##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-KSB
 
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the fiscal year ended December 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 001-32951
 SMART MOVE, INC.
  Delaware
    
    54-2189769(State or other jurisdiction of incorporation 
or organization)
    
    (IRS Employer Identification No.)
 5990 Greenwood Plaza Blvd, Suite 390
Greenwood Village, CO 80111
 Securities registered under Section 12(b) of the Exchange Act: None
 Securities registered under Section 12(g) of the Exchange Act: Common Stock, Par Value $0.0001
Registered on the American Stock Exchange
 
 þ Yes o No
 , þ
 o Yes þ No
    
 DOCUMENTS INCORPORATED BY REFERENCE
  o Yes þ No




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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
   
    
    effects of competition;
    
    our liquidity, results of operations and financial condition;
    
    our assumptions regarding leverage and debt service and financing and refinancing efforts;
    
    our relationships with, and other conditions affecting, our customers and strategic
alliances with major transportation companies;
    
    transportation performance and costs;
    
    general economic conditions, changes in laws or regulations;
    
    risks related to development activities; and
    
    other factors, including the risks discussed in Managements Discussion and Analysis
set forth in Item 6 of this report.
   2




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##### 



Smart Move, Inc.
Form 10-KSB
Index
 PagePART I
    
    
    4ITEM 1.
    
    DESCRIPTION OF BUSINESS
    
    
    4ITEM 2.
    
    DESCRIPTION OF PROPERTY
    
    
    22ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    22ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    23PART II
    
    
    23ITEM 5.
    
    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    
    
    23ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS
    
    
    27ITEM 7.
    
    FINANCIAL STATEMENTS
    
    
    36ITEM 8.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    36ITEM 8A.
    
    CONTROLS AND PROCEDURES
    
    
    36ITEM 8B.
    
    OTHER INFORMATION
    
    
    37PART III
    
    
    37ITEM 9
    
    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE;COMPLIANCE WITH SECTIONS 16(a) OF THE EXCHANGE ACT
    
    
    37ITEM 10
    
    EXECUTIVE COMPENSATION
    
    
    37ITEM 11
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    38ITEM 12
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
    
    
    38ITEM 13
    
    EXHIBITS
    
    
    38ITEM 14
    
    PRINCIPAL ACCOUNTANTS FEES AND SERVICES
    
    
    40PART F/SIndependent Auditors Report
    
    
    F 1Balance Sheet
    
    
    F 2Statements of Operations
    
    
    F 3Statement of Changes in Shareholders Equity
    
    
    F 4Statements of Cash Flows
    
    
    F 5Notes to Financial Statements
    
    
    F 6Exhibit 2.2Exhibit 10.28Exhibit 10.34Exhibit 21.1Exhibit 31.1Exhibit 31.2Exhibit 32.1
   3




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##### Table of Contents



PART I
 
 ITEM 1.
    
    DESCRIPTION OF BUSINESS
 BUSINESS
 General
  History
     BUSINESS DESCRIPTION
 Household Moving
 Market Overview
  
    
    Interstate Moving  $5 Billion
    
    Local Moving and Storage  $8 Billion
 
    
    Truck Rental  $3 Billion
    
    Mini Storage  $15 Billion
    
    Total Market Revenues  $31 Billion
 (Source: The American Movers and Storage Association, September 2005)
  4




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The Smart Move Solution
 tm tm tm tm
 tm tm tm
 tm tm tm tm
  5




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Strategy Overview
  
    
    inflexible or indefinite schedules for consumer moves;
    
    hidden costs of overhead or of insuring goods;
    
    lack of control by consumers over important aspects of the move; and
    
    risks of inadvertent offloads of goods at interim points during transit, increasing risk of loss or property theft.
  
    
    Efficient utilization of our specially designed proprietary
SmartVaulttm containers to ensure they are shipped back from
the original shipped-to destination to the nearest available terminal rather than a more
distant original shipped-from site; enabling us to achieve operational and freight cost
efficiencies by monitoring the availability of SmartVaultstm
at various terminals for outbound shipments by lowest cost long distance carriers to the
nearest location for which a current demand exists;
    
    Maintaining and enhancing our ability to scale operations rapidly and control costs by
outsourcing transportation, warehousing, and moving labor;
    
    Ability to open new markets with limited capital;
    
    Mitigation of risks of loss through use of state of the art GPS tracking technology; and
    
    Ability to replicate the model in additional markets to increase revenue opportunities.
 tm tm
 
    
    A technologically advanced material composition of ultra-strong high density
polyethylene (HDPE) built on an aluminum deck and base with an expected 8-year useful life;
    
    A standard 262 cubic feet loadable storage capacity able to handle loads in excess of 3,000 pounds;
    
    Spacious interior dimensions consisting of 7 feet length, 5 feet 10 inches width and 6 feet 7 inches height;
    
    Superior functionality for use, weatherproof and incorporating special security features;
    
    Ease of loading via forklift onto standard truck trailers and sea containers utilized
throughout the transportation and logistics industry.
 tm ® tm tm tm tm tm tm tm
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##### Table of Contents



Manufacturing Relationships and Sourcing of Raw Materials
 tm tm tm tm tm tm
 Utilization of SmartVault tm Assets
 tm tm
 Outsourced Warehouse and Transportation
 100-mile tm tm
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Tracking Technology
  tm TM
 Services and Markets
  Our Strategy
  
    
    High overhead costs passed onto consumers;
    
    Capital-intensive infrastructure;
    
    Property theft and loss;
    
    Inflexible schedules for consumers and hidden costs;
    
    Hidden or unexpected costs charged to consumers;
    
    Lack of control by consumers over important aspects of the move; and
    
    Inefficient use of the moving companys assets.
  Value Added to the Customer
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tm
  
    
    No Trucks to Rent and Drive.When renting our
SmartVaulttm container, the customers need for a moving
truck is eliminated. Typically, when moving and storing furnishings the consumers must
first locate and reserve a rental truck of the appropriate type and size. Often consumers
are inexperienced at driving larger rental trucks and have concerns upon accepting
responsibility for damage to the truck and liability for accidents they may cause
while operating the vehicle. In addition, many states require the driver of rental
trucks to be at least 25 years of age. Since most moves occur during the weekends, the
appropriate size truck for a given move is often unavailable, forcing the renter either to
rent a truck that is too small for the job, thereby necessitating multiple trips or,
incurring increased costs of renting a larger truck than is really needed and that may be
more difficult to operate. Once a truck is rented, customers drive it to their location and
load the truck by carrying their possessions up a ramp. The truck must be loaded and
unloaded quickly in order for them to be able to return the truck before the rental
deadline. When the customers are ready to retrieve their belongings at the destination
site, this entire process must be repeated. Our system wholly eliminates the need for our
customers to rent a truck. The customers need only contact us and a clean
SmartVaulttm will be delivered directly to their location
and left for packing. The customers can take as much time as they wish to pack the
SmartVaulttm. Once loaded, we return to pick up, load and
transport the SmartVaulttm to the customers final
destination. Upon the delivery of the SmartVaulttm, the
customers can take their time, unloading it at their convenience. When the customers are
finished, they simply call us to retrieve the empty unit.
    
    Ease of Use and Loading of Contents.Our customers have the added benefit of renting a
vault that is easy to use. Our customers only move their possessions directly into the
SmartVaulttm, which is placed at ground level for packing
and does not require the use of a cumbersome ramp.
    
    Convenience and Time Savings.The typical loading period for our self service customers
usually takes place over a few days, which permits them to load and unload the contents at
their convenience. This eliminates the stress and rush associated with trying to beat a
deadline imposed by a rental truck company. In addition, our customers save a significant
amount of time by avoiding unnecessary packing and unpacking and in reduced driving time.
When choosing a traditional self-storage facility, customers have to pick up a truck, drive
it to their location, load the truck, drive it to a storage facility and then unpack their
possessions. Next, the customers must return the rental truck. When ready to retrieve their
possessions, the customers must once again obtain and pick up a rental truck, pack the
truck, drive their possessions to their new location, unpack them, and upon completion,
return the truck to the rental company. With our solution, our customers need only notify
us to arrange delivery of our SmartVaulttm container, pack
the unit we provide and phone for a pickup.
 Execution of Our Plan
  Employees
  Sales and Marketing
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Market Opportunity in the Domestic Moving & Storage Industry
  Consistent Migration of the U.S. Population
  tm tm tm
 Other Statistical Indicators of the Domestic Opportunity
 
    
    40 million people (16% of the population) moved between March 2002 and March 2003;
    
    19% of movers relocated to another state; 20% moved to another county in the same state;
the majority of which 56% stayed within the same county, 4% came from abroad;
    
    The average American moves 12 times in a lifetime;
    
    33% of renters in the US and 8.3% of homeowners moved to a different residence in 1998/1999; and
    
    20 to 29 year olds have the highest moving rates  about 33% of the total in that age
group moved in the last year; the next most active group being 30-34 year olds, with 22%
having moved during the last year.
 (Source: US Census Bureau, March 2004)
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International Moving Opportunity
    Other Sales Opportunities
 Local Move Consumer Market.
 Storage and Moving Supplies. tm
 Homeland Security.
 National Van Lines. tm
 Commercial Uses.
 Military Uses.
 Competition
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Public Storage, Inc.
 PODS Enterprises, Inc.
 Major Van Lines,
 Local Movers
  Low Overhead,
    
    Deployment ofOutsource
    
    Solution can beCan Handle
    
    
    
    Model, Low
    
    Accomplished
    
    Business ModelInterstate Moves
    
    State of the Art
    
    Capital
    
    with Standard
    
    does not DependProprietary
    
    to Top 61 Cities
    
    GPS Tracking
    
    Investment
    
    Delivery
    
    on FranchiseCompany
    
    Container
    
    in the USA
    
    Capability
    
    Requirements
    
    Equipment
    
    AgreementsSMART MOVE
    
    YES
    
    YES
    
    YES
    
    YES
    
    YES
    
    YESPODS
    
    YES
    
    Limited Interstate
Service
    
    NO
    
    NO
    
    NO
    
    NOMajor Van Lines
    
    NO
    
    YES
    
    YES
    
    NO
    
    YES
    
    NOLocal Movers
    
    NO
    
    NO
    
    NO
    
    NO
    
    YES
    
    YESPublic Storage
    
    NO
    
    NO
    
    NO
    
    NO
    
    YES
    
    YES
 Future Competition.
 
    
    designing and engineering a functionally comparable storage container;
    
    locating a supplier of specialized storage containers built to specifications at competitive prices;
    
    establishing goodwill with prospective customer groups and brand awareness.
 Asset Tracking Technology
 Market Opportunity
  (Source for RFID market statistics: RFID Weblog.)
  12




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The Rapid ID Solution
   Value Added to the Customer
  Execution of the Our Plan
  Competition
   
    
    Governmental Agencies;
    
    International shipping companies; and
    
    Assets including: Sea Containers, ULDs, truck trailers, mobile assets and moving containers, etc.
 Research and Development
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Information Systems
  Our Intellectual Property and Trademarks
  tm tm
  Environmental Regulations
  Regulatory Matters
  
    
    Register with the FMCSA;
    
    Obtain an authorization certificate from the FMCSA for each state in which we conduct business;
    
    Obtain a certificate of insurance or surety bond in each state in which we are
authorized by the FMCSA to conduct business; and
    
    Offer arbitration as a means of settling loss and damage disputes on collect-on-delivery
shipments
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
    
    Obtain a certificate of authority to conduct business as a foreign entity;
    
    Obtain sales tax licenses and permits; and
    
    Where our Company name may not be available, apply for the right to conduct business
under an assumed tradename.
   2006 Highlights
   
    
    We have added over $5.9 million of property and equipment, including $4.5 million in new
SmartVault containers and proprietary mold;
    
    We expanded our service coverage through the addition of 21 additional Metropolitan
Service Areas (MSAs)* in September 2006, bringing our total major market coverage to 61
MSAs;
    
    We expanded from 900 to 3,721 revenue lanes (the available inbound, outbound and local
transport markets accessible by Smart Move for its products and services);**
    
    We completed our production Mold for version two of SmartVault containers;
    
    We began production of version two SmartVault containers;
    
    We completed our proprietary logistics, tracking and mapping software; and
    
    We completed our Initial Public Offering (IPO).
  **
 RISK FACTORS
 Risks Related to our Business and Industry
 We have a history of operating losses and may again incur losses in the future as we expand.
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Our business plan is unproven, and our financial results will suffer if consumers do not adopt our
moving solution.
  We depend on the third-party manufacturer for our SmartVaults tm moving containers.
 tm tm tm tm
 Our containers are subject to price increases by the manufacturer, and any significant increase in
price would negatively impact our operating margins.
  A disruption in the service of our third-party carriers could result in significant loss of revenue
and increased capital expense.
  Since we rely on third party carriers for our deliveries, higher prices for diesel fuel have
resulted in significant fuel surcharges in the past six months. Our operating margins and results
of operation will fluctuate during periods of fuel price volatility. If those surcharges continue
or increase, it will require us to raise prices at the risk of losing sales or reduce our operating
margins.
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We have incurred substantial debt to finance our operations; our lenders could foreclose on our
assets and force us out of business in the event of our default on this debt.
  We will need to raise substantial additional capital to fund our planned expansion of operations,
and we do not have any existing commitments for additional capital.
  We may need additional financing, including additional indebtedness, to fund our business expansion
in additional geographic areas and we do not have commitments for additional financing.
  
    
    we may be required to use a portion of our cash flow from operations for the payment of
any principal or interest due on our outstanding indebtedness;
    
    our outstanding indebtedness and leverage will increase the impact of negative changes
in general economic and industry conditions as well as competitive pressures; and
    
    the level of our outstanding debt may affect our ability to obtain additional financing
for working capital, capital expenditures or general corporate purposes.
  General economic conditions, industry cycles, financial, business and other factors affecting our
operations, many of which are beyond our control, may affect our future performance.
  
    
    seek additional financing in the debt or equity markets;
    
    refinance or restructure all or a portion of our indebtedness;
    
    sell selected assets; and
    
    reduce or delay planned capital expenditures.
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We expect our business will be highly seasonal, which can cause dramatic fluctuations in our cash
flow and could require us to incur additional debt or raise additional capital.
  We could be held liable for damages under environmental laws or be required to clean up
contamination caused by hazardous materials transported or stored in our containers.
  As a result of our limited operating history, we may not be able to estimate correctly our future
operating expenses, which could lead to cash shortfalls.
  We currently have limited human resources, and the effective management of our anticipated growth
will depend on our ability to attract and retain skilled personnel.
  We are dependent on our management team and the loss of any of these individuals would harm our
business.
  We encounter substantial competition from other moving companies, many of whom have greater
resources than Smart Move.
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We do not have any patented protected technologies that would preclude or inhibit competitors from
entering our market.
  Our ability to capture a meaningful share of our target market and achieve a profitable level of
operations is dependent upon our ability to establish and maintain our brand name.
  We may be unable to protect our trademark or other proprietary intellectual property rights.
 tm tm
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We may face liability from intellectual property litigation that could be costly to prosecute or
defend and distract managements attention with no assurance of success.
  We operate in a regulated industry. Increased costs of compliance with, liability for violation of,
or changes in, existing or future regulations could result in increased regulatory compliance costs
or decreased revenues and, thus, adversely affecting our business and operations.
  Our proposed future international operations would subject us to risks associated with trade
restrictions, political, economic and social instability and currency exchange rate fluctuations.
  
    
    unexpected changes in regulatory requirements;
    
    export and import restrictions, tariffs and other trade barriers;
    
    difficulties in staffing and managing foreign operations;
    
    longer payment cycles and problems in collecting accounts receivable;
    
    potential adverse tax consequences;
    
    currency exchange rate fluctuations;
    
    increased risks of piracy and limits on our ability to enforce our intellectual property rights;
    
    limits on repatriation of funds; and
    
    political risks that may limit or disrupt international sales.
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We have completed a placement of debt that included a beneficial conversion feature. That feature
will have the effect of reducing our reported operating results during the term of the debt.
  Changes in accounting rules governing the recognition of stock-based compensation expense could
adversely affect our financial operations by reducing our income or increasing our losses.
  We will incur increased costs as a result of being a public company.
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If we fail to maintain an effective system of internal controls, we may not be able to accurately
report our financial results or prevent fraud. As a result, current and potential shareholders
could lose confidence in our financial reporting, which would harm our business and the trading
price of our stock.
   
    
    introduction of additional procedures to ensure a more thorough review of financial data
in the financial reporting and close process;
    
    requirement that all complex non-routine transactions during any period be researched
and detailed in written memoranda with potential related disclosure requirements and
reviewed by senior management;
    
    implementation of enhanced preparation and review procedures of our disclosure controls
and procedures by hiring of additional outside accounting and SEC reporting consultants;
    
    implementation of a program of continuing education for our accounting personnel to
enhance their in the public company accounting and reporting matters; and
    
    continued review of our disclosure controls and procedures by our outside auditors.
 Consultants
  
 ITEM 2.
    
    DESCRIPTION OF PROPERTY
 Facilities and Employees
 Corporate Offices.
 Facilities.
 
 ITEM 3.
    
    LEGAL PROCEEDINGS
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ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5.
    
    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS
 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
  High
    
    
    LowFourth Quarter
    
    $
    4.80
    
    
    $
    4.402006 (from December 21 through December 31, 2006)
   Dividend Policy.
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Securities Authorized for Issuance Under Equity Compensation Plans
  Number of SecuritiesRemaining AvailableNumber of Securities
    
    
    
    
    
    
    for Future Issuanceto be Issued Upon
    
    
    Weighted-Average
    
    
    Under EquityExercise of
    
    
    Exercise Price of
    
    
    CompensationOutstanding
    
    
    Outstanding
    
    
    Plans (ExcludingOptions,
    
    
    Options, Warrants
    
    
    Securities Reflected inWarrants and Rights
    
    
    and Rights
    
    
    Column (a)Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    774,000
    
    
    $
    5.29
    
    
    
    626,000Equity compensation
plans not approved
by security holders
    
    
    
    
    
    $
    
    
    
    
    Total
    
    
    774,000
    
    
    $
    5.29
    
    
    
    626,000
 Recent sales of Unregistered Securities and Use of Proceeds
 Unregistered Sales of Securities
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25




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Date
    
    Number
    
    
    Exercise PriceAugust 2004
    
    
    200,000
    
    
    $
    0.625March 2005
    
    
    400,000
    
    
    $
    1.00September 2005
    
    
    400,000
    
    
    $
    2.50
  (i)
    
    In July 2006, we issued:
  (j)
    
    In September 2006, we issued:
    i) Use of the Proceeds of our Initial Public Offering
 333-137931
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ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS
 MANAGEMENTS DISCUSSION AND ANALYSIS
 The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our audited financial statements and related notes that appear
elsewhere in this filing. In addition to historical financial information, the following discussion
contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual
results could differ materially from those discussed in the forward-looking statements. Factors
that could cause or contribute to these differences include those discussed below and elsewhere in
this filing.
 Our Business
 tm tm
 Smart Move Strategy
  
    
    Efficient utilization of our proprietary SmartVaulttm
containers which is achieved by ensuring that our containers are shipped back from the
original destination to the nearest available terminal where they can be utilized in the
most efficient manner and by shipping them through long distance courier;
    
    Ability to control costs by outsourcing transportation, warehousing, and moving labor;
    
    Ability to open new markets with limited capital;
    
    Utilization of state of the art GPS tracking & barcode technology; and
    
    Ability to expand markets and increase revenue opportunities.
 Summary of Financial Results
  tm
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Three Months EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,
    
    
    TotalSales:2006
    
    $
    741,855
    
    
    $
    994,614
    
    
    $
    1,490,934
    
    
    $
    957,151
    
    
    $
    4,184,5542005
    
    
    
    
    
    
    
    
    
    
    655,120
    
    
    
    583,098
    
    
    
    1,238,218Percentage
change from 2005 to
2006
    
    
    100
    %
    
    
    100
    %
    
    
    128
    %
    
    
    64
    %
    
    
    238
    %Quarterly gross
loss as a
percentage
(exclusive of
depreciation and
amortization) of
2006 sales
    
    
    (16
    )%
    
    
    (33
    )%
    
    
    (9
    )%
    
    
    (7
    )%
    
    
    (15
    )%Quarterly gross
loss as a
percentage
(exclusive of
depreciation and
amortization) of
2005 sales
    
    
    
    
    
    
    
    
    
    
    (10
    )%
    
    
    (44
    )%
    
    
    (26
    )%Additions to
property and
equipment in 2006
    
    $
    52,698
    
    
    $
    3,718,870
    
    
    $
    756,439
    
    
    $
    1,454,004
    
    
    $
    5,982,011Additions to
property and
equipment in 2005
    
    $
    1,158,571
    
    
    $
    2,478,774
    
    
    $
    943,443
    
    
    $
    719,354
    
    
    $
    5,300,142
  Principal Costs and Expenses:
  
    
    Cost of Revenues:Cost of moving and storage represents the cost we incur to our
transportation partner and to outside warehouse agents. These costs include fixed and
variable costs which in the early stages of our operations burdened a relatively small
amount of revenue. Such charges included depreciation, charges for storage and other
related charges. We consider the amount of the fuel surcharges in effect at the time that
we provide a bid for services to a potential customer. However, after a customer contracts
with us we are subject to the risk that the fuel surcharge applicable to a move may
increase. In times of fuel price instability, increases in fuel surcharges imposed on us
after our commitment to a move and prior to delivery are borne by us and are not passed on
to the customer, resulting in reductions in gross margins.
    
    Depreciation and Amortization:Depreciation and amortization represent the costs
attributable to our containers, forklifts, flatbed trailers and GPS units.
    
    Selling, General and Administrative Expenses:Our selling, general and administrative
expenses include sales and marketing expenses, payroll and related costs, insurance
expense, professional fees, property and other taxes, licenses, administrative overhead,
and depreciation associated with office property and equipment.
    
    Interest Expense:Interest expense represents the interest on our outstanding debt
instruments and includes amortization of our debt issuance costs and debt discounts.
 
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Diversification of Revenues
  Future Revenues and Operating Expenses
   
    
    We are working on a number of additional revenue opportunities, such as expansion of our
affiliation with national moving companies, affiliation with local moving companies, and
the use of the container in other vertical markets, and the use of our technology within
other asset tracking environments.
  
    
    Accounting and Reporting:We expect to expand our accounting staff and to invest in
accounting system software infrastructure to assist us in complying with our obligations as
a public company.
    
    Public Company:Our general and administrative expenses will increase due to being a
public company, including the cost of periodic public reporting, investor relations, fees
to independent directors, insurance, and legal and accounting fees.
    
    Expenses:We expect that our expenses will decrease as a percentage of sales if we are
successful in expanding our business.
 Critical Accounting Policies; Use of Estimates
   Revenue and Cost Recognition
  tm
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Credit Risk, Service Provider and Supplier Risk
  tm
 tm tm
 Impairment of Long-Lived Assets
  Stock Based Compensation
   Nonemployee Options, Warrant and Convertible Debenture Valuation and Accounting
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Contractual Obligations and Commitments
  Payment Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    Over 6Total
    
    
    1 Year
    
    
    2-4 Years
    
    
    5-6 Years
    
    
    YearsLong-term debt
obligations:(1)Principal
    
    $
    10,996,209
    
    
    $
    816,238
    
    
    $
    3,921,581
    
    
    $
    6,258,390
    
    
    $
    Interest
    
    
    4,412,322
    
    
    
    1,113,632
    
    
    
    2,864,013
    
    
    
    434,677
    
    
    
    Capital leases
    
    
    382,500
    
    
    
    115,200
    
    
    
    267,300
    
    
    
    
    
    
    
    Operating leases
    
    
    492,582
    
    
    
    102,502
    
    
    
    349,800
    
    
    
    40,280
    
    
    
    $
    16,283,613
    
    
    $
    2,147,572
    
    
    $
    7,402,694
    
    
    $
    6,733,347
    
    
    $
    
 (1)
    
    Long-term debt obligations reflect payments for the principal and interest that is
based on rates that range from 8.23% to 12.00%(2)
    
    Does not include a 29 month lease, entered into in February 2007, for warehouse space
requiring monthly payments of $13,359 through June 2009.
  Qualitative and Quantitative Disclosures about Market Risk
    31




---



##### Table of Contents



Results of Operations
 Year ended December 31, 2006 compared to 2005
 Sales
 For the YearDecember 31,2006
    
    
    2005
    
    
    % Change(In thousands,except percentages)Sales
    
    $
    4,185
    
    
    $
    1,238
    
    
    
    238
    %
  Total cost of moving and storage
 For the YearDecember 31,2006
    
    
    2005
    
    
    % Change(In thousands,except percentages)Total cost
moving and storage
    
    $
    5,932
    
    
    $
    1,968
    
    
    
    201
    %Gross loss as a
percent of sales
    
    
    (42
    )%
    
    
    (59
    )%
 Cost of moving and storage (exclusive of depreciation and amortization)
 For the YearDecember 31,2006
    
    
    2005
    
    
    % Change(In thousands,except percentages)Cost moving
and storage
(exclusive of
depreciation and
amortization)
    
    $
    4,827
    
    
    $
    1,558
    
    
    
    210
    %Gross loss as a
percent (exclusive
of depreciation and
amortization) of
sales
    
    
    (15
    )%
    
    
    (26
    )%
 tm
  32




---



##### Table of Contents



Total selling, general and administrative expenses
 For the YearDecember 31,2006
    
    
    2005
    
    
    % Change(In thousands, exceptpercentages)Total selling,
general and
administrative expenses
    
    $
    6,848
    
    
    $
    2,008
    
    
    
    241
    %As a percentage of sales
    
    
    164
    %
    
    
    162
    %
  For the YearDecember 31,2006
    
    
    2005
    
    
    % Change(In thousands,except percentages)Selling, general
and administrative
expenses
    
    $
    3,408
    
    
    $
    1,799
    
    
    
    89
    %As a percentage of sales
    
    
    81
    %
    
    
    145
    %
    33




---



##### Table of Contents



Total other expense
 For the YearDecember 31,2006
    
    
    2005
    
    
    % Change(In thousands,except percentages)Total other expense
    
    $
    1,507
    
    
    $
    716
    
    
    
    110
    %As a percentage of sales
    
    
    36
    %
    
    
    58
    %
     Issuance of Stock Options
  Liquidity and Capital Resources
   34




---



##### Table of Contents



tm
 Cash Flows
   Investing Activities
  tm
 Financing Activities
    35




---



##### Table of Contents



Convertible Promissory Notes
   Off-Balance Sheet Arrangements
  
 ITEM 7.
    
    FINANCIAL STATEMENTS
  
 ITEM 8.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
 None
 
 ITEM 8A.
    
    CONTROLS AND PROCEDURES
    36




---



##### Table of Contents




    
    introduction of additional procedures to ensure a more thorough review of financial data
in the financial reporting and close process;
    
    requirement that all complex non-routine transactions during any period be researched
and detailed in written memoranda with potential related disclosure requirements and
reviewed by senior management;
    
    implementation of enhanced preparation and review procedures of our disclosure controls
and procedures by hiring of additional outside accounting and SEC reporting consultants;
    
    implementation of a program of continuing education for our accounting personnel to
enhance their training in the public company accounting and reporting matters; and
    
    continued review of our disclosure controls and procedures by our outside auditors.
   
 ITEM 8B.
    
    OTHER INFORMATION
 None
 
 PART III
 
 ITEM 9
    
    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE
GOVERNANCE;COMPLIANCE WITH SECTIONS 16(a) OF THE EXCHANGE ACT
   
 ITEM 10
    
    EXECUTIVE COMPENSATION
   37




---



##### Table of Contents



ITEM 11
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 12
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
  
 ITEM 13
    
    EXHIBITS
 The following exhibits are filed herewith and this list is intended to constitute the exhibit index:
 Exhibit Index
 Exhibit No.
    
    Description2.1
    
    Agreement and Plan of Merger*2.2
    
    Certificate of Merger3.1(i)
    
    Certificate of Incorporation, as amended and restated3.1(ii)
    
    Bylaws4.1
    
    Specimen Common Stock Certificate4.2
    
    Specimen Unit Certificate4.3
    
    Specimen Warrant Certificate10.1
    
    Form of Secured Promissory Note dated October 6, 200410.2
    
    Security Agreement October 2004 debt financing10.3
    
    Form of Warrant dated October 6, 2004 debt financing10.4
    
    Form of Warrant dated September 30, 2005 equity financing10.5
    
    Form of Secured Promissory Note dated September 26, 2005 debt financing10.6
    
    Security Agreement September 2005 debt financing10.7
    
    Form of Warrant dated September 26, 2005 debt financing10.8
    
    Form of Unsecured Note dated January 200610.9
    
    Form of Warrant dated January 2006 debt financing10.10
    
    Form of Secured Note dated July 200610.11
    
    Security Agreement dated July, 2006 debt financing10.12
    
    Form of Warrant dated July, 2006 debt financing10.13
    
    Loan and Security Agreement between A Smart Move, L.L.C. and Silicon Valley Bank dated
April 26, 200510.14
    
    Loan Modification Agreement between A Smart Move, L.L.C. and Silicon Valley Bank dated
June 21, 200510.15
    
    Second Amendment to the Loan and Security Agreement between A Smart Move, L.L.C. and
Silicon Valley Bank dated August 29, 200510.16
    
    Third Amendment and Waiver to the Loan and Security Agreement between A Smart Move, L.L.C.
and Silicon Valley Bank dated December 30, 200510.17
    
    Warrant to Purchase Common Stock dated April 15, 2005 in favor of Silicon Valley Bank10.18
    
    Warrant to Purchase Common Stock dated December 21, 2005 in favor of Silicon Valley Bank10.19
    
    Bailee Waiver to the Loan and Security Agreement between A Smart Move, L.L.C. and Silicon
Valley Bank dated August 29, 200510.20
    
    A Smart Move, L.L.C. Amended and Restated Operating Agreement dated November 30, 200510.21
    
    A Smart Move, L.L.C. Service Agreement between A Smart Move, L.L.C. and Overnite
Transportation Company dated May 9, 200510.22
    
    Master Purchase Agreement dated August 24, 200510.23
    
    Leasing Agreements between Park Western Leasing Inc. and A Smart Move, L.L.C. dated April
5, 2005
  38




---



##### Table of Contents



Exhibit No.
    
    Description10.24
    
    Office Building Lease between BRCP Greenwood Corporate Plaza, L.L.C. and A Smart Move,
L.L.C. dated May 3, 200610.25
    
    Employment Agreement with Chris Sapyta dated January 15, 200610.26
    
    Employment Agreement with Edward Johnson dated January 15, 200610.27
    
    Promissory Note between A Smart Move, L.L.C. and Chris Sapyta, dated June 15, 200510.28
    
    2006 Equity Incentive Plan*10.28
    
    Form of Option Grant Agreement10.29
    
    First Amendment to the Employment Agreement for Chris Sapyta dated September 15, 200610.30
    
    First Amendment to the Employment Agreement for Edward Johnson dated September 15, 200610.31
    
    Default Waiver and Fifth Amendment to Loan and Security Agreement10.32
    
    Form of Underwriters Warrant10.33
    
    Form of Warrant Agreement*10.34
    
    Warehouse Sublease Agreement between ACC Acquisition, LLC and Smart Move, Inc, dated
January 29, 200714.0
    
    Code of Ethics*21.1
    
    Subsidiaries of Smart Move, Inc.*24.1
    
    Power of Attorney (included on signature pages hereto).*31.1
    
    Certification of Chief Executive Officer of Smart Move, Inc. pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*31.2
    
    Certification of Chief Financial Officer of Smart Move, Inc. pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer of Smart Move, Inc.
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
    
    Previously filed with Smart Moves Registration Statement of Form SB-2 (SEC File No.
333-137931) and incorporated by reference herein.*
    
    Filed herewith.
 
 ITEM 14
    
    PRINCIPAL ACCOUNTANTS FEES AND SERVICES
   39




---



##### Table of Contents



SIGNATURES
  SMART MOVE, INC.By:
    /s/ Edward JohnsonName:
    Edward JohnsonTitle:
    Chief Financial Officer   Signature
    
    Date
    
    Title/s/ Chris Sapyta

Chris Sapyta
    
    April 2, 2007
    
    Chief Executive Officer
(principal executive
officer)/s/ Edward Johnson

Edward Johnson
    
    April 2, 2007
    
    Chief Financial Officer/s/ DOUG KELSALL

Doug Kelsall
    
    April 2, 2007
    
    Director/s/ Jack Burkholder

Jack Burkholder
    
    April 2, 2007
    
    Director/s/ JOHN JENKINS

John Jenkins
    
    April 2, 2007
    
    Director/s/ Kent Lund

Kent Lund
    
    April 2, 2007
    
    Director
  40




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Share-Based Payment
  
  F 1




---



##### Table of Contents



Smart Move, Inc.
Balance Sheet
 December 31, 2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    14,235,823Account receivable trade, net of allowance of $40,274
    
    
    121,280Contracts in process
    
    
    367,888Prepaid and other
    
    
    114,825Total current assets
    
    
    14,839,816Property and equipment, net
    
    
    9,662,213Other assets
    
    
    89,0069,751,219Total assets
    
    $
    24,591,035LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    797,508Accrued interest
    
    
    315,191Deferred revenue
    
    
    113,464Deferred income tax
    
    
    122,000Current portion of long-term debt and notes payable, (face amount of
$816,238) net of discounts of $522,599
    
    
    293,639Current portion of obligations under capital leases
    
    
    84,130Total current liabilities
    
    
    1,725,932Long-term liabilities:Long-term debt and notes payable, less current portion,(face amount of
$10,996,209) net of discounts of $5,695,423
    
    
    4,484,548Obligations under capital leases, less current portion
    
    
    250,666Deferred income tax
    
    
    2,165,000Total long-term liabilities
    
    
    6,900,214Total liabilities
    
    
    8,626,146Commitments and contingent liabilitiesShareholders equity:Preferred stock, $0.0001 par value, 10,000,000 shares authorized; no shares issued
    
    
    Common stock, $0.0001 par value, 100,000,000 shares authorized 10,171,092 issued
and outstanding
    
    
    1,017Additional paid-in-capital
    
    
    17,064,807Accumulated deficit
    
    
    (1,100,935
    )Total shareholders equity
    
    
    15,964,889Total liabilities and shareholders equity
    
    $
    24,591,035
   F 2




---



##### Table of Contents



Smart Move, Inc.
Statements of Operations
 Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,2006
    
    
    2005Sales
    
    $
    4,184,554
    
    
    $
    1,238,218Cost of moving and storage (exclusive of
depreciation and amortization shown separately
below)
    
    
    4,827,273
    
    
    
    1,557,533Depreciation and amortization
    
    
    1,104,590
    
    
    
    410,246Total cost of moving and storage
    
    
    5,931,863
    
    
    
    1,967,779Gross loss
    
    
    (1,747,309
    )
    
    
    (729,561
    )Selling, general and administrative expenses
(exclusive of depreciation and amortization
shown separately below and including noncash
compensation of $2,690,836 for the year ended
December 31, 2006)
    
    
    6,099,422
    
    
    
    1,799,150Depreciation and amortization
    
    
    99,395
    
    
    
    57,054Impairment of note receivable
    
    
    47,000
    
    
    
    151,930Write off of deferred offering costs
    
    
    602,262
    
    
    
    Total selling, general and administrative expenses
    
    
    6,848,079
    
    
    
    2,008,134Operating loss
    
    
    (8,595,388
    )
    
    
    (2,737,695
    )Other income (expense):Interest income
    
    
    107,043
    
    
    
    40,039Interest expense
    
    
    (1,614,331
    )
    
    
    (552,440
    )Other expense
    
    
    
    
    
    
    (204,000
    )Total other expense
    
    
    (1,507,288
    )
    
    
    (716,401
    )Loss before income tax benefit
    
    
    (10,102,676
    )
    
    
    (3,454,096
    )Income tax (benefit)
    
    
    (233,000
    )
    
    
    Net loss
    
    $
    (9,869,676
    )
    
    $
    (3,454,096
    )Net loss per share:Basic and diluted
    
    $
    (1.77
    )
    
    $
    (1.05
    )Shares used to compute net loss per share:Basic and diluted
    
    
    5,584,420
    
    
    
    3,283,184
   F 3




---



##### Table of Contents



Smart Move, Inc.
Statement of Changes in Shareholders Equity


Additional
    
    
    
    
    
    
    Total
    
    
    TotalMembers Equity
    
    
    Common Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Shareholders
    
    
    MembersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Equity
    
    
    EquityMembers Equity January 1, 2005
    
    
    2,835,000
    
    
    $
    1,791,536
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (634,103
    )
    
    $
    
    
    
    $
    1,157,433Conversion of accrued interest to
member shares, net of offering costs
of $5,000
    
    
    161,700
    
    
    
    201,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    201,700Issuance of member shares in
connection with private placement,
net of offering costs of $338,423
    
    
    1,346,140
    
    
    
    3,026,927
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,026,927Proceeds allocated to warrants
issued in debt offerings
    
    
    
    
    
    
    605,453
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    605,453Warrants issued to placement agent
in debt offerings
    
    
    
    
    
    
    205,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205,500Termination of warranty liability
    
    
    
    
    
    
    241,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    241,800Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,454,096
    )
    
    
    
    
    
    
    (3,454,096
    )Members Equity December 31, 2005
    
    
    4,342,840
    
    
    
    6,072,916
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,088,199
    )
    
    
    
    
    
    
    1,984,717Issuance of member shares to
officers for services rendered
    
    
    500,000
    
    
    
    2,500,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,500,000Exercise of options for cash
    
    
    40,000
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000Cashless exercise of options
    
    
    537,780
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of 2004 Notes to member
shares, net of discounts of $199,931
and fees of $33,030
    
    
    880,800
    
    
    
    1,969,039
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,969,039Issuance of shares and warrants in
connection with conversion of 2004
debt at a premium
    
    
    7,334
    
    
    
    161,140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161,140Issuance of member shares in
connection with private placement,
net of offering costs of $120,000
    
    
    473,204
    
    
    
    1,980,008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,980,008Conversion of accrued interest to
member shares, net of fees $23,736
    
    
    65,934
    
    
    
    272,964
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    272,964Proceeds allocated to warrants and
beneficial conversion features
    
    
    
    
    
    
    5,278,436
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,278,436Value of placement agent warrants
repurchased for cash
    
    
    
    
    
    
    (293,360
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (293,360
    )Net loss for the period January 1,
2006 through December 6, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,768,741
    )
    
    
    
    
    
    
    (8,768,741
    )Effect of the merger of A Smart Move
L.L.C. into Smart Move, Inc.
    
    
    (6,847,892
    )
    
    
    (17,966,143
    )
    
    
    6,847,892
    
    
    
    685
    
    
    
    5,108,518
    
    
    
    12,856,940
    
    
    
    5,109,203
    
    
    
    (5,109,203
    )Deferred tax on warrant discounts at
date of merger
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,486,000
    )
    
    
    
    
    
    
    (1,486,000
    )
    
    
    Deferred tax on beneficial
conversion features at date of
merger
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,034,000
    )
    
    
    
    
    
    
    (1,034,000
    )
    
    
    Common stock issued on December 7,
2006 pursuant to initial public
offering, net of offering costs of $2,302,315
    
    
    
    
    
    
    
    
    
    
    3,312,000
    
    
    
    331
    
    
    
    14,257,354
    
    
    
    
    
    
    
    14,257,685
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,836
    
    
    
    
    
    
    
    190,836
    
    
    
    Issuance of underwriters warrants in
connection with IPO for cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    100
    
    
    
    Conversion of 2004 Notes to common
stock
    
    
    
    
    
    
    
    
    
    
    11,200
    
    
    
    1
    
    
    
    27,999
    
    
    
    
    
    
    
    28,000
    
    
    
    Net loss for the period December 7,
2006 through December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,100,935
    )
    
    
    (1,100,935
    )
    
    
    Shareholders Equity December 31, 2006
    
    
    
    
    
    $
    
    
    
    
    10,171,092
    
    
    $
    1,017
    
    
    $
    17,064,807
    
    
    $
    (1,100,935
    )
    
    $
    15,964,889
    
    
    $
    


F 4




---



##### Table of Contents



Smart Move, Inc.
Statements of Cash Flows
 Year Ended
    
    
    Year EndedDecember 31,
    
    
    December2006
    
    
    31, 2005Cash flows from operating activities:Net loss
    
    $
    (9,869,676
    )
    
    $
    (3,454,096
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    1,203,985
    
    
    
    467,300Non-cash compensation
    
    
    2,690,836
    
    
    
    Write off of deferred offering costs
    
    
    602,262
    
    
    
    Amortization of debt discount
    
    
    351,754
    
    
    
    97,035Amortization of warrants for services
    
    
    11,786
    
    
    
    11,786Bad debt expense
    
    
    31,858
    
    
    
    8,416Additional shares issued upon conversion of debt to equity
    
    
    36,670
    
    
    
    Additional warrants issued upon conversion of debt to equity
    
    
    124,470
    
    
    
    Warrant liability
    
    
    
    
    
    
    204,000Loss on asset disposal
    
    
    7,446
    
    
    
    Impairment of notes receivable
    
    
    47,000
    
    
    
    151,930Deferred income tax benefit
    
    
    (233,000
    )
    
    
    Change in operating assets and liabilities:Accounts receivable
    
    
    (114,720
    )
    
    
    (46,834
    )Prepaid and other
    
    
    (102,083
    )
    
    
    21,786Contracts in process
    
    
    (149,168
    )
    
    
    (218,720
    )Accounts payable
    
    
    121,996
    
    
    
    477,773Accrued interest
    
    
    442,433
    
    
    
    304,258Deferred revenue
    
    
    15,273
    
    
    
    98,191Net cash used in operating activities
    
    
    (4,780,878
    )
    
    
    (1,877,175
    )Cash flows from investing activities:Additions of property and equipment (excluding items under capital lease)
    
    
    (5,789,427
    )
    
    
    (4,587,674
    )Restricted cash
    
    
    
    
    
    
    (15,000
    )Deposits on equipment
    
    
    
    
    
    
    300,000Notes receivable
    
    
    (47,000
    )
    
    
    (151,930
    )Deposits on office lease
    
    
    (44,000
    )
    
    
    Net cash used in investing activities
    
    
    (5,880,427
    )
    
    
    (4,454,604
    )Cash flows from financing activities:Proceeds from sale of member shares
    
    
    2,100,008
    
    
    
    3,265,350Offering costs on sale of and conversion to member shares
    
    
    (176,766
    )
    
    
    (338,423
    )Proceeds from IPO
    
    
    16,560,000
    
    
    
    Offering costs on IPO
    
    
    (2,302,315
    )
    
    
    Proceeds from exercise of options
    
    
    25,000
    
    
    
    Proceeds from notes payable
    
    
    6,832,500
    
    
    
    3,000,000Proceeds from subscription receivable
    
    
    
    
    
    
    28,500Notes payable issuance costs
    
    
    (532,113
    )
    
    
    (150,000
    )Proceeds from bank debt
    
    
    500,000
    
    
    
    1,490,578Bank debt issuance costs
    
    
    (4,500
    )
    
    
    (39,932
    )Payments on bank debt
    
    
    (649,637
    )
    
    
    (277,232
    )Payments on obligations under capital leases
    
    
    (79,139
    )
    
    
    (298,533
    )Issuance of underwriter warrants in connection with IPO for cash
    
    
    100
    
    
    
    Proceeds from member loan
    
    
    
    
    
    
    160,000Payments on member loan
    
    
    
    
    
    
    (60,000
    )Checks drawn in excess of available bank balances
    
    
    (199,802
    )
    
    
    193,134Deferred offering costs
    
    
    (520,279
    )
    
    
    (81,983
    )Net cash provided by financing activities
    
    
    21,553,057
    
    
    
    6,891,459Net increase in cash and cash equivalents
    
    
    10,891,752
    
    
    
    559,680Cash and cash equivalents at beginning of period
    
    
    3,344,071
    
    
    
    2,784,391Cash and cash equivalents at end of period
    
    $
    14,235,823
    
    
    $
    3,344,071
   F 5




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
 1. Nature of Business and Organization
 Business Description
   tm
 2. Summary of Significant Accounting Policies
 Revenue Recognition
 tm
 tm
     F 6




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
 Contracts in Process
  Cash and Cash Equivalents
  Restricted Cash
  Property and Equipment
  Class of Asset
    
    Useful Life in YearsSmartVaults
    
    8 yearsElectronic equipment
    
    5 yearsRolling stock and trailers
    
    5 yearsVault mold
    
    15 yearsOffice equipment
    
    3 to 5 yearsLeasehold improvements
    
    Shorter of term of lease or asset life
  Subscription receivable
  Income Taxes
   Deferred offering costs
   F 7




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
 Advertising Expenses
  Fair Value of Financial Instruments
  Concentrations of Credit, Service Provider and Supplier Risk
   tm
 tm tm
 Impairment of Long-Lived Assets
 F 8
    Table of Contents   A Smart Move, Inc.
Notes to Financial Statements
 Stock Based Compensation
    Year endedDecember 31, 2005Net loss, as reported
    
    $
    (3,454,096
    )Stock based compensation expense included in reported net loss
    
    
    Pro forma stock based employee compensation expense under fair value based method
    
    
    (628,000
    )Pro forma net loss
    
    $
    (4,082,096
    )Net loss per shareBasic and diluted  as reported
    
    $
    (1.05
    )Basic and diluted  as pro forma
    
    $
    (1.24
    )
  Nonemployee stock based compensation
  Loss Per Share
  F 9
    Table of Contents   A Smart Move, Inc.
Notes to Financial Statements
 Use of Estimates
  Recently Issued Accounting Pronouncements
  (SAB 108)
  3. Prepaid and Other Assets
  December 31,2006Prepaid insurance
    
    $
    96,883Accounts receivable other
    
    
    17,942$
    114,825
  F 10




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
 4. Property and Equipment
  December 31,2006SmartVaultsTM
    
    $
    4,361,161GPS equipment
    
    
    1,188,630Vault mold
    
    
    1,702,981Rolling stock and trailers
    
    
    3,732,415Office equipment
    
    
    341,825Leasehold improvements
    
    
    6,52011,333,532Less accumulated depreciation
    
    
    (1,671,319
    )Property and equipment, net
    
    $
    9,662,213
  5. Other Assets
  December 31,2006Debt issuance costs
    
    $
    30,006Restricted cash
    
    
    15,000Deposits
    
    
    44,000$
    89,006
 6. Notes Receivable
  7. Long-Term Debt
   F 11




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
     tm
  F 12




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
 tm
 tm
   F 13




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
  th
  F 14




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
  2006
    
    
    2006
    
    
    2005
    
    
    2006Year Ending
    
    
    
    
    
    January
    
    
    July
    
    
    Bank
    
    
    BankDecember 31,
    
    2005 Notes
    
    
    Notes
    
    
    Notes
    
    
    Note
    
    
    Note
    
    
    Total2007
    
    $
    111,306
    
    
    $
    
    
    
    $
    
    
    
    $
    538,265
    
    
    $
    166,667
    
    
    $
    816,2382008
    
    
    479,987
    
    
    
    
    
    
    
    
    
    
    
    178,222
    
    
    
    166,667
    
    
    
    824,8762009
    
    
    540,861
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,888
    
    
    
    554,7492010
    
    
    609,456
    
    
    
    1,932,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,541,9562011
    
    
    686,751
    
    
    
    
    
    
    
    5,000,000
    
    
    
    
    
    
    
    
    
    
    
    5,686,7512012
    
    
    571,639
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    571,639Total
    
    
    3,000,000
    
    
    
    1,932,500
    
    
    
    5,000,000
    
    
    
    716,487
    
    
    
    347,222
    
    
    
    10,996,209Less discounts
    
    
    613,034
    
    
    
    1,320,780
    
    
    
    3,511,799
    
    
    
    15,843
    
    
    
    15,863
    
    
    
    5,477,319Less offering costs
    
    
    122,524
    
    
    
    147,678
    
    
    
    470,501
    
    
    
    
    
    
    
    
    
    
    
    740,703Less current maturity
    
    
    111,306
    
    
    
    
    
    
    
    
    
    
    
    538,265
    
    
    
    166,667
    
    
    
    816,238Current portion of
discounts
    
    
    (167,298
    )
    
    
    (121,064
    )
    
    
    (208,483
    )
    
    
    (14,520
    )
    
    
    (11,234
    )
    
    
    (522,599
    )Long term-portion
    
    $
    2,320,434
    
    
    $
    585,106
    
    
    $
    1,226,183
    
    
    $
    176,899
    
    
    $
    175,926
    
    
    $
    4,484,548
 8. Capital Lease Obligations
  Year Ending December 31,2007
    
    $
    115,2002008
    
    
    115,2002009
    
    
    115,2002010
    
    
    36,900Total
    
    
    382,500Less interest
    
    
    47,704334,796Less current maturity
    
    
    84,130Long-term portion
    
    $
    250,666
 9. Authorized Capital
 Common Stock
  Preferred Stock
   F 15




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
       10. Stock Incentives and Options
 Overview
    F 16




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
    Year EndedDecember 31,2006Risk-free interest rate
    
    
    4.62 to 4.71
    %Expected life in years
    
    
    6Expected volatility
    
    
    33
    %Dividend yield
    
    
    Weighted-average fair value
    
    $
    1.86
   F 17




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contract Term
    
    
    IntrinsicShares
    
    
    Price
    
    
    In Years
    
    
    ValueOutstanding as of January 1, 2005
    
    
    200,000
    
    
    $
    0.625Granted
    
    
    600,000
    
    
    $
    1.50Outstanding as of December 31,
2005
    
    
    800,000
    
    
    $
    1.28Exercised for cash
    
    
    (40,000
    )
    
    $
    0.625Exercised cashless
    
    
    (760,000
    )
    
    $
    1.32Granted
    
    
    774,000
    
    
    $
    5.29Outstanding as of December 31,
2006
    
    
    774,000
    
    
    $
    5.29
    
    
    
    9.94
    
    
    $
    Vested and Exercisable as of
December 31, 2006
    
    
    108,000
    
    
    $
    4.73
    
    
    
    9.99
    
    
    $
    
  WeightedAverage Grant-Date FairShares
    
    
    ValueUnvested as of December 31, 2005
    
    
    
    
    
    $
    Granted
    
    
    774,000
    
    
    $
    1.86Vested
    
    
    (108,000
    )
    
    $
    1.95Unvested as of December 31, 2006
    
    
    666,000
    
    
    $
    1.85
    F 18




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
 Warrants
  Date of Grant
    
    Granted For
    
    Shares
    
    
    Exercise Price
    
    
    YearsSeptember 2004
    
    Consulting agreement
    
    
    120,000
    
    
    $
    0.625
    
    
    
    5September 2004
    
    Placement agent equity offering
    
    
    178,876
    
    
    $
    0.625
    
    
    
    5September 2004
    
    2004 Note offering
    
    
    243,272
    
    
    $
    0.625
    
    
    
    5September 2004
    
    Placement agent debt offering
    
    
    180,000
    
    
    $
    0.625
    
    
    
    5December 31, 2004
    
    Balance
    
    
    722,148
    
    
    $
    0.625
    
    
    
    5April 2005
    
    Bank debt
    
    
    100,000
    
    
    $
    0.875
    
    
    
    7March 2005
    
    Placement agent interest conversion to equity
    
    
    10,000
    
    
    $
    1.20
    
    
    
    5September 2005
    
    Equity offering
    
    
    673,070
    
    
    $
    5.00
    
    
    
    5September 2005
    
    Placement agent equity offering
    
    
    134,614
    
    
    $
    2.50
    
    
    
    5September 2005
    
    Placement agent equity offering
    
    
    67,308
    
    
    $
    5.00
    
    
    
    5September 2005
    
    2005 Note
    
    
    360,000
    
    
    $
    2.50
    
    
    
    5September 2005
    
    Placement agent debt offering
    
    
    120,000
    
    
    $
    2.50
    
    
    
    5September 2005
    
    Placement agent debt offering
    
    
    60,000
    
    
    $
    5.00
    
    
    
    5September 2005
    
    2005 Total
    
    
    1,524,992
    
    
    $
    .875 to $5.00
    
    
    
    5 to 7December 31, 2005
    
    Balance
    
    
    2,247,140
    
    
    $
    .625 to $5.00
    
    
    
    5 to 7January 2006
    
    Bank debt
    
    
    13,000
    
    
    $
    3.75
    
    
    
    7January 2006
    
    Placement agent debt offering
    
    
    41,226
    
    
    $
    3.75
    
    
    
    5January 2006
    
    Placement agent debt offering
    
    
    10,306
    
    
    $
    5.00
    
    
    
    5January 2006
    
    2006 Note offering (Jan Notes)
    
    
    128,834
    
    
    $
    5.00
    
    
    
    5July 2006
    
    2006 Note offering (July Notes)
    
    
    400,000
    
    
    $
    7.00
    
    
    
    5September 2006
    
    Placement agent debt offering
    
    
    80,000
    
    
    $
    3.75
    
    
    
    5September 2006
    
    Placement agent debt offering
    
    
    24,000
    
    
    $
    5.00
    
    
    
    5September 2006
    
    Placement agent warrants repurchased (1)
    
    
    (104,000
    )
    
    $
    3.75 to $5.00
    
    
    
    5September 2006
    
    Equity offering
    
    
    539,138
    
    
    $
    7.50
    
    
    
    5September 2006
    
    Inducement warrants
    
    
    60,000
    
    
    $
    7.50
    
    
    
    5December 2006
    
    Public offering warrants
    
    
    3,312,000
    
    
    $
    7.50
    
    
    
    5December 2006
    
    Underwriters option
    
    
    288,000
    
    
    $
    6.25
    
    
    
    5December 2006
    
    Underwriters option
    
    
    288,000
    
    
    $
    8.40
    
    
    
    5December 31, 2006
    
    Total
    
    
    5,080,504
    
    
    $
    3.75 to $8.40
    
    
    
    5 to 7December 31, 2006
    
    Balance
    
    
    7,327,644
    
    
    $
    .625 to $8.40
    
    
    
    5 to 7
 (1)
    
    As discussed in Note 7 these warrants were repurchased for $52,000.
  F 19




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
  Warrants Outstanding and ExercisableWeighted-AverageRemainingYear of
    
    Range of Warrant
    
    
    Number of
    
    
    Weighted-Average
    
    
    Contractual LifeGrant
    
    Exercise Price
    
    
    Warrants
    
    
    Exercise Price
    
    
    (Years)2004
    
    $
    0.625
    
    
    
    722,148
    
    
    $
    0.625
    
    
    
    2.752005
    
    $
    0.875 to $5.00
    
    
    
    1,524,992
    
    
    
    3.70
    
    
    
    3.852006
    
    $
    3.75 to $8.40
    
    
    
    5,080,504
    
    
    
    7.33
    
    
    
    4.86Total
    
    $
    .625 to $8.40
    
    
    
    7,327,644
    
    
    $
    5.91
    
    
    
    4.44
   Risk Free
    
    
    ExpectedInterest
    
    
    Dividend
    
    
    Expected
    
    
    VolatilityDate of Grant
    
    Rate
    
    
    Yield
    
    
    Life
    
    
    RangeSeptember 30, 2004 at $0.625
    
    
    3.44
    %
    
    $
    
    
    
    
    5
    
    
    
    45%-65
    %April 30, 2005 at $0.875 to $1.20
    
    
    4.09
    %
    
    $
    
    
    
    
    5 to 7
    
    
    
    45%-65
    %September 30, 2005 at $2.50 to $5.00
    
    
    4.18
    %
    
    $
    
    
    
    
    5
    
    
    
    45%-65
    %January 24, 2006 at $3.75 to $5.00
    
    
    4.28
    %
    
    $
    
    
    
    
    5 to 7
    
    
    
    45%-65
    %July 26, 2006 at $3.75 to $7.50
    
    
    4.99
    %
    
    $
    
    
    
    
    5
    
    
    
    45%-65
    %September 15, 2006 at $7.50
    
    
    4.76
    %
    
    $
    
    
    
    
    5
    
    
    
    45%-65
    %
    F 20




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
  C-Corporation
  Year EndedDecember 31,2006Current:Federal
    
    $
    State
    
    
    Deferred:Federal
    
    
    (204,000
    )State
    
    
    (29,000
    )(233,000
    )Income tax (benefit)
    
    $
    (233,000
    )
  Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2006
    
    
    2005Provision (benefit)Computed tax on book loss at the federal statutory
rate of 35%
    
    $
    (3,536,000
    )
    
    $
    (1,209,000
    )Pretax loss of A Smart Move, L.L.C. from January 1,
2006 to December 6, 2006 and for the year ended
December 31, 2005 at the federal statutory rate of
35%
    
    
    3,151,000
    
    
    
    1,209,000State taxes, net of federal benefit
    
    
    (55,000
    )
    
    
    Non-deductible incentive stock options and other
    
    
    75,000
    
    
    
    Deferred tax expense upon merger with Smart Move, Inc.
    
    
    132,000
    
    
    
    Income tax (benefit)
    
    $
    (233,000
    )
    
    $
    
  F 21




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
  December 31,2006Current deferred tax assets (liabilities):Deferred revenue
    
    $
    45,000Allowance for doubtful accounts
    
    
    16,000Accrued vacation
    
    
    3,000Deferred expenses
    
    
    (147,000
    )Prepaid insurance
    
    
    (39,000
    )(122,000
    )Long-term deferred tax assets (liabilities):Intangibles assets
    
    
    474,000Net operating loss carryforwards
    
    
    394,000Beneficial conversion features
    
    
    (1,031,000
    )Warrant allocation on debt
offerings
    
    
    (1,456,000
    )Property and equipment
    
    
    (546,000
    )(2,165,000
    )Net deferred tax (liability)
    
    $
    (2,287,000
    )
  13. Supplemental Disclosure of Cash Flow Information
 Ended December 31,
    
    2006
    
    
    2005Supplemental disclosure of cash
flow information:Cash paid during the period for interest
    
    $
    627,460
    
    
    $
    237,030Supplemental schedule of noncash
investing and financing activities:Conversion of accrued interest to
member shares
    
    $
    296,700
    
    
    $
    201,700Equipment acquired under capital lease
obligation
    
    $
    
    
    
    $
    712,468Conversion of debt to shares
    
    $
    2,030,069
    
    
    $
    100,000Warrants issued for debt offering costs
    
    $
    184,594
    
    
    $
    205,500Allocation of value of warrants issued
in connection with debt
    
    $
    1,243,952
    
    
    $
    605,453Allocation of value of beneficial
conversion feature in connection with
debt
    
    $
    3,556,530
    
    
    $
    Equipment acquired included in accounts
payable
    
    $
    192,584
    
    
    $
    
  F 22




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##### Table of Contents



A Smart Move, Inc.
Notes to Financial Statements
 14. Related-Party Transactions
  15. Commitments and Contingents
 Operating lease commitments
    Year Ending December 31,
    
    December 31, 20062007
    
    $
    102,5022008
    
    
    113,4202009
    
    
    116,6002010
    
    
    119,7802011
    
    
    40,280Total
    
    $
    492,582
  F 23




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##### Table of Contents



Employment Agreements
 th th
 Retirement plan
  Legal Proceedings
  16. Subsequent Events
     F 24




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##### Table of Contents



Exhibit Index
 Exhibit No.
    
    Description2.2
    
    
    Certificate of Merger10.28
    
    
    Form of Option Grant Agreement10.34
    
    
    Warehouse Sublease Agreement between ACC Acquisition, LLC and Smart Move, Inc, dated
January 29, 200721.1
    
    
    Subsidiaries of Smart Move, Inc.24.1
    
    
    Power of Attorney (included on signature pages hereto).31.1
    
    
    Certification of Chief Executive Officer of Smart Move, Inc. pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer of Smart Move, Inc. pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer and Chief Financial Officer of Smart Move, Inc.
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.