ACCELERIZE
NEW MEDIA, INC.
|
(Exact
Name of Registrant as Specified in Its
Charter)
|
Delaware
|
20-3858769
|
|
(State
of Incorporation)
|
(IRS
Employer Identification No.)
|
12121
Wilshire Blvd. , Suite 322,
Los
Angeles, CA 90025
|
||
(Address
of Principal Executive Offices) (Zip Code)
|
ACCELERIZE
NEW MEDIA, INC.
2007
ANNUAL REPORT ON FORM 10-K
|
||
Table
of Contents
|
||
PART
I
|
||
Page
|
||
Item
1.
|
Business
|
1
|
Item
1A.
|
Risk
Factors
|
7
|
Item
1B.
|
Unresolved
Staff Comments
|
14
|
Item
2.
|
Properties
|
14
|
Item
3.
|
Legal
Proceedings
|
14
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
14
|
PART
II
|
||
Item
5.
|
Market
For Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities`
|
14
|
Item
6.
|
Selected
Financial Data
|
15
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
15
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
22
|
Item
8.
|
Financial
Statements and Supplementary Data
|
22
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
22
|
Item
9A.
|
Controls
and Procedures
|
22
|
Item
9B.
|
Other
Information
|
22
|
PART
III
|
||
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
22
|
Item
11.
|
Executive
Compensation
|
25
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
28
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
29
|
Item
14.
|
Principal
Accountant Fees and Services
|
30
|
PART
IV
|
||
Item
15.
|
Exhibits
and Financial Statement Schedules
|
30
|
●
|
organic
search listings are results based on factors such as keyword relevancy
within a web page. These are the listings generally found on the left hand
side in search engines, and are not influenced by direct financial
payments, only by effective search engine
optimization.
|
●
|
paid
search marketing consists of placing ads for products or services on
search engines and on content sites across the Internet. These ads are
typically small snippets of text linked to merchandise pages. Payment is
made when users click through to the site from the
ad.
|
●
|
our
blog sites are complements to our financial portals, delivering up-to-date
news and analysis which then refers the user to our portals for more
detailed information. Using blogs allows us to benefit from the real-time
nature of blog search listings, so that current information in our blogs
can appear in a wide variety of sites and blog aggregation search engines,
often within minutes of the initial
posting.
|
●
|
our
financial portals generate sales leads for complementary financial
services including our investor relations web solutions, financial data
feeds, and debt consolidation services. Our IR web solutions and debt
consolidation sales teams market and sell our products directly to public
companies and consumers through traditional sales channels including phone
and email. We market our financial portals via free RSS feeds of financial
information that are widely disseminated throughout the internet in
traditional and blog search engines and
websites.
|
●
|
we
market our debt-settlement referral services through online advertising in
search engines, web portals, email newsletters, and other
financial-related websites. The ads drive interested consumers to our
portfolio of websites acquired with TDRG. If interested, the consumer will
submit information and request a free consultation from one of our debt
consultants. The debt consultant will contact the consumer to discuss in
more detail the services offered by the debt settlement agency. If the
consumer is interested, the debt consultant will prepare a detailed
proposal outlining a debt reduction solution for the consumer. Once a
consumer signs up for the program, the debt settlement agency takes over
ownership of the client and handles all customer service and
implementation of the debt program.
|
●
|
Try
Catch Consulting Inc. supports our portals and web-based solutions, our
financial/customer/alert data and our technical infrastructure through
development, database/server administration, and ongoing maintenance. Try
Catch was instrumental in helping us to develop several pivotal
technologies, including our e-mail alert engine, the financial data
process known as extract, transform and load, or ETL process, and the core
web portal platform, which is the basis for all of our web-based
solutions.
|
●
|
Verio
Inc. hosts our servers, concentrating solely upon managed hosting, an
advanced type of dedicated hosting. Unlike basic dedicated hosting,
managed hosting offers system level administration and support,
comprehensive Internet infrastructure and extensive services that relieve
IT departments of many critical, and costly responsibilities. These
services typically include advanced monitoring, load balancing, elevated
security, data storage, stress testing, industry-leading technical
expertise and content delivery.
|
●
|
Zerolag
Communications Inc. provides secure, managed web hosting, server
collocation, and IT security to select clients. Zerolag provides our
debt-settlement referral business with data back up, elevated security,
data storage, email, and hosting. Chosen for their security due to our
debt-settlement referral business’s financial data, they provide three
core layers of protection for our debt-settlement referral business’s
server: regular software updates, firewall protection, and intrusion
detection systems, or IDS. In addition, all of our debt-settlement
referral business’s data is backed up remotely on a daily basis to prevent
data loss.
|
●
|
Hemscott
Inc. is a leading independent provider of financial data in the U.S. and
Canada. Hemscott delivers detailed numerical, statistical and general
business information to us, to help us meet our analytical, compliance and
research needs.
|
●
|
Global
Securities Information, Inc. helps legal and financial firms to fulfill
their research requirements. We use GSI's SEC filing service, which is a
real time data feed of SEC filings submitted to the SEC via EDGAR service.
This relationship ensures that we have the most up-to-date SEC filing
data possible with no downtime or missed filings. We
retrieve this feed on a regular basis, identify any new SEC filings and
add them to our system. Our own supporting processes then retrieve
additional information based on the core SEC filing data provided by
GSI.
|
●
|
Zacks
Investment Research Inc. markets segments of our ad inventory. Zacks is a
Chicago based firm with 25 years of experience in providing institutional
and individual investors with the analytical tools and financial
information necessary to the success of their investment
process.
|
●
|
Opt-Intelligence
Inc., in partnership with Zacks, assists us with real-time consumer
opt-in advertising (commonly called Co-registration). Opt-Intelligence
clients include TheStreet.com, Match.com and StarMagazine.com. Their
advertiser list includes Circuit City, eBay, Wal-Mart, The Home Depot,
NASCAR, Nokia and Procter & Gamble. Co-registration is the practice of
one organization, on its own subscription and membership registration
forms, offering subscriptions, memberships, or leads to another
organization.
|
●
|
www.SECFilings.com,
a financial business networking portal delivering free, accurate SEC data
and user-generated content. Users can retrieve historical filings,
subscribe to free email alerts and RSS feeds, and can track SEC filings by
company, industry or person; and
|
●
|
www.ExecutiveDisclosure.com,
a financial and business networking portal offering free access to
in-depth information regarding the executive compensation (salaries,
bonuses, option grants, and stock award data) provided by all
publicly-held companies. Users are able to subscribe to email
and RSS alerts, and research executives by name, company or
industry.
|
●
|
Web
Marketing Services, which consists of web design and development of
websites;
|
●
|
Paid
Search, which consists of placing ads for products or services on search
engines and on content websites across the
Internet;
|
●
|
Publisher
Network, which consists of email marketing firms and websites;
and
|
●
|
Search
Engine Optimization, which consists of a set of methods aimed at improving
the ranking of a website in search engine
listings.
|
●
|
RSS
|
●
|
Business
Networking
|
●
|
Internet
Content Providers
|
●
|
Variability
in demand and usage for our products and
services;
|
●
|
Market
acceptance of new and existing services offered by us, our competitors and
potential competitors;
|
●
|
Governmental
regulations affecting the use of the Internet, including regulations
concerning intellectual property rights and security features;
and
|
●
|
The
recent downturn in the economy which led to a large increase in home
foreclosures and a substantial growth in consumer debt. Our debt
settlement referral business is based on helping consumers to resolve
their debt related problems. Therefore, any downturn in the economy
should lead to a larger number of consumers with a growing amount of debt,
which should increase revenues within our debt settlement referral
business.
|
●
|
If
the content or the performance of our services violates third party
copyright, trademark, or other intellectual property rights;
or
|
●
|
If
our customers violate the intellectual property rights of others by
providing content through our
services.
|
●
|
5,400,000
shares of Common Stock issuable upon the possible conversion of
outstanding 10% Series A Convertible Preferred
Stock;
|
●
|
11,887,500
shares of Common Stock issuable upon the possible conversion of
outstanding 8% Series B Convertible Preferred
Stock;
|
●
|
816,138
shares of Common Stock issuable in payment of PIK dividends by our 10%
Series A Convertible Preferred Stock holders, or the Series A PIK
Dividends;
|
●
|
585,122
shares of Common Stock issuable in payment of PIK dividends by our 8%
Series B Convertible Preferred Stock holders, or the Series B PIK
Dividends;
|
●
|
Warrants
to purchase up to a total of 1,850,000 shares of our Common Stock at a
price of $0.15 per share, or the Series A Warrants;
and
|
●
|
Warrants
to purchase up to a total of 5,499,375 shares of our Common Stock at a
price of $0.35 per share, or the Series B Warrants;
and
|
●
|
up
to 10,000,000 shares of Common Stock issuable under our stock option
plan.
|
●
|
problems
combining the acquired operations, technologies or
products;
|
●
|
unanticipated
costs or liabilities;
|
●
|
diversion
of management’s attention;
|
●
|
adverse
effects on existing business relationships with suppliers and
customers;
|
●
|
risks
associated with entering markets in which we have no or limited prior
experience; and
|
●
|
potential
loss of key employees, particularly those of the acquired
organizations.
|
●
|
Limiting
the growth of the Internet;
|
●
|
Creating
uncertainty in the marketplace that could reduce demand for our products
and services;
|
●
|
Increasing
our cost of doing business;
|
●
|
Exposing
us to significant liabilities associated with content distributed or
accessed through our products or services;
or
|
●
|
Leading
to increased product and applications development costs, or otherwise harm
our business.
|
·
|
that
a broker or dealer approve a person's account for transactions in penny
stocks; and
|
·
|
the
broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny
stock
|
|
to
be purchased.
|
·
|
obtain
financial information and investment experience objectives of the person;
and
|
·
|
make
a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and
experience in
financial matters to be capable of evaluating the risks of transactions in
penny
stocks.
|
·
|
sets
forth the basis on which the broker or dealer made the suitability
determination; and
|
·
|
that
the broker or dealer received a signed, written statement from the
investor prior to the transaction.
|
ACCELERIZE
NEW MEDIA, INC.
|
||||||||||||||||
RESULTS
OF OPERATIONS
|
||||||||||||||||
Increase/
|
Increase/
|
|||||||||||||||
Year
ended
|
(Decrease)
|
(Decrease)
|
||||||||||||||
December
31,
|
in
$ 2007
|
in
% 2007
|
||||||||||||||
2007
|
2006
|
vs
2006
|
vs
2006
|
|||||||||||||
Revenues
|
$ | 1,030,509 | $ | 199,214 | $ | 831,295 | 417.3 | % | ||||||||
Operating
expenses:
|
||||||||||||||||
Selling,
general & administrative
|
4,047,516 | 2,563,348 | 1,484,168 | 57.9 | % | |||||||||||
Total
operating expenses
|
4,047,516 | 2,563,348 | 1,484,168 | 57.9 | % | |||||||||||
Operating
loss
|
(3,017,007 | ) | (2,364,134 | ) | (652,873 | ) | 27.6 | % | ||||||||
Other
income (expense):
|
||||||||||||||||
Interest
income (expense), net
|
18,253 | (521 | ) | 17,732 |
NM
|
|||||||||||
18,253 | (521 | ) | 17,732 |
NM
|
||||||||||||
Net
loss
|
(2,998,754 | ) | (2,364,655 | ) | (634,099 | ) | 26.8 | % | ||||||||
Less
dividends issued for series A and B preferred stock
|
296,977 | 44,596 | 252,381 | 565.9 | % | |||||||||||
Net
loss attributable to common stock
|
$ | (3,295,731 | ) | $ | (2,409,251 | ) | $ | (886,480 | ) | 36.8 | % | |||||
NM:
Not Meaningful
|
·
|
an
increase in amortization of website development costs of approximately
$170,000;
|
|
·
|
an
increase in legal and professional fees of approximately $204,000
associated with the preparation and filing of a registration statement and
interim filings;
|
|
·
|
an
increase in selling, general and administrative expenses associated with
assuming the operations of TDRG of approximately
$630,000;
|
|
·
|
an
increase in cash compensation and related employer taxes and
benefits to new and existing employees of approximately $941,000 primarily
to expand the marketing of our products and services;
and
|
|
·
|
an
increase in the marketing program expenditures of approximately
$1,110,000;
|
|
These
increases were offset by:
|
||
·
|
A
decrease in expenses associated with the issuance of stock for
compensation to employees of $1,550,000, which occurred during
2006.
|
·
|
Fair
value of options granted to employees of approximately $94,000;
and
|
|
·
|
Amortization
of capitalized web development and depreciation of fixed assets of
approximately $199,000.
|
|
Additionally,
the following variations in operating assets and liabilities impacted our
cash used in operating activity:
|
||
·
|
Increase
in accounts receivable of approximately $27,000, primarily due to an
increase in our revenues;
|
|
·
|
Increase
in prepaid expenses of approximately $203,000, primarily from the
acquisition of a domain name registration in October
2007;
|
|
·
|
Decrease
in accounts payable and accrued expenses of approximately $72,000,
primarily from paying our obligations in a more timely manner in 2007;
and
|
|
·
|
Increase
in deferred revenue of approximately $223,000, resulting from the
assumption of the operations of
TDRG.
|
·
|
Fair
value of shares issued to employees hired for services of approximately
$1.55 million; and
|
|
·
|
Amortization
of capitalized web development of approximately
$59,000.
|
|
Additionally,
the following variations in operating assets and liabilities impacted our
cash used in operating activity:
|
||
·
|
Increase
in accounts payable and accrued expenses of approximately $247,000,
primarily from delaying certain payments to our vendors in
2006.
|
Name
|
Age
|
Position
|
Brian
Ross
|
33
|
President,
Chief Executive Officer, Treasurer, Director
|
Chris
Meredith
|
37
|
Chief
Technology Officer, Assistant Treasurer, Assistant Secretary,
Director
|
Daniel
Minton
|
32
|
Head
of Financial Portals
|
Damon
Stein
|
32
|
General
Counsel, Head of the Debt Division and Secretary
|
Dan
Goldberg
|
36
|
Chief
Marketing Officer
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)(6)(7)
|
Option
Awards
($)(1)
|
Total
($)
|
|||||||||||||||
Brian
Ross, President, Chief
Executive
Officer, and Treasurer (2)
|
2006
|
- | - | 610,000 | - | 610,000 | |||||||||||||||
2007
|
90,000 | 300,000 | (3) | 390,000 | |||||||||||||||||
Chris
Meredith, Chief Technology Officer, Assistant Treasurer and Assistant
Secretary (4)
|
2006
|
127,000 | - | 305,000 | - | 432,000 | |||||||||||||||
2007
|
137,500 | 30,000 | (5) | 167,500 | |||||||||||||||||
Damon
Stein, General Counsel, Head of the Debt Division and
Secretary
|
2007
|
135,833 | 60,000 | (8) | 180,000 | ||||||||||||||||
Dan
Goldberg, Chief Marketing Officer
|
2007
|
91,875 | 60,000 | (9) | 151,875 | ||||||||||||||||
Jeff
McCollum
|
2007
|
118,750 | 525,000 | (10) | 643,750 |
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|||||
OPTION
AWARDS
|
|||||
Name
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
|
Brian
Ross
|
1,000,000
|
1,000,000
|
$0.15
|
1/1/2017
|
|
Chris
Meredith
|
100,000
|
100,000
|
$0.15
|
1/1/2017
|
|
Damon
Stein
|
200,000
|
200,000
|
$0.15
|
1/1/2017
|
|
Dan
Goldberg
|
200,000
|
200,000
|
$0.15
|
1/1/2017
|
·
|
each
person known by us to be the beneficial owner of more than 5% of our
Common Stock;
|
·
|
each
of our directors;
|
·
|
each
of our executive officers named in the compensation tables in Item 11;
and
|
·
|
All
of our executive officers and directors as a
group.
|
AMOUNT
AND NATURE OF BENEFICIAL OWNERSHIP (2)
|
|||||||
COMMON
STOCK
|
SERIES
A PREFERRED
STOCK
|
SERIES
B PREDERRED
STOCK
|
|||||
NAME
(1)
|
#
OF
SHARES
|
%
OF
CLASS
|
#
OF
SHARES
|
%
OF
CLASS
|
#
OF
SHARES
|
%
OF
CLASS
|
%
OF VOTE
|
Brian
Ross (3)
|
7,100,000
|
28.3%
|
-0-
|
n/a
|
-0-
|
n/a
|
16.8%
|
Chris
Meredith (4)
|
3,150,000
|
13.0%
|
-0-
|
n/a
|
-0-
|
n/a
|
7.6%
|
Daniel
Minton (5)
|
712,500
|
2.9%
|
-0-
|
n/a
|
-0-
|
n/a
|
1.7%
|
Damon
Stein (6)
|
1,950,000
|
8.0%
|
-0-
|
n/a
|
-0-
|
n/a
|
4.7%
|
Dan
Goldberg (7)
|
1,950,000
|
8.0%
|
-0-
|
n/a
|
-0-
|
n/a
|
4.7%
|
All
officers and directors as a group (five persons) (8)
|
15,362,500
|
62.2%
|
-0-
|
n/a
|
-0-
|
n/a
|
36.7%
|
Sharon
Standowski (9)
|
1,750,000
|
7.3%
|
-0-
|
n/a
|
-0-
|
n/a
|
4.2%
|
Camien
Advisors LLC (10)
|
1,750,000
|
7.3%
|
-0-
|
n/a
|
-0-
|
n/a
|
4.2%
|
(1)
|
Unless
otherwise indicated, the business address of each person listed is in care
of Accelerize New Media, Inc., 12121 Wilshire Blvd.
, Suite 322, Los Angeles, CA
90025.
|
(2)
|
The
percentages in the table have been calculated on the basis of treating as
outstanding for a particular person, all shares of our common stock
outstanding on that date and all shares of our common stock issuable to
that holder in the event of exercise of outstanding options, warrants,
rights or conversion privileges owned by that person at that date which
are exercisable within 60 days of that date. Except as otherwise
indicated, the persons listed have sole voting and investment power with
respect to all shares of our common stock owned by them, except to the
extent that power may be shared with a spouse. To our knowledge, none of
the shares included are pledged as
security.
|
(3)
|
Includes
1,000,000 options, exercisable at $.15 per
share.
|
(4)
|
Includes
100,000 options, exercisable at $.15 per
share.
|
(5)
|
Includes
112,500 options, exercisable at $.15 per
share.
|
(6)
|
Includes
200,000 options, exercisable at $.15 per
share.
|
(7)
|
Includes
200,000 options, exercisable at $.15 per
share.
|
(8)
|
Includes
1,612,500 options, exercisable at $.15 per
share.
|
(9)
|
Ms.
Standowski’s address is 307 Wildflower Court Jackson, New Jersey
08527.
|
(10)
|
Camien
Advisors LLC is a New York limited liability company. Mr. Leonard Dietz is
the CEO of Camien Advisors LLC, and has sole voting and investment powers
with regard to the shares of Camien Advisors
LLC.
|
Equity
Compensation Plan Information
|
|||
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
Equity
compensation plans approved by security holders
|
|||
Equity
compensation plans not approved by security holders
|
7,542,500
|
$0.16
|
2,457,500
|
Total
|
7,542,500
|
$0.16
|
2,457,500
|
Fee Category
|
2007
|
2006
|
|
Audit
Fees (1)
|
$56,000
|
$60,000
|
|
Audit
Related Fees
|
-
|
-
|
|
Tax
Fees (2)
|
-
|
5,000
|
|
All
Other Fees(3)
|
6,000
|
-
|
|
Total
Fees
|
$62,000
|
$65,000
|
a.
|
Index
to Financial Statements and Financial Statement
Schedules
|
b.
|
All
other schedules for which provision is made in the applicable accounting
regulations of the SEC are not required under the related instructions, or
are inapplicable, and therefore have been
omitted.
|
c.
|
Exhibits
|
EXHIBIT
NO.
|
DESCRIPTION
|
3.1
|
Certificate
of Incorporation dated November 22, 2005, as amended by Certificate of
Designation dated August 8, 2006 (incorporated by reference to the
Company’s Registration Statement on Form SB-2 (file no.
333-139586) filed on December 22, 2006.)
|
3.2
|
Certificate
of Designation of 10% Series A Convertible Preferred Stock (incorporated
by reference to Exhibit 3.1 to the Company’s Registration Statement on
Form SB-2 (file no. 333-139586) filed on December 22,
2006.)
|
3.3
|
Certificate
of Designation of 8% Series B Convertible Preferred Stock (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 10-QSB
for the quarter ended June 30, 2007.)
|
3.4
|
By-laws
of the Company (incorporated by reference to the Company’s Registration
Statement on Form SB-2 (file no. 333-139586) filed on December 22,
2006.)
|
3.5
|
Form of Common Stock
Certificate (incorporated by reference to the Company’s
Registration Statement on Form SB-2 (file no.
333-139586) filed on December 22, 2006.)
|
3.6
|
Form of Preferred
Stock Certificate (incorporated by reference to the Company’s
Registration Statement on Form SB-2 (file no.
333-139586) filed on December 22, 2006.)
|
4.1
|
Form of Subscription
Agreement of 10% Series A Convertible Preferred Stock (incorporated
by reference to the Company’s Registration Statement on Form SB-2 (file no.
333-139586) filed on December 22,
2006.)
|
4.2
|
Form of Common Stock
Purchase Warrant for 10% Series A Convertible Preferred Stock
(incorporated by reference to the Company’s Registration Statement
on Form SB-2 (file no.
333-139586) filed on December 22, 2006.)
|
4.3
|
Form of Subscription
Agreement of 8% Series B Convertible Preferred Stock (incorporated
by reference to the Company’s Quarterly Report on Form 10QSB filed
on August 13, 2007.)
|
4.4
|
Form of Common Stock
Purchase Warrant for 8% Series B Convertible Preferred Stock
(incorporated by reference to the Company’s Quarterly Report on
Form 10QSB filed
on August 13, 2007.)
|
10.1
|
Form of Promissory
Note (incorporated by reference to Amendment No.3 of the Company’s
Registration Statement on Form SB-2 (file no.
333-139586) filed on April 30, 2007.)
|
10.2
|
Form of Note
Conversion Agreement (incorporated by reference to the Company’s
Current Report on Form 8-K furnished on
September 7, 2007.)
|
10.3
|
Form
of Stock Option Agreement (incorporated by reference to the Company’s
Registration Statement on Form SB-2 (file no. 333-139586) filed on
December 22, 2006.)
|
10.4
|
Employment
Agreement of Brian Ross (incorporated by reference to the Company’s
Registration Statement on Form SB-2 (file no.
333-139586) filed on December 22, 2006.)
|
10.5
|
Employment
Agreement of Chris Meredith (incorporated by reference to the
Company’s Registration Statement on Form SB-2 (file no.
333-139586) filed on December 22, 2006.)
|
10.6
|
Employment
Agreement of Damon Stein (incorporated by reference to Amendment No.1 to
the Company’s Registration Statement on Form SB-2 (file no.
333-139586) filed on January 31, 2007.)
|
10.7
|
Employment
Agreement of Dan Goldberg (incorporated by reference to Amendment No.1 to
the Company’s Registration Statement on Form SB-2 (file no.
333-139586) filed on January 31, 2007.)
|
10.8
|
Form
of Convertible Promissory Note (filed herewith)
|
10.9
|
Accelerize
New Media, Inc. Stock Option Plan (incorporated by reference to the
Company’s Registration Statement on Form SB-2 (file no. 333-139586) filed
on December 22, 2006.)
|
23.1
|
Consent
of Sherb & Co., LLP. (filed
herewith)
|
31.1
|
Rule
13a-14(a) Certification. (filed herewith)
|
31.2
|
Rule
13a-14(a) Certification. (filed herewith)
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. (furnished
herewith)
|
32.2
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. (furnished
herewith)
|
SIGNATURE
|
TITLE
|
DATE
|
By:
/S/ Brian
Ross
|
President,
Chief Executive Officer, Treasurer and Director
|
March
31, 2008
|
By:
/S/ Chris
Meredith
|
Chief
Technology Officer, Assistant Treasurer, Assistant Secretary and
Director
|
March
31, 2008
|
The
following consolidated financial statements and financial statement
schedules are included on the pages indicated:
|
|
Page
|
|
Reports
of Independent Registered Public Accounting Firm
|
F-2
|
Balance
Sheet as of December 31, 2007 and 2006
|
F-3
|
Statement
of Operations for each of the two years in the period ended December 31,
2007,
|
F-4
|
Statement
of Shareholders’ Equity for each of the two years in the period ended
December 31, 2007
|
F-5
|
Statement
of Cash Flows for each of the two years in the period ended December 31,
2007,
|
F-6
|
Notes
to Consolidated Financial Statements
|
F-8
– F-19
|
ACCELERIZE
NEW MEDIA, INC.
|
||||||||
BALANCE
SHEET
|
||||||||
December
31,
|
||||||||
ASSETS
|
2007
|
2006
|
||||||
Current
Assets:
|
||||||||
Cash
|
$ | 951,317 | $ | 414,270 | ||||
Accounts
receivable, net of allowance for bad debt of $3,037 and $0
at
|
||||||||
December
31, 2007 and 2006, respectively
|
50,499 | 11,623 | ||||||
Prepaid
expenses
|
5,487 | 2,575 | ||||||
Domain
name rights
|
162,740 | - | ||||||
Deferred
tax asset
|
80,026 | - | ||||||
Total
current assets
|
1,250,069 | 428,468 | ||||||
Website
development costs, net of accumulated amortization of $210,411
and
|
||||||||
$58,635
at December 31, 2007 and 2006, respectively
|
226,483 | 82,911 | ||||||
Fixed
assets, net of accumulated depreciation of $10,689
|
21,380 | - | ||||||
Goodwill
|
580,547 | - | ||||||
Total
assets
|
$ | 2,078,479 | $ | 511,379 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 214,578 | $ | 249,430 | ||||
Payable
to former member
|
36,315 | - | ||||||
Deferred
revenues- short-term
|
550,992 | - | ||||||
Deferred
tax liability
|
80,026 | - | ||||||
Total
current liabilities
|
881,911 | 249,430 | ||||||
Deferred
revenue- long-term
|
90,307 | - | ||||||
Total
liabilities
|
972,218 | 249,430 | ||||||
Stockholders'
Equity:
|
||||||||
Preferred
stock, $0.001 par value, 2,000,000 shares authorized:
|
||||||||
Series
A, 54,000 issued and outstanding at December 31,
2007
|
||||||||
and
2006, respectively
|
728,567 | 728,567 | ||||||
Series
B, 118,875 issued and outstanding at December 31, 2007 and
|
||||||||
0 shares
issued and outstanding at December 31, 2006
|
3,644,563 | - | ||||||
Common
stock; $.001 par value; 100,000,000 shares authorized;
|
||||||||
21,779,294
shares issued and outstanding at December 31, 2007
and
|
||||||||
19,140,027
shares issued and outstanding at December 31, 2006
|
21,779 | 19,140 | ||||||
Additional
paid-in capital
|
2,418,062 | 1,925,220 | ||||||
Accumulated
deficit
|
(5,706,710 | ) | (2,410,978 | ) | ||||
Total
stockholders’ equity
|
1,106,261 | 261,949 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 2,078,479 | $ | 511,379 |
See
Notes to Financial Statements.
|
ACCELERIZE
NEW MEDIA, INC.
|
||||||||
STATEMENTS
OF OPERATIONS
|
||||||||
Year
ended
|
||||||||
December
31, 2007
|
||||||||
2007
|
2006
|
|||||||
Revenues
|
$ | 1,030,509 | $ | 199,214 | ||||
Operating
expenses:
|
||||||||
Selling,
general and administrative
|
4,047,516 | 2,563,348 | ||||||
Total
operating expenses
|
4,047,516 | 2,563,348 | ||||||
Operating
loss
|
(3,017,007 | ) | (2,364,134 | ) | ||||
Other
income (expense):
|
||||||||
Interest
income (expense)
|
18,253 | (521 | ) | |||||
18,253 | (521 | ) | ||||||
Net
loss
|
(2,998,754 | ) | (2,364,655 | ) | ||||
Less
dividends issued for series A and B preferred stock
|
296,977 | 44,596 | ||||||
Net
loss attributable to common stock
|
$ | (3,295,731 | ) | $ | (2,409,251 | ) | ||
Basic
and diluted loss per common share
|
$ | (0.16 | ) | $ | (0.13 | ) | ||
Basic
and diluted weighted average common
|
||||||||
shares
outstanding
|
21,124,349 | 18,748,958 | ||||||
See
Notes to Financial Statements.
|
Common
|
Total
|
|||||||||||||||||||||||||||||||||||||||
Series
A
|
Series
B
|
Stock
|
Additional
|
Accumu-
|
Stock-
|
|||||||||||||||||||||||||||||||||||
Preferred
Stock
|
Preferred
Stock
|
Common
Stock
|
to
be
|
Paid-in-
|
lated
|
holders’
|
||||||||||||||||||||||||||||||||||
Shares
|
$
|
Shares
|
$
|
Shares
|
$
|
issued
|
Capital
|
Deficit
|
Equity
|
|||||||||||||||||||||||||||||||
Balance,
January 1, 2006
|
- | $ | - | - | $ | - | - | $ | - | $ | 20,000 | $ | (236 | ) | $ | (1727 | ) | $ | 18,037 | |||||||||||||||||||||
- | ||||||||||||||||||||||||||||||||||||||||
Common
Stock to be issued
|
- | - | - | - | - | - | (20,000 | ) | - | - | (20,000 | ) | ||||||||||||||||||||||||||||
Shares
issued pursuant to private placements
|
54,000 | 728,567 | - | - | 3,500,000 | 3,500 | - | 346,500 | - | 1,078,567 | ||||||||||||||||||||||||||||||
Shares
issues for services
|
- | - | - | - | 15,500,000 | 15,500 | - | 1,534,500 | - | 1,550,000 | ||||||||||||||||||||||||||||||
Preferred
Stock dividends
|
- | - | - | - | 140,027 | 140 | - | 20,864 | (21,004 | ) | - | |||||||||||||||||||||||||||||
Fair
value of warrants issued
|
- | - | - | - | - | - | - | 23,592 | (23,592 | ) | - | |||||||||||||||||||||||||||||
Net
Loss
|
- | - | - | - | - | - | - | - | (2,364,655 | ) | (2,364,655 | ) | ||||||||||||||||||||||||||||
Ending
Balance, December 31, 2006
|
54,00 | 728,567 | - | - | 19,140,027 | 19,140 | - | 1,925,220 | (2,410,978 | ) | 261,949 | |||||||||||||||||||||||||||||
Shares
issued to DRG acquisition
|
- | - | - | - | 1,750,000 | 1,750 | - | 103,250 | - | 105,000 | ||||||||||||||||||||||||||||||
Fair
value of warrants issued
|
- | - | - | - | - | - | - | 94,030 | (94,030 | ) | - | |||||||||||||||||||||||||||||
Fair
value of options granted
|
- | - | - | - | - | - | - | 93,503 | - | 93,503 | ||||||||||||||||||||||||||||||
Shares
issued pursuant to private placement
|
- | - | 118,875 | 3,644,563 | - | - | - | - | - | 3,644,563 | ||||||||||||||||||||||||||||||
Preferred
stock dividends
|
- | - | - | - | 889,267 | 889 | - | 202,059 | (202,948 | ) | - | |||||||||||||||||||||||||||||
Net
Loss
|
- | - | - | - | - | - | - | - | (2,998,754 | ) | (2,998,754 | ) | ||||||||||||||||||||||||||||
Ending
balance, December 31, 2007
|
54,000 | $ | 728,567 | 118,875 | $ | 3,644,563 | 21,779,294 | $ | 21,779 | $ | - | $ | 2,418,062 | $ | (5,706,710 | ) | $ | 1,106,261 |
ACCELERIZE
NEW MEDIA, INC.
|
||||||||
STATEMENTS
OF CASH FLOWS
|
||||||||
Year
ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (2,998,754 | ) | $ | (2,364,655 | ) | ||
Adjustments
to reconcile net loss to net cash provided by
|
||||||||
operating
activities:
|
||||||||
Depreciation
and amortization
|
199,395 | 58,635 | ||||||
Fair
value of shares issued for services
|
- | 1,550,000 | ||||||
Fair
value of options granted
|
93,503 | - | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(26,840 | ) | (11,623 | ) | ||||
Prepaid
expenses
|
(202,912 | ) | (2,575 | ) | ||||
Variation
in deferred tax asset
|
(80,026 | ) | - | |||||
Accrued
interest
|
1,067 | - | ||||||
Accounts
payable and accrued expenses
|
(71,907 | ) | 247,243 | |||||
Variation
in deferred tax liability
|
80,026 | - | ||||||
Deferred
revenue
|
223,384 | - | ||||||
Net
cash used in operating activities
|
(2,783,064 | ) | (522,975 | ) | ||||
Cash
flows used in investing activity:
|
||||||||
Website
development costs
|
(295,018 | ) | (141,546 | ) | ||||
Net
cash used in investing activity
|
(295,018 | ) | (141,546 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from notes payable
|
400,000 | - | ||||||
Payment
to former member
|
(29,434 | ) | - | |||||
Payment
of financing fees
|
(516,062 | ) | (81,443 | ) | ||||
Common
stock to be issued
|
- | (20,000 | ) | |||||
Proceeds
from issuance of shares of common stock
|
- | 350,000 | ||||||
Proceeds
from issuance of shares of Preferred Stock A
|
- | 810,010 | ||||||
Proceeds
from issuance of shares of Preferred Stock B
|
3,760,625 | - | ||||||
Net
cash provided by financing activities
|
3,615,129 | 1,058,567 | ||||||
Net
increase in cash
|
537,047 | 394,046 | ||||||
Cash,
beginning of year
|
414,270 | 20,224 | ||||||
Cash,
end of year
|
$ | 951,317 | $ | 414,270 |
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid for interest
|
$ | 4,194 | $ | 521 | ||||
Cash
paid for income taxes
|
$ | - | $ | - | ||||
Non-cash
investing and financing activities:
|
||||||||
Beneficial
conversion feature associated with issuance
|
||||||||
of
warrants related to Preferred Stock B
|
$ | 94,030 | $ | - | ||||
Conversion
of notes payable into shares of
|
||||||||
Preferred
Stock B
|
$ | 400,000 | $ | - | ||||
Preferred
stock dividends
|
$ | 202,948 | $ | 21,004 | ||||
Goodwill
results from acquisition and corresponding
|
||||||||
increase
in
|
$ | 580,547 | $ | - | ||||
Assets
|
$ | 44,105 | $ | - | ||||
Liabilities
|
$ | 519,652 | $ | - | ||||
Common
stock and additional paid-in capital
|
$ | 105,000 | $ | - | ||||
See
Notes to the Financial Statements
|
Fair
value of the unescrowed shares:
|
$
|
105,000
|
||
Assets
acquired:
|
(44,105
|
)
|
||
Liabilities
assumed:
|
519,652
|
|||
Goodwill:
|
$
|
580,547
|
December 31, 2007
|
||||
Computer
equipment and software
|
$ | 1,464 | ||
Phone
equipment
|
19,155 | |||
Office
furniture and equipment
|
11,450 | |||
32,069 | ||||
Accumulated
depreciation
|
(10,689 | ) | ||
$ | 21,380 |
·
|
Recognized
financial assets and financial liabilities except:
|
|
·
|
An
investment in a subsidiary that the entity is required to
consolidate
|
|
·
|
An
interest in a variable interest entity that the entity is required to
consolidate
|
|
·
|
Employers’
and plans’ obligations (or assets representing net over funded positions)
for pension benefits, other postretirement benefits (including health care
and life insurance benefits), post employment benefits, employee stock
option and stock purchase plans, and other forms of deferred compensation
arrangements, as defined in SFAS No. 35, “Accounting and Reporting by
Defined Benefit Pension Plans”, No. 87, “Employers’ Accounting for
Pensions”, No. 106, “Employers’ Accounting for Postretirement Benefits
Other Than Pensions”, No. 112, “Employers’ Accounting for Post employment
Benefits”, No. 123 (revised December 2004), “Share-Based Payment”, No. 43,
“Accounting for Compensated Absences”, No. 146, “Accounting for Costs
Associated with Exit or Disposal Activities”, and No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans”,
and APB Opinion No. 12, “Omnibus Opinion—1967”
|
|
·
|
Financial
assets and financial liabilities recognized under leases as defined in
FASB Statement No. 13, “Accounting for Leases” (This exception does not
apply to a guarantee of a third-party lease obligation or a contingent
obligation arising from a cancelled lease.)
|
|
·
|
Deposit
liabilities, withdrawable on demand, of banks, savings and loan
associations, credit unions, and other similar depository
institutions
|
|
·
|
Financial
instruments that are, in whole or in part, classified by the issuer as a
component of shareholder’s equity (including “temporary equity”). An
example is a convertible debt security
with
a noncontingent beneficial conversion feature.
|
|
·
|
Firm
commitments that would otherwise not be recognized at inception and that
involve only financial instruments
|
|
·
|
Nonfinancial
insurance contracts and warranties that the insurer can settle by paying a
third party to provide those goods or services
|
|
·
|
Host
financial instruments resulting from separation of an embedded
nonfinancial derivative instrument from a nonfinancial hybrid
instrument.
|
·
|
May
be applied instrument by instrument, with a few exceptions, such as
investments otherwise accounted for by the equity
method
|
|
·
|
Is
irrevocable (unless a new election date occurs)
|
|
·
|
Is
applied only to entire instruments and not to portions of
instruments.
|
For
the year ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Numerator:
|
||||||||
Net
loss attributable to common stock
|
$
|
(3,295,731
|
)
|
$
|
(2,409,251
|
)
|
||
Denominator:
|
||||||||
Denominator
for basic earnings per share-
|
||||||||
Weighted
average shares outstanding
|
21,124,349
|
18,748,958
|
||||||
Denominator
for diluted earnings per share-
|
||||||||
Weighted
average shares outstanding
|
21,124,349
|
18,748,958
|
||||||
Basic
earnings per share
|
$
|
(0.16
|
)
|
$
|
(0.13
|
)
|
||
Diluted
earnings per share
|
$
|
(0.16
|
)
|
$
|
(0.13
|
)
|
December
31,
|
||||||||
2007
|
2006
|
|||||||
Website
development costs
|
$ | 436,564 | $ | 141,546 | ||||
Less:
accumulated amortization
|
(210,081 | ) | (58,635 | ) | ||||
Website
development costs, net
|
$ | 226,483 | $ | 82,911 |
2008: | $ | 98,578 | ||
2009: | 76,052 | |||
2010: | 51,853 | |||
$ | 226,483 |
Exercise
price:
|
$
|
0.15
to 0.35
|
||
Market
price at date of grant:
|
$
|
0.06
to 0.75
|
||
Expected
volatility:
|
69
|
%
|
||
Expected
dividend rate:
|
0
|
%
|
||
Risk-free
interest rate:
|
3.41
to 4.54
|
%
|
Weighted
|
Weighted
|
|||||||||||||||
Average
Exercise
|
Average
Contractual
|
Aggregate
Intrinsic
|
||||||||||||||
Options
|
Price
|
Terms
|
Value
|
|||||||||||||
Outstanding
at January 1, 2007
|
- | $ | - | - | $ | - | ||||||||||
Granted
|
7,542,500 | 0.16 | 104,000 | |||||||||||||
Exercised
|
- | - | ||||||||||||||
Expired
|
10,000 | 0.15 | ||||||||||||||
Outstanding
at December 31, 2007
|
7,532,500 | $ | 0.16 | 9.38 | $ | 4,459,500 | ||||||||||
Exercisable
and vested at December 31, 2007
|
1,729,161 | $ | 0.15 | 9.04 | $ | 1,036,997 |
2007
|
2006
|
|||
Tax
at U.S. statutory rate:
|
35.0%
|
35.0%
|
||
State
tax rate, net of federal benefits
|
5.7
|
4.4
|
||
Change
in valuation allowance
|
(40.7)
|
(39.4)
|
||
Effective
tax rate
|
0.0%
|
0.0%
|
Net
operating losses
|
$ |
1,450,332
|
||
Valuation
|
(1,370,306
|
) | ||
Total
deferred tax-assets – current
|
$ |
80,026
|
Website
development costs
|
$ | 75,689 | ||
Amortization
of goodwill
|
4,337 | |||
Total
deferred tax-liability – current
|
$ | 80,026 |
Future
Minimum
|
Sublease
|
Net
Minimum
|
||||||||||
Lease
Payments
|
Income
|
Lease
Payments
|
||||||||||
2008
|
$ | 146,377 | (22,008 | ) | $ | 124,369 | ||||||
2009
|
102,996 | (22,008 | ) | 80,988 | ||||||||
2010
|
44,027 | (11,004 | ) | 33,023 |
Year
|
Commitments
|
|||
2008
|
$ |
435,000
|
||
2009
|
435,000
|
Year
ended
|
||||||||||||
December
31, 2006
|
||||||||||||
Accelerize
|
TDRG
|
Total
|
||||||||||
Revenues
|
$
|
199,214
|
$
|
497,350
|
$
|
696,564
|
||||||
Operating
expenses:
|
||||||||||||
Selling,
general & administrative
|
2,563,348
|
837,143
|
3,400,491
|
|||||||||
Total
operating expenses
|
2,563,348
|
837,143
|
3,400,491
|
|||||||||
Operating
loss
|
(2,364,134
|
)
|
(339,793
|
)
|
(2,703,927
|
)
|
||||||
Other
income (expense):
|
||||||||||||
Interest
income
|
-
|
465
|
465
|
|||||||||
Other
income
|
-
|
19,250
|
19,250
|
|||||||||
Interest
expense- related party
|
-
|
(2,625
|
)
|
(2,625
|
)
|
|||||||
Interest
expense
|
(521)
|
(190
|
)
|
(711
|
)
|
|||||||
(521)
|
16,900
|
16,379
|
||||||||||
Net
loss
|
(2,364,655
|
)
|
(322,893
|
)
|
(2,687,548
|
)
|
||||||
Less
dividends issued for series A and B preferred
stock
|
44,596
|
-
|
44,596
|
|||||||||
Net
loss attributable to common stock
|
$
|
(2,409,251
|
)
|
$
|
(322,893
|
)
|
$
|
(2,732,144
|
)
|
|||
Basic
and diluted loss per common share
|
$
|
(0.13
|
)
|
$
|
(0.18
|
)
|
$
|
(0.13
|
)
|
|||
Basic
and diluted weighted average common shares outstanding
|
18,748,958
|
1,750,000
|
20,498,958
|