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.
2008
ANNUAL REPORT ON FORM 10-K
|
||
Table
of Contents
|
||
PART
I
|
||
Page
|
||
Item
1.
|
Business
|
3
|
Item
1A.
|
Risk
Factors
|
8
|
Item
1B.
|
Unresolved
Staff Comments
|
15
|
Item
2.
|
Properties
|
15
|
Item
3.
|
Legal
Proceedings
|
15
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
16
|
PART
II
|
||
Item
5.
|
Market
For Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities`
|
16
|
Item
6.
|
Selected
Financial Data
|
17
|
Item
7.
|
Management
’s Discussion and Analysis of Financial Condition and Results of
Operations
|
17
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
25
|
Item
8.
|
Financial
Statements and Supplementary Data
|
25
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
25
|
Item
9A(T).
|
Controls
and Procedures
|
25
|
Item
9B.
|
Other
Information
|
26
|
PART
III
|
||
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
26
|
Item
11.
|
Executive
Compensation
|
29
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
32
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
33
|
Item
14.
|
Principal
Accountant Fees and Services
|
33
|
PART
IV
|
||
Item
15.
|
Exhibits
and Financial Statement Schedules
|
34
|
●
|
organic
search listings, which 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, which 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
blogs and microsites, which complement our financial portals, deliver
up-to-date news and analysis, which then refer 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;
and
|
●
|
our
financial portals, which generate sales leads and targeted traffic for
advertisers. We market our services within our portfolio of websites via
banner ad inventory, targeted newsletters, and filing
alerts.
|
●
|
marketing
methods, which include organic search engine optimization, paid search
engine marketing, e-mail marketing, media buys, and display advertising;
and
|
●
|
marketing
affiliates and publishers, who drive qualified traffic from one website to
another.
|
●
|
Edgar Online, Inc.
provides financial content and engages in the creation and distribution of
fundamental financial data and public filings for equities, mutual funds,
and other publicly traded assets principally in the United States. It
produces data that assists in the analysis of the financial, business, and
ownership conditions of an investment. The company delivers its
information products via the Internet in the form of end-user
subscriptions and data feeds; and
|
●
|
Maximum
ASP
hosts our servers and provides comprehensive network protection,
automated server patching, and advanced server monitoring, with a strong
focus on hosting solutions that combine advanced monitoring and management
tools.
|
●
|
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; and
|
●
|
Lake Group Media, whose
services include list brokerage, list management and interactive
programs.
|
●
|
Try Catch Consulting
Inc., which supported our portals and web-based solutions, our
financial/customer/alert data and our technical
infrastructure;
|
●
|
Verio Inc., which
hosted our servers;
|
●
|
Hemscott Inc., which
provided us with detailed numerical, statistical and general business
information; and
|
●
|
Global Securities Information,
Inc., which provided us with SEC filing
services.
|
·
|
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;
|
·
|
www.executivedisclosure.com,
a financial and business networking blog offering news and information
about salaries, bonuses, option grants, and stock award data provided by
all publicly-held companies;
|
·
|
www.investerms.com,
which provides investors with real-time news and education, syndicated
across a wide network of distribution partners. Content is aimed to help
readers fully understand the news by presenting it in an
easy-to-understand manner;
|
·
|
www.otcroadshow.com,
which generates investor awareness for public and private companies. Our
team creates company reports, marketing materials and supplementary
materials that are then put in front of a targeted audience to garner
company awareness, business leads, and real time feedback on
products/services; and
|
·
|
www.takingthestreet.com,
a financial blog containing investment opinions that are syndicated across
a wide network of distribution partners. Our focus is on helping readers
to identify new investment opportunities through in-depth
analysis.
|
·
|
Combining
management’s direct marketing practices and industry experience we have
developed a technology platform to generate, validate, and deliver lead
generation programs. Utilizing this platform we are
able to deliver buyers to sellers, in return for the lead fees we receive
as our compensation;
|
·
|
We
also promote our Lead Generation offers through our website:
http://www.accelerizenewmedia.com/offers/index.aspx
|
●
|
Online
Advertising; and
|
●
|
Lead
Generation/Performance Based
Marketing.
|
●
|
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, business failures, unemployment and substantial growth in
consumer debt.
|
●
|
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;
|
●
|
1,224,470
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;
|
●
|
1,005,386
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 1,800,000 shares of our Common Stock at a
price of $0.15 per share, or the Series A
Warrants;
|
●
|
Warrants
to purchase up to a total of 3,199,375 shares of our Common Stock at a
price of $0.35 per share, or the Series B
Warrants;
|
●
|
Warrants
to purchase up to a total of 2,350,000 shares of our Common Stock at a
price of $0.35 per share with a cashless exercise feature, issued to
holders of Series B Preferred Stock, who exercised their Series B
Warrants;
|
●
|
Convertible
Promissory Notes in a total principal amount of $530,000, which may be
converted at the note holders' option at conversion prices ranging between
$0.35 - $0.75 per share;
|
●
|
Convertible
Promissory Notes in a total principal amount of $617,000, which may be
converted at the note holders' option at conversion prices ranging between
$0.35 - $0.55 per share;
|
●
|
Warrants
to purchase up to a total of 573,500 shares of our Common Stock at prices
ranging between $0.55 - $0.75 per share, issued in connection with
convertible promissory notes;
|
●
|
Warrants
to purchase up to a total of 2,808,333 shares of our Common Stock at
prices ranging between $0.50 - $0.55 per share, issued to various service
providers; 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.
|
Fiscal Year Ended December 31,
2008
|
High
|
Low
|
First
Quarter Ended March 31, 2008
|
$0.80
|
$0.50
|
Second
Quarter Ended June 30, 2008
|
$0.78
|
$0.72
|
Third
Quarter Ended September 30, 2008
|
$0.75
|
$0.45
|
Fourth
Quarter Ended December 31, 2008
|
$0.50
|
$0.25
|
ACCELERIZE
NEW MEDIA, INC.
|
|||||||||||||
RESULTS
OF OPERATIONS
|
Year
ended
|
Increase/
|
Increase/
|
||||||||||||||
December
31,
|
(Decrease)
|
(Decrease)
|
||||||||||||||
2008
|
2007
|
in
$ 2008
|
in
% 2007
|
|||||||||||||
vs
2007
|
vs
2006
|
|||||||||||||||
Revenue:
|
||||||||||||||||
Debt
solution revenues
|
$ | 1,190,966 | $ | 540,386 | $ | 650,580 | 120.4 | % | ||||||||
Lead
generation revenues
|
2,216,302 | 359,911 | 1,856,391 | 515.8 | % | |||||||||||
Advertising
and other revenues
|
388,095 | 130,212 | 257,883 | 198.0 | % | |||||||||||
Total
revenues:
|
3,795,363 | 1,030,509 | 2,764,854 | 268.3 | % | |||||||||||
Operating
expenses:
|
||||||||||||||||
Selling,
general and administrative
|
8,754,657 | 4,047,516 | 4,707,141 | 116.3 | % | |||||||||||
Total
operating expenses
|
8,754,657 | 4,047,516 | 4,707,141 | 116.3 | % | |||||||||||
Operating
loss
|
(4,959,294 | ) | (3,017,007 | ) | (1,942,287 | ) | 54.4 | % | ||||||||
Other
income (expense):
|
||||||||||||||||
Interest
income (expense)
|
(32,302 | ) | 18,253 | (50,555 | ) | -277.0 | % | |||||||||
(32,302 | ) | 18,253 | (50,555 | ) | -277.0 | % | ||||||||||
Net
loss
|
(4,991,596 | ) | (2,998,754 | ) | (1,992,842 | ) | 66.5 | % | ||||||||
Less
dividends issued for series A and B preferred stock
|
415,206 | 296,977 | $ | 118,229 | 39.8 | % | ||||||||||
Net
loss attributable to common stock
|
$ | (5,406,802 | ) | $ | (3,295,731 | ) | $ | (2,111,071 | ) | 64.1 | % |
·
|
an
increase in lead acquisition costs and sales acquisition costs
of approximately $2,193,000; This increase is primarily due to a
concentrated effort by management to increase lead generation
revenues;
|
|
·
|
an
increase in advertising expenses of approximately $31,000; This increase
is primarily due to a concentrated effort by management to increase
revenues;
|
|
·
|
an
increase in payroll expenses of approximately $608,000; This increase is
primarily due to the need for more help to handle the increase in
sales;
|
|
·
|
an
increase in option expense of approximately $129,000; This increase is
primarily due to the increase in stock issuance to new employees;
and
|
|
·
|
an
increase in warrant expense of approximately $1,413,624 for the valuation
of the cashless warrants issued to Series B Preferred Stock holders and
valuation of warrants issued pursuant to the TDRG
acquisition.
|
·
|
Fair
value of options granted to employees of approximately
$223,000;
|
|
·
|
Amortization
of capitalized web development and discount on notes payable, and
depreciation of fixed assets of approximately $341,000;
|
|
·
|
Amortization
of deferred compensation of approximately $71,000;
|
|
·
|
Fair
value warrants issued of approximately $1,239,000;
|
|
·
|
Fair
value warrants issued pursuant to the TDRG acquisition of approximately
$174,000; and
|
|
·
|
Fair
value of warrants issued for services of
$910,000.
|
Additionally,
the following variations in operating assets and liabilities impacted our
cash used in operating activity:
|
||
·
|
Increase
in accounts receivable of approximately $127,000, resulting from increased
lead generation revenues;
|
|
·
|
Increase
in accounts payable and accrued expenses of approximately $228,000,
resulting from increased marketing programs expenditures associated with
increased acquisition of leads; and
|
|
·
|
Increase
in domain name rights of $25,000, resulting from the renewal of domain
name rights.
|
·
|
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.
|
·
|
Increase
in accounts receivable of approximately $27,000, primarily due to an
increase in our revenues;
|
|
·
|
Increase
in domain name rights of $200,000, 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 $223,000, resulting from the
assumption of the operations of
TDRG.
|
|
·
|
There
is no documentation that the board of directors monitored or provided
oversight responsibility related to financial reporting and related
internal controls and considered its
effectiveness;
|
|
·
|
While
the Company has processes in place, there are no formal written policies
and procedures related to certain financial reporting
processes;
|
|
·
|
There
is no formal documentation in which management specified financial
reporting objectives to enable the identification of risks, including
fraud risks;
|
|
·
|
The
Company lacked the resources and personnel to implement proper segregation
of duties or other risk mitigation
system.
|
Name
|
Age
|
Position
|
Brian
Ross
|
34
|
President,
Chief Executive Officer, Treasurer, Director
|
Chris
Meredith
|
38
|
Chief
Technology Officer, Assistant Treasurer, Assistant Secretary,
Director
|
Daniel
Minton
|
33
|
Head
of Financial Portals
|
Damon
Stein
|
33
|
General
Counsel and Secretary
|
Jeff
McCollum
|
37
|
Head
of Lead Generation
Division
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)(1)
|
Total
($)(10)
|
||||||||||||
Brian
Ross, President, Chief
Executive
Officer, and Treasurer (2)
|
2007
|
90,000
|
300,000
|
(3)
|
390,000
|
|||||||||||||
2008
|
93,000
|
-
|
93,000
|
|||||||||||||||
Chris
Meredith, Chief Technology Officer, Assistant Treasurer and Assistant
Secretary (4)
|
2007
|
137,500
|
30,000
|
(5)
|
167,500
|
|||||||||||||
2008
|
150,625
|
-
|
150,625
|
|||||||||||||||
Damon
Stein, General Counsel, Head of the Debt Division and Secretary
(6)
|
2007
|
135,833
|
60,000
|
(7)
|
195,833
|
|||||||||||||
2008
|
152,950
|
-
|
152,950
|
|||||||||||||||
Jeff
McCollum
Head
of Lead Generation Division (8)
|
2007
|
118,750
|
525,000
|
(9)
|
643,750
|
|||||||||||||
2008
|
154,000
|
154,000
|
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
|
2,000,000
|
-0-
|
$0.15
|
1/1/2017
|
|
Chris
Meredith
|
200,000
|
-0-
|
$0.15
|
1/1/2017
|
|
Damon
Stein
|
400,000
|
-0-
|
$0.15
|
1/1/2017
|
|
Jeff
McCollum
|
2,041,666
(1)
|
1,458,334
(1)
|
$0.15
|
4/1/2017
|
·
|
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)
|
8,100,000
|
27.7%
|
-0-
|
n/a
|
-0-
|
n/a
|
17.4%
|
|||||||
Jeff
McCollum (4)
|
2,041,666
|
7.0%
|
-0-
|
n/a
|
-0-
|
n/a
|
4.4%
|
|||||||
Chris
Meredith (5)
|
3,250,000
|
11.8%
|
-0-
|
n/a
|
-0-
|
n/a
|
7.3%
|
|||||||
Daniel
Minton (6)
|
825,000
|
3.0%
|
-0-
|
n/a
|
-0-
|
n/a
|
1.8%
|
|||||||
Damon
Stein (7)
|
2,375,000
|
8.6%
|
-0-
|
n/a
|
-0-
|
n/a
|
5.3%
|
|||||||
All
officers and directors as a group (five persons) (8)
|
16,574,999
|
58.1%
|
-0-
|
n/a
|
-0-
|
n/a
|
36.2%
|
|||||||
Dan
Goldberg (9)
|
2,375,000
|
8.6%
|
-0-
|
n/a
|
-0-
|
n/a
|
5.3%
|
|||||||
Sharon
Standowski (10)
|
1,742,500
|
6.4%
|
-0-
|
n/a
|
-0-
|
n/a
|
3.9%
|
|||||||
Camien
Advisors LLC (11)
|
1,545,500
|
5.7%
|
-0-
|
n/a
|
-0-
|
n/a
|
3.5%
|
(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
2,000,000 options, exercisable at $.15 per share.
|
(4)
|
Includes
2,041,666 options, exercisable at $.15 per share.
|
(5)
|
Includes
200,000 options, exercisable at $.15 per
share.
|
(6)
|
Includes
225,000 options, exercisable at $.15 per share.
|
(7)
|
Includes
400,000 options, exercisable at $.15 per
share.
|
(8)
|
Includes
4,799,999 options, exercisable at $.15 per share.
|
(9)
|
Includes
400,000 options, exercisable at $.15 per
share.
|
(10)
|
Ms.
Standowski’s address is 307 Wildflower Court Jackson, New Jersey
08527.
|
(11)
|
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
|
n/a
|
n/a
|
n/a
|
Equity
compensation plans not approved by security holders
|
7,151,000
|
$0.16
|
2,849,000
|
Total
|
7,151,000
|
$0.16
|
2,849,000
|
Fee Category
|
2007
|
2008
|
||||||
Audit
Fees (1)
|
$ | 56,000 | $ | 76,000 | ||||
Audit
Related Fees
|
- | - | ||||||
Tax
Fees (2)
|
- | 5,000 | ||||||
All
Other Fees(3)
|
6,000 | 2,125 | ||||||
Total
Fees
|
$ | 62,000 | $ | 83,125 |
a.
|
Index
to Financial Statements and Financial Statement
Schedules
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Balance
Sheet as of December 31, 2008 and 2007
|
F-3
|
Statement
of Operations for each of the two years in the period ended December 31,
2008,
|
F-4
|
Statement
of Shareholders’ Equity for each of the two years in the period ended
December 31, 2008
|
F-5
|
Statement
of Cash Flows for each of the two years in the period ended December 31,
2008,
|
F-6
|
Notes
to Consolidated Financial Statements
|
F-8
– F-20
|
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 Quarterly 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.)
|
4.1
|
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.)
|
4.2
|
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.)
|
4.3
|
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.)
|
4.4
|
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.)
|
4.5
|
Form
of Subscription Agreement of 8% Series B Convertible Preferred Stock
(incorporated by reference to the Company’s Quarterly Report on Form
10-QSB filed on August 13, 2007.)
|
4.6
|
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
|
Employment
Agreement of Jeff McCollum (incorporated by reference to the Company
Current Report on Form 8-K (file no. 000-52635) filed on March
19, 2009.)
|
10.9
|
Form
of First Convertible Promissory Note (incorporated by reference to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2007
(file no. 000-52635) filed on March 31, 2008.)
|
10.10
|
Form
of Warrant issued to First Convertible Promissory Note holders
(incorporated by reference to the Company Current Report on Form 8-K (file
no. 000-52635) filed on May 5, 2008.)
|
10.11
|
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.)
|
10.12
|
Form
of Second Convertible Promissory Note (incorporated by reference to the
Company’s Current Report on Form 8-K (file no. 000-52635) filed on March
26, 2009.)
|
10.13
|
Form
of Warrant issued to Second Convertible Promissory Note holders
(incorporated by reference to the Company’s Current Report on Form 8-K
(file no. 000-52635) filed on March 26,
2009.)
|
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. (furnished
herewith)
|
SIGNATURE
|
TITLE
|
DATE
|
By:
/S/ Brian
Ross
|
President,
Chief Executive Officer, Treasurer and Director
(Principal
executive and accounting officer)
|
March
31, 2009
|
By:
/S/
Chris Meredith
|
Chief
Technology Officer, Assistant Treasurer, Assistant
Secretary
and Director
|
March
31, 2009
|
The
following consolidated financial statements and financial statement
schedules are included on the pages indicated:
|
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Balance
Sheets as of December 31, 2008 and 2007
|
F-3
|
Statements
of Operations for each of the two years in the periods ended December 31,
2008 and 2007
|
F-4
|
Statements
of Stockholders’ Equity (Deficit) for each of the two years in the periods
ended December 31, 2008 and 2007
|
F-5
|
Statements
of Cash Flows for each of the two years in the periods ended December 31,
2008 and 2007
|
F-6
|
Notes
to Financial Statements
|
F-8
– F-20
|
ACCELERIZE
NEW MEDIA, INC.
|
||||||||
BALANCE
SHEETS
|
||||||||
ASSETS
|
||||||||
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Current
Assets:
|
||||||||
Cash
|
$ | 252,921 | $ | 951,317 | ||||
Accounts
receivable, net of allowance for bad debt of $6,857
|
||||||||
and
$3,037 at December 31, 2008 and 2007, respectively
|
177,752 | 50,499 | ||||||
Prepaid
expenses and other assets
|
30,224 | 5,487 | ||||||
Domain
name rights
|
20,411 | 162,740 | ||||||
Deferred
tax asset
|
56,030 | 80,026 | ||||||
Total
current assets
|
537,338 | 1,250,069 | ||||||
Website
development costs, net of accumulated amortization of
$206,410
|
||||||||
and
$210,411 at December 31, 2008 and 2007, respectively
|
140,075 | 226,483 | ||||||
Fixed
assets, net of accumulated depreciation of $24,436 and
|
||||||||
$10,689
at December 31, 2008 and 2007, respectively
|
17,527 | 21,380 | ||||||
Goodwill
|
685,547 | 580,547 | ||||||
Total
assets
|
$ | 1,380,487 | $ | 2,078,479 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 442,565 | $ | 214,578 | ||||
Payable
to former member
|
- | 36,315 | ||||||
Deferred
revenues- short-term
|
580,920 | 550,992 | ||||||
Deferred
tax liability
|
56,030 | 80,026 | ||||||
Total
current liabilities
|
1,079,515 | 881,911 | ||||||
Convertible
notes payable and accrued interest, net of debt discount of
$156,852
|
375,787 | - | ||||||
Deferred
revenue- long-term
|
86,110 | 90,307 | ||||||
Total
liabilities
|
1,541,412 | 972,218 | ||||||
Stockholders'
Equity (Deficit):
|
||||||||
Preferred
stock, $0.001 par value, 2,000,000 shares authorized:
|
||||||||
Series
A, 54,000 issued and outstanding at December 31, 2008 and
2007,
respectively
|
728,567 | 728,567 | ||||||
Series
B, 118,875 issued and outstanding at December 31, 2008 and
2007,
respectively
|
3,644,563 | 3,644,563 | ||||||
Common
stock; $.001 par value; 100,000,000 shares authorized;
|
||||||||
27,184,854
and 21,779,294 shares issued and outstanding
|
||||||||
at
December 31, 2008 and 2007, respectively
|
27,185 | 21,779 | ||||||
Additional
paid-in capital
|
6,552,272 | 2,418,062 | ||||||
Accumulated
deficit
|
(11,113,512 | ) | (5,706,710 | ) | ||||
Total
stockholders’ equity (deficit)
|
(160,925 | ) | 1,106,261 | |||||
Total
liabilities and stockholders’ equity (deficit)
|
$ | 1,380,487 | $ | 2,078,479 |
See
Notes to Financial
Statements.
|
ACCELERIZE
NEW MEDIA, INC.
|
||||||||
STATEMENTS
OF OPERATIONS
|
||||||||
Year
ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Revenue:
|
||||||||
Debt
solution revenues
|
$ | 1,190,966 | $ | 540,386 | ||||
Lead
generation revenues
|
2,216,302 | 359,911 | ||||||
Advertising
and other revenues
|
388,095 | 130,212 | ||||||
Total
revenues:
|
3,795,363 | 1,030,509 | ||||||
Operating
expenses:
|
||||||||
Selling,
general and administrative
|
8,754,657 | 4,047,516 | ||||||
Total
operating expenses
|
8,754,657 | 4,047,516 | ||||||
Operating
loss
|
(4,959,294 | ) | (3,017,007 | ) | ||||
Other
income (expense):
|
||||||||
Interest
income (expense)
|
(32,302 | ) | 18,253 | |||||
(32,302 | ) | 18,253 | ||||||
Net
loss
|
(4,991,596 | ) | (2,998,754 | ) | ||||
Less
dividends issued for series A and B preferred stock
|
415,206 | 296,977 | ||||||
Net
loss attributable to common stock
|
$ | (5,406,802 | ) | $ | (3,295,731 | ) | ||
Basic
and diluted loss per common share
|
$ | (0.21 | ) | $ | (0.16 | ) | ||
Basic
and diluted weighted average common
|
||||||||
shares
outstanding
|
25,220,571 | 21,124,349 | ||||||
See
Notes to Financial Statements.
|
Total
|
||||||||||||||||||||||||||||||||||||
Additional
|
Stockholders'
|
|||||||||||||||||||||||||||||||||||
Series
A Preferred Stock
|
Series
B Preferred Stock
|
Common
Stock
|
Paid-in
|
Accumulated
|
Equity
|
|||||||||||||||||||||||||||||||
Shares
|
$
|
Shares
|
$
|
Shares
|
$
|
Capital
|
Deficit
|
(Deficit)
|
||||||||||||||||||||||||||||
Balance,
January 1, 2007
|
54,000 | $ | 728,567 | - | $ | - | 19,140,027 | $ | 19,140 | $ | 1,925,220 | $ | (2,410,978 | ) | $ | 261,949 | ||||||||||||||||||||
Stock
issued for TDRG 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 | ||||||||||||||||||||||||||
Stock
issued for TDRG acquisition
|
- | - | - | - | 1,750,000 | 1,750 | 103,250 | - | 105,000 | |||||||||||||||||||||||||||
Fair
value of warrants issued
|
- | - | - | - | - | - | 1,239,204 | - | 1,239,204 | |||||||||||||||||||||||||||
Fair
value of warrants issued pursuant to TDRG acquisition
|
- | - | - | - | - | - | 174,420 | - | 174,420 | |||||||||||||||||||||||||||
Beneficial
conversion features of Convertible notes
|
- | - | - | - | - | - | 179,450 | - | 179,450 | |||||||||||||||||||||||||||
Fair
value of warrants issued for services
|
- | - | - | - | - | - | 909,908 | - | 909,908 | |||||||||||||||||||||||||||
Fair
value of options granted
|
- | - | - | - | - | - | 222,528 | - | 222,528 | |||||||||||||||||||||||||||
Exercise
of warrants
|
- | - | - | - | 2,350,000 | 2,350 | 820,150 | - | 822,500 | |||||||||||||||||||||||||||
Deferred
compensation
|
- | - | - | - | 105,000 | 105 | 71,295 | - | 71,400 | |||||||||||||||||||||||||||
Preferred
stock dividends
|
- | - | - | - | 1,200,560 | 1,201 | 414,005 | (415,206 | ) | - | ||||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | - | (4,991,596 | ) | (4,991,596 | ) | |||||||||||||||||||||||||
Ending
balance, December 31, 2008
|
54,000 | $ | 728,567 | 118,875 | $ | 3,644,563 | 27,184,854 | $ | 27,185 | $ | 6,552,272 | $ | (11,113,512 | ) | $ | (160,925 | ) | |||||||||||||||||||
See
Notes to Financial Statements
|
ACCELERIZE
NEW MEDIA, INC.
|
||||||||
STATEMENTS
OF CASH FLOWS
|
||||||||
Year
ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (4,991,596 | ) | $ | (2,998,754 | ) | ||
Adjustments
to reconcile net loss to net cash used in
|
||||||||
operating
activities:
|
||||||||
Depreciation
and amortization
|
341,219 | 199,395 | ||||||
Amortization
of deferred compensation
|
71,400 | - | ||||||
Fair
value of warrants issued for services
|
909,908 | - | ||||||
Fair
value of warrants issued for TDRG acquisition
|
174,420 | - | ||||||
Fair
value of warrants issued
|
1,239,204 | - | ||||||
Fair
value of options granted
|
222,528 | 93,503 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(127,253 | ) | (26,840 | ) | ||||
Prepaid
expenses
|
(24,437 | ) | (2,912 | ) | ||||
Domain
name rights
|
(25,000 | ) | (200,000 | ) | ||||
Deferred
tax asset
|
23,996 | (80,026 | ) | |||||
Other
assets
|
(300 | ) | - | |||||
Accrued
interest
|
(4,693 | ) | 1,067 | |||||
Accounts
payable and accrued expenses
|
227,987 | (71,907 | ) | |||||
Deferred
tax liability
|
(23,996 | ) | 80,026 | |||||
Deferred
revenues
|
25,731 | 223,384 | ||||||
Net
cash used in operating activities
|
(1,960,882 | ) | (2,783,064 | ) | ||||
Cash
flows used in investing activities:
|
||||||||
Capital
expenditures
|
(9,894 | ) | - | |||||
Website
development costs
|
(51,137 | ) | (295,018 | ) | ||||
Net
cash used in investing activities
|
(61,031 | ) | (295,018 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from notes payable
|
530,000 | 400,000 | ||||||
Payment
to former member
|
(28,983 | ) | (29,434 | ) | ||||
Payment
of financing fees
|
- | (516,062 | ) | |||||
Proceeds
from exercise of warrants
|
822,500 | - | ||||||
Proceeds
from issuance of shares of Preferred Stock B
|
- | 3,760,625 | ||||||
Net
cash provided by financing activities
|
1,323,517 | 3,615,129 | ||||||
Net
increase (decrease) in cash
|
(698,396 | ) | 537,047 | |||||
Cash,
beginning of year
|
951,317 | 414,270 | ||||||
Cash,
end of year
|
$ | 252,921 | $ | 951,317 |
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid for interest
|
$ | 38,055 | $ | 4,194 | ||||
Cash
paid for income taxes
|
$ | - | $ | - | ||||
Non-cash
investing and financing activities:
|
||||||||
Beneficial
conversion feature associated with convertible
notes payable
|
$ | 179,450 | $ | - | ||||
Fair
value of warrants issued associated with notes payable
|
$ | - | $ | 94,030 | ||||
Preferred
stock dividends
|
$ | 415,206 | $ | 202,948 | ||||
Conversion
of notes payable into shares of Preferred Stock
B
|
$ | - | $ | 400,000 | ||||
Goodwill
resulting from acquisition and corresponding increase
in:
|
$ | 105,000 | $ | 580,547 | ||||
Assets
|
$ | - | $ | 44,105 | ||||
Liabilities
|
$ | - | $ | 519,652 | ||||
Common
stock and additional paid-in capital
|
$ | 105,000 | $ | 105,000 | ||||
See
Notes to Financial Statements.
|
Amount
|
||||
Accounts
receivable
|
$ | 12,036 | ||
Property
and equipment
|
32,069 | |||
Goodwill
|
685,547 | |||
Total
Purchase Price
|
$ | 729,652 |
December
31,
2008
|
December
31,
2007
|
|||||||
Computer
equipment and software
|
$
|
11,358
|
$
|
1,464
|
||||
Phone
equipment
|
19,155
|
19,155
|
||||||
Office
furniture and equipment
|
11,450
|
11,450
|
||||||
41,963
|
32,069
|
|||||||
Accumulated
depreciation
|
(24,436
|
)
|
(10,689
|
)
|
||||
$
|
17,527
|
$
|
21,380
|
For
the years ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Numerator:
|
||||||||
Net
loss attributable to common stock
|
$
|
(5,406,802
|
)
|
$
|
(3,295,731
|
)
|
||
Denominator:
|
||||||||
Denominator
for basic earnings per share-
|
||||||||
Weighted
average shares outstanding
|
25,220,571
|
21,124,349
|
||||||
Denominator
for diluted earnings per share-
|
||||||||
Weighted
average shares outstanding
|
25,220,571
|
21,124,349
|
||||||
Basic
earnings per share
|
$
|
(0.21
|
)
|
$
|
(0.16
|
)
|
||
Diluted
earnings per share
|
$
|
(0.21
|
)
|
$
|
(0.16
|
)
|
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Website
development costs
|
$
|
346,485
|
$
|
436,564
|
||||
Less:
accumulated amortization
|
(206,410
|
)
|
(210,081
|
)
|
||||
Website
development costs, net
|
$
|
140,075
|
$
|
226,483
|
2009
|
$
|
84,700
|
||
2010
|
53,826
|
|||
2011
|
1,549
|
|||
$
|
140,075
|
2008
|
2007
|
|
Exercise
price:
|
$
0.47 to 0.72
|
$
0.15 to 0.35
|
Market
price at date of grant:
|
$
0.50 to 0.72
|
$
0.06 to 0.75
|
Expected
volatility:
|
68
to 69%
|
69%
|
Expected
dividend rate:
|
0%
|
0%
|
Risk-free
interest rate:
|
2.55
to 3.41%
|
3.41
to 4.54%
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Contractual
Terms
|
Aggregate
Intrinsic
Value
|
|||||||||||||
Outstanding
at January 1, 2007
|
- | $ | - | - | $ | - | ||||||||||
Granted
|
7,542,000 | 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 | ||||||||||||
Granted
|
173,500 | 0.68 | ||||||||||||||
Exercised
|
- | - | ||||||||||||||
Expired
|
555,000 | 0.32 | ||||||||||||||
Outstanding
at December 31, 2008
|
7,151,000 | $ | 0.16 | 4.40 | $ | 1,397,500 | ||||||||||
Exercisable
and vested at December 31, 2008
|
5,196,666 | $ | 0.15 | 6.94 | $ | 1,036,833 |
2008
|
2007
|
|
Tax
at US statutory rate
|
35.0%
|
35.0%
|
State
tax rate, net of federal benefits
|
5.0
|
5.7
|
Permanent
differences - principally beneficial conversion
feature
|
(28.4) | (0.0) |
Change
in valuation allowance
|
(11.6)
|
(40.7)
|
Effective
tax rate
|
0.0%
|
0.0%
|
2008
|
2007
|
|||||||
Deferred
tax assets:
|
||||||||
Net
operating losses
|
$ | 2,646,000 | $ | 1,730,000 | ||||
Depreciation
|
112,000 | 61,000 | ||||||
Options
issued for services
|
492,000 | 39,000 | ||||||
Other
|
68,000 | 37,000 | ||||||
|
3,318,000 | 1,867,000 | ||||||
Less:
valuation allowance
|
(3,262,000 | ) | (1,787,000 | ) | ||||
Net
deferred tax assets
|
56,000 | 80,000 | ||||||
Deferred
tax liability:
|
||||||||
Software
development costs
|
$ | 56,000 | $ | 80,000 |
Website
development costs
|
$ | 56,030 | ||
Total
deferred tax liability-current
|
$ | 56,030 |
Future
Minimum
Lease
Payments
|
Sublease
Income
|
Net
Minimum
Lease
Payments
|
|
2009
|
101,176
|
(45,236)
|
55,940
|
2010
|
45,788
|
(45,788)
|
-
|
Year
|
Commitments
|
2009
|
$ 360,000
|