hipcricket10q_aug312013.htm

10-Q 1 hipcricket10q_aug312013.htm FORM 10-Q hipcricket10q_aug312013.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended August 31, 2013

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

Commission File Number 333-57818

HIPCRICKET, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		20-0122076
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

4400 CARILLON POINT

KIRKLAND, WA 98033

(Address of principal executive offices)

(Zip Code)

(855) 423-5433

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such files). Yes [X] No [ ]

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

Large accelerated filer [ ]		Accelerated filer []

Non-accelerated filer [ ]		Smaller reporting company [X]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of October 7, 2013 the issuer has 154,477,359 shares of common stock, par value $.0001, issued and outstanding.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of August 31, 2013 (unaudited) and February 28, 2012	1
	Consolidated Statements of Operations for the three and six months ended August 31, 2013 and 2012 (unaudited)	2
	Consolidated Statement of Stockholders’ Equity for the six months ended August 31, 2013 (unaudited)	3
	Consolidated Statements of Cash Flows for the six months ended August 31, 2013 and 2012 (unaudited)	4
	Condensed Notes to Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures	22

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	23

Item 6.	Exhibits	24

SIGNATURES

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HIPCRICKET, INC.

CONSOLIDATED BALANCE SHEETS

	August 31, 2013
	(unaudited)			February 28, 2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	360,206		$	4,352,691
Restricted cash		214,570			214,455
Accounts receivable, net		5,791,896			5,707,019
Prepaid expenses and other current assets		505,765			772,029
Total current assets		6,872,437			11,046,194

Intangible assets held for sale		3,500,000			3,500,000
Property and equipment, net		71,430			82,737
Goodwill		35,060,183			35,060,183
Intangible assets, net		23,598,414			25,812,037
Deposits		261,122			238,011

TOTAL ASSETS	$	69,363,586		$	75,739,162

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	5,137,789		$	4,812,086
Accrued liabilities		1,761,991			2,614,365
Deferred revenue		599,696			851,847
Line of credit		1,669,377			-
Total current liabilities		9,168,853			8,278,298

LONG TERM LIABILITIES:
Deferred income tax liability, net		3,517,652			3,517,652
Accrued liabilities		48,083			82,002

TOTAL LIABILITIES		12,734,588			11,877,952

Commitments and contingencies

STOCKHOLDERS' EQUITY:
Common stock, $.0001 par value; 250,000,000 shares authorized; 130,248,049 and 129,554,226 shares issued and outstanding, respectively.		13,025			12,955
Additional paid-in capital		177,398,976			175,241,799
Accumulated deficit		(120,783,003	)		(111,393,544	)
Total stockholders' equity		56,628,998			63,861,210

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	69,363,586		$	75,739,162

See accompanying notes to the consolidated financial statements.

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HIPCRICKET, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended						Six Months Ended
	August 31,						August 31,
	2013			2012			2013			2012
				(Restated)						(Restated)

REVENUE	$	7,592,735		$	6,189,220		$	13,458,299		$	11,267,571

COST OF REVENUES		3,381,299			2,474,292			5,983,802			4,410,237

OPERATING EXPENSES:
Selling and marketing		2,824,362			3,911,686			6,161,495			7,504,223
Technology and development		1,370,120			1,833,318			3,358,349			4,010,140
General and administrative		2,099,201			3,541,298			4,776,113			6,983,305
Depreciation and amortization		1,278,120			1,589,005			2,553,310			3,083,686
Total operating expenses		7,571,803			10,875,307			16,849,267			21,581,354

LOSS FROM OPERATIONS		(3,360,367	)		(7,160,379	)		(9,374,770	)		(14,724,020	)

OTHER INCOME (EXPENSE):
Interest income (expense), net		(13,888	)		224			(14,689	)		2,869
Acquisition related contingent consideration		-			4,860,557			-			4,860,557
NET LOSS BEFORE INCOME TAXES		(3,374,255	)		(2,299,598	)		(9,389,459	)		(9,860,594	)

Income tax benefit		-			-			-			2,618,723

NET LOSS	$	(3,374,255	)	$	(2,299,598	)	$	(9,389,459	)	$	(7,241,871	)

NET LOSS PER SHARE - Basic and diluted	$	(0.03	)	$	(0.02	)	$	(0.07	)	$	(0.08	)

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted		130,164,694			96,317,373			129,880,120			95,403,523

See accompanying notes to the consolidated financial statements.

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HIPCRICKET, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED AUGUST 31, 2013

(UNAUDITED)

	Common Stock
	Shares		Amount		Paid-in Capital		Accumulated Deficit			Stockholders' Equity
Balances, February 28, 2013		129,554,226	$	12,955	$	175,241,799	$	(111,393,544	)	$	63,861,210

Common stock issued for cash for:
Stock with warrant subscription, fees						4,865					4,865
Option/Warrant exercise		10,000		1		2,499					2,500
Common stock issued for:
Board of Director fees		133,823		14		50,653					50,667
Advisory services		550,000		55		220,445					220,500
Employee share-based compensation						1,563,264					1,563,264
Warrant expense						315,451					315,451
Net loss								(9,389,459	)		(9,389,459	)
Balances, August 31, 2013		130,248,049	$	13,025	$	177,398,976	$	(120,783,003	)	$	56,628,998

See accompanying notes to the consolidated financial statements.

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HIPCRICKET, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	August 31,
	2013			2012
				(Restated)
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$	(9,389,459	)	$	(7,241,871	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,553,310			3,083,686
Bad debt expense		22,720			38,219
Common stock issued for services		271,167			625,000
Deferred income tax benefits		-			(2,618,723	)
Loss on sale or disposal of fixed assets		895			-
Share-based compensation expense		1,878,715			2,926,257
Acquisition related contingent obligation adjustment		-			(4,860,557	)
Changes in operating assets and liabilities:
Accounts receivable		(107,597	)		(1,071,634	)
Prepaid expenses and other current assets		266,264			(178,541	)
Interest on restricted cash		(115	)		-
Deposits		(23,111	)		98,693
Accounts payable and accrued liabilities		(521,806	)		2,352,642
Deferred revenue		(252,151	)		(180,513	)
Long-term liabilities		(33,919	)		(33,111	)
NET CASH USED IN OPERATING ACTIVITIES		(5,335,087	)		(7,060,453	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for purchase of patents		(43,540	)		(688,435	)
Cash paid for patent defense costs		(231,068	)		(2,253,813	)
Cash paid for acquisition related contingent consideration		-			(2,000,000	)
Cash paid for long-term investment		(54,667	)		(200,000	)
NET CASH USED IN INVESTING ACTVITIES:		(329,275	)		(5,142,248	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds received from line of credit		1,669,377			-
Proceeds received from the exercise of stock options and warrants, net		2,500			1,249,660
NET CASH PROVIDED BY FINANCING ACTIVITEIS		1,671,877			1,249,660

NET CHANGE IN CASH AND CASH EQUIVALENTS		(3,992,485	)		(10,953,041	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		4,352,691			11,428,825
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	360,206		$	475,784

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	14,804		$	-
Income taxes paid		76,887			-
Non-cash investing activity:
Stock issued for asset purchase		-			3,813,953

See accompanying notes to the consolidated financial statements.

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HIPCRICKET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Hipcricket, Inc. (“Hipcricket,” the “Company,” “we,” or “us”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report on Form 10-K filed with the SEC on May 24, 2013.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the fiscal year ended February 28, 2013 included in our Annual Report on Form 10-K have been omitted.

Description of Business

On August 23, 2013, we changed our company name from Augme Technologies, Inc. to Hipcricket, Inc. Hipcricket®, Augme®, Augme Technologies™, AD LIFE® (“AD LIFE”), AD SERVE®, A+®, Boombox® and the Company logos are trademarks of Hipcricket, Inc.

We provide a customer engagement platform that empowers brands, agencies and media properties to engage customers, drive loyalty and increase sales via mobile. Our proprietary AD LIFE mobile marketing technology platform (the “Platform”) allows marketers, brands, and agencies to plan, create, test, deploy, and track mobile marketing programs across every mobile channel. Through the use of Consumer Response Tags such as 2D codes, UPC codes, short message service (“SMS”), and image recognition, our Platform facilitates consumer brand interaction and the ability to track and analyze campaign results. Using our own patented device-detection and proprietary mobile content adaptation software, AD LIFE solves the mobile marketing industry problem of disparate operating systems, device types, and on-screen mobile content rendering. We also provide business-to-consumer utilities including national mobile couponing solutions, strategic mobile healthcare tools, custom mobile application development and consumer data tracking and analytics. Our products serve advertisers and ad agencies in many vertical markets, including automotive, retail, consumer products, food and beverage, media and broadcast, pharmaceutical and restaurant brands.

The mobile marketing and advertising landscape, while in its early stages, is highly competitive. Many of the landscape’s significant players are focused on delivering point solutions targeting a specific segment of the mobile marketing and/or advertising landscape. We differ from the competition by offering complete, end-to-end mobile advertising and marketing solutions delivered through our AD LIFE Platform.

Our advanced, comprehensive, and fully integrated Platform drives revenue primarily through license fees, marketing campaign fees, and fees associated with certain add-on promotional applications in the Platform. Additional revenue is generated by platform administration and professional service fees related to the mobilization of client content and implementation of marketing campaigns through the Platform.

Our portfolio of patents covers technical processes and methods that are believed to be a foundational component of behavioral targeting — the automatic provision of customized content to individuals based on information such as past web activity, personal preferences, geography, or demographic data. We own 19 U.S. patents, and on a selected basis we are pursuing additional patents that generally relate to targeting, analytics, advanced mobile marketing, customized content delivery, and mobile and networked marketing technology.

We operate under one reportable segment and are headquartered in Kirkland, Washington. Additionally, we maintain a presence in New York, Atlanta, Miami, Dallas, Chicago, San Francisco and Los Angeles.

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Liquidity

As of August 31, 2013 and February 28, 2013, we had accumulated deficits of $120.8 million and $111.4 million, respectively. We are subject to the risks and challenges associated with companies at a similar stage of development including dependence on key individuals, successful development and marketing of our products and services, integration of recent business combinations, competition from alternative products and services and larger companies with greater financial, technical management and marketing resources. Further, we may require additional financing to execute our key business strategies and fund operations. Those funds may not be readily available or may not be on terms that are favorable to us. Certain financing terms could be dilutive to existing shareholders or could result in significant interest or other costs, or require us to license or relinquish certain intellectual property rights.

We operate in the mobile marketing industry and, accordingly, can be affected by a variety of factors. For example, we believe that any of the following factors could have a significant negative effect on our future financial position, results of operations and cash flows: unanticipated fluctuations in quarterly operating results, adverse changes in our relationship with significant customers or failure to secure contracts with other customers, intense competition, failure to attract and retain key personnel, failure to protect intellectual property, decrease in the migration trends from traditional advertising methods to digital and mobile media and the inability to manage growth.

In September 2012, we adopted a restructuring plan which includes reducing the number of employees, slowing the pace of investments in our intellectual property (“IP”) portfolio and minimizing variable expenses. We are restructuring overall corporate overhead expenses in order to focus our business around our mobile marketing and advertising technology and services. We have implemented measures specifically designed to reduce our cash used in operations. Consistent with this plan, we have settled a majority of our patent litigation cases, while protecting the value of our IP assets, to reduce our ongoing legal costs, downsized our Tucson division which was primarily involved with development and monetization of our IP, streamlined personnel and variable costs, and solidified the management team by appointing new personnel with extensive experience in the mobile marketing and advertising space to lead our sales and engineering teams. We intend to continue to minimize cash spend and identify additional cost savings opportunities while carefully investing our resources and protecting our strategic assets to strengthen our position in the mobile marketing and mobile advertising industry.

During the quarter ended May 31, 2013, we secured an accounts receivable credit facility from Silicon Valley Bank (“SVB”) to help fund our working capital needs. The revolving loan facility has a two-year term and allows us to borrow up to $5.0 million based upon a formula equal to 90% of eligible accounts receivable, decreasing to 80% of eligible accounts receivable after January 31, 2014. The facility is secured by substantially all of our assets other than our intellectual property. Amounts drawn under the facility accrue annual interest at the prime rate plus 0.75% during a Streamline Period, as defined in the loan and security agreement, and at the prime rate plus 1.25% when a Streamline Period is not in effect. We are required to deliver periodic reports to SVB regarding our ability to meet certain financial and other covenants contained in the loan agreement. In late July we delivered the report to SVB indicating that as of June 30, 2013, we had breached our minimum tangible net worth covenant and began discussions of a forbearance agreement with SVB. We are in negotiations with SVB to obtain a waiver of the covenant default. The terms of such waiver may include modification of certain loan terms, including expanding the collateral on the facility to include our intellectual property. As of the August 31, 2013, we had drawn $1.7 million from this line of credit and had approximately $1.7 million available based on our outstanding accounts receivable as of that date. See Note 9 below for additional information about the credit facility.

On October 4, 2013, we closed a $9.6 million financing transaction with 13 investors, each of which is an “accredited investor” within the meaning of the Securities Act of 1933 (the “Securities Act”). The investors purchased units of our securities at $0.40 per unit. Each unit consisted of one share of our common stock and a warrant to purchase 0.3 shares of our common stock. An aggregate of 23,875,000 shares of our common stock and warrants to purchase up to 7,162,500 shares of our common stock were purchased in the financing. The warrants have a five year term and an exercise price of $0.60 per share. In connection with the financing, we also entered into a registration rights agreement with each investor pursuant to which we will file, and cause to become effective with the SEC, a registration statement covering the resale of all of the shares of common stock and shares of common stock underlying the warrants sold in the financing.

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In the future, we may need to raise additional cash through equity or debt financings, and/or sell all or part of our patent portfolio, while retaining the rights to use the patents in our technology. There is no certainty that we will have the ability to raise additional funds through debt or equity financings under terms acceptable to us or that we will have the ability to sell all or part of the patent portfolio. If sources of capital are unavailable, or are available only on a limited basis or under unacceptable terms, then we could be required to substantially reduce or discontinue our investments in new customers and new products; reduce selling, marketing, general and administrative costs related to our continuing operations; or limit the scope of our continuing operations. Due to the nature of our operations and financial commitments we may not have the discretion to reduce operations in an orderly manner to a more sustainable level without impacting future operations.

As of the filing of our Annual Report on Form 10-K for the fiscal year ended February 28, 2013, we no longer met the minimum $75 million public float requirement for use of Form S-3 registration for primary sales of our common stock and therefore are limited in our ability to issue the remaining $41.4 million remaining on our existing Form S-3 and/or to file new shelf registration statements on Form S-3. Until such time as we satisfy the $75 million public float and other requirements for use of Form S-3 registration, we will be required to use a registration statement on Form S-1 to register securities with the SEC, including to register the resale of the common shares issued in our October 2013 financing, or issue such securities in a private placement, which could increase the cost of raising capital.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in the financial statements. We regularly evaluate estimates and judgments based on historical experience and other relevant facts and circumstances. Actual results could differ from those estimates. Significant estimates relate to fair value of assets acquired and liabilities assumed in business combinations, acquisition related contingent consideration, allowances for tax assets, the use of the Black-Scholes pricing model for valuing stock option and common stock warrant issuances, estimates of future cash flows used to evaluate impairment of long-lived assets, revenues earned from percentage of completion contracts and the period in which revenues should be recorded.

Reclassifications

Certain reclassifications have been made to prior periods to conform to current reporting. The presentation of our Consolidated Statements of Operations has been adjusted for the reclassification of operating expenses to be presented in the following categories: sales and marketing, technology and development, general and administrative and depreciation and amortization. The operating expenses for the three and six months ended August 31, 2012 have been reclassified accordingly.

Summary of Significant Accounting Policies

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the SEC. The same accounting policies are followed for preparing the quarterly and annual financial information unless otherwise disclosed.

NOTE 2 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

In this Quarterly Report on Form 10-Q, we are reporting quarterly data for our fiscal quarter ended August 31, 2013, and in some cases providing the comparative data from the same quarter a year ago. As described in our Annual Report on Form 10-K for the fiscal year ended February 28, 2013 filed with the SEC on May 24, 2013, and summarized below, we restated the financial statements for certain quarterly and year-to-date periods, including the quarter ended August 31, 2012. All comparative data for the quarter ended August 31, 2012 is as restated.

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Description of Restatement

In connection with our financial close process for our fiscal year 2013 financial statements, we concluded that the accounting for our acquisition of Hipcricket, Inc. (“Hipcricket subsidiary”) and JAGTAG, Inc. (“JAGTAG”), both of which occurred during fiscal year 2012, and of GEOS Communications IP Holdings, Inc. (“GEOS”), which occurred during the first quarter of fiscal 2013, was incorrect because deferred income tax liabilities arising from the acquisition accounting were not properly recorded for the differences between the book and tax basis of the acquired assets. The corresponding reduction to the deferred income tax asset valuation allowance was also not properly recognized. The Hipcricket subsidiary and JAGTAG transactions were structured as non-taxable transactions to the acquired companies’ shareholders and therefore considered mergers according to the provisions of IRS Code Section 368(a)(1)(c). To correct the errors related to the Hipcricket subsidiary and JAGTAG transactions, we recorded an increase to goodwill of $13.5 million, an increase to deferred tax liability of $13.5 million, which resulted in a corresponding reduction to the deferred income tax asset valuation allowance of $10.0 million and an increase to income tax benefits of $10.0 million for the quarter ended August 31, 2011 and fiscal year ended February 29, 2012. To correct the errors related to the GEOS transaction, we recorded an increase to the identified intangible asset category of patents of $2.6 million, an increase to deferred income tax liability of $2.6 million, and a corresponding reduction to the deferred income tax asset valuation allowance of $2.6 million and an increase to income tax benefits of $2.6 million for the quarter ended May 31, 2012. As a result of our previously completed impairment analysis performed during the quarter ended November 30, 2012 on certain identified intangibles, we recognized additional impairment expense of $2.6 million to write off the increased value resulting from the adjustments for the GEOS transaction.

We assessed the impact of the errors relating to the Hipcricket subsidiary and JAGTAG transactions on our interim goodwill impairment analysis that was performed as of November 30, 2012. As a result of the increase in the carrying amount of goodwill resulting from the restatement, in our updated interim impairment assessment step one recoverability test we concluded that the carrying value of the reporting unit that included goodwill exceeded its fair value, resulting in an indication of impairment. Therefore we were required to perform the step two analysis to calculate the impairment. We determined the implied goodwill was less than the carrying value and we recognized an impairment write down of goodwill of $25.9 million for the period ended November 30, 2012 and the year ended February 28, 2013, to reduce the carrying value of goodwill to $35.1 million.

Accordingly, the financial statements for the year ended February 29, 2012 and unaudited quarterly and year-to-date periods ended August 31, 2011, November 30, 2011, February 29, 2012, May 31, 2012, August 31, 2012 and November 30, 2012 were restated in our Annual Report on Form 10-K for the fiscal year ended February 28, 2013, from amounts previously reported. Net loss, basic and diluted net loss per share, accumulated deficit, and shareholders’ equity were also affected by the restatements. These adjustments are carried forward in subsequent periods. The corrections had no impact on total revenue, operating expense, or operating cash flows.

The following table summarizes the corrections by financial statement line item for the three and six months ended August 31, 2012:

	As of and for the Three								As of and for the Six
	Months ended August 31, 2012								Months ended August 31, 2012
	(unaudited)								(unaudited)
	As previously reported			Restatement adjustments		As restated			As previously reported			Restatement adjustments			As restated
Balance Sheet
Goodwill	$	47,484,708		$	13,494,475	$	60,979,183		$	47,484,708		$	13,494,475		$	60,979,183
Intangible assets, net		40,583,291			2,618,723		43,202,014			40,583,291			2,618,723			43,202,014
Total assets		94,624,813			16,113,198		110,738,011			94,624,813			16,113,198			110,738,011
Deferred income tax liability		-			3,517,652		3,517,652			-			3,517,652			3,517,652
Total liabilities		18,515,584			3,517,652		22,033,236			18,515,584			3,517,652			22,033,236
Accumulated deficit		(82,393,665	)		12,595,546		(69,798,119	)		(82,393,665	)		12,595,546			(69,798,119	)
Total stockholders' equity		76,109,229			12,595,546		88,704,775			76,109,229			12,595,546			88,704,775
Total liabilities and stockholders' equity		94,624,813			16,113,198		110,738,011			94,624,813			16,113,198			110,738,011
Statement of Cash Flows
Net loss		(2,299,598	)		-		(2,299,598	)		(9,860,594	)		2,618,723			(7,241,871	)
Deferred income tax benefit		-			-		-			-			(2,618,723	)		(2,618,723	)
Statement of Stockholders' Equity
Accumulated deficit		(82,393,665	)		12,595,546		(69,798,119	)		(82,393,665	)		12,595,546			(69,798,119	)
Stockholders' equity		76,109,229			12,595,546		88,704,775			76,109,229			12,595,546			88,704,775
Statement of Operations
Net loss		(2,299,598	)		-		(2,299,598	)		(9,860,594	)		2,618,723			(7,241,871	)
Basic and diluted net loss per share	$	(0.02	)	$	-	$	(0.02	)	$	(0.10	)	$	0.02		$	(0.08	)

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NOTE 3 — STOCKHOLDERS’ EQUITY

During the six months ended August 31, 2013, we issued approximately 133,800 shares of common stock to our independent directors for payment of fees pursuant to the Board of Director’s compensation plan, 50,000 shares to a consultant for services, and 500,000 shares to legal counsel for services.

NOTE 4 — SHARE-BASED PAYMENTS

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the estimated fair value of the award. We use the Black-Scholes option pricing model to estimate the fair value of stock options and warrants. The determination of the fair value of stock-based awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the expected term of the awards, actual and projected employee stock option exercise behaviors, a risk-free interest rate and any expected dividends.

Stock Option Exchange

On August 29, 2013, we completed a stock option exchange program. Subject to the terms of our exchange offer filed on August 2, 2013, eligible participants tendered, and we exchanged, 5,460,424 options for 1,261,710 new options affecting 73 employees and 2 independent directors. The new options have an exercise price of $0.42, which was the closing price of our common stock on August 29, 2013. The new options were granted with the same vesting proportions as the tendered options. Of the 1,261,710 new option granted, 846,516, or 67%, were vested on the grant date and 415,194 or 33% will vest over the remaining vesting periods of the original options. The tender offer did not result in the acceleration of vesting of any options. The new options have the same expiration dates as the options exchanged.

We are required to compare the fair value of the options immediately before and after modification and recognize additional compensation expense to the extent the new options have greater value than the exchanged options they replaced. The fair value of the stock options tendered for exchange and the replacement stock options was estimated on August 29, 2013 using the Black-Scholes option-pricing model with the following assumptions:

	Pre-modification			Post-modification
Weighted-average exercise price	$	2.40		$	0.42
Expected term (in years)		3.00			2.00
Weighted-average volatility		70	%		70	%
Risk-free rate		0.79	%		0.39	%
Expected dividends		0	%		0	%

The total fair value of the new options issued to each participant in the exchange did not exceed the fair value of the original options outstanding just prior to the exchange. As such, no compensation expense was recognized as a result of the stock option exchange offer.

OPTIONS:

The estimated fair values of our stock option awards were determined using the following weighted average assumptions:

	Three Months Ended						Six Months Ended
	August 31,						August 31,
	2013			2012			2013			2012
Expected dividends		0	%		0	%		0	%		0	%
Expected term (in years)		3.50			3.50			3.50			3.50
Weighted-average volatility		70	%		60	%		70	%		60	%
Risk-free rate		0.51	%		0.41	%		0.51	%		0.45	%

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The effect on our results of operations of option expense for the three and six months ended August 31, 2013 and 2012 was as follows:

	Three Months Ended				Six Months Ended
	August 31,				August 31,
	2013		2012		2013		2012
Selling and marketing	$	252,765	$	467,893	$	591,131	$	1,027,637
Technology and development		137,342		342,226		508,905		609,970
General and administrative		158,527		443,606		463,228		854,584
Total stock option expense	$	548,634	$	1,253,725	$	1,563,264	$	2,492,191

We maintain stock incentive plans for our employees. The 2010 Stock Incentive Plan provides for the grant to employees, officers, directors and consultants of incentive stock options, non-qualified stock options, restricted shares, and other stock based awards to purchase up to an aggregate of 15.0 million shares of our common stock. We have approximately 7.9 million stock options and restricted shares outstanding under this plan as of August 31, 2013.

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

The summary of activity for our stock options is presented below:

	Number of options			Weighted Average Exercise Price		Average Remaining Contractual Term (In Years)

Options outstanding at February 28, 2013		17,373,932		$	2.00		2.99
Granted		2,600,635			0.41
Exercised		-			-
Cancelled or expired		(5,710,424	)		2.46
Forfeited		(2,567,830	)		2.19
Options outstanding at August 31, 2013		11,696,313		$	1.38		2.39

Options vested and expected to vest at August 31, 2013		11,409,124		$	1.41		2.34
Options exercisable at August 31, 2013		9,781,617		$	1.55		2.00

As of August 31, 2013, there was $1.9 million of unrecognized share-based payment expense related to options, which is expected to be recognized over a weighted average period of approximately 2.3 years.

The aggregate intrinsic value of the exercisable options at August 31, 2013 was approximately $31,000. The aggregate intrinsic value was calculated based on the positive differences between the market value of our common stock on August 31, 2013 of $0.39 per share and the exercise prices of the exercisable options.

The exercise prices of options outstanding at August 31, 2013 ranged from $0.25 to $3.90. The weighted average fair value of options granted was $0.41 per option share for the three months ended August 31, 2013.

WARRANTS:

The fair values of our stock warrant awards issued during the three and six months ended August 31, 2013 and 2012, respectively, were estimated using the following weighted average assumptions:

	Three Months Ended						Six Months Ended
	August 31,						August 31,
	2013			2012			2013			2012
Expected dividends		0	%		0	%		0	%		0	%
Expected term (in years)		5.00			3.00			5.00			3.00
Weighted-average volatility		70	%		60	%		70	%		60	%
Risk-free rate		1.62	%		0.38	%		1.62	%		0.38	%

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The warrant expense for the three and six months ended August 31, 2013 and 2012 is as follows, and is included in general and administrative expense:

	Three Months Ended				Six Months Ended
	August 31,				August 31,
	2013		2012		2013		2012
Total warrant expense	$	278,179	$	261,905	$	315,450	$	434,066

The summary of activity for our warrants is presented below:

	Number of Warrants			Weighted Average Exercise Price		Average Remaining Contractual Term (In Years)

Warrants outstanding at February 28, 2013		19,171,104		$	1.32		3.53
Granted		875,000			0.70
Exercised		-			-
Forfeited and expired		(181,250	)		1.24
Warrants outstanding at August 31, 2013		19,864,854		$	1.30		3.05

Warrants vested and expected to vest at August 31, 2013		19,864,854		$	1.30		3.05
Warrants exercisable at August 31, 2013		18,931,523		$	1.31		2.99

The exercisable warrants as of August 31, 2013 had no aggregate intrinsic value because the market value of our common stock on August 31, 2013 of $0.37 per share was lower than the exercise prices of the exercisable warrants. The exercise prices of warrants outstanding at August 31, 2013 ranged from $0.39 to $4.00.

As of August 31, 2013, there was approximately $116,000 of unrecognized share-based payment expense related to warrants, which is expected to be recognized over a weighted average period of approximately 2.2 years.

NOTE 5 — NET LOSS PER SHARE

Basic net loss per share is based on the weighted average number of common shares outstanding. Diluted net loss per share is based on the weighted average number of common shares and common share equivalents outstanding. Common share equivalents included in the computation represent shares issuable upon assumed exercise of outstanding stock options and warrants except when the effect of their inclusion would be anti-dilutive. As of August 31, 2013 and 2012, there were potentially dilutive securities consisting of options exercisable to purchase 9.8 million and 3.2 million shares of common stock, respectively, and warrants exercisable to purchase 18.9 million and 3.7 million shares of our common stock, respectively. As the inclusion of these outstanding stock options and warrants would be anti-dilutive, they were excluded from the computation of loss per share. Accordingly, basic net loss per share and diluted net loss per share are identical for each of the periods presented in the accompanying statements of operations.

NOTE 6 — ACQUISITIONS

Acquisition of GEOS IP Assets: On May 24, 2012, we acquired all of the common stock and all of the preferred stock of GEOS Communications IP Holdings, Inc. pursuant to the Stock Purchase Agreement between Augme and GEOS and other parties. By acquiring the GEOS stock, we acquired five U.S. patents covering Voice over Internet Protocol (“VoIP”) and other mobility inventions. The patents allow us to expand our mobile marketing and mobile advertising technology offerings to include adaptive voice technologies for any mobile environment, VoIP-enabled mobile marketing and advertising, VoIP-enabled e-commerce and VoIP-enabled services and support features within our AD LIFE Platform.

We determined that the GEOS assets acquired did not constitute a business as defined under ASC Topic 805 on the basis that the GEOS assets were not an integrated set of activities or assets that were capable of being conducted or managed in a manner that would provide economic benefits or return to us. As a result, we accounted for this acquisition as an asset purchase. The total consideration paid has been allocated to the intangible assets acquired based upon their relative fair values at the date of acquisition.

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The fair value of the consideration given for the acquisition of the GEOS stock was $4.2 million, which included $355,000 in cash and $3.8 million in our common stock (1,860,465 shares at a price of $2.05 per share). We are indemnified against certain losses resulting from breaches of any representation, warranty, covenant or agreement of GEOS. In order to secure payment of any loss, the approximate 1.9 million shares of our common stock were held for the benefit of the sellers in escrow for a period of up to 14 months following the closing date of the acquisition. In July 2013, the shares were released from escrow.

As described in Note 2, we recorded an increase to the carrying value of the patents on our balance sheet of $2.6 million to correct errors related to the income tax provision impacts of differences between the book and tax basis of the acquired assets, and a corresponding income tax benefit on our consolidated statement of operations, due to the reduction in the deferred income tax asset valuation allowance during the quarter ended May 31, 2012.

Acquisition of Hipcricket, Inc. Assets

On August 25, 2011, Augme completed its acquisition of the business and substantially all of the assets of Hipcricket, Inc. pursuant to the Amended and Restated Asset Purchase Agreement dated August 25, 2011 between Augme and Hipcricket. The acquisition provides us with expanded mobile marketing solutions for consumer brands, agencies, pharmaceutical/health, and media companies. We accounted for the acquisition as a business combination. The results of Hipcricket’s operations have been included in our financial statements since the date of the acquisition.

The estimated fair value of the acquisition consideration was $62.8 million, which included $3.0 million in cash, $35.5 million in our common stock (11,457,359 shares at a price of $3.10), a $1.0 million promissory note, which was subsequently paid off in cash, and $2.0 million of seller tax liabilities, which was paid during the quarter ended May 31, 2012. In addition, the transaction called for a twelve-month earn-out payment to Hipcricket shareholders and employees, which if achieved was estimated to be no less than $15.0 million and as high as $27.5 million. The amount of contingent consideration was based on the amount of revenue recognized in the earn-out period and could be paid in our common stock or a combination of common stock and cash at our discretion, provided that the transaction remained a tax-free reorganization. The contingent consideration recorded at the time of the acquisition was $23.3 million plus the seller tax liabilities of $2.0 million, resulting in an aggregate liability on the transaction date of $25.2 million. The tax liability of $2.0 million was paid during the quarter ended May 31, 2012.

The earn-out period ended on August 25, 2012, which was the measurement date of the contingent consideration obligation. The earn-out payment was calculated to be $22.0 million and we recognized a gain of $2.0 million from the reduction of the liability of the actual consideration due, compared to management’s previous estimates. The gain is included within other income on the statements of operations for the three and six months ended August 31, 2012.

As partial satisfaction of the contingent consideration payments, we paid approximately 50% of the outstanding obligation using shares of our common stock. We issued a total of 5.5 million shares of our common stock as payment of approximately $11.0 million in contingent consideration to the former Hipcricket stockholders. The number of common shares issued was calculated using a $2.00 per share “floor” price, as defined in the agreement. The market price of our common stock on August 25, 2012 was $1.48. The difference between the $2.00 floor price used to calculate the number of shares to be issued, and the actual price of $1.48 on the measurement date, resulted in a reduction of the estimated consideration payment of $2.9 million, which is included in other income on the statements of operations for the three and six months ended August 31, 2012.

On November 2, 2012 we issued 3.7 million shares of common stock, net of tax withholding, for substantially all of the remaining contingent consideration obligation. The difference between the $2.00 floor price and the actual price of $0.65 on the date the shares were issued resulted in a reduction of the estimated contingent consideration payment of $7.3 million, which was included in other income on the statements of operations for the three and six months ended November 30, 2012.

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NOTE 7 — INTANGIBLE ASSETS

The following table presents the gross carrying value of the components of intangible assets and accumulated amortization:

			As of August 31, 2013
	Weighted Average Amortization Period (In months)		Carrying Amount, net of impairment write downs		Accumulated Amortization		Net Carrying Value
Indefinite Lived Intangible:
Trade name	Indefinite		$	8,700,000	$	-	$	8,700,000

Definite Lived Intangible:
Patent litigation		84		4,269,973		1,516,346		2,753,627
Patents		120		717,846		87,183		630,663
Acquired technology		60		7,270,000		3,192,750		4,077,250
Customer relationships		60-72		12,850,000		5,413,126		7,436,874
Software		36		2,095,705		2,095,705		-
Non-compete agreements		36		212,000		212,000		-
Trade names		24		44,000		44,000		-
Total intangibles			$	36,159,524	$	12,561,110	$	23,598,414

			As of February 28, 2013
	Weighted Average Amortization Period (In months)		Carrying Amount, net of impairment write downs		Accumulated Amortization		Transfer to Held for Sale		Net Carrying Value
Indefinite Lived Intangible:
Trade name	Indefinite		$	8,700,000	$	-	$	-	$	8,700,000

Definite Lived Intangible:
Patent litigation		84		4,038,904		1,060,109		-		2,978,795
Patents		120		4,174,306		51,356		3,500,000		622,950
Acquired technology		60		7,270,000		2,465,750		-		4,804,250
Customer relationships		60-72		12,850,000		4,143,958		-		8,706,042
Software		36		2,095,705		2,095,705		-		-
Non-compete agreements		36		212,000		212,000		-		-
Trade names		24		44,000		44,000		-		-
Total intangibles			$	39,384,915	$	10,072,878	$	3,500,000	$	25,812,037

Intangible assets relate to patent filing and patent protection litigation costs as well as customer relationships, trade names and technology obtained in past acquisitions. With the exception of the Hipcricket trade name carried at $8.7 million, the intangible assets have finite lives and, as such, are subject to amortization. Amortization of intangible assets was $1.2 million and $2.4 million, for the three and six months ended August 31, 2013, respectively.

Amortization in future fiscal periods is expected to be as follows:

Remainder of 2014	$	2,176,229
2015		5,101,399
2016		4,642,676
2017		2,369,316
2018		217,014
Thereafter		391,780
Total	$	14,898,414

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NOTE 8 — CONTINGENCIES

Litigation

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

Litigation Update

Augme Technologies, Inc. v. Yahoo! Inc., Civil Action No. 3:09-cv-05386-JCS, a patent infringement lawsuit pending in the U.S. District Court for the Northern District of California since November 16, 2009. On December 21, 2010, Yahoo! filed a first amended answer to Augme’s complaint, in which Yahoo! asserted its own counterclaim against Augme alleging infringement of, inter alia, U.S. Patent Nos. 7,640,320 (“‘320 patent”) and 7,512,622 (“‘622 patent”). On August 21, 2012, the parties stipulated to dismissal of Yahoo’s claim for infringement of the ‘622 patent with prejudice.

This case is a patent infringement lawsuit brought by Augme against Yahoo, Inc. Yahoo has also counterclaimed for patent infringement. In this case, Augme is seeking monetary relief for patent infringement damage and injunctive relief against future infringement. A summary of the case is set forth below.

With respect to Augme’s claims of patent infringement, on June 11, 2012, Yahoo! renewed its Motion for Summary Judgment of non-infringement. The Court heard argument on the summary judgment issues on July 20, 2012. On August 8, 2012, the Court granted Yahoo!’s Motion for Summary Judgment of non-infringement, dismissing Augme’s patent claims against Yahoo! and declining to address Augme’s previously filed Motion for Partial Summary Judgment of validity. Based on the Court’s summary judgment order, Augme moved for Entry of Judgment under Rule 54(b). Yahoo! opposed Augme’s motion in light of the pending counterclaim for infringement of the ‘320 patent. Nonetheless, Augme’s motion was granted by the Court on October 29, 2012, and final judgment was entered shortly thereafter on November 15, 2012. On December 12, 2012, Augme filed a Notice of Appeal as to the judgment as to the Augme patent. The appeal was docketed by the Federal Circuit on December 19, 2012.

With respect to Yahoo!’s counterclaim regarding infringement of the ‘320 patent, the parties agreed to and filed a stipulation of infringement of this patent on December 13, 2012, under the Court’s claim construction ruling of January 3, 2012. The parties also stipulated to entry of judgment under Rule 54(b) and 28 U.S.C. § 1292(c)(2), which permits the entry of judgment in patent cases “which … [are] final except for an accounting.” The parties also requested that the Court stay the remainder of the case pending Augme’s appeal to the Federal Circuit Court of Appeals. The Court signed such an order on December 13, 2012, and entered it the next day.

On January 11, 2013, Augme filed with the district court a Notice of Appeal to the Federal Circuit Court of Appeals as to Yahoo!’s ‘320 patent judgment. The second appeal was docketed by the Federal Circuit on February 6, 2013 and consolidated with the prior appeal (now Lead Appeal No. 13-1121). Augme tendered its principal brief to the Federal Circuit on May 7, 2013. Augme filed its Reply Brief on September 6, 2013, and the parties subsequently filed a Joint Appendix on September 13, 2013. Both consolidated appeals remain pending before the Federal Circuit.

Augme Technologies, Inc. v. Millennial Media, Inc., Civil Action No. 1:12-cv-00424, a patent infringement lawsuit pending in the U.S. District Court for the District of Delaware since April 5, 2012. Augme filed a case against Millennial Media, Inc., asserting three causes of action involving alleged patent infringement related to Augme-owned United States Patent No. 7,783,721, United States Patent No. 7,269,636 and United States Patent No. 6,594,691.

This case is a patent infringement lawsuit filed by Augme against Millennial Media, Inc. As originally filed, Augme was seeking monetary relief for patent infringement damage and injunctive relief against future infringement. A summary of the current status is set forth below.

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On May 30, 2012, Millennial Media filed a Motion to Dismiss For Failure to State a Claim Under Federal Rule of Civil Procedure 12(b)(6). Augme filed an amended complaint and an answer brief on June 18, 2012, and Millennial Media withdrew its Motion to Dismiss on June 28, 2012. A Scheduling Order was entered on September 28, 2012. The case has been set for a seven day jury trial beginning on September 15, 2014. On March 22, 2013, the parties began settlement discussions. To facilitate those discussions, the parties filed, on April 12, 2013, a stipulation to stay further proceeding in the case which Judge Stark entered as an order on April 18, 2013. As required by the joint stipulation, the parties filed a joint status report on July 1, 2013, stipulated that the stay be continued at least until October 1, 2013. On September 30, 2013, the parties filed a joint status report requesting that the stay be continued at least until December 1, 2013. The Court entered an Order to this effect the next day.

Augme Technologies, Inc. v. AOL, Inc. and Time Warner, Inc., Civil Action No. 1:12-cv-05439-CM (transferred from Civil Action No. 1:09-cv-04299-RWS (S.D.N.Y.)), a patent infringement and trademark infringement lawsuit pending in the U.S. District Court for the Southern District of New York (transferred from the U.S. District Court for the Central District of California) since September 10, 2008.

The case is a patent infringement case originally filed by Augme against AOL, Inc. and Time Warner, Inc. in the Central District of California and subsequently transferred to the Southern District of New York. It also originally included a trademark infringement action against AOL, Inc. for use of the BOOMBOX trademark which has subsequently been dismissed. In its patent infringement claim, Augme sought both monetary relief for patent infringement damages and injunctive relief against further infringement by AOL and Time Warner. The AOL defendants and Augme agreed to settle litigation between themselves and, on February 26, 2013, the case was dismissed between those parties. The stayed case remains pending against Time Warner, Inc. Below is a summary of the current status of this case.

On June 13, 2012, the patent infringement claims were transferred from Judge Robert Sweet to Judge Colleen McMahon. The residual claims for trademark infringement, unfair competition and false designation of origin, which remained with Judge Sweet, were dismissed by agreement of the parties on November 19, 2012.

With regard to the patent infringement claims, Time Warner filed a Motion for Judgment on the Pleadings on September 27, 2012, and, shortly thereafter, a Motion for Rule 11 Sanctions on October 23, 2012. On October 26, 2012, the Court sua sponte stayed the case regarding any claims related to U.S. Patent No. 7,269,636 (“‘636 patent”), pending the outcome of the ongoing reexamination of that patent by the U.S. Patent and Trademark Office. Because the remaining patent-in-suit, U.S. Patent Nos. 6,594,691 (“‘691 patent”), is closely related to the ‘636 patent, Augme moved to stay the case in its entirety on November 5, 2012. On December 20, 2012, Judge McMahon denied Augme’s motion to stay as to the ‘691 patent and did not disturb the preexisting stay as to the ‘636 patent.

Because of Judge McMahon’s requirement that all discovery in the case be completed by the end of February 2013 and given that discovery as to the ‘691 patent would be totally duplicative of discovery which would have to be conducted later as to the ‘636 patent, on January 7, 2013, Augme filed a covenant not to sue defendants on the ‘691 patent and a motion to dismiss the ‘691 patent from the case. Based on the pendency of the motion to dismiss, on January 11, 2013, Magistrate Judge Gabriel Gorenstein adjourned all further discovery as to the ‘691 patent.

On January 16, 2013, Judge McMahon entered an order dismissing the ‘691 patent from the case and maintaining the stay as to the ‘636 patent. She placed the case on suspension and denied Time Warner’s pending motions without prejudice.

The AOL defendants and Augme agreed to settle the litigation as between Augme, on the one hand, and AOL, Inc. and AOL Advertising, Inc., on the other. Accordingly, on February 26, 2013, Judge McMahon entered an Order of Dismissal as to the parties, AOL, Inc. and AOL Advertising, Inc. The stayed case remains pending against Time Warner, Inc.

On July 16, 2013, the court denied Time Warner’s motion for sanctions against Augme without prejudice to renewal, pending the outcome of the USPTO reexamination.

Brandofino Communications vs. Augme Technologies, Inc. On September 27, 2011, Brandofino Communications, Inc. (“Brandofino”) filed suit against Augme and New Aug LLC in the Supreme Court of the State of New York, New York County. The complaint alleges, inter alia, breach of contract and unjust enrichment claims arising from work Brandofino allegedly performed for Augme pursuant to a marketing agreement entered into by Brandofino and Augme. Augme has served its Answer and set forth counterclaims for breach of contract, unfair competition, tortious interference with business relations, and violations of New York General Business Law Section 349 (relating to violations of Augme’s intellectual property rights). The Company intends to vigorously defend against Brandofino’s claim and pursue its counterclaims.

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Shaub& Williams, L.L.P., vs. Augme Technologies, Inc., Civil Action No. 1:13-cv-01101-GBD. Augme's prior counsel, Shaub & Williams, LLP, filed a Complaint in the United States District Court for the Southern District of New York seeking recovery on a quantum meruit (value of services) basis attorney's fees in the amount of $2,249,686.25 for its prior representation of Augme in litigation. Augme filed and served (1) an Answer denying the material allegations and claims of the First Amended Complaint; (2) counterclaims for professional negligence and breach of contract. Shaub & Williams filed motions to dismiss Augme's counterclaims and to strike certain of Augme's affirmative defenses to the complaint, in addition to an early motion for summary judgment seeking to dismiss Augme's counterclaims. The Court denied the motion for summary judgment, but at hearing October 7 on the motion to dismiss indicated that Augme's affirmative counterclaims may have insufficient factual support since Augme has not actually paid any of Shaub & Williams' bills to date. Augme was given leave to submit a proposed amended Counterclaim by October 21 (with opposition by Shaub & Williams by November 4 and a reply allowed to Augme by November 12) and the Court will determine whether it will be allowed. The Court indicated the affirmative defenses are sufficient. A further status conference has been set for January 14, 2014, at which time the Court will finalize a trial date. In the meantime, the parties are conducting discovery on the claims and counterclaims.

Subpoena from the Securities and Exchange Commission

On February 26, 2013, the Company received a subpoena from the SEC that sought documents and information with respect to statements made by us between October 2010 and April 2011 in certain press releases, investor presentations and filings with the SEC. We provided responsive documents and information to the Staff in compliance with the subpoena. The SEC did not make any specific allegations of misconduct or misrepresentation by us or any of our current or former officers, directors or employees. On August 19, 2013, the Staff issued a letter to us stating that its investigation has been completed and that the Commission Staff does not intend to recommend any enforcement action by the SEC.

NOTE 9 — LINE OF CREDIT

On May 21, 2013, we entered into a loan and security agreement with Silicon Valley Bank (“SVB”). The agreement provides for a $5.0 million asset based revolving loan facility, with availability subject to a borrowing base of 90% of our eligible accounts receivable, decreasing to 80% of eligible accounts receivable after January 31, 2014, and the satisfaction of conditions specified in the agreement. The facility expires on May 21, 2015, at which time all outstanding amounts will become due and payable.

Amounts drawn under the facility accrue interest at a floating per annum rate equal to 1.25% above the prime rate, or 0.75% above prime rate at all times when a Streamline Period is in effect. A Streamline Period commences on the first day of the month following the day that we provide SVB a written notice that, for each consecutive day in the immediately preceding fiscal quarter, we had unrestricted cash at Silicon Valley Bank plus the unused amount available under the facility in an amount above $4.0 million, subject to terms and conditions of the loan agreement. Interest is payable monthly. We also are required to pay SVB a quarterly fee equal to 0.25% per annum of the average unused portion of the facility. The facility is secured by substantially all of our assets, other than our intellectual property. Borrowings under the facility may be used for general corporate purposes, including funding working capital. As of the August 31, 2013, we had drawn $1.7 million from the line of credit and had approximately $1.7 million available based on our outstanding accounts receivable as of that date.

The loan agreement includes customary covenants, including covenants that limit or restrict our ability to, without the prior written consent of SVB, dispose of assets, change our business, have a change in control, make acquisitions, be acquired, incur indebtedness, grant liens, make investments, make distributions, repurchase stock, and enter into certain transactions with affiliates. The loan agreement also requires us to maintain a minimum tangible net worth of at least negative $1.25 million, increasing (i) at the end of each month by 50% of the proceeds of issuances of equity securities and the principal amount of any subordinated debt received during such month, (ii) at the end of each calendar quarter 50% of net income for such quarter and (iii) immediately by 1.5x the cash received by us from the sale of any intellectual property minus any realized gain or plus any realized loss associated with the sale of such intellectual property.

The loan agreement contains customary events of default that include non-payment defaults, covenant defaults, material adverse change defaults, insolvency defaults, material judgment defaults and inaccuracy of representations and warranty defaults. The occurrence of an event of default could result in the acceleration of obligations under the loan agreement, in which case we must repay all loans and related charges, fees and amounts then due and payable. At the election of SVB, upon the occurrence and during the continuance of an event of default, the interest rate will increase an additional 5.0% per annum above the rate that is otherwise applicable.

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We are required to deliver periodic reports to SVB regarding our ability to meet certain financial and other covenants contained in the loan agreement. In late July we delivered the report to SVB indicating that as of June 30, 2013, we had breached our minimum tangible net worth covenant and began discussions of a forbearance agreement with SVB. We are in negotiations with SVB to obtain a waiver of the covenant default. The terms of such waiver may include modification of certain loan terms, including expanding the collateral on the facility to include our intellectual property.

NOTE 10 — CONCENTRATION OF RISK

During the quarter ended August 31, 2013, three customers accounted for approximately 6.8%, 5.6%, and 5% of our revenue and no other customer accounted for over 5% of revenues. During the quarter ended August 31, 2012 there were two customers that accounted for approximately 10% and 8% of our revenue and no other customer accounted for over 5% of revenue.

At August 31, 2013, four customers accounted for approximately 24% of accounts receivable, the largest of which accounted for 8%. At August 31, 2012, three customers accounted for 27% of accounts receivable, the largest of which accounted for approximately 11%.

NOTE 11 — SUBSEQUENT EVENT

On October 4, 2013, we closed a $9.6 million financing transaction with 13 investors, each of which is and “accredited investor” within the meaning of the Securities Act of 1933 (the “Securities Act”). The investors purchased units of our securities at $0.40 per unit. Each unit consisted of 1 share of our common stock and a warrant to purchase 0.3 shares of our common stock. An aggregate of 23,875,000 shares of our common stock and warrants to purchase up to 7,162,500 shares of our common stock were purchased in the financing. The warrants have a five year term and an exercise price of $0.60 per share.

In connection with the financing, we also entered into a registration rights agreement with each investor pursuant to which we will file, and cause to become effective with the SEC, a registration statement covering the resale of all of the shares of common stock and shares of common stock underlying the warrants sold in the financing.

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

The following discussion and analysis summarizes the significant factors affecting our results of operations, financial condition and liquidity position for the three months ended August 31, 2013 and 2012, and should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this filing.

FORWARD LOOKING STATEMENTS

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

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

● overall economic and business conditions;

● the demand for our products and services;

● competitive factors in the industries in which we compete;

● the results of our pending and future litigation;

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

● our cash position and uses of cash;

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

● the strength of our intellectual property portfolio; and

● changes in government regulations related to our industry.

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In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions. These statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We discuss many of these risks in greater detail under the heading “Risk Factors” in our Annual Report on Form 10-K, in Part II, Item 1A (Risk Factors) of this Report and in other reports we file with the Securities and Exchange Commission. As discussed in Note 2 of the Notes to Consolidated Financial Statements, our unaudited quarterly financial statements for the period ended August 31, 2012 have been restated.

Our forward-looking statement are based on information currently available to us and speak only as of the date of this report, or in the case of forward-looking statements incorporated herein by reference, the date of the filing that includes such statement. Unless required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements.

OVERVIEW

Business Update

In September 2012, we adopted a restructuring plan which includes reducing the number of employees, slowing the pace of investments in our intellectual property (“IP”) portfolio and minimizing variable expenses. We are restructuring overall corporate overhead expenses in order to focus our business around our mobile marketing and advertising technology and services. Consistent with this plan, we have settled the majority of our patent litigation cases, while protecting the value of our IP assets, to reduce our ongoing legal costs, downsized our Tucson division which was primarily involved with development and monetization of our IP, streamlined personnel and variable costs, and solidified the management team by appointing new personnel with extensive experience in the mobile marketing and advertising space to lead our sales and engineering teams. We intend to continue to minimize cash spend and identify additional cost savings opportunities while carefully investing our resources and protecting our strategic assets to strengthen our position in the mobile marketing and mobile advertising industry.

Also consistent with our restructuring plan, we have shifted our strategy as it relates to investing in new patents. We are selectively investing in additional patents that generally relate to our core competencies of targeting, advanced mobile marketing, customized content delivery, and mobile and networked marketing technology. We believe that protecting these core competencies is a fundamental aspect of our strategy to penetrate the mobile marketing and mobile advertising markets. We are also working to find a strategic partner to monetize certain of our patents, while retaining the rights to use these patents in our technology.

During the quarter ended August 31, 2013 we continued to invest in our sales team to drive revenue and adoption of our ADLIFE platform as well as identify cost savings opportunities. On August 23, 2013, we changed the Company name from Augme Technologies, Inc. to Hipcricket, Inc. We believe the Hipcricket name provides us with broader marketplace appeal and recognition.

Business

We provide a customer engagement platform that empowers brands, agencies and media properties to engage customers, drive loyalty and increase sales via mobile. Our proprietary software-as-a-service (“SaaS”) AD LIFE Platform allows marketers, brands, and agencies to plan, create, test, deploy, and track mobile marketing programs across every mobile channel. Through the use of Consumer Response Tags such as 2D codes, UPC codes, short messaging service (“SMS”), and image recognition, our Platform facilitates consumer brand interaction and the ability to track and analyze campaign results. Using our own patented device-detection and proprietary mobile content adaptation software, AD LIFE solves the mobile marketing industry problem of disparate operating systems, device types, and on-screen mobile content rendering. We also provide business-to-consumer utilities including national mobile couponing solutions, strategic mobile healthcare tools, custom mobile application development and consumer data tracking and analytics. Our products serve advertisers and ad agencies in many vertical markets, including automotive, retail, consumer products, food and beverage, media and broadcast, pharmaceutical and restaurant brands.

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We have successfully completed over 250,000 mobile campaigns to date with hundreds of clients across some of the leading brands in the U.S. and have consistently maintained a customer renewal rate of over 95%. Our products serve advertisers and ad agencies in many vertical markets, including automotive, retail, consumer products, food and beverage, media and broadcast, pharmaceutical and restaurant brands.

Liquidity and Capital Resources

Net cash used in operating activities was $5.3 million during the six months ended August 31, 2013. Net cash used in operating activities reflects the net loss for the period, partially offset by depreciation and amortization, share-based compensation expense and changes in operating assets and liabilities. Net cash used in operating activities during the six months ended August 31, 2012 was $7.1 million, reflecting the net loss for the period, partially offset by stock option and warrant expense, depreciation and amortization and changes in operating assets and liabilities. Included in the net loss for the period was a non-cash adjustment for deferred income tax benefits of $2.6 million related to our acquisition of GEOS in May 2012.

Net cash used in investing activities was approximately $329,000 during the six months ended August 31, 2013. We used approximately $231,000 for legal actions in support of our patent enforcement, $44,000 to purchase patents, which we capitalize as intangible assets, and $55,000 for leasehold improvements. Net cash used in investing activities was $5.1 million for the six months ended August 31, 2012. We used $2.0 million for payment of contingent consideration related to our acquisition of Hipcricket, $2.3 million for legal actions supporting our patent enforcement initiatives and $0.7 million to purchase patents. Additionally, we used cash of $0.2 million for a long-term investment. During the six months ended August 31, 2012, we paid $355,000 in cash and $3.8 million in our common stock (1,860,465 shares at a price of $2.05 per share) for the purchase of all of the common and preferred stock of GEOS. We also we issued 5,225,039 shares of common stock as partial satisfaction of the contingent consideration obligation related to the acquisition of Hipcricket in August 2011. The fair value of the stock on the measurement date was $1.48 per share.

Net cash provided by financing activities was $1.7 million during the six months ended August 31, 2013, compared to approximately $1.2 million for the six months ended August 31, 2012. Cash provided by financing for the six months ended August 31, 2013 was primarily attributed to proceeds received from our loan facility, compared to proceeds received from the exercise of options and warrants in the comparative period a year ago.

As of August 31, 2013 and February 28, 2013, we had accumulated deficits of $120.7 million and $111.4 million, respectively. We are subject to the risks and challenges associated with companies at a similar stage of development including dependence on key individuals, successful development and marketing of our products and services, integration of recent business combinations, competition from alternative products and services and larger companies with greater financial, technical management and marketing resources. Further, we may require additional financing to execute our key business strategies and fund operations, those funds may not be readily available or may not be on terms that are favorable to us. Certain financing terms could be dilutive to existing shareholders or could result in significant interest or other costs, or require us to license or relinquish certain intellectual property rights.

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In September 2012, we adopted a restructuring plan which includes reducing the number of employees, slowing the pace of investments in our intellectual property (“IP”) portfolio and minimizing variable expenses. We are restructuring overall corporate overhead expenses in order to focus our business around our mobile marketing and advertising technology and services. We have implemented measures specifically designed to reduce our cash used in operations. Consistent with this plan, we have settled the majority of our patent litigation cases, while protecting the value of our IP assets, to reduce our ongoing legal costs, downsized our Tucson division which was primarily involved with development and monetization of our IP, streamlined personnel and variable costs and solidified the management team by appointing new personnel with extensive experience in the mobile marketing and advertising space to lead our sales and engineering teams. We intend to continue to minimize cash spend and identify additional cost savings opportunities while carefully investing our resources and protecting our strategic assets to strengthen our position in the mobile marketing and mobile advertising industry.

During the quarter ended May 31, 2013, we secured an accounts receivable credit facility from Silicon Valley Bank (“SVB”) to help fund our working capital needs. The revolving loan credit facility has a two-year term and allows us to borrow up to $5.0 million based upon a formula equal to 90% of eligible accounts receivable, decreasing to 80% of eligible accounts receivable after January 31, 2014. The facility is secured by substantially all of our assets other than our intellectual property. Amounts drawn under the facility accrue annual interest at the prime rate plus 0.75% during a Streamline Period, as defined in the loan and security agreement, and at the prime rate plus 1.25% when a Streamline Period is not in effect. We are required to deliver periodic reports to SVB regarding our ability to meet certain financial and other covenants contained in the loan agreement. In late July we delivered the report to SVB indicating that as of June 30, 2013, we had breached our minimum tangible net worth covenant and began discussions of a forbearance agreement with SVB. We are in negotiations with SVB to obtain a waiver of the covenant default. The terms of such waiver may include modification of certain loan terms, including expanding the collateral on the facility to include our intellectual property. As of the August 31, 2013, we had drawn $1.7 million from this line of credit and had approximately $1.7 million available based on our outstanding accounts receivable as of that date.

On October 4, 2013, we closed a $9.6 million financing transaction with 13 investors, each of which is an “accredited investor” within the meaning of the Securities Act of 1933 (the “Securities Act”). The investors purchased units of our securities at $0.40 per unit. Each unit consisted of 1 share of our common stock and a warrant to purchase 0.3 shares of our common stock. An aggregate of 23,875,000 shares of our common stock and warrants to purchase up to 7,162,500 shares of our common stock were purchased in the financing. The warrants have a five year term and an exercise price of $0.60 per share. In connection with the financing, we also entered into a registration rights agreement with each investor pursuant to which we will file, and cause to become effective with the SEC, a registration statement covering the resale of all of the shares of common stock and shares of common stock underlying the warrants sold in the financing.

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As of the filing of our Annual Report on Form 10-K for the fiscal year ended February 28, 2013, we no longer met the minimum $75 million public float requirement for use of Form S-3 registration for primary sales of our shares and therefore are limited in our ability to issue the remaining $41.4 million remaining on our existing Form S-3 and/or to file new shelf registration statements on Form S-3. Until such time as we satisfy the $75 million public float and other requirements for use of Form S-3 registration, we will be required to use a registration statement on Form S-1 to register securities with the SEC, including to register the resale of the common shares issued in our October 2013 financing, or issue such securities in a private placement, which could increase the cost of raising capital. If we need to raise additional capital, we do not believe that the unavailability of Form S-3 registration will be a significant limiting factor.

Critical Accounting Policies

Our critical accounting policies, as described in our Annual Report on Form 10-K for the fiscal year ended February 28, 2013, relate to capitalized legal patent costs, income taxes, business combinations, fair value measurements, goodwill, intangible assets, share-based payments, revenue recognition, and research and development costs. There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K.

Results of Operations

The discussion below is not necessarily indicative of the results which may be expected for any subsequent periods and pertains only to the results of operations for the three months ended August 31, 2013 and 2012. Our prospects should be considered in light of the risks, expenses and difficulties that we may encounter. We may not be successful in addressing these risk and difficulties. As discussed in Note 2 to the Notes to Consolidated Financial Statements, our financial statements for the unaudited quarterly period ended August 31, 2012 has been restated to reflect increases to the value of our intangible assets and income tax benefits associated with the acquisition of GEOS in May 2012. Net loss was also affected by the restatement. The corrections had no impact on total revenue or operating expense. Comparative data for the quarter ended August 31, 2012 is as restated.

COMPARISON OF THREE MONTHS ENDED AUGUST 31, 2013 TO THREE MONTHS ENDED AUGUST 31, 2012

Revenue

Revenues are generated through providing access to our SaaS mobile marketing platforms and services through term license fees, support fees and mobile marketing and advertising campaigns. Through our platform we deliver campaigns and other mobile marketing services using SMS, multimedia messaging service (“MMS”), quick response (“QR”) codes, Geo-fencing, Mobile Web, Mobile Apps, and analytics. We also provide professional services and extensive integration into customer CRM systems using application programming interfaces (“APIs”). The revenues from these multiple elements of a contract are generally recognized over the term of the contract. For the quarter ended August 31, 2013, revenues were $7.6 million compared with $6.2 million in the quarter ended August 31, 2012, an increase of approximately 23%. We continue to experience higher demand for our AD LIFE Platform. During the quarter ended August 31, 2013, approximately 18% of our revenue was generated by three customers.

Cost of Revenue

Cost of revenue includes the costs of hosting, short codes and mobile ad inventory. For the quarter ended August 31, 2013, cost of revenue increased 37% to $3.4 million from $2.5 million in the quarter ended August 31, 2012, as a result of higher revenue and a shift in business toward a greater percentage of sales from mobile advertising which carries a greater cost of sales.

Operating Expenses

Operating expenses consist of sales and marketing, technology and development, general and administrative and depreciation and amortization expenses. Salaries and personnel costs are the most significant component of the sales and marketing, technology and development and general and administrative expense categories. We include stock-based compensation expense in connection with the grant of stock options and warrants in the applicable operating expense category based on the respective equity award recipient’s function. For the quarter ended August 31, 2013 operating expenses decreased a total of $3.3 million. The decrease was primarily attributed to lower staffing levels in the second quarter of fiscal 2014 compared to the same quarter a year ago, resulting from the implementation of our restructuring plan adopted in September 2012.

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Sales and marketing expense. Sales and marketing expense consists primarily of salaries and personnel costs for our sales and marketing employees, including stock-based compensation, commissions and bonuses. Additional expenses include marketing programs, consulting, travel and other related overhead. Sales and marketing expense decreased $1.1 million, or 28%, to $2.8 million at August 31, 2013 compared to $3.9 million at August 31, 2012. The decrease in sales and marketing expense is related to lower payroll costs associated with reduced staffing levels in sales support and client services compared to the prior year.

Technology and development expense. Technology and development expense consists primarily of salaries and personnel costs for development employees, including stock-based compensation and bonuses. Additional expenses include costs related to the development, quality assurance and testing of new technology and enhancement of existing technology, consulting, travel and other related overhead. We experienced a $0.5 million decrease, or 25%, in these expenses to $1.4 million at August 31, 2013 compared to $1.8 million at August 31, 2012. The decrease is primarily related to lower personnel costs associated with reduced staffing levels compared to the prior year.

General and administrative expense. General and administrative expense consists primarily of salaries and personnel costs for product, operations, developer support, business development, administration, finance and accounting, legal, information systems and human resources employees, including stock-based compensation and bonuses. Additional expenses include consulting and professional fees, travel, insurance and other corporate expenses. General and administrative expense decreased $1.4 million, or 41%, to $2.1 million at August 31, 2013 compared to $3.5 million at August 31, 2012. The decrease is primarily a result of lower personnel costs from headcount reductions, including the downsizing of our patent development and enforcement efforts, which included eliminating our Tucson office, as well as reducing redundancies from the acquisition of Hipcricket.

Depreciation and amortization expense. Depreciation and amortization expense of $1.3 million for the quarter ended August 31, 2013 decreased by $0.3 million from $1.6 million for the quarter ended August 31, 2012. This decrease is related to amortization of fewer intangible assets compared to the prior year.

Income Tax Benefit

We did not recognize any income tax benefits during the three and six months ended August 31, 2013, compared to $0 and $2.6 million during the three and six months ended August 31, 2012, respectively. As a result of our acquisition of GEOS in May 2012 we recognized $2.6 million in income tax benefits associated with the reduction of our valuation allowance against the net deferred tax asset. The reduction of our valuation allowance resulted from the recognition of certain deferred income tax liabilities arising from the acquisition.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has concluded that, as of August 31, 2013, our disclosure controls and procedures are ineffective due to insufficient technical accounting resources to identify, address and review complex accounting and financial reporting matters, including accounting for business combinations and the preparation and review of the income tax provision and related income tax financial statement disclosures.

Management has been actively engaged in the planning for, and implementation of, remediation efforts since material weaknesses were initially discovered and reported in our Form 10-Q for the interim period ended November 30, 2011 and as included in the Form 10-K for the fiscal year ended February 28, 2013. During fiscal year 2013 and continuing into the first quarter of fiscal 2014, we implemented changes in control process and added additional resources which we believe will continue to improve internal controls and remediate the control deficiencies in our financial reporting. Management implemented a more formalized process for the preparation and review of financial statement reconciliations and review, establishing appropriate accounting policies and procedures related to complex and unusual transactions, expanded staffing and engaged additional third parties to provide ongoing technical advice. Management believes the measures described above will remediate the material weakness that existed as of February 28, 2013, and strengthen our internal control over financial reporting. Management is committed to continuous improvement of the Company’s internal control processes and will continue to diligently review the Company’s financial reporting controls and procedures. As management continues to evaluate and work to improve internal control over financial reporting, we may take additional measures to address control deficiencies.

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Despite the existence of the material weaknesses, we believe that our consolidated financial statements contained in this Form 10-Q fairly present our financial position, results of operations and cash flows as of and for the periods presented in all material respects.

Changes in Internal Control over Financial Reporting

Except as discussed above, there have been no material changes in our internal control over financial reporting that occurred during the quarter ended August 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in legal proceedings that are described in Note 8, Contingencies, of Notes to the Consolidated Financial Statements included in this report which information is incorporated by reference into this item.

ITEM 1A. RISK FACTORS

Our Annual Report on Form 10-K for the year ended February 28, 2013, filed with the SEC on May 24, 2013, contains a detailed discussion of certain risk factors that could materially adversely affect our business, operating results and/or financial condition. In addition to other information contained in this report, you should carefully consider the potential risks or uncertainties that we have identified in Part I. Item 1A. (Risk Factors) in our Form 10-K. Other than as set forth in our Form 10-Q for the quarter ended May 31, 2013, filed with the SEC on July 10, 2013, there have not been any material changes to the risk factors set forth in our Annual Report on Form 10-K. These risk factors are not the only ones affecting our company. Additional risks and uncertainties not currently deemed to be material also may materially or adversely affect our business, financial condition or results of operations.

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ITEM 6. EXHIBITS

Exhibit Number		Document
3.1		Certificate of Incorporation, as amended*
3.2		Restated Bylaws, as amended (1)
10.1		Amended Offer Letter of John Devlin dated July 5, 2013. + (2)
10.2		Amended Offer Letter of Donald Stout dated July 5, 2013. + (2)
10.3		Amended Offer Letter of Todd Wilson dated July 5, 2013. + (2)
10.4		Amended Employment Agreement between the Company and Ivan Braiker dated July 5, 2013. + (2)
10.5		Restated Hipcricket, Inc. 2010 Incentive Stock Option Plan, as amended.*
10.6		Employment Agreement between the Company and Douglas Stovall dated June 17, 2013. + (3)
10.7		Indemnification Agreement dated June 17, 2013 between the Company and Douglas Stovall. + (3)
10.8		Letter dated June 17, 2013 to Michael Brochu regarding appointment to the Board of Directors. + (3)
10.9		Indemnification Agreement dated June 17, 2013 between the Company and Michael Brochu. + (3)
10.10		Warrant for Purchase of Common Stock issued to Michael Brochu on June 17, 2013. + (3)
10.11		Amended Consulting Agreement with Trove Capital Partners LLC dated August 29, 2013. +*
10.12		Securities Purchase Agreement dated October 3, 2013 between the Company and the purchasers indentified in the signatures pages thereto. (4)
10.13		Registrations Rights Agreement dated October 4, 2013 between the Company and the purchasers indentified in the signatures pages thereto. (4)
10.14		Form of Investor Warrant dated October 4, 2013. (4)
10.15		Lease Agreement between the Company and Talon Portfolio Services, LLC.*
31.1		Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(a) and Section 302 of the Sarbanes Oxley Act of 2002.*
31.2		Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(a) and Section 302 of the Sarbanes Oxley Act of 2002.*
32.1		Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(a) and Section 906 of the Sarbanes Oxley Act of 2002.*
101.INS		XBRL Instance Document.*
101.SCH		XBRL Taxonomy Extension Schema Document.*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.*

____________________

+Management contract or compensatory plan or arrangement.

*Filed herewith.

(1) Incorporated herein by reference to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 26, 2013.

(2) Incorporated herein by reference to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on July 10, 2013.

(3) Incorporated herein by reference to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 21, 2013.

(4) Incorporated herein by reference to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 8, 2013.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	HIPCRICKET, INC.
	(Registrant)

Date: October 9, 2013	By:	/s/ Ivan E. Braiker
		Ivan E. Braiker
		Chief Executive Officer


	By:	/s/ Thomas J. Virgin
		Thomas J. Virgin
		Chief Financial Officer