Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended November 30, 2011

OR

Commission File Number 333-57818

AUGME TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

350 7th AVENUE, 2nd FLOOR

NEW YORK, NY 10001

(Address of principal executive offices)

(Zip Code)

(855) 423-5433

(Registrant’s telephone number, including area code)

(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 than 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, or a non-accelerated filer. See definition of “accelerated filer,” and “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

As of January 17, 2012 the issuer has 94,310,683 shares of common stock, par value $.0001, issued and outstanding.

Table of Contents

TABLE OF CONTENTS

Table of Contents

AUGME TECHNOLOGIES, INC.

BALANCE SHEETS

(UNAUDITED)

See accompanying notes to the consolidated financial statements.

1

Table of Contents

AUGME TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

See accompanying notes to the consolidated financial statements.

2

Table of Contents

AUGME TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

See accompanying notes to the consolidated financial statements.

3

Table of Contents

AUGME TECHNOLOGIES, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED NOVEMBER 30, 2011

(UNAUDITED)

See accompanying notes to the consolidated financial statements.

4

Table of Contents

AUGME TECHNOLOGIES, INC.

STATEMENT OF CASH FLOWS

(UNAUDITED)

See accompanying notes to the consolidated financial statements.

5

Table of Contents

AUGME TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Augme Technologies, Inc. (“Augme” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Augme’s Annual Report filed with the SEC on Form 10-K, as amended.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. Certain prior year amounts have been reclassified to be consistent with the current period classification.  The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the fiscal year ended February 28, 2011 as reported in Form 10-K, as amended, have been omitted.

Description of Business

Augme Technologies, Inc. provides strategic services and mobile technology to leading consumer and healthcare brands. We were formerly known as Modavox, Inc. and changed our name to Augme Technologies, Inc. in February 2010. Augme owns the “Method and System for Adding Function to a Webpage” portfolio of patents, which cover technical processes and methods that are believed to be a foundational component of behavioral targeting — the automatic provision of customized content to individuals based on information such as past web activity, personal preferences, geography, or demographic data. Augme’s AD LIFE™ mobile marketing technology platform allows marketers, brands, and agencies the ability to plan, create, test, deploy, and track mobile marketing programs. Through the use of consumer response tags (CRTs) such as 2D codes, UPC codes, SMS, and image recognition, AD LIFE™ facilitates consumer brand interaction and the ability to track and analyze campaign results. Using its own patented device-detection and proprietary mobile content adaptation software, AD LIFE™ solves the mobile marketing industry problem of disparate operating systems, device types, and on-screen mobile content rendering. Augme also provides business to consumer utilities including national mobile couponing solutions, strategic mobile healthcare tools, custom mobile application development, and consumer data tracking and analytics.

Augme operates under one business segment and is headquartered in New York City and a new office location near Seattle, Washington.  Additionally, the Company maintains offices in Atlanta, Tucson, Dallas, Chicago, San Francisco and Los Angeles.  During July and August 2011, the Company made two business acquisitions, see Note 4.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities in the financial statements and the accompanying notes. Significant estimates include the allowance for doubtful accounts, the useful lives of fixed assets, stock-based compensation, assumptions used in estimating the fair value of warrants, assumptions used in testing for impairment of goodwill and other long-lived assets, including identified intangibles; and the assumptions used in estimating the fair value of assets acquired and liabilities assumed in business combinations. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements.

Fair Value of Financial Instruments

The fair value of some of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate their respective carrying value due to their short maturity. Financial instruments that potentially subject the Company to concentrations of credit risk are cash-equivalents and trade receivables.

Capitalized Legal Patent Costs

We capitalize external legal costs incurred in the defense of our patents where we believe that there is an evident increase in the value of the patent and that the successful outcome of the legal action is probable. During the course of any legal action, the court where the

6

Table of Contents

case is pending makes decisions and issues rulings of various kinds, which may be favorable or unfavorable. We monitor developments in the legal action, the legal costs incurred and the anticipated outcome of the legal action, and assess the likelihood of a successful outcome based on the entire action. If changes in the anticipated outcome occur that reduce the likelihood of a successful outcome of the entire action to less than probable, the capitalized costs would be charged to expense in the period in which the change is determined. The capitalized legal patent costs are recorded within intangible assets on our consolidated balance sheets.

Intangible Assets

Intangible assets with finite lives are amortized on a straight-line basis over the estimated useful life. A majority of our finite-lived intangible assets pertain to a portion of our patent portfolio, acquired customer relationships, and have estimated useful lives ranging from 5 years to 10 years. See Note 5.

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and intangible assets of acquired entities. We perform a goodwill impairment test annually on February 28 of our fiscal year and more frequently if an event or circumstance indicates that an impairment may have occurred. We did not record any charges related to goodwill impairment during the year ended February 28, 2011 or the three or nine months ended November 30, 2011.

Impairment of Long-Lived Assets including Intangible Assets

We assess the recoverability of long-lived assets when events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. If undiscounted expected cash flows to be generated by a long-lived asset or asset group are less than its carrying amount, we record an impairment to write down the long-lived asset or asset group to its estimated fair value. Fair value is estimated based on discounted expected future cash flows. No impairment of long-lived assets was considered necessary during the three or nine month periods ended November 30, 2011 or 2010.

Business Combinations

We account for business combinations using the acquisition method of accounting. The consideration transferred or transferable to sellers and the assets acquired and liabilities assumed are recorded at their estimated fair values at the date of acquistion. Acquisition transaction costs are expensed as incurred.

Deferred Revenues

Deferred revenues primarily consist of billings or payments received in advance of revenue recognition from our subscription and professional services and support and maintenance revenues and are recognized as the revenue recognition criteria are met. We generally invoice our customers in monthly or quarterly installments for subscription revenue and as services are provided. Accordingly, the deferred revenues balance does not represent the total contract value of annual or multi-year non-cancelable subscription agreements.  Deferred revenues also include certain deferred professional services fees, which are recognized as revenues ratably over the associated contract term or under a percentage of completion.

Share-Based Payments

The fair value of our share based payments for stock options and stock warrants is estimated at the grant date based on the stock award’s fair value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model and is recognized as expense over the requisite service period using the straight line method. The BSM model requires various highly judgmental assumptions including expected volatility and option life. We estimate the forfeiture rate based on historical experience. To the extent our actual forfeiture rate is different from our estimates; share-based payment expense is adjusted accordingly in that period.

Revenue Recognition Policy

The Company provides access to its AD LIFE™ 4.0 and HIP 7.0 software-as-a-service (“SaaS”) mobile marketing platforms and services through term license fees, support fees, and mobile marketing campaign fees.  The contracts generally include multiple elements as part of the overall service delivery and revenues are generally recognized over the term of the contract.  The Company also offers professional services related to the strategy and execution of mobile marketing campaigns.  Professional services revenue is

7

Table of Contents

recognized as the services are performed as these services have value on a standalone basis, do not involve unique acceptance criteria and have a fair value that can be obtained as the other services are generally sold without professional services.

Contracts may include multiple deliverables such as production and delivery of media content, hosting, fees from content retention, delivery or placement of mobile or online advertising content.  Contracts may also include multiple deliverables such as custom software creation, audio production, and delivery of online media content or hosting. Revenues from multiple delivery contracts for the production and delivery of online media content and hosting are recorded pro-rata over the term of the media content production, delivery or hosting period.

Revenues from the creation of custom software are generally a component of contracts that include hosting and/or production and delivery services. Software revenues are recorded when the software is completed and accepted by the client if the software has free standing functionality, the fee for the software is separately determinable and the Company has demonstrated its capability of completing any remaining terms under the contract. Otherwise all revenues under the multi-deliverable contracts are recorded pro rata over the term of the production and content delivery or hosting period.

Fees for producing interactive advertising content are based upon a fee for the production and hosting of the advertising content and/or a percentage of the fees paid by third party advertisers. Fees from third parties for the production and hosting of the advertising content are recorded pro rata over the related hosting period. Fees representing a percentage of the fees paid by third party advertisers for advertising on third party or company websites are recorded when the contractual criteria has been met and amounts are due from third party advertisers.

Income or Loss Per Share

Basic income or loss per share is computed using the weighted average number of common shares outstanding during the period, and excludes any dilutive effects of common stock equivalent shares, such as stock options and stock warrants. Diluted income or loss per share is computed using the weighted average number of common shares outstanding and common stock equivalent shares outstanding during the period using the treasury stock method. Common stock equivalent shares are excluded from the computation if their effect is anti-dilutive, see Note 3.

Recently Issued Accounting Standards

In May 2011, the FASB amended ASC 820, “Fair Value Measurements.” This amendment is intended to result in convergence between U.S. GAAP and International Financial Reporting Standards requirements for measurement of and disclosures about fair value. This guidance clarifies the application of existing fair value measurements and disclosures, and changes certain principles or requirements for fair value measurements and disclosures. The updated guidance is effective on a prospective basis for financial statements issued for interim and annual periods beginning after December 15, 2011. The adoption of this guidance will not have a material impact on our consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08, “Testing Goodwill for Impairment.” ASU 2011-08 simplifies the goodwill impairment assessment by permitting a company to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If the conclusion is that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the company would be required to conduct the current two-step goodwill impairment test. Otherwise, it would not need to apply the two-step test. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. We do not expect the adoption of ASU 2011-08 to have a material impact on our financial position, results of operations, or cash flows.

2.  RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

On December 22, 2011, based on the recommendation of the Audit Committee, the Board of Directors determined that the Company should restate its consolidated financial statements for the second quarterly period of fiscal year 2012, ending August 31, 2011. Accordingly, on December 29, 2011, the Company announced that its previously released financial statements for this period should not be relied upon.

8

Table of Contents

The Company identified the following errors within its previously issued financial statements for the period ended August 31, 2011; which were corrected in the Form 10-Q/A for the period ended August 31, 2011, filed on January 17, 2012.

Accounting for share-based payments and warrants - The Company corrected errors in the recognition of share-based payments. The Company incorrectly recognized expense related to share based payments issued to employees and service providers, using the contractual term of the warrant rather than the corresponding vesting or requisite service period. Additionally, for certain warrants issued in connection with equity financings or issued in connection with the issuance of common stock, the Company incorrectly recognized warrant expense during the period, instead of classifying the amount as an adjustment to paid in capital. The errors related to the share-based payments impacted the quarterly interim period ended August 31, 2011 resulting in an increase to warrant expense of $300,000.

Accounting for business combinations — The Company corrected errors in the accounting for its business acquisitions of Hipcricket, Inc. (“Hipcricket”) and JAGTAG.  To correct the error related to the acquisition of Hipcricket the Company has recorded an increase to goodwill and to acquisition related contingent consideration to reflect the fair value of the contingent consideration related to the earn-out described in Note 4, resulting in a $23,284,000 increase, respectively, as of the date of acquisition.  The Company also incorrectly capitalized acquisition related transaction costs for the Hipcricket and JAGTAG business acquisitions, which should be expensed as incurred.  This change resulted in additional transaction expense of $696,616 during the six month period ended August 31, 2011.  These acquisitions were consummated during the Company’s second quarter ended August 31, 2011.

9

Table of Contents

NOTE 3 — EQUITY TRANSACTIONS

COMMON STOCK:

During the nine months ended November 30, 2011, Augme completed the following common stock transactions:

Issued 9,400,000 common shares in connection with a public offering, with net proceeds of $18,743,052.  These shares were issued at $2.15 per share, and were registered on an S-3 registration statement which we filed with the Securities and Exchange Commission and which allows us to sell securities having a total value of up to $75.0 million.  Transaction fees and other fees related the underwriting were $1,466,948.

Issued 11,457,359 shares of common shares in connection with the asset purchase acquisition of Hipcricket at a price of $3.10, and issued 1,464,085 shares of common stock in connection with the acquisition of JAGTAG at a price per share of $3.86.

Issued 111,191 shares of common stock for investment banking services related to the acquisition of Hipcricket at a price of $2.15 per share.

STOCK OPTIONS AND WARRANTS:

STOCK OPTIONS

The estimated fair value of stock-based awards is recognized as compensation expense over the vesting period of the award, net of estimated forfeitures. We estimate forfeitures based on historical experience and expected future activity. The fair value of stock option awards is estimated at the grant date based on the fair value of each vesting tranche as calculated by the BSM option-pricing model. The BSM model requires various highly judgmental assumptions including expected volatility and option life. The fair values of our equity awards, primarily stock option grants, were estimated with the following weighted average assumptions:

The affect on our results of operations of recording stock-based compensation expense for the three and nine months ended November 30, 2011 and 2010 was as follows, which is included in Selling, General Administrative expenses within the statement of operations:

The Company maintains stock incentive plans for its employees. The 2010 Stock Incentive Plan provides for the grant to employees, officers, directors and consultants of options, restricted shares, and other stock based awards to purchase up to an aggregate of 15,000,000 shares of common stock. The stock based awards may consist of both incentive stock options and non-qualified options.  The Company issued 10,924,971 stock options under this plan as of November 30, 2011.

The Company also has issued non-qualified stock options to consultants and vendors for services provided, as well as employees, including officers, directors and consultants.

10

Table of Contents

The summary of activity for Augme’s stock options is presented below:

As of November 30, 2011, there was $18,305,612 of unamortized stock option expense, which is expected to be amortized through August 2016 over the remaining weighted average expected life 4.22 years.

The aggregate intrinsic value of the exercisable options at November 30, 2011 was $3,955,671

WARRANTS:

As of November 30, 2011 there was $951,081 of unamortized expense, which is expected to be expensed through November 2013 over the remaining weighted average contractual life of 3.19 years.

The estimated fair values of our stock warrant awards issued to service providers and employees were estimated with the following weighted average assumptions:

The fair value of the stock warrants issued is expensed.  The warrant expense for the three and nine months ended November 30, 2011 and 2010 was as follows, which is included in Selling, General and Administrative expense within the statement of operations:

11

Table of Contents

The summary of activity for Augme’s warrants is presented below:

The aggregate intrinsic value of the exercisable warrants at November 30, 2011 was $2,896,622.

Common Stock Reserved for Future Issuance

The following table summarizes our shares of common stock reserved for future issuance at November 30, 2011:

NOTE 4 - ACQUISITIONS

Acquisition of Hipcricket, Inc. Assets:  On August 25, 2011, Augme completed its acquisition of the business and substantially all of the assets of Hipcricket pursuant to the Amended and Restated Asset Purchase Agreement, dated August 25, 2011, between Augme and Hipcricket, as described under Item 1.01 of Augme’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 31, 2011. The Company has accounted for the acquisition as a business combination. The results of Hipcricket’s operations have been included in the consolidated financial statements of the Company since the date of the acquisition.

The estimated fair value of the consideration was $62.8 million, included $3 million in cash, $35.5 million in Augme’s common stock (11,457,359 shares at a price of $3.10), a $1 million promissory note, and $2 million to be paid to holders of Hipcricket options, which amount Augme may pay, at its discretion, in either cash or Augme’s common stock.   In addition, the transaction calls for a twelve-month earn-out payment to Hipcricket shareholders and employees, which if achieved will be no less than $15.0 million and may be as high as $27.5 million.  The earn-out may be paid in cash or Augme’s common stock at Augme’s discretion provided that the transaction remains a tax-free reorganization.  The contingent consideration recorded at the time of the acquisition was $23.3 million which is the discounted present value of the estimated earn-out of $25.2 million.  As of November 30, 2011, the Company remeasured the contingent consideration to fair value and increased the acquisition related contingent consideration by $966,750 which is classified in other expense.

The consideration and the tangible and intangible assets acquired and liabilities assumed have been recorded at their estimated fair values. The fair value of the consideration paid in excess of net assets acquired is recorded as goodwill. Management used an independent valuation to estimate the acquisition date fair values.  The following table summarizes the estimates of fair value as of the date of acquisition:

12

Table of Contents

The following table reflects the fair value of the acquired identifiable intangible assets and related estimates of useful lives:

Unaudited Pro Forma Results of Operations for Hipcricket Acquisition

The results of this acquisition are included in the consolidated financial statements from the date of acquisition. The unaudited pro forma results of operations data are being furnished solely for informational purposes and are not intended to represent or be indicative of the consolidated results of operations that we would have reported had the Hipcricket acquisition been completed as of the dates and for the periods presented, nor are they necessarily indicative of future results.

Acquisition of JAGTAG, Inc. Assets:  On July 22, 2011, Augme completed its acquisition of the business and substantially all of the assets of JAGTAG pursuant to the Asset Purchase Agreement, dated July 22, 2011, between Augme and JAGTAG, as described under Item 1.01 of Augme’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 26, 2011. The Company has accounted for the acquisition as a business combination. The results of JAGTAG’s operations have been included in the

13

Table of Contents

consolidated financial statements of the Company since the date of the acquisition.  The estimated fair value of the consideration transferred to sellers was $5.6 million, comprised of 1,464,085 shares of Augme common stock at a price of $3.86 per share.

The estimated fair value of the intangible assets was based on a preliminary valuation and the final purchase price allocation may differ due to ongoing evaluations of the valuation. The following table summarizes the estimates of fair value as of the date of acquisition:

NOTE 5 — GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the nine months ended November 30, 2011 are as follows:

We do not expect all of the amounts recorded as goodwill to be deductible for tax purposes. The measurement period for purchase price allocations ends as soon as information on the facts and circumstances becomes available, but will not exceed 12 months. Adjustments in the purchase price allocation may require a recasting of the amounts allocated to goodwill retroactive to the period in which the acquisition occurred.

Intangible assets relate to patent filing and patent protection litigation costs; as well as customer relationships, trade names, trademarks and technology obtained in past acquisitions, including the acquisitions of Hipcricket and JAGTAG during fiscal 2012. The following table presents the gross carrying value of the acquired intangible assets and accumulated amortization:

14

Table of Contents

Amortization expense was $1,165,824 and $1,558,210 for the three and nine months ended November 30, 2011, respectively, and $170,688 and $520,713 for the three and nine months ended November 30, 2010 respectively. Amortization in future periods is expected to be as follows:

15

Table of Contents

NOTE 6 — FAIR VALUE MEASUREMENTS

The changes in the carrying amount in the fair value of acquisition related contingent consideration for the nine months ended November 30, 2011 are as follows

NOTE 7 — CONTINGENCIES

Litigation

In the normal course of business, we may become involved in various legal proceedings.  Except as stated below, we know of no pending or threatened legal proceeding to which we are or will be a party that, if successful, might result in a material adverse change in our business, properties or financial condition.

Litigation Update

Tacoda, Inc. In 2007, Augme filed a lawsuit against Tacoda, Inc. in the U.S. District Court for the Southern District of New York, seeking damages for alleged infringement of Augme-owned U.S. Patent Nos. 6,594,691 (“Method and System for Adding Function to a Web Page”) and 7,269,636 (“Method and Code Module for Adding Function to a Web Page”).  On September 6, 2011, Judge McMahon issued a Supplemental Claims Construction ruling that is believed to be favorable to the Company with respect to certain claim interpretations. On November 14, 2011, Hon. Colleen McMahon, District Judge for the U.S. District Court for the Southern District of New York, issued an order granting in part and denying in part Defendants AOL’s and Tacoda’s motion for a summary judgment of non-infringement.

Augme had asserted that AOL/Tacoda had infringed its patented targeted advertising technology on two distinct grounds. The Court held that Augme could not prevail on one of the asserted grounds under the Court’s claim construction ruling.  The Court withheld ruling on the other ground and requested that Augme provide further briefing to establish that the Data Agent combined with Data Tag employed in Defendants’ advertising network operates in essentially the same manner as claimed within the patents asserted by Augme.  Augme filed an Opposition Brief on December 5, 2011 asserting that infringement exists under the Doctrine of Equivalents. If the Court agrees with Augme’s position, the case will proceed to trial.

AOL, LLC; Time Warner, Inc.; and Platform-A, Inc.  On September 10, 2008, the Company filed a complaint against AOL, LLC in the U.S. District Court for the Central District of California, seeking damages for alleged infringement of its trademark BOOMBOX RADIO.  On January 21, 2009, the Company filed a First Amended Complaint against AOL, LLC; Time Warner, Inc.; and Platform-A, Inc., for trademark infringement relating to the mark BOOMBOX RADIO, and infringement of the Company’s U.S. Patent Nos. 6,594,691 and 7,269,636.  Pursuant to a court order dated April 14, 2009, the case was transferred to the U.S. District Court, Southern District of New York.  This case has been stayed pending the outcome of Augme’s case against AOL and Tacoda.  A pre-trial scheduling conference has been scheduled with Judge Robert Sweet for February 1, 2012.

Yahoo! Inc.  On November 16, 2009, Augme filed a complaint against Yahoo! Inc. seeking damages for alleged infringement relating to its U.S. Patent Nos. 6,594,691 and 7,269,636.  The matter is currently pending in the United States District Court for the Northern District of California, Case No. C-09-5386 EDL.  The remedies available to Augme, if successful, include an injunction prohibiting any infringing acts, an appropriate award of damages adequate to compensate the Company for the infringement, and potential attorneys’ fees and costs of the action.

On November 12, 2010, Yahoo! filed a motion for summary judgment with the United States District Court for the Northern District of California.  On December 3, 2010, an order was issued by Magistrate Judge Joseph C. Spero denying the Yahoo! motion without prejudice.  On December 3, 2010, Yahoo! filed a Notice of Motion and Motion for Leave to File Amended Answer with Additional Counterclaims seeking damages for costs of defense and willful infringement, and to join World Talk Radio, LLC as a Counterclaim Defendant.  Augme believes that there is no merit with respect to these counterclaims and will continue to vigorously pursue the prosecution of the claims related to Yahoo!’s infringement against the Company’s patents.  On August 11, 2011, a Markman hearing was held at the United States District Court for the Northern District of California with Magistrate Judge Joseph C. Spero.  On September 13, 2011, Judge Spero issued a Claims Construction Order that is believed to be favorable to the Company with respect to certain claim interpretations.  On January 6, 2012, Judge Spero issued an order setting the trial date for this matter to be held January 7, 2013.

16

Table of Contents

On November 30, 2011, the United States Patent and Trademark Office’s (“USPTO”) announced its decision to grant Yahoo Inc.’s request for reexamination on the Company’s U.S. Patent No. 7,269,636.  It is believed that Augme has strong evidence supporting the patentability of the claims of its patent and that the outcome of this reexamination proceeding will only further enhance the strength of the patent.

The Company has filed two Inter Partes Reexamination Requests with assignments to the Central Reexamination Unit of the USPTO for the Yahoo! U.S. Patent Nos. 7,640,320 and 7,512,622 that Yahoo! has asserted in its counterclaim against Augme.  Both requests for reexamination have been accepted and assigned filing dates and control numbers by the USPTO.  The Notices were mailed on November 7, 2011 and November 14, 2011 but were assigned sequential Control Nos. 95/001,794 and 95/011,795.  Both requests received a filing date of October 26, 2011.  On January 5, 2012, the requests were accepted by the USPTO Central Reexamination Unit. This case remains pending.

Pandora Media, Inc.  On April 29, 2011, Augme filed a complaint against Pandora Media, Inc. in the U.S. District Court, District of Delaware, seeking damages relating to the alleged infringement of Augme’s U.S. Patent No. 7,831,690 (“Appliance Metaphor For Adding Media Function To A Web Page”).  Pandora answered on June 22, 2011.  On November 22, 2011 Pandora announced Quarterly revenue of $75 million has grown 99% year-over-year, Quarterly total listener hours of 2.1 billion grew 104% year-over-year, and its 66% share of U.S. Internet radio grew from 53% from last year and its’ 4.3% share of total U.S. radio listening grew from 2.1% in 3Q11. Pandora also announced that the company raises fiscal 2012 revenue and profitability guidance. Augme’s experts have begun to quantify royalty and estimated damages related to Pandora’s infringement of Augme’s ‘690 patent.  Discovery has begun, and the Company intends to vigorously prosecute this action.

Gannett Co., Inc. Lucidmedia Networks, Inc.; and AOL, Inc.  On April 29, 2011, Augme filed a complaint against Gannett Co., Inc.; Lucidmedia Networks, Inc.; and AOL, Inc. in the U.S. District Court for the Eastern District of Virginia, seeking damages relating to the alleged infringement of the Company’s U.S. Patent Nos. 7,783,721 (“Method and Code Module For Adding Function to a Web Page”) and 7,831,690 (see above).  On July 26, 2011, the case was moved to the U.S. District Court for the Southern District of New York.  This case remains pending.

On June 24, 2011, Lucidmedia Networks, Inc. filed a counterclaim suit against Augme in the U.S. District Court for the Eastern District of Virginia.  The Company intends to vigorously contest the merit of these counterclaims and will continue to pursue the prosecution of infringement against Lucidmedia Networks, Inc. on the Company’s patent claims.  This case will be tried separately from the Gannett Co., Inc.; Lucidmedia Networks, Inc.; and AOL, Inc case described above.  A mediation conference is scheduled for January 23, 2012.

Brandofino Communications v. Augme Technologies, Inc. On September 27, 2011 Brandofino Communications, Inc. (“Brandofino”) filed suit against Augme and New Aug LLC in the Supreme Court of the State of New York, New York County. The complaint alleges, inter alia, breach of contract and unjust enrichment claims arising from work Brandofino allegedly performed for Augme pursuant to a marketing agreement entered into by Brandofino and Augme. The complaint seeks damages in excess of one million dollars. Augme has served its Answer and set forth counterclaims for breach of contract, unfair competition, and violations of New York General Business Law Section 349 (relating to violations of Augme’s intellectual property rights). The Company intends to vigorously contest the merit of this case.

NOTE 8 — CONCENTRATION OF RISK

During the quarter ended November 30, 2011, 3 clients accounted for approximately 10 percent, 7 percent and 6 percent respectively of the Company’s revenue and no other client was over 5 percent.  In the quarter ended November 30, 2010 there were 3 clients that accounted for over 55 percent of revenues.

At November 30, 2011 four customers accounted for 32 percent of accounts receivable, the largest is 17 percent.  At February 28, 2011 three customers accounted for 62 percent of accounts receivable.

17

Table of Contents

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

This report contains forward-looking statements.  These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

Factors that might affect our forward-looking statements include, among other things:

·      overall economic and business conditions;

·      the demand for our products and services;

·      competitive factors in the industries in which we compete;

·      emergence of new technologies which compete with our product and service offerings;

·      other capital market conditions, including availability of funding sources;

·      changes in government regulations related to our industry.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements.  These statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties.  Given these uncertainties, you should not place undue reliance on these forward-looking statements.  We discuss many of these risks in greater detail under the heading “Risk Factors” included in our Annual Report on Form 10-K, as amended, which we filed with the Securities and Exchange Commission.  Also, these forward-looking statements represent our estimates and assumptions only as of the date of the document containing the applicable statement.

Unless required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or developments.  Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements.

OVERVIEW

We provide strategic services and mobile technology to leading consumer and healthcare brands. Our sales are comprised of a combination of SaaS based sales, individual campaign fees, and mobile advertising fees.

We own the “Method and System for Adding Function to a Webpage” portfolio of patents, which cover technical processes and methods that we believe are an indispensable component of behavioral targeting — the automatic provision of customized content to individuals based on information such as past web activity, personal preferences, geography, or demographic data.  Our AD LIFE™ 4.0 and HIP 7.0 SaaS mobile marketing technologies have been used in campaigns for such clients as Macy’s, MillerCoors, Nestle, KFC, and Clear Channel.  Our technologies allow marketers, brands, and agencies the ability to plan, create, test, deploy, and track mobile marketing programs across mobile channels, including SMS, 2D/QR codes, mobile websites, advertising networks, social media and branded apps.  AD LIFE™ 4.0 and HIP 7.0 facilitate consumer brand interactions and the ability to track and analyze campaign results.  We believe that our patented device-detection and proprietary mobile content adaptation software provides a solution to the mobile marketing industry problem of disparate operating systems, device types, and on-screen mobile content rendering. We also provide business to consumer utilities including national mobile couponing solutions, strategic mobile healthcare tools, custom mobile application development, and consumer data tracking and analytics.  We are headquartered in New York City.

On August 25, 2011, we completed our acquisition of the business and substantially all of the assets of Hipcricket.  Hipcricket provides a cloud-based mobile marketing and advertising SaaS platform that empowers its clients to engage customers, drive loyalty, and increase sales by creating, analyzing, and optimizing integrated mobile marketing campaigns and enterprise class solutions.  Hipcricket’s clients connect with consumers across every mobile channel, including SMS, 2D/QR codes, mobile Web sites, advertising networks, social media and branded apps.  Hipcricket has also created the first comprehensive permission-based mobile ad network, targeting customers via location and highly-specific demographic information across SMS, display, rich media and video.

18

Table of Contents

On July 22, 2011, we completed our acquisition of the business and substantially all of the assets of JAGTAG. Unlike other 2D barcode systems, JAGTAG delivers multimedia to both smartphones and standard phones without requiring the consumer to download an application prior to use. As a result, JAGTAG can share video, images, music and text with more mobile consumers than mobile web-dependent media. Anywhere mobile consumers encounter JAGTAGs, they can use their phones to request and immediately receive multimedia content, including video, audio, pictures, coupons and text.

Our goal is to be the leading provider of mobile marketing.  The principal elements of our strategy to achieve this goal are to:

·                  capitalize upon our existing patented technology to further develop new product innovations and licensing opportunities, fully leveraging the value of our technology and patent portfolio;

·                  invest in our platform to address changes in our end markets and technology;

·                  further penetrate brands within our existing customer base and add new strategic relationships with brands and advertising agencies;

·                  grow our revenue by increasing the size of our sales team; and

·                  monetize the value of our intellectual property through patent enforcement, licensing and collaboration efforts.

Trends, Events and Uncertainties

On August 25, 2011 (the “Closing Date”) we acquired all of the assets of Hipcricket, including its intellectual property, and we assumed certain liabilities.  Among the liabilities we assumed were liabilities arising after the Closing Date that were in connection with or incidental to our ownership of the acquired assets.

In December 2008, Hipcricket received a letter from TeleComunications Systems, Inc. (“TCS”) alleging patent infringement related to wireless messaging.  To date, TCS had not instituted any legal action against Hipcricket relating to these allegations.  Since June 2010 five Hipcricket clients received infringement notices from Helferich Patent Licensing, LLC (“Helferich”) involving multiple patents and these clients sought indemnity from Hipcricket against these claims.  To date, Helferich does not assert that Hipcricket’s patents or technology have infringed Helferich’s patents.