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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||
Item
1.
|
Financial
Statements (Unaudited)
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4-17
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Item
2.
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Management’s
Discussion and Analysis And Results of Operations
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18-22
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Item
4.
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Controls
and Procedures
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22
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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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22-23
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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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23
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ACCELERIZE
NEW MEDIA, INC.
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BALANCE
SHEETS
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June
30,
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December
31,
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|||||||
ASSETS
|
2009
|
2008
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||||||
(Unaudited)
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(1)
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|||||||
Current
Assets:
|
||||||||
Cash
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$ | 288,891 | $ | 252,921 | ||||
Accounts
receivable, net of allowance for bad debt of $19,909 and $6,857
at
|
||||||||
June
30, 2009 and December 31, 2008, respectively
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208,707 | 177,752 | ||||||
Prepaid
expenses and other assets
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34,303 | 30,224 | ||||||
Domain
name rights
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8,014 | 20,411 | ||||||
Deferred
tax asset
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103,912 | 56,030 | ||||||
Total
current assets
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643,827 | 537,338 | ||||||
Website
development costs, net of accumulated amortization of $227,144
and
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||||||||
$206,410
at June 30, 2009 and December 31, 2008, respectively
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119,706 | 140,075 | ||||||
Fixed
assets, net of accumulated depreciation of $31,705 and $24,436
at
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||||||||
June
30, 2009 and December 31, 2008, respectively
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13,408 | 17,527 | ||||||
Deferred
financing fees
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56,521 | - | ||||||
Goodwill
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154,000 | 685,547 | ||||||
Total
assets
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$ | 987,462 | $ | 1,380,487 | ||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 431,693 | $ | 442,565 | ||||
Deferred
revenues- short-term
|
476,177 | 580,920 | ||||||
Deferred
tax liability
|
103,912 | 56,030 | ||||||
Total
current liabilities
|
1,011,782 | 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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813,695 | 375,787 | ||||||
Deferred
revenue- long-term
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145,835 | 86,110 | ||||||
Total
liabilities
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1,971,312 | 1,541,412 | ||||||
Stockholders'
Deficit:
|
||||||||
Preferred
stock, $0.001 par value, 2,000,000 shares authorized:
|
||||||||
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, 112,125 issued and outstanding at March 31, 2009 and December 31, 2008,
respectively
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3,565,813 | 3,644,563 | ||||||
Common
stock; $.001 par value; 100,000,000 shares authorized;
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||||||||
28,005,230
and 27,184,854 shares issued and outstanding
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||||||||
at
March 31, 2009 and December 31, 2008, respectively
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28,505 | 27,185 | ||||||
Additional
paid-in capital
|
7,356,953 | 6,552,272 | ||||||
Treasury
stock
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(500 | ) | - | |||||
Accumulated
deficit
|
(12,663,188 | ) | (11,113,512 | ) | ||||
Total
stockholders’ deficit
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(983,850 | ) | (160,925 | ) | ||||
Total
liabilities and stockholders’ deficit
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$ | 987,462 | $ | 1,380,487 |
(1)
Derived from audited financial statements
|
|||||
See
Notes to Unaudited Financial
Statements.
|
ACCELERIZE
NEW MEDIA, INC.
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STATEMENTS
OF
OPERATIONS
|
Three-month
periods ended
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Six-month
periods ended
|
|||||||||||||||
June
30,
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June
30,
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|||||||||||||||
2009
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2008
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2009
|
2008
|
|||||||||||||
(Unaudited)
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(Unaudited)
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(Unaudited)
|
(Unaudited)
|
|||||||||||||
Revenues:
|
||||||||||||||||
Lead
generation revenues
|
$ | 999,565 | $ | 226,541 | $ | 1,777,214 | $ | 529,426 | ||||||||
Debt
solution revenues
|
189,348 | 549,815 | 380,320 | 933,947 | ||||||||||||
Advertising
and other revenues
|
39,022 | 76,619 | 102,867 | 164,507 | ||||||||||||
Total
revenues:
|
1,227,935 | 852,975 | 2,260,401 | 1,627,880 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Selling,
general and administrative
|
1,562,272 | 1,799,772 | 3,549,112 | 3,531,146 | ||||||||||||
Total
operating expenses
|
1,562,272 | 1,799,772 | 3,549,112 | 3,531,146 | ||||||||||||
Operating
loss
|
(334,337 | ) | (946,797 | ) | (1,288,711 | ) | (1,903,266 | ) | ||||||||
Other
expense:
|
||||||||||||||||
Interest
expense
|
(39,683 | ) | (10,288 | ) | (54,607 | ) | (6,881 | ) | ||||||||
(39,683 | ) | (10,288 | ) | (54,607 | ) | (6,881 | ) | |||||||||
Net
loss
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(374,020 | ) | (957,085 | ) | (1,343,318 | ) | (1,910,147 | ) | ||||||||
Less
dividends series A and B preferred stock
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104,313 | 104,313 | 206,358 | 207,492 | ||||||||||||
Net
loss attributable to common stock
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$ | (478,333 | ) | $ | (1,061,398 | ) | $ | (1,549,676 | ) | $ | (2,117,639 | ) | ||||
Basic
and diluted loss per common share
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$ | (0.02 | ) | $ | (0.04 | ) | $ | (0.06 | ) | $ | (0.09 | ) | ||||
Basic
and diluted weighted average common
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||||||||||||||||
shares
outstanding
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27,843,668 | 24,051,131 | 27,620,876 | 23,906,070 |
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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Six-month
periods ended
|
||||||||
June
30,
|
||||||||
2009
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2008
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|||||||
(Unaudited)
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(Unaudited)
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
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$ | (1,343,318 | ) | $ | (1,910,147 | ) | ||
Adjustments
to reconcile net loss to net cash used in
|
||||||||
operating
activities:
|
||||||||
Depreciation
and amortization
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62,882 | 198,698 | ||||||
Amortization
of deferred compensation
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- | 64,260 | ||||||
Impairment
of goodwill
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531,547 | - | ||||||
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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54,177 | 68,053 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
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(30,955 | ) | (47,993 | ) | ||||
Prepaid
expenses
|
20,921 | (21,859 | ) | |||||
Deferred
tax asset
|
(35,253 | ) | (5,756 | ) | ||||
Other
assets
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(25,000 | ) | (12,584 | ) | ||||
Accrued
interest
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8,148 | 3,201 | ||||||
Accounts
payable and accrued expenses
|
(10,872 | ) | 293,405 | |||||
Deferred
tax liability
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35,253 | 5,756 | ||||||
Deferred
revenues
|
(45,018 | ) | 159,730 | |||||
Net
cash used in operating activities
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(490,994 | ) | (1,205,236 | ) | ||||
Cash
flows used in investing activities:
|
||||||||
Capital
expenditures
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(3,150 | ) | (12,130 | ) | ||||
Website
development costs
|
(365 | ) | (45,547 | ) | ||||
Net
cash used in investing activities
|
(3,515 | ) | (57,677 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from notes payable
|
580,479 | 530,000 | ||||||
Payment
to former member
|
- | (14,491 | ) | |||||
Repurchase
of shares of common stock
|
(50,000 | ) | - | |||||
Net
cash provided by financing activities
|
530,479 | 515,509 | ||||||
Net
increase (decrease) in cash
|
35,970 | (747,404 | ) | |||||
Cash,
beginning of period
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252,921 | 951,317 | ||||||
Cash,
end of period
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$ | 288,891 | $ | 203,913 | ||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid for interest
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$ | 45,120 | $ | 9,679 | ||||
Cash
paid for income taxes
|
$ | - | $ | - | ||||
Non-cash
investing and financing activities:
|
||||||||
Beneficial
conversion feature associated with convertible notes
payable
|
$ | 194,703 | $ | 144,794 | ||||
Revaluation
of beneficial conversion feature associated with
|
||||||||
convertible
notes payable
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$ | 35,019 | $ | - | ||||
Conversion
of preferred stock Series B to common stock
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$ | 78,750 | $ | - | ||||
Cashless
exercise of warrants
|
$ | 102 | $ | - | ||||
Preferred
stock dividends
|
$ | 206,358 | $ | 207,492 | ||||
Fair
value of shares issued for future services
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$ | 50,000 | $ | 71,400 | ||||
Goodwill
resulting from acquisition and corresponding
|
||||||||
increase
(decrease) in:
|
$ | - | $ | 105,000 | ||||
Assets
|
$ | - | $ | - | ||||
Common
stock and additional paid-in capital
|
$ | - | $ | 105,000 |
See
Notes to Unaudited Financial
Statements.
|
June
30, 2009
|
December
31, 2008
|
|||||||
Computer
equipment and software
|
$ | 14,508 | $ | 11,358 | ||||
Phone
equipment
|
19,155 | 19,155 | ||||||
Office
furniture and equipment
|
11,450 | 11,450 | ||||||
45,113 | 41,963 | |||||||
Accumulated
depreciation
|
(31,705 | ) | (24,436 | ) | ||||
$ | 13,408 | $ | 17,527 |
Level 1:
|
Observable
inputs such as quoted market prices in active markets for identical assets
or liabilities
|
Level 2:
|
Observable
market-based inputs or unobservable inputs that are corroborated by market
data
|
Level 3:
|
Unobservable
inputs for which there is little or no market data, which require the use
of the reporting entity’s own
assumptions.
|
For
the six-month periods ended
|
||||||||
June
30,
|
||||||||
2009
|
2008
|
|||||||
Numerator:
|
||||||||
Net
loss attributable to common stock
|
$ | (1,549,676 | ) | $ | (2,117,639 | ) | ||
Denominator:
|
||||||||
Denominator
for basic earnings per share-
|
||||||||
Weighted
average shares outstanding
|
27,620,876 | 23,906,070 | ||||||
Denominator
for diluted earnings per share-
|
||||||||
Weighted
average shares outstanding
|
27,620,876 | 23,906,070 | ||||||
Basic
earnings per share
|
$ | (0.06 | ) | $ | (0.09 | ) | ||
Diluted
earnings per share
|
$ | (0.06 | ) | $ | (0.09 | ) |
June
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Website
development costs
|
$ | 346,850 | $ | 346,485 | ||||
Less:
accumulated amortization
|
(227,144 | ) | (206,410 | ) | ||||
Website
development costs, net
|
$ | 119,706 | $ | 140,075 |
Exercise
price:
|
$
0.35
|
Market
price at date of grant:
|
$
0.35
|
Expected
volatility:
|
68.0
to 74.6%
|
Expected
dividend rate:
|
0%
|
Risk-free
interest rate:
|
1.67
to 1.99%
|
ACCELERIZE
NEW MEDIA, INC.
|
RESULTS
OF
OPERATIONS
|
Three-month
periods ended
|
Increase/
|
Increase/
|
Six-month
periods ended
|
Increase/
|
Increase/
|
||||||||||||
June
30,
|
(Decrease)
|
(Decrease)
|
June
30,
|
(Decrease)
|
(Decrease)
|
||||||||||||
2009
|
2008
|
in $
2009
|
in %
2009
|
2009
|
2008
|
in $
2009
|
in %
2009
|
||||||||||
vs
2008
|
vs
2008
|
vs
2008
|
vs
2008
|
||||||||||||||
Revenue:
|
|||||||||||||||||
Lead
generation revenues
|
$ 999,565
|
$ 226,541
|
$ 773,024
|
341.2%
|
$ 1,777,214
|
$ 529,426
|
$ 1,247,788
|
235.7%
|
|||||||||
Debt
solution revenues
|
189,348
|
549,815
|
(360,467)
|
-65.6%
|
380,320
|
933,947
|
(553,627)
|
-59.3%
|
|||||||||
Advertising
and other revenues
|
39,022
|
76,619
|
(37,597)
|
-49.1%
|
102,867
|
164,507
|
(61,640)
|
-37.5%
|
|||||||||
Total
revenues:
|
1,227,935
|
852,975
|
374,960
|
44.0%
|
2,260,401
|
1,627,880
|
632,521
|
38.9%
|
|||||||||
Operating
expenses:
|
|||||||||||||||||
Selling,
general and administrative
|
1,562,272
|
1,799,772
|
(237,500)
|
-13.2%
|
3,549,112
|
3,531,146
|
17,966
|
0.5%
|
|||||||||
Total
operating expenses
|
1,562,272
|
1,799,772
|
(237,500)
|
-13.2%
|
3,549,112
|
3,531,146
|
17,966
|
0.5%
|
|||||||||
Operating
loss
|
(334,337)
|
(946,797)
|
612,460
|
-64.7%
|
(1,288,711)
|
(1,903,266)
|
614,555
|
-32.3%
|
|||||||||
Other
income (expense):
|
|||||||||||||||||
Interest
income (expense)
|
(39,683)
|
(10,288)
|
(29,395)
|
285.7%
|
(54,607)
|
(6,881)
|
(47,726)
|
693.6%
|
|||||||||
(39,683)
|
(10,288)
|
(29,395)
|
285.7%
|
(54,607)
|
(6,881)
|
(47,726)
|
693.6%
|
||||||||||
Net
loss
|
(374,020)
|
(957,085)
|
583,065
|
-60.9%
|
(1,343,318)
|
(1,910,147)
|
566,829
|
-29.7%
|
|||||||||
Less
dividends issued for series A and B preferred stock
|
104,313
|
104,313
|
-
|
0.0%
|
206,358
|
207,492
|
$ (1,134)
|
-0.5%
|
|||||||||
Net
loss attributable to common stock
|
$ (478,333)
|
$ (1,061,398)
|
$ 583,065
|
-54.9%
|
$ (1,549,676)
|
$ (2,117,639)
|
$ 567,963
|
-26.8%
|
|||||||||
NM:
Not Meaningful
|
·
|
an
increase in lead acquisition costs of approximately $74,000; this increase
is primarily due to a concerted effort by management to place greater
emphasis on our lead generation initiatives;
|
|
·
|
an
increase in impairment of goodwill according to SFAS No. 142 of
approximately $184,000 which was recorded in the three-month period ended
June 30, 2009, and which did not occur in 2008;
|
|
·
|
a
decrease in IT expense of approximately $82,000 due to a reduction in cost
for hosting and financial data feeds;
|
|
·
|
a
decrease in amortization costs of approximately $51,000; 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;
|
|
·
|
a
decrease in professional services expense of approximately $107,000; 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
|
|
·
|
a
decrease in payroll expenses of approximately $212,000; this decrease is
primarily due to the termination of a number of employees in September
2008 resulting from the Company’s decreased involvement in the sales and
marketing of debt settlement
solutions.
|
·
|
an
increase in lead acquisition costs of approximately $203,000; this
increase is primarily due to a concerted effort by management to place
greater emphasis on our lead generation initiatives;
|
|
·
|
an
increase in impairment of goodwill according to SFAS No. 142 of
approximately $532,000 which was recorded in the six-month period ended
June 30, 2009, and which did not occur in 2008;
|
|
·
|
an
increase in warrant expense of approximately $236,000 from the issuance of
warrants for consulting services and due to the re-pricing of the warrants
issued to the 10% notes holders; the exercise price decreased from $0.75
to $0.55;
|
|
·
|
a
decrease in IT expense of approximately $77,000 due to a reduction in cost
for hosting and financial data feeds;
|
|
·
|
a
decrease in amortization costs of approximately $128,000; 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;
|
|
·
|
a
decrease in professional services expense of approximately $221,000; 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
|
|
·
|
a
decrease in payroll expenses of approximately $454,000; this decrease is
primarily due to the termination of a number of employees in September
2008 resulting from the Company’s decreased involvement in the sales and
marketing of debt settlement
solutions.
|
·
|
Fair
value of options granted to employees of approximately
$54,000;
|
|
·
|
Amortization
of capitalized web development and discount on notes payable, and
depreciation of fixed assets of approximately $63,000;
|
|
·
|
Impairment
of goodwill of approximately $532,000;
|
|
·
|
Fair
value of warrants issued for services of approximately
$139,000;
|
|
·
|
Change
in terms of warrants issued of approximately $97,000;
and
|
|
·
|
Fair
value of shares issued for services of $50,000.
|
|
Additionally,
the following variations in operating assets and liabilities impacted our
cash used in operating activity:
|
||
·
|
Increase
in accounts receivable of approximately $31,000, resulting from increased
lead generation revenues; and
|
|
·
|
Decrease
in deferred revenue of approximately $45,000, resulting from increased
number of consumers successfully referred to debt settlement
agencies.
|
·
|
Fair
value of options granted to employees of approximately
$68,000;
|
|
·
|
Amortization
of capitalized web development and discount on notes payable, and
depreciation of fixed assets of approximately $199,000;
and
|
|
·
|
Amortization
of deferred compensation of approximately $64,000.
|
|
Additionally,
the following variations in operating assets and liabilities impacted our
cash used in operating activity:
|
||
·
|
Increase
in accounts receivable of approximately $48,000, resulting from increased
lead generation revenues;
|
|
·
|
Increase
in accounts payable and accrued expenses of approximately $293,000,
resulting from increased marketing programs expenditures associated with
increased acquisition of leads; and
|
|
·
|
Increase
in deferred revenue of approximately $160,000, resulting from increased
number of consumers successfully referred to debt settlement
agencies.
|
4.1
|
Amendment
No. 2 to 10% Convertible Promissory Note (filed with our Current Report on
Form 8-K filed with the SEC on May 29, 2009.)
|
4.2
|
Amendment
No. 1 to 12% Convertible Promissory Note (filed with our Current Report on
Form 8-K filed with the SEC on May 29, 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:
August 10, 2009
|
By:
|
/s/
Brian Ross
|
Brian
Ross
Chief
Executive Officer
|