Commitments and Contingencies

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Commitments and Contingencies

9. COMMITMENTS AND CONTINGENCIES

Lease Commitment

The Company operated from leased office space under an operating lease that was to expire in November 2013. Effective July 1, 2010, the Company renegotiated its lease agreement with the landlord to: (a) reduce the monthly rent to $4,000; (b) a termination date of December 31, 2010; and (c) agreed that the landlord and tenant each have the right to cancel the lease with a thirty day written notice. Effective January 1, 2011 through July 31, 2011, Bluegate paid $4,000 month-to-month rent which totaled $28,000 for the seven months.

Effective July 1, 2010 through July 31, 2011, the Sperco entities agreed to pay a monthly amount of $4,000 for office space and associated services to Bluegate for the Sperco entities. For the seven months ended July 31, 2011, $28,000 was recorded as a reduction in rent expense and accounts payable to related party.

Effective August 1, 2011, the Sperco entities entered into a lease agreement for space in Suite 350 of the same building and moved from Suite 600 to Suite 350. At the same time, Bluegate relocated to Suite 350 with the Sperco entities and agreed to pay the Sperco entities $1,000 rent on a month-to-month basis which totaled $8,000 for the period from August 1, 2011 through March 31, 2012. For the three months ended March 31, 2012, the net amount of $3,000 was recorded as rent expense and an increase to accounts payable to related party.