provides for payments to the Company at a base service fee of $10,000 per month along with an annual per user service fee payable at the beginning of each service year that Licensee utilizes the OneVision® service. The annual user service fees are a minimum of $1,140 per year, with additional optional services and hardware available. The Company's per user service fee rates are subject to an upward rate adjustment if the Licensee does not meet certain agreed upon user participation levels. Further, in order for the Licensee to maintain the exclusivity rights in the United States, the Licensee must meet minimum user participation levels and have paid all fees due under the agreement.

Product Revenue

Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. In instances where products are configured to customer requirements, revenue is recorded upon the successful completion of the Company’s final test procedures and the customer’s acceptance.

Escrowed Funds

The Company had funds from the Exchange Agreement that were held in escrow. These funds had been classified as "Escrowed funds" - a current asset in the accompanying Balance Sheet. There were no escrowed funds remaining at September 30, 2008.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent obligations in the financial statements and accompanying notes. Our most significant assumptions relate to recording net revenue, collectability of accounts receivable, useful lives and impairment of tangible and intangible assets, accruals, income taxes, stock-based compensation expense, and other factors. The estimation process requires assumptions to be made about future events and conditions, and as such, is inherently subjective and uncertain. Actual results could differ materially from our estimates.

F-7

ForgeHouse, Inc.

Notes to the Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

2.	Summary of Significant Accounting Policies, Continued

Concentration of Credit Risk

At September 30, 2008, the Company had $- on deposit that exceeded United States (FDIC) federally insurance limit of $250,000 per bank.

Software Development Costs

The Company accounts for development costs related to software products to be sold, leased, or otherwise marketed in accordance with FASB SFAS No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed. Software development costs are expensed as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers. The Company's software was available July 1, 2003, for general release, approximately seven months after the establishment of technological feasibility and, accordingly, the Company capitalized certain software development costs incurred during that period. SFAS No. 2, Accounting for Research and Development Costs, establishes accounting and reporting standards for research and development. During the three and nine month periods ended September 30, 2008 and 2007, the Company did not capitalize any software development costs. The Company capitalized $173,333 in software development costs as of September 30, 2008. The Company expensed $34,682, $127,146, $123,614 and $248,840 as research and development expense during the three- and nine-month periods ended September 30, 2008 and 2007, respectively.

In accordance with SFAS No. 2, the costs the Company incurs to enhance its existing products are expensed in the period they are incurred and included in software development costs in the statements of operations.

Amortization of capitalized software development costs begins when the product is available for general release. Amortization is provided on a product-by-product basis on the straight-line method over the software product's economic useful life. Unamortized capitalized software development costs determined to be in excess of net realizable values of the product are expensed immediately. During the three- and nine-month periods ended September 30, 2008 and 2007, amortization of software development costs totaled $8,667, $26,000, $8,667 and $26,000, respectively.

F-8

ForgeHouse, Inc.

Notes to the Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

2.	Summary of Significant Accounting Policies, Continued

Management has concluded that the software development costs have no residual value and a five-year period of amortization, with the amortization period starting with the first general sale of the product after the beta site. This occurred in April 2005.

The Company includes in software development expense those costs related to the following software development activities:

·	Conceptual formulation and design of possible product or process alternatives;

·	Testing in search for, or evaluation of, product or process alternatives;

·	Modification of the formulation or design of a product or process; and

·	Engineering activity required to advance the design of a product to the point that it meets specific functional and economic requirements and is ready for production.

Future amortization of the software development costs is as follows for the 12 months ended September 30:

2009		$	34,667
2010			17,333

Fair Value of Financial Instruments

As of January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” (FAS 157). In February 2008, the Financial Accounting Standards Board, or FASB, issued FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No.157, which provides a one year deferral of the effective date of FAS 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. Therefore, we adopted the provisions of FAS 157 with respect to our financial assets and liabilities only. FAS 157 defines fair value, establishes a framework for measuring fair value under GAAP, and enhances disclosures about fair value measurements. Fair value is defined under FAS 157 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under FAS 157 must maximize the use of observable inputs and minimize the use of unobservable inputs.

F-9

ForgeHouse, Inc.

Notes to the Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

2.	Summary of Significant Accounting Policies, Continued

We utilize the market approach to measure fair value for our financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as the consideration of counterparty credit risk in its assessment of fair value.

The adoption of this statement did not have a material impact on our combined results of operations and financial condition. The carrying values of our cash, cash equivalents, and marketable securities, carried at fair value as of September 30, 2008, are classified in the table below in one of the three categories described above:

Fair Value Measurements at September 30, 2008

Level 1

Level 2

Level 3

Total

Cash & Equivalents

Escrowed Funds

Cash, Cash Equivalents and Escrowed Funds

Basic and Diluted Loss Per Share

In accordance with FASB Statement No. 128, Earnings per Share, the Company calculates basic and diluted net loss per share using the weighted average number of common shares outstanding during the periods presented and adjusts the amount of net loss used in this calculation for preferred stock dividends declared during the period, if any.

F-10

ForgeHouse, Inc.

Notes to the Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

2.	Summary of Significant Accounting Policies, Continued

We incurred a net loss in each period presented, and as such, did not include the effect of potentially dilutive common stock equivalents in the diluted net loss per share calculation, as their effect would be anti-dilutive for all periods. Dilutive common stock equivalents would include the common stock issuable upon the conversion of preferred stock and the exercise of warrants and stock options that have conversion or exercise prices below the market value of our common stock at the measurement date.

The following data shows the amounts used in computing basic loss per share for the three- and nine-month periods ended September 30, 2008 and 2007.

As of September 30, 2008, the Company had issued and outstanding common stock equivalents comprised of common stock options and warrants that can be converted into 3,877,000 shares of common stock. As of September 30, 2007, there were no common stock equivalents issued and outstanding.

Cash and Cash Equivalents

The Company considers deposits that can be redeemed on demand and investments that have original maturities of less than three months, when purchased, to be cash equivalents. As of September 30, 2008, the Company had no cash or cash equivalents.

Accounts Receivable - Trade and Allowance for Doubtful Accounts

Trade accounts receivable are stated at the amount the Company expects to collect. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on its historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change. Based on the Company's status as a development stage company until 2007 and past level of sales, the Company has not experienced any accounts receivable that could not be collected, and as such, the allowance for doubtful accounts is zero at September 30, 2008. As the Company expands, it fully expects the allowance for doubtful accounts to increase from zero.

Inventory

Inventories are stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out (FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net realizable value. The Company buys and resells hardware as necessary, but does not carry inventory on-hand for extended periods of time, and had only five PDA's for resale on-hand at September 30, 2008. Inventory was $7,701 at September 30, 2008.

F-11

ForgeHouse, Inc.

Notes to the Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

2.	Summary of Significant Accounting Policies, Continued

Prepaid Expenses

The Company's prepaid expenses consist mainly of amounts paid for annual insurance contracts. The amounts are expensed ratably over the term of the contract.

Equipment

Equipment is recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally, accelerated depreciation methods) for tax purposes where appropriate. Repairs and maintenance are expensed as incurred. When equipment is retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. During the three- and nine-month periods ended September 30, 2008 and 2007, the Company did not dispose of any equipment. The estimated useful lives of computer and office equipment are as follows:

		Estimated
		Useful
		Lives
Computer equipment		3 years
Office equipment		5 years
Office furniture		7 years

Leases

The Company reviews all leases for capital or operating classification at their inception under the guidance of the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) No. 13, Accounting for Leases, as amended. The Company uses its incremental borrowing rate in the assessment of lease classification and defines the initial lease term to exclude lease extension periods.

The Company has entered into an operating lease agreement for its corporate office, which contains provisions for future rent increases or periods in which rent payments are reduced (abated). In accordance with generally accepted accounting principles, the Company records monthly rent expense equal to the total of the payments due over the lease term, divided by the number of months of the lease term. The difference between rent expense recorded and the amount paid is credited or charged to “Deferred rent.” Deferred rent was not material at September 30, 2008.

F-12

ForgeHouse, Inc.

Notes to the Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

2.	Summary of Significant Accounting Policies, Continued

Impairment of Long-Lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property and equipment, and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on the estimated discounted future cash flows expected to be generated by the asset. The factors considered by management in performing this assessment include current operating results and trends and prospects, as well as the effects of obsolescence and economic factors.

Deferred Revenue - Amounts Billed in Advance

The Company recognizes revenue as earned. Amounts billed in advance of the period in which service is rendered will be recorded as a liability under “Deferred revenue.” The Company had $6,975 of deferred revenue at September 30, 2008.

General and Administrative Expense

General and administrative expense includes the cost of maintaining the infrastructure of the Company that is not directly related to delivery services. Also included in this category would be the provision for doubtful accounts receivable.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carryforwards, 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. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

F-13

ForgeHouse, Inc.

Notes to the Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

2.	Summary of Significant Accounting Policies, Continued

Reclassification of Accounts

Certain reclassifications have been made to prior-year comparative financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or financial position.

Recent Accounting Pronouncements

In June 2006, FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. The interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires recognition of tax benefits that satisfy a greater than 50% probability threshold. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for the Company beginning January 1, 2008. The Company believes that adoption of FIN 48 will not have a material effect on its financial position, results of operations, or cash flows.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations, (FAS 141(R)) and No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (FAS 160). FAS 141(R) will change how business acquisitions are accounted for and FAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. The Company will adopt both FAS 141(R) and FAS 160 as of January 1, 2009 and neither pronouncement is expected to have a material impact on the Company’s financial statements.

3.	Variable Interest Entity

ForgeHouse determined its debt servicing of the GS Security's SBA loan required GS Security to be recognized as a variable interest entity as defined in FIN 46R. ForgeHouse concluded that it was the primary beneficiary and, as a result, combined its financial operating results with those of GS Security from January 1, 2005 through January 31, 2008. The combination of GS Security with ForgeHouse did not materially affect its operating results or its financial condition. As of September 30, 2008, GS Security is no longer combined with the Company as a result of the satisfaction of the SBA Loan in February 2008 (Note 7 - Debt). For consistency, the balance sheet as of December 31, 2007 and the statement of operations for the three- and nine-month periods ended September 30, 2008 and 2007 do not include the operations of the variable interest entity.

F-14

ForgeHouse, Inc.

Notes to the Combined Financial Statements

As of September 30, 2008 and

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

3.	Variable Interest Entity, Continued

Reconciliation of Balance Sheet Presented to Consolidated Balance Sheet as Filed

A reconciliation of the balance sheet shown above to the consolidated balance sheet, which was filed in an 8-K/A on April 22, 2008, is as follows:

	Per Balance			Per Balance			Consolidated
	Sheet Shown			Sheet of VIE			Balance Sheet
	Above as of			As of			As of
	December 31,			December 31,			December 31,
	2007			2007			2007
ASSETS
Current assets:
Accounts receivable - trade	$	42,323			-		$	42,323
Prepaid insurance		7,052			-			7,052
Escrowed funds		7,114			-			7,114
Total current assets		56,489			-			56,489
Equipment, net of accumulated depreciation of $28,142		14,123			-			14,123
Software development costs, net of accumulated amortization $95,333		78,000			-			78,000
Total assets	$	148,612			-		$	148,612
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Cash overdraft	$	9,712			-		$	9,712
Accounts payable - trade		655,662			-			655,662
Related party payable		120,559			-			120,559
Accrued payroll and related expenses		27,198			-			27,198
Accrued expenses		184,805			-			184,805
Accrued interest on notes payable		648,029		$	12,424			660,453
Current portion of obligations under capital leases		4,262			-			4,262
Related party notes payable - current		580,000			-			580,000
Notes payable - current		149,657			56,934			206,591
Total current liabilities		2,379,884			69,358			2,449,242
Obligations under capital leases		4,398			-			4,398
Related party notes payable, less current portion		1,120,000			-			1,120,000
Total liabilities	$	3,504,282		$	69,358		$	3,573,640
Commitments and contingencies

Stockholders' deficit:
Additional paid in capital	$	1,263,978			-			1,263,978
Accumulated deficit		(4,619,648	)	$	(69,358	)		(4,689,006	)
Total stockholders' deficit	$	(3,355,670	)	$	(69,358	)	$	(3,425,028	)
Total liabilities and stockholders' deficit	$	148,612			-		$	148,612

F-15

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

4.	Accounts Receivable - Trade

Accounts receivable - trade is comprised of the following at September 30, 2008:

Accounts receivable - trade	$	35,148
Allowance for doubtful accounts receivable		-
Accounts receivable - trade, net	$	35,148

The Company did not provide for an allowance for doubtful accounts as of September 30, 2008 as all open account balances were determined to be collectible. The accounts receivable - trade account as of September 30, 2008 (and also those that arise from future operations) are pledged as security as part of the Company's loans with the private and commercial lenders (Note 7 - Debt).

5.	Equipment

Equipment, net is comprised of the following at September 30, 2008:
Computer equipment	$	42,302
Office furniture		2,397
Office equipment		8,667
Equipment under capital lease		7,809
Total equipment		61,175
Less: accumulated depreciation		(35,108	)
Equipment, net	$	26,067

Depreciation expense amounted to $3,562, $6,967, $461 and $1,382 for the three and nine month periods ended September 30, 2008 and 2007, respectively. All of the equipment with a net book value of $26,067 was pledged as security for the Company's loans two loans with the private lender (Note 7 - Debt).

6.	Obligations under Capital Lease

The Company leases certain equipment under a capital lease. The equipment under such capital lease is recorded at the lower of the present value of the minimum lease payments or the fair value of the equipment. Equipment held under capital leases is included in the Balance Sheet as equipment, net was $7,809 at September 30, 2008. Accumulated depreciation of the leased equipment at September 30, 2008 was $2,271. Depreciation of assets under such capital lease is included in depreciation expense.

F-16

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

6.	Obligations Under Capital Lease, Continued

The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of September 30, 2008, are as follows:

Twelve Months
Ending
September 30	Amount
2009	$	5,101
2010		850
Total minimum lease payments		5,951
Less: amount representing interest		(438	)
Present value of net minimum lease payments		5,513
Less: current maturities of capital lease obligations		4,676
Long-term capital lease obligations	$	837

Debt

Debt as of September 30, 2008 is comprised of the following:

Debt, unsecured

There is one unsecured debt that was restructured and re-written as of January 31, 2008, with principal amount of $200,000 that accrues interest at a rate of 6% per annum until maturity and 8% after maturity, with payments of $40,000 due every six months beginning December 31, 2008 until and including December 31, 2010. This note must be prepaid in whole or in part as part of the closing of any equity or debt financing of the Company in the amount equal to 20% of the net funding received or the remaining loan balance, whichever is less.

Debt, unsecured as of September 30, 2008	$	200,000
Less: current portion of the unsecured debt		(80,000	)
Long term portion of the debt, unsecured, as of September 30, 2008	$	120,000

F-17

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

7.	Debt, Continued

Debt

There is one secured debt that was restructured and re-written as of January 31, 2008 with a principal amount of $1,200,000, that accrues interest at a rate of 6% per annum. The promissory note calls for principal payments of $240,000 commencing on December 31, 2008, and continuing every six months until and including December 31, 2010. This note must be prepaid in whole or in part of the closing of any equity or debt financing of the Company in the amount equal to 20% of the net funding received or the remaining loan balance, whichever is less.

Debt, as of September 30, 2008	$	1,141,938
Less: current portion		(480,000	)
Long term portion of the debt, as of September 30, 2008	$	661,938

Total long term debt, at September 30, 2008	$	781,938

Short Term Notes Payable - Secured

North Atlanta National Bank - Small Business Administration Guaranteed Loan

On August 19, 2002, the variable interest entity entered into a loan agreement with North Atlanta National Bank (the "Lender"), which was guaranteed by the Small Business Administration (the "SBA Loan"). The SBA Loan had a face value of $456,000 with a variable interest rate based on the Wall Street Journal prime rate plus 2.75% per annum. The SBA Loan required monthly payments of $6,331 and originated in August 2002 with all unpaid principal and interest due at maturity in August 2010. The amount of the monthly SBA Loan payment was subject to annual payment adjustment each August to provide for the ratable amortization over the remaining term of the loan. The interest rate at September 30, 2007 was 11.0% and at February 5, 2008 (the date the note was satisfied - see Note 1.) was 10.0%. The weighted average interest rate for the nine-month period ended September 30, 2007, and the period from January 1, 2008 to February 5, 2008 was 11.0% and 10.0%, respectively. The SBA Loan was secured by substantially all of the assets (both tangible and intangible) of ForgeHouse and GS Security (Note 3 - Variable Interest Entity). The loan was fully satisfied in February 2008.

F-18

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

7.	Debt, Continued

Short Term Bridge Financing

In the fourth quarter of 2007, ForgeHouse completed a short term bridge financing (the bridge loan) with an investor group for $300,000, which came in four tranches during the quarter ended December 31, 2007. The bridge loan was necessary to sustain the ongoing operations of the ForgeHouse until the Exchange Agreement and the related equity financing was complete (Note 1.- Description of Company's Business). The loan was guaranteed personally by the CEO and COO of ForgeHouse (Note 9 - Related Party Transactions). The loan was satisfied in February 2008, and while outstanding, bore an interest rate of 6% per annum.

Long Term Debt - Unsecured

After All Group

In August 2006, ForgeHouse borrowed $200,000 from a group ("After All") that consisted of some of the same owners (who were members of ForgeHouse) of Arngrove Group Holdings, Ltd. The loan was unsecured and interest accrues at a rate of 20% per annum, which is calculated monthly and rolled into the principal balance of the loan. The loan term was six months from the issuance date and has been extended on a month-to-month basis at the discretion of After All. This note payable was restructured on January 31, 2008, and all accrued interest was forgiven, which is included in the gain on the restructuring of debt in the statement of operations. The restructured note is at an interest rate of 6% per annum, with scheduled principal payments of $40,000 to be made starting December 31, 2008, and every six months thereafter, up to and including December 31, 2010. The long term balance, current principal balance, and accrued interest balance at September 30, 2008, was $120,000, $80,000 and $8,010, respectively. Interest accrues at 8% beyond maturity. This note must be prepaid in whole or in part upon the closing of any equity or debt financing of the Company in the amount of 20% of the net funding received.

Long Term Notes Payable - Secured

Arngrove Group Holdings Ltd.

In May 2005, ForgeHouse entered into a combination debt, sale of Members' equity and services agreement transaction (the "Agreement") with Arngrove Group Holdings Ltd (a United Kingdom entity) ("Arngrove"). The Agreement provided ForgeHouse with a line-of-credit facility (the "Loan Agreement") that called for Arngrove to advance ForgeHouse as requested up to $100,000 per month, with a maximum aggregate principal amount not to exceed $1,200,000 over the twelve month period ending May 2006. The Loan Agreement was evidenced by a note payable with a not-to-exceed face amount of $1,200,000 with a fixed interest rate of 10.0% per annum. The Loan Agreement for financial reporting

F-19

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

7.	Debt, Continued

purposes was discounted at inception to reflect an effective interest rate yield of 29.7% (as of the date the Loan Agreement promissory note was created); its initial discount recognized was $114,622. The discount was being accreted ratably over the initial life of the Loan Agreement promissory note. The required annual interest only payments were to commence as of June 1, 2006, but were not made. As such, in 2006, the Loan Agreement's restrictive covenants went into default and all of the unaccreted discount was expensed.

The Agreement also included a services contract that provided for Arngrove to provide certain consulting services and to receive a fee (the "Fee") of approximately $120,000 each year, payable monthly within 7 days of each month-end. The Fee was a required portion of the Agreement. It is being treated by ForgeHouse as additional interest. ForgeHouse determined that the nature of the consultancy services called for in the Agreement were investor's due diligence procedures or were not provided to ForgeHouse at all. ForgeHouse did not make any Fee payments to Arngrove as provided for in the service contract until the agreement was restructured at January 31, 2008, at which time payments totaling $368,571 were made to satisfy all accrued interest and management fees on the Arngrove and After All notes. This resulted in a first quarter gain on the restructuring of debt of $365,834.

The Agreement included the sale of Members equity to four individuals related to Arngrove for $300,000 and a 30% interest in ForgeHouse (Note 10). This was a necessary provision to obtain the loan, which was why ForgeHouse accepted the investment at a discounted price. ForgeHouse, based on prior equity investments, estimated the fair value of the 30% equity interest at $600,000. ForgeHouse trifurcated the values of the loan, equity interest, and service contract based on the net cash received from the agreement, resulting in the recording of the equity investment at a value of $414,622 and a discount on the underlying loan of $114,622, to be amortized over the life of the loan. However, as mentioned above, the loan discount was accelerated when the note became in default in 2006. This 30% interest was purchased by the Company at January 31, 2008, for $171,430.

ForgeHouse restructured the debt in January 2008 as part of the exchange transaction (Note 10 - Equity), and, as such, the debt is classified as a long term Note Payable on the face of the balance sheet. This note payable was restructured on January 31, 2008 at an interest rate of 6% per annum, with scheduled principal payments of $240,000 to be made starting December 31, 2008 and every six months thereafter, up to and including December 31, 2010. Interest accrues at 8% beyond maturity. The amount of stated interest related to the Loan Agreement was included in accrued interest and was $48,060 at September 30, 2008. This note must be prepaid in whole or in part upon the closing of any equity or debt financing of the Company in the amount of 20% of the net funding received.

F-20

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

7.	Debt, Continued

The Company incurred interest expense during the three and nine month periods ended September 30, 2008 and 2007 of $21,790, $157,135, $81,432 and $247,706, respectively, all of which was charged to operations.

Debt is scheduled to mature during the twelve month periods ended September 30 as follows:

2009	$	560,000
2010		560,000
2011		280,000

8.	Commitments and Contingencies

Financial Results, Liquidity and Management's Plan

The Company’s success will depend in part on its ability to obtain patents (one is now pending in 36 countries) and to expand its OneVision® product license holders and related revenue, to maintain its trade secrets, and to operate without infringing on the proprietary rights of others, both in the United States and other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated, or circumvented, or that the rights granted there under will provide proprietary protection or competitive advantages to the Company.

The accompanying financial statements as of September 30, 2008, have been prepared assuming the Company will continue as a going concern. The Company, over time, has experienced recurring losses and negative cash flows from operations, and as of September 30, 2008, the Company’s current liabilities exceeded its current assets by $1,632,464 and its total liabilities exceeded its total assets by $2,333,549. The Company also has substantial debt that was restructured in January 2008 (Note 7 - Debt). These factors raise substantial doubt about the Company's ability to continue as a going concern. During 2008, management intends to raise additional debt and/or equity financing to fund future operations, ongoing software development costs and debt retirement needs. The Company’s marketing plan is to assist its licensees and to promote the expand acceptance and use of its OneVision®product, and to develop additional applications in industries where there is significant anticipated demand requirements. Management believes that its plans will contribute towards achieving profitability but there is no assurance that they can be implemented; or that the results will be of a sufficient level necessary to meet the Company’s ongoing cash needs. No assurances can be given that the Company can obtain sufficient working capital through borrowings from a related party or lending institutions or that the continued implementation of its business plan will generate sufficient revenues in the future to sustain ongoing operations.

F-21

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

8.	Commitments and Contingencies, Continued

The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern. As discussed in Note 10 - Equity Transactions, the Company was able to obtain additional working capital in connection with the reverse acquisition in January 2008.

Legal Actions

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Operating Leases

The Company recognized rental expense of $3,623, $21,192, $0, and $17,658 for the three and nine month periods ended September 30, 2008 and 2007, respectively. The Company occupied its Norcross, Georgia facility under a rental agreement that had a lease term that expired in March 2007. The Company began subleasing space from a third party for $1,500 per month in October 2007 on a month-to-month basis until they entered their current lease agreement starting on June 1, 2008. The 39 month lease calls for initial monthly payments of $3,623 and does not have any renewal options.

F-22

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

8.	Commitments and Contingencies, Continued

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of the accounts receivable - trade. The Company operates in a market segment that is highly competitive and rapidly changing. Significant technological changes, shifting customer requirements, the emergence of competitive products with new capabilities, and other factors could negatively impact the Company's operating results.

The Company had three customers that individually comprised more than 10% of the accounts receivable - trade balance, for a total of 96% of the accounts receivable - trade balance at September 30, 2008.

Two customers were individually responsible for more than 10% of the revenue for the three and nine month periods ended September 30, 2008, totaling 93% and 91%, respectively, of the Company's sales during the period. These customers individually made up more than 10% of the Company's sales during 2007, totaling 86% and 92% of total sales during the three and nine month periods ended September 30, 2007.

The Company made 100% of its hardware purchases for resale from one vendor in the three and nine month periods ended September 30, 2008. The Company feels that other vendors with similar products could be used.

If the Company were to lose any of these customers or vendors, the impact on its financial statements would be unknown, but could be significant. The Company has not experienced any such loss of customers or vendors as of September 30, 2008.

9.	Related Party Transactions

Personal Guarantees

VIE's SBA Loan

TWE Members provided personal guarantees for the VIE's SBA loan (Note 7 - Debt) that was fully satisfied in February 2008. Each of the personal guarantees was for an amount not to exceed the SBA Loan principal balance plus costs and unpaid accrued interest.

Short Term Bridge Financing

TWE Members provided personal guarantees for the Short Term Bridge Financing (Note 7 - Debt). Each of the personal guarantees was for an amount not to exceed the loan principal balance plus costs and unpaid accrued interest.

F-23

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

9.	Related Party Transactions, Continued

Contributed Services

An individual, who was an equity holder of ForgeHouse and is a stockholder of the Company, provided software development services during the year ended December 31, 2007. The contributed services provided to ForgeHouse were recorded at a fair value of $54,000 and the equity holder did not receive additional membership units or capital participation (Note 10 - Equity Transactions).

10.

Equity Transactions

Capital Contributions

During the year ended December 31, 2007, the two largest equity holders in ForgeHouse contributed $200,943 of additional-paid-in-capital.

In the year ended December 31, 2007, a ForgeHouse equity holder contributed as additional-paid-in-capital the amount due him by the ForgeHouse for past software programming services related to the ongoing software system development of OneVision^®. The fair value of the contributed services was $54,000 based on the fair value of the services. The total amount was charged to operations as software development costs.

Sale of Units

On January 31, 2008, the Company sold 2,000,000 units, each unit consisted of one share of the Company's Series A Convertible Preferred stock and one warrant to purchase a share of the Company's common stock. The total proceeds from this transaction was $2,100,000. Each of the Series A Preferred shares is convertible into the Company's common stock on a one-to-one basis. The Series A Preferred Shares are senior as to all other equity instruments, have voting rights, and have a dividend rate of 4% of the stated liquidation preference amount of $2,000,000. The warrants have an exercise price of $1.00 and expire 2 years from the grant date.

F-24

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

10.

Equity Transactions, Continued

Shares Issued for Cash

In June 2008, the Company issued 244,022 shares of the Company’s common stock to eight individuals for cash proceeds of $290,388, which is $1.19 per share. The share price represented a 30% discount to the 10-trading-day volume weighted average closing price of the common stock, with May 29, 2008, as the 10th trading day. As stipulated in the restructured Arngrove note payable agreement, the Company is required to remit 20% of all funds raised to Arngrove to be applied first to the then outstanding principal balance of the note payable and second to any interest accrued thereon.

Shares Issued in Satisfaction of Accounts Payable - Trade

In June 2008, the Company issued 45,812 shares of the Company’s common stock to two individuals for satisfaction of $45,800 of accounts payable - trade at $1.00 per share.

Options Activity

A summary of the option activity as of September 30, 2008, and changes during the period then ended is presented below:

					Weighted
					Average
			Weighted		Remaining		Aggregate
	Number of		Average		Contractual		Intrinsic
	Options		Exercise Price		Term (Years)		Value
Outstanding at
December 31, 2007		-		-		-		-
Granted		1,877,000	$	1.00		-		-
Exercised		-		-		-		-
Forfeited		-		-		-		-
Expired		-		-		-		-
Outstanding at
September 30, 2008		1,877,000	$	1.00		6.59	$	-
Exercisable at
September 30, 2008		727,000	$	1.01		7.35	$	-

F-25

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

10.

Equity Transactions, Continued

On January 31, 2008, the Company granted options to purchase 251,000 shares of its common stock to the Company's Chief Executive Officer immediately following the Exchange Agreement as a condition for entering his employment agreement. The options have an exercise price of $1.00, vest immediately and expire 10 years from the grant date. The Company also granted options to purchase 90,000 shares of its common stock to the Company's Chief Operating Officer immediately following the Exchange Agreement as a condition for entering his employment agreement. The options have an exercise price of $1.10, vest immediately and expire 5 years from the grant date.

On January 31, 2008, the Company granted options to purchase 186,000 shares of its common stock to the Company's Chief Operating Officer immediately following the Exchange Agreement as a condition for entering his employment agreement. The options have an exercise price of $1.00, vest immediately and expire 10 years from the grant date.

On January 31, 2008, the Company granted options to purchase 75,000 shares of its common stock to both the Company's Chief Strategy Officer and the Chief Technology Officer immediately following the Exchange Agreement for entering their employment agreements. The options have an exercise price of $1.00, vest immediately and expire in 5 years from the grant date.

On January 31, 2008, the Company granted options to purchase 225,000 shares of its common stock to each of two employees for past services immediately following Exchange Agreement. The options have an exercise price of $1.00, vest evenly on each of the first three anniversaries of the grant date and expire 5 years from the grant date.

On February 15, 2008, the Company granted options to purchase 350,000 shares of its common stock to the Company's Chief Financial Officer for entering his employment agreement. The options have an exercise price of $1.00, 50,000 vest immediately, and the remaining 300,000 vest evenly on each of the first three anniversaries of the grant date and expire 5 years from the grant date. The Company also granted options to purchase 400,000 shares of its common stock to the Company's Chief Financial Officer for entering his employment agreement. The options have an exercise price of $1.00 and vest evenly on each of the first three anniversaries of the grant date and expire 10 years from the grant date.

F-26

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

10.

Equity Transactions, Continued

The assumptions used in the Black-Scholes option pricing model for the stock options granted during the nine month period ended September 30, 2008, were as follows:

	For the
	Nine Month
	Period Ended
	September 30, 2008
Risk-free interest rate		2.78 to 3.83%
Expected volatility of common stock		92%
Dividend yield		$0.00
Expected life of options		5-10 years
Weighted average fair market value of options granted		$1.13

Warrant Activity

A summary of the warrant activity as of September 30, 2008, and changes during the period then ended is presented below:

			Weighted
			Average
	Number of		Exercise
	Warrants		Price
Outstanding, December 31, 2007		-		-
Issued		2,000,000	$	1.00
Exercised		-		-
Outstanding, September 30, 2008		2,000,000	$	1.00
Exercisable, September 30, 2008		2,000,000	$	1.00

On January 31, 2008, the Company sold 2,000,000 units, with each unit consisting of one share of the Company's Series A Convertible Preferred stock and one warrant to purchase a share of the Company's common stock. The warrants have an exercise price of $1.00 and expire 2 years from the grant date.

Shares Reserved for Future Issuance

The Company has reserved shares for future issuance upon exercise of outstanding options and warrants as follows:

Options			1,877,000
Warrants			2,000,000
Reserved shares at September 30, 2008			3,877,000

F-27

ForgeHouse, Inc.

Combined Statements of Operations

For Each of the Three and Nine Month Periods Ended September 30, 2008 and 2007

11.

Earnings Per Share

In accordance with FASB Statement No. 128, Earnings Per Share, the Company calculates basic and diluted net loss per share using the weighted average number of common shares outstanding during the periods presented and adjust the amount of net loss, used in this calculation, for preferred stock dividends declared during the period.

The Company incurred a net loss in each period presented, and as such, did not include the effect of potentially dilutive common stock equivalents in the diluted net loss per share calculation, as their effect would be anti-dilutive for all periods. Potentially dilutive common stock equivalents would include the common stock issuable upon the conversion of the convertible preferred stock and the exercise of warrants and stock options that have conversion or exercise prices below the market value of the Company’s common stock at the measurement date. As of September 30, 2008, all potentially dilutive common stock equivalents amounted to 5,877,000 shares.

The following table illustrates the computation of basic and diluted net loss per share:

	For the			For the			For the			For the
	Nine Month			Nine Month			Three Month			Three Month
	Period Ended			Period Ended			Period Ended			Period Ended
	September 30,			September 30,			September 30,			September 30,
	2008			2007			2008			2007
Numerator:
Net loss	$	(2,231,410	)	$	(806,013	)		(418,759	)		(251,196	)
Denominator:
Denominator for basic and diluted net loss per share-weighted average number of common shares outstanding		26,645,788			15,000,000			28,289,384			15,000,000
Basic and diluted net loss per share	$	(0.08	)	$	(0.05	)		(0.01	)		(0.02	)

F-28

ForgeHouse, Inc.

Combined Balance Sheet

September 30, 2008

11.

Earnings Per Share, Continued

The following table sets forth potential shares of common stock that are not included in the diluted net loss per share because to do so would be antidilutive since the Company reported net losses in all the reporting periods:

	For the		For the		For the		For the
	Nine Month		Nine Month		Three Month		Three Month
	Period Ended		Period Ended		Period Ended		Period Ended
	September 30,		September 30,		September 30,		September 30,
	2008		2007		2008		2007
Options to purchase shares of common stock		1,877,000		-		1,877,000		-
Warrants to purchase shares of common stock		2,000,000		-		2,000,000		-
Convertible preferred stock		2,000,000		-		2,000,000		-
Total		5,877,000		-		5,877,000		-

F-29

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of the financial condition and results of operation of ForgeHouse, Inc. (“ForgeHouse,” the “Company,” “we,” “us,” and, as noted, the “Resulting Company”) should be read in conjunction with the financial statements and the notes to those statements included herein. This discussion includes forward-looking statements that involve risk and uncertainties. Actual results may differ materially from those anticipated in the forward-looking statements.

Overview

ForgeHouse is in the business-to-business arena and is focused on providing scalable, enterprise-class, web-based solutions that increase productivity and accountability by workflow optimization. Our markets range from Fortune 1000 companies to government to small and medium enterprises and businesses (SMEs and SMBs). During the quarter ended September 30, 2008, we continued to market our software solution to targeted prospects.

We will need to obtain additional operating capital during the balance of our 2008 fiscal year to fund continuing software development and to increase our sales team to penetrate and gain traction in the markets identified as critical to our business success. Although we are considering various debt or equity financings, there can be no assurance that any financing will be available to us on terms acceptable to us or at the time that we would require such financing, or at all. Failure to obtain any such financing will result in our inability to effectuate our business plan. As of the date of this Quarterly Report, we have not entered into any agreements and have not received any commitments to obtain any such financing.

For the Quarter and Nine Months Ended September 30, 2008 in Comparison to the Quarter and Nine Months Ended September 30, 2007.

Results of Operations

Financial statements for the quarter and nine months ended September 30, 2007, contain information regarding the Operating Company combined with GS Security Group, a variable interest entity; financial statements for the nine months ended September 30, 2008, contain information of the Operating Company (through January 31, 2008, the date of the closing of the exchange transaction) and of the Resulting Company (combined with GS Security Group through February 2008, when a bank loan owed by the Operating Company was repaid).

Net Revenue

Net revenues for the three months ended September 30, 2008, increased to $61,000 from $51,000 in the prior year, an increase of approximately 20%. Revenues from the ASP service increased by approximately 13%, while sales of hardware increased by approximately 73%. One customer accounted for 88% and another for 5% of total net revenues for the three months ended September 30, 2008.

Net revenues for the nine months ended September 30, 2008, increased to $180,000 from $178,000 in the prior year, an increase of approximately 1%. Revenues from the ASP service increased by approximately 2%, while sales of hardware decreased by approximately 21%. One customer accounted for 82% and another for 9% of total net revenues for the nine months ended September 30, 2008.

The increase in revenues for the current periods in comparison to the prior periods was the result of lower commissions on sales for the nine months ended September 30, 2008, versus the same period in 2007.

Cost of Revenue

Cost of revenue primarily consists of server hosting cost and cost of hardware purchased for resale. Cost of revenue for the three months ended September 30, 2008, increased to $21,000 from $5,000 in the prior year. Cost of sales as a percentage of sales was 34% for the period ending September 30, 2008, and 10% for the prior period. The higher cost of revenue was due to higher hardware sales for the period, as described in Net Revenue, above.

Cost of revenue for the nine months ended September 30, 2008, increased to $66,000 from $63,000 in the prior year. Cost of sales as a percentage of sales was 37% for the period ending September 30, 2008, and 35% for the prior period.

Operating Expenses

Total operating expenses for the three months ended September 30, 2008, increased to $402,000 from $157,000 in the prior year. For the nine months ended September 30, 2008, operating expenses increased to $2,426,000 from $425,000. The expense breakdown is as follows:

	Three Months Ending September 30										Nine Months Ending September 30
Operating Expenses	2008		2007		Var B(W)			Var B(W)			2008		2007		Var B(W)			Var B(W)
	$ 000		$ 000		$ 000			A%			$ 000		$ 000		$ 000			a%
Payroll related expenses		177		66		(111	)		(168	)%		667		164		(503	)		(308	)%
Professional fees		48		37		(11	)		(30	)%		374		80		(295	)		(369	)%
Depreciation and Amortization		12		9		(3	)		(34	)%		33		27		(6	)		(20	)%
Stock-based charges		107		0		(107	)		N/A			1,121		0		(1,121	)		N/A
General and Administrative		58		45		(13	)		(29	)%		231		154		(77	)		(50	)%
Total		402		157		( 245	)		(156	)%		2,426		425		(2,001	)		(471	)%

Professional fees represent both accounting and legal fees. We anticipate that our professional fees will decrease during the balance of the fiscal year, as a material amount of professional service fees were incurred during the nine months ended September 30, 2008, in connection with the January 31, 2008, exchange transaction and related filings with the Securities and Exchange Commission.

*	*Depreciation and Amortization expenses* represent depreciation of fixed assets over three years and amortization of software development over five years. We expect depreciation expenses to remain flat for the balance of the current fiscal year.

Stock-Based Charges represent the amortization of stock options issued to management and certain of our other employees. Since the total option value is amortized over the vesting period, the charges were higher for the first quarter of 2008 because certain of the options vested on the date of grant. We anticipate that, during the balance of this fiscal year, stock-based charges will remain at a level commensurate with the three months ended September 30, 2008.

General and Administrative expenses are primarily comprised of occupancy & equipment, travel & entertainment, printing & stationary, postage & delivery, office supplies, and fees. We expect these expenses to moderate during the balance of this fiscal year, as a major portion of the expenses to date related to the January 31, 2008, exchange transaction.

Other Expense

For the three months ended September 30, 2008, interest expense amounted to $21,000. For the nine months ended September 30, 2008, interest expense amounted to $157,000 and was attributable to two notes payable. These notes were renegotiated in January 2008 as described in Liquidity and Capital Resources, below.

Net Loss

For the three months ended September 30, 2008, we reported a loss from operations of $419,000 (or a loss per share of $0.01), compared to a loss of $251,000 for the equivalent period in the prior year.

For the nine months ended September 30, 2008, we reported a loss from operations of $2,231,000 (or a loss per share of $0.08), compared to a loss of $806,000 for the equivalent period in the prior year. The overall net loss increased in comparison with last year due to the increases in Operating Expenses described above, notwithstanding a one-time gain on restructuring of debt of $365,000 that was offset by stock-based charges of $1,121,000.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. At September 30, 2008, we had a cash balance of $0 and a working capital deficit of $1,632,000. Our balance sheet at September 30, 2008, reflects long-term notes payable of $782,000.

Net cash flows used by operating activities for the nine months ended September 30, 2008, amounted to $1,574,000 and were primarily attributable to our net loss of $1,443,340 (net of depreciation, stock and asset amortization, and gain from debt restructuring). Net cash flows used in investing activities for the nine months ended September 30, 2008, amounted to $199,000 and were primarily used for the January 31, 2008, exchange transaction. Net cash flows provided by financing activities for the nine months ended September 30, 2008, amounted to $1,773,000 and were primarily attributable to the $1,850,000 net proceeds of a preferred stock financing that closed in connection with the January 31, 2008, exchange transaction, and $290,000 in proceeds from the equity private placement, as offset by repayment of a short-term loan in the amount of $300,000, repayment of the Operating Company’s bank loan in the amount of $220,000, and a partial prepayment of the long-term loan in the amount of $58,000.

At September 30, 2008, we had cash of $0, which represented no change during the nine months ended September 30, 2008. We have no currently planned material commitments for capital expenditures; however, we presently have no other alternative source of operating capital, without which we may be unable to continue software development, to increase our sales team to penetrate and gain traction in the markets identified as critical to our business success, or to have the capital necessary to fund our ongoing operations and obligations. Although we are considering various debt or equity financings, there can be no assurance that any financing will be available to us on terms acceptable to us or at the time that we would require such financing, or at all. Failure to obtain any such financing will result in our inability to effectuate our business plan. As of the date of this Quarterly Report, we have not entered into any agreements and have not received any commitments to obtain any such financing.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements at September 30, 2008.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, fair valuation of stock related to stock-based compensation and income taxes. We based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Use of Estimates

In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition, revenues, and expenses for the period then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, stock-based compensation, valuation of debt discounts, and useful life of property and equipment.

Accounts Receivable

We have a policy of reserving for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. We periodically review our accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Inventories

Inventories are stated at the lower of cost or market utilizing the first-in, first-out method and consist of raw materials related to our products. We intend to write down inventory for estimated obsolescence or unmarketable inventory based upon assumptions and estimates about future demand and market conditions. If actual market conditions become less favorable than those projected by us, additional inventory write-downs might be required.

Property and Equipment

Property and equipment are carried at cost. Depreciation and amortization are provided using the straight-line method over the estimated economic lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.

Revenue Recognition

We follow the guidance of the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements.” In general, we record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.

The following policies reflect our specific criteria for our revenue stream: We generate revenue from the sale of our beverage products. Revenues from the sale of these items are recognized upon delivery of the product to the customer. Consideration given by us to a customer (including a reseller of our products) such as slotting fees is accounted for as a reduction of revenue when recognized in our income statement.

Stock Based Compensation

We adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share Based Payment (“SFAS No. 123R”). SFAS No. 123R establishes the financial accounting and reporting standards for stock-based compensation plans. As required by SFAS No. 123R, we recognized the cost resulting from all stock-based payment transactions including shares issued under our stock option plans in the financial statements.

Non-Employee Stock-Based Compensation

The cost of stock based compensation awards issued to non-employees for services are recorded at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in Emerging Issues Task Force Issue (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”).

Recent Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”). This Statement defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure related to the use of fair value measures in financial statements. The Statement is to be effective for the Company’s financial statements issued in 2008; however, earlier application is encouraged. The adoption of this interpretation did not have an impact on the Company’s financial position, results of operations, or cash flows.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, considering the Effects of Prior Year Misstatements when quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 requires companies to evaluate the materiality of identified unadjusted errors on each financial statement and related financial statement disclosure using both the rollover approach and the iron curtain approach, as those terms are defined in SAB 108. The rollover approach quantifies misstatements based on the amount of the error in the current year financial statement, whereas the iron curtain approach quantifies misstatements based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement’s year(s) of origin. Financial statements would require adjustment when either approach results in quantifying a misstatement that is material. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. If a company determines that an adjustment to prior year financial statements is required upon adoption of SAB 108 and does not elect to restate its previous financial statements, then it must recognize the cumulative effect of applying SAB 108 in fiscal 2006 beginning balances of the affected assets and liabilities with a corresponding adjustment to the fiscal 2006 opening balance in retained earnings. SAB 108 is effective for interim periods of the first fiscal year ending after November 15, 2006. The adoption of SAB 108 did not have an impact on the Company’s financial statements.

In December 2006, FASB Staff Position No. EITF 00-19-2, “Accounting for Registration Payment Arrangements,” was issued. The FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with SFAS No. 5, “Accounting for Contingencies.” The Company believes that its current accounting is consistent with the FSP.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115,” under which entities will now be permitted to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 157. The Company is currently assessing the impact, if any, that the adoption of SFAS 159 will have on its financial statements.

In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48 (the “FSP”). The FSP provides guidance about how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under the FSP, a tax position could be effectively settled on completion of examination by a taxing authority if the entity does not intend to appeal or litigate the result and it is remote that the taxing authority would examine or re-examine the tax position. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” which replaces SFAS No. 141, “Business Combinations,” which, among other things, establishes principles and requirements for how an acquirer entity recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed (including intangibles) and any noncontrolling interests in the acquired entity. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We are currently evaluating what impact our adoption of SFAS No. 141(R) will have on our financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51.” SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of SFAS No. 141(R). SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We are currently evaluating what impact our adoption of SFAS No. 160 will have on our financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

ITEM 4. CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level for timely gathering, analyzing and disclosing the information we are required to disclose in our reports filed under the Securities Exchange Act of 1934. Our management, which includes our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are effective to (i) give reasonable assurance that the information required to be disclosed by us in reports that we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and (ii) ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 6. EXHIBITS

Exhibit No.		Description

2.1*		Agreement and Plan of Exchange by and among Milk Bottle Cards, Inc., and certain members of ForgeHouse, LLC, dated January 31, 2008

2.2*		Capital Interest Purchase Agreement, by and among the Company and Paul Grootendorst, Bryan Irving, Brooks Mileson, and Ian Morl, dated January 31, 2008

2.3*		Repurchase Agreement, by and between the Company and Nicole Milkovich, dated January 31, 2008

3.1*		Amended and Restated Articles of Incorporation, as filed with the Secretary of State of the State of Nevada, effective January 31, 2008

3.2		Bylaws, incorporated by reference to Exhibit 3(ii) of the Company’s Registration Statement on Form SB-2, filed on April 15, 2005

3.3*		Certificate of Designation of Series A Convertible Preferred Stock, as filed with the Secretary of State of the State of Nevada, effective January 31, 2008

3.4*		Articles of Exchange, as filed with the Secretary of State of the State of Nevada, effective January 31, 2008

10.1		2008 Incentive Plan, incorporated by reference to Exhibit B of the Company’s definitive Information Statement on Schedule 14-C, filed January 2, 2008

10.2*		Form on Incentive Stock Option Award Agreement under the 2008 Incentive Plan

10.3*		Form of Nonqualified Stock Option Award Agreement under the 2008 Incentive Plan

10.4*		Employment Agreement with John Britchford-Steel, dated as of January 31, 2008

10.5*		Employment Agreement with Jose Alonso, dated as of January 31, 2008

10.6*		Mutual Release, by and among the Company, ForgeHouse, LLC, and Paul Grootendorst, Bryan Irving, Brooks Mileson, and Ian Morl, dated as of January 31, 2008

10.7*		Form of Lock-Up Agreement, dated as of January 31, 2008, by and between the Company and each of certain beneficial stockholders.

10.8*		Form of Subscription Agreement, dated as of January 31, 2008, by and between the Company and each of certain preferred stockholders.

10.9*		Form of Common Stock Purchase Warrant, dated as of January 31, 2008, by and between the Company and each of certain preferred stockholders.

10.10*		Promissory Note, in favor of Arngrove Group Holdings Ltd., dated as of January 31, 2008

10.11*		Promissory Note, in favor of After All Limited, dates as of January 31, 2008

10.12*		Subordination and Inter-creditor Agreement, by and among the Company, ForgeHouse, LLC, and Paul Grootendorst, Bryan Irving, Brooks Mileson, and Ian Morl, dated as of January 31, 2008

10.13**		Employment Agreement with Jorge Vargas, dated as of February 15, 2008

10.14/*		Service and Software License Agreement, dated April 15, 2007, by and between the Company and Securitas Security Services USA, Inc.

10.15**		Office Lease Agreement, by and between the Company and Wolff Atlanta Portfolio, LLC.

31.1****		Certification pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2****		Certification pursuant to Section 302 of the Sarbanes-Oxley Act.

32.1****		Certification pursuant to Section 906 of the Sarbanes-Oxley Act.

* Incorporated by reference to the same Exhibit No. of the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on February 7, 2008.

** Incorporated by reference to the same Exhibit No. of the Form 10-QSB filed by the Company with the Securities and Exchange Commission on May 20, 2008.

*** Portions omitted pursuant to a request for confidential treatment.

**** Filed herewith.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FORGEHOUSE, INC.

	By: /s/ John Britchford-Steel
November 14, 2008	John Britchford-Steel
	Chief Executive Officer

EX-31.1 2 v132146_ex31-1.htm

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, John Britchford-Steel, certify that:

I have reviewed this Form 10-Q of ForgeHouse, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: November 14, 2008

/s/ John Britchford-Steel

John Britchford-Steel

Chief Executive Officer

EX-31.2 3 v132146_ex31-2.htm

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Jorge Vargas, certify that:

I have reviewed this Form 10-Q of ForgeHouse, Inc.;

(a)

(b)

(c)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: November 14, 2008

/s/ Jorge Vargas

Jorge Vargas

Chief Financial Officer

EX-32.1 4 v132146_ex32-1.htm

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ForgeHouse, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Britchford-Steel, Chief Executive Officer and Director of the Company, and I, Jorge Vargas, Chief Financial Officer of the Company, hereby certify, to the best of my knowledge, pursuant to Exchange Act Rule 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, that:

i. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

ii. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to ForgeHouse, Inc. and will be retained by ForgeHouse, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

/S/ JOHN BRITCHFORD-STEEL

JOHN BRITCHFORD-STEEL

CHIEF EXECUTIVE OFFICER AND DIRECTOR

FORGEHOUSE, INC.

NOVEMBER 14, 2008

/S/ JORGE VARGAS

JORGE VARGAS

CHIEF FINANCIAL OFFICER

FORGEHOUSE, INC.

NOVEMBER 14, 2008