UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 10-Q

_______________

(Mark One)

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

For the quarterly period ended March 31, 2012

or

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

For the transition period from ______to______.

MAX SOUND CORPORATION

 (Exact name of registrant as specified in charter)

DELAWARE	000-51886	26-3534190
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S Employer Identification No.)

10685-B Hazelhurst Drive #6572

Houston, Texas 77043

 (Address of principal executive offices)

 _______________

210-401-7667

(Registrant’s telephone number, including area code)

_______________

Not applicable

(Former name, former address and former fiscal year, 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 Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock. As of May 15, 2012, there were 255,335,394 shares, par value $0.0001 per share, of common stock issued and outstanding.

MAX SOUND CORPORATION

FORM 10-Q

March 31, 2012

INDEX

PART I-- FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2
Item 3	Quantitative and Qualitative Disclosures About Market Risk	8
Item 4.	Controls and Procedures	8

PART II-- OTHER INFORMATION

Item 1	Legal Proceedings	9
Item 1A	Risk Factors	9
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9
Item 3.	Defaults Upon Senior Securities	9
Item 4.	Mine Safety Disclosures	9
Item 5.	Other Information	9
Item 6.	Exhibits	9

SIGNATURES

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MAX SOUND CORPORATION

 (A DEVELOPMENT STAGE COMPANY)

CONTENTS

PAGE	F-1	CONDENSED BALANCE SHEETS AS OF MARCH 31, 2012 (UNAUDITED) AND AS OF DECEMBER 31, 2011 (AUDITED).
PAGE	F-2	CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011 AND FOR THE PERIOD DECEMBER 9, 2005 (INCEPTION) TO MARCH 31, 2012 (UNAUDITED).
PAGE	F-3	CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE PERIOD FROM DECEMBER 9, 2005 (INCEPTION) TO MARCH 31, 2012 (UNAUDITED).
PAGE	F-4	CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011 AND FOR THE PERIOD DECEMBER 9, 2005 (INCEPTION) TO MARCH 31, 2012 (UNAUDITED).
PAGES	F-5 - F-39	NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED).

Max Sound Corporation
(A Development Stage Company)
Condensed Balance Sheets
ASSETS
	March 31, 2012			December 31, 2011
	(Unaudited)
Current Assets
Cash	$	212,212		$	516,532
Prepaid expenses		21,950			23,659
Debt offering costs - net		17,965			-
Total  Current Assets		252,127			540,191
Property and equipment, net		181,935			146,000
Other Assets
Security deposit		413			413
Intangible assets		7,800,275			7,800,275
Total  Other Assets		7,800,688			7,800,688
Total  Assets	$	8,234,750		$	8,486,879
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	65,680		$	25,470
Accrued expenses		107,751			165,897
Derivative liability		143,576			-
Convertible note payable - net of debt discount		200,628			-
Total Current Liabilities		517,635			191,367
Commitments and Contingencies
Stockholders' Equity
Preferred stock,  $0.0001 par value; 10,000,000 shares authorized,
No shares issued and outstanding		-			-
Common stock,  $0.0001 par value; 400,000,000 shares authorized,
255,335,394 and 255,184,661 shares issued and outstanding, respectively		25,534			25,519
Additional paid-in capital		22,661,917			22,629,977
Deficit accumulated during the development stage		(14,970,336	)		(14,359,984	)
Total Stockholders' Equity		7,717,115			8,295,512
Total Liabilities and Stockholders' Equity	$	8,234,750		$	8,486,879

See accompanying notes to condensed unaudited financial statements

F-1

Max Sound Corporation

(A Development Stage Company)

Condensed Statements of Operations

(Unaudited)

							For the Period From
	For the Three Months Ended,						December 9, 2005
	March 31, 2012			March 31, 2011			(Inception) to March 31, 2012
Revenue	$	-		$	-		$	23,826
Operating Expenses
General and administrative		193,615			37,119			816,983
Endorsement fees		-			407,373			4,942,277
Consulting		120,000			1,926,860			5,515,946
Professional fees		58,570			40,449			424,881
Website development		-			-			251,263
Compensation		162,000			54,000			2,820,343
Total Operating Expenses		534,185			2,465,801			14,771,693
Loss from Operations		(534,185	)		(2,465,801	)		(14,747,867	)
Other Income / (Expense)
Interest income		72			-			583
Gain on extinguishment of debt		-			-			6,643
Interest expense		-			(3,035	)		(17,001	)
Amortization of debt offering costs		(1,202	)		-			(1,202	)
Amortization of debt discount		(4,533	)		(6,232	)		(28,516	)
Change in fair value of embedded derivative liability		(70,504	)		(49,125	)		(46,521	)
Total Other Income / (Expense)		(76,167	)		(58,392	)		(86,014	)
Provision for Income  Taxes		-			-			-
Net Loss	$	(610,352	)	$	(2,524,193	)	$	(14,833,881	)
Net Loss Per Share  - Basic and Diluted	$	(0.00	)	$	(0.01	)
Weighted average number of shares outstanding
during the year Basic and Diluted		242,287,741			227,978,768

See accompanying notes to condensed unaudited financial statements

F-2

Max Sound Corporation
(A Development Stage Company)
Condensed Statement of Changes in Stockholders' Equity
For the Period from December 9, 2005 (Inception) to March 31, 2012
(Unaudited)
	Preferred stock				Common stock						Additional												Total
											paid-in			Accumulated			Subscription			Deferred			Stockholder's
	Shares		Amount		Shares			Amount			capital			Deficit			Receivable			Compensation			Equity
Balance, December 9, 2005 (Inception)		-	$	-		-		$	-		$	-		$	-		$	-		$	-		$	-
Stock issued on acceptance of incorporation expenses		-		-		100,000			10			90			-			-			-			100
Net loss for the period December 9, 2005 (Inception) to December 31, 2005		-		-		-			-			-			(400	)		-			-			(400	)
Balance, December 31, 2005		-		-		100,000			10			90			(400	)		-			-			(300	)
Net loss for the year ended December 31, 2006		-		-		-			-			-			(1,450	)		-			-			(1,450	)
Balance, December 31, 2006		-		-		100,000			10			90			(1,850	)		-			-			(1,750	)
Net loss for the year ended December 31, 2007		-		-		-			-			-			(1,400	)		-						(1,400	)
Balance, December 31, 2007		-		-		100,000			10			90			(3,250	)		-			-			(3,150	)
Common stock issued for services to founder ($0.001/sh)		-		-		44,900,000			4,490			40,410			-			-			-			44,900
Common stock issued for cash ($0.25/sh)		-		-		473,000			47			118,203			-			(67,750	)		-			50,500
Common stock issued for services ($0.25/sh)		-		-		12,000			1			2,999			-			-			-			3,000
Shares issued in connection with stock dividend		-		-		136,455,000			13,646			122,809			(136,455	)		-			-			-
In kind contribution of rent - related party		-		-		-			-			2,913			-			-			-			2,913
Accrued expenses payment made by a former shareholder		-		-		-			-			4,400			-			-			-			4,400
Net loss for the year ended December 31, 2008		-		-		-			-			-			(117,115	)		-			-			(117,115	)
Balance, December 31, 2008		-		-		181,940,000			18,194			291,824			(256,820	)		(67,750	)		-			(14,552	)
Common stock issued for cash ($0.25/sh)		-		-		62,000			6			15,494			-			-			-			15,500
Common stock issued for services ($0.25/sh)		-		-		24,000			2			5,998			-			-			-			6,000
Common stock issued for services ($0.35/sh)		-		-		1,700,000			170			594,830			-			-			(499,333	)		95,667
Common stock issued for services ($0.0625/sh)		-		-		935,714			94			58,388			-			-			-			58,482
Warrants issued for services		-		-		-			-			823,077			-			-			-			823,077
Common stock issued for services ($1.50/sh)		-		-		30,000			3			44,997			-			-			(39,699	)		5,301
Common stock issued for services ($1.77/sh)		-		-		30,000			3			53,097			-			-			(53,100	)		-
Common stock issued for services ($1.78/sh)		-		-		100,000			10			177,990			-			-			(166,052	)		11,948
Common stock issued for services ($1.80/sh)		-		-		100,000			10			179,990			-			-			(168,904	)		11,096
Common stock issued for services ($1.93/sh)		-		-		2,830,000			283			5,461,617			-			-			(5,459,098	)		2,802
Common stock issued for services ($1.94/sh)		-		-		30,000			3			58,197			-			-			(58,200	)		-
Common stock issued for services ($1.95/sh)		-		-		920,000			92			1,793,908			-			-			(1,135,808	)		658,192
Common stock issued for services ($2.00/sh)		-		-		300,000			30			599,970			-			-			(506,423	)		93,577
Return of common stock issued for services ($0.35/sh)		-		-		(1,100,000	)		(110	)		(384,890	)		-			-			385,000			-
Shares issued in connection with stock dividend		-		-		258,000			26			(26	)		-			-			-			-
Stock offering costs		-		-		-			-			(850	)		-			-			-			(850	)
Collection of subscription receivable		-		-		-			-			-			-			67,750			-			67,750
In kind contribution of rent - related party		-		-		-			-			12,600			-			-			-			12,600
Deferred compensation realized		-		-		-			-			-			-			-			114,333			114,333
Net loss for the year ended December 31, 2009		-		-		-			-			-			(2,298,552	)		-			-			(2,298,552	)
Balance, December 31, 2009		-		-		188,159,714			18,816			9,786,211			(2,555,372	)		-			(7,587,284	)		(337,629	)
Common stock issued for cash ($0.25/sh)		-		-		1,200,000			120			299,880			-			-			-			300,000
Accrued salary conversion into common stock ($0.30/sh)		-		-		945,507			95			283,557			-			-			-			283,652
Common stock issued for services ($0.15/sh)		-		-		250,000			25			37,475			-			-			-			37,500
Common stock issued for services ($0.18/sh)		-		-		100,000			10			17,990			-			-			-			18,000
Common stock issued for services ($0.19/sh)		-		-		100,000			10			18,990			-			-			-			19,000
Common stock issued for services ($0.20/sh)		-		-		210,000			21			41,979			-			-			-			42,000
Common stock issued for services ($0.25/sh)		-		-		140,000			14			34,986			-			-			-			35,000
Common stock issued in exchange for technology rights ($0.25/sh)		-		-		30,000,000			3,000			7,497,000			-			-			-			7,500,000
Return of common stock issued for services ($1.05/sh)		-		-		(150,000	)		(15	)		15			-			-			-			-
Common stock issued for services ($1.24/Sh)		-		-		1,000,000			100			1,239,900			-			-			(1,097,315	)		142,685
Common stock issued for services ($1.70/sh)		-		-		100,000			10			169,990			-			-			(152,534	)		17,466
Cancellation of shares held in escrow ($1.93/sh)		-		-		(1,000,000	)		(100	)		(1,929,900	)		-			-			487,802			(1,442,198	)
Warrants issued for services		-		-		-			-			10,559			-			-			-			10,559
Blue sky fees		-		-		-			-			(400	)		-			-			-			(400	)
Stock and financing offering costs		-		-		-			-			(8,000	)											(8,000	)
In kind contribution of rent - related party		-		-		-			-			9,450			-			-			-			9,450
Deferred compensation realized		-		-		-			-			-			-			-			6,546,046			6,546,046
Net loss for the year ended December 31, 2010		-		-		-			-			-			(6,312,965	)		-			-			(6,312,965	)
Balance, December 31, 2010		-		-		221,055,221			22,106			17,509,682			(8,868,337	)		-			(1,803,285	)		6,860,166
Common stock issued in exchange for assets ($0.10/sh)		-		-		3,000,000			300			299,700			-			-			-			300,000
Common stock issued for services ($0.07/sh)		-		-		2,000,000			200			139,800			-			-			-			140,000
Common stock issued for services ($0.08/sh)		-		-		1,006,500			101			80,419			-			-			-			80,520
Common stock issued for services ($0.10/sh)		-		-		3,066,462			307			306,339			-			-			-			306,646
Common stock issued for services ($0.11/sh)		-		-		500,000			50			54,950			-			-			-			55,000
Common stock issued for services ($0.22/sh)		-		-		15,403			2			3,387			-			-			-			3,389
Common stock issued for services ($0.23/sh)		-		-		100,000			10			22,990			-			-			-			23,000
Common stock issued for services ($0.25/sh)		-		-		702,860			70			175,645			-			-			-			175,715
Common stock issued for services ($0.33/sh)		-		-		100,000			10			32,990			-			-			-			33,000
Common stock issued for services ($0.35/sh)		-		-		2,443			-			855			-			-			-			855
Common stock issued for services ($0.39/sh)		-		-		101,500			10			39,575			-			-			-			39,585
Common stock issued for services ($0.47/sh)		-		-		123,795			12			58,172			-			-			-			58,184
Common stock issued for services ($0.50/sh)		-		-		100,000			10			49,990			-			-			-			50,000
Common stock issued for services ($0.54/sh)		-		-		200,000			20			107,980			-			-			-			108,000
Common stock issued for services ($0.70/sh)		-		-		100,000			10			69,990			-			-			-			70,000
Common stock issued for services ($0.88/sh)		-		-		100,000			10			87,990			-			-			-			88,000
Convertible debt conversion into common stock ($0.0295/sh)		-		-		271,186			27			7,973			-			-			-			8,000
Convertible debt conversion into common stock ($0.0315/sh)		-		-		587,382			59			18,444			-			-			-			18,503
Convertible debt conversion into common stock ($0.032/sh)		-		-		109,375			11			3,489			-			-			-			3,500
Convertible debt conversion into common stock ($0.0336/sh)		-		-		357,143			36			11,964			-			-			-			12,000
Convertible debt conversion into common stock ($0.0454/sh)		-		-		220,264			22			9,978			-			-			-			10,000
Convertible debt conversion into common stock ($0.1339/sh)		-		-		116,505			12			15,588			-			-			-			15,600
Convertible debt conversion into common stock ($0.1455/sh)		-		-		96,220			9			13,991			-			-			-			14,000
Convertible debt conversion into common stock ($0.1554/sh)		-		-		77,220			8			11,992			-			-			-			12,000
Accrued salary conversion into common stock ($0.11/sh)		-		-		1,309,091			131			143,869			-			-			-			144,000
Line of credit conversion into common stock ($0.11/sh)		-		-		909,091			91			99,909			-			-			-			100,000
Common stock issued for cash ($0.10/sh)		-		-		18,857,000			1,886			1,883,814			-			-			-			1,885,700
Warrants issued for services		-		-		-			-			248,498			-			-			-			248,498
Stock offering costs		-		-		-			-			(79,780	)		-			-			-			(79,780	)
Amortization of stock options		-		-		-			-			1,199,794			-			-			-			1,199,794
Deferred compensation realized		-		-		-			-			-			-			-			1,803,285			1,803,285
Net loss for the year ended December 31, 2011		-		-		-			-			-			(5,491,647	)		-			-			(5,491,647	)
Balance, December 31, 2011		-		-		255,184,661			25,519			22,629,977			(14,359,984	)		-			-			8,295,512
Common stock issued for services ($0.62/sh)		-		-		733			-			455			-			-			-			455
Common stock issued for services ($0.21/sh)		-		-		150,000			15			31,485			-			-			-			31,500
Net loss for the three months ended March 31, 2012		-		-		-			-			-			(610,352	)		-			-			(610,352	)
Balance, March 31, 2012		-	$	-		255,335,394		$	25,534		$	22,661,917		$	(14,970,336	)	$	-		$	-		$	7,717,115

See accompanying notes to condensed unaudited financial statements

F-3

Max Sound Corporation
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
							For the Period From
	For the Three Months Ended,						December 9, 2005
	March 31, 2012			March 31, 2011			(Inception) to March 31, 2012
Cash Flows From Operating Activities:
Net Loss	$	(610,352	)	$	(2,524,193	)	$	(14,833,881	)
Adjustments to reconcile net loss to net cash used in operations
Depreciation/Amortization		10,095			9,515			93,841
Depreciation for abandonment of website		-			-			38,794
In kind contribution of rent - related party		-			-			24,963
Stock issued for services		31,955			435,000			2,566,565
Warrants issued for services		-			-			1,082,134
Amortization of stock options		-			1,199,794			1,199,794
Bluesky Fees		-			-			(1,750	)
Amortization of stock based compensation		-			637,385			7,021,466
Security deposit		-			-			(413	)
Amortization of debt offering costs		1,202			-			1,202
Amortization of debt discount		4,533			6,232			(20,399	)
Change in fair value of derivative liability		70,504			49,125			95,436
Changes in operating assets and liabilities:
(Increase)/Decrease in prepaid expenses		1,709			2,714			(21,950	)
Increase/(Decrease) accounts payable		40,210			(8,819	)		65,680
Increase/(Decrease) in accrued expenses		(58,146	)		61,166			539,005
Net Cash Used In Operating Activities		(508,290	)		(132,081	)		(2,149,513	)
Cash Flows From Investing Activities:
Register of trademark		-			-			(275	)
Purchase of property equipment		(46,030	)		-			(314,570	)
Net Cash Used In Investing Activities		(46,030	)		-			(314,845	)
Cash Flows From Financing Activities:
Proceeds from stockholder loans		-			110,000			620,583
Repayment of stockholder loans		-			(15,000	)		(520,583	)
Accrued expenses payment made by a former shareholder		-			-			4,400
Proceeds from issuance of convertible note, net of offering costs		250,000			37,500			334,500
Proceeds from issuance of stock, net of subscriptions receivable and net of offering costs		-			16,000			1,772,920
Proceeds from collection of stock subscription receivable		-			-			464,750
Net Cash Provided by Financing Activities		250,000			148,500			2,676,570
Net Increase / (Decrease) in Cash		(304,320	)		16,419			212,212
Cash at Beginning of Period		516,532			297			-
Cash at End of Period	$	212,212		$	16,716		$	212,212
Supplemental disclosure of cash flow information:
Cash paid for interest	$	-		$	-		$	-
Cash paid for taxes	$	-		$	-		$	-
Supplemental disclosure of non-cash investing and financing activities:
Shares issued in connection with intellectual property	$	-		$	-		$	7,800,000
Shares issued in conversion of related party accrued compensation	$	-		$	-		$	427,652
Shares issued in conversion of related party line of credit	$	-		$	-		$	100,000
Shares issued in conversion of convertible debt and accrued interest	$	-		$	-		$	93,603
Shares issued in connection with stock dividend	$	-		$	-		$	136,713
Stock sold for subscription	$	-		$	-		$	464,750
Debt discount recorded on convertible and unsecured debt accounted for as a derivative liability	$	73,072		$	-		$	73,072

See accompanying notes to condensed unaudited financial statements

F-4

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A)  Organization and Basis of Presentation

Max Sound Corporation (the "Company") was incorporated in Delaware on December 9, 2005.  The Company is currently in the development stage, and on or around February 2011, the Company changed its business operations to focus primarily on developing and launching audio technology software.

Prior to February 2011, the Company's business operations were focused on creating search technologies within an online networking platform.

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information.  Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

It is management's opinion, however, that all material adjustments (consisting of normal and recurring adjustments) have been made which are necessary for a fair financial statements presentation.  The results for the interim period are not necessarily indicative of the results to be expected for the year.

Activities during the development stage include developing the online networking platform, launching our audio technology, and raising capital.

Effective March 1, 2011, the Company filed with the State of Delaware a Certificate of Amendment of Certificate of Incorporation changing our name from So Act Network, Inc. to Max Sound Corporation.

(B) Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period.  Actual results could differ from those estimates.

(C) Cash and Cash Equivalents

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.  As of March 31, 2012 and December 31, 2011, the Company had no cash equivalents.

F-5

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

(D) Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation.  Expenditures for maintenance and repairs are charged to expense as incurred.  Depreciation is provided using the straight-line method over the estimated useful life of three to five years.

(E) Research and Development

The Company has adopted the provisions of FASB Accounting Standards Codification No. 350, Intangibles – Goodwill & Other.  Costs incurred in the planning stage of a website are expensed as research and development while costs incurred in the development stage are capitalized and amortized over the life of the asset, estimated to be three years.  Expenses subsequent to the launch have been expensed as website development expenses.

(F) Concentration of Credit Risk

The Company at times has cash in banks in excess of FDIC insurance limits. The Company had approximately $0 and $ 251,578 in excess of FDIC insurance limits as of March 31, 2012 and December 31, 2011, respectively.

(G) Revenue Recognition

The Company recognized revenue on arrangements in accordance with FASB Codification Topic 605, “Revenue Recognition” (“ASC Topic 605”).  Under ASC Topic 605, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.  We had revenue of $0 and $0 for the three months ended March 31, 2012 and 2011, respectively.

(H) Advertising Costs

Advertising costs are expensed as incurred and include the costs of public relations activities.  These costs are included in consulting and general and administrative expenses and totaled $48,150 and $0 for the three months ended March 31, 2012 and 2011, respectively.

(I) Identifiable Intangible Assets

As of March 31, 2012 and December 31, 2011, $7,800,275 and $7,800,275, respectively of costs related to registering a trademark and acquiring technology rights have been capitalized.  It has been determined that the trademark and technology rights have an indefinite useful life and are not subject to amortization.  However, the trademark and technology rights will be reviewed for impairment annually or more frequently if impairment indicators arise.

F-6

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

(J) Impairment of Long-Lived Assets

The Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets, such as technology rights, be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or disposable value. No impairments were recorded for three months ended March 31, 2012, and for the year ended December 31, 2011.

(K) Loss Per Share

In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,”  Basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.  Because of the Company’s net losses, the effects of stock warrants and stock options would be anti-dilutive and accordingly, is excluded from the computation of earnings per share.  The number of such shares excluded from the computations of diluted loss per share totaled 2,715,800 and 1,760,000 for stock warrants, and 12,000,000 and 12,000,000 for stock options, and 1,818,610 and 1,437,659 shares issuable upon the conversion of convertible debt, for the three months ended March 31, 2012 and 2011, respectively.

(L) Income Taxes

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”) Income Taxes.  Under ASC 740-10-25, 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 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.  Under ASC 740-10-25, 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.

F-7

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

The Company's federal income tax returns are no longer subject to examination by the IRS for the years prior to 2008, and the related state income tax returns are no longer subject to examination by state authorities for the years prior to 2008.

(M) Business Segments

The Company operates in one segment and therefore segment information is not presented.

(N) Recent Accounting Pronouncements

The Company's management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted would have a material impact on the accompanying financial statements.

(O) Fair Value of Financial Instruments

The carrying amounts on the Company’s financial instruments including prepaid expenses, accounts payable, accrued expenses, derivative liability, convertible note payable, and loan payable-related party, approximate fair value due to the relatively short period to maturity for these instruments.

(P) Stock-Based Compensation

In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation.  Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans.  As such, compensation cost is measured on the date of grant at their fair value.  Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.  The Company applies this statement prospectively.

Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718.  FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments.  In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.

F-8

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

(Q) Reclassification

Certain amounts from prior periods have been reclassified to conform to the current period presentation.  These reclassifications had no impact on the Company's net loss or cash flows.

(R) Derivative Financial Instruments

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes.  In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model.  In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement.  If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.  In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.

NOTE 2             GOING CONCERN

As reflected in the accompanying financial statements, the Company is in the development stage with minimal operations, has an accumulated deficit of $14,970,336 for the period from December 9, 2005 (inception) to March 31, 21012, and has negative cash flow from operations of $2,149,513 from inception.  This raises substantial doubt about its ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

NOTE 3             NOTE PAYABLE – PRINCIPAL STOCKHOLDER

During the year ended December 31, 2008, the Company received $18,803 from the principal stockholder.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and due on demand.  In 2008, the Company repaid $15,000 in principal to the principal stockholder.  In 2009, the Company repaid $3,803 in principal to the principal stockholder.  As of December 31, 2010, the principal portion of this principal stockholder loan balance has been repaid (See Note 9).

F-9

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On May 11, 2009, the Company received $9,500 from the principal stockholder.  During the year ended December 31, 2009, the Company repaid $1,500 in principal to the principal stockholder.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 9).

On May 22, 2009, the Company received $15,000 from the principal stockholder.  During the year ended December 31, 2010, the Company repaid $6,000 in principal to the principal stockholder under the terms of the loan.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 9).

On May 26, 2009, the Company received $16,700 from the principal stockholder.  During the year ended December 31, 2010, the Company repaid $15,700 in principal to the principal stockholder under the term of this loan.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 9).

During the year ended December 31, 2011, the Company repaid $18,000 in principal and $2,116 of accrued interest to the principal stockholder related to these principal stockholder loans (See Note 9).

NOTE 4             LINE OF CREDIT – PRINCIPAL STOCKHOLDER

On May 28, 2009, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $100,000.  The line of credit carries an interest rate of 3.25%.  As of December 31, 2011, the principal stockholder has advanced the Company $100,000 and was repaid $100,000 under the terms of this line of credit agreement (See Note 9).

On November 10, 2009, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $100,000.  The line of credit carries an interest rate of 3.25%.  As of December 31, 2011, the principal stockholder has advanced $100,000 to the Company and was repaid $100,000 under the terms of this line of credit agreement (See Note 9).

On March 25, 2010, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $500,000.  The line of credit carries an interest rate of 3.25%.  On February 17, 2011, the principal stockholder converted $100,000 of the line of credit owed into 909,091 shares of common stock at $0.11 per share.  As of December 31, 2011, the principal stockholder has advanced $360,580 to the Company and was repaid $260,580 under the terms of this line of credit agreement. (See Note 7(G) and Note 9).

As of December 31, 2011, the Company repaid $255,480 in principal and $11,283 of accrued interest to the principal stockholder related to these lines of credit (See Note 9).

F-10

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

NOTE 5 PROPERTY AND EQUIPMENT

At March 31, 2012 and December 31, 2011, respectively, property and equipment is as follows:

	March 31, 2012			December 31, 2011
Website Development	$	157,722		$	127,722
Furniture and Equipment		103,906			103,906
Leasehold Improvements		6,573			6,573
Software		21,163			18,888
Office Equipment		23,078			9,323
Domain Name		1,500			1,500
Sign		628			628
Less accumulated depreciation and amortization		(132,635	)		(122,540	)
	$	181,935		$	146,000

Depreciation/amortization expense for the three months ended March 31, 2012 and 2011, was $10,095 and $9,515, respectively.

NOTE 6 CONVERTIBLE DEBTS

On July 6, 2010, the Company entered into an agreement whereby the Company will issue up to $50,000 in a convertible note.  The note matured on March 30, 2011, and bears an interest rate of 8%.  Any unpaid amount as of the maturity date bears an interest rate of 22%.  The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock.  The conversion prices equals the "Variable Conversion Price", which is 59% of the "Market Price", which is the average of the lowest six trading prices for the Common Stock during the ten (10) trading day period prior to the conversion.  In July of 2010, the Company received $50,000 proceeds less the $3,000 finder’s fee pursuant to the terms of this convertible note.  During the year ended December 31, 2011, the note holder converted $52,003 of the note payable and accrued interest into 1,545,350 shares of the company stock (See Note 7 (G)).

The Company computed the fair value of the conversion feature at the commitment date, based on the following management assumptions:

Exercise price	$0.1377
Expected dividends	0%
Expected volatility	172.27%
Expected term: conversion feature	267 days
Risk free interest rate	0.32%

F-11

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

The fair value of the embedded conversion option on the commitment date was $15,409.  The Company recorded a related debt discount of $15,409, which was amortized over the life of the debt.  For the year ended December 31, 2010, the Company amortized $10,273 of debt discount.  For the year ended December 31, 2011, the Company amortized $5,136 of debt discount.

At December 31, 2011 the Company remeasured the derivative liability and recorded a fair value of $0.  As a result of the remeasurement, the Company recorded a change in fair value associated with this derivative liability as income totaling $13,262 for the year ended December 31, 2011. The following management assumptions were considered:

Exercise price	$0.0393
Expected dividends	0%
Expected volatility	471.81%
Risk free interest rate	0.30%
Expected life of warrant in days	0

On February 17, 2011, the Company entered into an agreement whereby the Company will issue up to $40,000 in a convertible note.  The note matures on November 17, 2011, and bears an interest rate of 8%.  The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock.  The conversion prices equals the "Variable Conversion Price", which is 59% of the "Market Price", which is the average of the lowest six (6) trading prices for the Common Stock during the ten trading day period prior to the conversion.  In February of 2011, the Company received $40,000 proceeds less the $2,500 finder’s fee pursuant to the terms of this convertible note.  During the year ended December 31, 2011, the Company converted $41,600 of the note payable and accrued interest into 289,945 shares of the common stock.

The Company computed the fair value of the conversion feature at the commitment date, based on the following management assumptions:

Exercise price	$0.0738
Expected dividends	0%
Expected volatility	456.63%
Expected term: conversion feature	365 days
Risk free interest rate	0.27%

The fair value of the embedded conversion option on the commitment date was $9,523.  The Company recorded a related debt discount of $9,523, which is amortized over the life of the debt.  For the year ended December 31, 2011, the Company amortized $9,523 of debt discount.

At December 31, 2011 the Company remeasured the derivative liability and recorded a fair value of $0.  As a result of the remeasurement, the Company recorded a change in fair value associated with this derivative liability as income totaling $9,523 for the year ended December 31, 2011. The following management assumptions were considered:

F-12

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

Exercise price	$0.035
Expected dividends	0%
Expected volatility	514.06%
Risk free interest rate	0.19%
Expected life of warrant in days	140

On March 14, 2012, the Company entered into an agreement whereby the Company will issue up to $102,500 in a convertible note.  The note matures on December 19, 2012 and bears an interest rate of 8%.  The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months.  The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten trading day period prior to the conversion.  The Company received $102,500 proceeds, less the $2,500 finder’s fee pursuant to the terms of this convertible note, on March 20, 2012.

The Company computed the fair value of the conversion feature at the commitment date, based on the following management assumptions:

Exercise price	$0.1490
Expected dividends	0%
Expected volatility	228.61%
Expected term: conversion feature	280 days
Risk free interest rate	0.21%

The fair value of the embedded conversion option on the commitment date was $30,894.  The Company recorded a related debt discount of $30,894, which is amortized over the life of the debt.  For the three months ended March 31, 2012 the Company amortized $1,875 of debt discount.

At March 31, 2012 the Company remeasured the derivative liability and recorded a fair value of $64,592.  As a result of the remeasurement, the Company recorded a change in fair value associated with this derivative liability as income totaling $33,698 for the three months ended March 31, 2012. The following management assumptions were considered:

Exercise price	$0.1365
Expected dividends	0%
Expected volatility	226.52%
Risk free interest rate	0.19%
Expected life of warrant in days	263

F-13

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On March 8, 2012, the Company entered into an agreement whereby the Company will issue up to $166,667 in a convertible note.  The note matures on March 9, 2013 and bears an interest rate of 4%.  The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months.  The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest ten (10) trading prices for the common stock during the ten trading day period prior to the conversion.  The Company received $150,000 proceeds, less the $16,667 finder’s fee pursuant to the terms of this convertible note, on March 14, 2012.

The Company computed the fair value of the conversion feature at the commitment date, based on the following management assumptions:

Exercise price	$0.2629
Expected dividends	0%
Expected volatility	228.76%
Expected term: conversion feature	365 days
Risk free interest rate	0.18%

The fair value of the embedded conversion option on the commitment date was $42,178.  The Company recorded a related debt discount of $42,178, which is amortized over the life of the debt.  For the three months ended March 31, 2012 the Company amortized $2,658 of debt discount.

At March 31, 2012 the Company remeasured the derivative liability and recorded a fair value of $78,984.  As a result of the remeasurement, the Company recorded a change in fair value associated with this derivative liability as loss totaling $36,806 for the three months ended March 31, 2012. The following management assumptions were considered:

Exercise price	$0.1561
Expected dividends	0%
Expected volatility	226.52%
Risk free interest rate	0.19%
Expected life of warrant in days	343

NOTE 7 STOCKHOLDERS’ EQUITY

(A) Common Stock Issued for Cash

On December 31, 2005, the Company issued 100,000 shares of common stock for cash of $100 in exchange for acceptance of the incorporation expenses for the Company ($0.001/share).   As a result of the forward split, the 100,000 shares were increased to 400,000 shares ($0.00025/share) (See Note 7(D)).

F-14

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

For the year ended December 31, 2008, the Company issued 473,000 shares of common stock for cash of $118,250 ($0.25/share), of which $67,750 was a subscription receivable.   During the month of January 2009, $67,750 of stock subscription receivable was collected.  As a result of the forward split, the 473,000 shares were increased to 1,892,000 shares ($0.0625/share). (See Note 7(D)).

On January 2, 2009, the Company entered into stock purchase agreements to issue 20,000 shares of common stock for cash of $5,000 ($0.25/share).   As a result of the forward split, the 20,000 shares were increased to 80,000 shares ($0.0625/share) (See Note 7(D)).

On January 3, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share).  As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 7(D)).

On January 3, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share).  As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 7(D)).

On January 11, 2009, the Company entered into stock purchase agreements to issue 32,000 shares of common stock for cash of $8,000 ($0.25/share).  As a result of the forward split, the 32,000 shares were increased to 128,000 shares ($0.0625/share) (See Note 7(D)).

On January 12, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share).   As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 7(D)).

On January 15, 2009, the Company entered into stock purchase agreements to issue 4,000 shares of common stock for cash of $1,000 ($0.25/share).  As a result of the forward split, the 4,000 shares were increased to 16,000 shares ($0.0625/share) (See Note 7(D)).

In February of 2009, the Company paid direct offering costs of $850 related to the securities sold.

On May 27, 2010 the Company issued one unit; each unit consisted of 100,000 shares of common stock and 100,000 warrants to purchase common stock, for cash of $22,500 net of the $2,500 finder’s fee ($0.25/share).  Each warrant is exercisable for a three year period and has an exercise price of $0.50 per share (See Note 7(C)).

On July 23, 2010, the Company issued one unit; each unit consisted of 100,000 shares of common stock and 100,000 warrants to purchase common stock, for cash of $25,000 ($0.25/share).  Each warrant is exercisable for a three year period and has an exercise price of $0.50 per share (See Note 7(C).

On August 5, 2010, the Company issued 10 units; each unit consisted of 100,000 shares of common stock and 100,000 warrants to purchase common stock, for cash of $250,000 ($0.25/share).  Each warrant is exercisable for a three year period and has an exercise price of $0.50 per share (See Note 7(C).

F-15

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

During the year ended December 31, 2010, the Company paid direct offering costs of $2,900 related to the securities sold.

On January 24, 2011, the Company issued 10,000 shares of common stock for cash of $1,000 ($0.10/share).

On February 23, 2011, the Company issued 300,000 shares of common stock for cash of $30,000 ($0.10/share).

On March 21, 2011, the Company issued 150,000 shares of common stock for cash of $15,000 ($0.10/share).

On May 2, 2011, the Company issued 2,000,000 shares of common stock for cash of $200,000 ($0.10/share).

During the month of June 2011, the Company issued 5,460,000 shares of common stock for cash of $546,000 ($0.10/share) of which $397,000 was a subscription receivable.  The Company received the entire $397,000 of subscription receivable in July 2011.

During the months of July, August and September of 2011, the Company issued 10,937,000 shares of common stock for cash of $1,093,700 ($0.10/share).

During the year-ended December 31, 2011, the Company paid $76,780 in finder’s fees and issued 955,800 warrants (See Note 7(C)).

(B) Stock Issued for Services

On October 14, 2008, the Company issued 44,900,000 shares of common stock to its founder having a fair value of $44,900 ($0.001/share) in exchange for services provided.  As a result of the forward split, the 44,900,000 shares were increased to 179,600,000 shares and its purchase price was similarly adjusted to $0.00025((See Note 7(D) and Note 9).

On November 24, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services.  As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 7(D)).

On December 5, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services.  As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 7(D)).

F-16

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On December 20, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services.  As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 7(D)).

On January 12, 2009, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services.  As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 7(D)).

On January 14, 2009, the Company issued 20,000 shares of common stock having a fair value of $5,000 ($0.25/share) in exchange for services related to a development services agreement entered on January 19, 2009.  As a result of the forward split, the 20,000 shares were increased to 80,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 7(D) and Note 8(B)).

On August 25, 2009, the Company issued 50,000 shares of common stock having a fair value of $3,125 ($0.0625/share), based upon the fair value on the date of grant, in exchange for professional services.

On August 31, 2009, the Company issued 885,714 shares of common stock in exchange for services valued at $62,000 related to the development services agreement entered into on January 19, 2009.  Based on the most recent fair market value at that time, the shares were valued at $55,357 ($0.0625/share), resulting in the recognition of a gain on the extinguishment of debt of $6,643 (See Note 8(B)).

On September 18, 2009, the Company issued 500,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $175,000 ($0.35/share) based upon fair value on the date of grant.  On November 11, 2009, the Company cancelled the agreement and 300,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $105,000 of deferred compensation was reclassified to $0 (See Note 8(B)).

On September 18, 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant.  On November 18, 2009, the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company.  As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassified to $0 (See Note 8(B)).

On September 21, 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant.  On December 18, 2009, the Company terminated the consulting agreement and 400,000 shares were returned to the Company.  As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassified to $0 (See Note 8(B)).

F-17

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On November 12, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $178,000 ($1.78/share) based upon fair value on the date of grant.  During 2009 and 2010, $11,948 and $89,000 was recorded as consulting expense, respectively.  For the year ended December 31, 2011, $77,052 is recorded as consulting expense and $0 is recorded as deferred compensation (See Note 8(B)).

On November 12, 2009, the Company issued 200,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $400,000 ($2.00/share) based upon fair value on the date of grant.  During 2009 and 2010, $22,466 and $200,000 was recorded as consulting expense, respectively.  For the year ended December 31, 2011, $177,534 is recorded as consulting expense and $0 is recorded as deferred compensation (See Note 8(B)).

On November 16, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $180,000 ($1.80/share) based upon fair value on the date of grant.  During 2009 and 2010, $11,096 and $90,000 was recorded as consulting expense, respectively.  For the year ended December 31, 2011, $78,904 is recorded as consulting expense and $0 is recorded as deferred compensation (See Note 8(B)).

On November 18, 2009, the Company issued 30,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $45,000 ($1.50/share) based upon fair value on the date of grant.  During 2009, $5,301 was recorded as consulting expense.  For the year ended December 31, 2010, $39,699 was recorded as consulting expense. (See Note 8(B)).

On November 21, 2009, the Company issued 30,000 shares of common stock as compensation pursuant to the terms of the marketing agreement, having a fair value of $53,100 ($1.77/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $53,100 was recorded as consulting expense (See Note 8(B)).

On December 3, 2009, the Company issued 240,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $468,000 ($1.95/share) based upon fair value on the date of grant.  As of December 31, 2009, $468,000 was recorded as consulting expense (See Note 8(B)).

On December 3, 2009, the Company issued 35,000 shares of common stock as compensation pursuant to the terms of the commission agreement, having a fair value of $68,250 ($1.95/share) based upon fair value on the date of grant.  As of December 31, 2009, $68,250 was recorded as consulting expense (See Note 8(B)).

F-18

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On December 3, 2009, the Company issued 35,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $68,250 ($1.95/share) based upon fair value on the date of grant.  As of December 31, 2009, $68,250 was recorded as consulting expense (Note 8(B)).

On December 3, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the commission agreement, having a fair value of $19,500 ($1.95/share) based upon fair value on the date of grant.  As of December 31, 2009, $19,500 is recorded as consulting expense (See Note 8(B)).

On December 15, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $200,000 ($2.00/share) based upon fair value on the date of grant.  During 2009, $71,111 was recorded as consulting expense.  For the year ended December 31, 2010, $128,889 was recorded as consulting expense (See Note 8(B)).

On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $19,400 was recorded as consulting expense (See Note 8(B)).

On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $19,400 was recorded as consulting expense (See Note 8(B)).

On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $19,400 was recorded as consulting expense (See Note 8(B)).

On December 30, 2009, the Company issued 1,500,000 shares of common stock as compensation pursuant to the terms of the advertising agreement, having a fair value of $2,895,000 ($1.93/share) based upon fair value on the date of grant.  In 2010, the Company cancelled a portion of the agreement and as a result, 1,000,000 shares of common stock were returned to the Company.  For the year ended December 31, 2010, $965,000 was recorded as consulting expense (See Note 8(B)).

On December 31, 2009, the Company issued 75,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $116,374 was recorded as consulting expense.  For the year ended December 31, 2011, $28,376 is recorded as consulting expense (See Note 8(B)).

F-19

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On December 31, 2009, the Company issued 75,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $116,374 was recorded as consulting expense.  For the year ended December 31, 2011, $28,376 is recorded as consulting expense (See Note 8(B)).

On December 31, 2009, the Company issued 500,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $965,000 was recorded as consulting expense (See Note 8(B)).

During December of 2009, the Company issued 680,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $1,312,400 ($1.93/share) based upon fair value on the date of grant.  During 2009 and 2010, $2,802 and $709,116 was recorded as consulting expense, respectively.  For the year ended December 31, 2011, $600,482 is recorded as consulting expense and $0 is recorded as deferred compensation (See Note 8(B)).

During December of 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $1,170,000 ($1.95/share) based upon fair value on the date of grant.  During 2009 and 2010, $34,192 and $585,000 was recorded as consulting expense, respectively.  For the year ended December 31, 2011, $550,808 is recorded as consulting expense and $0 is recorded as deferred compensation (See Note 8(B)).

On January 15, 2010, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $170,000 ($1.70/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $81,507 was recorded as consulting expense.  For the year ended December 31, 2011, $88,493 is recorded as consulting expense and $0 is recorded as deferred compensation (See Note 8(B)).

On February 17, 2010, the Company entered into a twelve month consulting agreement with an unrelated third party effective February 17, 2010.  In exchange for the services provided, the Company issued 1,000,000 shares of common stock having a fair value of $1,240,000 ($1.24/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $1,066,740 was recorded as consulting expense.  For the year ended December 31, 2011, $173,260 is recorded as consulting expense (See Note 8(B)).

On June 1, 2010, the Company entered into a twelve month consulting agreement for consulting and business services.  As part of the agreement, the Company issued 40,000 shares as a nonrefundable retainer fee having a value of $10,000 ($0.25/share) based upon fair value on the date of the agreement.  (See Note 8(B)).

F-20

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On July 23, 2010, the Company issued 10,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $2,000 ($0.20/share) based upon fair value on the grant date (See Note 8(B)).

On August 1, 2010, the Company issued 200,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $40,000 ($0.20/share) based upon fair value on the grant date (See Note 8(B)).

On September 1, 2010, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $19,000 ($0.19/share) based upon fair value on the grant date (See Note 8(B)).

On October 1, 2010, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $18,000 ($0.18/share) based upon fair value on the grant date (See Note 8(B)).

On November 1, 2010, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $25,000 ($0.25/share) based upon fair value on the grant date (See Note 8(B)).

On December 14, 2010, the Company issued 250,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $37,500 ($0.15/share) based upon fair value on the grant date (See Note 8(B)).

On January 17, 2011, the Company issued 3,000,000 shares of common stock to its' new CEO pursuant to an employment agreement having a fair value of $300,000 ($0.10/share) based upon fair value on the grant date.  (See Note 8(A)).

On February 17, 2011, the Company issued 500,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $55,000 ($0.11/share) based upon fair value on the grant date (See Note 8(B)).

On March 3, 2011, the Company issued 1,000,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $80,000 ($0.08/share) based upon fair value on the grant date (See Note 8(B)).

On May 17, 2011, the Company issued 2,000,000 shares of common stock pursuant to an employment agreement having a fair value of $140,000 ($0.07/share) based upon fair value on the grant date.  (See Note 8(A)).

During June 2011, the Company issued 300,000 shares of common stock pursuant to  consulting agreements for consulting services having a fair value of $75,000 ($0.25/share) based upon fair value on the grant date (See Note 8(B)).

F-21

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On June 15, 2011, the Company issued 15,980 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $1,598 ($0.10/share) based upon the terms of the consulting agreement (See Note 8(B)).

On July 1, 2011, the Company issued 6,500 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $520 ($0.08/share) based upon the terms of the consulting agreement (See Note 8(B)).

On August 14, 2011, the Company issued 2,443 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $855 ($0.35/share) based upon the terms of the consulting agreements (See Note 8(B)).

On September 12, 2011, the Company issued 2,860 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $715 ($0.25/share) based upon the terms of the consulting agreements (See Note 8(B)).

On September 18, 2011, the Company issued 15,403 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $3,388 ($0.22/share) based upon the terms of the consulting agreements (See Note 8(B)).

On September 25, 2011, the Company issued 1,500 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $585 ($0.39/share) based upon the terms of the consulting agreements (See Note 8(B)).

During the three months ended September 30, 2011, the Company issued 50,482 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $5,048 ($0.10/share) based upon the terms of the consulting agreements (See Note 8(B)).

On September 19, 2011, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $23,000 ($0.23/share) based upon the terms of the consulting agreement (See Note 8(B)).

On September 21, 2011, the Company issued 400,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $100,000 ($0.25/share) based upon the terms of the consulting agreement (See Note 8(B)).

On September 24, 2011, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $33,000 ($0.33/share) based upon the terms of the consulting agreement (See Note 8(B)).

On September 27, 2011, the Company issued 100,000 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $39,000 ($0.22/share) based upon the terms of the consulting agreements (See Note 8(B)).

F-22

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

During October 2011, the Company issued 123,795 shares of common stock for services having a fair value of $58,184 ($0.47/share).

On October 28, 2011, the Company issued 100,000 shares of common stock for consulting services having a fair value of $88,000 ($0.88/share).

On November 18, 2011, the Company issued 100,000 shares of common stock for consulting services having a fair value of $70,000 ($0.70/share).

During December 2011, the Company issued 200,000 shares of common stock for services having a fair value of $108,000 ($0.54/share).

On December 18, 2011, the Company issued 100,000 shares of common stock for consulting services having a fair value of $50,000 ($0.50/share).

On January 25, 2012 the Company issued 733 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $455 ($0.62/share) based upon the terms of the consulting agreements (See Note 8(B)).

On March 14, 2012, the Company entered into a settlement agreement with a former employee with relation to the restriction on shares owned by the former employee.  The settlement agreement will lift the restriction on his 6 million shares, and thus agreed to allow the former employee to sell 250,000 of the Company stock per quarter for two years.  In addition, the Company settled a dispute over the termination of the employment agreement by agreeing to give the former employee an additional 150,000 shares to eliminate any dispute over anything owed under his old employment agreement.  He is not an affiliate, not an insider and not a 5% or greater shareholder.  For the three months ended March 31, 2012, the Company issued 150,000 shares of common stock for consulting services having a fair value of $31,500 ($0.21/share), in relation to this settlement agreement.

(C) Common Stock Warrants

On December 30, 2009, the Company issued 500,000 warrants under a consulting agreement. The Company recognized an expense of $823,077 for the year ended December 31, 2009.  The Company recorded the fair value of the warrants  based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2009, dividend yield of zero, expected volatility of 112.80%; risk-free interest rates of 1.65%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.52 per share.

F-23

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On May 27, 2010, the Company issued 10,000 warrants under a consulting agreement. The Company recognized an expense of $1,782 for the year ended December 31, 2010.  The Company recorded the fair value of the warrants  based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2010, dividend yield of zero, expected volatility of 152.80%; risk-free interest rates of 1.35%, expected life of three years. The warrants vested immediately.   The warrants expire in three years from the date of issuance and have an exercise price of $0.50 per share (See Note 8(B)).

On June 1, 2010, the Company issued 40,000 warrants under a consulting agreement. The Company recognized an expense of $7,184 for the year ended December 31, 2010.  The Company recorded the fair value of the warrants  based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2010, dividend yield of zero, expected volatility of 145.70%; risk-free interest rates of 1.26%, expected life of three years.  The warrants vested immediately.  The warrants expire in three years from the date of issuance and have an exercise price of $0.50 per share (See Note 8(B)).

On July 23, 2010, the Company issued 10,000 warrants under a consulting agreement. The Company recognized an expense of $1,593 for the year ended December 31, 2010.  The Company recorded the fair value of the warrants  based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2010, dividend yield of zero, expected volatility of 172.90%; risk-free interest rates of 0.94%, expected life of three years. The warrants vested immediately.   The warrants expire in three years from the date of issuance and have an exercise price of $0.50 per share (See Note 8(B)).

During the year ended December 31, 2010, the Company issued 1,200,000 warrants in conjunction with the sale of the Company stock (See Note 7(A)).

On September 2, 2011, the Company issued 955,800 warrants under consulting agreements. The Company recognized an expense of $248,498 for the year ended December 31, 2011.  The Company recorded the fair value of the warrants  based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2011, dividend yield of zero, expected volatility of 461.11%; risk-free interest rates of 0.33%, expected life of three years. The warrants vested immediately.   The warrants expire in three years from the date of issuance and have an exercise price of $0.10 per share (See Note 8(B)).

F-24

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

The following tables summarize all warrant grants as of March 31, 2012 and March 31, 2011, and the related changes during these periods are presented below:

	Number of Warrants		Weighted Average Exercise Price
Stock Warrants
Balance at March 31, 2011		1,760,000	$	.51
Granted		955,800		.10
Exercised		-		-
Forfeited		-		-
Balance at December 31, 2011		2,715,800	$	0.37
Granted		-	$	-
Exercised		-
Forfeited		-
Balance at March 31, 2012		2,715,800	$	0.37
Options Exercisable at March 31, 2012		2,715,800	$	0.37
Weighted Average Fair Value of Options Granted			$	0.37

Warrants Outstanding								Warrants Exercisable
Range of Exercise Price		Number Outstanding at March 31, 2012		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable at March 31, 2012		Weighted Average Exercise Price
$	0.52		500,000		0.75	$	0.52		500,000	$	0.52
$	0.50		1,260,000		1.06	$	0.50		1,260,000	$	0.50
$	0.10		955,800		2.42	$	0.10		955,800	$	0.10

Warrants Outstanding								Warrants Exercisable
Range of Exercise Price		Number Outstanding at March 31, 2011		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable at March 31, 2011		Weighted Average Exercise Price
$	0.52		500,000		1.75	$	0.52		500,000	$	0.52
$	0.50		1,260,000		2.25	$	0.50		1,260,000	$	0.50

F-25

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

In connection with the warrants issued for cash and services, the Company has an aggregate of 2,715,800 and 1,760,000 warrants outstanding as of March 31, 2012 and 2011, respectively.  As of March 31, 2012, the Company has reserved 2,715,800 shares of common stock for the future exercise of the warrants.

(D) Stock Split Effected in the Form of a Stock Dividend

On January 16, 2009, the Company's Board of Directors declared a four-for-one stock split to be effected in the form of a stock dividend.  The stock split was distributed on January 16, 2009 to shareholders of record.  A total of 136,713,000 shares of common stock were issued.  All basic and diluted loss per share and average shares outstanding information has been adjusted to reflect the aforementioned stock dividend.

(E) Amendment to Articles of Incorporation

On January 27, 2009, the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital. The authorized capital stock increased to 250,000,000 common shares at a par value of $0.001 per share, and 10,000,000 preferred shares at a par value of $0.001 with class and series designations, voting rights, and relative rights and preferences to be determined by the Board of Directors of the Company from time to time.

On June 2, 2010, the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital. The authorized capital stock increased to 295,000,000 common shares at a par value of $0.001 per share.

On September 20, 2010, the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital and a change in the par value per share. The authorized capital stock increased to 400,000,000 common shares at a par value of $0.0001 per share.

Effective March 1, 2011, the Company filed with the State of Delaware a Certificate of Amendment of Certificate of Incorporation changing our name from So Act Network, Inc. to Max Sound Corporation.

(F) In Kind Contribution

During the fourth quarter of 2008, a former stockholder of the Company paid $4,400 of operating expenses on behalf of the Company.

During the fourth quarter of 2008, the principal stockholder contributed office space with a fair market value of $2,913 (See Note 9).

For the year ended December 31, 2009, the principal stockholder contributed office space with a fair market value of $12,600 (See Note 9).

F-26

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

For the year ended December 31, 2010, the principal stockholder contributed office space with a fair value of $9,450 (See Note 9).

(G) Share Conversion

On June 2, 2010, a principal stockholder converted $283,652 of accrued compensation into 945,507 shares of common stock at $0.30 per share (See Note 9).

On February 17, 2011, a principal stockholder converted $144,000 of accrued compensation into 1,309,091 shares of common stock at $0.11 per share (See Note 9).

On February 17, 2011, a principal stockholder converted $100,000 of a line of credit owed into 909,091 shares of common stock at $.011 per share (See Note 4 and Note 9).

On January 18, 2011, the Company entered into a conversion agreement executed by a note holder for 109,375 shares based on a conversion price of $0.032 per share (See Note 6).

On February 9, 2011, the Company entered into a conversion agreement executed by a note holder for 271,186 shares based on a conversion price of $0.0295 per share (See Note 6).

On February 15, 2011, the Company entered into a conversion agreement executed by a note holder for 357,143 shares based on a conversion price of $0.0336 per share (See Note 6).

On February 23, 2011, the Company entered into a conversion agreement executed by a note holder for 220,264 shares based on a conversion price of $0.0454 per share (See Note 6).

On April 11, 2011, the Company entered into a conversion agreement executed by a note holder for 587,382 shares based on a conversion price of $0.0315 per share (See Note 6).

On August 25, 2011, the Company entered into a conversion agreement executed by a note holder for 77,220 shares based on a conversion price of $0.1554 per share (See Note 6).

On August 30, 2011, the Company entered into a conversion agreement executed by a note holder for 96,220 shares based on a conversion price of $0.1455 per share (See Note 6).

On September 12, 2011, the Company entered into a conversion agreement executed by a note holder for 116,505 shares based on a conversion price of $0.1339 per share (See Note 6).

F-27

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

(H) Share Exchange

On May 11, 2010, the Company acquired the rights to an audio technology known as Max Audio Technology (Max) through a share exchange, whereby the Company issued 30,000,000 shares of common stock to two individuals in exchange for their rights in Max having a value of $7,500,000 based upon recent market value ($0.25/share) (See Note 8(B)).

On January 17, 2011, the Company acquired the rights to software technology known as Blog Software, Social Media Vault, Social Media Bar and Trending Topix (BSST) through a share exchange, whereby the Company issued 3,000,000 shares of common stock to two individuals in exchange for their rights to BSST having a value of $300,000 based upon recent market value ($0.10/share).

(I) Stock Options

On January 17, 2011, the Company issued 12,000,000 options to buy common shares of the Company's stock at $0.12 per share, good for three years, to its' new CEO pursuant to an employment agreement.  The Company recognized an expense of $1,199,794 for the year ended December 31, 2011.  The Company recorded the fair value of the options  based on the fair value of each option grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2010; dividend yield of zero, expected volatility of 436.04%, risk-free interest rates of 1.00%, expected life of three years.  The options vest immediately (See Note 8 (A)).

The following tables summarize all warrant grants as of  March 31, 2012 and March 31, 2011, and the related changes during these periods are presented below:

	Number of Options		Weighted Average Exercise Price
Stock Options
Balance at March 31, 2011		12,000,000		0.12
Granted		-	$	-
Exercised		-
Forfeited		-
Balance at March 31, 2012		12,000,000	$	0.12
Options Exercisable at March 31, 2012		12,000,000	$	0.12
Weighted Average Fair Value of Options Granted			$	0.12

F-28

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

Options Outstanding								Options Exercisable
Range of Exercise Price		Number Outstanding at March 31, 2012		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable at March 31, 2012		Weighted Average Exercise Price
$	0.12		12,000,000		1.80	$	0.12		12,000,000	$	0.12

Options Outstanding								Options Exercisable
Range of Exercise Price		Number Outstanding at March 31, 2011		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable at March 31, 2011		Weighted Average Exercise Price
$	-		-		-	$	-		-	$	-

In connection with the options issued for cash and services, the Company has an aggregate of 12,000,000 and 0 options outstanding as of March 31, 2012 and 2011, respectively. As of March 31, 2012, the Company has reserved 12,000,000 shares of common stock for the future exercise of the options.

NOTE 8             COMMITMENTS

(A)  Employment Agreement

On October 13, 2008, the Company executed an employment agreement with its President and CEO.  The term of the agreement is for ten years.  As compensation for services, the President will receive a monthly compensation of $18,000 beginning October 13, 2008.  In addition, to the base salary, the employee is entitled to receive a 10% commission of all sales of the Corporation.  The agreement also calls for the employee to receive health benefits.  For the three months ended March 31, 2012, the Company has recorded $54,000 in compensation expense (See Note 9).

On January 17, 2011, the Company executed an employment agreement with an executive to be CEO for five years.  As compensation for services, the executive will receive a monthly compensation of $8,000 beginning after the completion of at least one million dollars of new funding to the Corporation or can be paid as commissions from sales brought to the Company, whichever comes first. In addition to the base salary, the employee is entitled to receive a 20% commission of all sales the executive is directly responsible for bringing to the Company.  The agreement also calls for the executive to receive, upon execution of the agreement, three million shares of Rule 144 common stock and twelve million options, which are good for three years, to buy shares of Rule 144 common stock at $0.12/share.  As a supplement to the agreement, on February 4, 2011, the executive shall receive an additional twenty million common shares directly from the President of the Company.  On August 25, 2011, the agreement was updated to increase the monthly compensation to $12,000 per month beginning September 1, 2011, terminate the initial 20% commission on sales and to add a commission on sales equal to 10% of gross quarterly profits.  The agreement also calls for the employee to receive health benefits (See Note 7(B) and 7(I)).

F-29

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On May 17, 2011, the Company executed an employment agreement with its Chief Internet Officer (“CIO”).  The term of the agreement is for five years.  As compensation for services, the CIO will receive a monthly compensation of $9,000 beginning at the completion of at least one million dollars of new funding.  In addition to the base salary, the employee is entitled to receive health benefits.  The agreement also calls for the CIO to receive two million shares of Rule 144 common stock upon the execution of the agreement.  On August 25, 2011, the agreement was updated to increase the monthly compensation to $12,000 per month beginning October 1, 2011.  (See Note 7(B)).

On October 1, 2011, the Company executed an employment agreement with its Chief Technical Officer (“CTO”).  The term of the agreement is for five years.  As compensation for services, the CTO will receive a monthly compensation of $10,000, monthly commission equal to 5% of all profits derived from the sales of all products and services related to Max Sound, and an annual bonus of 5% of all profits derived from the sales of all products and services related to Max Sound that is over one million dollars.  In addition to the base salary, the employee is entitled to receive health benefits.  Effective January 1, 2012, the Company increased the monthly compensation to $12,000.

(B)  Consulting Agreement

On January 19, 2009, the Company entered into a development services agreement to construct social network software for a fee of $150 and $375 an hour.  The contract will remain in place until either party desires to cancel.  A retainer fee of $20,000 has been paid upon the execution of the agreement and will be used towards the services provided.  In addition, on January 14, 2009 the Company issued 20,000 shares in exchange for services valued at $5,000 ($0.25/share).  As a result of the forward split, the 20,000 shares were increased to 80,000 shares and its purchase price was similarly adjusted to $0.0625 (See Note 7(B) and Note 7(D)).  On May 29, 2009 the Company amended the consulting agreement by reducing the hourly rate to $75 an hour and reducing the outstanding balance due by $17,163. On August 31, 2009, the Company issued 885,714 shares of common stock in exchange for services valued at $62,000 related to the development services agreement entered into on January 19, 2009.  Based on the most recent fair market value at that time, the shares were valued at $55,357 ($0.0625/share), resulting in the recognition of a gain on the extinguishment of debt of $6,643 (See Note 7(B)).

On January 20, 2009, the Company entered into a service agreement with a transfer agent to become the Company's transfer agent for the purpose of maintaining stock ownership and transfer records for the Company.

F-30

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On September 17, 2009, the Company entered into a six month consulting agreement with an unrelated third party to provide public relations services. In exchange for the services provided, on September 18, 2009 the Company issued 500,000 shares of common stock having a fair value of $175,000 ($0.35/share) based upon fair value on the date of grant. The Company has an option to cancel the contract during the first ninety days of the agreement and 200,000 shares will be returned back to the Company.  On November 11, 2009, the Company cancelled the agreement and 300,000 shares of common stock were returned to the Company.   As of December 31, 2009, $70,000 is recorded as consulting expense and $105,000 of deferred compensation was reclassified to $0 (See Note 7(B)).

On September 18, 2009, the Company entered into a six month consulting agreement with an unrelated third party to provide public relations services.  In exchange for the services provided the Company issued 600,000 shares of common stock having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant.  Shares will be issued on or before December 18, 2009 in six 100,000 increments.  The Company has an option to cancel the contract at any time, in such event; the consultant will return a prorated amount of shares based on the months remaining in the consulting agreement.   On November 18, 2009, the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company.  As of December 31, 2009 $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassified to $0 (See Note 7(B)).

On September 21, 2009, the Company entered into an eight month consulting agreement with an unrelated third party to provide public relations services.  In exchange for the services provided, the Company issued 600,000 shares of common stock having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant.  Shares will be issued on or before September 18, 2009, December 18, 2009, and March 18, 2010, in 200,000 increments.  The Company has an option to cancel the contract at any time and no additional stock issuances will be due.  On December 18, 2009, the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company.  As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassified to $0 (See Note 7(B)).

On October 20, 2009, the Company entered into a marketing agreement with an unrelated third party.  In exchange for the services provided, on November 21, 2009, the Company issued 30,000 shares of common stock having a fair value $53,100 ($1.77/share) based upon fair value on the date of grant, and compensation of $5,000, of which $2,500 was paid in 2009 upon the execution of the agreement and the remaining $2,500 was paid in 2010 upon completion (See Note 7(B)).

During the months of November and December 2009, the Company entered into celebrity endorsement agreements for a period of one to two years of service.  In total, 1,710,000 shares of common stock were issued having a fair value of $3,285,400 based upon fair value on the respective date of grant.  During 2009 and 2010, $87,805 and $1,712,815 was recorded as consulting expense, respectively.  For the year ended December 31, 2011, $1,484,780 is recorded as consulting expense, and $0 is recorded as deferred compensation (See Note 7(B)).

F-31

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On December 3, 2009, the Company entered into a commission agreement with an unrelated third party.  The company will pay a 10% commission in shares of common stock for every passive endorsement.  In exchange for the services provided the Company issued 35,000 shares of common stock having a fair value $68,250 ($1.95/share) based upon fair value on the date of grant (See Note 7(B)).

On December 3, 2009, the Company entered into a commission agreement with an unrelated third party.  The company will pay a 10% commission in shares of common stock for every passive endorsement.  In exchange for the services provided the Company issued 240,000 shares of common stock having a fair value $468,000 ($1.95/share) based upon fair value on the date of grant (See Note 7(B)).

On December 3, 2009, the Company entered into a commission agreement with an unrelated third party.  The company will pay a 10% commission in shares of common stock for every passive endorsement.  In exchange for the services provided the Company issued 35,000 shares of common stock having a fair value $68,250 ($1.95/share) based upon fair value on the date of grant (See Note 7(B)).

On December 3, 2009, the Company entered into a commission agreement with an unrelated third party.  The company will pay a 10% commission in shares of common stock for every passive endorsement.  In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,500 ($1.95/share) based upon fair value on the date of grant (See Note 7(B)).

On December 15, 2009, the Company entered into a consulting agreement with an unrelated third party to provide investor services.  The Company will receive a 10% of the gross receipts from the investor relations revenue for a two year period.  In exchange for the satisfactory services provided, on December 15, 2009, the Company issued 100,000 shares of common stock having a fair value of $200,000 ($2/share) based upon fair value on the date of grant (See Note 7(B)).

On December 27, 2009, the Company entered into a consulting agreement with an unrelated third party to provide film work.  In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 7(B)).

On December 27, 2009, the Company entered into an endorsement agreement with an unrelated third party to provide film work.  In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 7(B)).

F-32

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On December 27, 2009, the Company entered into a consulting agreement with an unrelated third party to provide film scripting, editing and production work.  In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 7(B)).

On December 30, 2009, the Company entered into a marketing agreement with an unrelated third party for a period from January 2010 to December 2010.  In exchange for the services provided, the Company issued 500,000 shares of common stock having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant.  An additional 1,000,000 shares of common stock having a fair value of $1,930,000 ($1.93/share) based upon fair value on the date of grant, were issued for an additional sponsorship commitment. The additional 1,000,000 shares were to be held in escrow until June 30, 2010, at which point the unrelated party would have 15 days to accept or decline the additional shares.As of December 31, 2010, the shares were returned back to the Company’s treasury due to non-performance of services and no additional shares will be issued (See Note 7(B)).

On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through March 30, 2011.  In exchange for the services provided, the Company issued 75,000 shares of common stock having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant, and deliverable in three increments of 25,000 shares of common stock each. The first 25,000 shares will be delivered upon the execution of the agreement and the other two increments will be delivered in six and twelve months upon the successful fulfillment of the agreement (See Note 7(B)).

On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through March 30, 2011.  In exchange for the services provided, the Company issued 75,000 shares of common stock having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant, and deliverable in three increments of 25,000 each. The first 25,000 shares will be delivered upon the execution of the agreement and the other two will be delivered in six and twelve months upon the successful fulfillment of the agreement (See Note 7(B)).

On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through December 31, 2010.  In exchange for the services provided, the Company issued 500,000 shares of common stock having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant (See Note 7(B)).

On January 11, 2010, the Company entered into a twelve month agreement with an unrelated third party for investor relations press release service for an annual fee of $14,250 and an initial onetime fee of $250.

F-33

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On January 15, 2010, the Company entered into a two year celebrity endorsement agreement.  In total, 100,000 shares of common stock were issued having a fair value of $170,000($1.70/share) based upon fair value on the date of grant (See Note 7(B)).

On February 1, 2010, the Company entered into a twelve month consulting agreement effective February 5, 2010, with an unrelated third party to produce music compositions for a fee of $500.  The agreement can be renewed for up to two additional years for a fee of $500 for the first renewal year and $750 for the second renewal year.

On February 17, 2010, the Company entered into a twelve month consulting agreement with an unrelated third party effective February 17, 2010.  In exchange for the services provided, the Company issued 1,000,000 shares of common stock having a fair value of $1,240,000 ($1.24/share) based upon fair value on the date of grant (See Note 7(B)).

On June 1, 2010, the Company entered into a twelve month consulting agreement to provide for consulting and business services in raising capital.  The Company agrees to pay a finder’s fee on all capital raised in stock and warrants.  The Company paid an initial nonrefundable retainer fee by issuing 40,000 shares of stock having a value of $10,000 ($0.25/share) based upon fair value on the date of the agreement.  In conjunction with the stock payment, the Company also issued one warrant attached to each share of stock exercisable at $0.50 per warrant.  Based upon the number of shares (40,000 shares) of stock issued, the Company issued 40,000 warrants (See Note 7(B) and Note 7(C).

On May 11, 2010, the Company acquired the rights to an audio technology known as Max Audio Technology (Max) through a share exchange, whereby the Company issued 30,000,000 shares of common stock to two individuals in exchange for their rights in Max having a value of $7,500,000 based upon recent market value ($0.25/share).  (See Note 7(H)).

In accordance with the share exchange, the former owners to the rights of Max became Executives of the Company.  The two new executives individually entered into employment agreements with the Company on May 11, 2010.  The term of the employment agreements are for ten years of service at a monthly compensation of $8,500 for each executive.  In addition, the Executives are entitled to receive 5% of all revenues derived from the sale of all products and services related to the Max Audio Technology.  On January 2, 2011, the agreement was cancelled.

On April 15, 2010, the Company entered into a finder’s fee agreement.  For each qualified investor introduced to the Company by the consultant, the Company will pay a 10% fee in cash equal to 10% of the dollar amount of securities purchased,  In addition, the Company will pay a 10% fee in warrants equal to 10% of the number of shares of stock purchased (See Note 7(C)).

F-34

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On August 8, 2010, the Company entered into a consulting agreement with an unrelated third party to provide consulting services.  Upon the execution of the agreement the consultant received 100,000 shares of common stock.  A monthly issuance of 100,000 shares of common stock will be issued as a compensation of services provided.  The term of the agreement is for three months and will continue to renew for three month intervals unless cancelled by either party.  The agreement was cancelled on November 1, 2010 (See Note 7(B)).

On August 17, 2010, the Company entered into a consulting agreement.  The agreement shall remain in effect until terminated.  In exchange for the services provided, the consultant will receive a $500 a month allowance for general expenses.  In addition, for all the new business brought to the Company the consultant will receive a 10% compensation for each gross dollar received by the Company.  On February 15, 2011, the Company terminated the agreement.

On December 14, 2010, the Company entered into to a consulting agreement for consulting and advertising services.  Upon the execution of the agreement, the consultant received 250,000 shares with an additional 750,000 shares to be issued upon consultant obtaining sponsorship rights in the year 2011.  The sponsorship rights were not obtained and the agreement was cancelled in 2011 and the additional 750,000 shares were never issued (See Note 7(B)).

On February 17, 2011, the Company entered into a consulting agreement for public relations and communications services.  In exchange for the services provided, the consultant received 500,000 shares of common stock. The term of the agreement is for one year (See Note 7 (B)).

On March 3, 2011, the Company entered into a consulting agreement for public relations and communications services.  In exchange for the services provided, the consultant received 1,000,000 shares of common stock. The term of the agreement is for one year (See Note 7 (B)).

On June 10, 2011, the Company entered into a five year advisory board consulting agreement with three persons to provide for consulting and business services.  In exchange for the services provided, the consultants received 100,000 shares of common stock each.  (See Note 7(B)).

On June 15, 2011, the Company entered into a consulting agreement with an unrelated third party for software and computer technology services.  In exchange for the services provided, the consultant will be paid $70 per hour with $50 per hour paid in cash and $20 per hour paid in Company stock at $0.10 per share.  The term of the agreement is for one year. (See Note 7(B)).

F-35

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On July 1, 2011, the Company entered into a consulting agreement with an unrelated third party for trade show services.  In exchange for the services provided, the consultant received 6,500 shares of common stock at $0.08/per share. The agreement was for one-time services. (See Note 7(B)).

During the year ended December 31, 2011, the Company entered into an agreement with an unrelated third party for software and computer technology services.  In exchange for the services provided, the consultant received 76,483 shares of common stock at $0.10 – 0.39 per share. The term of the agreement is for one year. (See Note 7(B)).

In September 2011, the Company entered into a five year advisory board consulting agreement with three persons to provide for consulting and business services.  In exchange for the services provided, the consultants received 100,000 shares of Company stock at $0.23 – 0.39 per share.  The terms of the agreements are for five years. (See Note 7(B)).

On September 21, 2011, the Company entered into a consulting agreement with an unrelated third party for investor relation services.  In exchange for the services provided, the consultant received 400,000 shares of Company stock at $0.25 per share.  The term of the agreement is for six months. (See Note 7(B)).

During the three months ended December 31, 2011, the Company entered into a five year advisory board consulting agreement with five persons to provide for consulting and business services.  In exchange for the services provided, the consultants received 100,000 shares of Company stock at $0.47 – 0.88 per share.  The terms of the agreements are for five years. (See Note 7(B)).

(C) Operating Lease Agreements

On September 1, 2010 the Company executed a three-year non-cancelable operating lease for its new corporate office space. The lease began on October 1, 2010 and expires on September 30, 2013.  Total base rent due during the term of the lease is $134,880.

NOTE 9             RELATED PARTY TRANSACTIONS

During the year ended December 31, 2008, the Company received $18,803 from the principal stockholder.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and due on demand.  In 2008, the Company repaid $15,000 in principal to the principal stockholder.  In 2009, the Company repaid $3,803 in principal to the principal stockholder.  As of December 31, 2010, the principal portion of this principal stockholder loan balance has been repaid (See Note 3).

On May 11, 2009, the Company received $9,500 from a principal stockholder. During the year ended December 31, 2009, the Company repaid $1,500 in principal to the principal stockholder.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).

On May 22, 2009, the Company received $15,000 from a principal stockholder.  During the year ended December 31, 2010, the Company repaid $6,000 in principal to a principal stockholder under the terms of the loan.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).

F-36

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On May 26, 2009, the Company received $16,700 from a principal stockholder.  During the year ended December 31, 2010, the Company repaid $15,700 in principal to the principal stockholder under the terms of this loan.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).

During the year ended December 31, 2011, the Company repaid $18,000 in principal and $2,116 of accrued interest to the principal stockholder related to these principal loans (See Note 3).

On May 28, 2009, the Company entered into a two year line of credit agreement with a principal stockholder in the amount of $100,000.  The line of credit carries an interest rate at 3.25%.  As of December 31, 2011, the principal shareholder has advanced the Company $100,000 and was repaid $100,000 under the terms of this line of credit agreement (See Note 4).

On November 10, 2009, the Company entered into a two year line of credit agreement with a principal stockholder in the amount of $100,000.  The line of credit carries an interest rate at 3.25%.  As of December 31, 2011, the principal shareholder has advanced $100,000 to the Company and was repaid $100,000 under the terms of this line of credit agreement (See Note 4).

On March 25, 2010, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $500,000.  The line of credit carries an interest rate of 3.25%.  On February 17, 2011, the principal stockholder converted $100,000 of the line of credit owed into 909,091 shares of common stock at $0.11 per share.  As of December 31, 2011, the principal stockholder has advanced $360,580 to the Company and was repaid $260,580 under this line of credit agreement (See Note 7(G) and Note 4).

As of December 31, 2011, the Company repaid $255,480 in principal and $11,283 of accrued interest to the principal stockholder related to these lines of credit (See Note 4).

On October 14, 2008, the Company issued 44,900,000 shares of common stock to its founder having a fair value of $44,900 ($0.001/share) in exchange for services provided.  As a result of the forward split, the 44,900,000 shares were increased to 179,600,000 shares and its purchase price was similarly adjusted to $0.00025 (See Note 7(B) and Note 7(D)).

On October 13, 2008, the Company executed an employment agreement with its President and CEO.  The term of the agreement is ten years.  As compensation for services, the President will receive a monthly compensation of $18,000 beginning October 13, 2008.  In addition, to the base salary, the employee is entitled to receive a 10% commission of all sales of the Corporation.  The agreement also calls for the employee to receive health benefits (See Note 8(A)).

F-37

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

On June 2, 2010, a principal stockholder converted $283,652 of accrued compensation into 945,507 shares of common stock at $0.30 per share.  (See Note 7(G)).

On February 17, 2011, a principal stockholder converted $144,000 of accrued compensation into 1,309,091 shares of common stock at $.0.11 per share. (See Note 7(G)).

During the fourth quarter of 2008, the principal stockholder contributed office space with a fair market value of $2,913 (See Note 7(F)).

For the year ended December 31, 2009, the principal stockholder contributed office space with a fair market value of $12,600 (See Note 7(F)).

For the year ended December 31, 2010, the principal stockholder contributed office space with a fair value of $9,450 (See Note 7(F)).

NOTE 10          LITIGATION

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business.

On February 6, 2012, the Company filed a suit for declaratory judgment and rescission of contract associated with a former consultant for failure to perform contractual requirements.  It seeks clarification that the former consultant is not owed 750,000 shares of restricted common stock.  The defendants have been served.  This case will be vigorously prosecuted and has a good likelihood of a favorable outcome. The case seeks in excess of the jurisdictional amount which is $50,000 dollars.

On February 21, 2012, the Company filed a suit for breach of contract, intentional misrepresentation, negligent misrepresentation, fraud, false advertising, and unfair competition with a former consultant.   It seeks damages due to their alleged failure to meet the contractual requirements regarding promotions.  The defendant has just recently been served.  This case will be vigorously prosecuted and has a good likelihood of success.  The case seeks in excess of the jurisdictional amount which is $50,000 dollars.

No assurance can be given as to the ultimate outcome of these actions or its effect on the Company.

F-38

MAX SOUND CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

NOTE 11                   SUBSEQUENT EVENTS

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure as follows:

On April 4, 2012, the Company entered into an agreement whereby the Company will issue up to $166,000 in a convertible note.  The note matures on December 28, 2012 and bears an interest rate of 8%.  The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion

On April 25, 2012, the Company entered into an agreement whereby the Company will issue up to $166,666 in a convertible note.  The note matures on April 25, 2013 and bears an interest rate of 4%.  The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the lower of the average trading prices for the common stock during the ten (10) trading day period prior to the conversion

On May 8, 2012, the Company entered into an agreement whereby the Company will issue up to $333,000 in a convertible note.  The note matures on May 8, 2013 and bears an interest rate of 0% if note is repaid on or before 90 days from the effective date. If the note is not repaid within 90 days a one-time interest charge of 5% will be applied to the principal.  The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion

F-39

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Corporate History and Structure

We were incorporated in the State of Delaware as of December 9, 2005 as 43010, Inc. to engage in any lawful corporate undertaking, including, but not limited to, locating and negotiating with a business entity for combination in the form of a merger, stock-for-stock exchange or stock-for-assets exchange. On October 7, 2008, pursuant to the terms of a stock purchase agreement, Mr. Greg Halpern purchased a total of 100,000 shares of our common stock from Michael Raleigh for an aggregate of $30,000 in cash. The total of 100,000 shares represented 100% of our issued and outstanding common stock at the time of the transfer. As a result, Mr. Halpern became our sole shareholder. As part of the acquisition, and pursuant to the Stock Purchase Agreement, Michael Raleigh, our then President, CEO, CFO, and Chairman resigned from all the positions he held in the company, and Mr. Halpern was appointed as our President, CEO CFO and Chairman. The original business model was developed by Mr. Halpern in September of 2008 and began when he joined the company on October 7, 2008. In October 2008, we became a development stage company focused on creating an Internet search engine and networking web site. 

In May of 2010, we acquired the worldwide rights to all fields of use for Max Sound HD Audio technology. In November of 2010, we opened our post-production facility for Max Sound HD Audio in Santa Monica California.  On January 17, 2011, Greg Halpern resigned as our CEO and we entered into an employment agreement with John Blaisure to serve as our new CEO.  In February of 2011, after several successful demonstrations of our Max Sound Audio technology to various multi-media industry company executives, we decided to shift the focus of the Company to the Max Sound HD Audio technology and commenced the name change from So Act Network, Inc. to Max Sound Corporation and the symbol from SOAN to MAXD.

The Company is in negotiations with several multi-media companies that will utilize our HD Audio solution in the future.

A new video is currently available on the company website at http://www.maxsound.com. The Max Sound® Technology Highlights Video is 10 minutes long and summarizes the HD Audio™ process including meeting the inventor of the technology and showing the need for high definition audio in several key vertical markets.

Plan of Operation

We began our operations on October 8, 2008 when we purchased the Form 10 Company from the previous owners.  Since that date, we have completed financing to raise initial start-up money for the building of our internet search engine and social networking and to start our operations.  

We have also received three loans from Mr. Greg Halpern, in the amount of $9,500, $15,000 and $16,700 on May 11, May 22, and May 26, 2009, respectively.  Each of the loans bears an interest rate equal to the prime rate as of the date of issuance.  As of March 31, 2012, the Company owes $0 in principal and $0 in accrued interest on these loans.

2

We entered into three Credit Line Agreements with Greg Halpern.  The first two have a $0 principal balance and one expired in May of 2011, and the second expired in November of 2011.  The third Credit Line Agreement issued by Mr. Halpern in March 2010 is for an additional $500,000 and matured in March of 2012.  All three agreements accrue interest at the prime rate as of the date of issuance.  The prime rate of interest is the rate of interest that major banks charge their most creditworthy customers.  For the purposes of these agreements, we shall determine the prime rate by using the prime rate reported by the Wall Street Journal on the date funds are extended to the Company.  Based on the prime rate as of the date of issuance, the prime rate shall be 3.25%.  As of March 31, 2012, the Company owes $0 in principal and $0 in accrued interest related to the third line of credit.

In 2011, the Company has received from Mr. Halpern additional net advances on the established lines of credit in the amount of $134,000 and forgiveness of amounts owed to Mr. Halpern of $244,000 through conversion of debt notes and accrued salary into shares at $0.11 cents per share.  This further demonstrates our Chairman’s ongoing commitment thus far to continue financing the Company’s needs.  While the Company expects to have ongoing needs for additional financing, the amount of those needs is not clearly established as the Company moves forward.

In February of 2011, management shifted the primary focus of the Company to the marketing of the Max Sound HD Audio Technology.  The Company believes that Max Sound HD Audio Technology is a game changer for several vertical markets whose demand will create revenue opportunities in the fourth quarter of 2012 that will meet the Company’s needs to eliminate its going concern status in 2013.

The Company believes that the Mr. Halpern's (our chairman/principal stockholder) past history of extending credit and willingness to further extend credit in the future as needed, along with the capital raised by the funding campaign in the summer of 2011, and the Company's ability to secure third party financing will allow the Company to cover the additional expense arising from the maintenance of our regulatory filings with the SEC, the development of our technology, and will allow for the Company to continue marketing the Max Sound HD Audio Technology to Multi-Media Industry Users of Audio and Audio with Video products.

We expect our financial requirements to increase with the additional expenses needed to promote the Max Sound® Audio technology.  We plan to fund these additional expenses by loans from our chairman/principal stockholder, along with pursing various private funding opportunities until such time that our revenue stream is adequate enough to provide the necessary funds.

In the event that we are unable to obtain additional funding from third parties, additional capital funding campaigns, or our chairman/principal stockholder either fails to extend us more financing, declines to loan additional cash, declines to fund new lines of credit, declines to defer his salary payments, we will no longer be able to continue to operate and will have to cease operations unless we begin to generate sufficient revenue to cover our costs.

Results of Operations

The following tables set forth key components of our results of operations for the periods indicated, in dollars, and key components of our revenue for the period indicated, in dollars.

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	For the three months Ended March 31,
	2012			2011
Revenue	$	-		$	-
Operating Expenses
General and Administrative		193,615			37,119
Endorsement Fees *		-			407,373
Consulting Fees *		120,000			1,926,860
Professional Fees		58,570			40,449
Compensation		162,000			54,000
Total Operating Expenses		534,185			2,465,801
Loss from Operations		(534,185	)		(2,465,801	)
Other Income / (Expense)
Interest Income		72			-
Interest Expense		-			(3,035	)
Amortization of Debt Offering Costs		(1,202	)		-
Amortization of Debt Discount		(4,533	)		(6,232	)
Change in fair value of embedded derivative liability		(70,504	)		(49,125	)
Total Other Income / (Expense)		(76,167	)		(58,392	)
Provision for Income  Taxes		-
Net Loss	$	(610,352	)	$	(2,524,193	)
Net Loss Per Share  - Basic and Diluted	$	(0.00	)	$	(0.01	)
Weighted average number of shares outstanding
during the year Basic and Diluted		242,887,741			227,978,768

* The line items Endorsement Fees and Consulting Fees represent mainly non-recurring compensation in the form of stock at the then current market value at the time of entering into the services agreement.

For the three months ended March 31, 2012 and for the three months ended March 31, 2011

General and Administrative Expenses: Our general and administrative expenses were $193,615 for the three months ended March 31, 2012 and $37,119 for the three months ended March 31, 2011, representing an increase of $156,496 or approximately 421.61%, as a result of our expenses on the general operation of the Company including added personnel, product development and marketing of our Max Sound Technology.

Endorsement Fees:  Our endorsement fees were $0 for the three months ended March 31, 2012 and $407,373 for the three months ended March 31, 2011, representing an decrease of $407,373 or approximately 100% as a result of the acceleration in expensing of the remaining multi-year consulting agreements related to the marketing of our social networking website which was abandoned on August 16, 2011.

Consulting Fees:  Our consulting fees were $120,000 for the three months ended March 31, 2012 and $1,926,860 for the three months ended March 31, 2011, representing a decrease of $1,806,860, or approximately 93.77%. While the $120,000 represents added members of the Max Sound Advisory Board, the use of consultants to assist the Company in raising capital, and the promotion of the Max Sound Technology, the overall substantial decrease was due primarily to the discontinued use of consultants needed for promotional and marketing services related to our social networking website which was abandoned on August 16, 2011.

Professional Fees: Our professional fees were $58,570 for the three months ended March 31, 2012 and $40,449 for the three months ended March 31, 2011, representing an increase of $18,121 or approximately 44.80% as a result of expanded business activities by the Company and increases in fees by our professionals.

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Compensation: Our compensation expenses were $162,000 for the three months ended March 31, 2012 and $54,000 for the three months ended March 31, 2011, as a result of our expensing of monthly compensation to our CFO, CEO, CIO and to our CTO pursuant to their employment agreements.

Net Loss: Our net loss for the three months ended March 31, 2012 and 2011, were $610,352, compared to $2,524,193, respectively. While the operational expenses in marketing our Max Sound technology increased from the same period of last year, the overall amount of net loss substantially decreased as a result of the decline in expenses due to the abandonment of our social networking website.

Liquidity and Capital Resources

As reflected in the accompanying financial statements, the Company is in the development stage with minimal operations.  Revenue was $0 and $0 for the three months ended March 31, 2012 and 2011, respectively. We have an accumulated deficit of $14,970,336 for the period from December 9, 2005 (inception) to March 31, 2012, and have negative cash flow from operations of $2,149,513 from inception.  

Our financial statements have been presented on the basis that it is a going concern, which contemplates the realization of revenues from our subscriber base and the satisfaction of liabilities in the normal course of business. We have incurred losses from inception. These factors raise substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that would be necessary if the Company is unable to continue as a going concern.

Management believes the actions presently being taken to obtain additional funding and implement its strategic plans provide for the Company to continue as a going concern.

From our inception through March 31, 2012, our primary source of funds has been the proceeds of private offerings of our common stock and loans from our principal stockholder. Our need to obtain capital from outside investors is expected to continue until we are able to achieve profitable operations, if ever. There is no assurance that management will be successful in fulfilling all or any elements of its plans.  

We have received three loans from Mr. Greg Halpern, in the amount of $9,500, $15,000 and $16,700 on May 11, May 22, and May 26, 2009, respectively. During the nine months ended March 31, 2012, the Company repaid $23,200 in principal to the principal stockholder. Each of these loans is due upon demand and accrue interest at the prime rate as of the date of issuance. The prime rate of interest is the rate of interest that major banks charge their most creditworthy customers. For the purposes of this agreement, we shall determine the prime rate by using the prime rate reported by the Wall Street Journal on the date funds are extended to the Company. Based on the prime rate as of the date of issuance, we have determined that the prime rate shall be 3.25%. As of March 31, 2012, we owed $0 in principal and $0 in accrued interest.

We have entered into three lines of credit with our principal stockholder, Mr. Greg Halpern, in the amount of $100,000, $100,000, and $500,000, respectively. Pursuant to the lines of credit agreements, the lines of credits bear an annual interest rate of 3.25% and are due on May 29, 2011, November 11, 2011, and March 25, 2012.  As of March 31, 2012, we owe $0 in principal and accrued interest of $0 related to these lines of credit

On October 13, 2008, the Company entered into an employment agreement with the principal stockholder whereby the principal stockholder would be paid $18,000 per month for a term of ten (10) years for services rendered as the Chief Executive Officer of the Company.

On February 18, 2011 the Company’s Board authorized the issuance and conversion of 2,218,182 shares of par value $.0001 common stock at $.11 per share as payment to the principal stockholder for conversion of $100,000 of the debt outstanding and the full $144,000 in accrued wages payable owed as of January 31, 2011. Pursuant to the Board’s authorization and resulting issuance of shares, the principal shareholder has entered into an agreement (the “Conversion Agreement”) with the Company relinquishing the Company from any further obligation to the principal shareholder with respect to $100,000 of the note payable outstanding and all amounts due and payable as wages as of January 31, 2011. 

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Recent Accounting Pronouncements

There are no new accounting pronouncements that are expected to have a material impact on the Company's financial position or results of operations.

Critical Accounting Policies and Estimates

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to

GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Use of Estimates:In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period.  Actual results could differ from those estimates.

Revenue Recognition:  Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is assured.  We had $0 and $0 in revenue for the three months ended March 31, 2012 and 2011, respectively.

Stock-Based Compensation:

In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation.  Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.

Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718.  FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments.  In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.

Derivative Financial Instruments

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model.  In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement.  If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

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Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.  In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.  

Impairment of Long-Lived Assets

The Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, Accounting for the Impairment or Disposal of Long-Lived Assets."  ASC Topic 360-10-05 requires that long-lived assets, such as technology rights, be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate.  The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including the eventual disposition.  If the future net cash flows are less than the carrying value of an asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value or disposable value.  For the year ended December 31, 2011, the Company completed an impairment analysis on its' long-lived assets, their technology rights, and determined that no impairment was necessary.

The Company believes that the accounting estimate related to asset impairment is a "critical accounting estimate" because the impairment methodology is highly susceptible to change from period to period, because it requires management to make assumptions about future cash flows, and because the impact of recognizing impairment could have a significant effect on operations. Management's assumptions about future cash flows require significant judgment because actual business operations of marketing the technology rights is in its infancy stages and managements expects that their future operating levels to fluctuate. The analysis included assumptions that are based on annual business plans and other forecasted results which are used to reflect market-based estimates of the risks associated with the projected cash flows, based on the best information available as of the date of the impairment test. There can be no assurance that the estimates and assumptions used in the impairment tests will prove to be accurate predictions of the future.  If the future adversely differs from management's best estimate of key economic assumptions, and if associated future cash flows materially decrease, the Company may be required to record impairment charges related to its indefinite life intangible asset.

Prior to February of 2011, the Company's business operations were related to the development and launching of a social networking website.  However, since February of 2011, our business focus has been on the marketing of our Max Sound HD Audio Technology.  Since 2011, was our initial year of marketing our technology, management considers past operational levels to be inconsistent with future operations mainly due to the shift in business focus.  In our impairment testing, the Company made assumptions towards the income and expenses expected in the future including, but not limited to, determining the actual expenses incurred in the current year that were attributable to the new business focus in order to develop an annual cost benchmark, trends in the marketplace, feedback from current and past marketing activities, and assessments upon the useful life of the technology rights.

The Company's primary focus over the next three to five years will be centered around the marketing and implementation of their technology in order to take advantage of the current trends in the marketplace for users of their technology.  In particular, the Company expects that expenses will increase significantly from year to year over the next five years, at which time in year six and beyond the year to year change will be a minimal increase.  In addition, the Company expects minimal revenue over the next two years, while in year three to six the Company expects to realize significant year to year increases in revenue, at which time in year seven and beyond the year to year change will be a minimal increase.

As part of the impairment test performed in December of 2011, the Company reviewed its' initial useful life analysis, in reference to their technology, and updated this analysis with factors that existed at the time of the impairment testing and determined that nothing had occurred in the marketplace that would change their initial determination of the useful life of their technology. The analysis included researching known technological advances in the marketplace and determining if those advances which are similar to the Company's products would limit the useful life of the asset. The Company believes that the technological advances in the marketplace are geared to developing different playback devices and the implementation of technology that is similar to the Company's technology. Thus, the Company concluded that their technology rights continue to have an indefinite useful life. However, it is understood that technological advancements could happen in the future that would limit the useful life of their technology.  If a technology was created in the future that would limit the useful life of the technology, the Company would be required to update their impairment testing to include a useful life determination of the technology and may be required to record impairment charges at some time in the future.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for Smaller Reporting Companies.

Item 4.  Controls and Procedures

Disclosure controls and procedures.Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

On February 6, 2012, the Company and Greg Halpern (our Chief Financial Officer) filed a suit in Superior Court of California, Los Angeles County – West District for declaratory judgment and rescission of contract associated with a former consultant (Roy Anthony and Creative Licensing, Inc.) for failure to perform contractual requirements.  It seeks clarification that the former consultant is not owed 750,000 shares of restricted common stock.  The defendants have been served. The case seeks in excess of the jurisdictional amount which is $50,000 dollars.  The defendants have answered the complaint and have filed a cross-complaint for breach of contract, claiming that they are entitled to the 750,000 shares of common stock and that the Company breached the agreement.  The discovery phrase has commenced and the Company has put forth initial written discovery on the defendants.

Item 1A. Risk Factors.

Not required for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

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Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None

Item 6. Exhibits

31.1 Certification of Principal Executive Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Principal Financial Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Principal Executive Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Principal Financial Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101  Interactive Data File (Form 10-Q for the quarterly period ended March 31, 2012 furnished in XBRL).

In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

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SIGNATURES

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

Dated: May 15, 2012	MAX SOUND CORPORATION
	By:	/s/John Blaisure
		John Blaisure President and Chief Executive Officer (Duly Authorized Officer and Principal Executive Officer)

By:	/s/Greg Halpern
	Greg Halpern Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

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