MVE Smart Move,

 

 

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, 2007

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.

(Name of small business issuer in its charter)

Delaware		54-2189769
(State or other jurisdiction of incorporation		(IRS Employer Identification No.)
or organization)

5990 Greenwood Plaza Blvd, Suite 390
Greenwood Village, CO 80111
(Address of Principal Executive Offices)
Issuer’s telephone number: 720-488-0204

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). o Yes þ No

The issuer’s revenues for its most recent fiscal year were $5,810,898.

As of March 12, 2008, the aggregate market value of the registrant’s common stock held by non-affiliates based on the closing sale price of Common Stock was $5,450,224. As of June 30, 2007, the aggregate market value of the registrant’s outstanding common equity held by nonaffiliates was $27,945,453, based on the closing prices of the registrant’s stock on June 29, 2007, the last trading day of the registrant’s most recently completed second fiscal quarter. For purposes of this calculation, shares of common stock held by each executive officer and director and by holders of more than 5% of the outstanding common stock have been excluded since those persons may under certain circumstances be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 12, 2008, the issuer had 12,399,623 shares of common stock outstanding.

Transitional Small Business Disclosure Format (check one): Yes o No þ

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates certain information by reference from the registrant’s definitive Proxy Statement for the 2008 Annual Meeting of Stockholders which Proxy Statement will be filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2007.

Transitional Small Business Disclosure Format (Check one): o Yes þ No

 

 

NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-KSB contains forward-looking statements concerning our financial condition, results of operations and business, including, without limitation, statements pertaining to:

	•		The development of new services and product and the expansion of our current markets;
	•		Implementing aspects of our business plans;
	•		Expectations regarding business generated through marketing alliance and other referral programs
	•		Financing goals and plans;
	•		Our existing cash and whether and how long these funds will be sufficient to fund our operations
	•		Our raising of additional capital through future equity or debt financings; and
	•		General economic conditions

These and other forward-looking statements are primarily in the sections entitled “Item 6 - Management’s Discussion and Analysis” and “Item 1 — Business.” Generally, you can identify these statements because they use phrases like “anticipates,” “believes,” “expects,” “future,” “intends,” “plans,” and similar terms. These statements are only predictions. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy, and actual results may differ materially from those we anticipated due to a number of uncertainties, many of which are unforeseen. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Report. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including those stated in this Report.

We believe it is important to communicate our expectations to our investors. There may be events in the future, however, that we are unable to predict accurately or over which we have no control. Cautionary language in this Report provides examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Such factors include, among other things, risks and uncertainties discussed throughout Item 1 — Business and Item 6 — Management’s Discussion and Analysis .

We are not obligated to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Report and other statements made from time to time by us or our representatives might not occur. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Smart Move, Inc.
Form 10-KSB
Index

		Page
PART I			4
ITEM 1. DESCRIPTION OF BUSINESS			4
ITEM 2. DESCRIPTION OF PROPERTY			24
ITEM 3. LEGAL PROCEEDINGS			24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			24
PART II			25
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS			25
ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS			28
ITEM 7. FINANCIAL STATEMENTS			43
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			43
ITEM 8A. CONTROLS AND PROCEDURES			43
ITEM 8B. OTHER INFORMATION			44
PART III			45
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTIONS 16(a) OF THE EXCHANGE ACT			45
ITEM 10. EXECUTIVE COMPENSATION			45
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS			45
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE			45
ITEM 13. EXHIBITS			45
ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES			48
PART F/S
Independent Auditors Report			F1
Balance Sheet			F2
Statement of Operations			F3
Statement of Changes in Shareholders’ Equity			F4
Statement of Cash Flows			F5
Notes to Financial Statements			F6
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I

Liquidity and Capital Resources

Our financial statements have been prepared on the assumption that we are a going concern and that we will be able to realize our assets and discharge our liabilities in the normal course of business; however certain events and conditions cast substantial doubt on this assumption. We have incurred net losses since our inception and we anticipate that we will continue to operate in a deficit position for the foreseeable future. We have estimated that we will need additional capital of $2,500,000 during 2008 in order to fund our operations, make our scheduled debt payments and implement our business plan during the next twelve months. This amount of capital could be less or more depending upon the volume of sales and the timing of the sales volume during the year. Due to our historical inability to generate revenue to cover all operating costs, and the difficulty of predicting future revenue, we will require additional financing in order to conduct our normal operating activities and cover our monthly expenses. There can be no assurance that we will be able to obtain the additional financing we require, or be able to obtain such additional financing on terms acceptable to our Company. These circumstances raise substantial doubt in our ability to continue as a going concern.

Because of our loss from operations, and our need for additional financing in order to fund 2008 obligations our independent auditors included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern.

For additional information regarding factors which could affect our ability to meet our obligations, please see the “Risk Factors” section below in this Item 1, and the sections titled “Liquidity and Going Concern” in Item 6 of this Report.

Strategy Overview

Our overall business objective is to be a leading provider of affordable solutions for a wide range of both individual and commercial customers who require predictable, reliable and secure moves and/or storage to minimize the uncertainties and frustrations generally associated with the moving experience. The problems we undertake to solve for customers have been widespread through the industry and our ability to deal with them helps us to generate goodwill for the future by improving our customers’ moving experiences. The issues and concerns we address include such common problems as:

	•		Inflexible or indefinite schedules for consumer moves;
	•		Hidden costs of overhead or of insuring goods;
	•		Consumers’ inability to control important aspects of the move; and
	•		Risks of inadvertent offloads of goods at interim points during transit, increasing risk of loss or property theft.

We provide a solution that eliminates the underlying cause of these common problems experienced during moves. Smart Move’s service model: (i) does not require customers to rent or drive trucks to the destination; (ii) provides ease of customer use of our standardized moving containers and our content loading processes; (iii) the consumers goods are loaded and unloaded only once; and (iv) provides scheduling convenience and time saving that avoids the crisis management scenarios typically associated with consumers’ moving experiences. Key elements of our strategy include:

	•		Efficient utilization of our specially designed proprietary SmartVault™ 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 SmartVaults™ 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
	•		Ability to replicate the model in additional markets to increase revenue opportunities; and
	•		Offer our services direct to our “competition”, the industry’s leading moving companies as clients.

Asset Based Strategy

The key asset component of our solution and overall strategy is the maintenance of a proprietary fleet of unique containers designed to ship household and commercial goods in a secure, protected environment. Our specially designed, SmartVaults™ are equipped with a global positioning (GPS) device enabling the Company to track and map the location of the vault throughout the supply chain. The features of the SmartVault™ also include:

	•		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.

The all aluminum deck and base of the SmartVault™ combines with the durable HDPE composition of these containers to allow a longer useful life for the entire unit. The aluminum base also enables the container to be used in additional vertical markets where wood containers are generally considered unsuitable for transport of goods, such as pharmaceutical, food and international shipments. In addition to being of a uniform size, our SmartVault™ containers are designed to be readily loaded by forklift and can be transported inside of all standard trailers and sea containers. The SmartVault’s™ sturdy and waterproof structure and its ability to be locked and secured also provide a high degree of protection from transit-related damage and theft. The risk of loss or excessive delay in transit is further reduced by our ability to monitor the location of each of our SmartVaults™ through the combined tracking functionality of bar-code scanning and GPS. The SmartVault’s™ security features and our ability to track these assets fosters the availability of lower cost insurance against the loss of or damage of goods during transit.

Strategic Outsourcing of Warehouse and Transportation Requirements

The ability to maximize our operational leverage through strategic outsourcing of trucking and warehouse infrastructure is a key element of our business model. By avoiding the direct capital outlay required to acquire and maintain transportation equipment and facilities across the country, and the associated costs of administration, environmental compliance and highly variable fuel costs, we are able to focus our operational and financial resources on optimizing the use of our proprietary fleet of SmartVault™ containers. We believe that our best of breed SmartVault™ units, which are manufactured from sturdy and highly durable, recyclable material and which have a significantly longer usable life and greater versatility than competitive container products, represent a state-of-the-art container for a broad range of moving service markets in which containerized shipping offers significant advantages.

UPS Freight provides the vast majority of our pick-up and delivery needs within local markets (consisting of markets within an approximate 100-mile radius of our terminals in various geographic locations). UPS Freight also provides a majority of our terminal to terminal transportation and warehousing service requirements. Rather than building a costly infrastructure with associated overhead demands, we have outsourced these requirements by contracting with UPS Freight. Consequently, we avoid recurring fixed costs for transportation and warehouse storage that conventional movers incur as we are able to access most of our transport and warehousing requirements cost-effectively through contract arrangements with UPS Freight. Our agreement with UPS Freight requires UPS Freight to perform a variety of functions with regard to our containers on a non-exclusive basis, including, but not limited to, vault delivery, vault pick-up, vault line haul transportation and container storage. Our agreement with UPS Freight has a stated 36-month term that expires August 24, 2008. Although either party may terminate the agreement at any time by giving the other party 90 days’ written notice of termination, we believe the UPS Freight relationship provides strategic advantages for both Smart Move and UPS Freight that will foster its continuation. Smart Move will continue to require the ability to outsource to other firms the types of services we obtain from UPS Freight in order to expand rapidly and to be able to use our available capital for SmartVault™ purchases and revenue growth.

Although we would incur significant delays and associated costs in the event of any termination of our strategic relationship with UPS Freight, we believe that other major cartage providers in the logistics transport sector would be available to contract with us to meet our outsourcing requirements on a cost-effective basis. While UPS Freight performs the shipping, delivery and storage service components of our containerized moving services, we remain the primary contact for our customers and negotiate the price and schedule of services, including delivery and pickup. We direct UPS Freight to carry out the delivery and pick-up of our containers to and from the customer’s location. Smart Move pays UPS Freight a set fee per trip, so that our costs are fixed, except for a fuel surcharge. We also provide the trailer and forklift equipment for the local delivery. UPS Freight is required to provide on-going quality control inspections, training and safety consistent with our requirements. Once the vault is ready to be deployed to another city, UPS Freight will deliver the SmartVaults™ on its existing trucks that are traveling to that destination. National and regional freight carriers such as UPS often cannot fill their trucks to capacity and consequently are able and willing to offer very competitive rates to move our vaults long distance in order to fill their unused trailer space.

Use of Tracking Technology

We have the ability to track our containers by means of two compatible and synergistic technologies. We utilize a proven, reliable barcode-based logistics tracking system currently maintained by UPS Freight and supplement this online tracking functionality with our own proprietary GPS tracking technology. We continue to refine these technology components of our service offering.

Our tracking technology and our proprietary inventory software allow us to manage and monitor our assets on a continuous basis. We expect that having the technology-enabled ability to track SmartVaults™, spot trends, manage our own supply chain and predict future inventory needs allows us to increase vault utilization rates and increase revenues. Our customers benefit from our combined tracking technologies and processes. The UPS Freight Pro Number ^TM tracking system and our GPS system both allow our customers to track their goods, thereby providing the sense of security, control and peace of mind that the move is progressing as planned, with precision and accuracy.

Market Opportunity

Smart Move competes in the U.S. household moving and storage industry. This industry generates combined annual revenues of approximately $31 billion. The interstate and local U.S. household moving and storage industry component alone represents revenues of approximately $13 billion annually. The 20 largest companies control approximately 35 percent of the market. (Source: The American Movers and Storage Association, September 2005)

We currently offer our services in 61 of the largest U.S. metropolitan centers from the terminals of our primary transportation provider, UPS Freight. Our expansion plan calls for expansion into additional metropolitan markets and adding additional equipment to existing centers to increase productivity capacity.

Market Opportunity in the Domestic Moving and Storage Industry

The containerized moving business is an emerging business segment with attractive growth and market opportunities. In recent years, the moving industry has offered consumers the option of containerized “do-it-yourself” moves only on a local basis, maintaining traditional practices for the interstate segment of the market. Historically, local container moves have been undertaken mainly by smaller “mom and pop” operations. Often, the containers used by these firms have been low-quality plywood crates. The few companies that do offer more durable, updated containers within these markets have limited flexibility in their loading and shipping methods. Some companies have developed serviceable storage boxes but have not used the boxes successfully on a national basis. We believe we are well positioned as an early entrant in this market to offer a credible nationwide service and that we are the first company primarily dedicated to serving the interstate market.

Consistent Migration of the U.S. Population

According to the latest U.S. Census Bureau report,” Geographical Mobility 2006”, every year 40 to 42 million Americans move. This involves 17 million households utilizing moving services of some nature, whether it be a full service move or simply renting a truck for a self-move. Approximately 20% of those moves are regional in scope, involving a length of haul extending outside of a given county, but within the same state. Another 14% involve longer distance moves to another state or country. Our immediate target is the interstate market which is estimated at about 2.38 million moves per year.

We have identified the top 60 cities with respect to their total moving activity. Significant synergies exist in serving these cities because over 80% of all moves are between these cities. The data we have received from the 10 largest national moving companies indicate that those companies provide over 500,000 interstate moves per year undertaken into and out of the top 30 cities. This data does not include any statistics regarding the number of self moves nor does it reflect second tier moving company activity. Consequently, we believe the market for these moves is actually much larger. We launched our services in those 30 top ranked cities in May of 2005 and have subsequently added an additional 31 cities. Through UPS Freight, we have access to operational terminals in all major metropolitan areas. To expand further, we would need to procure a sufficient number of SmartVaults™ for each city in order to be able to commence local operations and to supply each city with our standard forklift and flat bed trailer for local pick up and delivery. Our strategic objective is to maintain a sufficient number of locations from which containers can be accessed to allow movements within Smart Move’s network to be coordinated on the most cost-effective basis. Our proprietary fleet of SmartVaults™ allows positioning and redeployment of empty containers that are ready for next use to any other location within our network and avoids the need for individual SmartVaults™ to be returned only to a base location. This allows freight cost and administrative efficiencies to be realized on a fleet-wide basis and repositioning of containers to be based on multiple factors including demand and length of haul.

Other Statistical Indicators of the Domestic Opportunity

The following statistics further support the demand for a flexible, secure and efficient moving solution:
(Source: US Census Bureau)

	•		40 million people (16% of the population) moved between March 2005 and 2006;
	•		14% of movers relocated to another state; 20% moved to another county in the same state; the majority of which 62% stayed within the same county, 4% came from abroad;
	•		The average American moves 12 times in a lifetime;
	•		30% of renters in the US and 7% of homeowners moved to a different residence in 2006; 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.

Competition

Our main competitors include the self-storage facilities and portable storage and moving service providers described below. The discussion which follows reflects the Company’s own assessment of the competitive landscape it is facing and is based in part on our review of a variety of publicly available sources of information regarding these companies, including (but not limited to) SEC filings made by public companies and the descriptions of activities and operations contained in corporate websites.

Public Storage, Inc. is the largest self-storage company in the US, with interests in about 1,100 storage facilities in 38 states. Over 80% of its sales come from self-storage properties located mostly in larger cities and rented for personal or business use. This firm also rents commercial and industrial storage space, rents and transports portable self-storage units, and owns retail stores that rent trucks and sell related moving items.

PODS Enterprises, Inc. is a Florida company providing Portable On Demand storage and moving services in certain parts of Florida and Illinois. The company is also a franchiser of PODS protected franchise areas in 132 metropolitan areas in 42 states. PODS was recently acquired by ARCAPITA, Inc, for approximately $430 million (announced December 21, 2007).

Major Van Lines, including well known long distance moving companies such as United, Atlas, North American, Allied, Mayflower, Bekins and Wheaton, each with annual revenues of $150 million to over $1 billion provide a range of services within markets that include those in which we operate. These companies offer full service moves to consumers through their network of agents and have operations in a majority of the largest 100 cities in the United States. These van lines all operate and require their local agents to operate truck and trailer moving assets to complete the moves required by their traditional customer base.

Local Movers include thousands of existing small, local companies that perform moves only within their immediate local markets. The typical local mover has 15 employees, 2 to 3 trucks and annual revenues of less than $1 million.

The following table summarizes the principal areas in which commercial and residential movers compete and identifies areas in which we believe we offer a competitive advantage:

We provide solutions for both individual consumers and businesses in need of moving services or desiring to use secured containers to ship and/or to store commercial goods. Most of our competitors act as independent agents on behalf of large transportation providers, and are forced to make significant capital investment in trucks and trucking equipment. We “outsource” our trucking service requirements on a contract basis that avoids a need for extensive infrastructure. As a result, we believe that we enjoy a competitive advantage because we are able to scale our operations activity to match our current level of demand very rapidly. Our business model and processes also allow us to operate on a cost-efficient basis with a small labor force and to replicate the model in additional markets to increase revenue opportunities.

We believe that traditional movers have failed to address basic consumer issues and service problems in the following fundamental respects:

	•		High overhead costs passed onto consumers;
	•		Capital-intensive infrastructure;
	•		Property theft and loss;
	•		Inflexible schedules for consumers;
	•		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.

Conventional movers find it difficult to address the issues and problems listed above on a cost-effective basis. Our business model and implementation strategy is designed to minimize these common problems and to improve our customers’ moving experience. We believe that the combination of design features, loading flexibility and efficient and predictable cube-configured space requirements of our SmartVault™ also gives us a competitive advantage over container storage companies like PODS ^® , and Public Storage. In addition to being of a uniform size, our SmartVault™ containers are designed to be readily loaded by forklift and can be transported by all standard trailers and sea containers. The SmartVault’s™ sturdy and waterproof structure and its ability to be locked and secured also provide a high degree of protection from transit-related damage and theft. The risk of loss or excessive delay is further reduced by our ability to monitor the location of each of our SmartVaults™ through the combined tracking functionality of bar-code scanning and GPS. The SmartVault’s™ security features and our ability to track these assets fosters the availability of lower cost insurance against the loss or damage of goods during transit.

Value Added to the Customer

Most insurance and liability claims in the moving industry relate to lost or missing goods. The Smart Move solution minimizes the risk of loss of goods by allowing customers to place their own lock on the vaults and, as an added security feature, a secure seal is attached by UPS Freight to the vault at the time of shipment. Customers are thereby assured that their goods have not been touched or handled multiple times, as it is often the case with moves handled by traditional movers. We also believe that we can provide customers a cost savings of from 15% to 20% (a part of which savings comes from a customer’s election to pack his or her own goods), depending upon the type of move, service level, distance, origin and destination, as compared to the pricing offered by traditional movers. Also, we provide consumers with convenience and flexibility. The consumer is afforded the significant planning advantage of more time to pack and fill the container prior to shipment and to unload it upon arrival at the destination site. For example, in a traditional full service move, the customer must, generally, be ready to move out and have all goods loaded in one day. Then, upon arrival at his or her destination, the customer must accept the household goods on the assigned delivery date or pay additional fees. Consumers using Smart Move’s services, in contrast, can load, take delivery, ship and store their goods in a warehouse near the destination for up to 28 days without incurring additional charges. If additional storage time is required, we are able to provide the required storage at a very competitive price of $2.00 per day, per vault.

The benefits to the end-user of our solution include:

	•		No Trucks to Rent and Drive. When renting our SmartVault™ 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 have liability for accidents they may cause while operating the vehicle. In addition, many states require that 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 SmartVault™ will be delivered directly to their location and left for packing. The customers can take as much time as they wish to pack the SmartVault™. Once loaded, we return to pick up, load and transport the SmartVault™ to the customers’ final destination. Upon the delivery of the SmartVault™, 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 SmartVault™, 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 SmartVault™ container, pack the unit we provide and phone for a pickup.

Future Competition.

Although we believe that we offer superior flexibility, cost structure, asset pooling efficiencies and technology-enabled containers, we recognize that cost-driven entry barriers for this industry are relatively low. In addition, as more businesses become aware of our business model and services, we believe others may attempt to copy our concept. However, a competitor desiring to gain entry into this industry and to compete directly with us by offering a similar service would have to overcome the following obstacles:

	•		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.

We believe that we will need to continue to maintain superior quality moving containers and service standards and to pursue an aggressive marketing program in order to maintain and expand our market share within market sectors in relation to these competitors and we expect our methods of competition in the containerized moving sector to include:

	•		continuing our efforts to develop, and deploy Smart Vaults, which, when compared to existing alternative moving containers available in the marketplace, perform more efficiently and are made available as part of our services on terms that are acceptable to the market;
	•		building upon the business platforms and alliance relationships we have established to pursue additional co-marketing and cross-referral opportunities;
	•		pursuing opportunities in selected special use markets for which our GPS-enabled containers support customers’ asset management and location monitoring requirements.

International Moving Opportunity

We continue to evaluate potential opportunities for expansion of our services into Europe and elsewhere. The EU market, in particular, presents the same challenges and opportunities we have identified in the US, i.e. long distances, high fuel costs, shipping an empty truck back to its origin country, etc. Through establishing services and strategic operating alliances within selected EU countries, we may be able to expand our network to include moves between these countries and to offer similar cost savings to those provided our U.S. customers for interstate moves by not having to return empty assets to origin.

For international moves, we intend to use the same basic business model we have developed for domestic moves with appropriate refinements tailored to local operating conditions. We have currently established a business relationship with a freight forwarding company specializing in expatriate moves to Europe. We execute these moves by first contracting with a U.S.-based customer for a move to one of the cities we propose to service and then arrange to deliver our containers to an overseas shipper’s U.S. terminal. The freight forwarders with which we engage accepts responsibility for shipping the containers to their ultimate destination.

Smart Move currently is able to provide full service moves to United Kingdom, Ireland, Germany, Netherlands, Belgium and France without any significant additional capital outlays to service those markets since we use third-party independent freight forwarders to service those markets.

Asset Tracking Technology-Market Opportunity

Our subsidiary, Rapid ID, Inc., will be pursuing efforts to develop and market an alternative solution for tracking of assets, documents and information that currently are tracked by bar-codes, RFID and other scanning-based tracking technologies. Rapid ID, Inc. is in an early, development stage of operations, seeking to develop and refine applications of an alternative technology to RFID. Rapid ID’s technology will combine GPS functionality with cell phone technology components to provide a lower cost tracking alternative to RFID. The RFID industry is fragmented and market size estimates range from $2 billion in 2006 to a future market size to be in excess of $26 billion in 2015. The current RFID solutions offered can be expensive and time consuming to implement. We believe that the technology offers a low cost option to a segment of the market place looking to track assets efficiently, with GPS information or data included on a time sensitive basis. We have invested approximately $180,000 to date and will not be required to invest any additional funds.

The Rapid ID Solution

Using our proprietary software attributes of mapping data base design, barcode process software and combining it with a third party software and a picture cell phone, provides a unique tracking solution, that provides real time GPS location and other captured data of the “tracked item.” The process has the ability to read and record one and two dimensional bar codes, human readable numbers, logos, or names of locations, and transmit those images from a cell phone into a central server and translate that into useful data for Smart Move and other customers.

By bundling our proprietary software with licensed software of other companies, we will be able to deploy camera cell phone picture technology to capture a bar code or other unique identification code, and to identify and track the movement of the assets, at each of the contact points during transit for which a customer wishes to capture such data.

Value Added to the Customer

Key advantages for the consumer will include the low cost of installation and the utilization of proven cell phone technology. Rapid ID offers an accurate methodology of tracking assets world wide. The solution can be offered separately or in combination with the logistics component of Smart Move’s solution to its target commercial clients who need a secure method of transportation services for high value products that require specialized handling and tracking capabilities. This will typically be any product or asset of high dollar value, that is subject to theft or tampering, and is important for both the assets and the contents to be tracked, monitored and delivered on a timely basis. The Rapid ID concept is designed to compete favorably with current various RFID solutions which are typically expensive to deploy, limited to high volume applications, and can be costly to maintain.

Execution of the Our Plan for Rapid ID

Our plan is to first provide test programs to targeted markets. If these pilot tests are successful, we will attempt to market this technology with industry leading partners.

Competition in the Technology Sector

Our competition will be from many different sources. Some are large consulting groups or large manufacturers of RFID products and solutions, while others are local companies focused on providing solutions to the industry-specific requirements of companies based in the same geographical area. Initially we will target large companies that are seeking a low cost solution, such as shipping and delivery companies, the marine container industry and defense suppliers of critical and high-cost assets, such as the following target markets:

	•		Governmental Agencies;
	•		International shipping companies; and
	•		Assets including: Sea Containers, ULDs, truck trailers, mobile assets and moving containers, etc.

Sales and Marketing

Smart Move maintains a sales staff that works in coordination with management to identify opportunities to expand existing business and to market our new areas of service. We also engage third party resources to identify prospective customers, but do not rely solely on one source of lead generation. We pursue various avenues for marketing research and referrals. Resources we currently utilize include the internet, yellow pages, print material, direct mailings, real estate companies, corporate human resources departments, military leads and publications, universities and search engine results directing the public to our website.

There are several relocation and moving resources web portals. These portals generally advertise or offer visitors to their site one stop shopping for all of their relocation needs, from moving services to real estate listings. We are also able to purchase leads generated from many of these different portals at any time for specific origination and destination combinations without any long term contract commitments. Depending upon the type of information provided by web statistics and leads, we would typically expect to pay a fixed fee per lead from the various moving web portals in the market.

Corporate relocation programs can use our services to realize savings within their own recruitment/personnel moving budgets. We plan to pursue opportunities to undertake direct moves on a contract basis with larger businesses such as Fortune 500 companies through targeted marketing to their human resources departments. We have performed some relocations for large corporations and we believe have demonstrated our ability to complete these strategic moves at a significant savings to these corporations. We expect these types of moves will help us gain exposure, acceptance and additional corporate relocation business.

Other Sales Opportunities

Local Move Consumer Market. It is our belief that the convenience our container-based model affords will be attractive to many local self-movers and will produce an additional demand source providing a steady revenue stream.

Storage and Moving Supplies. Increasing demand for storage of surplus goods in today’s mobile society has created a $15 billion dollar business, according to First Research. Although the latest prototype of our SmartVault™ has design features that offer superior advantages for use in transporting goods, the dimensions and durability of both the original and latest SmartVault™ prototypes allow them to be very effectively utilized for either temporary or long-term storage, with flexibility to the consumer not offered by standard storage bins and bays. In February 2007, we executed a warehouse sub-lease in Denver, CO, to enter this market segment utilizing our earlier prototype SmartVaults™. In connection with this storage service initiative, we also sell, market and distribute moving supplies such as cardboard boxes, tape, and other supplies to our own customers as well as to local moving and storage companies.

Homeland Security. Security requirements have increased the need to ship high value goods in a secured container that can then be loaded within larger rail or marine shipping containers. New homeland security laws, regulations and custom clearance requirements will encourage corporations to seek additional ways to compartmentalize the shipment of high value goods. By insuring their integrity, these goods will pass through customs more quickly with less risk of tampering and loss.

National Van Lines. We have begun providing service to national van lines that include the use of SmartVault™ containers to fill orders for small customers whose shipments require an expedited or time guaranteed service. We have recently worked to develop a service arrangement with Bekins A-1, a significant van line agent with 19 major market operations. In addition Smart Move has established alliances with other leading interstate van lines that are taking advantage of the outstanding transit times and performance metrics that Smart Move has demonstrated it can deliver. Atlas World Group, for example, continue to promote Smart Move’s initiatives and to book new moves with the company every week helping to contribute to national awareness of Smart Move’s value proposition for customers. We continue to offer our service to various national van lines.

Commercial Uses. There is an increased demand from corporate clients who need specialized transportation services for high value products that require specialized handling and tracking capabilities. The Smart Move offering can deliver the components necessary to meet this demand.

Military Uses. Medical supplies and electronic equipment need to be shipped in smaller quantities, within a portable container, by truck or helicopter at a moment’s notice. The container must be locked and tracked for security and content management. Moves associated with personnel relocation could also be a significant future source of revenue.

New Services and Products

Corporate Relocations. In December 2007 we announced a letter of intent to acquire rights to conduct corporate relocation management programs conducted under the Star Alliance ^SM trade name which we expect to generate opportunities through relationships with the real estate brokerage community, third party relocation companies and HR departments of major corporations. This purchase closed on January 31, 2008. These activities commenced in February 2008 and will be supported by a national call center offering personalized move counseling and customized relocation services

Manufacturing Relationships and Sourcing of Raw Materials

SmartVault™ components are currently manufactured by Orbis Corporation (“Orbis”), the successor in interest of our original manufacturer/supplier, LINPAC Material Handling, Inc. Smart Move owns the proprietary mold which Orbis uses in its plant to mold the components of the SmartVault™ but we do not intend to engage in any manufacturing operations relating to these containers or container components. Pursuant to our manufacturing arrangements, Orbis may only utilize the mold for manufacture of SmartVaults™ on behalf of the Company. The SmartVault™ container has 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. The Company believes that HDPE is a widely available product and that we are not dependent on a single or limited source of supply for this key component. The additional aluminum components of the SmartVault™ base are currently procured from a single outside vendor, LM Containers LLC. The aluminum raw material associated with our construction requirements is readily available from other vendors in the market place and we are not dependent on a single or limited source of supply. At certain times in the past, we have experienced delivery delays and incurred unexpected price increases on the finished SmartVaults™ as a result of varying labor costs for unit assembly. However, with the new design and mold we believe that production efficiency has been greatly enhanced as the new SmartVault™ container requires less labor and is designed for more efficient assembly than the earlier prototype which required a significant amount of man hours for assembly.

There is no assurance that manufacturers and other suppliers will provide the raw materials needed by us in the quantities requested or at a price we are willing to pay. Because we do not control the source of component materials, we are also subject to delays caused by interruption in production of materials based on conditions outside of our control.

Seasonality

Seasonal factors cause our revenue to fluctuate from quarter to quarter. Our highest revenue (as much as 50%, based on our experience to date) typically is generated in the four months of June through September. Most of our operating expenses, including general and administrative costs and debt service, are fixed and do not vary with the volume of our business.

Our Intellectual Property and Trademarks

The Company does not hold any patents on its products, but we do obtain confidentiality agreements and other contractual assurances to protect our trade secrets and proprietary products. In the view of management, the Company’s competitive position is not currently dependent on the availability of patent protection.

The Company will, if it conducts research and development activities which result in patentable products, seek appropriate intellectual property protection for such products. The Company claims certain trademarks and holds certain trademarks which have been registered, however, and has filed certain trademark applications with the U.S. Patent and Trademark Office (“USPTO”) to protect the mark SmartVault™ for our containers and SmartMove, Design™ , GoSmartMove, Changing the Way the World Moves, and SmartMove Changing the Way the World Moves for our containers and services. We have also filed a federal copyright application covering the content on our website. We also have a registered domain name for www.gosmartmove.com, which is the address of our principal website. We have registered additional domain names for needmovingboxes.com, a secondary active website. In addition, we own the following domain names: gosmartmove.net, gosmartmoveeu.com, gosmartmoveuk.com, gosmarttrac.com, movingtocity.com, movingtocity.net, smartmove.net, smartmoveuk.com, smartmoveusa.com, and smartboxsupply.com. We do not currently use these registered domain names.

Under our agreement with the manufacturer of our containers, we have the exclusive ownership rights to the tooling mold and design of our container. We believe that the costs of replicating the functionality of the Smart Move container design and mold would be prohibitively high for competitors. Additionally, our agreements with our manufacturer/supplier provide that the supplier may not produce containers for other companies using our mold and or design. However, we have limited ability to prevent other companies from attempting to copy our container design and our business model.

Information Systems

We use both internet and Company intranet communication systems to provide real time updates regarding certain pending and completed sales and operational events and transactions. These systems include integrated information processes to manage the flow of information to help facilitate our moving service and logistics operations.

Regulatory Matters

We are regulated by the Federal Motor Carrier Safety Administration (FMCSA). Under the FMCSA’s regulatory framework, Smart Move is considered a “freight forwarder.” As a freight forwarder, we must:

	•		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

We believe that we are in compliance with all FMCSA requirements.

In addition, we must comply with regulatory requirements imposed by the local and state authorities in each jurisdiction where we are deemed to conduct business. In most cases, we are required to:

	•		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 trade name.

We believe we are in compliance with all of these requirements.

Various federal and state labor laws govern our relationship with our employees, including minimum wage requirements, overtime, working conditions and immigration requirements. Significant additional government imposed increases in minimum wages, paid leaves of absence and mandated health benefits, or increased tax reporting and tax payment requirements for employees could have an adverse effect on our results of operations.

Research and Development

During 2006 and 2005, the Company did not pursue research and development as an independent activity, but rather as an incidental aspect of our container design and refinements based on our experiences and customer feedback and our ongoing logistics management activities. During 2007 we undertook refinements of our proprietary technology processes and software and launched our new Rapid ID development activities. Management believes that these activities are necessary to enable the Company to maintain and enhance its competitive advantage over those participants in the moving industry that do not provide this service component.

Environmental Regulations

The Company does not currently anticipate that its cost of compliance with environmental laws will be material. The Company does not presently engage in any manufacturing processes in performing its services and does not use, generate, store or discharge or permit any users of its containers to store or discharge any toxic, volatile or otherwise hazardous chemicals and wastes. The Company does provide storage services, however, and is subject to a variety of federal, state and local governmental laws and regulations related to the storage, use and disposal of hazardous materials. If and to the extent any toxic or hazardous materials are ever transported or stored in our containers with or without our permission and if the Company fails to comply with present or future environmental laws and regulations applicable to the Company, we could be subject to fines, suspension of production or a cessation of operations. In addition, under some foreign, federal, state and local statutes and regulations, a governmental agency may seek recovery and response costs from operators of property where releases of hazardous substances have occurred or are ongoing, even if the operator was not responsible for the release or otherwise was not at fault. Any failure by us to control the use of or to restrict adequately the discharge of, hazardous substances could subject us to substantial financial liabilities, operational interruptions and adverse publicity, any of which could materially and adversely affect our business, results of operations and financial condition.

Employees

The Company currently employs approximately 28 people, including 26 employees in our headquarters location in Colorado who perform corporate and administrative as well as sales and marketing functions. None of Smart Move’s employees are unionized or covered by a collective bargaining agreement.

Execution of Our Business Plan

Our strategic plan is to focus on interstate or city-to-city moves because we believe we will be most competitive in meeting customers’ demands associated with these moves Smart Move plans to focus marketing efforts on sales lead generation and continued introduction of our moving concepts to consumers in this market category. In addition, Smart Move has established alliances with other leading interstate van lines that are taking advantage of the outstanding transit times and performance metrics that Smart Move has demonstrated it can deliver. We manage the sales efforts and administer and direct the logistics of these moves from our Denver headquarters offices.

2007 Highlights

Financial information regarding our operations, assets and liabilities, including our revenues and net loss for the fiscal years ended December 31, 2007 and 2006 is included in our financial statements and respective notes included in Item 7 “Financial Statements.” Selected operating highlights of our 2007 results include the following:

During the year ended December 31, 2007, we were able to complete the following to advance our business plan:

	•		We have added over $10.9 million of property and equipment, including over 4,100 new SmartVault™ containers.
	•		We believe our current fleet of approximately 4,500 SmartVaults™ has the capacity to enable us to generate over $18 million in annual revenues.
	•		Smart Move lowered its average freight expense as compared to the prior year period by 25%. Freight expense is the single biggest component of cost of goods sold; in 2006 freight expense was 83% of the top line revenues, for 2007, the average was 58%.
	•		We launched our affiliate program which allows local moving companies to book moves through our proprietary software. We estimate that there are over 5,000 local moving companies in the markets that we serve that we can target for this program.
	•		We refined our software to provide for automation in the quoting of long-distance freight costs, and to help improve our operating margins.
	•		We have refined our internal processes to allow us to handle significant increases in the volume of moves with our existing infrastructure.
	•		The Smart Move concept gained recognition within the close-knit moving industry community. National relocation firms became aware that Smart Move’s service offering addresses specific current needs in their industry.
	•		We expanded our alliances with leading interstate van lines that are taking advantage of the outstanding transit times and performance metrics that Smart Move has demonstrated it can deliver.
	•		We acquired Star Move Alliance, which establishes us as a third party move manager. The platform allows us to generate revenue from move lead referrals, from direct booking fees from van lines and from our completed jobs.

Available Information

We maintain a website at www.gosmartmove.com. The information on or available through our website is not, and should not be considered, a part of this report. You may access our annual reports on Form 10-KSB, quarterly reports on Form 10-QSB, current reports on Form 8-K and amendments to those reports, as well as other reports relating to us that are filed with or furnished to the SEC, free of charge at our website as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

RISK FACTORS

Risks Related to our Business and Industry

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.

Our financial statements have been prepared on the assumption that we are a going concern and that we will be able to realize our assets and discharge our liabilities in the normal course of business; however certain events and conditions cast substantial doubt on this assumption. We have incurred net losses since our inception and we anticipate that we will continue to operate in a deficit position for the foreseeable future. We have estimated that we will need additional capital of $2,500,000 during 2008 in order to fund our operations, make our scheduled debt payments and implement our business plan during the next twelve months. This amount of capital could be less or more depending upon the volume of sales and the timing of the sales volume during the year. Due to our historical inability to generate revenue to cover all operating costs, and the difficulty of predicting future revenue, we will require additional financing in order to conduct our normal operating activities and cover our monthly expenses. There can be no assurance that we will be able to obtain the additional financing we require, or be able to obtain such additional financing on terms acceptable to our Company. These circumstances raise substantial doubt in our ability to continue as a going concern.

Because of our loss from operations, and our need for additional financing in order to fund 2008 obligations our independent auditors included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern.

We have a history of operating losses and may again incur losses in the future as we expand.

We generated our first revenues in June 2005. We have sustained losses since our inception. We had an accumulated deficit as of December 31, 2007. We also had negative cash flows from operating activities since inception. The Company has historically funded its operations through sale of equity and debt securities. You must consider our prospects in light of the risks, expenses and challenges of attempting to introduce a new service in a mature and established market.

We cannot predict effectiveness of our third party marketing alliances.

As an early stage company, Smart Move has little historical information to assist management in identifying the factors and trends that may influence the company’s future results and as Smart Move expands its sales channels it depends significantly on large national alliance partners in connection with the timing, as well as the effectiveness of a number of the company’s important strategic joint marketing initiatives. Moreover, the company is offering a service that is a new value proposition in a mature industry, and it is difficult to predict the extent and timeframe of acceptance of our innovations.

Our business plan is unproven, and our financial results will suffer if consumers do not adopt our moving solution.

Due to our limited operating history, it is too early to determine if our target consumers which include a wide spectrum of customers seeking various moving services, will adopt our moving solution in the numbers and as readily as we expect. If consumers do not react favorably to our solution, or if it takes us longer to develop customers than we have planned, our revenues and our financial operating results will suffer.

We depend on the third-party manufacturer for our SmartVaults ™ moving containers.

Our business model is built around the use of our SmartVault™, which has been designed and is manufactured for us by a third party. Smart Move owns a proprietary mold that Orbis Corporation (formerly LINPAC Material Handling Inc. which was acquired by Orbis) can only use exclusively to manufacture the SmartVaults™ for the Company. At certain times in the past, we have experienced delivery delays and incurred unexpected price increases on the finished SmartVaults™. In some instances, these production delays have required us to delay our planned expansion to new markets, and with the slower expansion of our business, our early operating results have suffered. A material change in our relationship with the manufacturer of SmartVaults™ or our inability to future meet the purchase commitments could also harm our business and the trading value of our securities and our operating results. Additionally, any determination to replace our existing manufacturer could result in delays and additional expenses.

Our containers are subject to price increases by the manufacturer, and any significant increase in price would negatively impact our operating margins.

If we order additional containers in the future, our container manufacturer may increase the per unit price of our container due to an increase in the costs to the manufacturer of plastic or other materials used in the manufacturing of the containers. Depending on the competitive environment at the time, we may be unable to increase the price of our service to offset the operating effect of the increase in the cost of our containers. Consequently, a significant increase in the price of our containers could negatively impact our operating results.

Risks related to our current financial condition

	•		Our capital requirements have been and will continue to be significant, and we have an immediate and long-term need of capital to continue to operate.
	•		Currently, we are incurring losses from operations, have limited capital resources, and do not have access to a line of credit or other debt facility.
	•		Our Management is pursuing various funding alternatives, including additional private placement of debt, commercial loans and finance leases, but no definitive arrangements are in place to ensure we will have capital to sustain operations.
	•		If we raise additional capital through the issuance of debt securities, the interests of our shareholders will continue to be subordinated to the interests of our debt holders and any cash interest payments would reduce the amount of cash available to operate and grow our business. Additionally, we will be subject to all of the risks associated with incurring indebtedness, including the risks that interest rates may fluctuate and that our cash flow may be insufficient to pay principal and interest on any such indebtedness.
	•		If we raise additional capital through the sale of equity securities, including additional convertible notes and warrants in the future, the ownership of our shareholders would be diluted.
	•		Our assets serve as collateral for various loan and note obligations. If we are unable to maintain compliance with loan covenants or procure waivers when required or in the event we fail to pay loans and notes according to their terms, there can be no assurance that our lenders will not declare an event of default and demand immediate payment or seek to attach our assets.
	•		Should any of our large trade creditors demand immediate payment for services or materials we require to conduct business, we would have to raise the needed funds to satisfy the obligations, possibly on unsatisfactory terms or, failing that, we would have to consider entering into arrangements with creditors or other debt reorganization measures that could have a negative impact to our shareholders.

A disruption in the service of our third-party carriers could result in significant loss of revenue and increased capital expense.

We depend on several third-party cartage companies to provide the long-haul transport services we require. We currently rely on UPS Freight to handle the majority of our local pick-ups and deliveries. With the exception of UPS Freight, which handles a majority of our long distance hauls as well as local pickup and delivery, we do not have written agreements with these third party cartage companies, and our arrangements with these service providers may be terminated at anytime. Although we have a contract with UPS Freight, we can not ensure that UPS Freight will be able consistently to make pickups and deliveries for our customers in the time and manner we may request or require in the future. If our arrangement with UPS Freight is terminated, we will attempt to contract with alternative cartage companies to provide the services we currently outsource from UPS Freight. Any material changes in our primary carrier relationships and/or our local pick-up and delivery arrangements would disrupt our business operations. Our agreement with UPS Freight may be terminated by either party to the agreement upon 90 days written notice to the other party. If there is a material interruption in our ability to utilize third-party carriers and cartage providers for the services we require, we may be required to purchase or lease our own trucks and warehouse facilities in order to meet our requirements. In the event we are required to pursue new sources for these services or to purchase and maintain equipment and facilities we currently outsource, our results of operations could suffer due to delay in procuring acceptable alternative shipping arrangements and our access to available capital resources may be severely limited.

Since we rely on third party carriers for our deliveries, higher prices for fuel have resulted in significant fuel surcharges in the past. 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.

We generally contract to provide our services on a fixed price basis. Our freight charges are fixed and not subject to fluctuation. However, we are required to pay fuel surcharges based upon the price of fuel to the cartage companies that transport our containers. The market price for fuel can be very volatile and can be affected by a number of economic and political factors. In addition, changes in federal or state regulations could impact the price and availability of fuel as well as increase the amount we pay in fuel taxes. Since we did not anticipate the extent of this surcharge increase, the additional cost (need current data) resulted in an erosion of our gross margins and adversely affected our operating results. 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 such move will increase. If those surcharges continue to increase in the future, we will be required to either raise our prices at the risk of losing sales or continue to suffer lower margins on our moves. In either case, our ability to achieve our expansion goals and break-even operations will be materially impaired, and our operating margins and results will fluctuate during periods of fuel price volatility.

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.

As of December 31, 2007, we had approximately $11.6 million outstanding in long-term debt and equipment financing. If we are unable to make timely payment of principal and interest on our debt, or if we default on any of the covenants or other requirements of our loan instruments, our lenders will be able to foreclose on the assets by which their loans are secured. The foreclosure on our containers or other material assets could result in a cessation of business and/or bankruptcy. The Company did not make certain scheduled “interest payment” for the quarter ended December 31, 2007, due in arrears under its August 2007 and 2005 Notes (the “Notes”), and as a result, the Company will be obligated to pay a default interest rate of 18% per annum on all outstanding principal amounts relating to these Notes, until such time as the amount of the scheduled interest payments under the terms of the Notes is paid current.

We will need to raise substantial additional capital to fund our operations, and we do not have any existing commitments for additional capital.

Currently, we are incurring losses from operations, have limited capital resources, and do not have access to a line of credit or other debt facility. We have had losses and negative cash flow from operations since inception in August 2004, which may impact our access to additional capital we will require to execute our business plan. If we raise additional capital through the issuance of debt securities, the interests of our shareholders will be subordinated to the interests of our debt holders and any interest payments will reduce the amount of cash available to operate and grow our business. If we raise additional capital through the sale of equity securities, the ownership of our shareholders would be diluted. Additionally, we do not know whether any financing, if obtained, will be adequate to meet our capital needs and to support our growth.

We may need additional financing, including additional indebtedness, to fund our business plan and we do not have commitments for additional financing.

Our level of indebtedness will have several significant effects on our future operations, including the following:

	•		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.

If any of the foregoing events occur, we may be prevented from expanding into additional markets.

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.

General economic conditions, industry cycles, financial and other factors may affect our operations and our ability to make principal and interest payments on our indebtedness and raising additional capital. If we cannot generate sufficient cash flow from operations in the future to service our debt, we may, among other things, be required to take one or more of the following actions:

	•		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.

The measures listed above might not be adequate to enable us to continue operations or to service our indebtedness. In addition, we might not be able to procure financing, refinancing or to make a sale of assets on economically favorable terms, which may prevent our future expansion and growth in new markets and, thus, negatively affect our business and financial condition and/or cause us to cease operation.

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 expect that a significant portion of our revenue (as much as 50%, based on our experience to date and certain industry data) will be generated in the four months of June through September. We expect that this seasonality will result in dramatic fluctuations in our operating results from quarter to quarter. Most of our operating expenses, including general and administrative costs and debt service, are fixed and do not vary with the volume of our business. As a result, in the slower months it may be difficult to manage cash flow to meet our operating needs. If we fail to manage cash flow in anticipation of these quarterly fluctuations, or if the fluctuations vary significantly from our expectations, we may be required to incur additional debt, which will impair our profitability, or raise additional equity capital, which will be dilutive to our shareholders.

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.

We require our customers to agree in writing not to store or ship hazardous materials in our containers. However, we do not inspect the containers to make sure they do not contain hazardous materials. If hazardous materials are stored in our containers and leak or otherwise cause a dangerous situation, we could be held liable for damages, be required to clean up the leak and suffer adverse publicity. We do not intend to carry insurance covering these occurrences. To date, no environmental-related claims have been asserted against us. However, a significant hazardous materials event could negatively impact our results of operations, disrupt our business, cause adverse publicity and subject us to significant liability and increase the risk of litigation, all which could harm our business and the trading price of our securities.

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 have a limited operating history, and, as a result, our historical financial data may be of limited value in estimating future operating revenues and expenses. Our budgeted expense levels are based in part on our expectations concerning future revenues. However, the amount of these future revenues depends on the choices and demand of individuals, which are difficult to forecast accurately.

We have limited operating history, we have not been through a recession cycle, and may not be able to estimate our future revenue or the effect of a decline in the economy will have on our business operations.

We have limited operating history, and as such we have not been through an economic business decline, and as such may not be able to adequately predict the effects this will have on our sales and costs. Our budgeted revenues are based on our expectations and new relationships with van lines, and internet marketing programs. The effect of an economic downturn on these expectations is uncertain to us.

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 expect that expansion of our business may place a strain on our limited managerial, operational and financial resources. We will be required to expand significantly, train and manage our work force in order to manage the growth of our operations. Our future success will depend in large part on our ability to attract, train and retain additional skilled management, logistics and sales personnel. We may not be successful in attracting and retaining qualified personnel on a timely basis, on competitive terms or at all. If we are unable to attract and retain skilled personnel, our operating results could be harmed, we may fail to meet our reporting and contractual obligations and existing and potential shareholders may lose confidence in our business, all of which would harm our business and the trading price of our securities.

We are dependent on our management team and the loss of any of these individuals would harm our business.

Our success is dependent, in large part, upon the continued services of Chris Sapyta, our Chief Executive Officer, and Edward Johnson, our Chief Financial Officer, and the rest of the senior management team. There is no guarantee that any of the members of our management team will remain employed by us. While we have employment agreements with Messrs. Sapyta and Johnson, their continued services cannot be assured. The loss of our senior executives, particularly, Messrs. Sapyta and Johnson, would harm our business.

We encounter substantial competition from other moving companies, many of whom have greater resources than Smart Move.

The U.S. household moving and service industry is serviced by approximately 10,000 providers. In this highly fragmented industry, the 20 largest providers control approximately 35% of the revenue. Many of our competitors are larger than we are and have longer operating histories. As a result, we expect that many of our competitors will have greater financial and human resources and more established sales and marketing capabilities than we have. Existing or future competitors with greater resources could readily duplicate certain of our services and/or business model.

We do not have any patent protected technologies that would preclude or inhibit competitors from entering our market.

We consider the design of our containers to be proprietary and have negotiated exclusive ownership rights to the design of the containers from the manufacturer. The container design, however, is not currently patented. Since the container design is not patented, we rely on a combination of specific contracts and confidentiality agreements to protect our design. Despite our efforts to protect our design, it would be relatively easy for our competitors to copy certain aspects of our design or independently develop similar containers. Accordingly, our container design may not provide an effective barrier to entry against our competitors.

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 believe that continuing to build awareness of our brand name is critical to achieving widespread acceptance of our business. Brand recognition is a key differentiating factor among providers of moving services. In order to maintain and build brand awareness, we must succeed in our marketing efforts. If we fail to successfully promote and maintain our brand, incur significant expenses in promoting our brand and fail to generate a corresponding increase in revenue as a result of our branding efforts, or encounter legal obstacles which prevent our continued use of our brand name, our business and the value of your shares could be materially adversely affected. In addition, our brand may be used by third parties unaffiliated with our Company, which, in turn, may also harm our business and our ability to expand and achieve a profitable level of operations.

We may be unable to protect our trademark or other proprietary intellectual property rights.

We have filed and received certain trademark applications, on service marks or trademarks with the U.S. Patent and Trademark Office (“USPTO”). Our future success may depend upon the protection of our brand names, SmartMove and GoSmartMove (collectively “SmartMove brand”). If we are unable to protect our rights in the SmartMove brand, a key element of our strategy of promoting SmartMove as a brand could be disrupted and our business could be adversely affected. We may not be able to detect all unauthorized uses of our trademark or take all appropriate steps to enforce our intellectual property rights. In addition, the validity, enforceability and scope of protection of our trademark and related intellectual property is uncertain and still evolving. The laws of other countries in which we may market our goods and services in the future are uncertain and may afford little or no effective protection of our intellectual property. The unauthorized reproduction or other misappropriation of our proprietary technology could enable third parties to benefit from our technology and our SmartMove brand name without paying us for them which could result in a substantial decrease of our competitive advantage in those markets and our ability to conduct profitable activities in such markets.

We are aware of several companies that conduct business which incorporate the terms “Smart” and “Move” in their respective names and, in some cases, those companies have registered such names as a trademark in the state where they conduct business. In states where the corporate name or trademark for “Smart Move” may be held by third parties, we may have to conduct business under the trade name “GoSmartMove.” Such states include California, Texas, Illinois and New Jersey. Because of the potential conflicting uses by others of the words “Smart Move,” we may not be able to fully protect our brand from use by others. In addition, we are at risk that third parties will claim that our use of the name SmartMove may infringe on their intellectual property rights. If that were to occur, we could be required to defend against infringement claims, which will be extremely costly and time consuming, both in terms of money and human resources. Further, if we were to be found to have infringed upon or violated the rights of a third party, we could also be liable for monetary damages and subject to an injunction requiring us to cease doing business under the SmartMove name. To date, no such infringement claims have been asserted against us. However, if that were to occur, and we were unsuccessful in defending against them, we would have to incur the expense and likely business disruption associated with a re-branding of our services.

Notwithstanding our efforts to develop and protect our intellectual property rights, including our trademarks and domain names, all or some of our intellectual property may be unenforceable or limited. As a result, we may not be able to maintain our current trademarks or domain name if they are subject to challenge. We believe that any successful challenge to our use of a trademark or our domain name could substantially diminish our ability to conduct business in a particular market or jurisdiction and, thus, decrease our revenues and result in possible losses to our business.

On March 3, 2006, SmartBox Moving & Storage LLC (“SmartBox”) filed a Notice of Opposition before the Trademark Trial and Appeal Board of the US Patent and Trademark Office (“Board”) requesting that the Board deny registration of our SmartVault™ application Serial No. 78/560,422 based on SmartBox’s claimed rights in “SMARTBOX” and SMARTBOX A B & DESIGN (U.S. Reg. No. 2,864,385). We filed our Answer denying the allegations of any likelihood of confusion and fraud. We also counterclaimed to cancel SmartBox’s SMARTBOX A B & Design registration because the SMARTBOX, among other reasons, the term is merely descriptive of the goods. SmartBox filed its answer and affirmative defenses to our counterclaim on June 30, 2006. On November 6, 2006, the parties to these proceedings settled this matter. Under the terms of this settlement, the parties agree, among other things, not to use each other’s respective corporate names as well as certain similar marks. The settlement does not involve any monetary penalty payable by either party to the other and the parties could, if mutually agreeable, enter into any future business relationship.

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 cannot be certain that our services, product, content and brand names do not or will not infringe valid patents, copyrights or other intellectual property rights held by third parties. Several companies in the industry may have names similar to ours, including the phrase “smart move” or a variation thereof. Further, in order to protect or enforce our intellectual property rights, we may initiate litigation against third parties. In addition, we may become subject to inference, cancellation, or opposition proceedings conducted in trademark offices or the courts to determine the priority of rights in our marks. The defense of intellectual property rights, interference, cancellation, or opposition proceedings, and other legal and administrative proceedings, would be costly and divert our technical and management personnel from their normal responsibilities. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation which disclosure could substantially diminish our competitive advantages, thus, resulting in decrease revenues and possible losses.

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.

There are regulations specifically relating to the moving industry, including testing and specifications of equipment and product handling requirements. In addition, the moving industry is increasingly subject to regulatory and legislative changes, such as stringent environmental, occupational safety and health regulations or limits on vehicle weight and size, security and ergonomics. When and to the extent that we conduct operations outside the United States, we are subject to the Foreign Corrupt Practices Act, which generally prohibits U.S. companies and their intermediaries from bribing foreign officials for the purpose of obtaining or retaining favorable treatment. Such matters could disrupt or impede the timing of our deliveries and we may fail to meet the needs of our customers. The cost of complying with these regulatory measures, or any future measures, could have a materially adverse effect on our business or results of operations. Violations of regulations can subject the Company to fines and penalties and significant and repeated violations could result in governmental action to curtail or suspend our 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.

As we expand to international markets, we will be subject to the risks of doing business abroad, which may include:

	•		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.

A foreign country in which we may propose to operate in the future may impose trade or foreign exchange restrictions or increased tariffs, which could adversely affect our operations. Political, economic and social instability in foreign countries, including terrorism, may impact our ability to conduct business in those countries, may cause our financial condition and operations to suffer as a result of a decrease in revenues or exchange rate volatility. As we continue to focus on expanding our international operations, these and other risks associated with international operations may increase.

Any limitations or interruptions in our proposed foreign operations could have a negative impact on our business. We plan to transact substantially all of our foreign business in US dollars, but we may not be successful in avoiding doing business in foreign currencies. We have no plans to engage in hedging of any foreign currency transactions and therefore would be subject to the risk of changes in currency exchange rates.

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.

In July 2006 we issued $5,000,000 in units of secured convertible debentures and warrants. The terms of these convertible debentures included conversion features allowing the holders to convert their debt into shares of our common stock at a conversion price equal to the lower of (a) $3.75 or (b) 75% of the per share offering price in our IPO if the Unit offering price had been less than $5.00, but in no event less than $2.50. Certain of those conversion features that allowed for the reduction in conversion price upon the occurrence of stated events constitute a “beneficial conversion feature” for accounting purposes. In August of 2007, September 2007 and November of 2007 we issued convertible notes that also had a “beneficial conversion feature”. The accounting treatment related to the beneficial conversion feature will have an adverse impact on our results of operations for the term of the notes which mature in July 2011, August 2010, September 2010 and November 2008. This accounting will result in an increase in interest expense in all reporting periods 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.

Our financial results will be affected by changes in the accounting rules governing the recognition of stock-based compensation expense. Prior to January 1, 2006, we measured compensation expense for our employee stock options under the intrinsic value method of accounting prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” Because we have granted all options at the estimated fair value on the date of grant, no compensation expense has been recognized through December 31, 2005. On January 1, 2006 we adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 123, “Share-Based Payment,” which addresses the accounting for share-based payment transactions. SFAS No. 123(R) eliminates the ability to account for share-based compensation transactions using Accounting Principles Board Opinion No. 25, and requires instead that such transactions be accounted for and recognized in the statement of operations based on their fair value.

We incur increased costs as a result of being a public company.

As a public company, we incur significant accounting, legal and other expenses that a private company conducting the same operations would not incur. The Sarbanes-Oxley Act of 2002 (SOX), which became law in July 2002, and related rules of the U.S. Securities and Exchange Commission and the American Stock Exchange regulate corporate governance practices of public companies. We expect these expenses will continue to increase in the future. In particular, we are required to include management’s report on internal controls as part of our annual report for the year ending December 31, 2008 pursuant to Section 404 of SOX. We are in the process of evaluating our internal control systems in order to (i) allow management to report on, and our independent auditors to attest to, our internal controls, as required by these laws, rules and regulations, (ii) provide reasonable assurance that our public disclosure will be accurate and complete, and (iii) comply with the other provisions of Section 404 of SOX. We cannot be certain as to the timing of the completion of our evaluation, testing and remediation actions or the impact these may have on our operations. If we are not able to implement the requirements relating to internal controls and all other provisions of Section 404 in a timely fashion or achieve adequate compliance with these requirements or other requirements of SOX, we might become subject to sanctions or investigation by regulatory authorities such as the SEC or the securities exchange on which we may be trading at that time, which action may be injurious to our reputation and affect our financial condition and decrease the value and liquidity of our securities, including our common stock. We expect that SOX and these other laws, rules and regulations will increase legal and financial compliance costs and will make our corporate governance activities more difficult, time-consuming and costly. We presently estimate that these compliance costs will be at least $600,000 during each fiscal year of our existence as a public company. This estimate is subject to future revisions and adjustments as circumstances may warrant. We also expect that these new requirements will make it more difficult and expensive for us to obtain director and officer liability insurance.

We are subject to impairment of our long-lived assets that could affect future net income.

We have made a significant investment in long-lived assets. During the ownership of an asset, an asset impairment charge against the Company’s earnings may result from the occurrence of unexpected adverse changes that impact the Company’s estimates of expected cash flows generated from the use of our assets. The Company’s ability to recover its purchase investment in assets is subject to market risks, including any changes in market conditions that may make the use of our assets less cost-effective relative to available alternatives. Our ability to deploy assets successfully depends significantly on having the use of the asset accepted by our customers for the moving services they require. In accordance with applicable accounting standards, we periodically assess the value of long-lived assets in light of current circumstances to determine whether impairment has occurred. If an impairment should occur, we would reduce the carrying amount to our fair market value and record an amount of that reduction as a non-cash charge to income, which could adversely affect our net income reported in that quarter in accordance with generally accepted accounting principles. For the year ended December 31, 2007 we recorded impairments on our fixed assets of $1,539,563 comprised of $75,094 of the full net book value of 333 analog GPS units that are no longer in use and have no known salvage value, $589,469 of the retired and recycled portion of our inventory of the older prototype SmartVault™-Version I units that were damaged, and $875,000 of impairment on the Version I vaults used for storage. During the fourth quarter of 2007, the Company performed a strategic review of the Version I vaults used in the local storage opportunity. Due to the limited financial capital necessary to develop and capture revenue, management assessed the recoverability of these Version I vaults and determined the impairment. This impairment reflects the amount by which the carrying value of Version I vaults exceed their estimated fair values determined by their estimated future discounted cash flows. We cannot definitively determine the extent of impairments that may occur in the future, and if impairments do occur, what the timing might be or the extent to which any impairment might have a material adverse effect on our financial results.

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.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide financial reports or prevent fraud, our business reputation and operating results could be harmed. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock. In connection with their evaluation of the Company’s disclosure controls and procedures as of the end of each of the first three fiscal quarters during 2007 our management determined that our controls did not operate effectively on a continuous basis throughout the reporting period. Management’s evaluation of the Company’s disclosure controls and the procedures implemented during 2007 as discussed in our previous reports, management has determined that controls did not operate effectively on a continuous basis throughout the fourth fiscal quarter.

(2)

The proposal to approve the appointment of Anton Collins Mitchell LLP as our independent registered public accounting firm for 2007 was approved by shareholders as follows:

FOR		AGAINST		ABSTAIN
5,441,656		182,110		13,850

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information as of the end of fiscal year 2007 with respect to compensation plans under which our equity securities are authorized for issuance.

Recent sales of Unregistered Securities and Use of Proceeds

(a)

Unregistered Sales of Securities

During the fourth fiscal quarter of 2007, we sold secured subordinated convertible notes for gross proceeds of $1,071,500. The subordinated secured convertible notes were sold in Note Units of $25,000 each to accredited investors within the meaning of Regulation D under the Securities Act of 1933. The notes were convertible into shares of the Company’s common stock at a conversion price of $1.00 per share. Each note was issued with a warrant permitting the holder to purchase 25,000 shares of the Company’s common stock at an exercise price of $1.25 and 25,000 shares of the Company’s common stock at an exercise price of $1.50 per share. These notes were amended by agreement with the note holders in January 2008 to satisfy a requirement that the Company obtain an agreement from the holders of the Company’s November 2007 Secured Convertible Notes to convert their notes described in the Company’s Form 8-K filed on November 15, 2007 or further subordinate their existing junior security interests securing the November 2007 Notes which covered the same collateral pledged as a senior security interest to Silicon Valley Bank being acquired by the new lender. The Company engaged the services of a registered broker dealer to solicit the agreement of existing holders to convert or subordinate the security for their existing convertible notes and warrants in exchange for the amendment of terms and additional warrants described as follows: (i) Option A — to convert notes and accrued interest into common stock at an adjusted conversion price equal to the lower of $0.75 or the “Market Price” (as defined below) on the effective date of the conversion, which was January 16, 2008; or (ii) Option B — to retain status as a debt holder and to agree to subordinate their existing second lien security interests to a first lien to be acquired by Purchasers under the Securities Purchase Agreement to the extent of indebtedness not in excess of $4 million. Holders electing Option A were subject to amendments reducing the conversion price of their November 2007 Notes from $1.00 to $0.75 contingent on actual conversion. As an added inducement to convert the November 2007 Notes, the warrant exercise term of existing warrants attached to the November 2007 Notes was extended by one year and the exercise price of these warrants was reduced from $1.25 and $1.50, respectively, to $0.95 and $1.20. The Company also agreed that holders electing Option A would be granted a new 5 year common stock purchase warrant exercisable at $1.00 for each $2.00 principal amount converted.

The terms of the proposal made to the November 2007 Holders as described above were formulated and recommended to the Company’s Board of Directors by the registered broker dealer engaged to solicit the holder agreements to convert or subordinate. The proposals were approved by the Company’s Board of Directors upon a vote in which four of the Company’s six directors who had declared their personal interest in the transaction, having purchased November 2007 Notes aggregating $85,000 total principal amount, did not participate. The elections received from holders of the November 2007 Notes, all accredited investors, were conditioned upon the actual closing and funding of the new securities investments made by Purchasers under the Securities Purchase Agreement described above.

The Company received final elections to convert under Option A described above from holders of the outstanding November 2007 Notes in the aggregate principal amount of $796,500, which will result in the issuance of 1,250,040 restricted shares of the Company’s common stock, $0.0001 par value, and the issuance to such holders of new common stock purchase warrants to acquire 398,250 shares at an exercise price of $1.00 per share. The holders of outstanding November 2007 Notes in the aggregate principal amount of $275,000 elected to maintain their status as debt holders, but elected the terms of Option B described above to subordinate their security interests in favor of the Purchasers’ senior security interest to be acquired in certain assets upon payment of outstanding debt to Silicon Valley Bank. The conversion price applicable to the holders electing Option A was $0.65 per share, based upon determination of Market Price as equal to the lower of $0.75 or the five day average closing price of the Company’s common stock ending on the January 15, 2008 effective date of the Company’s closing of its transaction with the Purchasers under the Securities Purchase Agreement. The elections, amendments of terms and right to receive an additional warrant (in the case of holders electing conversion to common stock) were conditioned upon the closing of the securities sale transaction with the Purchasers pursuant to the Securities Purchase Agreement signed effective January 15, 2008 and the actual funding of a $3 million level of investment by the Purchasers which occurred on January 16, 2008.

The registered broker dealer engaged by the Company to recommend suitable proposal terms and to solicit holder elections pursuant to the proposal received no cash compensation for its services but was granted a five year common stock purchase warrant covering 50,000 shares of the common stock of the Company exercisable at $0.75 per share.

(b) Use of the Proceeds of our Initial Public Offering

Our initial public offering of 2,760,000 units (including an option granted to the underwriters in the IPO to purchase an additional 360,000 units to cover over-allotments), each unit consisting of one share of our common stock and one five-year warrant entitling the holder to purchase one share of our common stock, was effected through a Registration Statement on Form SB-2 (SEC File No. 333-137931) that was declared effective by the Securities and Exchange Commission on December 6, 2006. On December 7, 2006, we filed another Registration Statement on Form SB-2 pursuant to the SEC Rule 462(b) (SEC File No. 333-139153 to register the increase in the size of the offering to 3,312,000 units (including 432,000 units to cover over-allotments). Our public offering commenced on December 6, 2006, and terminated on December 7, 2006, after the sale of all securities registered. The underwriters’ over-allotment option was exercised in full. Newbridge Securities Corporation, I-Bankers Securities, Inc., Neidiger, Tucker, Bruner, Inc. and Bathgate Capital Partners, LLC acted as managing underwriters in this offering. All 3,312,000 units were sold at a price of $5.00 per unit, which resulted in an aggregate offering amount of $16,560,000.

The net proceeds received by us in the offering were approximately $14,257,685, determined as follows:

None of the underwriting discounts and commissions, offering expenses or net proceeds of the offering was paid, directly or indirectly, to our directors or officers or their associates or to persons owning 10% or more of our common stock or to any affiliates of ours. We are using, or expect to use, the net proceeds of the offering to provide capital to support the growth of our business and for general corporate purposes as described in the final prospectus for our IPO dated December 7, 2006.

As of September 30, 2007, the Company had expended the proceeds from the IPO. Approximately $9,775,964 of the net proceeds from the public offering was used for purchases of property and equipment, $408,288 for interest expense, approximately $706,531 for marketing and the remaining $3,366,902 million for working capital.

ITEM 6.		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.

Liquidity and Going Concern

The financial statements included in this Annual Report on Form 10-KSB have been prepared assuming that we will continue as a going concern, however, there can be no assurance that we will be able to do so, and our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

At December 31, 2007 the Company had an accumulated deficit of $13,986,494 and negative working capital of $2,735,568. At March 21, 2008, we had $366,073 in cash. We anticipate that we will continue to operate in a deficit position for the foreseeable future. We will need additional funds in order to fund our operations for the next twelve months based upon our estimated future operations. Due to our inability to generate sufficient revenue to cover operating expenses, we will require additional financing in order to fund our activities and our monthly expenses. There can be no assurance that we will be able to obtain the additional financing we require, or be able to obtain such additional financing on terms favorable to our Company. These circumstances raise substantial doubt about our ability to continue as a going concern.

As a result of previous measures to conserve cash as described in our prior periodic reports, we believe that our existing funds will be sufficient to fund our current operations into the second quarter of 2008. We are pursuing several initiatives to increase revenue generation opportunities, including alliance and referral programs with van lines and other partners. Our affiliate program, for example, is designed to expand the volume of business we do with local movers by providing incentives for them use our services to provide moves for their customers. We are also in discussions with several corporate relocation companies regarding strategic opportunities to use our services to improve efficiencies and the cost-effectiveness of their managed moves for corporate clients.

We expect to increase our revenues during fiscal 2008. However, we cannot be certain that the anticipated revenues and corresponding cash flows will materialize. If our revenues and cash flows are not adequate to enable us to meet our obligations; we will need to raise additional funds to cover the shortfall through either commercial loans, equipment leasing transactions or additional public or private offerings of our securities. We are currently investigating additional funding opportunities, talking to various potential lenders and investors who could provide financing.

Based on our prior success in raising capital when required through private placements, and our expected eligibility to use Form S-3 Registrations for primary public offerings of our common stock listed on the American Stock Exchange, we are hopeful that we will be able to secure appropriate financing in the near term. We have no current commitments for additional financing, and there can be no assurance that any private or public offering of debt or equity securities or other funding arrangements could be effected on a timely basis or to an extent sufficient to enable us to continue to satisfy our capital requirements. If we fail to demonstrate an ability to generate sufficient revenue to meet our obligations and sustain our operations, our ability to continue to raise capital may be impaired and we may not be able to continue as a going concern.

In view of our lack of operating history and present inability to generate revenues sufficient to cover our operating expenses our auditors have stated their opinion that there currently exists a substantial doubt about our ability to continue as a going concern.

Our Business

A Smart Move, L.L.C. was formed as a Colorado limited liability company (the “LLC”) on August 11, 2004. On December 6, 2006, A Smart Move LLC merged into Smart Move, Inc., a Delaware corporation and wholly owned subsidiary of the LLC. Smart Move was formed to provide an alternative method of moving household goods through the use of our proprietary SmartVaults™ shipping containers. In June 2005, we began providing services to our customers. We provide intrastate and interstate moving services from 61 of the largest U.S. metropolitan centers from the terminals of our primary transportation provider UPS Freight. We have begun providing service to national van lines that include the use of SmartVault™ containers to fill orders for small customers whose shipments require an expedited or time guaranteed service. In addition we believe that there is an increased demand from corporate clients who need specialized transportation services for high value products that require specialized handling and tracking capabilities. We utilize UPS Freight for outsourcing most of our transportation in order to obtain market penetration faster with less infrastructure costs than traditional movers.

Smart Move Strategy

The Smart Move solution provides a flexible, competitively priced and secure moving alternative for the consumer. To compete in the multi-billion dollar annual US moving and storage market, we have designed our business model so that it provides for:

	•		Efficient utilization of our proprietary SmartVault™ 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

We are an early stage company and reported our first revenues in July 2005. We believe that the rate and extent of growth of our property and equipment deployed for services and increase in our sales are key measurements of Smart Move’s financial results as we continue to implement our nationwide expansion. For the year ended December 31, 2007, sales were $5,810,898, compared to $4,184,554 in the same period during 2006, representing an increase of 39%. The net loss for the year ended December 31, 2007, was $12,805,559 compared to a net loss of $9,869,676 for the year ended December 31, 2006, an increase of 30%. The Company has incurred substantial noncash expenses for the years ended December 31, 2007 and 2006. Total noncash expenses for 2007 were approximately $8 million compared to approximately $5.1 million in 2006. The increase in the loss from 2006 to 2007 is primarily due to: (i) an increase in depreciation, amortization and asset impairment expense of $3,407,317, and an increase in sales-related general and administrative expenses of $141,218 as compared with the prior period in 2006 (in 2006 the Company had $2,690,836 of non cash compensation compared to $284,180 in 2007), an increase in interest expense of $1,139,696 (including an increase in noncash interest of $1,108,600), and a non cash loss on debt extinguishment of $1,328,565; (ii) the increased loss between years is reduced by an income tax benefit increase of $2,134,000. The net basic loss per share for the year ended December 31, 2007, was $1.21, compared to a net basic loss per share of $1.77 reported for the same period during 2006. Net loss per share is based upon weighted average shares outstanding of 10,623,167 for the year ended December 31, 2007, compared to 5,584,420 for the year ended December 31, 2006. The increase in weighted average shares is primarily due to the shares issued in conjunction with the December 2006 IPO, the conversion of debt and interest expense to common stock in 2006 and 2007.

The Company was able to negotiate with the 2005 Note holders the ability to defer the payment of $177,750 of accrued interest at December 31, 2007 and the payment of $177,750 of interest in future periods, and the deferral of scheduled principal payments, in consideration for a reduction in the notes conversion price and additional warrants, thereby increasing cash flow of the Company. Under the current accounting rules, this required the Company to report $514,053 as a non cash charge in the current period which is included in the loss on debt extinguishment for the benefit of deferring these interest payments.

Our investment in property and equipment and capitalized software increased for the year December 31, 2007, by over $10.9 million, to an aggregate of approximately $21 million investment (before accumulated depreciation, impairment and amortization). Approximately $10.5 million of this aggregate amount was attributable to purchases of additional SmartVault™ units and to the purchase of GPS units and other container components relating to final assembly of the units.

Cash flows used in operations for the year December 31, 2007, were $5,579,441 compared to cash used of $4,780,878 during the same period in 2006. The required use of cash was primarily attributable to the current period operating loss, offset by non-cash items of depreciation expense of $3,040,944, impairment of fixed assets of $1,539,563 amortization of debt discounts of $1,371,057, and a non cash loss on debt extinguishment of $1,328,565 , an increase in accounts payable of $934,247, an increase in accrued interest of $704,847, and an increase in deferred revenue of $342,783.

The following tabular presentation illustrates developments noted during the successive quarters of the current fiscal year of the Company relating to its cost of sales. The table below summarizes sales by quarter and the quarterly gross loss (exclusive of depreciation, impairment and amortization) expressed as a percentage of total sales volumes, and the table also shows the quarterly additions to property and equipment which occurred for the successive quarterly intervals:

The Company reported its first quarterly gross profit (excluding depreciation, impairment and amortization) for the three months ended September 30, 2007 of $67,709. The Company’s quarterly gross loss increased for the three months ended June 30, 2007 compared to the three months ended March 31, 2007 because of repositioning and furniture pad expenditures of $300,517 (22% of sales) compared to $132,356 (14% of sales) for the three months ended March 31, 2007. The gross loss (excluding depreciation, impairment and amortization) for the three months ended December 31, 2007 was $221,159. The increase in the gross loss (excluding depreciation, impairment and amortization) from September 30, 2007 to December 31, 2007 was due to an increase in freight expenses from 54% of total revenue to 60% of total revenue and annual maintenance costs for the rolling stock in the amount of $93,677. Freight increased for the three months ended December 31, 2007 compared to September 30, 2007 due to more of the loads in this non peak time period being shipped as less than truckloads rather than full truckloads. The gross loss is expressed in the table above as a percentage of sales exclusive of depreciation, impairment and amortization expense. This information reflects that the Company has been actively concentrating on reducing its service cost associated with delivering moving and storage services, a majority of which has resulted from the Company’s ability to reduce its freight costs incurred for moves. This reduction in freight costs has been achieved through the utilization of better software tools to minimize the number of missed shipments and through a proactive effort to consolidate shipments into a full truck load rather than “LTL” or less than truck load freight in separate partial truckloads, normally enabling a lower freight cost for full loads. The Company also has been able to reduce its warehouse costs by actively seeking to conclude arrangements with lower priced providers. The Company’s labor costs also have declined as a percentage of sales as a result of Smart Move’s continuing efforts to expand its base of labor provider resources within the markets we serve. The increased utilization of our container assets comprising that fleet will help reduce our expenses associated with repositioning of the SmartVault™ containers.

During the year ended December 31, 2007, the Company added approximately 4,100 containers to its existing fleet of SmartVault™ units. As a result of this expansion, the Company incurred repositioning costs and furniture pad expenditures of $657,348 (representing 11% of Sales). The majority of the repositioning costs relate to positioning of the previous older Version I SmartVault™ units for use in our local storage operations. These costs are included in costs of moving and storage during the current period. We believe these costs will be reduced in subsequent periods as the Company reaches the appropriate vault capacity to meet market demand.

The following table summarizes total sales, completed moves and moves in progress:

		Three Months Ended								Three Months Ended								Three Months Ended								Three Months Ended
		December 31, 2007								September 30, 2007								June 30, 2007								March 31, 2007
		Number				Amount				Number				Amount				Number				Amount				Number				Amount
Completed Moves			355			$	1,104,074				658			$	1,948,008				378			$	1,082,362				237			$	801,696
Storage and other							103,537								363,160								261,809								146,252
Total Sales						$	1,207,611							$	2,311,168							$	1,344,171							$	947,948
		At December 31, 2007								At September 30, 2007								At June 30, 2007								At March 31, 2007
Moves in Progress			410			$	1,081,631				356			$	1,176,632				412			$	1,394,912				224			$	893,655

The majority of our sales through the end of the current period in fiscal 2007 were to the general public. As of December 31, 2007, we had 410 moves in progress (that includes advanced billings) which, when completed, will represent revenue of approximately $1.1 million. The Company recognizes revenue upon completion of all the moving services. The Company delineates a customer move into five stages, 1-5, based on the move status of the customer. Stage five is the final stage, retrieval of the empty vaults from the destination, indicating completion of all required services and triggers revenue recognition. A move in progress is a contracted customer move which has yet to reach stage five. The costs associated with moves in progress are reflected as deferred costs and any cash collected on a move in progress is reflected as deferred revenue.

The following table summarizes the components of cost of goods sold:

Cost of goods sold (excluding depreciation, impairment and amortization) is comprised of the following cost categories: variable costs, fixed costs and furniture pads and repositioning. Included in variable costs is, freight, insurance, labor and service costs for which the Company will not incur a charge unless a move is started.

Fixed costs are monthly expenses relating to our containers that may or may not be associated with or involved in an actual move during the period. Included in fixed cost is GPS service and storage. Repositioning cost is expected to be reduced as a percentage of sales as the units are positioned in markets based on demand. Furniture pads are expensed in the period purchased. As a result of our accelerated expansion of our fleet of SmartVaults™ the cost of furniture pads incurred to date is greater, as a percentage of revenue, than the normal replacement cost of pads we anticipate will be expected in the future.

Principal Costs and Expenses:

Our principal costs and expenses incurred on a recurring basis consist of:

Cost of Revenues : Cost of moving and storage consist of both fixed and variable costs incurred for the acquisition, transportation, repositioning and storage associated with the SmartVault™ containers. During the expansion phase of the Company the fixed period costs, such as the depreciation, storage and other related cost incurred to build capacity have inequitably burdened the Company’s current period growth stage revenue.

Depreciation, Impairment and Amortization: Represents the reduction in the balance sheet value of our containers, forklifts, flatbed trailers and GPS units to reflect the cost of ownership and the consumption and estimated future benefit of the asset’s useful life. These costs are included in the cost of moving and storage above.

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 our office-related property and equipment.

Interest Expense: Interest expense represents the interest that accrues and becomes payable on our outstanding debt instruments in addition to the amortization of warrant discounts, debt issuance costs and beneficial conversion features.

Future Revenues and Operating Expenses

We have had only a short operating history and are continuing to expand within our existing and targeted future markets. Although our expectations may not be realized, we anticipate that our revenue and operating expenses will increase substantially in the future for the following reasons:

Revenues

•

We are working to develop a number of additional revenue-generating opportunities by increasing the number of relationships we have with national and local moving companies, through increased use of our SmartVault™ containers for special purposes in other vertical markets, and by deployment or licensing of our tracking technology components within other industries which require asset tracking.

Expenses

	•		Accounting and Reporting: We have expanded our accounting staff and invested in additional accounting system software to assist us in administering a higher volume of transactions and we are implementing better controls to facilitate our ongoing reporting obligations as a public company.
	•		Public Company Administrative Costs: As a public company we have incurred, and will continue to incur, additional legal, accounting and other expenses that we did not incur as a private company. These additional costs include the recurring legal, accounting fees and investor relation fees associated with ongoing reporting requirements under the Securities Exchange Act of 1934, as amended, and compliance with the various provisions of the Sarbanes-Oxley Act of 2002, investor relations administration costs, fees to independent Board members for their services as directors, and certain director and officer liability insurance costs. We obtained directors and officer’s liability insurance on December 4, 2006 and key man life insurance on our CEO which we did not have in the past and for which we will incur additional premium costs. We also expect the outside legal, accounting and other expenses that we incur as a public company on an annual basis will be in excess of $600,000.
	•		Expenses: We believe that our recurring expenses for labor, materials and general administrative costs of conducting sales and operations will not increase proportionately to increased revenues if we are successful and the volume of our business expands, and that we will continue to experience a decrease in our expenses as a percentage of sales.

Critical Accounting Policies; Use of Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to the valuation of accounts receivable, inventories, intangible assets including goodwill, long-lived assets, income taxes, contingencies and litigation and stock-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. In addition, Financial Reporting Release No. 67, recently released by the SEC, requires all companies to include a discussion to address, among other things, liquidity, off-balance sheet arrangements, contractual obligations and commercial commitments. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period.

Critical accounting policies are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences, which are of a limited duration given our status as an early stage company. We also consider factors and assumptions we believe to be appropriate under the circumstances, but in some cases we do not control the implementation timelines associated with the assumptions we must formulate. Actual results may differ from our current and previous estimates, and we might obtain or formulate different estimates if we used different assumptions or conditions. We believe the critical accounting polices briefly described below affect our current evaluations and the estimates used in the preparation of our financial statements. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements. For a further discussion on the application of these and other accounting policies, see Note 2 to our financial statements included elsewhere in this report.

Revenue and Cost Recognition

We recognize service revenue and expenses only upon completion of the applicable contract for our services. This policy involves deferring direct and incremental moving expenses, including freight and handling costs and the related revenue, until completion of the services covered by a given contract. We recognize advance billings and the related deferred revenue for contracts in process on a net basis. Advanced billings and related deferred revenue for services that have not been completed in the amount of approximately $351,059 have not been recognized on our balance sheet, at December 31, 2007. As of December 31, 2007, we also deferred expenses of $517,485 on contracts in process and deferred revenue of $456,247 with respect to cash payments we received on contracts in process in accordance with this policy. We incur costs as each move is completed and generally receive payment for the full move upon completion and final delivery of services. As a consequence, we also defer expenses which may exceed advance payments we receive on contracts for which the services remaining to be performed will not be completed until after the end of a given month. The deferral of these associated costs is necessary to properly match revenue with corresponding direct and incremental moving expenses. If we were to recognize these deferred expenses as costs during the year incurred, they would increase our gross loss. For the period ending December 31, 2007, if the deferred costs were expensed, our gross loss would be increased by $517,485.

Our services are sold based on the assumption that current pricing for contracts will be applicable to services performed in the future. Actual costs may vary from our estimates utilizing current pricing parameters, resulting in short term variances. We must accurately estimate our requirements for SmartVault™ units in order to meet the growing demand for our planned expansion. If we either over or underestimate our level of requirements for containers, our earnings and working capital can be adversely affected. We believe that through day-to-day operational analysis, we can anticipate and make appropriate adjustments to accommodate fluctuations in demand. However these estimates are subject to varying market conditions and results may vary accordingly.

Credit Risk, Service Provider and Supplier Risk

Our customers generally are required to pay for the services we provide in connection with a given move upon completion of the move and delivery of the transported household and other goods. We seek to mitigate the credit risk associated with our services rendered prior to payment by extending credit terms with respect only to those limited trade accounts receivable of the customers we deem creditworthy. At December 31, 2007, we had an allowance of $45,000 for estimated credit losses. We continually review the adequacy of our allowance for doubtful accounts and adjust it, as necessary, based upon current credit knowledge of the customers’ circumstances.

We purchase the majority of our transportation shipping services from UPS Freight with which we have a distribution agreement. The terms of the distribution agreement include storage and local pickup and delivery of the SmartVaults™. We believe that, while there are alternative sources for the transportation services we purchase, termination of the agreement could have a material adverse effect on our business, financial condition or results of operation in the near term if we should be unable to obtain an adequate and timely replacement for the services currently rendered by this strategic transportation provider.

We purchase our SmartVaults™ from a single manufacturer with which we have a supplier agreement. The containers are made by the manufacturer exclusively for us. We believe that while there are alternative sources for the manufacture of the SmartVaults™, termination of the agreement and arrangements with the current manufacturer could have a material adverse effect on our business, financial condition or results of operation if we are unable to obtain an adequate or timely alternative manufacturer.

Impairment of Long-Lived Assets

The financial statements adhere to the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of”, which requires that long-lived assets, including identifiable intangibles, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Smart Move evaluates the recoverability of its long-lived assets based on estimated undiscounted future cash flows and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived asset. If impaired, the long-lived asset is written down to its estimated fair value. When alternative courses of action to recover the carrying amount of a long-lived asset are under consideration, a probability-weighted approach is used for developing estimates of future undiscounted cash flows. If the carrying value of the long-lived asset is not recoverable based on these estimated future undiscounted cash flows, the impairment loss is measured as the excess of the asset’s carrying value over its fair value, such that the asset’s carrying value is adjusted to its estimated fair value. The assumptions used by management in its projections of undiscounted cash flows involves significant judgment of material estimates of future revenue and customer acceptance. If the assumptions utilized in the projections do not materialize, the SmartVault™, GPS equipment, vault mold, rolling stock and trailers and container components carrying values could become impaired resulting in a substantial impairment expense in the future.

Management assesses the fair value of long-lived assets using commonly accepted techniques, and may use more than one source. Sources to determine fair value include, but are not limited to, recent third party comparable sales, internally developed discounted cash flow analysis and analysis from outside advisors. Significant changes in market conditions resulting from events such as changes in commodity prices or the condition of an asset, or a change in management’s intent to utilize the asset would generally require management to re-assess the cash flows related to the long-lived assets.

During the second quarter of 2007 the Company was notified by its GPS analog providers that the FCC had ruled that service providers of analog signals will be allowed to discontinue service when the so-called “analog sunset” takes effect in February 2008. As of March 1, 2007 the Company had 2,660 of analog GPS units in service. Beginning March 1, 2007 these units will be depreciated over their remaining 11 month useful life. This accelerated rate of depreciation resulted in an increase of $460,550 in depreciation for the year ended December 31, 2007. During the quarter ended June 30, 2007, the Company impaired the $75,094 full net book value of 333 analog GPS units that are no longer in use and have no known salvage value.

During the quarters ended June 30, September 30, and December 31, 2007 the Company retired and recycled a portion of its inventory of the older prototype SmartVault™-Version I units that were damaged and recorded an asset impairment of $281,947, $48,970 and $258,552, respectively as these components were recycled. The remaining prototype “SmartVault™-Version I are used exclusively in a local storage environment. A portion of Version I vaults have shown forklift and movement damage to the plastic base and corner joints. The new version vaults have a solid aluminum base proven to handle significant stress and the new construction vaults also feature a one piece rounded molded corner and the over all design provides significant strength to the container compared to the Version I prototype. During the fourth quarter of 2007, the Company performed a strategic review of the Version I vaults used in the local storage opportunity. Due to the limited financial capital resources necessary to develop and capture revenue, management assessed the recoverability of these Version I vaults and determined an impairment of $875,000. This impairment reflects the amount by which the carrying value of Version I vaults exceed their estimated fair values determined by their estimated future discounted cash flows. The impairment loss is recorded as a component of “Cost of moving and storage” for the year ended December 31, 2007. In addition management assessed the recoverability of its other long-lived assets based on estimated undiscounted future cash flows and determined that such undiscounted cash flows, based upon the Company’s current projections, are sufficient to recover the carrying amount of the other long-lived asset. If we are not able to realize the cash flow (as projected) in future years, additional impairment expense may be required to be recorded in future periods.

Stock Based Compensation

Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123R , “Share-Based Payment,” (“SFAS 123R”) which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options, based on estimated fair values. Stock based compensation is recognized on a straight-line basis over the requisite service period. The amount of compensation expense recognized for options with a graded vesting schedule equals no less than the portion of the award that is vested. SFAS 123R supersedes our previous accounting under APB 25 for periods beginning on or after January 1, 2006. The Company recognized compensation expense related to options of $200,147 for the year ended December, 2007.

In 2007, Directors who were not employees of Smart Move receive as part of their compensation for services as directors an annual grant of restricted shares of our common stock having a fair market value of $10,000 at the beginning of the year, determined as the average closing price of a share of the Company’s common stock for each day during the month of December preceding the grant date. These stock grants vest as to one half of the shares at June 30 ^th and as to the other half at December 31 ^st of each year. The Company expenses these stock grants using the straight-line method over the vesting term and recognized $40,000 of compensation expense during the twelve months ended December 31, 2007. Beginning in January of 2008, the compensation will be increased to $15,000 per non-employee director or a total of $60,000 per year, based on the current composition of our Board of Directors.

We expect that equity-based compensation expense for fiscal 2008 and 2009 from all existing awards to employees, officers and directors will be approximately $285,000 per year. This amount represents both stock option awards and restricted stock grants. The performance-based portion of the 342,000 options to purchase shares of common stock issued to our CEO and CFO in September of 2006 are not included in the equity-based compensation expense described above because management has determined that the attainment of the performance targets specified in the employment agreements is not probable. In the event that subsequent developments indicate that the attainment of the performance targets has become probable, our equity-based compensation expense would increase annually for fiscal 2007 and/or 2008. Any future significant awards or changes in the estimated forfeiture rates of stock options and stock grants may impact these estimates. A total of 114,000 of these options were subject to vesting at September 30, 2007, and have been forfeited as the performance conditions were not satisfied at the vesting date.

Income Taxes

Smart Move’s annual tax rate is determined based on income, statutory tax rates and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Tax law requires some items to be included in the tax return at different times than the items reflected in the financial statements. As a result, the annual tax rate in the financial statements is different than the rate reported on Smart Move’s tax return. Some of these differences are permanent, such as expenses that are not deductible in the tax return, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities.

Inherent in determining the annual tax rate are judgments regarding business plans, planning opportunities and expectations about future outcomes. Significant management judgments are required for the following items:

	•		Management reviews Smart Move’s deferred tax assets for realizability. Valuation allowances are established when management believes that it is more likely than not that some portion of the deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in the tax provision.
	•		We establish accruals for uncertain tax contingencies when, despite the belief that Smart Move’s tax return positions are fully supported, Smart Move believes that an uncertain tax position does not meet the recognition threshold of FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes.” The tax contingency accruals are adjusted in light of changing facts and circumstances, such as the progress of tax audits, the expiration of the statute of limitations for the relevant taxing authority to examine a tax return, case law and emerging legislation. While it is difficult to predict the final outcome or timing of resolution for any particular tax matter, Smart Move believes that the accruals reflect the likely outcome of known tax contingencies in accordance with FIN No. 48.

Nonemployee Options, Warrant and Convertible Debenture Valuation and Accounting

We apply SFAS No. 123R in valuing options granted to consultants and estimate the fair value of such options using the Black-Scholes option-pricing model. The estimated fair value is recorded as consulting expense as services are provided. Options granted to consultants for which vesting is contingent based on future performance are measured at their then current estimated fair value at each period end, until vested.

We issued warrants as part of our convertible debentures and other financings. We value the warrants using the Black-Scholes pricing model based on estimated fair value at issuance and the estimated fair value is recorded as debt discount. The debt discount is amortized to interest expense over the life of the debenture, using the effective interest method, assuming the debenture will be held to maturity. If the debenture is converted to equity prior to its maturity date, any debt discount not previously amortized is also charged against equity except for any beneficial conversion which is charged to expense. We also apply EITF No. 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments,” which requires us to estimate the fair value of the as converted shares upon the conversion of the convertible debentures and record a beneficial conversion (debt discount) if the value of the converted shares is greater than the conversion price.

The use of the Black-Scholes model requires that we estimate the fair value of the underlying equity instruments issuable upon the exercise of options and warrants and the conversion of convertible debt into equity. In determining the fair value of our options, warrants and convertible debentures we utilize the market price for our shares and valuations prepared by independent valuation consultants.

In accordance with EITF No. 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock,” options, warrants and convertible debentures with registration rights deemed outside of our control are reflected as liabilities and marked to estimated fair value in our financial statements.

Contractual Obligations and Commitments

The following table identifies our long-term debt and contractual obligation as of December 31, 2007:

The Company entered into employment agreements with our CEO and CFO in 2006. These agreements provide for base salaries of $188,000 and $175,000, respectively. These officers additionally are eligible for cash bonuses up to 50% of base salaries. In addition, they were granted 342,000 options that vest based upon exceeding certain performance targets. On April 27, 2007, the Board of Directors voted to approve the Compensation Committee’s recommendation to increase executive salaries to $196,000 in the case of our Chief Executive Officer and $182,400 in the case of our Chief Financial Officer with the adjustments to be effective from February 15, 2007. The performance criteria applicable for the cash bonuses during 2007 consisted of two components, an EBITDA target threshold to be measured both semi-annually and annually, and an annual target for “number of moves.” If the specified targets are met, our CEO and CFO each would be eligible to earn cash bonuses up to the greater of 50% of base salary or a stipulated amount for each officer, being $125,000, in the case of the Chief Executive Officer, and $110,000 in the case of the Chief Financial Officer. As of September 30, 2007, management determined that these performance targets would not be met and no bonus has been accrued. Additionally 114,000 options were subject to vesting at September 30, 2007, and were forfeited as the performance conditions were not satisfied at the vesting date.

In November 2007, our CEO, CFO and other members of the management team agreed to waive 50% of their salaries for the months of November and December 2007. This waived cash compensation totaling $44,033 is reflected as non-cash compensation expense and a credit to paid-in capital in the fourth quarter of 2007.

Diversification of Revenues

The majority of our sales in 2007 were to the general public. As of December 31, 2007 we had over 400 moves in progress which, when completed, will represent revenue of approximately $1.1 million. These moves are in various stages of completion, and a portion (not all of the costs) are included in deferred costs.

Qualitative and Quantitative Disclosures about Market Risk

Our funds are currently held in checking accounts and money market funds which do not subject us to risk of a loss of principal due to changes in prevailing interest rates. Some of these securities may be subject to market risk due to changes in prevailing interest rates, which may cause fluctuations in market value.

The fair value of our cash and short-term investment portfolio at December 31, 2007, approximated its carrying value due to the short-term maturities of these investments. The potential decrease in fair value resulting from a hypothetical 10% increase in interest rates at year-end for our investment portfolio is not material.

The face value of our long-term debt at December 31, 2007, including current maturities, was approximately $11.4 million compared to a carrying value of $6.8 million reflecting discounts of approximately $4.6 million. Our long-term debt is at fixed interest rates ranging from 7.00% to 12.00%. The potential increase in interest expense resulting from a hypothetical 10% increase in the average interest rates applicable to our long-term debt at December 31, 2007 would be approximately $135,000.

Results of Operations

Year ended December 31, 2007 compared to 2006

Sales increased $1,626,344 during the year ended December 31, 2007, as compared to the comparable period in the prior year. The increase in revenues can be attributed to operating in a larger market of 61 Metropolitan Service Areas (“MSAs”) during the entire twelve months ended December 31, 2007 compared to 40 MSAs for the majority of 2006, as well as revenue from commercial and national van lines in 2007 compared to a minimal amount in 2006. In 2007 we completed 1,628 moves compared to 1,462 in 2006. In 2007 our average move (including storage revenue) was approximately $3,500 compared to approximately $2,800 in 2006.

Cost of moving and storage (exclusive of depreciation, impairment and amortization)

Cost of moving and storage consists primarily of the cost of transportation to move the containers (freight). Our cost of moving and storage for the year ended December 31, 2007, was $10,755,314, resulting in a gross loss of $4,944,416, compared to the year ended December 31, 2006 of cost of moving storage of $5,931,863 and a gross loss of $1,747,309. Our gross loss increased $3,197,107. The increase in the gross loss is attributable to an increase in depreciation expense due to all of the 61 MSAs in operation for a full twelve months in 2007 and additional SmartVaults™ being placed into service during 2007. Included in cost of moving and storage for the year ended December 31, 2007, was $2,878,391 of depreciation on our SmartVaults™, forklifts, GPS units and flat bed trailers compared to depreciation of $1,104,590 for the year ended December 31, 2006. This is an increase of $1,773,801. During the year ended December 31, 2007, the Company recorded total fixed asset impairments of $1,539,563, comprised of an asset impairment of $75,094 full net book value of 333 analog GPS units that are no longer in use and recorded an asset impairment of $589,469 on certain Version I vaults that were damaged and an $875,000 impairment on Version I vaults used in local storage. The all plastic base is subject to damage from forklifts and movement. The older Version I vaults are now being used exclusively in local storage environment where movement and handling are minimized. However due to the Company’s limited financial capital, resources, in the fourth quarter of 2007, the Company did not expend any resources to grow the storage only business. With the limited revenue growth potential due to allocating resources to the inter-state moving, the Company reported an impairment on these assets of $875,000. Our gross profit percentage has been negatively impacted by our high depreciation costs associated with the operational fixed assets necessary to establish the national expansion. Our gross loss (excluding depreciation, impairment and amortization) as a percentage of sales decreased from 2006 to 2007 by our concentration on reducing costs, through the upgrades of our software, additional personnel to monitor costs and consolidation of loads to take advantage of full truck load freight rates. Included in our costs of moving and storage (exclusive of depreciation, impairment and amortization ) we have certain costs that are variable, fixed, and repositioning and furniture pad expenses. We believe that our repositioning and furniture pad costs will decrease in the future, (assuming no new containers are added to the fleet), as these costs are incurred to place the assets into position for use. For the year December 31, 2007, we incurred repositioning costs and furniture pad expenditures of $657,348 (representing 11% of Sales).

As we complete our national expansion program (adding MSAs) and concentrate on sales growth and improved execution in our logistics, we are seeing improvements in our gross margins as a result of reductions in freight costs achieved by economies of scale, and through enhancements to our logistics software which has reduced costs previously attributed to missed shipment deadlines. In addition, we are reducing warehouse costs and labor costs on our full service moves by expanding our network of third party warehouse and labor providers. Increasing sales revenues in existing locations will also help overcome fixed operational costs and contribute to higher operating margins. By increasing the size of our fleet of containers we will lower repositioning expenses.

Total selling general and administrative expenses consist primarily of salaries, related benefits and fees for professional services, such as legal and accounting services. Total selling, general and administrative expenses were $6,433,988 for the year ended December 31, 2007, compared to $6,848,079 for the year ended December 31, 2006, or a decrease of $414,091. The majority of the change is comprised of salaries and wages for year ended December 31, 2007, of $2,274,470 (including $284,180 of non-cash compensation) compared to salaries and wages for year ended December 31, 2006, of $4,286,340 (including non-cash compensation of $2,690,836) or a decrease of $2,011,870 offset by an increase of legal and accounting of $648,306 an increase in advertising and marketing of $401,210 an increase of director fees of $115,000 and an increase in bad debts of $136,156 due to outdated collection policies that have been subsequently changed. In prior periods, our transportation providers administered arrangements by which funds due from customers paying by certified check were remitted to us. A significant portion of the increase in the bad debts is due to procedural problems or delays in remittance or pick up of certified funds. In the future all payments by checks are required to be remitted directly to the Company by ACH transfer prior to delivery of the containers to the ultimate destination point.

Also in total selling, general and administrative expenses was depreciation and impairment expense of $193,348, for the year ended December 31, 2007, compared to depreciation of $99,395, for the year December 31, 2006. We expect selling, general and administrative expenses to increase modestly as we transition from our national rollout (adding MSAs) to concentrating on sales growth. It is our expectation that these expenses will continue to decrease as a percentage of revenue if we are successful in expanding our sales.

We will continue to increase advertising and marketing expenses as we expand markets and sales efforts. These expenses include web leads purchased from internet moving portals, pay per click programs, key word placements, internet yellow page directories, and other web advertising.

During the period October 1, 2005 to December 31, 2005 we invested $151,930 in convertible notes of a service company, which provided us moving and handling services. We intended to supplement our moving services with those loading and unloading services provided by the Company to address the needs of our customers who seek full service moves. We originally intended to provide this entity with working capital loans up to $210,000 to maintain the service company’s operations until March 2006. However, the service company was not able to maintain budgeting necessary to reach a breakeven position and we discontinued the funding after providing an additional $47,000 in January 2006, which is shown as note impairment of note receivable of $47,000 at September 30, 2006. During the first quarter of 2006 we determined that the convertible note value had been impaired as the service company was not able to execute its business plan and the future collection of the notes receivable is doubtful. Accordingly we recorded impairment for 100% of the notes receivable balance and we are not recognizing any interest income due under the terms of the notes receivable.

Included in total selling, general and administrative expenses for the year ended December 31, 2006 was the write off of $602,262 of deferred offering costs when we withdrew our prior registration statement with the United States Securities and Exchange Commission in July of 2006.

Total other expense consists primarily of interest expense, interest income and a loss on extinguishment of debt in 2007. Interest expense for the year ended December 31, 2007, was $2,754,027 (which included total non-cash interest of $2,027,978 comprised of $1,371,057 of non-cash interest from the amortization of debt discounts, including $870,523 from the expensing of the unamortized beneficial conversion discount upon the conversion of the January 2006 Notes to equity, and $250,437 of stock and warrants issued as inducements to convert interest into equity, and $406,484 of conversion of accrued interest to shares) compared to $1,614,331 (which included $351,754 of non-cash interest from the amortization of debt discounts and $161,140 of inducements to convert debt to equity) for the year ended December 31, 2006. The increase is directly attributable to higher debt levels to fund our equipment purchases and operating loss. In the fourth quarter of 2007, the Company negotiated an interest deferral on the 2005 Notes and the waiver of scheduled principal payments on $2.7 million of the $3 million face amount of the notes. For accounting purposes this caused the 2005 Notes to be deemed an extinguishment, and the Company recorded a non cash loss of $1,328,565. Interest income for the year ended December 31, 2007, was $288,437 compared to $107,043 in the prior year.

As a result, the Company reported a loss before income taxes of $15,172,559 for the year ended December 31, 2007, compared to a net loss of $10,102,676 for the year ended December 31, 2006. The increase in the loss before income taxes is attributable primarily to an increase in depreciation expense of approximately $1,836,959, an increase in impairments of $1,570,358, an increase in interest expense of $1,139,696, and a non cash loss on extinguishment of debt of $1,328,565. These increases were off set by a reduction in total selling, general and administrative expenses (excluding depreciation and impairment) of approximately $508,044.

For the year ended December 31, 2007, we recorded an income tax benefit of $2,367,000 compared to $233,000 in the prior year as we were a limited liability company treated as a partnership for income tax purposes until December 6, 2006. The tax benefit is a result of the reduction in the deferred tax liability originally recognized when we became a taxable corporation in December 2006. The deferred tax liability has been reduced to zero and we will not recognize a tax benefit on additional net operating losses until we generate taxable income and the use of the net operating losses is more likely than not.

As a result, the Company reported a net loss of $12,805,559 for the year ended December 31, 2007, compared to a net loss of $9,869,676 for the year ended December 31, 2006. Net loss per basic and diluted shares was $1.21 for the year ended December 31, 2007, compared to $1.77 for the year ended December 31, 2006. Net loss per share is based upon weighted average shares outstanding of 10,623,167 for the year ended December 31, 2007, compared to 5,584,420 for the year ended December 31, 2006. The increase in weighted average shares is primarily due to the shares issued in conjunction with the December 2006 IPO, the conversion of debt and interest expense to common stock in 2006 and 2007.

Issuance of Stock Options

We adopted our 2006 Equity Incentive Plan (“Plan”) prior to our initial public offering. We are authorized to issue up to 1,400,000 shares of common stock shares under the Plan pursuant to options, rights and stock awards. The Plan is administered by the Board of Directors. The exercise price of options granted under the Plan is determined by the Board of Directors at an amount no less than the estimated fair value of our common stock at the date of grant. The exercise prices of our options granted prior to our IPO were set by the Board of Directors based upon contemporaneous equity transactions at or near the time options were granted. Our Board of Directors determines the term of each option, the number of shares for which each option is granted and the rate at which each option is exercisable. Options are granted with terms not to exceed ten years. On December 29, 2006, we granted 432,000 stock options to our employees at an exercise price of $4.73, the closing price of our common stock on December 29, 2006. Smart Move, Inc. recognized compensation expense in the fourth quarter of 2006 estimated using the Black-Scholes option pricing model of approximately $190,836 assuming a six year exercise period, 33% volatility and no forfeitures. There were 182,000 options granted to new employees and no options were exercised during the year ended December 31, 2007 and they were valued using the Black-Scholes option pricing model assuming a six year exercise period, 36.7% volatility and no forfeitures.

In accordance with Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (“SFAS 123R”), compensation costs related to share-based payments that vested during the twelve months ended December 31, 2007 and recognized in the Statements of Operations was $200,147. The Company has recognized $40,000 of expense for the twelve months ended December 31, 2007, relating to the vested portion of restricted stock grants made to non-employee directors in January, 2007. In addition we issued 342,000 options to our CEO and CFO in connections with their employment agreements prior to the effectiveness of our 2006 Plan. These options vest subject to performance conditions based upon moves booked for the 12 month periods ending September 30, 2007, 2008 and 2009. One third of the options are exercisable at $5.00, one third at $6.00 and the balance at $7.00. As of December 31, 2007, 114,000 (exercisable at $5.00) of these were subject to vesting at September 30, 2007, and have been forfeited as the performance conditions were not satisfied at the vesting date.

Liquidity and Capital Resources

As a public company, we incur legal, accounting and other expenses that we did not incur as a private company related to the SEC’s reporting requirements under the Securities Exchange Act of 1934, as amended, and compliance with the various provisions of the Sarbanes-Oxley Act of 2002.

We expect the legal, accounting and other expenses that we incur as a public company on an annual basis to be at least $600,000.

Through December 31, 2007, we have financed our operations through the sale of our shares for gross proceeds of approximately $7 million, the issuance of convertible debentures for gross proceeds of $10 million and bank and capital lease financing on equipment purchases totaling $2.7 million, the completion of our IPO for net proceeds of approximately $14.3 million, and additional convertible note and debenture sales in 2007 aggregating $2.8 Million. At December 31, 2007 we had working capital deficit of $2,735,568.

Our ability to raise capital involves uncertainties discussed under “Risk Factors” and will be affected by any of the risks affecting our business discussed there under.

We recently sold debt instruments to fund our business and we currently have a significant amount of debt outstanding that likely will increase if we are successful in securing additional funding. Our level of debt could significantly affect our business by: (i) making it more difficult for us to satisfy our obligations, including making scheduled principal and interest payments under our debt obligations; (ii) limiting our ability to obtain additional financing; (iii) requiring us to dedicate a portion of our cash flow from operations to payments of debt, thereby reducing the availability of our cash flow for other purposes; and (v) limiting our flexibility.

If we are unable to pay our trade creditors in a timely manner, we may incur additional charges or be unable to obtain services we require in order to provide moving services to our customers. If our vendors of strategic operational services do not extend us necessary credit we may not be able to fill current or new orders, which may affect the willingness of our customers to continue to place orders with us.

Management cannot provide any assurance that we will be able to obtain loans or raise sufficient money through the sale of our equity securities. If we are not able to raise adequate funding, we will be unable to continue in business in our current form. If we are able to raise funding in the equity markets, our stockholders will suffer significant dilution and the issuance of securities may result in a change of control.

In April 2005 and in January 2006 Smart Move borrowed from a financial institution (“Bank Notes”) that had an outstanding principal balance as of December 31, 2007 of $178,223 and $180,556, respectively. The Bank Notes are secured by all business assets excluding the SmartVaults™ and the tool mold and are payable in monthly installments of approximately $55,000 plus interest, and matures through January 2009. In August of 2007 the Bank amended the loan agreements by waiving all of the Company’s previous loan covenant violations and providing for one covenant requiring the Company to maintain a minimum liquidity ratio coverage of 2.5 to 1.0 determined by the ratio of cash and net accounts receivable to the outstanding loan balance with the bank. As of December 31, 2007 the Company was in compliance with the loan covenant. Additionally the Bank amended the interest rate on the Bank Notes by increasing the interest to a fixed rate of 9.25%. Subsequent to December 31, 2007, the Company borrowed $3,655,000 in the form of a 11% Secured Convertible Debentures with warrants and used a portion of these proceeds to retire the Bank Notes. In addition the Company borrowed $200,000 in the form of 12% Unsecured Convertible Note with warrants.

Cash Flows

Smart Move’s largest source of cash flow from operations is cash collections from customers. Smart Move’s standard payment terms are such that the entire balance is due at the earlier of the 28 ^th day after the containers are delivered to the customer for loading or when the containers are delivered to the customer’s final destination point. Net cash used in operations was $5,579,441 for the twelve months ended December 31, 2007. Cash was consumed by the net loss of $12,805,559, less non-cash expenses of $3,040,944 for depreciation, $1,371,057 of amortization of debt discounts, loss on debt extinguishment of $1,328,565, $284,180 of non-cash compensation, impairments of $1,570,358, bad debts of $168,014 and shares and warrants issued as inducements to convert debt to equity of $250,437 offset by a non-cash cost of a deferred income tax benefit of $2,367,000. Cash was also consumed by increases in accounts receivable of $126,846, an increase in contracts in process of $149,597, an increase in packing supplies of $94,437 and an increase in prepaid and other of $31,434. Cash consumed was offset by, an increase in accounts payable of $934,247, an increase in accrued interest of $704,847, and an increase in deferred revenue of $342,783.

Investing Activities

For the year ended December 31, 2007 net cash used in investing activities of $10,080,373 was attributable to purchases of property equipment totaling $10,041,173, and, and a deposit on office lease of $39,200.

For the year ended December 31, 2006 net cash used in investing activities of $5,880,427 was attributable to purchases of property equipment totaling $5,789,427, and advancing $47,000 under a note receivable and a deposit on office lease of $44,000.

Financing Activities

For the year ended December 31, 2007 we received proceeds from notes of $2,829,000 which were off set by note payable issuance cost of $233,395 and payments of debt and capital leases of $802,425.

For the year ended December 31, 2006 our financing activities consisted primarily of $18,660,008 of proceeds from sale of shares of common stock and member shares and $6,832,500 from proceeds of notes payable, and $500,000 from proceeds of bank debt, offset by offering and issuance costs of approximately $3.54 million.

Convertible Promissory Notes

At December 31, 2007, the Company had outstanding $10,289,000 in principal amount of secured promissory notes. The secured promissory notes bear interest at 10% to 12% per annum. Only interest was specified to be payable on the 2005 notes aggregating $3,000,000 during the first two years after issuance in October 2005. On the third anniversary of their issuance, however, we were required to begin making principal payments on the notes on a five-year amortization basis. In November 2007, the holders of $2,700,000 of the 2005 notes agreed to waive and defer the monthly principal amortization in exchange for a reduced conversion price and other consideration in the form of warrants. The July 2006 notes in the amount of $5,000,000 require only interest to be paid for 5 years and all principal is due at maturity. The August 2007 notes, in the amount of $1,217,500, bear interest at the rate of 12% per annum payable quarterly with the principal due on September 1, 2009. The November 2007 notes, in the amount of $1,071,500, bear interest at the rate of 12% payable at maturity of October 31, 2008. The secured promissory notes aggregating $5,289,000 may be prepaid in whole or part without any prepayment penalty. The July 2006 note totaling $5,000,000 is subject to a 2% pre-payment penalty for the first two years, unless our stock trades at a 25% premium to the initial public offering price of our stock. The promissory notes aggregating $9,217,500 are secured by a first lien on all our container assets and our tool mold. The $1,071,500 November 2007 notes are secured by a second lien on certain assets previously held as security for the bank indebtedness (which was acquired together with the security interest by a new investor in January 2008). The principal amount of these promissory notes may be converted into shares of our common stock at the option of the holders. Of the $3.0 million 2005 notes, $2.7 million may be converted at a price of $3.00 per share and $300,000 is convertible at $5.00 per share. The July 2006 $5.0 million notes are convertible at a price of $3.75. The August 2007 $1.2 million notes may be converted at a price of $2.00 per share and the November 2007 $1.07 million notes are convertible at $1.00 per share. In September of 2007 we issued a $540,000 unsecured promissory note that bears interest at the rate of 7% per annum payable quarterly. The principal amount is due September 2, 2010. The unsecured note may be converted at a price of $1.80. In November 2007, we issued amended and restated convertible notes totaling $355,500 to certain of the 2005 Notes holders bearing interest at 12% per annum in exchange for their agreement to defer interest payments. These notes are due in October 2010 and are convertible at $1.00 per share.

The Company did not make certain scheduled interest payments for the quarter ended December 31, 2007, as required under the terms of the August 2007 and 2005 Notes (the “Notes”). As a result, the Company will be obligated to pay a default interest rate of 18% per annum on all outstanding principal amounts until the scheduled interest payments under the terms of the Notes are paid current. On August 28, 2007, an Intercreditor Agreement and Stipulation (the “Intercreditor Agreement”) was entered into by the holders of the August 2007 Notes, the 2005 Notes and the 2006 July Notes which precludes acceleration of the August 2007 note principal amount as long as the 2005 Notes and the 2006 July Notes are not in default. As of March 28, 2008, $57,000 of interest due and payable, as of December 1, 2007, on the August 2007 Notes has not been paid. As of December 31, 2007, the Company is current in its payments of principal and interest under the terms of the 2006 July Notes and $1,975,000 of the 2005 Notes. In January 2008, the required interest payments on the remaining $1,025,000 of the 2005 Notes were made and therefore the August 2007 Note holders have no acceleration rights and the August 2007 Notes have been classified as long-term.

The above convertible promissory notes will have substantial financial impact on our future financial statements in accordance with proper accounting procedures of EITF No. 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments,” and EITF No. 00-19 “Accounting for Derivative Financial instruments Indexed to, and Potentially Settled in a Company’s Own Stock”. As of December 31, 2007 we have allocated $4.6 million of the $11.4 million total debt to the detachable warrants and beneficial conversion feature. Our future financial statement will reflect interest expense calculated at an effective interest rate of 64% on the detachable warrants and beneficial conversion feature.

Off-Balance Sheet Arrangements

As of December 31, 2007 and 2006, we had no off-balance sheet arrangements or obligations.

During the first half of 2008, the Certifying Officers, with the Company’s other management representatives, will complete remediation measures which may included engaging a financial accounting firm to help the Company, evaluate, account for and prepare financial statement disclosures for complex accounting transactions.

We will also monitor our disclosure controls and procedures on a continuing basis to ensure that information we are required to be disclose in the reports we file or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In the future as such controls change in relation to developments in the Company’s business and financial reporting requirements, our evaluation and monitoring measures will also address any additional corrective actions that may be required.

Our management does not expect that our disclosure control procedures or our internal control over financial reporting will prevent all errors and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Management’s Annual Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as set forth in Internal Control - Integrated Framework. Based on our evaluation under the framework in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was not effective as of December 31, 2007. A remediation measure may be the hiring of a consultant to review our SEC filings to ascertain that all accounting financial disclosure are made.

This annual report does not include an audit or attestation report of our registered public accounting firm regarding our internal control over financial reporting. Our management’s report was not subject to audit or attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

ITEM 8B.		OTHER INFORMATION

None

PART III

Items numbered (1) through (8) are incorporated by reference to Smart Move, Inc.’s Current Reports on Form 8-K as follows:

(1) Incorporated by reference to Smart Move, Inc.’s Current Report on Form 8-K (File No. 001-32951) filed with the Securities and Exchange Commission on April 30, 2007.

(2) Incorporated by reference to Smart Move, Inc.’s Current Report on Form 8-K (File No. 001-32951) filed with the Securities and Exchange Commission on August 28, 2007.

(3) Incorporated by reference to Smart Move, Inc.’s Current Report on Form 8-K (File No. 001-32951) filed with the Securities and Exchange Commission on September 5, 2007.

(4) Incorporated by reference to Smart Move, Inc.’s Current Report on Form 8-K (File No. 001-32951) filed with the Securities and Exchange Commission on October 1, 2007.

(5) Incorporated by reference to Smart Move, Inc.’s Current Report on Form 8-K (File No. 001-32951) filed with the Securities and Exchange Commission on November 15, 2007.

(6) Incorporated by reference to Smart Move, Inc.’s Current Report on Form 8-K (File No. 001-32951) filed with the Securities and Exchange Commission on January 2, 2008.

(7) Incorporated by reference to Smart Move, Inc.’s Current Report on Form 8-K (File No. 001-32951) filed with the Securities and Exchange Commission on January 18, 2008.

(8) Incorporated by reference to Smart Move, Inc.’s Current Report on Form 8-K (File No. 001-32951) filed with the Securities and Exchange Commission on January 28, 2008.

ITEM 14.		PRINCIPAL ACCOUNTANTS FEES AND SERVICES

Incorporated by reference from the definitive proxy statement for our 2008 annual meeting of shareholders, which will be filed no later than 120 days after December 31, 2007.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 28, 2008

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Chris Sapyta and Edward Johnson and each of them, his or her true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any amendments to this report on Form 10-KSB and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Date		Title
/s/ Chris Sapyta		March 28, 2008		Chief Executive Officer
Chris Sapyta				(principal executive officer)
/s/ Edward Johnson		March 28, 2008		Chief Financial Officer
Edward Johnson
/s/ Doug Kelsall		March 28, 2008		Director
Doug Kelsall
/s/ Jack Burkholder		March 28, 2008		Director
Jack Burkholder
/s/ John Jenkins		March 28, 2008		Director
John Jenkins
/s/ Kent Lund		March 28, 2008		Director
Kent Lund

Report of Independent Registered Public Accounting Firm

Board of Directors
Smart Move, Inc.
Denver, Colorado

We have audited the accompanying balance sheet of Smart Move, Inc (the “Company”) as of December 31, 2007 and the related statements of operations, shareholders’ equity, and cash flows for the years ended December 31, 2007 and 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Smart Move, Inc. at December 31, 2007, and the results of its operations and its cash flows for the years ended December 31, 2007 and 2006, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the financial statements, in 2006, the Company changed its method of accounting for stock-based compensation in accordance with the guidance provided in Statement of Financial Accounting Standards No. 123(R), Share-Based Payment.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses and has a working capital deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Anton Collins Mitchell LLP

Denver, Colorado
March 28, 2008

The accompanying notes are an integral part of these financial statements.

Smart Move, Inc.
Statements of Operations

		Year ended				Year ended
		December 31,				December 31,
		2007				2006
Sales		$	5,810,898			$	4,184,554
Cost of moving and storage (exclusive of depreciation, amortization and impairment shown separately below)			6,337,360				4,827,273
Depreciation and amortization			2,878,391				1,104,590
Impairment of fixed assets			1,539,563				—
Total cost of moving and storage			10,755,314				5,931,863
Gross loss			(4,944,416	)			(1,747,309	)
Selling, general and administrative expenses (exclusive of depreciation, amortization and impairment shown separately below and including non-cash compensation of $284,180 and $2,690,836 for the year ended December 31, 2007 and 2006, respectively)			6,240,640				6,099,422
Depreciation and amortization			162,553				99,395
Impairment of note receivable			—				47,000
Impairment of capitalized software			30,795
Write off of deferred offering costs			—				602,262
Total selling, general and administrative expenses			6,433,988				6,848,079
Operating loss			(11,378,404	)			(8,595,388	)
Other income (expense):
Interest income			288,437				107,043
Interest expense			(2,754,027	)			(1,614,331	)
Loss on extinguishment of debt			(1,328,565	)			—
Total other expense			(3,794,155	)			(1,507,288	)
Loss before income tax benefit			(15,172,559	)			(10,102,676	)
Income tax (benefit)			(2,367,000	)			(233,000	)
Net loss		$	(12,805,559	)		$	(9,869,676	)
Net loss per share:
Basic and diluted		$	(1.21	)		$	(1.77	)
Shares used to compute net loss per share:
Basic and diluted			10,623,167				5,584,420

The accompanying notes are an integral part of these financial statements.