·
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Our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, which
was filed with the Securities and Exchange Commission on May 8,
2009.
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x
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QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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o
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
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Delaware
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20-3858769
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
(Do
not check if smaller reporting company)
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Smaller
reporting company x
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Page
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PART
I - FINANCIAL INFORMATION:
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||
4-16
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||
Item
1.
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Financial
Statements (Unaudited)
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Item
2.
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Management’s
Discussion and Analysis And Results of Operations
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17-21
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Item
4T.
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Controls
and Procedures
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21
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PART
II - OTHER INFORMATION:
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||
Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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22
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Item
6.
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Exhibits
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23
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SIGNATURES
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24
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ACCELERIZE
NEW MEDIA, INC.
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BALANCE
SHEETS
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March
31,
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December
31,
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|||||||
ASSETS
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2009
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2008
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||||||
(Unaudited)
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(1 | ) | ||||||
Current
Assets:
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||||||||
Cash
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$ | 515,260 | $ | 252,921 | ||||
Accounts
receivable, net of allowance for bad debt of $12,486 and $6,857
at
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||||||||
March
31, 2009 and December 31, 2008, respectively
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280,466 | 177,752 | ||||||
Prepaid
expenses and other assets
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33,273 | 30,224 | ||||||
Domain
name rights
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14,246 | 20,411 | ||||||
Deferred
tax asset
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113,251 | 56,030 | ||||||
Total
current assets
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956,496 | 537,338 | ||||||
Website
development costs, net of accumulated amortization of $203,797
and
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||||||||
$206,410
at March 31, 2009 and December 31, 2008, respectively
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143,053 | 140,075 | ||||||
Fixed
assets, net of accumulated depreciation of $28,297 and $24,436
at
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||||||||
March
31, 2009 and December 31, 2008, respectively
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20,094 | 17,527 | ||||||
Deferred
financing fees
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59,799 | - | ||||||
Goodwill
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338,000 | 685,547 | ||||||
Total
assets
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$ | 1,517,442 | $ | 1,380,487 | ||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
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||||||||
Current
Liabilities:
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||||||||
Accounts
payable and accrued expenses
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$ | 513,608 | $ | 442,565 | ||||
Deferred
revenues- short-term
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542,907 | 580,920 | ||||||
Deferred
tax liability
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113,251 | 56,030 | ||||||
Total
current liabilities
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1,169,766 | 1,079,515 | ||||||
Convertible
notes payable and accrued interest, net of debt discount of
$339,266
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||||||||
and
$156,852 at March 31, 2009 and December 31, 2008,
respectively
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833,623 | 375,787 | ||||||
Deferred
revenue- long-term
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126,341 | 86,110 | ||||||
Total
liabilities
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2,129,730 | 1,541,412 | ||||||
Stockholders'
Deficit:
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||||||||
Preferred
stock, $0.001 par value, 2,000,000 shares authorized:
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||||||||
Series
A, 54,000 issued and outstanding at March 31, 2009 and December
31, 2008, respectively
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728,567 | 728,567 | ||||||
Series
B, 118,875 issued and outstanding at March 31, 2009 and December 31, 2008,
respectively
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3,644,563 | 3,644,563 | ||||||
Common
stock; $.001 par value; 100,000,000 shares authorized;
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||||||||
27,934,631
and 27,184,854 shares issued and outstanding
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||||||||
at
March 31, 2009 and December 31, 2008, respectively
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27,935 | 27,185 | ||||||
Additional
paid-in capital
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7,171,502 | 6,552,272 | ||||||
Accumulated
deficit
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(12,184,855 | ) | (11,113,512 | ) | ||||
Total
stockholders’ deficit
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(612,288 | ) | (160,925 | ) | ||||
Total
liabilities and stockholders’ deficit
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$ | 1,517,442 | $ | 1,380,487 |
(1)
Derived from audited financial statements
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||||||||
See
Notes to Unaudited Financial
Statements.
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ACCELERIZE
NEW MEDIA, INC.
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STATEMENTS
OF
OPERATIONS
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Three-month
periods ended
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||||||||
March
31,
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||||||||
2009
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2008
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|||||||
(Unaudited)
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(Unaudited)
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|||||||
Revenues:
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||||||||
Lead
generation revenues
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$ | 777,649 | $ | 384,132 | ||||
Debt
solution revenues
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190,972 | 302,885 | ||||||
Advertising
and other revenues
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63,845 | 87,888 | ||||||
Total
revenues:
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1,032,466 | 774,905 | ||||||
Operating
expenses:
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||||||||
Selling,
general and administrative
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1,986,840 | 1,731,374 | ||||||
Total
operating expenses
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1,986,840 | 1,731,374 | ||||||
Operating
loss
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(954,374 | ) | (956,469 | ) | ||||
Other
income (expense):
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||||||||
Interest
income (expense)
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(14,924 | ) | 3,407 | |||||
(14,924 | ) | 3,407 | ||||||
Net
loss
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(969,298 | ) | (953,062 | ) | ||||
Less
dividends series A and B preferred stock
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102,045 | 103,179 | ||||||
Net
loss attributable to common stock
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$ | (1,071,343 | ) | $ | (1,056,241 | ) | ||
Basic
and diluted loss per common share
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$ | (0.04 | ) | $ | (0.04 | ) | ||
Basic
and diluted weighted average common
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||||||||
shares
outstanding
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27,184,854 | 23,656,008 |
See
Notes to Unaudited Financial
Statements.
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ACCELERIZE
NEW MEDIA, INC.
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STATEMENTS
OF CASH
FLOWS
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Three-month
periods ended
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||||||||
March
31,
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||||||||
2009
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2008
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|||||||
(Unaudited)
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(Unaudited)
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|||||||
Cash
flows from operating activities:
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Net
loss
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$ | (969,298 | ) | $ | (953,062 | ) | ||
Adjustments
to reconcile net loss to net cash used in
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||||||||
operating
activities:
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||||||||
Depreciation
and amortization
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16,647 | 94,183 | ||||||
Impairment
of goodwill
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347,547 | - | ||||||
Fair
value of shares issued for services
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50,000 | - | ||||||
Change
in terms of warrants issued
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97,414 | - | ||||||
Fair
value of warrants issued for services
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139,080 | - | ||||||
Fair
value of options granted
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39,793 | 34,143 | ||||||
Changes
in operating assets and liabilities:
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||||||||
Accounts
receivable
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(102,714 | ) | (59,652 | ) | ||||
Prepaid
expenses
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21,951 | (25,500 | ) | |||||
Deferred
tax asset
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(44,592 | ) | (17,933 | ) | ||||
Other
assets
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(25,000 | ) | (6,076 | ) | ||||
Accrued
interest
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13,250 | 1,570 | ||||||
Accounts
payable and accrued expenses
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71,043 | 183,991 | ||||||
Deferred
tax liability
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44,592 | 17,933 | ||||||
Deferred
revenues
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2,218 | 55,386 | ||||||
Net
cash used in operating activities
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(298,069 | ) | (675,017 | ) | ||||
Cash
flows used in investing activities:
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||||||||
Capital
expenditures
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(6,428 | ) | (12,130 | ) | ||||
Website
development costs
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(365 | ) | (41,619 | ) | ||||
Net
cash used in investing activities
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(6,793 | ) | (53,749 | ) | ||||
Cash
flows from financing activities:
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||||||||
Proceeds
from notes payable
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567,201 | 430,000 | ||||||
Payment
to former member
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- | (6,830 | ) | |||||
Net
cash provided by financing activities
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567,201 | 423,170 | ||||||
Net
increase (decrease) in cash
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262,339 | (305,596 | ) | |||||
Cash,
beginning of period
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252,921 | 951,317 | ||||||
Cash,
end of period
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$ | 515,260 | $ | 645,721 | ||||
Supplemental
disclosures of cash flow information:
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||||||||
Cash
paid for interest
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$ | - | $ | - | ||||
Cash
paid for income taxes
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$ | - | $ | - | ||||
Non-cash
investing and financing activities:
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||||||||
Beneficial
conversion feature associated with convertible notes
payable
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$ | 191,648 | $ | 144,794 | ||||
Exercise
of warrants
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$ | 102 | $ | - | ||||
Preferred
stock dividends
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$ | 102,045 | $ | 103,791 | ||||
Goodwill
resulting from acquisition and corresponding
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||||||||
increase
(decrease) in:
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$ | (347,547 | ) | $ | 105,000 | |||
Assets
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$ | (347,547 | ) | $ | - | |||
Common
stock and additional paid-in capital
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$ | - | $ | 105,000 |
See
Notes to Unaudited Financial
Statements.
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March
31, 2009
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December
31, 2008
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|||||||
Computer
equipment and software
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$ | 17,786 | $ | 11,358 | ||||
Phone
equipment
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19,155 | 19,155 | ||||||
Office
furniture and equipment
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11,450 | 11,450 | ||||||
48,391 | 41,963 | |||||||
Accumulated
depreciation
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(28,297 | ) | (24,436 | ) | ||||
$ | 20,094 | $ | 17,527 |
For
the three-month periods ended
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||||||||
March
31,
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||||||||
2009
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2008
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|||||||
Numerator:
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||||||||
Net
loss attributable to common stock
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$ | (1,071,343 | ) | $ | (1,056,241 | ) | ||
Denominator:
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||||||||
Denominator
for basic earnings per share-
|
||||||||
Weighted
average shares outstanding
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27,184,854 | 23,656,008 | ||||||
Denominator
for diluted earnings per share-
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||||||||
Weighted
average shares outstanding
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27,184,854 | 23,656,008 | ||||||
Basic
earnings per share
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$ | (0.04 | ) | $ | (0.04 | ) | ||
Diluted
earnings per share
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$ | (0.04 | ) | $ | (0.04 | ) |
March
31,
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December
31,
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|||||||
2009
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2008
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|||||||
Website
development costs
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$ | 346,850 | $ | 346,485 | ||||
Less:
accumulated amortization
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(203,797 | ) | (206,410 | ) | ||||
Website
development costs, net
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$ | 143,053 | $ | 140,075 |
Exercise
price:
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$
0.35
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Market
price at date of grant:
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$
0.35
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Expected
volatility:
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68.0
to 74.6%
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Expected
dividend rate:
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0%
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Risk-free
interest rate:
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1.67
to 1.99%
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ACCELERIZE
NEW MEDIA, INC.
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RESULTS
OF
OPERATIONS
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Three-months
periods ending
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Increase/
|
Increase/
|
||||||||||||||
March
31,
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(Decrease)
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(Decrease)
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||||||||||||||
2009
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2008
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in
$ 2008
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in
% 2007
|
|||||||||||||
vs
2007
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vs
2006
|
|||||||||||||||
Revenue:
|
||||||||||||||||
Lead
generation revenues
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$ | 777,649 | $ | 384,132 | $ | 393,517 | 102.4 | % | ||||||||
Debt
solution revenues
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190,972 | 302,885 | (111,913 | ) | -36.9 | % | ||||||||||
Advertising
and other revenues
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63,845 | 87,888 | (24,043 | ) | -27.4 | % | ||||||||||
Total
revenues:
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1,032,466 | 774,905 | 257,561 | 33.2 | % | |||||||||||
Operating
expenses:
|
||||||||||||||||
Selling,
general and administrative
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1,986,840 | 1,731,374 | 255,466 | 14.8 | % | |||||||||||
Total
operating expenses
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1,986,840 | 1,731,374 | 255,466 | 14.8 | % | |||||||||||
Operating
loss
|
(954,374 | ) | (956,469 | ) | 2,095 | -0.2 | % | |||||||||
Other
income (expense):
|
||||||||||||||||
Interest
income (expense)
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(14,924 | ) | 3,407 | (18,331 | ) | -538.0 | % | |||||||||
(14,924 | ) | 3,407 | (18,331 | ) | -538.0 | % | ||||||||||
Net
loss
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(969,298 | ) | (953,062 | ) | (16,236 | ) | 1.7 | % | ||||||||
Less
dividends issued for series A and B preferred stock
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102,045 | 103,179 | $ | (1,134 | ) | -1.1 | % | |||||||||
Net
loss attributable to common stock
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$ | (1,071,343 | ) | $ | (1,056,241 | ) | $ | (15,102 | ) | 1.4 | % | |||||
NM:
Not Meaningful
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·
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an
increase in lead acquisition costs of approximately $129,000; this
increase is primarily due to a concerted effort by management to use such
marketing programs compared to others, which are less
efficient;
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·
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an
increase in impairment of goodwill according to SFAS No. 142 of
approximately $348,000 which was recorded in the three-month period ended
March 31, 2009, and which did not occur in 2008;
|
|
·
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an
increase in warrant expense of approximately $236,000 due to the
re-pricing of the warrants issued to the 10% notes holders; the exercise
price decreased from $0.75 to $0.55, as well from the issuance of warrants
for consulting services;
|
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·
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a
decrease in amortization costs of approximately $78,000; this decrease is
primarily due to the fact that the Company has invested less in web
development costs in 2009 when compared to prior periods, resulting in a
lower amortization base;
|
|
·
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a
decrease in professional services expense of approximately $131,000; this
decrease is primarily due to the termination of an agreement with a
marketing consultant in February 2009 and, to a lesser extent, a decrease
in allocation of outside resources to support the operations of the
Company; and
|
|
·
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a
decrease in payroll expenses of approximately $244,000; this decrease is
primarily due to the termination of employment of a number of employees in
September 2008 resulting from the Company’s decreased involvement in the
sales and marketing of debt settlement
solutions.
|
·
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Fair
value of options granted to employees of approximately
$40,000;
|
|
·
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Amortization
of capitalized web development and discount on notes payable, and
depreciation of fixed assets of approximately $17,000;
|
|
·
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Fair
value of shares issued for services of $50,000;
|
|
·
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Fair
value of warrants issued of approximately $97,000;
|
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·
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Fair
value of warrants issued for services of approximately $139,000;
and
|
|
·
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Impairment
of goodwill of approximately
$348,000;
|
Additionally,
the following variations in operating assets and liabilities impacted our
cash used in operating activity:
|
||
·
|
Increase
in accounts receivable of approximately $103,000, resulting from increased
lead generation revenues; and
|
|
·
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Increase
in accounts payable and accrued expenses of approximately $71,000,
resulting from increased marketing programs expenditures associated with
increased acquisition of leads.
|
·
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Fair
value of options granted to employees of approximately $34,000;
and
|
|
·
|
Amortization
of capitalized web development and discount on notes payable, and
depreciation of fixed assets of approximately $94,000.
|
|
Additionally,
the following variations in operating assets and liabilities impacted our
cash used in operating activity:
|
||
·
|
Increase
in accounts receivable of approximately $60,000, resulting from increased
lead generation revenues;
|
|
·
|
Increase
in accounts payable and accrued expenses of approximately $184,000,
resulting from increased marketing programs expenditures associated with
increased acquisition of leads; and
|
|
·
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Increase
in deferred revenue of approximately $55,000, resulting from increased
number of consumers successfully referred to debt settlement
agencies.
|
·
|
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.
|
4.1
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Common
Stock Purchase Warrant issued to SGI and dated March 23, 2009. (filed with
our Current Report on Form 8-K filed with the SEC on March 27,
2009.)
|
10.1
|
Agreement
between the Company and Strategic Growth International, Inc., dated March
23, 2009. (filed with our Current Report on Form 8-K filed with the SEC on
March 27, 2009.)
|
31.1
|
Certification
of Chief Executive Officer and Principal Financial Officer Pursuant to
Rule 13a-14(a) and15d-14(a) (filed herewith.)
|
32.1
|
Certification
of Chief Executive Officer and Principal Financial Officer Pursuant to 18
U.S.C. 1350 (furnished
herewith.)
|
ACCELERIZE
NEW MEDIA, INC.
|
||
Dated:
May 8, 2009
|
By:
|
/s/
Brian Ross
|
Brian
Ross
Chief
Executive Officer
|