ALLDIGITAL HOLDINGS, INC.

There are a number of market dynamics that we believe will drive significant demand for digital services over the next 3 to 5 years, including: (i) increasing popularity of OTT video streaming services, (ii) global improvements in Internet accessibility, (iii) substantial and growing demand for mobile devices and for viewing digital video on these devices, (iv) rapid technological advancements increasing the affordability of and access to devices capable of creating and viewing ultra high definition (4K) video, and (v) business applications for digital video across existing and evolving use cases. We believe that the growth of the digital services market will not be sustainable without the support from third party service providers that offer the digital services and solutions required to successfully develop, operate, and support digital media workflows.

New Brevity has been completely re-architected and developed with the cloud in mind, incorporating many of the latest software architectural styles and technologies including microservices architecture, docker containers, and kuberenetes orchestration technology, and like all generations of Brevity, New Brevity has our patented technology at its core (United States Patent No. 8,533,166 B1 – Methods and systems for encoding/decoding files and transmission thereof, issued September 10, 2014; United States Patent No. 8,874,531 B2 – Methods and systems for encoding/decoding files and transmission thereof, issued October 28, 2014), which enables it to transcode video files as they are being delivered real time. We believe this to be a key differentiating benefit of our service.

For the past year we have been working closely with our Brevity customers and prospects, including broadcasters, global technology companies, entertainment companies, and OEM’s. Their valued feedback helped us to identify and prioritize the development of the new and newly enhanced features that are part of New Brevity, which include, (i) extensive and fully documented APIs, (ii) cloud agnostic capabilities, (iii) industry leading security protocols, (iv) multitenancy, (v) scalability, (vi) redundancy, (vii) speed (Brevity Warp™), (viii) broadcast codecs, and (ix) simplicity – a completely redesigned app that allows for point and click design and deployment of custom digital workflows, control over system resources, and the system-directed creation of transcoding profiles.

On August 10, 2015, we received notice from a longstanding, material customer of their plan to insource and reduce the majority of their AllDigital services, representing approximately $19,000 of our monthly recurring revenue and 9.6% of our total revenue for the nine months ended September 30, 2015. This reduction in services became effective on October 9, 2015 and is not reflected in our financial results.

We expect that our future available capital resources will consist primarily of cash on hand, cash generated from our business, if any, and future debt and/or equity financings, if any.

In addition, we are subject to legal proceedings, claims and litigation arising in the ordinary course of business. While the amounts claimed may be substantial, the ultimate liability cannot presently be determined because of considerable uncertainties that exist. Therefore, it is possible that the outcome of those legal proceedings, claims and litigation could adversely affect our quarterly or annual operating results or cash flows when resolved in a future period. However, based on facts currently available, management believes such matters will not adversely affect in any material respect our financial position, results of operations or cash flows.