UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549  FORM 10-Q  (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended: December 31, 2008[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from N/A to N/A  Commission file number: 000-27145  IDEAEDGE, INC. (Name of small business issuer in its charter)  Colorado33-0756798(State or jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)  6440 Lusk Blvd., Suite 200San Diego California92121(Address and of principal executive offices)(Zip Code)   (858) 677-0080 (Issuers telephone number, including area code)   Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x    No  oIndicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company xIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o   No  x At February 10, 2009, there were 42,233,181 shares outstanding of the issuer’s common stock, the only class of common equity.  Transitional Small Business Disclosure Format (Check one):  Yes  o   No  x      TABLE OF CONTENTS  PART I: Financial Information   Item 1 – Financial Statements Consolidated Balance Sheets as of December 31, 2008 (unaudited) and September 30, 2008 Consolidated Statements of Operations (unaudited) for the three months ended December 31, 2008 and 2007 Consolidated Statement of Cash Flows (unaudited) for the three months ended December 31, 2008 and 2007 Notes to Consolidated Financial Statements (unaudited) Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations Item 3A(T)  Controls and Procedures     PART II: Other Information  Item 1  Legal Proceedings Item 2  Sales of Unregistered Securities and Use of Proceeds Item 3  Defaults upon Senior Securities Item 4  Submission of Matters to a Vote of Security Holders Item 5  Other Information Item 6  Exhibits and Reports on Form 8-K   Signatures  Exhibits    FORWARD LOOKING STATEMENTS  In addition to historical information, this Quarterly Report on Form 10-Q may contain statements relating to future results of IdeaEdge, Inc. (including certain projections and business trends) that are forward-looking statements. Our actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to, without limitation, statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as expects or does not expect, is expected, anticipates or does not anticipate, plans, estimates or intends, or stating that certain actions, events or results may, could, would, might or will be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or achievements of the Company to be materially different from any future results or achievements of the Company expressed or implied by such forward-looking statements. Such factors include, among others, those set forth herein and those detailed from time to time in our other Securities and Exchange Commission (SEC) filings including those contained in our most recent Form 10-K. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Also, there can be no assurance that the Company will be able to raise sufficient capital to continue as a going concern.        IDEAEDGE, INC.Consolidated Balance SheetsAssetsDecember 31, 2008 (unaudited)September 30, 2008Current assets:Cash and cash equivalents$1,730,912$1,379,282Prepaid consulting services-110,366Other current assets45,8877,867Total current assets1,776,7991,497,515Property and equipment, net of accumulated depreciation of$6,821 ($3,244  at September 30, 2008)36,1058,474Intangible assets191,579186,943Other assets5,2225,688$2,009,705$1,698,620Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable and accrued liabilities$360,850$340,364Accrued and deferred personnel compensation85,08165,072Other current liabilities13,65813,506Total current liabilities459,589418,942Commitments and contingenciesStockholders equity:Series A convertible preferred stock; $0.001 par value; 10,000,000shares authorized; 10,750 shares issued and outstanding(12,000 at September 30, 2008)1112Common stock; $0.001 par value; 80,000,000 shares authorized; 42,233,181shares issued and outstanding (39,766,580 at September 30, 2008)42,23339,767Additional paid-in capital9,756,8707,716,515Accumulated deficit(8,248,998)(6,476,616)Total stockholders' equity1,550,1161,279,678$2,009,705$1,698,620See accompanying notes.  1   IDEAEDGE, INC.Consolidated Statements of Operations (unaudited)For the three months ended December 31, 2008 and 200720082007Sales revenues$-$848Cost of sales-4,435Gross margin-(3,587)Operating expenses:Selling and marketing365,880263,808Operations, general and administrative1,414,766453,480Total operating expenses1,780,646717,288Loss from operations(1,780,646)(720,875)Nonoperating income (expense):Interest expense-(27,669)Interest income8,264-8,264(27,669)Net loss and comprehensive net loss$(1,772,382)$(748,544)Basic and diluted net loss per share$(0.04)$(0.02)Basic and diluted weighted average common sharesoutstanding used in computing net loss per share40,239,85833,596,736See accompanying notes.    2   IDEAEDGE, INC.Consolidated Statements of Cash Flows (unaudited)For the three months ended December 31, 2008 and 200720082007Cash flows from operating activities:Net loss$(1,772,382)$(748,544)Adjustments to reconcile net loss to cash flows from operating activities:Depreciation expense3,577485Stock based compensation535,32065,155Consulting services rendered in exchange for common stock110,366120,634Loss due to impairment and amortization of gift card inventory-60,100Amortization and accretion of interest on licensing agreement payable-16,774Interest expense subsequently forgiven-11,365Changes in operating assets and liabilities:Inventory-(14,132)Other assets(37,554)3,509Accounts payable and accrued liabilities20,48675,829Accrued and deferred personnel compensation20,009(5,899)Other liabilities1521,043Cash flows from operating activities(1,120,026)(413,681)Cash flows from investing activities:Purchases of property and equipment(31,208)(5,893)Additions to intangible assets(4,636)-Cash flows from investing activities(35,844)(5,893)Cash flows from financing activities:Proceeds from issuance of common stock and warrants1,507,500823,630Repayments of bridge loans payable-(255,000)Payments to affiliate for fund raising activates-(100,000)Cash flows from financing activities1,507,500468,630Change in cash and cash equivalents during period351,63049,056Cash and cash equivalents, beginning of period1,379,282520,613Cash and cash equivalents, end of period$1,730,912$569,669Supplemental disclosure of cash flow information:Cash paid during the period for:Interest$-$-Income taxes$-$-Noncash investing and financing transactions:Common stock issued in exchange for conversion of notes payable$-$740,000Common stock issued in exchange for debt extinguishment, net of costs$-$55,125Accrued interest forgiven$-$34,415See accompanying notes.  3   IdeaEdge, Inc. Notes to Consolidated Financial Statements (unaudited)  1. Basis of Presentation IdeaEdge, Inc. (hereinafter referred to as we or the/our Company) is a Colorado corporation.  Through our subsidiary incorporated in the state of California, Socialwise, Inc. (Socialwise), we develop and market innovative gifting and payment solutions. We have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q.  Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements.  In the opinion of our management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included.  Operating results for the three months ended December 31, 2008 are not necessarily indicative of the results that may be expected for the entire year. For further information, see our consolidated financial statements and related disclosures thereto for the year ended September 30, 2008 in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.  All intercompany amounts have been eliminated in consolidation. Our financial statements have been prepared assuming that we will continue as a going concern.   However, we have incurred net losses and have yet to establish profitable operations.  These factors, among others, create a substantial doubt about our ability to continue as a going concern.  We are dependent upon sufficient future revenues, additional sales of our securities or obtaining debt financing to meet our cash requirements.  Barring our generation of revenues in excess of our costs and expenses or our obtaining additional funds from equity or debt financing, we will not have sufficient cash to continue to fund the operations of our Company through our September 30, 2009 fiscal year end.  2. Summary of Significant Accounting Policies  Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America.  Use of Estimates  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Revenue Recognition  Revenue in 2008 was recognized on the accrual basis of accounting when earned.  In connection with our former business of issuing gift cards to purchase our branded merchandise, we were responsible for providing merchandise to customers who purchased our gift cards.  Accordingly, we recognized revenue at the time that the gift cards were redeemed by customers in exchange for goods from our online Website, the product had been shipped, the selling price was fixed, collection was reasonably assured and when both title and risk of loss transferred to the customer, provided no significant obligations remained.  Cash received in connection with unredeemed gift cards sold was recorded as deferred revenue until such time as the corresponding gift cards were redeemed for merchandise.  Deferred revenues totaled $13,342 at December 31, 2008 ($13,033 at September 30, 2008).  Sales revenues included sales taxes collected from the customer.  In connection with our future business of selling gift cards of other merchants, we will recognize commission revenue at the time the gift card is purchased by customers, the gift card has been shipped, the selling price and our commission for the sale is fixed, collection is reasonably assured and when both title and risk of loss transfers to the customer, provided no significant obligations remain.  Cash to be received in advance of the satisfaction of the criteria for revenue recognition will be deferred until such time as the criteria are satisfied.  We do not anticipate collecting sales taxes in connection with the sale of gift cards of other merchants.  The SEC's Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, provides guidance on the application of generally accepted accounting principles to selected revenue recognition issues.  We believe that our revenue recognition policies are appropriate and in accordance with generally accepted accounting principles and SAB No. 104.  4    IdeaEdge, Inc. Notes to Consolidated Financial Statements (unaudited)   Cash and cash equivalents  We consider all investments with an original maturity of three months or less to be cash equivalents.  Cash equivalents primarily represent funds invested in money market funds, bank certificates of deposit and U.S. government debt securities whose cost equals fair market value.  From time to time, we maintained bank balances in excess of the amounts insured by the Federal Deposit Insurance Corporation.  We have not experienced any losses with respect to cash.  Management believes our Company is not exposed to any significant credit risk with respect to its cash and cash equivalents.  Property and Equipment  Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets.  Costs incurred for maintenance and repairs are expensed as incurred and expenditures for major replacements and improvements are capitalized and depreciated over their estimated remaining useful lives.  Valuation of Long-Lived Assets  We account for long-lived assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144).  The scope of SFAS No. 144 includes long-lived assets, or groups of assets, to be held and used as well as those which are to be disposed of by sale or by other method. SFAS No. 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amount.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the estimated fair value of the assets.  We perform periodic reviews of the carrying value of our long-lived assets to be held and used, including certain identifiable intangible assets, on a periodic basis or whenever evidence comes to our attention that such impairment might have occurred.  Income Tax Expense Estimates and Policies  As part of the income tax provision process of preparing our financial statements, we are required to estimate our Companys provision for income taxes.  This process involves estimating our current tax liabilities together with assessing temporary differences resulting from differing treatments of items for tax and accounting purposes.  These differences result in deferred tax assets and liabilities.  Management then assesses the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent believed that recovery is not likely, a valuation allowance is established.  Further, to the extent a valuation allowance is established and changes occur to this allowance in a financial accounting period, such changes are recognized in our tax provision in our consolidated statement of operations.  We use our judgment in making estimates to determine our provision for income taxes, deferred tax assets and liabilities and any valuation allowance is recorded against our net deferred tax assets.  There are various factors that may cause these tax assumptions to change in the near term, and we may have to record a future valuation allowance against our deferred tax assets.  We recognize the benefit of an uncertain tax position taken or expected to be taken on our income tax returns if it is more likely than not that such tax position will be sustained based on its technical merits.  Stock Based Compensation  We account for stock based compensation arrangements in accordance with the provisions of Statement of Financial Accounting Standards No. 123R (SFAS 123R) Share-Based Payment, which requires the measurement and recognition of compensation expense for all stock based payment awards to employees and directors based on estimated fair values.  We use the Black-Scholes-Merton option valuation model to estimate the fair value of our stock options and warrants at the date of grant.  The Black-Scholes-Merton option valuation model requires the input of subjective assumptions to calculate the value of options and warrants.  We use historical company data among other information to estimate the expected price volatility and the expected forfeiture rate and not comparable company information, due to the lack of publicly traded companies that exist in our industry.  We use the simplified method as propounded in SAB No. 107 and SAB No. 110 to estimate the expected option life.  5    IdeaEdge, Inc. Notes to Consolidated Financial Statements (unaudited)   Net Loss per Share  We calculate basic earnings per share (EPS) by dividing our net loss by the weighted average number of common shares outstanding for the period, without considering common stock equivalents.  Diluted EPS is computed by dividing net income or net loss by the weighted average number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents, such as options and warrants.  Options and warrants are only included in the calculation of diluted EPS when their effect is dilutive.  Potentially dilutive securities at December 31, 2008 were excluded from historical basic and diluted earnings per share, respectively, due to their anti-dilutive effect.  Financial Instruments  Our financial instruments are accounts payable and cash and cash equivalents. The recorded values of accounts payable and cash and cash equivalents approximate their fair values based on their short-term nature.  Advertising  We will expense advertising costs as incurred.  We have no existing arrangements under which we provide or receive advertising services from others for any consideration other than cash.  Litigation  From time to time, we may become involved in disputes, litigation and other legal actions.  We estimate the range of liability related to any pending litigation where the amount and range of loss can be estimated.  We record our best estimate of a loss when the loss is considered probable.  Where a liability is probable and there is a range of estimated loss with no best estimate in the range, we record a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated.  Recently Issued Accounting Pronouncements  In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS 157).  SFAS No. 157 defines fair value, established a framework for measuring fair value under generally accepted accounting principles (GAAP) and expands disclosures about fair value measurements.  We adopted SFAS 157 on October 1, 2008 and its adoption did not have a material impact on our consolidated financial position, results of operations and cash flows.  In February 2007, the FASB issued SFAS No. 159 The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115, which permits entities to choose to measure many financial instruments and certain other items at fair value.  The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates.  A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date.  We adopted SFAS 157 on October 1, 2008 and its adoption did not have a material impact on our consolidated financial position, results of operations and cash flows.  In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R).  The new standard is a revision of previous guidance with respect to the proper accounting for business combinations.  SFAS 141R will be effective for our fiscal year beginning October 1, 2009 and early adoption is not permitted.  Our Company is currently evaluating whether SFAS 141R will have a material effect on its consolidated financial statements.  In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51 (SFAS 160).  The new standard establishes a single method of accounting for changes in a parents ownership interest in a subsidiary that do not result in deconsolidation.  SFAS 160 will be effective for our fiscal year beginning October 1, 2009 and early adoption is not permitted.  Our Company is currently evaluating whether SFAS 160 will have a material effect on its consolidated financial statements.  6    IdeaEdge, Inc. Notes to Consolidated Financial Statements (unaudited)   In April 2008, the FASB issued EITF 07-05, Determining whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock, (EITF 07-05).  EITF 07-05 provides guidance on determining what types of instruments or embedded features in an instrument held by a reporting entity can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in paragraph 11(a) of SFAS 133.  EITF 07-05 will be effective for our fiscal year beginning October 1, 2009 and early adoption is not permitted.  Management is evaluating what effect, if any, EITF 07-05 might have on the Company's financial position and operating results.  In May 2008, the FASB issued Staff Position (FSP) No. APB 144. or FSP 14-1, Accounting for Convertible Debt Instruments that may be Settled in Cash upon Conversion.  FSP 14-1 requires the issuers of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuers nonconvertible debt borrowing rate._ FSP 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, with early adoption prohibited.  FSP 14-1 is required to be applied retrospectively to all periods presented._ The Company does not currently have any convertible debt instruments and therefore FSP 14-1 would not impact its consolidated financial statements through December 31, 2008.  3. Sales of Common Stock and Warrants Beginning November 20, 2008 and ending on December 19, 2008, we entered into subscription agreements with nine accredited investors pursuant to which we issued 2,034,375 shares of our common stock and warrants to purchase an additional 508,594 shares of our common stock at an exercise price of $1.00 per share for a period of two years after their date of issuance, in exchange for gross proceeds totaling $1,627,500 ($1,507,500 net of cash expenses totaling $120,000).  SPN Investments, Inc. (SPN) acted as a Finder in connection with the transaction.  SPN directed the payment of fees earned in connection with the funds raised totaling $162,750 to three recipients who assisted in the fund raising.  The fees were paid in cash ($120,000) and equity of our Company.  The equity portion of the Finder fee compensation consisted of 53,438 shares of our unregistered common stock and two year warrants to purchase an additional 13,360 shares of our common stock at an exercise price of $1.00 per share.  As further consideration for its services related to the sale of our common stock, SPN will receive an additional 162,750 shares of our common stock in compensation directly from the share holdings of two of our three founding stockholders, James Collas and Chris Nicolaidis, who are also officers and directors of our Company.  4. Finder and Investor Relations Services Agreements Finder Services We entered into a Finder Agreement effective June 1, 2008 with SPN.  The Finder Agreement calls for SPN or its designees to be paid a finders fee (in cash or our Companys equity securities) of 10% of all funds raised by SPN on our Companys behalf.  The Finder Agreement also calls for two of our founding shareholders (the Founders) to issue SPN up to 500,000 restricted common shares from their personal stock holdings for Finder services.  SPN will receive one share of common stock from the Founders for each $10 of gross proceeds raised from sales of our Companys preferred or common stock where SPN acts as a Finder, up to a maximum of $5,000,000 of gross proceeds raised.  Payments of amounts incurred under the new Finder Agreement have been accounted for as a cost of capital raised and have been offset against capital raised under the agreement.  From the inception of the Finder Agreement, in addition to cash and equity received in connection with funds raised, SPN has earned a total of 362,750 additional shares of our Common Stock to be paid from the personal holdings of two of our Companys Founders.  Investor Relations Services  SPN and our Company entered into a Consulting Agreement dated November 14, 2007 pursuant to which SPN provides investor relations and management consulting services to our Company through November 2008 in exchange for the issuance of 825,000 shares of our Companys common stock.  In connection with this arrangement, we recognized a total of $924,000 of noncash consulting expense through November 2008, including $110,366 during the three months ended December 31, 2008.  7    IdeaEdge, Inc. Notes to Consolidated Financial Statements (unaudited)   In November 2008, we entered into an agreement with Two Eight, Inc. (Two Eight) to provide investor relations services to our Company in exchange for $100,000 in cash.  All amounts under the Two Eight agreement were charged to general and administrative expenses during the three months ended December 31, 2008.   5. Intangible assets Our intangible assets have a total value of $191,579 at December 31, 2008 and include a patent application acquired in March 2008 for $100,000 cash and warrants to purchase 100,000 shares of our Common Stock for $0.71 per share.  Also included in intangible assets are legal fees incurred in connection with our purchased patent and other patent applications.  We will amortize the cost of patents over their estimated useful life, commencing on the date the related patents are granted. 6. Stock-based compensation In October 2007, our stockholders approved the adoption of our IdeaEdge, Inc. 2007 Equity Incentive Plan (the Plan).  The Plan provides for granting of stock-based awards including: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock.  Intended Plan participants include employees, directors and consultants of our Company.  The total number of shares of common stock that may be issued pursuant to stock awards under the Plan (as subsequently amended and subject to shareholder approval) shall not exceed in the aggregate, 3,500,000 shares of common stock of our Company. Through December 31, 2008, we have granted a total of 3,220,000 incentive and nonqualified stock options to two employees and two advisors under the Plan (1,424,998 vested as of December 31, 2008).  We have also issued 899,482 warrants to ten advisors and Company consultants (359,703 vested as of December 31, 2008).  For purposes of accounting for stock-based compensation, the fair value of each option and warrant award is estimated on the date of grant using the Black-Scholes-Merton option pricing formula.  During the three months ended December 31, 2008 and 2007, we recognized stock-based compensation expense totaling $535,320 and $65,155, respectively, in connection with the issuance of stock warrants.  For purposes of accounting for stock based compensation, the fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing formula.  The following weighted average assumptions were utilized for the calculations during the 2009: expected life (in years)   1.50 years; weighted average volatility   104.61%; forfeiture rate  0%; risk-free interest rate  1.27%; and expected dividend rate  0%.    As of December 31, 2008, $1,346,503 of total unrecognized compensation expense related to unvested stock-based compensation is expected to be recognized through September 2010.   8    IdeaEdge, Inc. Notes to Consolidated Financial Statements (unaudited)  7. Warrants We have outstanding warrants to purchase shares of our common stock as follows:  Shares Underlying WarrantsExercise PriceVested (1)Expiration Date100,000$0.71100,00012/31/2013100,000$1.4574,9996/23/2011350,000$2.2587,4999/8/201075,000$2.409,3759/22/2011100,000$2.4533,3369/24/201013,482$2.084,49410/9/2010100,000$1.00100,00010/17/201050,000$1.8550,00011/4/201085,000$0.90-12/12/201020,000$0.90-12/19/20106,000$0.90-12/19/2010416,667$0.60416,6678/25/20131,818,182$0.501,818,18212/5/2013521,954$1.00521,95412/12/2010  (1)  vested as of December 31, 2008. During three months ended December 31, 2008, our Company issued warrants to purchase 274,482 shares of our common stock to six recipients in connection with the provision of consulting or advisory services at a weighted average exercise price of $1.17 per share, all with a two year term.  We also issued warrants to purchase 521,954 shares of our common stock as noted above in Note 3.  The $0.50 and $0.60 warrants have a call provision that allows our Company to require them to be exercised if we have registered the underlying shares of common stock and if the common stock maintains a closing market price of $1.00 per share for three consecutive trading days (subject to certain limitations).   The $0.50 and $0.60 warrants also carry additional provisions in favor of the warrant-holders including: (1) severe penalties for failure to timely deliver underlying share certificates upon exercise; 2) anti-dilution adjustments for any future issuances of common stock at prices less than the exercise price of the warrants; and 3) piggy-back registration rights.  8. Transactions with related parties In October 2007, we purchased marketing data with a total cost of $12,000 from a company which formerly employed our Chief Executive Officer and our Vice President of Business Development.  9. Income taxes We currently estimate our Companys net operating loss carryforwards (NOL) and deferred tax asset balance total approximately $6,100,000 and $2,400,000, respectively, as of December 31, 2008.  We have recorded a valuation allowance against our entire deferred tax asset balance due to our lack of a history of earnings, the limitations on the use of our NOL as a result of the IdeaEdge acquisition and the future expiration of the NOL.  These factors give rise to substantial uncertainty as to whether our net deferred tax assets will be realized.  As a result of these factors, our utilization of the NOL will likely be severely limited and a substantial portion of the NOL may expire unused.  9    IdeaEdge, Inc. Notes to Consolidated Financial Statements (unaudited)  10. Commitments and contingencies The Company signed a lease agreement for office space through June 30, 2009.  Rent expense totaled $7,364 and $6,467 for the three months ended December 31, 2008 and 2007, respectively.  The lease (as modified) calls for minimum monthly rentals of $2,758 from January 1, 2009 to June 30, 2009, for a total future commitment as of December 31, 2008 of $16,548.  Our Company entered into an agreement effective October 16, 2007 with its former President that provided for his assumption of all the liabilities of our Company and a former subsidiary incurred through October 16, 2007.  Through the date of this report, no one has asserted any liabilities of either subsidiary or our Company prior to October 17, 2007.  Should the Companys former President fail to honor his obligations under the agreement, we could ultimately be responsible for these liabilities.   10


Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations  The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated.  The discussion should be read in conjunction with our consolidated financial statements and the notes presented herein.  In addition to historical information, the following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed in this Quarterly Report and our other periodic reports filed with the Securities and Exchange Commission.  Overview and Financial Condition Our business, commencing with our October 16, 2007 acquisition of Socialwise, is centered on the development, marketing and sale of innovative online gifting programs and payment systems.  We have accounted for the operations of our Company prior to our acquisition of Socialwise in our accompanying financial statements in accordance with the presentation guidance appropriate to a reverse merger, which is to say that the operations prior to October 16, 2007 reflected in our financial statements are those of Socialwise.  Socialwises operations commenced upon its corporate inception on April 3, 2007. Results of Operations Sales revenues Our Company had no sales revenues for the three months ended December 31, 2008.  Our Company was focused on the completion of its SocialwiseTM Group Gifting Platform and its BillMyParentsTM payment system during this period and did not have products available for sale to the public in significant quantities.  Sales revenues for the three months ended December 31, 2007 totaled $848.  Sales revenues in 2007 were recognized in connection with our since discontinued American IdolTM gift card program.  We emerged from the development stage during the three months ended December 31, 2007.  Our SocialwiseTM Group Gifting Platform will be targeted at enabling individual and group gifting using popular online social networks.  Online social networks have built-in features that facilitate group interaction through multiple communication tools.  We intend for our platform to be used to enhance applications that run in the social networking environment, and enable a new class of electronic commerce transactions.  Our BillMyParentsTMpayment system will be targeted at enabling parents and teens to link and communicate to guide responsible e-commerce transactions on the Internet.  We have not however recognized any revenues to date under the SocialwiseTM Group Gifting Platform or BillMyParentsTM,and there can be no assurance that these programs will turn out to be a successful new focus for us or that they will generate sufficient revenues with adequate margins to fund our operations over future periods.  We have taken significant steps and continue working towards repositioning our business toward the SocialwiseTM Group Gifting Platform and BillMyParentsTMincluding: · Securing intellectual property in the form of a patent application dating back to 2001 covering the group gift card concept; · Filing new provisional patents targeted at integrating the group gifting process into social network environments and for the BillMyParentsTM payment process; · Building software solutions to manage transactions among gift card providers and sources of payment; · Programming user applications that will be incorporated as both stand-alone websites and as applications within social networking environments for product distribution; · Negotiating agreements with merchants to enable group gift giving and distribution for popular brand gift card merchants; and · Building a reloadable debit card program which is incorporated within the platform.


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Our Company continues to work with RockYou! on the initiative to incorporate the SocialwiseTM Group Gifting Platform within RockYou!’s Birthday CardsTM application.  This effort, previously estimated to be completed in December 2008 has not yet been launched.  RockYou! is continuing work on this integration and we currently estimate its completion and launch prior to June 30, 2009. Cost of Sales There were no cost of sales for the three months ended December 31, 2008 ($4,435 for the three months ended December 31, 2007).  Our gross margin for 2007 was a negative $3,587.  Due to the low volume of sales during 2007, we did not cover the basic costs in connection with the maintenance of fulfillment capabilities required to allow for the redemption of the American IdolTM gift card.  Due to our subsequent lack of success in reaching a sufficient level of revenues and positive gross margins from the program, we discontinued it in the third quarter of fiscal 2008.  Operating Expenses Selling and marketing expenses for the three months ended December 31, 2008 totaled $365,880 ($263,808 for the three months ended December 31, 2007).  Included in these expenses for the three months ended December 31, 2008 were employee compensation and related expenses of $45,625 ($44,199 for the three months ended December 31, 2007), payments to consultants for business development, marketing and merchandising services totaling $46,054 ($34,200 in 2007), marketing, sales, creative services and public relations of $54,330 ($44,190 in 2007), noncash stock-based compensation expenses totaling $211,798 ($7,459 in 2007), web development and maintenance expenses totaling $66,800 in 2007 and $60,100 charged in 2007 for expenses related to previously purchased gift cards.  Expenses incurred in 2007 represented amounts incurred to market the then nascent American IdolTM gift card program.  General and administrative expenses for the three months ended December 31, 2008 totaled $1,414,766 ($453,480 for the three months ended December 31, 2007).  Included in these expenses for the three months ended December 31, 2008 were costs in connection with building our two major IT platforms totaling $558,698, costs in connection with the establishment of our debit card initiative of $37,201, employee compensation and related charges of $176,736 ($146,843 for the three months ended December 31, 2007), noncash stock-based compensation of $323,522 ($57,696 in 2007), noncash charges in connection with the grant of common stock to SPN for investor relations services totaling $110,366 ($120,634 in 2007), legal fees of $18,792 ($38,093 in 2007), accounting and auditing charges of $42,450 ($11,015 in 2007), outside consulting of $104,455 ($21,215 in 2007), insurance of $13,860 ($6,249 in 2007) and facility related expenses of $7,266 ($6,970 in 2007).  Operating expenses for the three months ended December 31, 2008 totaled $1,780,646 ($717,288 for the three months ended December 31, 2007).  Noncash charges for stock-based compensation, investor relations services and depreciation included in these amounts for the three months ended December 31, 2008 totaled $649,263 ($246,374 in 2007).  Operating expenses net of noncash charges totaled $1,131,383 ($470,915 in 2007).  Interest Income and Expense For the three months ended December 31, 2008, interest income totaled $8,264, while interest expense totaled $27,669 for the corresponding period in 2007.  Interest income in the current year arose from excess cash on deposit.  Interest expense in the prior year was the result of charges for the accretion of interest expense on a licensing agreement payable, as well as imputed interest (later forgiven) by the holders of notes payable outstanding during that period.  Net Loss and Net Loss per Share For the three months ended December 31, 2008, our net loss totaled $1,772,382 ($748,544 for the three months ended December 31, 2007).  Noncash charges for operating and non-operating expenses noted above and included in our net loss totaled $649,263 for the three months ended December 31, 2008 ($274,513 in 2007).  Our basic and diluted net loss per share of $0.04 for the three months ended December 31, 2008 ($0.02 in 2007) were identical due to the anti-dilutive effects of common stock equivalents during all the periods represented.


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Liquidity and Capital Resources  We have primarily financed our operations to date through the sale of unregistered equity and prior to our reverse merger in October 2007 with the issuance of notes payable later converted into shares of our common stock.  At December 31, 2008, our total assets were $2,009,705 (including intangible assets for intellectual property totaling $191,579), working capital was $1,317,210, total liabilities were $459,589 (all of which were current) and our stockholders equity totaled $1,550,116.  Our cash and cash equivalents balance at December 31, 2008 totaled $1,730,912.  The improvement in our financial position from the previous amounts reported at September 30, 2008 resulted from the sale of unregistered common stock and warrants to purchase common stock that resulted in additional net cash proceeds totaling $1,507,500, offset by negative cash flows from operating and investing activities totaling $1,155,870 during the same period.  Our total liabilities at December 31, 2008 included $65,072 in salary deferrals from our employees.  Of the $360,850 recorded as accounts payable and accrued liabilities at December 31, 2008, a total of $299,671 was due to one vendor for software programming services.  Plan of Operations  We continue to be dependent upon future revenues, additional sales of our equity securities or obtaining debt financing to meet our cash requirements.  Barring our raising additional capital, we estimate we do not have sufficient cash as of the date of this Quarterly Report to fund the operations of the Company through our fiscal year ended September 30, 2009.  During the three months ended December 31, 2008, we raised additional equity funding totaling $1,507,500 (net of expenses) from the sale of our Common Stock and warrants to purchase shares of our Common Stock. Longer term, we are attempting to raise additional equity financing through the sale of unregistered shares of our Companys preferred and/or common stock in order to finance our future investing and operating cash flow needs.  However, there can be no assurance as to whether, when, or upon what terms we will be able to consummate any such financing.  We do not expect to purchase any significant property or equipment, or to have any significant change in the number of our employees for the next twelve months.  We expect however to continue to incur significant costs in improving, maintaining and marketing our SocialwiseTM Group Gifting Platform and BillMyParentsTM over the rest of fiscal 2009.  Going Concern  As noted above, there exists an uncertainty about our ability to continue as a going concern until the end of our current fiscal year in September 30, 2009, absent additional funding.  This uncertainty may adversely affect our relationship with customers and suppliers and have an adverse effect on our ability to obtain future equity financing to maintain our operations. Critical Accounting Policies  Managements discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which are prepared in accordance with accounting principles that are generally accepted in the United States.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  We continually evaluate our estimates and judgments and we base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances.  Materially different results can occur as circumstances change and additional information becomes known.  Item 4  Controls and Procedures Disclosure Controls and Procedures  We maintain disclosure controls and procedures and internal controls that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commissions rules and forms and that such information is accumulated and


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communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures and internal controls, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures and internal controls. As required by the Securities and Exchange Commission Rule 13a-15(e) and Rule 15d-15(e), we carried out an evaluation, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level. Changes in Internal Controls over Financial Reporting  There have not been any changes in our internal controls over financial reporting during the fiscal quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.  Part II Item 1  Legal Proceedings From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief.  The amount of the ultimate liability, if any, from such claims cannot be determined. However, in the opinion of our management, there are no legal claims currently pending or threatened against us that would be likely to have a material adverse effect on our financial position, results of operations or cash flows.   Item 1A  Risk Factors Investment in our common stock involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this herein before making an investment decision.  If any of the following risks actually occur, our business, financial condition or results of operations could suffer. In that case, the market price of our common stock could decline, and you may lose all or part of your investment.  Risks Related to Our Business  We have a very limited operating history overall and have only recently embarked on our current corporate focus of providing online platforms to market and sell cards for others.We completed our acquisition of Socialwise on October 16, 2007.  Socialwise was formed in April 2007 to pursue opportunities in the gift card industry.  We do not currently have significant operating revenues and have a very limited operating history.  We do not have any historical financial data upon which to base planned operations. Because we have no operating history, our historical financial information is not a reliable indicator of future performance. Therefore, it is difficult to evaluate the business and prospects of our Company.  Furthermore, we only recently embarked on a revised business focus centered on marketing and selling cards for others.  We have no experience as to whether this will be a popular program with consumers.  Failure to correctly evaluate our Companys prospects could result in an investors loss of a significant portion or all of his investment in our Company.  Our failure to obtain additional adequate financing would materially and adversely affect our business.We do not currently have sufficient revenues and gross margin to cover our operating expenses and have never been profitable. We cannot be certain that our Company will ever generate sufficient revenues and gross margin to achieve profitability.  Furthermore, we project that our current cash on hand and commitments for additional investment will not be sufficient to maintain our Companys operations for one year from the date of this report.  Our failure to significantly increase revenues or to raise additional adequate and necessary financing would seriously harm our business and operating results.  We have incurred significant costs in building, launching and marketing the SocialwiseTM Group Gifting Platform and BillMyParentsTM,and these costs are expected to continue through the calendar year 2009.  If we fail to achieve sufficient revenues and gross margin, or our revenues grow more slowly than anticipated, or if our operating or


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capital expenses increase more than is expected or cannot be reduced in the event of lower revenues, our business will be materially and adversely affected and an investor could suffer the loss of a significant portion or all of his investment in our Company.  We face competition from other providers of gift cards and gift card services.  We will face competition from other providers of gift cards and gift card services. Many of these providers have longer operating histories, greater name recognition and substantially greater financial, technical and marketing resources than us.  Many of these providers also have more extensive customer bases, broader customer relationships and broader industry alliances than us, including relationships with many of our potential customers. Increased competition from any of these sources could result in our failure to achieve and maintain an adequate level of customers and market share to support the cost of our operations.  We rely on third-party suppliers and distributors that are specific to the gift and debit card business and our distribution channels such as processors, programmers, social networks and security advisors. We will be dependent on other companies to provide necessary products and services in connection with key elements of our business.  Any interruption in our ability to obtain these services, or comparable quality replacements would severely harm our business and results of operations.  Our business model includes our plan to incorporate our SocialwiseTM Group Gifting Platform within existing social networks.  We will be dependent on these social networks to allow our applications for the SocialwiseTM Group Gifting Platform to run within their proprietary Internet websites.  Permission for our applications to run on social networks is revocable at any time at the discretion of the social networks. Should such social networks for any reason deny our applications access to their networks, this would substantially harm our business and results of operations and an investor could suffer the loss of a significant portion or all of his investment in our Company.  Our ability to protect our intellectual property and proprietary technology surrounding our group gifting focus through patents and other means is uncertain. Our future success may depend significantly on our ability to protect our proprietary rights to the intellectual property upon which our products and services will be based. Our pending U.S. patent application, which includes claims to material aspects of our products and services that are not currently protected by issued patents, may not be issued as patents in a form that will be advantageous to us. Any patents we have obtained or do obtain may be challenged by re-examination or otherwise invalidated or eventually found unenforceable. Both the patent application process and the process of managing patent disputes can be time consuming and expensive. Competitors may attempt to challenge or invalidate our patents, or may be able to design alternative techniques or devices that avoid infringement of our patents, or develop products with functionalities that are comparable to ours. In the event a competitor infringes upon our patent or other intellectual property rights, litigation to enforce our intellectual property rights or to defend our patents against challenge, even if successful, could be expensive and time consuming and could require significant time and attention from our management. We may not have sufficient resources to enforce our intellectual property rights or to defend our patents against challenges from others.  We are dependent upon consumer tastes with respect to gift cards for the success of our products and services. A gift card programs acceptance by consumers and whether its generation of revenues will depend upon a variety of unpredictable factors, including: · Public taste, which is always subject to change; · The quantity and popularity of other gift cards and programs available to the public; · The continued use and popularity of social networking sites such as Facebook and MySpace; and · The fact that the distribution and sales method chosen for gift cards we market may be ineffective.  For any of these reasons, our programs may be commercially unsuccessful.  If we are unable to market and sell gift cards which are commercially successful, we may not be able to recoup our expenses and/or generate sufficient revenues. In the event that we are unable to generate sufficient revenues, we may not be able to continue operating as a viable business and an investor could suffer the loss of a significant portion or all of his investment in our Company.  Our Company is economically sensitive to general economic conditions, including continued weakening of the economy, therefore consumer purchases of discretionary items such as gift cards which make up a substantial portion of our current product offering could be adversely affected  and could consequently materially impact our Companys sales of gift cards for the worse.The gift card industry and consumer purchases in general, are subject to cyclical variations, recessions in the general economy and future economic outlook. Our results may be dependent on a number of factors impacting consumer spending, including general economic and business conditions; consumer confidence; wages and employment levels; the housing market; consumer debt levels; availability of consumer credit; credit and interest rates; fuel and energy costs; energy shortages; taxes; general political conditions, both domestic and abroad; and the level of customer traffic on social networking websites. Consumer purchases of discretionary items,


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including gift cards, may decline during recessionary periods and at other times when disposable income is lower. A downturn or an uncertain outlook in the economy may materially adversely affect our business and the launch of our SocialwiseTM Group Gifting Platform andBillMyParentsTM.  A portion of the merchants whose gift cards will be sold by our Company, may encounter financial difficulties and in the future default on their redemption obligations in connection with their cards we have in stock or have sold to consumers on their behalf, negatively affecting our Companys reputation with consumers and potentially subjecting us to liabilities from said default and losses from the cards remaining in inventory.Purchasers of gift cards, including our Company, are subject to the risk that merchants issuing the gift cards could default on the obligation to redeem the cards for the merchants goods or services.  Our Company could be affected both from an inventory standpoint (cards we have purchased for resale could become worthless) and from a consumer liability standpoint (consumers may press claims against our Company for losses they might suffer from a merchants default).  In the event that either of these two contingencies were to occur, our Company could potentially be subject to substantial losses which could affect our Companys financial viability and lead an investor to lose a significant portion or all of his investment in our Company.  Financial Risks  Our financial statements have been prepared assuming that the Company will continue as a going concern. The factors described herein raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from this uncertainty. The report of our independent registered public accounting firm included an explanatory paragraph expressing doubt about our ability to continue as a going concern in their audit report for the fiscal year ended September 30, 2008.  We currently project that our cash on hand and existing commitments for additional investment will not be sufficient to maintain our Companys operations beyond one year from the date of this report.  If we cannot generate the required revenues and gross margin to achieve profitability or obtain additional capital on acceptable terms, we will need to substantially revise our business plan or cease operations and an investor could suffer the loss of a significant portion or all of his investment in our Company.  Moreover, over the past several months, there has been significant deterioration in the global credit and equity markets. Recessionary conditions in the global economy threaten to cause further tightening of the credit and equity markets and more stringent lending and investing standards.   The persistence of these conditions could have a material adverse effect on our access to further debt or equity capital. In addition, further deterioration in the economy could adversely affect our corporate results, which could adversely affect our financial condition and operations.  We do not expect to pay dividends for the foreseeable future, and we may never pay dividends and, consequently, the only opportunity for investors to achieve a return on their investment is if a trading market develops and investors are able to sell their shares for a profit or if our business is sold at a price that enables investors to recognize a profit.We currently intend to retain any future earnings to support the development and expansion of our business and do not anticipate paying cash dividends for the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. In addition, our ability to pay dividends on our common stock may be limited by state law. Accordingly, we cannot assure investors any return on their investment, other than in connection with a sale of their shares or a sale of our business. At the present time there is a limited trading market for our shares. Therefore, holders of our securities may be unable to sell them. We cannot assure investors that an active trading market will develop or that any third party will offer to purchase our business on acceptable terms and at a price that would enable our investors to recognize a profit.  Our net operating loss carry-forward will be limited.  We have recorded a valuation allowance amounting to our entire net deferred tax asset balance due to our lack of a history of earnings, possible limitations on the use of tax loss carry-forwards, of the inability to use the net operating loss carry-forwards (NOL) of the VOS Subsidiary and the future expiration of the NOL.  This gives rise to uncertainty as to whether the net deferred tax asset is realizable.  Internal Revenue Code Section 382, and similar California rules, place a limitation on the amount of taxable income that can be offset by carry-forwards after a change in control (generally greater than a 50% change in ownership).  As a result of these provisions, it is likely that given our acquisition of Socialwise, future utilization of the NOL will be severely limited.  Our inability to use our Companys historical NOL, or the full amount of the NOL, would limit our ability to offset any future tax liabilities with its NOL.


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Corporate and Other Risks  Limitations on director and officer liability and indemnification of our Companys officers and directors by us may discourage stockholders from bringing suit against an officer or director. Our Companys articles of incorporation and bylaws provide, with certain exceptions as permitted by governing state law, that a director or officer shall not be personally liable to us or our stockholders for breach of fiduciary duty as a director, except for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders on our behalf against a director.  We are responsible for the indemnification of our officers and directors. Should our officers and/or directors require us to contribute to their defense, we may be required to spend significant amounts of our capital. Our articles of incorporation and bylaws also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of our Company. This indemnification policy could result in substantial expenditures, which we may be unable to recoup. If these expenditures are significant, or involve issues which result in significant liability for our key personnel, we may be unable to continue operating as a going concern.  Our executive officers, directors and insider stockholders beneficially own or control a substantial portion of our outstanding common stock, which may limit your ability and the ability of our other stockholders, whether acting alone or together, to propose or direct the management or overall direction of our Company.Additionally, this concentration of ownership could discourage or prevent a potential takeover of our Company that might otherwise result in your receiving a premium over the market price for your shares. A substantial portion of our outstanding shares of common stock is beneficially owned and controlled by a group of insiders, including our directors and executive officers. Accordingly, any of our existing outside principal stockholders together with our directors, executive officers and insider shareholders would have the power to control the election of our directors and the approval of actions for which the approval of our stockholders is required. If you acquire shares of our common stock, you may have no effective voice in the management of our Company.  Such concentrated control of our Company may adversely affect the price of our common stock. Our principal stockholders may be able to control matters requiring approval by our stockholders, including the election of directors, mergers or other business combinations. Such concentrated control may also make it difficult for our stockholders to receive a premium for their shares of our common stock in the event we merge with a third party or enter into different transactions which require stockholder approval. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock.  While our management has evaluated our internal controls over financial reporting as effective in our most recent annual report of Form 10-K, in the future our independent auditors may not be able to certify as to their effectiveness at the time that such certification is required, which could have a significant and adverse effect on our business.We are subject to various regulatory requirements, including the Sarbanes-Oxley Act. We, like all other public companies, must incur additional expenses and to a lesser extent the diversion of our managements time in our efforts to comply with Section 404 of the Sarbanes-Oxley Act regarding internal controls over financial reporting. While our management has evaluated our internal controls over financial reporting for the purpose of allowing management to report on them (and has evaluated them as effective in our most recent evaluation), our independent auditors in the future will be required to attest to them as well.  This is required (or will be required) by Section 404 of the Sarbanes-Oxley Act and the rules and regulations of the SEC, which we collectively refer to as Section 404. If in the future our external auditors are unable to attest that our managements report is fairly stated or to express an opinion on the effectiveness of our internal controls, this could result in a loss of investor confidence in our financial reports, have an adverse effect on our stock price and/or subject us to sanctions or investigation by regulatory authorities.  We are dependent for our success on a few key executive officers, particularly our Companys Chief Executive Officer and our Vice Presidents of Business Development and Operations. Our inability to retain those officers would impede our business plan and growth strategies, which would have a negative impact on our business and the value of your investment. Our success depends on the skills, experience and performance of key members of our management team.  We do not have long-term employment agreements with any of the members of our senior management team. Each of those individuals may voluntarily terminate his employment with the Company at any time. Were we to lose one or more of these key executive officers, we would be forced to expend significant time and money in the pursuit of a replacement, which would result in both a delay in the implementation of our business plan and the diversion of limited working capital. We do not maintain a key man insurance policy on any of our executive officers.


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As we transition from a Company with insignificant revenues to what we hope will be a Company generating substantial revenues, we may not be able to manage our growth effectively, which could adversely affect our operations and financial performance. The ability to manage and operate our business as we execute our growth strategy will require effective planning. Significant rapid growth could strain our internal resources, leading to a lower quality of customer service, reporting problems and delays in meeting important deadlines resulting in loss of market share and other problems that could adversely affect our financial performance. Our efforts to grow could place a significant strain on our personnel, management systems, infrastructure and other resources. If we do not manage our growth effectively, our operations could be adversely affected, resulting in slower growth and a failure to achieve or sustain profitability.  Capital Market Risks  Our common stock is thinly traded, so you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.There is limited market activity in our stock and we are too small to attract the interest of many brokerage firms and analysts. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained. While we are trading on the OTC Bulletin Board, the trading volume we will develop may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in Bulletin Board stocks and certain major brokerage firms restrict their brokers from recommending Bulletin Board stocks because they are considered speculative, volatile, thinly traded and the market price of the common stock may not accurately reflect the underlying value of our Company.  The market price of our common stock could be subject to wide fluctuations in response to quarterly variations in our revenues and operating expenses, announcements of new products or services by us, significant sales of our common stock, including short sales, the operating and stock price performance of other companies that investors may deem comparable to us, and news reports relating to trends in our markets or general economic conditions.  The application of the penny stock rules to our common stock could limit the trading and liquidity of the common stock, adversely affect the market price of our common stock and increase your transaction costs to sell those shares. As long as the trading price of our common stock is below $5 per share, the open-market trading of our common stock will be subject to the penny stock rules, unless we otherwise qualify for an exemption from the penny stock definition. The penny stock rules impose additional sales practice requirements on certain broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). These regulations, if they apply, require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination regarding such a purchaser and receive such purchasers written agreement to a transaction prior to sale. These regulations may have the effect of limiting the trading activity of our common stock, reducing the liquidity of an investment in our common stock and increasing the transaction costs for sales and purchases of our common stock as compared to other securities. The stock market in general and the market prices for penny stock companies in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our stock, regardless of our operating performance.  Stockholders should be aware that, according to Securities and Exchange Commission (SEC) Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include 1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; 2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; 3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; 4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and 5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. The occurrence of these patterns or practices could increase the volatility of our share price.  We may not be able to attract the attention of major brokerage firms, which could have a material adverse impact on the market value of our common stock.Security analysts of major brokerage firms may not provide coverage of our common stock since there is no incentive to brokerage firms to recommend the purchase of our common stock. The absence of such coverage limits the likelihood that an active market will develop for our common stock. It will also likely make it more difficult to attract new investors at times when we require additional capital.


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We may be unable to list our common stock on NASDAQ or on any securities exchange. Although we may apply to list our common stock on NASDAQ or the American Stock Exchange in the future, we cannot assure you that we will be able to meet the initial listing standards, including the minimum per share price and minimum capitalization requirements, or that we will be able to maintain a listing of our common stock on either of those or any other trading venue. Until such time as we qualify for listing on NASDAQ, the American Stock Exchange or another trading venue, our common stock will continue to trade on the OTC Bulletin Board or another over-the-counter quotation system, or on the pink sheets, where an investor may find it more difficult to dispose of shares or obtain accurate quotations as to the market value of our common stock. In addition, rules promulgated by the SEC impose various practice requirements on broker-dealers who sell securities that fail to meet certain criteria set forth in those rules to persons other than established customers and accredited investors.  Consequently, these rules may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock. It would also make it more difficult for us to raise additional capital.  Further future sales of our equity securities could put downward selling pressure on our securities, and adversely affect the stock price.There is a risk that this downward pressure may make it impossible for an investor to sell his or her securities at any reasonable price, if at all. Future sales of substantial amounts of our equity securities in the public market, or the perception that such sales could occur, could put downward selling pressure on our securities, and adversely affect the market price of our common stock.  Item 2  Sales of Unregistered Securities and Use of Proceeds Beginning November 20, 2008 and ending on December 19, 2008, we entered into subscription agreements with nine accredited investors pursuant to which we issued 2,034,375 shares of our common stock and warrants to purchase an additional 508,594 shares of our common stock at an exercise price of $1.00 per share for a period of two years after their date of issuance, in exchange for gross proceeds totaling $1,627,500 ($1,507,500 net of expenses totaling $120,000). These issuances of the Companys securities were exempt from registration under the Securities Act pursuant to Section 4(2) thereof.  The transaction was not conducted in connection with a public offering, and no public solicitation or advertisement was made or relied upon by the investors in connection with the transaction.  The proceeds from these sales of our Companys equity will be used for further information systems development, marketing and sales and our Companys operating expense and working capital requirements.   Item 3  Defaults upon Senior Securities Not applicable. Item 4  Submission of Matters to a Vote of Security Holders Not applicable. Item 5  Other Information Not applicable.  Item 6  Exhibits and Reports on Form 8-K (a) Exhibits See Exhibit Index immediately following signatures. (b) Reports on Form 8-K  The Company filed a Form 8-K on October 8, 2008 regarding the engagement of BDO Seidman, LLC as its independent registered public accounting firm.


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The Company filed a Form 8-K on November 10, 2008 regarding the Companys announcement of entering into      agreements with various retailers for the marketing and sale of gift cards.  The Company filed a Form 8-K on December 19, 2008 regarding the Companys completion of an equity financing.


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SIGNATURES  In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  IdeaEdge, Inc., a Colorado corporation  By: /s/ JAMES COLLAS James Collas, Chief Executive Officer    By: /s/ JONATHAN SHULTZ Jonathan Shultz, Chief Financial Officer  February 10, 2009  Exhibit Index Exhibit No.Description10.18*Investor Relations Agreement dated November 14, 2008 with Two Eight, Inc.31.1*Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended, by Chief Executive Officer31.2*Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended, by Chief Financial Officer32.1*Certification pursuant to 18 U.S.C. §1350 by Chief Executive Officer32.2*Certification pursuant to 18 U.S.C. §1350 by Chief Financial Officer*Filed as an exhibit to this report


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