SPENDSMART NETWORKS, INC. - FORM 10-K

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EXCEL - IDEA: XBRL DOCUMENT - SPENDSMART NETWORKS, INC.	Financial_Report.xls
EX-31.2 - SPENDSMART NETWORKS, INC.	ex31-2.htm
EX-32.2 - SPENDSMART NETWORKS, INC.	ex32-2.htm
EX-32.1 - SPENDSMART NETWORKS, INC.	ex32-1.htm
EX-21.1 - SPENDSMART NETWORKS, INC.	ex21-1.htm
EX-31.1 - SPENDSMART NETWORKS, INC.	ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________to _______________.

Commission file number: 000-27145

SPENDSMART NETWORKS, INC.

(f/k/a The SpendSmart Payments Company)

(Exact Name of Registrant as Specified in its Charter)

Delaware			33-0756798
(State or jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

805 Aerovista Pkwy, Suite 205
San Luis Obispo California			93401
(Address and of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (877) 541-8398

Common Stock, par value $0.001 per share

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o No x

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

Indicate by check mark whether the registrant 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 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 if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b(2) of the Exchange Act. (Check one).

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o(1)

Smaller reporting company x

(1) 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

The aggregate market value of the voting and non-voting common equity on March 25, 2015 held by non-affiliates of the registrant (based on the average bid and asked price of such stock on such date of $.75) was approximately $13,857,581. Shares of common stock held by each officer of the Company (or of its wholly-owned subsidiary) and director and by each person who owns 10% or more of the outstanding common stock of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. Without acknowledging that any individual director of registrant is an affiliate, all directors have been included as affiliates with respect to shares owned by them.

At March 25, 2015, there were 18,476,774 shares outstanding of the issuer’s common stock, par value $0.001 per share.

SPENDSMART NETWORKS, INC.

TABLE OF CONTENTS

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	4
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Mine Safety Disclosures	16
PART II
Item 5.	Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
Item 6.	Selected Financial Data	18
Item 7.	Management's Discussion and Analysis of Financial Condition And Results of Operations	18
Item 8.	Financial Statements and Supplementary Data	25
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	54
Item 9A.	Controls and Procedures	54
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	54
Item 11.	Executive Compensation	60
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	60
Item 13.	Certain Relationships and Related Transactions, and Director Independence	61
Item 14.	Principal Accountant Fees and Services	62
PART IV
Item 15.	Exhibits and Financial Statement Schedules	64

SIGNATURES		65

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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

In addition to historical information, this Annual Report on Form 10-K may contain statements relating to future results of SpendSmart Networks, Inc. (including certain projections and business trends) that are “forward-looking statements.” Our actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to, without limitation, statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or achievements of the Company to be materially different from any future results or achievements of the Company expressed or implied by such forward-looking statements. Such factors include, among others, those set forth herein and those detailed from time to time in our other Securities and Exchange Commission (“SEC”) filings. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Also, there can be no assurance that the Company will be able to raise sufficient capital to continue as a going concern.

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PART I

Item 1 - Business

As used in this Annual Report on Form 10-K, the terms "we", "us", "our", “SpendSmart”, “SpendSmart Networks, Inc.”, and the "Company" means SpendSmart Networks, Inc., a Delaware corporation, its wholly-owned subsidiary SpendSmart Networks, Inc., a California corporation or their management.

Current Business & Strategy

Through our Mobile and Loyalty Marketing programs and proprietary website building software, we provide proprietary loyalty systems and a suite of digital engagement and marketing services that help local merchants build relationships with consumers and drive revenues. These services are implemented and supported both internally and by a vast network of certified digital marketing specialists, aka “Certified Masterminds,” who drive revenue and consumer relationships for merchants via loyalty programs, custom websites, social media engagement, mobile marketing, mobile commerce and financial tools, such as reward systems. We enter into licensing agreements for our proprietary loyalty marketing solutions and custom website building tools with “Certified Masterminds” which sell and support the technology in their respective markets. Our products aim to make Consumers’ dollars go further when they spend it with merchants in the SpendSmart network of merchants, as they receive exclusive deals, earn rewards and ultimately build a connection with their favorite merchants.

Our business strategy consists of delivering and managing:

(i)	Loyalty platforms

a.	Merchant funded rewards

b.	Loyalty rewards tablet/kiosk

c.	Proprietary rewards management system

(ii)	Mobile marketing technology

a.	Text and email messaging

b.	Customer analytics and propensity marketing

c.	Patent pending ‘automated engagement’ engine

d.	Text2Win sweepstakes features

(iii)

Enterprise level loyalty and mobile marketing consulting

a.	Monthly hands on reviews by our “Certified Masterminds”

b.	Campaign creation and optimization

c.	Localized support

We plan to pursue these strategies across a broad range of consumer, business, for-profit and non-profit organization, and government/municipal sectors. In addition, we have partnered with various groups to develop strategic affinity/co-brand opportunities. We expect to continue such partnership programs with various global for-profit and non-profit organizations.

Mobile and Loyalty Marketing Division

On February 11, 2014, we acquired substantially all of the assets of Intellectual Capital Management, LLC dba “SMS Masterminds.” As part of this transaction, Alex Minicucci was appointed the company’s Chief Executive Officer. Upon the completion of the acquisition, we developed our Mobile and Loyalty Marketing Division. SMS Masterminds is a turnkey mobile loyalty solution focused on delivering mobile and loyalty marketing services for small and medium sized businesses. SMS Mastermind’s business is composed of multiple revenue components including set up fees and recurring license fees, messaging, equipment and marketing services fees and value added mobile marketing and mobile commerce services. We expect to offer a “SpendSmart Network” of services and products to enhance and support all of our merchant partners’ businesses.

Our mobile loyalty solution is focused on mobile marketing for small and medium sized businesses. Our proprietary loyalty marketing solution is licensed to “certified Masterminds” to sell and support the technology in their respective markets. This technology consists of our loyalty and mobile marketing platforms and proprietary website development tools. The licensee sets up and deploys an appropriate loyalty solution customized for the merchant they are servicing. As SMS messages are sent out, revenues are generated on both the licensee and SpendSmart side.

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We enter into licensing agreements with licensees that seek to utilize our proprietary loyalty and mobile marketing platforms and website development tools. Typically, our licensing agreements provide for a term of two years, and provide the licensee with an exclusive territory designation. As part of the initial setup fee that is paid by the licensee to us, they receive access to our support and training services and materials, as well as loyalty kiosks. In some cases, we provide an in house financing option that allows the licensee to finance part of the cost of the initial setup fee over a period of up to two years.

We provide training to each new licensee, wherein they become a “Certified Mastermind” and we guide them through the process of establishing their independent logo, building their exclusive brand, and setting up all the elements of their website and promotional materials. Upon completion of the training process, the licensee is assigned a senior licensee as their “Mentor” who comes to their location for a three-day training and initial sales visit. Upon completion of the initial training, new licensees then begin working with with local merchants in their exclusive territory to sell and support the mobile and loyalty marketing services and website development services that they provide.

In addition to our introductory training program, our licensees have access to an online forum and knowledge base, and the ability to interface with various in house resources for needs related to merchant account management and support, as well as sales and business development.

Card Division & Pre-Paid Program Management and Platform

On November 26, 2014, in an effort to reduce expenses as well as focus its resources on its Mobile and Loyalty Marketing Division, the Company decided to begin a wind down of the operations of its Card Division. All Card Division related operations ceased on or about January 26, 2015. The Company is corresponding with its customers to effect an orderly wind down of its operations. The Company will maintain certain card customer data for five (5) years. The Card Division consisted of our pre-paid card programs and our pre-paid program management and platform. The pre-paid card program included our general purpose card and our SpendSmart MasterCard Teen Prepaid Card.

TechXpress Acquisition

On September 18, 2014, we purchased substantially all of the web related assets of TechXpress, Inc. (“TechXpress”), a California corporation. TechXpress provides personalized website, eCommerce and mobile app development services, as well as web marketing tools and analytics. We anticipate that we will integrate these solutions with our existing loyalty program offerings as well as utilize these resources to launch a website development platform and license.

Advertising and Marketing Strategies

SpendSmart develops the loyalty and mobile marketing license through the acquisition of interested ‘prospects’ or leads generated through various advertisements placed on web portals throughout the internet, as well as through referrals from existing licensees. These lead sources have proven to be a consistent and reliable channel for interested potential licensees. We intend to continue to look for new sources of licensee leads, as well as increase our budget to increase our volume of leads generated. All other aspects of the business will be promoted through our network of licensees in North America.

Financial Model

Our Mobile and Loyalty Marketing and website development programs provide for multiple revenue components including set up fees and recurring license fees, messaging, equipment and marketing services fees and value added mobile marketing and mobile commerce services.

We employ outside consultants to handle overflow development work on our proprietary software platforms, marketing services, legal and other specific business functions when needed. While we intend to restrict the number of new employees we add to our Company’s workforce, we believe that new personnel will be necessary in the future in the areas of project management, software programming, operations, accounting, sales and administration.

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Barriers to Entry

Our Company has applied for patents in connection with our Mobile and Loyalty Marketing program and its related uses and planned future features. We believe that the business processes in connection with our Mobile and Loyalty Marketing program are original to our Company; however we may discover that others have patent claims of which we are currently unaware. Should we be successful in obtaining the grant of the patents under application and should we be successful in countering any challenges to their validity that might emerge, the lifetime of the granted patents would be twenty years. Should the patent applications in question be approved, it could give us a cost advantage from the license fees that future potential competitors would be required to pay as well as revenues from said license fees. There can be no assurance however that we will be successful in receiving such a patent or successful in countering any challenges thereto.

Competitive Business Conditions

The market for loyalty and mobile marketing services is large, growing and highly competitive. We have identified a number of providers of loyalty and mobile marketing related products and services.

Spot On is a provider of a loyalty rewards platform that utilizes a touchscreen tablet to digitize a punch card type loyalty program. At this time Spot appears to be privately held, but well financed. They are based in California. They do not appear at this time to have any kind of text based marketing component to their offering, but instead focus on digitizing the punch card experience and delivering messaging to consumers via email. Spot On does not at this time have any localized representation or support, instead they rely on selling and supporting nationally over the phone and via their website.

BellyCard is a provider of loyalty rewards platforms directly to merchants utilizing a touchscreen tablet to digitize the punch card type loyalty program. They claim to have a total of ten thousand merchants located in the US.. They utilize an iPad device as their touchscreen interface and have robust customer analytics engine that the merchant can utilize to understand trends in their business. They do not at this time provide any texting capability and do not have localized support or sales teams. They instead rely on national support and an outsourced phone sales team.

In summary, while we face potential future competition in our target market for our products, we currently believe our products offer distinct features that respond to market needs not well served by the identified competitors mentioned above. However, many of these firms have longer operating histories, greater name recognition and greater financial, technical, and marketing resources than us. Increased competition from any of these sources could result in our failure to achieve and maintain an adequate level of customer demand and market share to support the cost of our operations.

Corporate History

Our Company was originally incorporated in the State of Colorado on May 14, 1990 as “Snow Eagle Investments, Inc.” and was inactive from 1990 until 1997. In April 1997, the Company acquired the assets of 1st Net Technologies, LLC, a California limited liability company, and the Company changed its name to “1st Net Technologies, Inc.” and operated as an Internet commerce and services business. In August 2001, the Company suspended its operations. In September of 2005, the Company acquired VOS Systems, Inc. (the “VOS Subsidiary”) as its wholly owned subsidiary and the Company changed its name to “VOS International, Inc.” and traded under the symbol “VOSI.OB”. The VOS Subsidiary operated as a technology company involved in the design, development, manufacturing, and marketing of consumer electronic products.

On October 16, 2007, we sold the VOS Subsidiary and acquired BillMyParents-CA (at the time both our Colorado parent and California subsidiary were named IdeaEdge, Inc.). On May 1, 2009, our Company changed our name from IdeaEdge, Inc. to Socialwise, Inc., and our stock traded under the symbol “SCLW.OB”. On May 25, 2011, we changed our name to BillMyParents, Inc. and beginning June 13, 2011, our stock traded under the symbol “BMPI.OB.” On February, 15, 2013, we changed our name to The SpendSmart Payments Company and beginning February 28, 2013, our stock traded under the symbol “SSPC.OB.” Effective as of June 20, 2014, the Company was re-domiciled from Colorado to Delaware. Effective as of June 20, 2014, we filed an amendment to our Certificate of Incorporation changing our name to “SpendSmart Networks, Inc.”

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Item 1A – Risk Factors

Investment in our common stock involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this herein before making an investment decision. If any of the following risks actually occur, our business, financial condition or results of operations could suffer. In that case, the market price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

OUR FAILURE TO OBTAIN ADDITIONAL ADEQUATE FINANCING WOULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS.

We cannot be certain that we will ever generate sufficient revenues and gross margin to achieve profitability in the future. Our failure to significantly increase revenues or to raise additional adequate and necessary financing would seriously harm our business and operating results. We have incurred significant costs in building, launching and marketing our Products as well as in our acquisition of substantially all of the assets of SMS Masterminds. We anticipate incurring additional expenses relating to customer account acquisitions, marketing, and building our infrastructure. We closed our offering of our Series C Preferred Stock on March 14, 2014, which resulted in net proceeds of approximately $10,500,000 in the aggregate. If we fail to achieve sufficient revenues and gross margin with our Products, or our revenues grow more slowly than anticipated, or if our operating or capital expenses increased more than is expected or cannot be reduced in the event of lower revenues, our business will be materially and adversely affected and an investor could suffer the loss of a significant portion or all of his investment in our Company.

THERE ARE RISKS ASSOCIATED WITH THE ACQUISITION OF SMS MASTERMINDS.

An integral part of our current, proposed growth strategy was the consummation of the acquisition of substantially all of the assets of SMS Masterminds. The SMS Masterminds transaction involved a number of risks and presented financial, managerial and operational challenges, including: diversion of management’s attention from running the existing business; increased expenses, including legal, administrative and compensation expenses resulting from newly hired employees; increased costs to integrate personnel, customer base and business practices of the acquired assets; adverse effects on reported operating results due to possible write-down of goodwill associated with the acquisition; and dilution to stockholders due to the issuance of securities in the proposed transaction.

THERE ARE RISKS ASSOCIATED WITH THE ACQUISITION OF THE TECHXPRESS WEB BUSINESS.

Part of our growth strategy was the consummation of the acquisition of substantially all of the web assets of TechXpress. The TechXpress transaction involved a number of risks and presented financial, managerial and operational challenges, including: diversion of management’s attention from running the existing business; increased expenses, including legal, administrative and compensation expenses resulting from newly hired employees; increased costs to integrate personnel, customer base and business practices of the acquired assets; adverse effects on reported operating results due to possible write-down of goodwill associated with the acquisition; and dilution to stockholders due to the issuance of securities in the proposed transaction.

WE FACE COMPETITION FROM OTHER MOBILE AND LOYALTY SYSTEMS.

We will face competition from other companies with similar product offerings. Many of these companies have longer operating histories, greater name recognition and substantially greater financial, technical and marketing resources than us. Many of these companies also have more extensive customer bases, broader customer relationships and broader industry alliances than us, including relationships with many of our potential customers. Increased competition from any of these sources could result in our failure to achieve and maintain an adequate level of customers and market share to support the cost of our operations.

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WE HAVE LIMITED RESOURCES TO DEVELOP OUR PRODUCT OFFERINGS.

Our ability to successfully access the capital markets at the same time that our Company has required funding for the development and marketing of our product offerings is challenging. This has caused and will likely continue to cause us to restrict funding of the development of our products and to favor the development of one product offering over the other based on their relative estimated potentials for commercial success as evaluated by our management. We may require additional debt and/or equity financing to pursue our growth strategy. Given our limited operating history and existing losses, there can be no assurance that we will be successful in obtaining additional financing. Furthermore, the issuance by us of any additional securities pursuant to any future fundraising activities undertaken by us would dilute the ownership of existing shareholders and may reduce the price of our common stock. Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. Our current focus is our Mobile and Loyalty Marketing program. The failure of this program to be commercially successful would substantially harm our business and results of operations. Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business and operations. Furthermore, in the future we may determine that it is in the best interest of our Company to severely curtail, license, jointly develop with a third party or sell one of our product offerings, which may be on terms which limit the revenue potential of the product offering to our Company.

WE RELY ON THIRD-PARTY SUPPLIERS AND DISTRIBUTORS THAT ARE SPECIFIC TO OUR BUSINESS SUCH AS CELLULAR SERVICE PROVIDERS, INTERNET SERVICE PROVIDERS, PROGRAMMERS, AND SOCIAL NETWORKS.

We will be dependent on other companies to provide necessary products and services in connection with key elements of our business. Any interruption in our ability to utilize these services, or comparable quality replacements would severely harm our business and results of operations. Should any of these adverse contingencies result, they could substantially harm our business and results of operations and an investor could suffer the loss of a significant portion or all of his investment in our Company.

WE OPERATE IN A HIGHLY REGULATED ENVIRONMENT AND FAILURE BY US OR THE BANK(S) THAT ISSUE(S) OUR CARDS TO COMPLY WITH APPLICABLE LAWS AND REGULATIONS COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS.

We operate in a highly regulated environment, and failure by us or one or more of the banks that issue our cards to comply with the laws and regulations to which we are subject could negatively impact our business. We are subject to a wide range of federal and state laws and regulations. In particular, our products and services are subject to an increasingly strict set of legal and regulatory requirements intended to protect consumers and to help detect and prevent money laundering, terrorist financing and other illicit activities. Many of these laws and regulations are evolving, unclear and inconsistent across various jurisdictions, and ensuring compliance with them is difficult and costly. Failure by us or our bank to comply with the laws and regulations to which we are or may become subject to could result in fines, penalties or limitations on our ability to conduct our business, or federal or state actions, any of which could significantly harm our reputation with consumers and other network participants, banks that issue our cards and regulators and could materially and adversely affect our business, operating results and financial condition.

CHANGES IN LAWS AND REGULATIONS TO WHICH WE ARE SUBJECT, OR TO WHICH WE MAY BECOME SUBJECT, MAY INCREASE OUR COSTS OF OPERATION, DECREASE OUR OPERATING REVENUES AND DISRUPT OUR BUSINESS.

Changes in laws and regulations or the interpretation or enforcement thereof may occur that could increase our compliance and other costs of doing business, require significant systems redevelopment, or render our products or services less profitable or obsolete, any of which could have an adverse effect on our results of operations. We could face more stringent Telephone Consumer Protection Act regulations, as well as more stringent compliance with which could be expensive and time consuming. Changes in laws and regulations governing the way our products and services are sold or in the way those laws and regulations are interpreted or enforced could adversely affect our ability to distribute our products and the cost of providing those products and services. If onerous regulatory requirements were imposed on the sale of our products and services, the requirements could lead to a loss of merchants and subscribers, which in turn could materially and adversely impact our operations.

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THE DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT MAY HAVE A SIGNIFICANT ADVERSE IMPACT ON OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

In July 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (“DFA”). The DFA, as well as regulations promulgated thereunder, could have a significant adverse impact on the Company’s business, results of operations and financial condition.

The DFA has resulted in increased scrutiny and oversight of consumer financial services and products, primarily through the establishment of the Consumer Financial Protection Bureau (“CFPB”) within the Federal Reserve. The CFPB has broad rulemaking and enforcement authority over providers of pre-paid cards, among other credit providers. The CFPB has the authority to write regulations under federal consumer financial protection laws, and to enforce those laws. The CFPB regulations have yet to be fully promulgated and depending on how the CFPB functions, it could have a material adverse impact on our business. The impact this new regulatory regime will have on the Company’s business is uncertain at this time.

Many provisions of the DFA require the adoption of rules to implement. In addition, the DFA mandates multiple studies, which could result in additional legislative or regulatory action. Therefore, the ultimate consequences of the DFA and its impact on our Company’s business, results of operations and financial condition remain uncertain.

WE ARE SUBJECT TO VARIOUS PRIVACY RELATED REGULATIONS, INCLUDING THE GRAMM-LEACH-BLILEY ACT WHICH MAY INCLUDE AN INCREASED COST OF COMPLIANCE.

We are subject to various laws, rules and regulations related to privacy, information security and data protection, including the Gramm-Leach-Bliley Act, and we could be negatively impacted by these laws, rules and regulations. The Gramm-Leach-Bliley Act guidelines require, among other things, that each financial institution develop, implement and maintain a written, comprehensive information security program containing safeguards that are appropriate to the financial institution’s size and complexity, the nature and scope of the financial institution’s activities and the sensitivity of any customer information at issue. Our management believes that we are currently operating in compliance with these regulations. However, continued compliance with these laws, rules and regulations regarding the privacy, security and protection of customer and employee data, or the implementation of any additional privacy rules and regulations, could result in higher compliance and technology costs for our Company.

OUR BUSINESS COULD SUFFER IF THERE IS A DECLINE IN THE USE OF SMS SERVICES OR THERE ARE ADVERSE DEVELOPMENTS WITH RESPECT TO THE SMS SERVICES INDUSTRY IN GENERAL.

As the mobile services industry evolves, consumers may find SMS services to be less attractive than other mobile messaging and communication services. Consumers might not use SMS services if less expensive services and technologies are offered. If consumer acceptance of SMS services as a form of communication does not continue to develop or develops more slowly than expected or if there is a shift form of mobile communications it could have a material adverse effect on our financial position and results of operations.

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A DATA SECURITY BREACH COULD EXPOSE US TO LIABILITY AND PROTRACTED AND COSTLY LITIGATION, AND COULD ADVERSELY AFFECT OUR REPUTATION AND OPERATING REVENUES.

We, the banks that issue our cards, network acceptance members and/or third-party processors receive, transmit and store confidential customer and other information in connection with the sale and use of our prepaid cards. Encryption software and the other technologies used to provide security for storage, processing and transmission of confidential customer and other information may not be effective to protect against data security breaches by third parties. The risk of unauthorized circumvention of such security measures has been heightened by advances in computer capabilities and the increasing sophistication of hackers. Improper access to our or these third parties’ systems or databases could result in the theft, publication, deletion or modification of confidential customer and other information. A data security breach of the systems on which sensitive cardholder data and account information are stored could lead to fraudulent activity involving our products and services, reputational damage and claims or regulatory actions against us. If we are sued in connection with any data security breach, we could be involved in protracted and costly litigation. If unsuccessful in defending that litigation, we might be forced to pay damages and/or change our business practices or pricing structure, any of which could have a material adverse effect on our operating revenues and profitability. We would also likely have to pay (or indemnify the banks that issue our cards for) fines, penalties and/or other assessments imposed as a result of any data security breach. Further, a significant data security breach could lead to additional regulation, which could impose new and costly compliance obligations. In addition, a data security breach at the bank that issues our cards, network acceptance members or third-party processors could result in significant reputational harm to us and cause the use and acceptance of our cards to decline, either of which could have a significant adverse impact on our operating revenues and future growth prospects.

OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGY SURROUNDING OUR SMS MESSAGING, WEB TOOLS, WEBSITE BUILDING TOOLS AND PREPAID CARDS IS UNCERTAIN.

Our future success may depend significantly on our ability to protect our proprietary rights to the intellectual property upon which our products and services will be based. Any patents we obtain in the future may be challenged by re-examination or otherwise invalidated or eventually be found unenforceable. Both the patent application process and the process of managing patent disputes can be time consuming and expensive. Competitors may attempt to challenge or invalidate our patents, or may be able to design alternative techniques or devices that avoid infringement of our patents, or develop products with functionalities that are comparable to ours. In the event a competitor infringes upon our patent or other intellectual property rights, litigation to enforce our intellectual property rights or to defend our patents against challenge, even if successful, could be expensive and time consuming and could require significant time and attention from our management. We may not have sufficient resources to enforce our intellectual property rights or to defend our patents against challenges from others.

WE ARE DEPENDENT UPON CONSUMER TASTES WITH RESPECT TO PREFERRED METHODS OF MOBILE COMMUNICATION FOR THE SUCCESS OF OUR PRODUCTS AND SERVICES.

Our product offerings’ acceptance by consumers and their consequent generation of revenues will depend upon a variety of unpredictable factors, including:

·	Public taste, which is always subject to change;

·	The quantity and popularity of other communication platforms; and

·	The fact that the sales methods chosen for the products and services we market may be ineffective.

For any of these reasons, our programs may be commercially unsuccessful. If we are unable to market products which are commercially successful, we may not be able to recoup our expenses and/or generate sufficient revenues. In the event that we are unable to generate sufficient revenues, we may not be able to continue operating as a viable business and an investor could suffer the loss of a significant portion or all of his investment in our Company.

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THE MOBILE ADVERTISING MARKET MAY DETERIORATE OR DEVELOP MORE SLOWLY THAN EXPECTED, WHICH COULD HARM OUR BUSINESS.

Advertising on mobile connected devices is an emerging industry sector. Advertisers have historically spent a smaller portion of their advertising budgets on mobile media as compared to traditional advertising methods, such as television, newspapers, radio and billboards, or internet advertising such banner ads. Future demand and market acceptance for mobile advertising is uncertain. Many advertisers still have limited experience with mobile advertising and may continue to devote larger portions of their advertising budgets to more traditional offline or online personal computer-based advertising, instead of shifting additional advertising resources to mobile advertising. In addition, our current and potential advertiser clients may ultimately find mobile advertising to be less effective than traditional advertising media or marketing methods or other technologies for promoting their products and services, and they may even reduce their spending on mobile advertising from current levels as a result. If the market for mobile advertising deteriorates, or develops more slowly than expected, we may not be able to increase our revenue.

SMS MASTERMINDS IS ONE OF THE DEFENDANTS NAMED IN A POTENTIAL CLASS-ACTION LAWSUIT FILED IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK RELATING TO ALLEGED VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT.

On January 1, 2014, Intellectual Capital Management, LLC dba SMS Masterminds was named in a potential class-action lawsuit filed in the United States District Court Eastern District of New York relating to alleged violations of the Telephone Consumer Protection Act of 1991 (the “TCPA”). The plaintiff’s lawsuit has sought the certification of a class, though as of the date of this Annual Report on Form 10-K such class certification has not been approved by the court. Specifically, the complaint alleges that SMS Masterminds sent unsolicited text messages to the plaintiff and other recipients without the prior express invitation or permission of the recipients and such plaintiff is now seeking unspecified monetary damages, injunctive relief, costs and attorneys’ fees. SMS Masterminds filed its motion for summary judgment in June. The briefing on the motion concluded on August 5th. Plaintiff made numerous requests for discovery prior to filing his opposition to our motion and repeated these requests in his opposition. The hearing on the motion took place September 17th . The Court granted Plaintiff a brief window to conduct discovery limited to the issues raised in our motion for summary judgment and that discovery has been completed. Class discovery remains stayed. We expect to renew our motion for summary judgment in early 2015. We believe Plaintiff’s allegations have no merit and will continue to vigorously defend against Plaintiff’s claims. Litigation is subject to numerous uncertainties and we are unable to predict the ultimate outcome of this or any other matter. Moreover, the amount of any potential liability in connection with this lawsuit will depend, to a large extent, on whether a class in a class action lawsuit is certified and, if one is certified, on the scope of the class, neither of which we can predict at this time. These and any future lawsuits that we may face regarding these issues could materially and adversely affect our results of operations, cash flows and financial condition, cause us to incur significant expenses and divert the attention of our management and key personnel from our business operations.

IF MOBILE CONNECTED DEVICES, THEIR OPERATING SYSTEMS OR CONTENT DISTRIBUTION CHANNELS, INCLUDING THOSE CONTROLLED BY OUR PRIMARY COMPETITORS, DEVELOP IN WAYS THAT PREVENT OUR ADVERTISING FROM BEING DELIVERED TO OUR USERS, OUR ABILITY TO GROW OUR BUSINESS WILL BE IMPAIRED.

Our mobile marketing business model depends upon the continued compatibility of our mobile advertising platform with most mobile connected devices, as well as the major operating systems that run on them. The design of mobile devices and operating systems is controlled by third parties with whom we do not have any formal relationships. These parties frequently introduce new devices, and from time to time they may introduce new operating systems or modify existing ones.

OUR MOBILE MARKETING SERVICES ARE PROVIDED ON MOBILE COMMUNICATIONS NETWORKS THAT ARE OWNED AND OPERATED BY THIRD PARTIES WHO WE DO NOT CONTROL AND THE FAILURE OF ANY OF THESE NETWORKS WOULD ADVERSELY AFFECT OUR ABILITY TO DELIVER OUR SERVICES TO OUR CUSTOMERS.

Our mobile marketing and advertising platform is dependent on the reliability of mobile operators who maintain sophisticated and complex mobile networks. Such mobile networks have historically, and particularly in recent years, been subject to both rapid growth and technological change. If the network of a mobile operator with which we are integrated should fail, including because of new technology incompatibility, the degradation of network performance under the strain of too many mobile consumers using it, or a general failure from natural disaster or political or regulatory shut-down, we will not be able provide our services to customers through such mobile network. This in turn, would impair our reputation and business, potentially resulting in a material, adverse effect on our financial results.

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THE SUCCESS OF OUR MOBILE MARKETING BUSINESS DEPENDS, IN PART, ON WIRELESS CARRIERS CONTINUING TO ACCEPT OUR CUSTOMERS' MESSAGES FOR DELIVERY TO THEIR SUBSCRIBER BASE.

We depend on wireless carriers to deliver our customers' messages to their subscriber base. Wireless carriers often impose standards of conduct or practice that significantly exceed current legal requirements and potentially classify our messages as "spam," even where we do not agree with that conclusion. In addition, the wireless carriers use technical and other measures to attempt to block non-compliant senders from transmitting messages to their customers; for example, wireless carriers block short codes or Internet Protocol addresses associated with those senders. There can be no guarantee that our, or short codes registered to us, will not be blocked or blacklisted or that we will be able to successfully remove ourselves from those lists. Although our services typically require customers to opt-in to a campaign, minimizing the risk that its customers' messages will be characterized as spam, blocking of this type could interfere with its ability to market products and services of its customers and communicate with end users and could undermine the effectiveness of our customers' marketing campaigns. To date we have not experienced any material blocking of our messages by wireless carriers, but any such blocking could have an adverse effect on our business and results of operations.

MOBILE CONNECTED DEVICE USERS MAY CHOOSE NOT TO ALLOW ADVERTISING ON THEIR DEVICES.

The success of our mobile marketing business model depends on our ability to deliver targeted, highly relevant ads to consumers on their mobile connected devices. Targeted advertising is done primarily through analysis of data, much of which is collected on the basis of user-provided permissions. This data might include a device's location or data collected when device users view an advertisement or video or when they click on or otherwise engage with an advertisement. Users may elect not to allow data sharing for targeted advertising for a number of reasons, such as privacy concerns, or pricing mechanisms that may charge the user based upon the amount or types of data consumed on the device. Users may also elect to opt out of receiving targeted advertising from our platform. In addition, the designers of mobile device operating systems are increasingly promoting features that allow device users to disable some of the functionality, which may impair or disable the delivery of ads on their devices, and device manufacturers may include these features as part of their standard device specifications. Although we are not aware of any such products that are widely used in the market today, as has occurred in the online advertising industry, companies may develop products that enable users to prevent ads from appearing on their mobile device screens. If any of these developments were to occur, our ability to deliver effective advertising campaigns on behalf of our advertiser clients would suffer, which could hurt our ability to generate revenue.

WE MAY NOT BE ABLE TO ENHANCE OUR MOBILE MARKETING AND ADVERTISING PLATFORM TO KEEP PACE WITH TECHNOLOGICAL AND MARKET DEVELOPMENTS, OR TO REMAIN COMPETITIVE AGAINST POTENTIAL NEW ENTRANTS IN OUR MARKETS.

The market for mobile marketing and advertising services is emerging and is characterized by rapid technological change, evolving industry standards, frequent new product introductions and short product life cycles. Our current platform or platforms we may offer in the future may not be acceptable to marketers and advertisers. To keep pace with technological developments, satisfy increasing customer requirements and achieve acceptance of our marketing and advertising campaigns, we will need to enhance our current mobile marketing solutions and continue to develop and introduce on a timely basis new, innovative mobile marketing services offering compatibility, enhanced features and functionality on a timely basis at competitive prices. Our inability, for technological or other reasons, to enhance, develop, introduce and deliver compelling mobile marketing services in a timely manner, or at all, in response to changing market conditions, technologies or customer expectations could have a material adverse effect on our operating results or could result in our mobile marketing services platform becoming obsolete. Our ability to compete successfully will depend in large measure on our ability to maintain a technically skilled development and engineering staff and to adapt to technological changes and advances in the industry, including providing for the continued compatibility of our mobile marketing services platform with evolving industry standards and protocols. In addition, as we believe the mobile marketing market is likely to grow substantially, other companies which are larger and have significantly more capital to invest than us may emerge as competitors. New entrants could seek to gain market share by introducing new technology or reducing pricing. This may make it more difficult for us to sell our products and services, and could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses or the loss of market share or expected market share, any of which may significantly harm our business, operating results and financial condition.

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OUR SALES EFFORTS WITH LICENSEES REQUIRES SIGNIFICANT TIME AND EXPENSE.

Attracting new licensees requires substantial time and expense, and we may not be successful in establishing new relationships or in maintaining or advancing current relationships. Further, it may be difficult for our licensees to identify, engage and market to potential merchant clients who do not currently spend on mobile advertising or are unfamiliar with our current services or platform. Furthermore, many merchant’s purchasing and design decisions typically require input from multiple internal constituencies.

The novelty of our services and our business model often requires us to spend substantial time and effort educating potential licensees about our offerings, including providing demonstrations and comparisons against other available services. This process can be costly and time-consuming. If we are not successful in streamlining our sales processes with licensees or successfully assisting licensees in selling to merchants, our ability to grow our business may be adversely affected.

IF WE CANNOT INCREASE THE CAPACITY OF OUR MOBILE ADVERTISING TECHNOLOGY PLATFORM TO MEET MERCHANT OR DEVICE USER DEMAND, OUR BUSINESS WILL BE HARMED.

We must be able to continue to increase the capacity of our technology platform in order to support substantial increases in the number of merchants and device users, to support an increasing variety of advertising formats and to maintain a stable service infrastructure and reliable service delivery for our mobile advertising campaigns. If we are unable to efficiently and effectively increase the scale of our mobile advertising platform to support and manage a substantial increase in the number of merchants and mobile device users, while also maintaining a high level of performance, the quality of our services could decline and our reputation and business could be seriously harmed. In addition, if we are not able to support emerging mobile advertising formats or services preferred by advertisers, we may be unable to obtain new advertising clients or may lose existing advertising clients, and in either case our revenue could decline.

SYSTEM FAILURES COULD SIGNIFICANTLY DISRUPT OUR OPERATIONS AND CAUSE US TO LOSE ADVERTISER CLIENTS OR ADVERTISING INVENTORY.

Our success depends on the continuing and uninterrupted performance of our own internal systems, which are utilized to send messages, and monitor the performance of advertising campaigns. Our revenue depends on the technological ability of our platform to deliver ads. Sustained or repeated system failures that interrupt our ability to provide services to clients, including technological failures affecting our ability to deliver ads quickly and accurately and to process mobile device users' responses to ads, could significantly reduce the attractiveness of our services to advertisers and reduce our revenue. Our systems are vulnerable to damage from a variety of sources, including telecommunications failures, power outages, malicious human acts and natural disasters. In addition, any steps we take to increase the reliability and redundancy of our systems may be expensive and may not be successful in preventing system failures.

ACTIVITIES OF LICENSEES OR MERCHANTS COULD DAMAGE OUR REPUTATION OR GIVE RISE TO LEGAL CLAIMS AGAINST US.

A merchant’s promotion of their products and services may not comply with federal, state and local laws, including, but not limited to, laws and regulations relating to mobile communications. Failure of a licensee or merchant to comply with federal, state or local laws or our policies could damage our reputation and expose us to liability under these laws. We may also be liable to third parties for content in the ads it delivers if the artwork, text or other content involved violates copyrights, trademarks or other intellectual property rights of third parties or if the content is defamatory, unfair and deceptive, or otherwise in violation of applicable laws. Although we generally receive assurance from licensees that ads are lawful and that they have the right to use any copyrights, trademarks or other intellectual property included in a communication, and although we are normally indemnified by the licensees, a third party or regulatory authority may still file a claim against us. Any such claims could be costly and time-consuming to defend and could also hurt our reputation within the mobile advertising industry. Further, if we are exposed to legal liability, we could be required to pay substantial fines or penalties, redesign our business methods, discontinue some of its services or otherwise expend significant resources.

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SOFTWARE AND COMPONENTS THAT WE INCORPORATE INTO OUR MOBILE ADVERTISING PLATFORM MAY CONTAIN ERRORS OR DEFECTS, WHICH COULD HARM OUR REPUTATION AND HURT ITS BUSINESS.

We use a combination of custom and third-party software, including open source software, in building our mobile advertising platform. Although we test software before incorporating it into our platform, we cannot guarantee that all of the third-party technology that we incorporate will not contain errors, bugs or other defects. We continue to launch enhancements to our mobile advertising platform, and cannot guarantee any such enhancements will be free from these kinds of defects. If errors or other defects occur in technology that we utilize in our mobile advertising platform, it could result in damage to our reputation and losses in revenue, and we could be required to spend significant amounts of additional resources to fix any problems.

OUR INABILITY TO USE SOFTWARE LICENSED FROM THIRD PARTIES, OR OUR USE OF OPEN SOURCE SOFTWARE UNDER LICENSE TERMS THAT INTERFERE WITH OUR PROPRIETARY RIGHTS, COULD DISRUPT OUR BUSINESS.

Our technology platform incorporates software licensed from third parties, including some software, known as open source software, which we use without charge. Although we monitor our use of open source software, U.S. or foreign courts have not interpreted the terms of many open source licenses to which we are subject, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide our platform to our clients. In the future, we could be required to seek licenses from third parties in order to continue offering our platform, which licenses may not be available on terms that are acceptable to us, or at all. Alternatively, we may need to re-engineer our platform or discontinue use of portions of the functionality provided by our platform. In addition, the terms of open source software licenses may require us to provide software that we develop to others on unfavorable license terms. Our inability to use third-party software could result in disruptions to our business, or delays in the development of future offerings or enhancements of existing offerings, which could impair our business.

IF OUR MOBILE MARKETING AND ADVERTISING SERVICES PLATFORM DOES NOT SCALE AS ANTICIPATED, OUR BUSINESS WILL BE HARMED.

We must be able to continue to scale to support potential ongoing substantial increases in the number of users in our actual commercial environment, and maintain a stable service infrastructure and reliable service delivery for our mobile marketing and advertising campaigns. In addition, we must continue to expand our service infrastructure to handle growth in customers and usage. If our mobile marketing services platform does not efficiently and effectively scale to support and manage a substantial increase in the number of users while maintaining a high level of performance, the quality of our services could decline and our business will be seriously harmed. In addition, if we are unable to secure data center space with appropriate power, cooling and bandwidth capacity, we may not be able to efficiently and effectively scale our business to manage the addition of new customers and overall mobile marketing campaigns.

IF A PORTION OF OUR BUSINESS MODEL IS DEEMED TO BE A FRANCHISE OUR BUSINESS COULD BE INTERUPTED.

Although our business model related to the Mobile and Loyalty Program is based upon a license, we cannot guarantee that any state’s franchise department will not find our model to be a franchise and require a transition to said model with possible associated penalties, fees, costs, and business delays and interruptions.

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OUR BUSINESS PRACTICES WITH RESPECT TO DATA MAY GIVE RISE TO LIABILITIES OR REPUTATIONAL HARM AS A RESULT OF GOVERNMENTAL REGULATION, LEGAL REQUIREMENTS OR INDUSTRY STANDARDS RELATING TO CONSUMER PRIVACY AND DATA PROTECTION.

In the course of providing services, we transmit and store information related to mobile devices and the ads we place with that user's consent. Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of data that we collect across our mobile marketing platform. We strive to comply with all applicable laws, regulations, policies and legal obligations relating to privacy and data protection. However, it is possible that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure, or perceived failure, by us to comply with U.S. federal, state, or international laws, including laws and regulations regulating privacy or consumer protection, could result in proceedings or actions against us by governmental entities or others. From time to time, there are several ongoing lawsuits filed against companies in our industry alleging various violations of privacy-related laws. These proceedings could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, adversely affect the demand for our services and ultimately result in the imposition of monetary liability.

The regulatory framework for privacy issues worldwide is evolving, and various government and consumer agencies and public advocacy groups have called for new regulation and changes in industry practices, including some directed at the mobile industry in particular. It is possible that new laws and regulations will be adopted in the United States and internationally, or existing laws and regulations may be interpreted in new ways, that would affect our business, particularly with regard to location-based services, collection or use of data to target ads and communication with consumers via mobile devices.

The U.S. government, including the Federal Trade Commission, or FTC, and the Department of Commerce, has announced that it is reviewing the need for greater regulation of the collection of consumer information, including regulation aimed at restricting some targeted advertising practices. The FTC has also proposed revisions to the Children's Online Privacy Protection Act, or COPPA, that could, if adopted, create greater compliance burdens on us. COPPA imposes a number of obligations, such as obtaining parental permission, on website operators to the extent they collect certain information from children who are under 13 years old. The proposed changes would broaden the applicability of COPPA, including the types of information that would be subject to these regulations, and could apply to information that we or our clients collect through mobile devices or apps that is not currently subject to COPPA.

As we expand our operations globally, compliance with regulations that differ from country to country may also impose substantial burdens on its business. In particular, the European Union has traditionally taken a broader view as to what is considered personal information and has imposed greater obligations under data privacy regulations. In addition, individual EU member countries have had discretion with respect to their interpretation and implementation of the regulations, which has resulted in variation of privacy standards from country to country. In January 2012, the European Commission announced significant proposed reforms to its existing data protection legal framework, including changes in obligations of data controllers and processors, the rights of data subjects and data security and breach notification requirements. The EU proposals, if implemented, may result in a greater compliance burden if SMS Masterminds delivers ads to mobile device users in Europe. Complying with any new regulatory requirements could force us to incur substantial costs or require us to change our business practices in a manner that could compromise our ability to effectively pursue its growth strategy.

In addition to compliance with government regulations, we voluntarily participate in several trade associations and industry self-regulatory groups that promulgate best practices or codes of conduct addressing the provision of location-based services, delivery of promotional content to mobile devices, and tracking of device users or devices for the purpose of delivering targeted advertising. We could be adversely affected by changes to these guidelines and codes in ways that are inconsistent with our practices or in conflict with the laws and regulations of U.S. or international regulatory authorities. If we are perceived as not operating in accordance with industry best practices or any such guidelines or codes with regard to privacy, our reputation may suffer and we could lose relationships with advertiser or developer partners.

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WE DEPEND ON THIRD PARTY PROVIDERS FOR A RELIABLE INTERNET INFRASTRUCTURE AND THE FAILURE OF THESE THIRD PARTIES, OR THE INTERNET IN GENERAL, FOR ANY REASON WOULD SIGNIFICANTLY IMPAIR OUR ABILITY TO CONDUCT OUR BUSINESS.

We outsource all of our data center facility management to third parties who host the actual servers and provide power and security in multiple data centers in each geographic location. These third party facilities require uninterrupted access to the Internet. If the operation of our servers are interrupted for any reason, including natural disaster, financial insolvency of a third party provider, or malicious electronic intrusion into the data center, our business would be significantly damaged. As has occurred with many Internet-based businesses, on occasion in the past, we have been subject to "denial-of-service" attacks in which unknown individuals bombarded its computer servers with requests for data, thereby degrading the servers' performance. While we have historically been successful in relatively quickly identifying and neutralizing these attacks, we cannot be certain that we will be able to do so in the future. If either a third party facility failed, or our ability to access the Internet was interfered with because of the failure of Internet equipment in general or we become subject to malicious attacks of computer intruders, our business and operating results will be materially adversely affected.

Financial Risks

OUR FINANCIAL STATEMENTS HAVE BEEN PREPARED ASSUMING THAT OUR COMPANY WILL CONTINUE AS A GOING CONCERN.

The factors described herein raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from this uncertainty. The report of our independent registered public accounting firm included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern in their audit report for the years ended December 31, 2014 and 2013. If we cannot generate the required revenues and gross margin to achieve profitability or obtain additional capital on acceptable terms, we will need to substantially revise our business plan or cease operations and an investor could suffer the loss of a significant portion or all of his investment in our Company.

CURRENT MACRO-ECONOMIC CONDITIONS COULD ADVERSELY AFFECT THE FINANCIAL VIABILITY OF OUR COMPANY.

Continuing recessionary conditions in the global economy threaten to cause further tightening of the credit and equity markets and more stringent lending and investing standards. The persistence of these conditions could have a material adverse effect on our access to further needed capital. In addition, further deterioration in the economy could adversely affect our corporate results, which could adversely affect our financial condition and operations.

WE DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE, AND WE MAY NEVER PAY DIVIDENDS AND, CONSEQUENTLY, THE ONLY OPPORTUNITY FOR INVESTORS TO ACHIEVE A RETURN ON THEIR INVESTMENT IS IF A TRADING MARKET DEVELOPS AND INVESTORS ARE ABLE TO SELL THEIR SHARES FOR A PROFIT OR IF OUR BUSINESS IS SOLD AT A PRICE THAT ENABLES INVESTORS TO RECOGNIZE A PROFIT.

We currently intend to retain any future earnings to support the development and expansion of our business and do not anticipate paying cash dividends for the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. In addition, our ability to pay dividends on our common stock may be limited by state law. Accordingly, we cannot assure investors any return on their investment, other than in connection with a sale of their shares or a sale of our business. At the present time there is a limited trading market for our shares. Therefore, holders of our securities may be unable to sell them. We cannot assure investors that an active trading market will develop or that any third party will offer to purchase our business on acceptable terms and at a price that would enable our investors to recognize a profit.

OUR NET OPERATING LOSS (“NOL”) CARRY-FORWARD IS LIMITED.

We have recorded a valuation allowance amounting to our entire net deferred tax asset balance due to our lack of a history of earnings, possible statutory limitations on the use of tax loss carry-forwards generated in the past and the future expiration of our NOL. This gives rise to uncertainty as to whether the net deferred tax asset is realizable. Internal Revenue Code Section 382, and similar California rules, place a limitation on the amount of taxable income that can be offset by carry-forwards after a change in control (generally greater than a 50% change in ownership). As a result of these provisions, it is likely that given our acquisition of The SpendSmart Payments Company-CA, future utilization of the NOL will be severely limited. Our inability to use our Company’s historical NOL, or the full amount of the NOL, would limit our ability to offset any future tax liabilities with its NOL.

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Corporate and Other Risks

LIMITATIONS ON DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION OF OUR COMPANY’S OFFICERS AND DIRECTORS BY US MAY DISCOURAGE STOCKHOLDERS FROM BRINGING SUIT AGAINST AN OFFICER OR DIRECTOR.

Our Company’s articles of incorporation and bylaws provide, with certain exceptions as permitted by governing state law, that a director or officer shall not be personally liable to us or our stockholders for breach of fiduciary duty as a director, except for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders on our behalf against a director.

WE ARE RESPONSIBLE FOR THE INDEMNIFICATION OF OUR OFFICERS AND DIRECTORS.

Should our officers and/or directors require us to contribute to their defense, we may be required to spend significant amounts of our capital. Our articles of incorporation and bylaws as well as an indemnification agreement also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of our Company. This indemnification policy could result in substantial expenditures, which we may be unable to recoup. If these expenditures are significant, or involve issues which result in significant liability for our key personnel, we may be unable to continue operating as a going concern.

OUR EMPLOYEES, EXECUTIVE OFFICERS, DIRECTORS AND INSIDER STOCKHOLDERS BENEFICIALLY OWN OR CONTROL A SUBSTANTIAL PORTION OF OUR OUTSTANDING COMMON STOCK, WHICH MAY LIMIT YOUR ABILITY AND THE ABILITY OF OUR OTHER STOCKHOLDERS, WHETHER ACTING ALONE OR TOGETHER, TO PROPOSE OR DIRECT THE MANAGEMENT OR OVERALL DIRECTION OF OUR COMPANY.

Additionally, this concentration of ownership could discourage or prevent a potential takeover of our Company that might otherwise result in an investor receiving a premium over the market price for his shares. Approximately half of our outstanding shares of common stock is beneficially owned and controlled by a group of insiders, including our employees, directors and executive officers. Accordingly, our employees, directors, executive officers and insider shareholders may have the power to control the election of our directors and the approval of actions for which the approval of our stockholders is required. If you acquire shares of our common stock, you may have no effective voice in the management of our Company. Such concentrated control of our Company may adversely affect the price of our common stock. Our principal stockholders may be able to control matters requiring approval by our stockholders, including the election of directors, mergers or other business combinations. Such concentrated control may also make it difficult for our stockholders to receive a premium for their shares of our common stock in the event we merge with a third party or enter into different transactions which require stockholder approval. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock.

WE ARE DEPENDENT FOR OUR SUCCESS ON A FEW KEY EMPLOYEES.

Our inability to retain those employees would impede our business plan and growth strategies, which would have a negative impact on our business and the value of your investment. Our success depends on the skills, experience and performance of key members of our Company. Each of those individuals may voluntarily terminate his employment with our Company at any time. Were we to lose one or more of these key employees, we would be forced to expend significant time and money in the pursuit of a replacement, which would result in both a delay in the implementation of our business plan and the diversion of limited working capital. We do not maintain a key man insurance policy on any of our key employees.

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SHOULD WE BE SUCCESSFUL IN TRANSITIONING TO A COMPANY GENERATING SIGNIFICANT REVENUES, WE MAY NOT BE ABLE TO MANAGE OUR GROWTH EFFECTIVELY, WHICH COULD ADVERSELY AFFECT OUR OPERATIONS AND FINANCIAL PERFORMANCE.

The ability to manage and operate our business as we execute our growth strategy will require effective planning. Significant rapid growth could strain our internal resources, leading to a lower quality of customer service, reporting problems and delays in meeting important deadlines resulting in loss of market share and other problems that could adversely affect our financial performance. Our efforts to grow could place a significant strain on our personnel, management systems, infrastructure and other resources. If we do not manage our growth effectively, our operations could be adversely affected, resulting in slower growth and a failure to achieve or sustain profitability.

Capital Market Risks

OUR COMMON STOCK IS THINLY TRADED, SO YOU MAY BE UNABLE TO SELL AT OR NEAR ASK PRICES OR AT ALL IF YOU NEED TO SELL YOUR SHARES TO RAISE MONEY OR OTHERWISE DESIRE TO LIQUIDATE YOUR SHARES.

There is limited market activity in our stock and we may be too small to attract the interest of many brokerage firms and analysts. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained. While we are trading on OTCQB, the trading volume we will develop may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in over-the-counter stocks and certain major brokerage firms restrict their brokers from recommending over-the-counter stocks because they are considered speculative, volatile, thinly traded and the market price of the common stock may not accurately reflect the underlying value of our Company. The market price of our common stock could be subject to wide fluctuations in response to quarterly variations in our revenues and operating expenses, announcements of new products or services by us, significant sales of our common stock, including “short” sales, the operating and stock price performance of other companies that investors may deem comparable to us, and news reports relating to trends in our markets or general economic conditions.

THE APPLICATION OF THE “PENNY STOCK” RULES TO OUR COMMON STOCK COULD LIMIT THE TRADING AND LIQUIDITY OF THE COMMON STOCK, ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK AND INCREASE YOUR TRANSACTION COSTS TO SELL THOSE SHARES.

As long as the trading price of our common stock is below $5 per share, our common stock will be subject to the “penny stock” rules, unless we otherwise qualify for an exemption from the “penny stock” definition. The “penny stock” rules impose additional sales practice requirements on certain broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). These regulations, if they apply, require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination regarding such a purchaser and receive such purchaser’s written agreement to a transaction prior to sale. The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder's ability to buy and sell our stock. In addition to the "penny stock" rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. These regulations may have the effect of limiting the trading activity of our common stock, reducing the liquidity of an investment in our common stock and increasing the transaction costs for sales and purchases of our common stock as compared to other securities. The stock market in general and the market prices for penny stock companies in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our stock, regardless of our operating performance. Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include 1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; 2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; 3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; 4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and 5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. The occurrence of these patterns or practices as well as the regulatory disclosure requirements set forth above could increase the volatility of our share price, may limit investors’ ability to buy and sell our securities and have an adverse effect on the market price for our shares of common stock.

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WE MAY NOT BE ABLE TO ATTRACT THE ATTENTION OF MAJOR BROKERAGE FIRMS, WHICH COULD HAVE A MATERIAL ADVERSE IMPACT ON THE MARKET VALUE OF OUR COMMON STOCK.

Security analysts of major brokerage firms may not provide coverage of our common stock since there is no incentive to brokerage firms to recommend the purchase of our common stock. The absence of such coverage limits the likelihood that an active market will develop for our common stock. It will also likely make it more difficult to attract new investors at times when we require additional capital.

WE MAY BE UNABLE TO LIST OUR COMMON STOCK ON NASDAQ OR ON ANY SECURITIES EXCHANGE.

Although we intend to apply to list our common stock on NASDAQ in the future, we cannot assure you that we will be able to meet the initial listing standards, including the minimum per share price and minimum capitalization requirements, or that we will be able to maintain a listing of our common stock on this trading. Until such time as we qualify for listing on NASDAQ or another national securities exchange, our common stock will continue to trade on OTCQB or another over-the-counter quotation system where an investor may find it more difficult to dispose of shares or obtain accurate quotations as to the market value of our common stock. In addition, rules promulgated by the SEC impose various practice requirements on broker-dealers who sell securities that fail to meet certain criteria set forth in those rules to persons other than established customers and accredited investors. Consequently, these rules may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock. It would also make it more difficult for us to raise additional capital.

FUTURE SALES OF OUR EQUITY SECURITIES COULD PUT DOWNWARD SELLING PRESSURE ON OUR SECURITIES, AND ADVERSELY AFFECT THE STOCK PRICE.

There is a risk that this downward pressure may make it impossible for an investor to sell his or her securities at any reasonable price, if at all. Future sales of substantial amounts of our equity securities in the public market, or the perception that such sales could occur, could put downward selling pressure on our securities, and adversely affect the market price of our common stock.

Item 1B. – Unresolved Staff Comments.

Not applicable.

Item 2 –Properties

Our corporate offices were previously located at 6190 Cornerstone Court, Suite 216, San Diego California 92121, where we leased approximately 3,100 square feet of office space. The monthly rental payments for the facility were approximately $2,695 plus common area maintenance charges. We closed our San Diego offices on July 17, 2013, however we had lease payment obligations remaining through June, 2014. Our corporate offices are now located in San Luis Obispo, CA, where we lease approximately 5,000 square feet of office space. The monthly payment is approximately, $10,572, including association and common area maintenance charges. We also have offices in Des Moines, IA, where we lease approximately 500 square feet of office space. The monthly payments for the facility are approximately $600, including common area maintenance charges. We believe our facilities are in good condition and adequate to meet our current and anticipated requirements.

Item 3 – Legal Proceedings

From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of any ultimate liability from such claims cannot be determined. On January 1, 2014, Intellectual Capital Management, LLC dba SMS Masterminds was named in a potential class-action lawsuit titled Telford v. Intellectual Capital, et al, filed in the United States District Court Eastern District of New York relating to alleged violations of the Telephone Consumer Protection Act of 1991 (the “TCPA”). The plaintiff’s lawsuit has sought the certification of a class, though as of the date of this Annual Report on Form 10-K such class certification has not been approved by the court. We believe Plaintiff’s allegations have no merit and will continue to vigorously defend against Plaintiff’s claims. The Company has filed its motion for summary judgment and the hearing date is June 10, 2015. There are no other legal claims currently pending or threatened against us that in the opinion of our management would be likely to have a material adverse effect on our financial position, results of operations or cash flows. Our Company was involved in an arbitration with our previous processor but we have since agreed to a settlement of such arbitration. The agreed upon settlement amount had been accrued at December 31, 2013 and was paid on February 13, 2014.

Item 4 – Mine Safety Disclosures

Not applicable.

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Part II

Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock trades publicly on the OTCQB under the symbol "SSPC." The OTCQB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter equity securities. The OTCQB securities are traded by a community of market makers that enter quotes and trade reports. This market is extremely limited and any prices quoted may not be a reliable indication of the value of our common stock. The following table sets forth the high and low bid prices per share of our common stock by the OTCQB for the periods indicated as reported on the OTCQB.

	High		Low

Year ended December 31, 2014
First Quarter	$	1.59	$	0.71
Second Quarter	$	3.34	$	1.00
Third Quarter	$	1.65	$	1.01
Fourth Quarter	$	1.20	$	0.73

Year ended December 31, 2013
First Quarter	$	6.30	$	4.50
Second Quarter	$	6.75	$	2.25
Third Quarter	$	2.73	$	0.76
Fourth Quarter	$	2.04	$	0.91

Our stock began trading on the OTC Bulletin Board under the symbol “IDED.OB” on October 18, 2007 and was later changed to “IDAE.OB” on March 12, 2008 and to “SCLW.OB” on May 13, 2009 and to “BMPI.OB” on June 13, 2011. On July 23, 2012 our stock was moved from the OTC Bulletin Board to the OTCQB. The quotes represent inter-dealer prices, without adjustment for retail mark-up, markdown or commission and may not represent actual transactions. The trading volume of our securities fluctuates and may be limited during certain periods. As a result of these volume fluctuations, the liquidity of an investment in our securities may be adversely affected.

Holders of Record

As of March 25, 2015, 18,476,774 shares of our common stock were issued and outstanding, and held by approximately 2,000 stockholders.

Transfer Agent

Our transfer agent is TranShare Corporation, 4626 South Broadway, Englewood, CO 80113, Telephone (303) 662-1112.

Dividends

We have never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of our Board of Directors.

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Securities Authorized for Issuance under Equity Compensation Plans

The table below sets forth information as of December 31, 2014 with respect to compensation plans under which our common stock is authorized for issuance.

On January 8, 2013, our Board of Directors approved the adoption of our 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan was approved by our shareholders on February 15, 2013. The 2013 Plan provides for granting of stock-based awards including: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock. The total number of shares of common stock that may be issued pursuant to stock awards under the 2013 Plan shall not exceed in the aggregate 10,000,000 shares of the common stock of our Company. On August 4, 2011, our Board of Directors approved the adoption of the SpendSmart Networks, Inc. 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan has been approved by our shareholders. The 2011 Plan provides for granting of stock-based awards including: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock. The total number of shares of common stock that may be issued pursuant to stock awards under the 2011 Plan shall not exceed in the aggregate 1,666,667 shares of the common stock of our Company. We also have a stockholder-approved Plan (the IdeaEdge, Inc. 2007 Equity Incentive Plan - the “2007 Plan”, previously approved by our shareholders). The 2007 Plan has similar provisions and purposes as the 2011 Plan. The total number of shares of common stock that may be issued pursuant to stock awards under the 2007 Plan shall not exceed in the aggregate 266.666 shares of the common stock of our Company. The table below sets forth information as of December 31, 2014 with respect to our 2007 Plan, 2011 Plan, and 2013 Plan:

Item 6 – Selected Consolidated Financial Data

Disclosure not required as a result of our Company’s status as a smaller reporting company.

Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our consolidated financial statements and the notes presented herein. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed in this report. See “FORWARD LOOKING STATEMENTS” paragraph above.

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Overview and Financial Condition

Discussions with respect to our Company’s operations included herein refer to our operating subsidiary, SpendSmart Networks, Inc.-CA and the consolidated results of the company. The Company purchased SpendSmart Networks, Inc.-CA on October 16, 2007. On February 11, 2014, we acquired substantially all of the assets of Intellectual Capital Management, LC, dba “SMS Masterminds”. As a result of the SMS Masterminds asset acquisition as well as the retention of our new Chief Executive Officer, the company is a national full-service mobile and loyalty marketing agency that offers a means for small and large business owners alike to better connect with their consumers. Through our mobile and loyalty marketing programs and proprietary website building software, the company provides proprietary loyalty systems and a suite of digital engagement and marketing services that help local merchants build relationships with consumers and drive revenues. These services are sold, implemented and supported both internally and by a vast network of certified digital marketing specialists, aka “Certified Masterminds,” who drive revenue and consumer relationships for merchants via loyalty programs, custom websites, social media engagement, mobile marketing, mobile commerce and financial tools, such as reward systems. We enter into licensing agreements for our proprietary loyalty and mobile marketing solutions and custom website building tools with “Certified Masterminds” which sell and support the technology in their respective markets. We provide extensive training materials, best practice guides and other resources to our licensees. The licensees also utilize loyalty kiosks provided to their merchants. The loyalty kiosks are tablet devices set up in physical retail locations where Consumers can enter their mobile phone number to “opt-in” to receive notifications from the merchant.

We generate revenues primarily in the form of set up fees, recurring license fees, messaging, equipment and marketing services fees and value added mobile marketing and mobile commerce services. License fees are charged monthly for our support services. Set-up fees primarily consist of fees for website development services (including support and unspecified upgrades and enhancements when and if they are available), training and professional services that are not essential to functionality.

In November 2014, we began winding down our prepaid card product offerings.

Comparison of Results of Operations for the Years Ended December 31, 2014 and December 31, 2013

The Company had total revenues of $4,036,196 for the year ended December 31, 2014 and $0 for the year ended December 31, 2013.

Our revenues increased $4,036,196 over the prior year due to our acquisition of SMS and TechXpress

Comparison of Operating Expenses for the Years Ended December 31, 2014 and December 31, 2013

In order to better represent our financial results and to make them comparable to leading companies in the mobile marketing industry, we have classified our operating expenses into four major categories: (1) selling and marketing; (2) personnel related; (3) operations; and (4) general and administrative expenses. We do not allocate common expenses to any of these expense categories.

Selling and marketing expenses

Selling and marketing expenses for the year ended December 31, 2014 totaled $753,466 and $0 for the year ended December 31, 2013. This was an increase of $753,466 from 2013 to 2014. Increases in marketing programs were due to our SMS acquisition during the first quarter 2014 and marketing spend to bring more brand awareness to our products.

Personnel related expenses

Personnel related expenses totaled $7,316,885 during the year ended December 31, 2014 and $4,866,233 for the year ended December 31, 2013. This amounted to an increase of $2,487,365 or a 51.1% increase from 2013 to 2014. Overall increases in personnel related expenses reflected the acquisition of SMS during the first quarter and TechXpress during the third quarter of 2014. Stock based compensation was significantly higher due to option and warrant grants made to directors and executive officers (and in prior periods that vested in the current year). Other personnel related expenses include employer taxes, employee benefits and other employee related costs.

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Processing expenses

Processing expenses totaled $1,048,377 for the year ended December 31, 2014 ($0 for the year ended December 31, 2013). This resulted in an increase of $1,048,377 compared to 2013. Increases in processing expenses were the result of our SMS acquisition during the first quarter 2014

Amortization of intangible assets

Amortization of intangible assets totaled $288,700 for the year ended December 31, 2014 and $0 for the year ended December 31, 2013, respectively. This resulted in an increase of $288,700 from 2013 to 2014. The amount for our SMS acquisition was $283,754 and the TechXpress acquisition was $4,946 for 2014.

General and administrative expenses

General and administrative expenses totaled $2,144,740 for the year ended December 31, 2014 and $2,545,074 for the year ended December 31, 2013. This resulted in a decrease of $400,334 or 15.7% from 2013 to 2014. We had decreases in investor relations consulting during the year offset by increases in rent, legal, and accounting expenses due to our SMS and TechXpress acquisitions

Bad debt expense

Bad debt expenses totaled $686,641 for the year ended December 31, 2014 and $0 for the year ended December 31, 2013. We recorded bad debt writeoffs due to non-performing accounts in our SMS division.

Earn-out liability expense

The change in fair value of Earn-out liability expenses totaled $13,582 for the year ended December 31, 2014 and $0 for the year ended December 31, 2013. We recorded the change in earn-out liability due to our updated operating assumptions in the underlying valuation related to the SMS acquisition.

Comparison of Non-operating Income and Expense for the Years Ended December 31, 2014 and December 31, 2013

For the years ended December 31, 2014 and 2013, net interest income totaled $1,466 and $4,153, respectively.

During the year ended December 31, 2014, we recognized a loss from the change in the fair value of derivative liabilities of $14,759 (and a gain of $352,588 in 2013). These derivative liabilities are the fair value of warrants issued in fiscal 2010 with anti-dilution privileges and warrants issued in fiscal 2012 with certain registration privileges.

Comparison of Discontinued Operations for the Years Ended December 31, 2014 and December 31, 2013

On November 26, 2014, as part of SpendSmart Networks, Inc.'s (the "Company") efforts to reduce expenses as well as focus its resources on its Mobile and Loyalty Marketing Division, the Company decided to begin a wind down of the operations of its Card Division. We have classified this as discontinued operations. For the years ended December 31, 2014 and 2013, the net loss from discontinued operations totaled $3,983,107 and $7,033,406, respectively.

Comparison of Net Loss and Net Loss per Share for the Years Ended December 31, 2014 and December 31, 2013

For the years ended December 31, 2014 and 2013, our net loss was $8,205,256 and $7,062,872, respectively. Our basic and diluted net loss per share was $.51 and $.78 for the twelve months ended December 31, 2014 and December 31, 2013, respectively. Common stock equivalents and outstanding options and warrants were not included in the calculations due to their effect being anti-dilutive.

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Comparison of Liquidity and Capital Resources for the Years Ended December 31, 2014 and December 31, 2013

We have primarily financed our operations to date through the sale of unregistered equity. At December 31, 2014, our total current assets were $2,294,010. Total current liabilities were $1,196,586 long-term liabilities were $594,216, and our stockholders’ equity totaled $7,369,922. Also included in current liabilities were amounts arising in connection with derivative liabilities (consisting of warrants) totaling $47,209. These liabilities represent the fair value of the warrants. Any future settlement of these securities could result either: (1) upon their expiration unexercised; or (2) upon their exercise and receipt of cash by our Company of the cash proceeds of their exercise (assuming the exercise is not effected on a cashless basis allowed by some of the outstanding warrants accounted for as derivatives).

We may raise additional funding through the sale of unregistered common stock and warrants although there can be no assurance that we will be successful in raising such funds. This description of our recent financing and our future plans does not constitute an offer to sell or the solicitation of an offer to buy our securities, nor shall such securities be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend stating the same.

Our cash and cash equivalents balance at December 31, 2014 totaled $1,242,155.

Going Concern

As noted above (and by our independent registered public accounting firm in their report on our consolidated financial statements as of and for the two-year period ended December 31, 2014), there exists substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not contain any adjustments related to the outcome of this uncertainty.

Critical Accounting Policies

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments and we base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known.

Contractual Obligations

With the exception of employment agreements, lease agreements, and the endorsement agreement described elsewhere herein, we have no outstanding contractual obligations through the date of this report that are not cancellable at our Company’s option.

Critical Accounting Policies Involving Management Estimates and Assumptions

In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we must make a variety of estimates that affect the reported amounts and related disclosures. We have identified the following accounting policies that we believe require application of management’s most subjective judgments, often requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our significant accounting policies are described in more detail in the notes to consolidated financial statements included elsewhere in this filing. If actual results differ significantly from our estimates and projections, there could be a material effect on our financial statements.

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Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Revenue Recognition

We recognize revenues when all of the following conditions are met:

•	there is persuasive evidence of an arrangement;

•	the products or services have been delivered to the customer;

•	the amount of fees to be paid by the customer is fixed or determinable; and

•	the collection of the related fees is probable.

Signed agreements are used as evidence of an arrangement. Electronic delivery occurs when we provide the customer with access to the software via a username and password. We assess whether a fee is fixed or determinable at the outset of the arrangement, primarily based on the payment terms associated with the transaction. We do offer extended payment terms with regards to the setup fee with typical terms of payment due between one and three years from delivery of license. We assess collectability of the set-up fee based on a number of factors such as collection history and creditworthiness of the customer. If we determine that collectability is not probable, revenue is deferred until collectability becomes probable, generally upon receipt of cash.

When contracts contain multiple elements wherein vendor specific objective evidence ("VSOE") exists for all undelivered elements and the services, if any, are not essential to the functionality of the delivered elements, we account for the delivered elements in accordance with the "Residual Method." Revenues related to term license fees are recognized ratably over the contract term beginning on the date the customer has access to the license and continuing through the end of the contract term.

License arrangements may also include set-up fees such as website development, delivery of tablets, professional services and training services, which are typically delivered within 90 days of the contract term. In determining whether set-up fee revenues should be accounted for separately from license revenues, we evaluate whether the set-up fees are considered essential to the functionality of the license using factors such as the nature of our products; whether they are ready for use by the customer upon receipt; the nature of our implementation services, which typically do not involve significant customization to or development of the underlying software code; the availability of services from other vendors; whether the timing of payments for license revenues is coincident with performance of services; and whether milestones or acceptance criteria exist that affect the realizability of the license fee. Substantially all of our set-up fee arrangements are recognized as the services are performed. VSOE of fair value of set-up fees is based upon stand-alone sales of those services. Payments received in advance of services performed are deferred and recognized when the related services are performed.

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We do not offer refunds and therefore have not recorded any sales return allowance for any of the periods presented. Upon a periodic review of outstanding accounts receivable under the extended payment terms, amounts that are not being paid timely are deemed to be uncollectible and are written off against the allowance for doubtful accounts.

Deferred revenue consists substantially of amounts invoiced in advance of revenue recognition for our products and services described above. We recognize deferred revenue as revenue only when the revenue recognition criteria are met.

Stock Based Compensation

We account for stock based compensation arrangements through the measurement and recognition of compensation expense for all stock based payment awards to employees and directors based on estimated fair values. We use the Black-Scholes option valuation model to estimate the fair value of our stock options and warrants at the date of grant. The Black-Scholes option valuation model requires the input of subjective assumptions to calculate the value of options and warrants. We use historical company data among other information to estimate the expected price volatility and the expected forfeiture rate and not comparable company information, due to the lack of comparable publicly traded companies that exist in our industry.

Derivatives

We account for certain of our outstanding warrants as derivative liabilities. These derivative liabilities are ineligible for equity classification due to provisions of the instruments that may result in an adjustment to their conversion or exercise prices. The fair value of these liabilities is estimated using option pricing models that are based on the individual characteristics of our warrants, preferred and common stock, the derivative liability on the valuation date as well as assumptions for volatility, remaining expected life, risk-free interest rate and, in some cases, credit spread.

Recent Accounting Pronouncements

The FASB issued ASU No. 2014-08 “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU No. 2014-08 changes the criteria for reporting discontinued operations and modifies related disclosure requirements. The new guidance is effective on a prospective basis for fiscal years beginning after December 15, 2014, and interim periods within annual periods beginning on or after December 15, 2015. The Company is currently assessing the future impact of ASU No. 2014-08 on its financial statements.

The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is proposed to be effective for fiscal years beginning after December 15, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. The adoption of this standard is not expected to have a material impact on the Company’s consolidated balance sheets and results of operations.

The FASB has issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated balance sheets and results of operations.

The FASB has issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The guidance, which is effective for annual reporting periods ending after December 15, 2016, extends the responsibility for performing the going-concern assessment to management and contains guidance on how to perform a going-concern assessment and when going-concern disclosures would be required under U.S. GAAP. The Company will assess the provisions of ASU 2014-15 and its impact on the consolidated financial statements. The events and conditions that raise substantial doubt regarding the Company’s ability to continue as a going concern have been disclosed in Note 1.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2014.

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Item 8 – Financial Statements

SPENDSMART NETWORKS, INC.

Index

	Page

Report of Independent Registered Public Accounting Firm	25

Consolidated Balance Sheets at December 31, 2014 and 2013	26

Consolidated Statements of Operations for the years ended December 31, 2014 and 2013	27

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2014 and 2013	28

Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013	29

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

SpendSmart Networks, Inc.

We have audited the accompanying consolidated balance sheets of SpendSmart Networks, Inc. (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, changes in stockholders’ equity (deficit) and redeemable preferred and common stock (not classified as equity), and cash flows for each of the years ended December 31, 2014 and 2013. The financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of SpendSmart Networks, Inc. as of December 31, 2014 and 2013, and the consolidated results of their operations and their cash flows for the years ended December 31, 2014 and 2013, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As described in Note 1 to the consolidated financial statements, the Company has recurring net losses since inception and has yet to establish a profitable operation. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern. Management’s plans in regard to those matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ EisnerAmper LLP

Iselin, New Jersey

April 3, 2015

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SPENDSMART NETWORKS, INC.
Condensed Consolidated Balance Sheets
	As of December 31,
	2014			2013
ASSETS
Current assets:
Cash and cash equivalents	$	1,242,155		$	497,313
Accounts receivable, net of allowance for doubtful accounts of $188,527		155,786			-
Customer short term notes receivable, net of allownace for doubtful accounts of $286,571		473,846			-
Third party short term notes receivable		416,133			-
Prepaid insurance		6,090			4,067
Total current assets		2,294,010			501,380

Long-term assets:
Customer long term notes receivable, net of allowance for doubtful accounts of $349,954		678,851			-
Property and equipment, net of accumulated depreciation of $83,854 on December 31, 2014		581,124			-
Intangible assets, net of accumulated amortization of $288,700 on December 31, 2014		3,097,700			-
Goodwill		3,202,276			-
Other assets		30,000			-
Total long-term assets		7,589,951			-

Other assets held for sale:		145,903			207,818

TOTAL ASSETS	$	10,029,864		$	709,198

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities	$	337,673		$	67,403
Deferred revenue		791,704			-
Notes payable, fair value		-			142,089
Deferred acquisition related payable		20,000			-
Derivative liabilities - warrants		47,209			26,505
Total current liabilities		1,196,586			235,997

Long-term liabilities:
Earn-out liablity		594,216			-
Total long-term liabilities		594,216			-

Other liabilities held for sale:		869,140			1,085,429

Total liabilities		2,659,942			1,321,426

Stockholders equity (deficit):
Common stock; $0.001 par value; 300,000,000 shares authorized; 18,435,239 and 10,398,527 shares issued and outstanding as of December 31, 2014 and December 30, 2013, respectively		18,435			10,398
Series C Preferred; $0.001 par value; 4,299,081 shares authorized; 3,757,229 and 0 shares issued and outstanding as of December 31, 2014 and December 31, 2013, respectively		3,757			-
Additional paid-in capital		88,064,205			67,905,486
Accumulated deficit		(80,716,475	)		(68,528,112	)
Total stockholders' equity (deficit)		7,369,922			(612,228	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	10,029,864		$	709,198

See accompanying notes to consolidated financial statements.

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SPENDSMART NETWORKS, INC.
Condensed Consolidated Statements of Operations

	For the years ended December 31,
	2014			2013
Revenues:
Mobile Marketing / Licensing	$	4,036,196		$	-
Total revenues		4,036,196			-

Operating expenses (income):
Selling and marketing		753,466			-
Personnel related		7,316,885			4,866,233
Processing		1,048,377			-
Amortization of intangible assets		288,700			-
General and administrative		2,144,740			2,545,074
Bad debt		686,641			-
Change in fair value of earn-out liability		(13,582	)		-
Total operating expenses		12,225,227			7,411,307

Loss from operations		(8,189,031	)		(7,411,307	)

Non-operating income (expense):
Net interest income		(1,466	)		(4,153	)
Change in fair value of financial instruments		(14,759	)		352,588
Total non-operating income (loss)		(16,225	)		348,435

Net loss from continuing operations		(8,205,256	)		(7,062,872	)

Discontinued operations:
Loss from discontinued operations		(3,983,107	)		(7,033,406	)

Net loss	$	(12,188,363	)	$	(14,096,278	)

Basic and diluted net loss per share
Net loss from continuing operatoins	$	(0.51	)	$	(0.78	)
Loss from discontinued operations	$	(0.25	)	$	(0.78	)
Basic and diluted net loss per share	$	(0.76	)	$	(1.56	)

Basic and diluted weighted average common shares outstanding used in computing net loss per share		16,052,990			9,015,046
The accompanying notes are an integral part of these consolidated financial statements.

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SPENDSMART NETWORKS, INC.
Statements of Changes in Stockholders' Deficiency and Redeemable Preferred and Common Stock (not classified as equity)
For the years ended December 31, 2014 and December 31, 2013


	Series B Preferred Stock		Redeemable Common Stock (not classified as equity)		Series C Preferred Stock		Series A Preferred Stock		Common Stock (classified as equity)		Additional Paid-In Capital		Total Stockholders' Deficit
	Series B Preferred Stock		Redeemable Common Stock (not classified as equity)		Series C Preferred Stock		Series A Preferred Stock		Common Stock (classified as equity)			Accumulated Deficit
	Shares	Par Value	Shares	Par Value	Shares	Par Value	Shares	Par Value	Shares	Par Value		Accumulated Deficit
Balance as of December 31, 2012	10,165	$ 8,656,892	1,699,415	$ 2,777,433	-	$ -	353	$ -	5,860,313	$ 5,860	$ 37,365,044	$ (54,431,834)	$ (17,060,930)
Series A Preferred Stock Conversion	-	-	-	-	-	-	(353)	-	7,121	7	(7)	-	-
Common Shares (reclassify from convertible common stock)	-	-	(1,699,415)	(2,777,433)	-	-	-	-	1,699,415	1,699	2,775,734	-	2,777,433
Series B (reclassify from convertible preferred stock)	(10,165)	(8,656,892)	-	-	-	-	-	-	1,694,167	1,694	8,655,198	-	8,656,892
Reverse stock split shares and par value change	-	-	-	-	-	-	-	-	165	-	-	-	-
Issuance of common stock for services	-	-	-	-	-	-	-	-	474,806	475	1,107,027	-	1,107,502
Exercise of warrants to purchase common stock	-	-	-	-	-	-	-	-	662,540	663	1,384,309	-	1,384,972
Reclassification of derivative liabilities	-	-	-	-	-	-	-	-	-	-	8,852,085	-	8,852,085
Stock based compensation from stock options and warrants	-	-	-	-	-	-	-	-	-	-	7,766,096	-	7,766,096
Net loss	-	-	-	-	-	-	-	-	-	-	-	(14,096,278)	(14,096,278)
Balance as of December 31, 2013	-	-	-	-	-	-	-	-	10,398,527	10,398	67,905,486	(68,528,112)	(612,228)
SMS acquisition	-	-	-	-	-	-	-	-	5,250,000	5,250	3,308,348	-	3,313,598
TechXpress acquisition	-	-	-	-	-	-	-	-	596,315	596	437,922	-	438,518
Issuance of Series C Preferredredeemable common and preferred stock and warrants for cash, net	-	-	-	-	4,072,426	4,072	-	-	-	-	10,467,931	-	10,472,003
Conversions of notes payable to preferred stock	-	-	-	-	226,655	227	-	-	-	-	141,862	-	142,089
Conversions of preferred stock to common stock	-	-	-	-	(541,852)	(542)	-	-	2,167,408	2,168	(1,626)	-	-
Issuance of common stock for services	-	-	-	-	-	-	-	-	22,989	23	19,977	-	20,000
Stock based compensation from stock options and warrants	-	-	-	-	-	-	-	-	-	-	5,784,305	-	5,784,305
Net loss	-	-	-	-	-	-	-	-	-	-	-	(12,188,363)	(12,188,363)
Balance as of December 31, 2014	-	$ -	-	$ -	3,757,229	$ 3,757	-	$ -	18,435,239	$ 18,435	$ 88,064,205	$ (80,716,475)	$ 7,369,922

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SPENDSMART NETWORKS, INC.
Consolidated Statements of Cash Flows

	For the years ended
	December 31,
	2014			2013
Cash flows from operating activities:
Net loss	$	(12,188,363	)	$	(14,096,278	)
Less: Loss from discontinued operations		(3,983,107	)		(7,033,406	)
Net loss from continuing operations		(8,205,256	)		(7,062,872	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation expense		83,854			-
Amortization of intangible asset		288,700			-
Stock-based compensation		5,784,305			7,766,096
Issuance of common stock for services		20,000			1,107,502
Change in fair value of financial instruments		14,759			(352,588	)
Accrued interest income on notes receivable from third party		(6,133	)
Change in earn-out liability		(13,582	)		-
Provision for bad debt		686,641			-
Changes in operating assets and liabilities:
Accounts receivable		(19,847	)		-
Customer short term notes receivable		(698,103	)		-
Customer long term notes receivable		(952,708	)		-
Deferred revenue		541,907			-
Prepaid insurance		(2,023	)		34,256
Other assets		(30,000	)		-
Accounts payable and accrued liabilities		53,947			(11,854	)
Net cash used in operating activities from continuing operations		(2,453,539	)		1,480,540
Net cash used in discontinued operations		(4,137,481	)		(9,476,271	)
Net cash used in operating activities		(6,591,020	)		(7,995,731	)

Cash flows from investing activities:
Acquisition of Intellectual Capital Management LLC ("SMS")		(1,000,000	)		-
Payment of deferred acquisition payable-Intellectual Capital Mgmt, LLC		(380,000	)		-
Capitalized software		(283,080	)		-
Short term notes receivable from third party		(410,000	)		-
Acquisition of TechXpress Web business		(454,641	)		-
Sale of property and equipment		251			2,505
Payment on long term liabilities (SBA Loans)		(226,522	)		-
Purchase of property and equipment		(382,149	)		-
Net cash used in investing activities from continuing operations		(3,136,141	)		2,505
Net cash used in discontinued operations		-			-
Net cash used in investing activities		(3,136,141	)		2,505

Cash flows from financing activities:
Net proceeds from issuance of preferred stock, common stock, and warrants		10,472,003			-
Net proceeds from exercise of warrants to purchase common stock		-			1,384,972
Proceeds from issuance of convertible debt		-			500,000
Net cash provided by financing activities from continuing operations		10,472,003			1,884,972
Net cash used in discontinued operations		-			-
Net cash used in financing activities		10,472,003			1,884,972

Net increase (decrease) in cash and cash equivalents		744,842			(6,108,254	)

Cash and cash equivalents at beginning of the year		497,313			6,605,567
Cash and cash equivalents at end of the year	$	1,242,155		$	497,313

The Company had conversion of 541,852 shares of Series C preferred stock into 1,333,736 shares of common stock during the year ended December 31, 2014.
The Company had conversion of the two notes payable into 226,655 shares of Series C preferred stock during the year ended December 31, 2014.
The Company issued 5,250,000 shares of common stock as part of of the SMS acquisition and 596,315 shares of common stock as part of the TechXpress acquisition during the year ended December 31, 2014.

See accompanying notes to the consolidated financial statements.

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SPENDSMART NETWORKS, INC.

Notes to Consolidated Financial Statements

1.	Basis of Presentation and Going Concern

The Company is a Delaware corporation. Through the subsidiary incorporated in the state of California, SpendSmart Networks, Inc. (“SpendSmart-CA”), the Company provides proprietary loyalty systems and a suite of digital engagement and marketing servers through our Mobile and Loyalty Marketing programs and proprietary website building software that help local merchants build relationships with consumers and drive revenues. The Company is a publicly traded company trading on the OTC Bulletin Board under the symbol “SSPC.” The accompanying audited consolidated financial statements include the accounts of the Company and SpendSmart-CA as of December 31, 2014 and 2013 and for the years ended December 31, 2014 and 2013, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

As of December 31, 2014, the Company’s audited consolidated financial statements included an opinion containing an explanatory paragraph as to the uncertainty of the Company’s ability to continue as a going concern. The Company has continued to incur net losses through December 31, 2014 and have yet to establish profitable operations. These factors among others create a substantial doubt about our ability to continue as a going concern. The Company’s audited consolidated financial statements as of and for the periods ended December 31, 2014 do not contain any adjustments for this uncertainty.

The Company also currently plans to attempt to raise additional required capital through the sale of unregistered shares of the Company’s preferred or common stock. All additional amounts raised will be used for our future investing and operating cash flow needs. However there can be no assurance that we will be successful in consummating such financing. This description of our recent financing and future plans for financing does not constitute an offer to sell or the solicitation of an offer to buy our securities, nor shall such securities be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend stating the same.

In June 2014, the Company changed its name to SpendSmart Networks, Inc. and SpendSmart Payments Company-CA changed its name to SpendSmart Networks, Inc.

2.	Discontinued Operations

On November 26, 2014, as part of SpendSmart Networks, Inc.'s (the "Company") efforts to reduce expenses as well as focus its resources on its Mobile and Loyalty Marketing Division, the Company decided to begin a wind down of the operations of its Card Division. All Card Division related operations ceased on January 26, 2015. The Company corresponded with its customers to affect an orderly wind down of its operations.

As a result of the sale, the Consolidated Financial Statements and related Notes for the periods presented herein reflect the Card Division as a discontinued operation.

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Operating results of discontinued operations were as follows:

	For the years ended December 31,
	2014		2013

Revenues:		770,890		999,992

Selling and Marketing		196,646		1,168,035
Personnel		2,910,284		5,295,232
Processing		1,647,067		1,570,131
Total operating expenses		4,753,997		8,033,398

Net loss from discontinued operations		3,983,107		7,033,406


Assets and liabilities of discontinued operations were as follows:


	December 31,
		2014		2013
Other assets as held for sale:
Amounts due from credit cards:	$	145,903	$	207,818
Total assets		145,903		207,818

Other liabilities as held for sale:
Accrued personnel comp:	$	284,231	$	231,668
Accounts Payable	$	573,124	$	841,976
Deferred Revenue	$	11,785	$	11,785
Total liabilities		869,140		1,085,429

Net liabilities of discontinued operations:	$	723,237	$	877,611

3.	Summary of Significant Accounting Policies

Loans Receivable and Accounts Receivable

The Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers. Loans and accounts receivable are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts that are outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time loan and accounts receivable are past due and the customer's current ability to pay its obligation to the Company. The Company writes off loans and accounts receivable when they become uncollectible.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, fair value of financial instruments, at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include recoverability and useful lives of intangible assets, the valuation allowance related to the Company's deferred tax assets, the allowance for doubtful accounts related and notes and accounts receivable and the fair value of stock options and warrants granted to employees, consultants, directors, investors and placement agents.

Revenue Recognition

We generate revenues primarily in the form of set up fees, license fees, messaging, equipment and marketing services fees and value added mobile marketing and mobile commerce services. License fees are charged monthly for our support services. Set-up fees primarily consist of fees for website development services (including support and unspecified upgrades and enhancements when and if they are available), training and professional services that are not essential to functionality.

We recognize revenues when all of the following conditions are met:

•	there is persuasive evidence of an arrangement;

•	the products or services have been delivered to the customer;

•	the amount of fees to be paid by the customer is fixed or determinable; and

•	the collection of the related fees is probable.

Signed agreements are used as evidence of an arrangement. Electronic delivery occurs when we provide the customer with access to the software. We assess whether a fee is fixed or determinable at the outset of the arrangement, primarily based on the payment terms associated with the transaction. We do offer extended payment terms with regards to the setup fee with typical terms of payment due between one and three years from delivery of license. We assess collectability of the set-up fee based on a number of factors such as collection history and creditworthiness of the customer. If we determine that collectability is not probable, revenue is deferred until collectability becomes probable, generally upon receipt of cash.

We do not offer refunds and therefore have not recorded any sales return allowance for any of the periods presented. Upon a periodic review of outstanding accounts and notes receivable, amounts that are deemed to be uncollectible are written off against the allowance for doubtful accounts.

Cash and cash equivalents

The Company considers all investments with an original maturity of three months or less to be cash equivalents. Cash equivalents primarily represent funds invested in money market funds, bank certificates of deposit and U.S. government debt securities whose cost equals fair market value.

From time to time, the Company has maintained bank balances in excess of insurance limits established by the Federal Deposit Insurance Corporation. The Company has not experienced any losses with respect to cash. Management believes the Company is not exposed to any significant credit risk with respect to its cash and cash equivalents.

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Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets (generally three to five years). Costs incurred for maintenance and repairs are expensed as incurred and expenditures for major replacements and improvements are capitalized and depreciated over their estimated remaining useful lives. Depreciation expense for the years ended December 31, 2014 and 2013 was $58,225 and $0, respectively.

Software Capitalization

The Company accounts for computer software used in the business in accordance with ASC 350 “Intangibles-Goodwill and Other”. ASC 350 requires computer software costs associated with internal use software to be charged to operations as incurred until certain capitalization criteria are met. Costs incurred during the preliminary project stage and the post-implementation stages are expensed as incurred. Certain qualifying costs incurred during the application development stage are capitalized as property, equipment and software. These costs generally consist of internal labor during configuration, coding, and testing activities. Capitalization begins when (i) the preliminary project stage is complete, (ii) management with the relevant authority authorizes and commits to the funding of the software project, and (iii) it is probable both that the project will be completed and that the software will be used to perform the function intended. We capitalized $283,080 in software for the year ended December 31, 2014. Software depreciation expense for the years ended December 31, 2014 and 2013 was $25,629 and $0, respectively.

Valuation of Long-Lived Assets

The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the estimated fair value of the assets. There has not been any impairments recorded.

Income Tax Expense Estimates and Policies

As part of the income tax provision process of preparing the Company’s financial statements, the Company is required to estimate the Company’s provision for income taxes. This process involves estimating our current tax liabilities together with assessing temporary differences resulting from differing treatments of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. Management then assesses the likelihood that the Company deferred tax assets will be recovered from future taxable income and to the extent believed that recovery is not likely, a valuation allowance is established. Further, to the extent a valuation allowance is established and changes occur to this allowance in a financial accounting period, such changes are recognized in the Company’s tax provision in the Company’s consolidated statement of operations. The Company’s use of judgment in making estimates to determine the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance is recorded against our net deferred tax assets.

There are various factors that may cause these tax assumptions to change in the near term, and the Company may have to record a future valuation allowance against our deferred tax assets. The Company recognizes the benefit of an uncertain tax position taken or expected to be taken on the Company’s income tax returns if it is “more likely than not” that such tax position will be sustained based on its technical merits.

Stock Based Compensation

The Company accounts for stock based compensation arrangements through the measurement and recognition of compensation expense for all stock based payment awards to employees and directors based on estimated fair values. The Company uses the Black-Scholes option valuation model to estimate the fair value of the Company’s stock options and warrants at the date of grant. The Black-Scholes option valuation model requires the input of subjective assumptions to calculate the value of options and warrants. The Company uses historical company data among other information to estimate the expected price volatility and the expected forfeiture rate and not comparable company information.

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Derivatives

The Company accounts for certain of its outstanding warrants issued in fiscal 2010, 2012 and 2013 (“2010 Warrants,” “2012 Warrants” and “2013 Warrants, respectively) as derivative liabilities. The 2010 Warrants were determined to be ineligible for equity classification due to provisions of the respective instruments that may result in an adjustment to their conversion or exercise prices. These derivative liabilities which arose from the issuance of the 2010 Warrants resulted in an ending balance of derivative liabilities of $47,209 and $26,505 as of December 31, 2014 and 2013, respectively. On March 20, 2013, the Company amended its warrant agreement for the 2012 and 2013 warrants whereby removing all terms that required net cash settlement, and as a result, the Company recorded its derivative liabilities relating to these warrants through March 20, 2013, at which time the balance of the derivative liability was reclassified into additional paid in capital.

The Company recognized a loss of $14,759 and a gain of $352,588 in the fair value of derivatives for the years ended December 31, 2014 and 2013, respectively. Subsequent changes to the fair value of the derivative liabilities will continue to require adjustments to their carrying value that will be recorded as other income (in the event that their value decreases) or as other expense (in the event that their value increases). In general (all other factors being equal), the Company will record income when the market value of the Company’s common stock decreases and will record expense when the value of the Company’s stock increases. The fair value of these liabilities is estimated using option pricing models that are based on the individual characteristics of the Company’s warrants, preferred and common stock, as well as assumptions for volatility, remaining expected life, risk-free interest rate and, in some cases, credit spread.

Net Loss per Share

The Company calculates basic earnings per share (“EPS”) by dividing the Company’s net loss and comprehensive net loss applicable to common shareholders by the weighted average number of common shares outstanding for the period, without considering common stock equivalents. Diluted EPS is computed by dividing net income or net loss and comprehensive net loss applicable to common shareholders by the weighted average number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents, such as options and warrants. Options and warrants are only included in the calculation of diluted EPS when their effect is dilutive.

Warrant Liability

The Company accounts for the common stock warrants granted and still outstanding as of December 31, 2014 in connection with certain financing transactions (“Transactions”) in accordance with the guidance contained in ASC 815-40-15-7D, "Contracts in Entity's Own Equity" whereby under that provision they do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classifies the warrant instrument as a liability at its fair value and adjusts the instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company's statements of operations. The fair value of the warrants issued by the Company in connection with the transactions has been estimated using a Monte Carlo simulation.

Fair value of assets and liabilities

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value for applicable assets and liabilities, we consider the principal or most advantageous market in which we would transact and we consider assumptions market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. This guidance also establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows:

·	Level 1: Observable inputs such as quoted prices in active markets;

·	Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

·	Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

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The Company’s financial instruments are cash and cash equivalents, accounts payable, and derivative liabilities. The recorded values of cash equivalents and accounts payable approximate their fair values based on their short-term nature. The fair value of derivative liabilities is estimated using option pricing models that are based on the individual characteristics of our warrants, preferred and common stock, the derivative liability on the valuation date as well as assumptions for volatility, remaining expected life, risk-free interest rate and, in some cases, credit spread. The derivative liabilities are the only Level 3 fair value measures.

A summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy as of December 31, 2014 and 2013 is as follows:

Date of Valuation	December 31, 2014			December 31, 2013
Stock Price		1.00			0.91
Volatility (Annual)	66% to 67%			70% to 72%
Number of assumed financings		1			1
Number of anti-dilutive warrants		129,167			159,167
Total warrants outstanding		23,933,927			7,977,990
Total shares outstanding		18,435,239			10,398,527
Strike Price		0.75			2.25
Risk-free Rate		0.21	%		0.33	%
Maturity Date	8/13/15 to 11/24/15			1/24/14 to 11/24/15
Expected Life	.62 to .90 years			.48 to 1.90 years

During 2013, the Company elected the fair value option for notes payable as this option better matches the changes in fair value of notes payable. The decision to elect the fair value option, which is irrevocable once elected, is determined on an instrument by instrument basis and applied to an entire instrument.

At December 31, 2014 and 2013, the estimated fair values of the liabilities measured on a recurring basis are as follows:

			Fair Value Measurements at December 31, 2014:
			Fair Value Measurements at December 31, 2014:
	Carrying Value
	Carrying Value		Level 1		Level 2		Level 3
Financial Assets
Earn-out liability		594,216		-		-		594,216
Derivative liability - warrants	$	47,209	$	-	$	-	$	47,209
Total securities	$	641,425	$	-	$	-	$	641,425

			Fair Value Measurements at December 31, 2013:
			Fair Value Measurements at December 31, 2013:
	Carrying Value
	Carrying Value		Level 1		Level 2		Level 3
Financial Assets
Note payable, fair value	$	142,089	$	-	$	-	$	142,089
Derivative liability - warrants	$	26,505	$	-	$	-	$	26,505
Total securities	$	168,594	$	-	$	0	$	168,594

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The following tables present the activity for Level 3 liabilities for the years ended December 31, 2014 and 2013:

	Fair Value Measurement Using Significant Unobservable Inputs
	(Level 3)
	Warrant Derivative Liabilities			Conversion Notes
Beginning balance at December 31, 2013	$	26,505		$	142,089
Additions during the year		-			-
Total unrealized (gains) or losses included in net loss		20,704			(5,945	)
Transfers in and/or out of Level 3		-			(136,144	)
Ending balance at December 31, 2014	$	47,209		$	-

	Fair Value Measurement Using
	Significant Unobservable Inputs
	(Level 3)
	Warrant Derivative Liabilities			Conversion Notes
Beginning balance at December 31, 2012	$	8,873,267		$	-
Additions during the year		(8	)		382,000
Total unrealized (gains) or losses included in net loss		(112,669	)		(239,911	)
Transfers in and/or out of Level 3		(8,734,085	)		-
Ending balance at December 31, 2013	$	26,505		$	142,089

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Changes in fair value of our Level 3 earn-out liability for the years ended December 31, 2014 and 2013 were as follows:

Fair Value Measurements Using Level 3 Inputs

	Liability			Total
Balance - December 31, 2013	$	-		$	-
Additions during the period		607,798			607,798
Total Unrealized (gains) or losses include in net loss		(13,582	)		(13,582	)
Balance - December 31, 2014	$	594,216		$	594,216

Advertising

The Company expenses advertising costs as incurred. The Company has no existing arrangements under which we provide or receive advertising services from others for any consideration other than cash. Advertising expenses from continuing operation (primarily in the form of Internet direct marketing) totaled $227,349 and $0 for the years ended December 31, 2014 and 2013, respectively.

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Litigation

From time to time, the Company may become involved in litigation and other legal actions. The Company estimates the range of liability related to any pending litigation where the amount and range of loss can be estimated. The Company records its best estimate of a loss when the loss is considered probable. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the Company records a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated. Through the date of these financial statements, the Company is currently not involved in litigation or other legal actions.

The Company was involved in a disagreement with our incumbent processor. Our Company was involved in an arbitration with our previous processor but we have since agreed to a settlement of such arbitration. The agreed upon settlement amount had been accrued at December 31, 2013 and was paid on February 13, 2014.

Goodwill

The Company accounts for goodwill and other intangible assets under ASC 350 “Intangibles – Goodwill and Other” (“ASC 350”). ASC 350 eliminates the amortization of goodwill and certain other intangible assets and requires an evaluation of impairment by assessing qualitative factors, and if necessary, applying a fair-value based test. The goodwill impairment test requires qualitative analysis to determine whether is it more likely than not that the fair value of a reporting unit is less than the carrying amount, including goodwill. An indication of impairment through analysis of these qualitative factors initiates a two-step process, which requires management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of the Company’s reporting units based on discounted cash flow models using revenue and profit forecasts and comparing the estimated fair values with the carrying values of the Company’s reporting units which include the goodwill. If the estimated fair values are less than the carrying values, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of the Company’s “implied fair value” requires the Company to allocate the estimated fair value to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to the corresponding carrying value. The Company tested goodwill impairment at December 31, 2014 and concluded that goodwill was not impaired.

Intangible assets

Intangible assets consist of intellectual property/technology, customer lists, and trade-name/marks acquired in business combinations under the purchase method of accounting are recorded at fair value net of accumulated amortization since the acquisition date. Amortization is calculated using the straight line method over the estimated useful lives at the following annual rates:

		Useful Lives
IP/technology		10
Customer lists		10
Trade-name/marks		10

The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of finite-lived intangible asset may not be recoverable. Recoverability of a finite-lived intangible asset is measured by a comparison of its carrying amount to the undiscounted future cash flows expected to be generated by the asset. If the asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is determined based on discounted cash flows.

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Recently Issued Accounting Pronouncements

The FASB has issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered.. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated balance sheets and results of operations.

Segments

The Company operates in one reportable segment now due to the discontinuance of our Card Division. On November 26, 2014, the Company decided to wind down the operations of the Card Division and focus on its Mobile and Loyalty Marketing Division in an effort to reduce expenses and focus its resources elsewhere.

Accordingly, no segment disclosures have been presented herein.

4. Accounts Receivable, Short-Term and Long-Term Notes Receivable

Management reviews accounts receivable, short-term and long-term notes receivable on a monthly basis to determine if any receivables are potentially uncollectible. An allowance for doubtful accounts is determined based on a combination of historical experience, length of time outstanding, customer credit worthiness, and current economic trends. As of December 31, 2013, the Company expected the amount of any potentially uncollectible receivables to be insignificant; therefore, no allowance for doubtful accounts had been determined necessary by management. As of December 31, 2014, the Company has recorded an allowance for doubtful accounts of $825,052.

Long-term receivables relate to notes receivable from the financing of set-up and license fees. Initial set up and licensing fees are $22,500 and clients typically contribute cash upfront of 20% and the remaining 80% is financed over a 3 year term.

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Notes receivable aged over 30 days past due are considered delinquent and notes receivable aged over 60 days past due with known collection issues are placed on non-accrual status. Interest revenue is not recognized on notes receivable while on non-accrual status. Cash payments received on non-accrual receivables are applied towards the principal. When notes receivable on non-accrual status are again less than 60 days past due, recognition of interest revenue for notes receivable is resumed. We charge interest rates on our notes receivable averaging 14% which approximates a fair value. We recorded approximately $89,000 in interest for the year ended December 31, 2014.

The allowance for doubtful accounts on long-term receivables is the Company's best estimate of the amount of probable credit losses related to the Company's existing note receivables. The allowance for doubtful accounts is the Company's best estimate of probable credit losses related to trade receivables and notes receivable based upon the aging of the receivables, historical collection data, internal assessments of credit quality and the economic conditions in the business subprime industry, as well as in the economy as a whole. The Company charges off uncollectable amounts against the reserve in the period in which it determines they are uncollectable. Unearned income on notes receivable is amortized using the effective interest method. The Company determines the allowance for doubtful accounts related to notes receivable based upon a reserve for known collection issues, as well as a reserve based upon aging, both of which are based upon history of such losses and current economic conditions. Based upon the Company's methodology, the notes receivable balances with reserves and the reserves associated with those balances are as follows:

	December 31, 2014
	Gross Notes Receivable				Reserve				Net Notes Receivable
	Current		Long-Term		Current		Long-Term		Current		Long-Term
Customer Notes Receivable	$	756,488	$	1,028,805	$	286,571	$	349,954	$	469,917	$	678,851

	December 31, 2014
	Gross Accounts Receivable				Reserve				Net Accounts Receivable
	Current				Current				Current
Accounts Receivable	$	342,304			$	188,527			$	153,777

The roll forward of the allowance for doubtful accounts related to notes receivable and accounts receivable is as follows:

	Notes Receivable				Accounts Receivable
	Current		Long-Term		Current		Long-Term
Balance at December 31, 2013	$	-	$	-	$	-	$	-
Incremental Provision	$	286,571	$	349,954	$	188,527	$	-
Recoveries	$	-	$	-	$	-	$	-
Charge offs	$	-	$	-	$	-	$	-
Balance at December 31, 2014	$	286,571	$	349,954	$	188,527	$	-

The allowance for doubtful accounts as a percentage of total receivables was approximately 39% as of December 31, 2014.

5. Business Combinations

SMS Acquisition

On February 11, 2014, the Company, through its wholly-owned subsidiary, SpendSmart Networks, Inc., acquired substantially all of the assets of Intellectual Capital Management, Inc., d/b/a SMS Masterminds (“SMS Masterminds”) a Nevada corporation, including but not limited to certain intellectual property and accounts receivable, pursuant to the terms of an Asset Purchase Agreement (the “Asset Purchase Agreement”).

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Pursuant to the Asset Purchase Agreement, the Company acquired substantially all of the assets of SMS Masterminds. In consideration of the purchased assets, the Company agreed to issue to SMS Masterminds five million two hundred and fifty thousand shares of the Company’s common stock and a cash payment of $1.4 million, of which $400,000 has been deferred. The Company paid $380,000 during the year ended December 31, 2014 to the sellers related to this deferment. $20,000 of this deferment remains outstanding as of December 31, 2014 and will be paid out at $5,000 per quarter over the next four quarters.

The Company also agreed to pay the sellers an earn-out payment relating to fifteen percent of the earnings generated by SMS Masterminds after the acquisition and an additional earn-out payment tied to the EBITDA of the Company after the acquisition of SMS Masterminds, of up to $2,000,000 in aggregate. The Company paid $0 during the year ended December 31, 2014 related to this earn-out payment.

The fair value of the total consideration at the date of acquisition is as follows:

Consideration Paid
Cash Paid and to be paid - to sellers	$	1,400,000
5,250,000 Common Stock issued to SMS		3,313,598
Fair value of earn-out payment		607,798
Total Consideration Paid	$	5,321,396

The transaction was accounted for using the acquisition method required by Topic 805, Business Combinations. Accordingly, goodwill has been measured as the excess of the total consideration including the fair value of any non-controlling interest on acquisition date over the amounts assigned to the identifiable assets acquired and liabilities assumed.

On the acquisition date, the fair value of net assets acquired was $5,321,396. The fair value of stock issued to the seller as part of the consideration was based on reference to quoted market values of SSPC stock as of the date of acquisition. We had originally estimated the fair value of the earn-out liability to be $846,785 and then revised the amount to $607,798 upon review of additional information during the measurement period. The final allocation of the total consideration to the fair value of the assets acquired and liabilities assumed as of the date of the acquisition is as follows:

Accounts receivable, net	$	318,708
Identifiable intangible assets		3,242,900
Goodwill		2,458,375
Total assets		6,019,983

Accounts payable and accrued expenses		222,268
Deferred Revenue		249,797
Long-term liabilities (SBA loan)		226,522
Total liabilities		698,587
Net assets acquired	$	5,321,396

Fair valuation methods used for the identifiable net assets acquired in that acquisition make use of projected and discounted cash flows using company specific interest rates. IP/Technology, Customer Base, and Trademarks are being amortized over ten years using the straight-line method. Amortization expense related to intangible assets was $283,754 for the year ended December 31, 2014 and will be $324,290 for each of the years ended December 31, 2015 through 2023 and $40,536 in the year ended December 31, 2024.

TechXpress Web Acquisition

On September 18, 2014, the Company through its wholly-owned subsidiary SpendSmart Networks, CA, purchased substantially all of the web related assets of TechXpress, Inc. (“TechXpress”), a California corporation, pursuant to the terms of an Asset Purchase Agreement (the “Asset Purchase Agreement”). In consideration of the purchased assets, the Company agreed to pay a purchase price consisting of $454,641 in cash and shares of the Company’s common stock, $0.001 par value per share, equal to $438,518, or an aggregate of 596,315 shares of the Company’s common stock (the “Stock Consideration”).

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The final fair value assigned to the total consideration is as follows:

Consideration Paid:
Cash consideration	$	454,641
596,315 common stock issued to TechXpress		438,518
Total consideration paid	$	893,159

On the acquisition date, the fair value of net assets acquired was $893,159. The fair value of stock issued to the seller as part of the consideration was based on reference to quoted market values of SSPC stock as of the date of acquisition. The final allocation of the total consideration to the fair value of the assets acquired as of the date of the acquisition is as follows:

Accounts receivable, net	$	5,758
Identifiable intangible assets		143,500
Goodwill		743,901
Net assets acquired	$	893,159

Fair valuation methods used for the identifiable net assets acquired in that acquisition make use of projected and discounted cash flows using company specific interest rates. Amortization expense related to intangible assets was $4,947 for the year ended December 31, 2014 and will be $14,350 for each of the years ended December 31, 2015 through 2023 and $10,165 in the year ended December 31, 2024.

Pro forma

The following unaudited pro forma financial information presents results as if the acquisition of SMS Masterminds and the TechXpress Web business had occurred on January 1, 2013 (in thousands):

	Year Ended December 31,
(Unaudited)	2014			2013

Total revenue	$	5,862		$	4,964
Net income (loss)	$	(12,107	)	$	(13,164	)

For purposes of the pro forma disclosures above, the primary adjustments for the years ended December 31, 2014 and 2013 include the amortization of the intangible assets purchased in the acquisition.

6. Short Term Note Receivable

The Company issued a Secured Convertible Promissory Note (the “Note”) for a principal amount of $410,000 to a third party in September 2014. The Note bears interest at the rate of 5.25% per annum and will be matured in four months. For the year ended December 31, 2014, the Company has recorded $6,133 of interest income from this Note. $90,000 of the principal amount was paid during first quarter of 2015 with the remainder expected to be paid in early second quarter 2015.

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7. Redeemable Preferred Stock

In 2012, the Company entered into subscription agreements with accredited investors pursuant to which we issued a total of 10,165 shares of our Series B Preferred Stock (convertible into 1,694,167 shares of the Company’s Common Stock), and five year warrants to purchase up to an additional 1,111,042 shares of our Common Stock at exercise prices ranging between $7.50 and $9.00 per share, in exchange for gross and net proceeds totaling approximately $10,165,000 and $9,219,461, respectively. The Series B Convertible Preferred Stock automatically converted to common stock on January 19, 2013 as in accordance with the registration statement. In aggregate 10,165 outstanding shares of the Series B Stock automatically converted into 1,694,167 common shares.

8. Convertible Promissory Notes

On October 25, 2013 and November 4, 2013, the Company closed a private placement of 10 Units to a total of 2 investors, each Unit consisting of (i) a 13-month $50,000 principal amount promissory note (“Promissory Note”) bearing an annual interest rate of 7%, and (ii) a four-year callable Warrant (the "Promissory Note Warrants"), to purchase 20,000 shares of common stock. The Company received gross proceeds of $500,000.

The Promissory Notes are convertible into shares of capital stock at a conversion price equal to the lesser of i) $1.25 per share of common stock, or ii) a 25% discount to market price of the next equity offering.

The Company, upon five-day notice to holders of outstanding Promissory Note Warrants, has the right, subject to limitations, to call all or any portion of the Warrants then outstanding if (i) the VWAP for each of ten (10) consecutive trading days equals or exceeds $4.50 per share and (ii) has a minimum trading volume of 50,000 shares per day over the same period.

The Company elected the fair value option for notes payable as this option better matches the changes in fair value of notes payable. The decision to elect the fair value option, which is irrevocable once elected, is determined on an instrument by instrument basis and applied to an entire instrument. The Company recognized a $239,911 net change in fair value of financial instruments the consolidated statements of operations in 2013. On February 11, 2014, the holders of the Promissory Notes converted their holdings into 226,655 shares of Series C Preferred.

9. Common Stock and Warrants

Common stock

On March 20, 2013, the Company amended its warrant and registration rights agreement whereby removing all terms that required net cash settlement. As a result, the Company reclassed 1,699,415 shares or $2,777,433 from redeemable common stock to common stock (classified as equity).

On July 15, 2013, the Company issued to a service provider 450,000 shares of common stock, at $2.25 per share, with a fair value of $1,012,500. During the period ended March 2013, the Company issued 11,167 shares of common stock to a contractor in exchange for programming services performed, at $6.00 per share, with a fair value of $67,002.

During the year ended December 31, 2014, the company issued 22,989 shares of common stock, at $.87 per share, and the Company recognized expense of $20,000 for services rendered.

During the year ended December 31, 2013, the company issued 474,806 shares of common stock, at $2.33 per share, and the Company recognized expense of $1,107,562 for services rendered.

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Warrants

On June 10, 2013, the Company announced its intention to exercise certain classes of outstanding warrants that were initially issued to investors participating in private placement financings in 2010, 2011 and 2012 consisting of the following classes: (i) outstanding warrants to purchase an aggregate of 634,916 shares of the Company’s common stock issued to investors participating in the Company’s private placement financing completed on December 13, 2012 and November 30, 2012, of which 541,667 are exercisable at an exercise price of $7.50 per share (the “$7.50 December Warrants”) and 93,249 are exercisable at an exercise price of $9.00 per share (the “$9.00 December Warrants”); (ii) outstanding warrants to purchase an aggregate of 1,016,518 shares of the Company’s common stock issued to investors participating in the Company’s private placement financings closed on July 19, 2012, June 20, 2012, May 24, 2012 and March 31, 2012, of which 833,333 are exercisable at an exercise price of $7.50 per share (the “$7.50 Investor Warrants”) and 183,185 are exercisable at an exercise price of $9.00 per share (the “$9.00 Investor Warrants”); (iii) outstanding warrants to purchase an aggregate of 446,188 shares of the Company’s common stock issued to investors participating in the Company’s private placement financing completed on October 21, 2011 and November 21, 2011, of which 333,334 are exercisable at an exercise price of $7.50 per share (the “$7.50 2011 Warrants”) and 112,854 are exercisable at an exercise price of $9.00 per share (the “$9.00 2011 Warrants”); and (iv) outstanding warrants to purchase an aggregate of 431,950 shares of the Company’s common stock issued to investors participating in the Company’s private placement financings closed on November 16, 2010, of which 125,000 are exercisable at an exercise price of $6.00 per share (the “$6.00 2010 Warrants”) and 306,950 are exercisable at an exercise price of $9.00 per share (the “$9.00 2010 Warrants”).The warrant redemption was intended to raise non-dilutive capital.

A Notice of Election to Participate was provided to the affected warrant holders on June 10, 2013. These warrant holders had until 5:00 p.m. ET on July 15, 2013, to exercise their outstanding warrants at $2.25 per share. Pursuant to the Offer to Amend and Exercise, on July 15, 2013 an aggregate of 662,540 warrants were tendered by their holders and were amended and exercised in connection therewith for an aggregate exercise price of approximately $1,490,715, including the following warrants: 85,974 $9.00 December Warrants; 99,703 $9.00 Investor Warrants; 83,334 $7.50 Investor Warrants; 82,408 $9.00 2011 Warrants; 93,751 $7.50 2011 Warrants; 154,870 $9.00 2010 Warrants; and 62,500 $6.00 2010 Warrants.

In accordance with ASC 718- 20-35, short-term inducement modifications shall be treated as an exchange of the original award for a new award. In substance, the Company repurchases the original instrument by issuing a new instrument of equal or greater value, incurring additional expense for any incremental value. The effects of this modification (incremental cost) shall be measured as the excess, if any, of the fair value of the modified award determined over the fair value of the original award immediately before its terms are modified, measured based on the share price and other pertinent factors at that date. Total recognized cost for an equity award shall at least equal the fair value of the award at the grant date. As a result of this modification, there was no incremental cost.

Through December 31, 2014, we have also issued warrants to purchase up to 4,917,276 shares of our common stock to investors (and as compensation to third parties in connection with investments) related to the sale of our common stock, 4,096,665 of which remain outstanding net of exercises, cancellations and expirations (all of which are fully vested).

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10.	Convertible Preferred Stock

Series A Preferred Stock

At December 31, 2014 and 2013 we had 0 shares of Series A Cumulative Convertible Preferred Stock (the “Series A Stock”) outstanding.

Series B Preferred Stock

Our Series B Convertible Preferred Stock (“Series B Stock”) automatically converted to common stock on January 19, 2013 as in accordance with the Certificate of Designation for the Series B stock which states that six months from the date of the final closing, as defined in the related subscription agreement, each share of Series B will automatically convert into common stock. On January 19, 2013, 10,165 outstanding shares of Series B Stock automatically converted into 1,694,167 common shares at an effective price of $600 per share.

At December 31, 2014 and 2013 we had 0 shares of Series B convertible preferred stock (“Series B Stock”) outstanding.

Series C Convertible Preferred Stock

At December 31, 2014 and 2013, we had 3,757,229 and 0 shares, respectively, of Series C convertible preferred stock (“Series C Stock”) outstanding that were issued to investors for $3.00 per share. We issued 4,299,081 shares of Series C Stock and had conversions of 541,852 shares for the year ended December 31, 2014.

On February 11, 2014, the Company filed a Certificate to Set Forth Designations, Voting Powers, Preferences, Limitations, Restrictions, and Relative Rights (the “Certificate of Designations”) of its Series C Convertible Preferred Stock with the Secretary of State of the State of Colorado to amend our articles of incorporation. On March 14, 2014, we filed an amendment to our Certificate of Designation increasing the number of authorized shares of Series C Stock to an aggregate of 4,299,081. The Certificate of Designations sets forth the rights, preferences and privileges of the Series C Preferred Stock. As provided in our articles of incorporation, the filing of the Certificate of Designations was approved by our Board of Directors. During the quarter ended September 30, 2014, 200,000 shares of Series C Stock voluntarily converted into 800,000 shares of Common Stock under the original terms. The following is a summary of the rights, privileges and preferences of the Series C Preferred Stock:

Number of Shares: The number of shares of Series C Preferred Stock designated as Series C Preferred Stock is 4,299,081 (which shall not be subject to increase without the written consent of all of the holders of the Series C Preferred Stock or as otherwise set forth in the Certificate of Designation.

Stated Value: The initial Stated Value of each share of Series C Preferred Stock is $3.00 (as adjusted pursuant to the Certificate of Designation).

Voluntary Conversion: The Series C Preferred Stock shall be convertible at the option of the holder, into common stock at the applicable conversion price of $.75 per share, subject to adjustments for stock dividends, splits, combinations and similar events as described in the form of Certificate of Designations. In addition, the Company has the right to require the holders to convert to common stock under certain enumerated circumstances.

Mandatory Conversion: At the Company’s sole option, each outstanding share of Series C Preferred Stock may be converted into shares of Common Stock at the applicable conversion price immediately prior to the close of business on the date that the volume weighted average price of the Common Stock, based on the closing price on the or any other market or exchange where the same is traded, shall exceed $4.00 per share for any 30 consecutive trading days anytime from the Original Issue Date with an average daily trading volume of 100,000 shares (such numbers shall be proportionally adjusted for dividends, stock splits, Common Stock combinations and recapitalizations involving the Common Stock).

Voting Rights: Except as described in the Certificate of Designations, holders of the Series C Preferred Stock will vote together with holders of the Company common stock on all matters, on an as-converted to common stock basis, and not as a separate class or series (subject to limited exceptions).

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Liquidation Preferences: In the event of any liquidation or winding up of the Company prior to and in preference to any Junior Securities (including common stock), the holders of the Series C Preferred Stock will be entitled to receive in preference to the holders of the Company common stock a per share amount equal to the Stated Value (as adjusted pursuant to the Certificate of Designations).

11.	Agreements for services, officer and Board of Directors’ compensation

In connection with the celebrity endorsement agreement (dated November 20, 2012), the Company made payments to two entities associated with a member of our Board of Directors, Jesse Itzler. Expenses related to these payments totaled $115,000 and $728,405 during the year ended December 31, 2013.

During January 2013 (the "Effective Date"), the Company entered into a Promotion/Endorsement Agreement (the “P/E Agreement”) with a term of eighteen (18) months (the “Term”). In connection with the P/E Agreement, the Company agreed to pay a nonrefundable fee of two hundred and fifty thousand dollars payable in four equal installments, on predetermined dates over the Term.

In addition to the fee, the Company has agreed to pay monthly incentive compensation per active account (“Incentive Compensation”) and have issued to the endorser additional warrants to purchase our common stock. Should the number of accounts reach a specified level, the endorser will have the opportunity to earn additional warrants equal to five times the number of active accounts at the end of the Term. The Additional Warrant (“Additional Warrant”) is exercisable for the number of shares of the Company’s common stock equal to five times the number of active accounts in effect at the end of the Term, provided there are more than two hundred and fifty thousand active accounts as of the last day of the Term. The Additional Warrant will be exercisable no more rapidly than in equal monthly installments during the six month period immediately following the Term at an exercise price of $5.70 per share. In the event the product of five times the number of active accounts exceeds two million, the Company will issue the endorser an “End of Term Warrant” for the number of shares in excess of 133,333. The exercise price of the End of Term Warrant shall be the arithmetic mean of the high and low prices of our Company’s common stock on the last trading day before the date of the issuance of the End of Term Warrant. Extension Warrants will vest equally on a monthly basis and will have an exercise price equal to the mean of the high and low prices of our Company’s common stock on the last trading day before the date of issuance of each Extension Warrant.

12.	Agreements with former officers

In February 2013, the Company granted warrants to purchase up to 200,000 shares of common stock to Kim Petry, the Company’s former CFO. She replaced former CFO, Jonathan Shultz. The warrants vest over a period of three years; have an exercise price of $5.85 per share; include a cashless exercise option; and expire five years after the date of grant. The fair value of these warrants on the grant date was $587,802. Ms. Petry resigned from the Company in October 2013, and the cost associated with the remainder of her warrants was recorded then.

Effective December 31, 2014, William Hernandez-Ellsworth resigned from his position as a director of SpendSmart Networks, Inc. (the “Company”). Mr. Hernandez-Ellsworth’s departure from the Board was not the result of any disagreements with the Company.

Effective as of January 26, 2015 (the “Effective Date”), William Hernandez-Ellsworth resigned from his position as President of SpendSmart Networks, Inc. (the “Company”). Mr. Hernandez-Ellsworth’s departure from his position as President was not the result of any disagreements with the Company.

In conjunction with Mr. Hernandez-Ellsworth’s resignation, on January 29, 2015 the Company entered into an Agreement with Mr. Hernandez-Ellsworth (the “Agreement”). Pursuant to the Agreement, and in conjunction with the closing of the Company’s card business, Mr. Hernandez-Ellsworth shall remain employed by the Company, on an as needed basis, for a one year term commencing on the Effective Date and shall be paid an annual salary of $120,000. Additionally, Mr. Hernandez-Ellsworth will: (i) be permitted to participate in any group life, hospitalization or disability insurance plans, health programs, retirement plans, fringe benefit programs and other benefits that may be available to employees of the Company; (ii) shall have 50,000 unvested shares of Non-Qualified Stock Options issued on March 19, 2014, and 112,500 unvested shares of Incentive Stock Options issued on March 21, 2014 (the “Incentive Stock Option”), become fully vested; and (iii) the provisions in Mr. Hernandez-Ellsworth Incentive Option that requires he exercise all vested and unexercised options within ninety (90) days of his departure from the Company shall be deleted and shall no longer apply. The Agreement also contains customary confidentiality and non-solicitation provisions.

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12.	Net Loss per Share Applicable to Common Stockholders

Options, warrants, and convertible debt outstanding were all considered anti-dilutive for the year ended December 31, 2014 and 2013 due to net losses.

The following securities were not included in the diluted net income (loss) per share calculation because their effect was anti-dilutive as of the periods presented:

	For the twelve months ended December 31,
	For the twelve months ended December 31,
	2014		2013
Common stock options		8,807,667		1,566,667
Investor warrants		21,920,064		4,096,665
Compensation warrants		2,013,858		3,881,325
Excluded potentially dilutive securities		32,741,589		9,544,657

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13.	Stockholder’s equity

Stock options

On January 8, 2013, the Company’s Board of Directors approved the adoption of the SpendSmart Networks, Inc. 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan provides for granting of stock-based awards including: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock. The total number of shares of common stock that may be issued pursuant to stock awards under the 2013 Plan (as approved by the Board of Directors but subject to future shareholder approval solicited by a Proxy Statement filed in January 2013) shall not exceed in the aggregate 3,000,000 shares of the common stock of the Company. On August 4, 2011, the Board of Directors approved the adoption of the SpendSmart Networks, Inc. 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan provides for granting of stock-based awards including: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock. The total number of shares of common stock that may be issued pursuant to stock awards under the Plan shall not exceed in the aggregate 1,666,667 shares of the common stock of the Company. The Company also have a stockholder-approved Plan (the IdeaEdge, Inc. 2007 Equity Incentive Plan - the “2007 Plan”, previously approved by our shareholders). The 2007 Plan has similar provisions and purposes as the 2011 Plan. The total number of shares of common stock that may be issued pursuant to stock awards under the 2007 Plan (as amended) shall not exceed in the aggregate 4,000,000 shares of the common stock of our Company. Upon shareholder approval of the 2013 Plan, our Board has expressed its intentions to issue no more shares under the 2011 and 2007 Plans.

At December 31, 2014 and 2013, we have outstanding a total of 8,807,666 and 1,566,667, respectively, of incentive and nonqualified stock options granted under the 2013 Plan, 2011 Plan, and the 2007 Plan, all of which (for the purpose of computing stock based compensation) we have estimated will eventually vest. All of the options have terms of five years with expiration dates ranging from July 2016 to November 2019.

The Company’s stock option plans are administered by the Board of Directors, which determines the terms and conditions of the options granted, including exercise price, number of options granted and vesting period of such options.

For the year ended December 31, 2014, we issued 8,541,000 options, as follows. On March 19, 2014, our Company granted options to purchase up to 405,000 shares of our common stock to members of our Board of Directors. The options vest immediately; have an exercise price of $0.87 per share; and expire five years after the date of grant. Each of the following Board members received 45,000 options each related to this issuance: Joe Proto, Isaac Blech, Alex Minicucci, William Hernandez, Cary Sucoff, Patrick Kolenik, Chris Leong, Jerold Rubinstein, and Mike McCoy. The fair value at grant date of these options was $247,939 and the entire amount was expensed in 2014.

In addition, the Company granted options to purchase up to 1,850,000 shares of our common stock to members of our Board of Directors on March 19, 2014. One half of the options vest immediately with the remaining options vesting on the one year anniversary of the grant date; have an exercise price of $0.87 per share; and expire five years after the date of grant. These options were issued as follows: Joe Proto received 500,000 options, Isaac Blech received 500,000 options, William Hernandez received 300,000 options, Cary Sucoff received 250,000 options, Patrick Kolenik received 200,000 options, and Mike McCoy received 100,000 options. The fair value at grant date of these options was $1,068,350 and the amount expensed in 2014 was $1,001,489.

In March 2014, our Company granted options to purchase up to 350,000 shares of our common stock to Alex Minicucci. One fourth of the options vest immediately with the remaining options vesting over the next three years; have an exercise price of $1.15 per share; and expire five years after the date of grant. The fair value at grant date of these options was $193,925 and the amount expensed for in 2014 was $100,168.

In March 2014, our Company granted options to purchase up to 400,000 shares of our common stock to William Hernandez. One fourth of the options vest immediately with the remaining options vesting over the next three years; have an exercise price of $1.15 per share; and expire five years after the date of grant. The fair value at grant date of these options was $221,629 and the amount expensed in 2014 was $114,478.

In March 2014, our Company granted options to purchase up to 1,410,000 shares of our common stock, of which 1,370,000 remain outstanding, to twenty-four employees. The options vest over three years; have an exercise price of $1.15 per share; and expire five years after the date of grant. The fair value at grant date of these options was $781,243 and the amount expensed in 2014 was $403,534.

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On August 1, 2014, our Company granted options to purchase up to 900,000 shares of our common stock to our Board of Directors and Chord Advisors. The options vest immediately; have an exercise price of $1.14 per share; and expire five years after the date of grant. Each of the following Board members received options as follows: Joe Proto was issued 200,000 shares, Isaac Blech was issued 225,000 shares, Cary Sucoff was issued 175,000 shares, Patrick Kolenik was issued 175,000 shares, and Jerold Rubinstein was issued 100,000 shares, and Chord Advisors was issued 25,000 shares. The fair value at grant date of these options was $617,760 and the entire amount was expensed in 2014.

In November 2014, the Company canceled 1,000,000 in outstanding Director stock options (and 1,695,374 in warrants) and issued the Directors 1,828,000 in replacement stock options. The replacement stock options have an exercise price equal to $1.15, a term of 5 years and a provision that allows for the exercise of these options only if the stock trades above $1.75 for 5 business days or upon a change of control. The cancellation and reissuance of these stock options was treated as a modification under ASC 718 and, accordingly, total stock-based compensation expense related to these awards increased $562,936, which will be recognized over the new vesting period. In addition, an additional 300,000 options were cancelled or expired.

Stock option activity during the following periods was as follows:

	For the twelve months ended
	December 31,
	2014			2013
Beginning balance outstanding		1,566,667			1,865,000
Options issued during the year		8,541,000			-
Options expired or cancelled during the year		(1,300,000	)		(298,333	)
Ending balance outstanding		8,807,667			1,566,667

Warrants

The Company issued warrants to purchase shares of the Company’s common stock to investors in connection with the issuances of restricted shares of common stock during the years ended December 31, 2014 and 2013 (the value of which was offset against the proceeds of the issuance of common stock and not charged to operations). Outstanding warrants from all sources have terms ranging from two to five and a half years.

In recompense for services performed on our behalf, we issued warrants to purchase up to 138,333 shares of our common stock during the year ended December 31, 2013, including a five-year warrant to purchase up to 133,333 shares (exercise price of $2.00 per share) to a member of our Board of Directors and a five-year warrant to purchase up to 5,000 shares at $2.00 to our CFO (Chord Advisors, LLC). The expense recorded in 2013 for both of these items was $29,452. In recompense for services performed on our behalf, we issued warrants to purchase up to 6,300,000 shares of our common stock during the year ended December 31, 2013, including a five year warrant to purchase up to 2,000,000 shares (exercise price of $10.35 per share) to a member of our Board of Directors. Through December 31, 2013, we have not issued any warrants to advisors, consultants and in connection with the purchase of intellectual property. Warrants to purchase up to 150,000 shares of common stock have expired. Warrants to purchase up to 3,881,325 shares of common stock remain outstanding at December 31, 2013, of which 3,279,367 have vested.

For the period ended December 31, 2014, we have not issued any warrants to advisors, consultants and in connection with the purchase of intellectual property. Warrants to purchase up to 267,369 shares of common stock have expired and warrants to purchase up to 1,695,374 to Directors have been cancelled (and replaced with 1,828,000 in replacement stock options, as noted above). Warrants to purchase up to 2,013,858 shares of common stock remain outstanding at December 31, 2014, of which 1,962,007 have vested.

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For the year ended December 31, 2014, we issued 17,918,675 warrants to new investors.

Warrant activity (including warrants issued to investors and for consulting and advisory services) for the years ended December 31, 2014 and 2013 was as follows:

	For the twelve months ended
	December 31,
	2014			2013
Beginning balance outstanding		7,977,990			8,409,531
Warrants issued during the year
For consulting and advisory services		-			338,333
In connection with sales of common and preferred stock		17,918,675			200,000
Warrants expired or cancelled during the year		(1,962,743	)		(307,445	)
Warrants exercised		-			(662,429	)
Ending balance outstanding		23,933,922			7,977,990

The numbers and exercise prices of all options and warrants outstanding at December 31, 2014 was as follows:

Shares Outstanding	Weighted Average Exercise Price	Expiration Fiscal Period
73,530	7.50	1st Qtr, 2015
6,780	8.11	2nd Qtr, 2015
80,584	3.57	3rd Qtr, 2015
478,312	7.53	4th Qtr, 2015
846,667	7.16	1st Qtr, 2016
919,166	6.28	2nd Qtr, 2016
317,292	7.13	3rd Qtr, 2016
355,144	7.84	4th Qtr, 2016
726,416	6.13	1st Qtr, 2017
1,076,476	7.66	2nd Qtr, 2017
705,874	6.95	3rd Qtr, 2017
862,339	6.56	4th Qtr, 2017
22,263,675	1.09	1st Qtr, 2019
160,000	1.15	2nd Qtr, 2019
1,113,000	1.16	3rd Qtr, 2019
2,623,000	1.15	4th Qtr, 2019
133,334	7.05	4th Qtr, 2022
32,741,589

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Stock based compensation

Results of operations for the years ended December 31, 2014 and 2013 include stock based compensation costs totaling $5,784,306 and $7,766,096, respectively, of which $4,856,638 and $4,866,233, respectively, was charged to personnel related expenses in connection with the issuance of stock options and warrants issued to employees, directors, advisors and consultants (not including shares of stock issued directly for services). $964,380 and $2,899,863 were charged to discontinued operations, respectively.

For purposes of accounting for stock based compensation, the fair value of each option and warrant award is estimated on the date of grant using the Black-Scholes-Merton option pricing formula. Compensation expense is recognized upon actual vesting of the options. The following weighted average assumptions were utilized for the calculations during the year ended December 31, 2014 and 2013:

	For the years ended
	December 31,
	2014			2013
Expected life (in years)	3.61 years			4.99 years
Weighted average volatility		96.98	%		90.07	%
Forfeiture rate		11.88	%		0.00	%
Risk-free interest rate		1.16	%		1.14	%
Expected dividend rate		0.00	%		0.00	%

The weighted average expected option and warrant term for employee stock options granted reflects the application of the simplified method set out in SEC Staff Accounting Bulletin No. 107, Share-Based Payment (SAB 107). The simplified method defines the life as the average of the contractual term of the options and the weighted average vesting period for all options. The Company utilized this approach as its historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term. Expected volatilities are based on the historical volatility of the Company’s stock. The Company estimated the forfeiture rate based on our expectation for future forfeitures and (for the purpose of computing stock based compensation given the contractual vesting of the Company’s options and warrants outstanding) the Company assumes that all options and warrants will vest. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield in effect at or near the time of grant. The Company has never declared or paid dividends and have no plans to do so in the foreseeable future.

As of December 31, 2014, $2,464,229 of total unrecognized compensation cost related to unvested stock based compensation arrangements is expected to be recognized over a weighted-average period of 21.8 months. The following table summarizes option activity in connection with stock options and warrants (which resulted in stock based compensation charges) as of and for the years ended December 31, 2014 and 2013:

					Weighted Average Exercise Price Price		Weighted Average Remaining Contractual Term
								Aggregate Instrinsic Value

	Shares
Outstanding at December 31, 2013		5,447,992		$	6.75
Granted		8,541,000			1.05
Cancelled or expired		(3,167,467	)		(6.12	)
Exercised		-			-
Outstanding at December 31, 2014		10,821,525		$	2.40		47.4 months	$	-

Exercisable		7,535,886		$	3.00		45.8 months	$	-

	Shares			Weighted Average Exercise Price Price			Weighted Average Remaining Contractual Term	Aggregate Instrinsic Value
Outstanding at December 31, 2012		5,597,659		$	6.90
Granted		338,333			4.20
Cancelled or expired		(488,000	)		(7.28	)
Exercised		-			-
Outstanding at December 31, 2013		5,447,992		$	6.75		37.9 months	$	-

Exercisable		4,225,664		$	6.75		37.0 months	$	-

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Additional disclosure concerning options and warrants is as follows:

	For the
	Year Ended
	December 31,		Deccember 31,
	2014		2013
Weighted average grant date fair value of options and warrants granted	$	0.60	$	2.25
Aggregate intrinsic value of options and warrants exercised		-		-
Weighted average fair value of options and warrants vested		1.95		4.20

The range of exercise prices for options and warrants granted and outstanding (which resulted in stock based compensation charges) was as follows at December 31, 2014 and 2013:

Exercise Price		Number of Options and Warrants
Range			December 31,	December 31,
			2014	2013
$	.75 - $1.20		8,241,000	-
$	1.21 - $3.00		5,000	138,333
$	3.01 - $4.50		-	-
$	4.51 - $12.00		2,575,525	5,269,525
$	12.01 - $15.00		-	40,133
			10,821,525	5,447,992

A summary of the activity of our non-vested options and warrants for the following periods:

	For the year ended
	December 31,
	2014			2013
Non-vested outstanding, beginning		888,995			2,634,200
Granted		8,541,000			338,333
Vested		(5,741,393	)		(1,876,502	)
Cancelled		(402,963	)		(207,037	)
Non-vested outstanding, ending		3,285,639			888,995

Common Shares Reserved for Future Issuance

The following table summarizes shares of our common stock reserved for future issuance at December 31, 2014:

	December 31,		December 31,
	2014		2013
Stock options outstanding		8,807,667		1,566,667
Stock options available for future grant		8,758,666		566,666
Warrants		23,933,927		7,977,989
Total common shares reserved for future issuance		41,500,260		10,111,322

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14.	Income taxes

Deferred tax assets at December 31, 2014 and 2013 consisted of the following:

	As of December 31,
	2014			2013
Deferred tax asset
Net operating loss carryovers	$	20,022,497		$	17,467,761
Total deferred tax assets		20,022,497			17,467,761
Valuation Allowance		(20,022,497	)		(17,467,761	)
Deferred tax asset, net of allowance	$	-		$	-

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As of December 31, 2014 and 2013, the Company had federal and state net operating loss carryovers of approximately $49.7 million and $43.3 million, which will begin to expire in 2022. The net operating loss carryover may be subject to limitation under Internal Revenue Code section 382, should there be a greater than 50% ownership change as determined under the regulations.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. The Company has determined that, based on objective evidence currently available, it is more likely than not that the deferred tax assets will not be realized in future periods. Accordingly, the Company has provided a valuation allowance for the full amount of the deferred tax assets at December 31, 2014 and 2013.

A reconciliation of the expected tax benefit computed at the U.S. federal and state statutory income tax rates to our tax benefit is as follows:

	For the years ended
	December 31,
	2014			2013
Statutory federal income tax rate		-34.0	%		-34.0	%
State taxes, net of federal tax benefit		-6.3	%		-6.3	%
Permanent differences		19.4	%		21.9	%
Valuation Allowance		20.9	%		18.4	%
Income tax provision (benefit)		0.0	%		0.0	%

We file income tax returns in the U.S. and in the state of California with varying statutes of limitations. Our policy is to recognize interest expense and penalties related to income tax matters as a component of our provision for income taxes. There were no accrued interest and penalties associated with uncertain tax positions as of December 31, 2014. The majority of our operations are in California and the Company believes it has no tax positions which could more-likely-than not be challenged by tax authorities. We have no unrecognized tax benefits and thus no interest or penalties included in the financial statements. The Company is subject to examination for tax years after 2009 for federal purposes and after 2010 for California state tax purposes.

15.	Commitments

Our Company lease for its San Diego office facilities ended on a lease agreement through June 2014 with previous monthly rentals of $2,695 plus common area maintenance charges. We moved our headquarters to Des Moines, IA in July, 2013 and subsequently moved our headquarters to San Luis Obispo in June 2014 after the SMS acquisition. We lease space in Des Moines and in San Luis Obispo. Rent expense was $162,266 and $72,668 for the years ended December 31, 2014 and 2013, respectively. Future rental commitments under contract total $19,700 as of December 31, 2014.

16.	Employee benefit plan

We have an employee savings plan (the “Plan”) pursuant to Section 401(k) of the Internal Revenue Code (the “Code”), covering all of our employees. Participants in the Plan may contribute a percentage of compensation, but not in excess of the maximum allowed under the Code. Our Company may make contributions at the discretion of its Board of Directors. During the years ended December 31, 2014 and 2013, we made contributions to the Plan totaling $54,696 and $49,103, respectively.

17.	Subsequent events

On March 31, 2015, SpendSmart Networks, Inc. (the “Company”) closed on a private offering and issued and sold 10 units (the “Units”) to accredited investors with each such Unit consisting of a 9% Convertible Promissory Note with the principal face value of $50,000 (the “Notes”) and a warrant to purchase 66,667 shares of the Company’s common stock (the “Warrant”). The Company also agreed to provide piggy-back registration rights to the holders of the Units. The Notes have a term of twelve (12) months, pay interest semi-annually at 9% per annum and can be voluntarily converted by the holder into shares of common stock at an exercise price of $0.75 per share, subject to adjustments for stock dividends, splits, combinations and similar events as described in the Notes. In addition, if the Company issues or sells common stock at a price below the conversion price then in effect, the conversion price of the Notes shall be adjusted downward to such price but in no event shall the conversion price be reduced to a price less than $0.50 per share. The Warrants have an exercise price of $1.00 per share and have a term of four years. The holders of the Warrants may exercise the Warrants on a cashless basis for as long as the shares of common stock underlying the Warrants are not registered on an effective registration statement. The Company plans to use net proceeds from the sale of the Units for general working capital.

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Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A - Controls and Procedures

(a)

Evaluation of disclosure controls and procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities and Exchange Commission Act of 1934 reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by Securities and Exchange Commission Rule 13a-15(e) and 15d-15(e), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not operating effectively as of December 31, 2014. Our disclosure controls and procedures were not effective because of the “material weakness” described below.

(b)

Management’s annual report on internal control over financial reporting.

SEC rules implementing Section 404 of the Sarbanes-Oxley Act of 2002 require our 2014 Annual Report on Form 10-K to contain management’s report regarding the effectiveness of internal control over financial reporting. As a basis for our report, we tested and evaluated the design, documentation, and operating effectiveness of our internal control.

Management is responsible for establishing and maintaining effective internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, of SpendSmart Networks, Inc. and its subsidiaries. The Company’s internal control over financial reporting consists of policies and procedures that are designed and operated to provide reasonable assurance about the reliability of the Company’s financial reporting and its process for preparing financial statements in accordance with generally accepted accounting principles (“GAAP”). There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

Based on management's evaluation as of December 31, 2014, our management identified the material weaknesses set forth below in our internal control over financial reporting:

(i)

The Company's process for internally reporting material information in a systematic manner to allow for timely filing of material information is ineffective, due to its inherent limitations from being a small company, and there exist material weaknesses in internal control over financial reporting that contribute to the weaknesses in our disclosure controls and procedures. These weaknesses include:

•	insufficient segregation of duties and oversight of work performed in our finance and accounting function due to limited personnel; and

•	lack of controls in place to ensure that all material transactions and developments impacting the financial statements are reflected.

Our company's management concluded that in light of the material weaknesses described above, our company did not maintain effective internal control over financial reporting as of December 31, 2014 based on the criteria set forth in Internal Control—Integrated Framework (2013) issued by the COSO.

This Report on Form 10-K does not include an attestation report of the Company’s independent public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent public accounting firm pursuant to permanent rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Transition Report on Form 10-K.

(c)	Changes in internal control over financial reporting.

There have been no changes in the Company's internal control over financial reporting that occurred during the year ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 10 – Directors, Executive Officers and Corporate Governance

Term of Office

Our directors are elected by our stockholders to a term of one year and to serve until their successor is duly elected and qualified, or until their death, resignation or removal. Each of our officers is appointed by our Board of Directors to a term of one year and serves until their successor is duly elected and qualified, or until their death, resignation or removal from office.

On December 23, 2011, our shareholders approved a change to our Articles of Incorporation, which was approved by our Board, which amended our bylaws to provide that the number of directors of the Company shall be no less than one (1) and no greater than eleven (11). Prior to the amendment, our Articles and Bylaws provided that the number of directors of the Company shall be no less than one (1) and no greater than five (5). The amendment to the Articles became effective upon the filing of the amendment with the Secretary of State of the State of Colorado on December 27, 2011. The amendment to the Bylaws became effective as of December 23, 2011.

Our current Board of Directors consists of eight directors.

The following table sets forth certain information regarding our executive officers and directors as of the date of this Annual Report:

Name	Age	Position
Alex Minicucci	36	Chief Executive Officer
William Hernandez	58	former President10
Jonathan Shultz	54	former Chief Financial Officer, Secretary and Treasurer 2
Kim Petry	45	former Chief Financial Officer, Secretary and Treasurer 3
Isaac Blech	65	Director
Rob DeSantis	50	former Director
Joseph Proto	58	Director4
Cary Sucoff	63	Director
Patrick M. Kolenik	63	Director
Jesse Itzler	46	former Director5
Brian Thompson	47	former Director6
Michael R. McCoy	54	Director1
Ka Cheong Christopher Leong	65	Director
Jerold Rubinstein	76	Director7
David Horin	46	Chief Financial Officer and Treasurer 8
John Eyler, Jr.	71	Director9

1 On November 27, 2013, Mr. McCoy resigned from his position as Chairman of the Board of Directors and on September 30, 2014, resigned from the Company
2 On February 19, 2013, Mr. Shultz resigned from his position as Chief Financial Officer, Secretary and Treasurer of the Company.
3 Ms. Petry was appointed as the Chief Financial Officer, Secretary and Treasurer of the Company on February 19, 2013. On October 28, 2013, Ms. Petry resigned from her position as Chief Financial Officer, Secretary and Treasurer of the Company.
4 On November 27, 2013, the Board of Directors appointed Mr. Proto as the Chairman of the Board of Directors.
5 On November 27, 2013, the Board of Directors accepted the resignation of Mr. Itzler.
6 On October 1, 2013, the Board of Directors accepted the resignation of Mr. Thompson.
7 On October 1, 2013, the Board of Directors appointed Mr. Rubinstein as a member of the Board of Directors.
8 On October 28, 2013, Mr. Horin was appointed the Chief Financial Officer and Treasurer of the Company.
9 On November 25, 2014, the Board of Directors appointed Mr. Eyler as a member of the Board of Directors.
10 On December 31, 2014, Mr. Hernandez resigned from his position as a Director and on January 26, 2015, resigned from the Company

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Alex Minicucci has been our Chief Executive Officer and Director since February 11, 2014. Mr. Minicucci is a serial entrepreneur with almost two decades of experience in web, ecommerce, and mobile marketing. In November 2008, Mr. Minicucci founded SMS Masterminds, subsequently earning several recognitions such as Top 20 under 40 Entrepreneur in 2013. Mr. Minicucci served as the Chief Executive Officer of SMS Masterminds until February 11, 2014. From 2006 to 2008, he served as Chief Operating Officer of TechXpress, Inc., a managed services IT firm. Between 2000 and 2003, Mr. Minicucci built and sold one of the nation’s largest virtual tour providers, USA Virtual Tours, to MediaNews Group. In the late 1990’s, Mr. Minicucci started and ran one of the first web development firms in central California, TooPhat.com, Inc., focused on next generation web development combined with interactive 3D environments. Mr. Minicucci is an Eagle Scout and active mentor to business students at Cal Poly San Luis Obispo.

Mr. William Hernandez had been the President of the Company from November 12, 2012 until January 26, 2015 and a director from January 8, 2013 until December 31,22014. Mr. Hernandez brought more than 30 years of experience in the global financial services, payments, transaction processing, card network, and brokerage industries. Mr. Hernandez is President and CEO of Conifer Consulting Group. Mr. Hernandez previously held the position of Executive Vice President at Epana/Unidos Financial a telecommunications and financial services company delivering relevant products to the Hispanic community in the US and Mexico. Mr. Hernandez also held the position of Executive Vice President of First Data Corporation managing the US Card Strategic Financial Services supporting clients such as American Express. During his 7+ years at MasterCard International, Mr. Hernandez was a Senior Vice President of the Americas, directing the largest US-based financial institutions. Prior to MasterCard, he was employed by Citibank for 11 years, where he held various international executive positions where he spearheaded global consumer banking and consumer card products, services and access channel for Citibank’s businesses in the United States, Latin America, Europe and Asia. Mr. Hernandez also held executive positions at Financial Guaranty Insurance Co., Shearson American Express and Manufacturers Hanover Trust Company.

Mr. Jonathan Shultz had been the Chief Financial Officer and Treasurer of the Company from November 13, 2007 until February 19, 2013. Mr. Shultz has Bachelor’s and Master’s Degrees in Accounting and Finance, respectively, from San Diego State University. He is a Certified Public Accountant, a Certified Management Accountant and a Certified Financial Manager.

Ms. Kim Petry had been the Chief Financial Officer and Treasury of the Company February 19, 2013 until October 28, 2013. Ms. Petry was employed by American Express from October 2008 to December 2012. From 2008 to 2010, Ms. Petry was the Vice President and Controller of Global Credit Cards and Small Business Services at American Express. In addition, from 2011 through 2012, Ms. Petry served as CFO of the Global Credit Cards and Small Business Services at American Express, where she led a team of over 150 finance professionals globally, supporting a business with over $4 billion in revenue. Prior to American Express, from 2006 to 2008, she was Vice President of Corporate Finance, Planning and Analysis and Business Finance and Analysis with TIAA-CREF where she led over 140 professionals across the U.S. and was responsible for reporting, budgeting, forecasting, strategy, long-term planning, new product development, mergers and acquisitions. Ms. Petry served at US Trust Corporation/Schwab Corporation from 1998 to 2006 in several executive roles following her prior experience working as a Senior Audit Manager for Financial Services at PricewaterhouseCoopers. She earned her MBA from New York University and her BA with a major in accounting, graduating summa cum laude, from Adelphi University.

Mr. David Horin was appointed the Chief Financial Officer and Treasurer of the Company on October 28, 2013. Mr. Horin is currently the President of Chord Advisors, LLC, an advisory firm that provides targeted financial solutions to public (small-cap and mid-cap) and private small and mid-sized companies. From March 2008 to June 2012, Mr. Horin was the Chief Financial Officer of Rodman & Renshaw Capital Group, Inc., a full-service investment bank dedicated to providing corporate finance, strategic advisory, sales and trading and related services to public and private companies across multiple sectors and regions. From March 2003 through March 2008, Mr. Horin was the Managing Director of Accounting Policy and Financial Reporting at Jefferies Group, Inc., a full-service global investment bank and institutional securities firm focused on growth and middle-market companies and their investors. Prior to his employment at Jefferies Group, Inc., from 2000 to 2003, Mr. Horin was a Senior Manager in KPMG’s Department of Professional Practice in New York, where he advised firm members and clients on technical accounting and risk management matters for a variety of public, international and early growth stage entities. Mr. Horin has a Bachelor of Science degree in Accounting from Baruch College, City University of New York. Mr. Horin is also a Certified Public Accountant.

Mr. Isaac Blech was appointed to the Board of Directors on March 10, 2011. He currently serves on the Board of Directors of Contrafect Corp., a biotech company specializing in novel methods to treat infectious disease; Cerecor, Inc., a biopharmaceutical company focused on activity in the human brain; Medgenics, Inc., a company that has developed a novel technology for the manufacture and delivery of therapeutic proteins; and Premier Alliance Group, Inc. (PIMO), a public company that provides business and technology consulting services to primarily Fortune 500 companies. Previously, Mr. Blech was an investor, advisor and director in a number of well-known companies, primarily focused in biotechnology.

Mr. Blech is the owner of 1,500,000 shares of our Company’s common stock and warrants to purchase up to an additional 1,337,500 million shares of our Company’s common stock. Mr. Blech has been a successful investor and a member of a number of Boards of Directors. We believe Mr. Blech’s past experience will be a tremendous benefit to our Company. Included among Mr. Blech’s more notable successes were:

·	Celgene Corporation – Mr. Blech was a founding shareholder of Celgene in 1986. Celgene has introduced two major cancer drugs and has a stock market valuation (as of September 6, 2011) of approximately $27 billion.

·	ICOS Corporation – Mr. Blech was a founding shareholder and member of the Board of Directors of ICOS beginning in 1991. ICOS discovered the drug Cialis and was later acquired by Eli Lilly for over $2 billion.

·	Nova Pharmaceutical Corporation – Mr. Blech was a founding shareholder and member of the Board of Directors of Nova from 1982 to 1990. Nova developed a treatment for brain cancer and subsequently merged with Scios Corporation which was later purchased for $2 billion by Johnson and Johnson.

·	Pathogeneses Corporation – Mr. Blech was a founding shareholder and member of the Board of Directors of Pathogeneses from 1992 to 1997. Pathogeneses created TOBI for the treatment of cystic fibrosis and was later acquired by Chiron Corp for $660 million.

·	Genetic Systems Corporation – Mr. Blech was a founding shareholder and member of the Board of Directors of GSC from 1981 to 1986. GSC developed the first inexpensive and accurate test to diagnose chlamydia and was later acquired by Bristol Myers for approximately $300 million.

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Mr. Rob DeSantis was appointed to our Board of Directors on March 26, 2012 and resigned from the Board of Directors effective January 29, 2014. Mr. DeSantis co-founded Ariba, a provider of business to business e-commerce solutions that was one of the first B2B Internet companies to go public, and whose market capitalization reached $40 billion. He was also an early angel investor and board member of LinkedIn, the world’s largest professional online network, which has more than 150 million global members today.

Mr. Joseph Proto was appointed to our Board of Directors on January 26, 2012 and was appointed Chairman of the Board of Directors on November 28, 2013, replacing Mike McCoy. Mr. Proto is a seasoned and successful senior executive and entrepreneur with three decades in the billing and payments industry. Mr. Proto is currently the Chairman and Chief Executive Officer of electronic billing company Transactis Inc. He founded REMITCO, a remittance processing company where he also served as President for 11 years, which was acquired in 2000 by First Data Corp. Mr. Proto also founded Financial Telesis (CashFlex), a payment processor to 65 of the top 100 banks in the U.S., which was acquired by CoreStates/Wachovia and is now a part of Wells Fargo. In 2004, Mr. Proto co-founded Windham Ventures, an investment company focusing on financial technology and life sciences companies, where he currently serves as a founding partner.

Mr. Cary Sucoff was appointed to our Board of Directors on May 23, 2011. Mr. Sucoff has served as an advisor to our Company since September 2009 through his firm Equity Source Partners, LLC, a firm he has owned and operated since February 2006. He has been key to our success in fundraising since joining our firm. Additionally, Mr. Sucoff is an attorney (non-practicing) and contributes valuable insights in the area of legal matters in addition to those areas for which he is contracted with our Company. We believe Mr. Sucoff’s broad and diversified background serves as a strong asset to our Company.

Mr. Sucoff currently serves on the Board of Directors of Contrafect Corp., a biotech company specializing in novel methods to treat infectious disease, Cerecor, Inc., a biopharmaceutical company focused on activity in the human brain, Premier Alliance Group, Inc. (PIMO), a public company that provides business and technology consulting services to primarily Fortune 500 companies and American Roadside Burgers, Inc., a fast-casual hamburger restaurant company. Mr. Sucoff has been a member of the Board of Trustees of New England Law/Boston for over 20 years and is the current Chairman of the Endowment Committee. Mr. Sucoff has recently taught a third year law school seminar entitled “Perspectives in Law: Lawyers as Entrepreneurs and as Representatives of Entrepreneurs”. Mr. Sucoff received a B.A. from SUNY Binghamton (1974) and a J.D. from New England School of Law (1977) where he was the Managing Editor of the Law Review and graduated Magna Cum Laude. Mr. Sucoff has been a member of the Bar of the State of New York since 1978.

Mr. Patrick M. Kolenik was appointed to our Board of Directors on August 30, 2011. Mr. Kolenik has over forty years of securities industry experience. Mr. Kolenik was the Chief Executive Officer of Sherwood Securities Corp. where he has been involved with more than 200 successful public and private financings. Since 2003, Mr. Kolenik has been a consultant to both public and private companies through his company PK Advisors. Mr. Kolenik currently serves on the Board of Directors of Premier Alliance Group, Inc. (PIMO) a public company that provides business and technology consulting services. Mr. Kolenik also serves on the Board of Directors of American Roadside Burgers, Inc. Mr. Kolenik has also been elected to the Board of Directors of Stratus Media Group (SMDI), a public company that owns and operates more than 140 live events.

Mr. Kolenik has advised our Company since May 2009 in the area of investment banking, fund raising and capital markets. We have greatly benefited from Mr. Kolenik’s contributions to date and look forward to his future guidance in his role as a member of our Board of Directors.

Mr. Jesse Itzler was appointed to our Board of Directors on July 24, 2012 and resigned from the Board of Directors effective November 27, 2013. In 2011, Mr. Itzler founded 100 Mile Group LLC, a brand incubator and creative marketing company, which is a successor to Suite 850, LLC (founded by Mr. Itzler in 2009). Mr. Itzler serves as the managing member of 100 Mile Group. In June 2010, Mr. Itzler co-founded PureBrands, LLC, a consumer products company featuring nutritional and dietary supplements. From 2001 through 2010, Mr. Itzler served as co-founder and vice-chairman of Marquis Jet Partners, a private aviation company. Mr. Itzler is a graduate of American University.

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Mr. Brian Thompson was appointed to our Board of Directors on July 24, 2012 and resigned from the Board of Directors effective October 1, 2013. Since 2006, Mr. Thompson has been working for Mr. John Pappajohn at Equity Dynamics, Inc., a financial consulting firm. In his role as senior vice president, Mr. Thompson evaluates investment opportunities, performs due diligence, negotiates investment transactions, raises capital for new ventures and interacts with management teams through various board and board observer positions. Prior to this, Mr. Thompson was the CFO and CAO for Kum & Go, LC (“KG”), a convenience retailer. Prior to KG, Mr. Thompson was the President and CFO of Astracon, Inc. of Denver, CO, a provider of connectivity intelligence OSS software for communications service providers, until its sale in 2003. From 1995 to 2000, Mr. Thompson was a Partner and CFO of the Edgewater Private Equity Funds. After receiving his BS/BA in accounting from the University of South Dakota in 1991, Mr. Thompson spent four years in the audit department of KPMG, LLP in San Antonio and Des Moines.

Dr. Ka Cheong Christopher Leong was appointed to our board on October 29, 2012. Dr. Leong is a co-founder and the President of Transpac Capital, a venture capital firm based in Singapore. Transpac was formed in 1989 through the amalgamation of Techno-Ventures Hong Kong, which Dr. Leong co-founded in 1986, and Transtech Capital Management of Singapore, both pioneers of venture capital in their respective countries. Prior to his venture capital career, Dr. Leong was the CEO of Amoy Canning Corporation Limited, a food and packaging conglomerate listed on the stock exchange of Hong Kong. Prior to Amoy he founded Convenience Foods Limited in Hong Kong, which he sold to RJR Nabisco. Prior to his industrial career, Dr. Leong was a Senior Scientist at American Science and Engineering in Cambridge, MA. Dr. Leong has been a chairman of the Hong Kong Venture Capital Association, and is one of the founding inductees to the Singapore Venture Capital Hall of Fame in 2010 for his pioneering work in venture capital. Dr. Leong obtained a BS and a PhD degree from Massachusetts Institute of Technology, Cambridge, MA.

Mr. Jerold Rubinstein was appointed to our board on October 1, 2013. Mr. Rubinstein currently serves as the chair of our audit committee. Since June 28, 2012, Mr. Rubinstein has served as the Chairman of the Board, CEO and a director of Stratus Media Group, Inc., and joined the board of Stratus Group Media, Inc. in April 2011. Mr. Rubinstein is the chairman of the audit committee of CKE Restaurants, the parent company of Carl’s Jr. Restaurants and Hardees Restaurants. Mr. Rubinstein also serves as the non-executive chairman of US Global investors Inc., a mutual fund advisory company. Mr. Rubinstein has started and sold many companies over the years, including Bel Air Savings and Loan and DMX, a cable and satellite music distribution company. Mr. Rubinstein started and sold XTRA Music Ltd., a satellite and cable music distribution company in Europe. Most recently Mr. Rubinstein consults with and serves on 3 early stage development companies. Mr. Rubinstein is both a CPA and attorney.

Mr. John Eyler was appointed to our board on November 25, 2014. Mr. Eyler retired from Toys "R" Us, Inc. as President and Chief Executive Officer in July, 2005. Mr. Eyler joined Toys "R" Us in January, 2000 and served as Chairman of the Board of Directors as well as Chairman of the Toys "R" Us Childrens fund from 2001 to 2005. Mr. Eyler was Chairman and Chief Executive Officer of FAO Schwarz from 1992 to 2000 and spent his entire career prior to that in retailing including becoming Chairman and Chief Executive Officer of May D & F, a department store in Denver Colorado at the age of 32. He served on the Board of the Andre Agassi Charitable Foundation for eight years, was a member of the NYC 2012 Board and a Board member of the Donna Karan Corporation from 1999 to 2001. For the past five years Mr. Eyler has served as President of Titan Sculpture Inc. which represents Roberto Santo's sculptures and paintings globally. He is an Advisory Board member of the College of the Environment at the University of Washington, and manages a charitable foundation created upon his retirement with a primary focus on improving the lives of children. A graduate of the University of Washington in 1969 with a degree in Finance, Mr. Eyler received an MBA from the Harvard Graduate School of Business in 1971.

Mr. Michael R. McCoy had been our Chief Executive Officer, from September 19, 2011 until February 11, 2014, and Chairman, Board of Directors from September 19, 2011 until November 27, 2011. Formerly President, Consumer Credit Cards at Wells Fargo, Mr. McCoy was responsible for the overall business and strategic direction of this business unit, directing a staff of over 4,000 individuals and managing a customer base of over 8.5 million with over $20 billion in credit card balances. A recognized leader in the financial services industry, Mr. McCoy previously served in a number of executive positions at Wells Fargo, having served as group Senior Vice President, Strategy and Business Development for Wells Fargo Financial, where he led the Retail Sales Finance and Insurance Services businesses and directed Marketing for the Wells Fargo Financial enterprise. He also served as Executive Vice President, Human Resources and Communications for the Home and Consumer Finance Group, which included Leadership Development, Learning and Development, Compensation, Recruiting and Corporate Sponsorships.

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Prior to joining Wells Fargo in January 2001, Mr. McCoy led several national distribution organizations within the financial services sector, including serving as general manager for ING’s Financial Institution Division and at American Express, where he was chief marketing officer and senior vice president for American Enterprise Life.

In evaluating director nominees, our Company considers the following factors:

·	The appropriate size of the Board;

·	Our needs with respect to the particular talents and experience of our directors;

·	The knowledge, skills and experience of nominees;

·	Experience with accounting rules and practices; and

·	The nominees’ other commitments.

Our Company’s goal is to assemble a Board of Directors that brings our Company a variety of perspectives and skills derived from high quality business, professional and personal experience. Other than the foregoing, there are no stated minimum criteria for director nominees.

Specific talents and qualifications that we considered for the members of our Company’s Board of Directors are as follows:

Mr. McCoy as the recent former President of the Consumer Credit Cards business unit at Wells Fargo, was responsible for a business with numerous similarities to our Company’s prepaid card business. In the short time since joining our Company, Mr. McCoy has proven to be a very articulate spokesman for us and an excellent interface from our Board of Directors to the outside world. Mr. McCoy’s insights in the areas of strategy, regulatory compliance, fraud prevention and corporate value enhancement will serve him well as he guides our Board of Directors in his role as Chairman.

Mr. Blech is the owner of a significant number of shares of our Company’s common stock and warrants to purchase additional shares of our Company’s common stock. Mr. Blech has been a successful investor and a member of a number of Boards of Directors. We believe Mr. Blech’s past experience will be a tremendous benefit to our Company. Included among Mr. Blech’s more notable successes were:

●	Celgene Corporation – Mr. Blech was a founding shareholder of Celgene in 1986. Celgene has introduced two major cancer drugs and had a stock market valuation (as of March 8, 2011) of approximately $25 billion.

●	ICOS Corporation – Mr. Blech was a founding shareholder and member of the Board of Directors of ICOS beginning in 1991. ICOS discovered the drug Cialis and was later acquired by Eli Lilly for over $2 billion.

●	Nova Pharmaceutical Corporation – Mr. Blech was a founding shareholder and member of the Board of Directors of Nova from 1982 to 1990. Nova developed a treatment for brain cancer and subsequently merged with Scios Corporation which was later purchased for $2 billion by Johnson and Johnson.

●	Pathogeneses Corporation – Mr. Blech was a founding shareholder and member of the Board of Directors of Pathogeneses from 1992 to 1997. Pathogeneses created TOBI for the treatment of cystic fibrosis and was later acquired by Chiron Corp for $660 million.

●	Genetic Systems Corporation – Mr. Blech was a founding shareholder and member of the Board of Directors of GSC from 1981 to 1986. GSC developed the first inexpensive and accurate test to diagnose chlamydia and was later acquired by Bristol Myers for approximately $300 million.

Mr. DeSantis co-founded Ariba, a provider of business to business e-commerce solutions that was one of the first B2B Internet companies to go public, and whose market capitalization reached $40 billion. He was also an early angel investor and board member of LinkedIn, the world’s largest professional online network, which has more than 150 million global members today.

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Mr. Proto is a seasoned and successful senior executive and entrepreneur with three decades in the billing and payments industry. Mr. Proto is currently the Chairman and Chief Executive Officer of electronic billing company Transactis Inc. Mr. Proto’s also founded REMITCO, a remittance processing company, which was acquired in 2000 by First Data Corp., and Financial Telesis (CashFlex), a payment processor to 65 of the top 100 banks in the U.S., which was acquired by CoreStates/Wachovia and is now a part of Wells Fargo. In 2004, Mr. Proto co-founded Windham Ventures, an investment company focusing on financial technology and life sciences companies, where he currently serves as a founding partner.

Mr. Kolenik’s vast securities industry history and work as a consultant to both public and private companies allows us to benefit from wisdom he has accrued from many varied companies and situations. Mr. Kolenik’s other public and private company Board service has been valuable as he has been a Company interface to our investors and potential investors since 2009 (prior to his appointment to the Board). We expect to further benefit from his expertise, now as a recently added member of our Board of Directors.

Mr. Sucoff has advised our Company since September 2009 in the area of investment banking, fund raising and capital markets. He has been key to our success in fundraising since joining our firm. Additionally, Mr. Sucoff is an attorney (non-practicing) and contributes valuable insights in the area of legal matters in addition to those areas for which he is contracted with our Company. Mr. Sucoff’s broad and diversified background has been a strong asset to our Company.

Mr. Itlzer founded 100 Mile Group LLC, a brand incubator and creative marketing company, which is a successor to Suite 850, LLC (founded by Mr. Itzler in 2009). Mr. Itzler serves as the managing member of 100 Mile Group. In June 2010, Mr. Itzler co-founded PureBrands, LLC, a consumer products company featuring nutritional and dietary supplements.

Mr. Thompson has been working for Mr. John Pappajohn at Equity Dynamics, Inc., a financial consulting firm. Prior to this, Mr. Thompson was the CFO and CAO for Kum & Go, LC (“KG”), a convenience store retailer. Prior to KG, Mr. Thompson was the President and CFO of Astracon, Inc. of Denver, CO, a provider of connectivity intelligence OSS software for communications service providers, until its sale in 2003. From 1995 to 2000, Mr. Thompson was a Partner and CFO of the Edgewater Private Equity Funds.

Dr. Leong is a co-founder and the President of Transpac Capital, a venture capital firm based in Singapore. Transpac was formed in 1989 through the amalgamation of Techno-Ventures Hong Kong, which Dr. Leong co-founded in 1986, and Transtech Capital Management of Singapore, both pioneers of venture capital in their respective countries. Prior to his venture capital career, Dr. Leong was the CEO of Amoy Canning Corporation Limited, a food and packaging conglomerate listed on the stock exchange of Hong Kong. Prior to Amoy he founded Convenience Foods Limited in Hong Kong, which he sold to RJR Nabisco.

There are no family relationships among members of our management or our Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and beneficial owners of more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Directors, executive officers and greater than 10% beneficial owners are required by SEC regulations to furnish to us copies of all Section 16(a) reports they file.

Based solely on our review of the reports, we believe that all required Section 16(a) reports were timely filed during our last fiscal year. None of our directors, executive officers or greater than 10% beneficial owners filed any Form 5s.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to, among other persons, our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Our Code of Business Conduct and Ethics is available, free of charge, to any stockholder upon written request to our Corporate Secretary at SpendSmart Networks, Inc., 805 Aerovista Parkway, Suite 205, San Luis Obispo, California 93401.

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Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has, during the past ten years, involved in any of the items below that the Company deems material to their service on behalf of the Company:

•	been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
•	had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
•	been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
•	been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
•	been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
•	been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.

Corporate Governance

The business and affairs of the company are managed under the direction of our board. In the fiscal year ended December 31, 2014, we held four special board meetings. Each of our directors has attended all meetings either in person or via telephone conference.

Item 11. Executive Compensation

The information required by this item will be incorporated by reference from the information under the caption “Compensation of Named Executive Officers” contained in our 2014 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item will be incorporated by reference from the information under the caption “Security Ownership of Certain Beneficial Owners and Management” contained in our 2014 Proxy Statement.

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Item 13 – Certain Relationships and Related Transactions, and Director Independence

Related Party Transactions. Our Company closely reviews transactions between the Company and persons or entities considered to be related parties (collectively “related parties”). Our Company considers entities to be related parties where an executive officer, director or a 5% or more beneficial owner of our common stock (or an immediate family member of these persons) has a direct or indirect material interest. Transactions of this nature require the approval of our management and our Board of Directors. We believe such transactions were at terms comparable to those we could have obtained from unaffiliated third parties. Since January 1, 2012, we have not had any transactions in which any of our related parties had or will have a direct or indirect material interest, nor are any such transactions currently proposed, except as noted below.

On March 6, 2014, the Company conducted and closed an offering of its Series C Convertible Preferred Stock. Windham-BMP Investment I, LLC (“Windham”) purchased an aggregate of 55,533 shares of Series C Preferred Stock and warrants to purchase 222,132 shares of common stock at an exercise price of $1.10 per share for an aggregate purchase price of $166,599. Mr. Proto, our Chairman, is a general partner of Windham. In addition, Transpac Investments Limited (“Transpac”) purchased an aggregate of 250,000 shares of Series C Preferred Stock and warrants to purchase 1,000,000 shares of common stock at an exercise price of $1.10 per share for an aggregate purchase price of $750,000. Dr. Ka Cheong Christopher Leong, our Director, is the co-founder and President of Transpac.

On July 24, 2012, our Board of Directors approved our entering into a management consulting agreement with each of Messrs. Kolenik and Sucoff (or an entity owned by either of them) with respect to consulting services to be provided to us for a period of 12 months, pursuant to which each of Messrs. Kolenik and Sucoff will receive $5,000 per month.

On July 23, 2012, we issued warrants to purchase common stock to certain Board members for their extraordinary efforts on behalf of the Company, as follows: Isaac Blech, 333,333; Joseph Proto, 200,000; Cary Sucoff, 133,333; and Patrick Kolenik, 133,333. The warrants vest monthly over a period of 12 months; have an exercise price of $6.45 per share; include a cashless exercise option; and expire 5 years after the date of grant. On July 24, 2012 we granted our Chief Executive Officer, Mr. McCoy, options to purchase 293,333 shares of the Company’s common stock. The options vest monthly over a period of 12 months; have an exercise price of $6.45 per share; and expire 5 years after the date of grant. On October 29, 2012, we granted Chris Leong warrants to purchase up to 133,333 shares of common stock at an exercise price of $10.35 per share and having a term of 5 years. The warrants will vest monthly over a period of 36 months provided Dr. Leong continues to serve on the Board. On November 12, 2012, we granted our President, William Hernandez, options to purchase up to 333,333 shares of common stock at an exercise price of $7.35 per share. The options will vest as follows: 66,667 options vested immediately and the remaining 266,667 options vest equally over a thirty-six month period.

During the twelve months ended September 30, 2011, we entered into subscription agreements with a member of our Board of Directors, Isaac Blech, pursuant to which we issued 1,333,333 shares of our common stock and five-year warrants to purchase up to an additional 1,208,333 shares of our common stock with an exercise price of $6.00 per share, in exchange for gross proceeds totaling $8,000,000. We also issued warrants to purchase up to a total of 100,000 shares of our common stock with an exercise price of $9.00 per share to Equity Source Partners, LLC (“ESP”), who assisted us in connection with the transactions (these totals do not reflect amounts received in connection with convertible debt described below). A principal of ESP Cary Sucoff, became a member of our Company’s Board of Directors in May 2011.

Director Independence. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

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·	the director is, or at any time during the past three years was, an employee of the company;
·	the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
·	a family member of the director is, or at any time during the past three years was, an executive officer of the company;
·	the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);

·	the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
·	the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

Messrs. Blech, Proto, Sucoff, Kolenik, Rubinstein, Eyler, and Leong are the only members of the Board of Directors that are considered independent.

Item 14 – Principal Accountant Fees and Services

Principal Accountant Fees and Services

(1)	Audit Fees

Our audit fees for our 10-K for the twelve months ended September 30, 2013 was $32,000 and the March 31, 2013 and June 30, 2013 10Q’s were $8,000 each and for the three months ended December 31, 2013 related to our 10K-T were $28,080

For the amended 10-K/A and amended 10Q’s for the twelve months ended September 30, 2012 and 2011, our Company engaged EisnerAmper LLP and the aggregate fees for professional services rendered was $65,000 for the 10-K/A and $35,000 for the 10-Q/A’s.

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	For the Twelve
	Months Ended
	December 31,		December 31,
	2014		2013
Audit Fees	$	130,300	$	171,900

(2) Audit-Related Fees

There were no fees billed in 2013 for assurance and related services by EisnerAmper LLP that are reasonably related to the performance of the audit or review of the registrant's financial statements and are not reported under item (1).

(3) Tax Fees

No fees were billed for professional services rendered by EisnerAmper LLP for tax compliance, tax advice, and tax planning for the years ended December 31, 2014 and 2013.

(4) All Other Fees

No aggregate fees were billed for professional services provided by EisnerAmper LLP, other than the services reported in items (1) through (3) for the years ended December 31, 2014 and 2013.

(5) Audit Committee

The registrant's Board of Directors, which formerly performed the functions of the Audit Committee prior to its establishment on November 1, 2011, previously approved the predecessor auditor’s performance of services for the audit of the registrant’s annual financial statements for the twelve months ended September 30, 2012 and 2011. Audit-related fees, tax fees, and all other fees, if any, were also approved by the Board of Directors.

The registrants Audit Committee approved EisnerAmper LLP’s performance of services on for the audit of the registrant’s amended annual financial statements for the twelve months ended September 30, 2012 and 2011 as well as those fees for the period ended September 30, 2013 and for the three months ended December 31, 2013 and for the twelve months ended December 31, 2014.

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Item 15 – Exhibits, Financial Statement Schedules

Exhibit No.	Description
2.1	Share Exchange Agreement with IdeaEdge, Inc., a California corporation (1)
2.2	Purchase Agreement for VOS Systems, Inc. by Allan Ligi (1)
3.1	Amended and Restated Articles of Incorporation (2)
3.1a	Amendment to Amended and Restated Articles of Incorporation (13)
3.2	Bylaws (3)
3.3	Certificate of Designations for the Series A Cumulative Convertible Preferred Stock (4)
10.2	2007 Equity Incentive Plan (1)
10.10	Change of Control Agreement with Jonathan Shultz dated August 11, 2008(5)
10.25	Investor relations agreement dated February 12, 2010 (6)
10.26	Stock contribution and disposition restriction agreement with Chris Nicolaidis dated February 11, 2010 (6)
10.27	Investor relations agreement with Kay Holdings, Inc. dated May 10, 2010 (7)
10.28	Agreement with Equity Source Partners, LLC dated April 30, 2010 (7)
10.30	Investor relations agreement with Two Eight, Inc. dated April 7, 2010 (7)
10.31	Financial Advisory Services agreement with Iroquois Master Fund Ltd. dated June 24, 2010 (8)
10.32	Investor Relations Agreement with Kay Holdings, Inc. dated December 29, 2010(9)
10.33	Subscription Agreement dated January 19, 2011(10)
10.34	Common Stock Purchase Warrant dated January 19, 2011(10)
10.35	Registration Rights Agreement dated January 19, 2011(10)
10.39	Employment agreement between the Company and James Collas dated January 31, 2011 (11)
10.40	Employment agreement between the Company and Jonathan Shultz dated January 31, 2011(11)
10.43	Agreement and Release between the Company and James P. Collas dated April 26, 2011 (12)
10.46	Warrant Agreement with Mark Sandson dated July 19, 2011 (14)
10.47	Stock Option Modification Agreement with Jonathan Shultz dated July 19, 2011 (14)
10.48	Form of Warrant Agreement with named members of Company’s Board of Directors dated August 4, 2011(15)
10.49	Stock Option Agreement with Jonathan Shultz dated August 4, 2011(15)
10.50	Investor Relations Agreement with SPN Investments, Inc. dated August 5, 2011(15)
10.51	Employment Agreement with Michael R. McCoy dated September 19, 2011 (16)
10.52	Stock Option Agreement with Michael R. McCoy dated September 19, 2011 (16)
10.53	Warrant Agreement with Patrick Kolenik dated September 19, 2011 (16)
10.54	Form of Common Stock Purchase Warrant dated October 21, 2011(17)
10.55	Form of Subscription Agreement dated October 21, 2011 (17)
10.56	Form of Registration Rights Agreement dated October 21, 2011 (17)
10.57	Warrant Agreement with Isaac Blech dated November 1, 2011 (18)
10.58	Form of Common Stock Purchase Warrant dated November 21, 2011(19)
10.59	Form of Subscription Agreement dated November 21, 2011 (19)
10.60	Form of Registration Rights Agreement dated November 21, 2011(19)
10.61	Employment Agreement with Evan Jones dated May 1, 2011 (20)
10.62	Warrant Agreement with Robert DeSantis dated March 26, 2012 (21)
10.63	Amended Employment Agreement with Michael R. McCoy dated July 24, 2012 (22)
10.64	Stock Option Agreement with Michael R. McCoy dated July 24, 2012 (22)
10.65	Warrant Agreement with Isaac Blech dated July 23, 2012 (22)
10.67	Warrant Agreement with Cary Sucoff dated July 23, 2012 (22)
10.68	Warrant Agreement with Joseph Proto dated July 23, 2012 (22)
10.69	Warrant Agreement with Patrick Kolenik dated July 23, 2012 (22)
10.70	Warrant Agreement with Jesse Itzler dated July 23, 2012 (22)
10.71	Warrant Agreement with Dr. Ka Cheong Christopher Leong dated October 29, 2012 (23)
10.72	Employment Agreement with William Hernandez dated November 12, 2012 (24)
10.73	Form of Subscription Agreement (25)
10.74	Form of Common Stock Purchase Warrant (25)
10.75	Form of Registration Rights Agreement (25)
11.1	Statement re Computation of Per Share Earnings (20)
14.1	Code of Business Conduct and Ethics (21)
21.1*	Listing of Subsidiaries (20)
24.1	Power of Attorney (contained in the signature page to this Transition Report on Form 10-K)
31.1*	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended, by Chief Executive Officer
31.2*	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended, by Chief Financial Officer
32.1*	Certification pursuant to 18 U.S.C. §1350 by Chief Executive Officer
32.2*	Certification pursuant to 18 U.S.C. §1350 by Chief Financial Officer
*	Filed as an exhibit to this report
(1)	Incorporated by reference from the registrant’s Definitive Proxy Statement filed on September 21, 2007
(2)	Incorporated herein by reference to the registrant's Form 8-K filed on October 22, 2007
(3)	Incorporated herein by reference to the registrant’s Form 8-K filed on September 22, 2005
(4)	Incorporated herein by reference to the registrant’s Form 8-K filed on June 11, 2008
(5)	Incorporated herein by reference to the registrant’s Form 10-QSB filed on August 14, 2008
(6)	Incorporated herein by reference to the registrant’s Form 10-Q filed on February 12, 2010
(7)	Incorporated herein by reference to the registrant’s Form 10-Q filed on May 14, 2010
(8)	Incorporated herein by reference to the registrant’s Form 10-Q filed on August 12, 2010
(9)	Incorporated herein by reference to the registrant’s Form 10-K filed on December 29, 2010
(10)	Incorporated herein by reference to the registrant’s Form 8-K filed on January 19, 2011
(11)	Incorporated herein by reference to the registrant’s Form 10-Q filed on February 1, 2011
(12)	Incorporated herein by reference to the registrant’s Form 8-K filed on April 26, 2011
(13)	Incorporated herein by reference to the registrant’s Form 8-K filed on May 13, 2011
(14)	Incorporated herein by reference to the registrant’s Form 8-K filed on July 21, 2011
(15)	Incorporated herein by reference to the registrant’s Form 10-Q filed on August 10, 2011
(16)	Incorporated herein by reference to the registrant’s Form 8-K filed on September 22, 2011
(17)	Incorporated herein by reference to the registrant’s Form 8-K filed on October 25, 2011
(18)	Incorporated herein by reference to the registrant’s Form 8-K filed on November 4, 2011
(19)	Incorporated herein by reference to the registrant’s Form 8-K filed on November 25, 2011
(20)	Included within the financial statements filed in this Transition Report on Form 10-K
(21)	Incorporated herein by reference to the registrant’s Form 8-K filed on November 10, 2005
(20)	Incorporated by reference to the registrant’s form 10-K filed on December 21, 2011
(21)	Incorporated herein by reference to the registrant’s Form 8-K filed on April 4, 2012
(22)	Incorporated herein by reference to the registrant’s Form 8-K filed on July 27, 2012
(23)	Incorporated herein by reference to the registrant’s Form 8-K filed on November 1, 2012
(24)	Incorporated herein by reference to the registrant’s Form 8-K filed on November 16, 2012
(25)	Incorporated herein by reference to the registrant’s Form 8-K filed on December 6, 2012

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Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: April 3, 2015

SpendSmart Networks Inc., a Delaware corporation

By: /s/ ALEX MINICUCCI

Alex Minicucci, Chief Executive Officer

(Principal Executive Officer)

Power of Attorney

We, the undersigned directors and/or officers of SpendSmart Networks, Inc., a Delaware corporation, hereby severally constitute and appoint Alex Minicucci, acting individually, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Transition Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done that such Transition Report on Form 10-K and its amendments shall comply with the Securities Act, and the applicable rules and regulations adopted or issued pursuant thereto, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1934, this report has been signed by the following persons in the capacities and on the dates stated.

Signature	Title	Date

/s/ ALEX MINICUCCI	Chief Executive Officer and Director (Principal Executive Officer)	April 3, 2015
Alex Minicucci

/s/ DAVID HORIN	Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)	April 3, 2015
David Horin

/s/ ISAAC BLECH	Director	April 3, 2015
Isaac Blech

/s/ CARY SUCOFF	Director	April 3, 2015
Cary Sucoff

/s/ PATRICK KOLENIK	Director	April 3, 2015
Patrick Kolenik

/S/ JOSEPH PROTO	Director	April 3, 2015
Joseph Proto

/s/ KA CHEONG CHRISTOPHER LEONG	Director	April 3, 2015
Ka Cheong Christopher Leong

/s/ JEROLD RUBINSTEIN	Director	April 3, 2015
Jerold Rubinstein

/s/ JOHN EYLER	Director	April 3, 2015
John Eyler

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SPENDSMART NETWORKS, INC. - FORM 10-K - April 3, 2015

Attached files

SPENDSMART NETWORKS, INC. Reports