UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





FORM
10-K





[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
fiscal year ended December 31, 2009





or





[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934





For the
transition period from ___________ to _________.





Commission
file number 000-52635





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)





Registrant's telephone
number, including area code: (310) 903
4001








Securities
registered pursuant to Section 12(b) of the Act: None





Securities
registered pursuant to Section 12(g) of the Act: Common Stock, par value
$0.001





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes [  ]  No
[X]





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes
[  ]  No [X]





Indicate
by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No
[   ]







Indicate
by checkmark whether the registrant submitted electronically and posted on its
corporate Website, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files). Yes [  ]  No [  ]





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]








Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.  (Check one):





Large
accelerated filer
[   ]                                                                    Accelerated
filer [  ]





Non-accelerated
filer
[   ]                                                                      Smaller
reporting company [X]


(Do not
check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes [  ]  No [
X]





The
aggregate market value of the common equity voting shares of the registrant held
by non-affiliates on June 30, 2009, the registrant's most recently completed
second fiscal quarter, was $7,002,092. For purposes of this calculation, an
aggregate of 11,000,000 shares of common stock were held by the directors and
officers of the registrant on June 30, 2009 and have been included in the number
of shares of common stock held by affiliates.





The
number of the registrant’s shares of common stock outstanding as of March 22,
2010: 30,430,816.





In this
Annual Report on Form 10-K, the terms the “Company,” “Accelerize”, “we”, “us” or
“our” refers to Accelerize New Media, Inc., unless the context indicates
otherwise.








WARNING CONCERNING FORWARD
LOOKING STATEMENTS





THIS
ANNUAL REPORT CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD LOOKING STATEMENTS
WITHIN THE MEANING OF THE FEDERAL SECURITIES LAWS. ALSO, WHENEVER WE USE WORDS
SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE” OR
SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS. FOR EXAMPLE, WHEN
WE DISCUSS THE INTERNET MARKET TRENDS, AND SPECIFICALLY, THE GROWTH IN ON-LINE
ADVERTISING, LEAD GENERATION, PERFORMANCE BASED MARKETING, AND
SOFTWARE-AS-A-SERVICE, AND OUR EXPECTATIONS BASED ON SUCH TRENDS, WE ARE USING
FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON OUR
PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT
GUARANTEED TO OCCUR AND MAY NOT OCCUR.  ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS
AS A RESULT OF VARIOUS FACTORS.





IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN OUR
FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, GENERAL MARKET CONDITIONS,
INCLUDING THE RECENT DOWNTURN IN THE ECONOMY AND THE GROWTH IN CONSUMER DEBT,
REGULATORY DEVELOPMENTS AND OTHER CONDITIONS WHICH ARE NOT WITHIN OUR
CONTROL.





OTHER
RISKS MAY ADVERSELY IMPACT US, AS DESCRIBED MORE FULLY IN THIS ANNUAL REPORT
UNDER “ITEM 1A. RISK FACTORS.”





YOU
SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.





EXCEPT AS
REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD
LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR
OTHERWISE.










ACCELERIZE
      NEW MEDIA, INC.
              2009
      ANNUAL REPORT ON FORM 10-KTable
      of ContentsPART
      IPageItem
      1.
            Business
            4Item
      1A.
            Risk
      Factors
            9Item
      1B.
            Unresolved
      Staff Comments
            15Item
      2.
            Properties
            15Item
      3.
            Legal
      Proceedings
            15Item
      4.
            [Removed
      and Reserved]
            16PART
      IIItem
      5.
            Market
      For The Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities`
            16Item
      6.
            Selected
      Financial Data
            17Item
      7.
            Management
      ’s Discussion and Analysis of Financial Condition and Results of
      Operations
            17Item
      7A.
            Quantitative
      and Qualitative Disclosures About Market Risk
            23Item
      8.
            Financial
      Statements and Supplementary Data
            23Item
      9.
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            24Item
      9A(T).
            Controls
      and Procedures
            24Item
      9B.
            Other
      Information
            25PART
      IIIItem
      10.
            Directors,
      Executive Officers and Corporate Governance
            25Item
      11.
            Executive
      Compensation
            27Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            29Item
      13.
            Certain
      Relationships and Related Transactions, and Director
      Independence
            30Item
      14.
            Principal
      Accountant Fees and Services
            30PART
      IVItem
      15.
            Exhibits
      and Financial Statement Schedules
            31





3





PART I





Item
1.  Business





Overview





We offer
a comprehensive online media solution for clients to reach their target audience
on the Internet. We provide lead generation and performance based customer
acquisition solutions via our network of financial, news, and business
networking portals, blogs, targeted e-mail, banners, search engine optimization,
and co-registration opportunities. We primarily make money from the following
two lines of business: (1) Online advertising - Our financial content
network is available over the Internet, and our revenues are generated
through the sale of display advertisings, list management, targeted lead
generation, and web consulting services, and (2) Lead generation/Performance
based marketing - Utilizing our internally designed and developed lead
generation platform, we deliver buyers to sellers by providing vendors with
opportunities to contact qualified and interested potential customers, and
essentially crafting high-quality new-business leads for such vendors, and in
return we receive fees. Our current lead generation focus surrounds, but is not
limited to, the industry of debt settlement, credit repair/reports, and tax
settlements.





We own and operate an extensive
portfolio of approximately 6,000 domain names (commonly referred to as URLs).
Our URL portfolio is currently used to build consumer-based financial portals,
microsites, blogs, and landing pages used for lead generation
initiatives.  This media strategy drives new membership, which
results in recurring user traffic to our websites and allows us to generate
highly relevant responses and leads for our online advertising and lead
generation customers.





In 2010
we expanded into the rapidly growing performance based software business through
the formation of our new Cake Marketing Software Division. Our proprietary
software streamlines the management of large scale online marketing campaigns
for affiliate marketers and advertisers, while its unique ability to simplify
online marketing efforts generates immediate cost saving for clients. The
software is available for a monthly licensing fee to affiliate marketers,
advertising agencies and corporations using a Software-as-a-Service (SaaS)
model.





As of the
end of 2008 we closed our debt settlement referrals division, however in 2009 we
still received fees for sales and marketing support we provided in connection
with debt settlement solutions prior to closing this unit. These payments
gradually decreased in 2009 and we expect that they will continue to decrease in
2010.





Our
principal offices are located at: 12121 Wilshire Blvd., Suite 322, Los Angeles,
CA 90025, and our telephone number there is: (310) 903 4001. Our corporate
website is: www.accelerizenewmedia.com.





How we market our
services





We
market our online publishing and financial portal strategy through:





●
            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;





4




●
            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.





We
market our Lead Generation/Performance Based Marketing Services
through:





●
            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.


We
market our Software-as-a-Service through:





●
            lead
      generation firms, online publishers, advertising agencies and corporations
      worldwide.





How
we support our services





Web
development, server and database development/maintenance, financial data
process, and lead generation development/maintenance are carried out in-house
and via a number of partners.





On March
16, 2009, we entered into a services agreement with Edgar Online Inc. to provide
financial data and content to our www.secfilings.com financial portal. This
strategic partnership has resulted in significant cost savings as it reduced our
dependence on in-house technical resources, hosting services, and data service
providers.





Partners
who support our services:





●
            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.




●
              TARGUSinfo, a
      provider of On-Demand Insight® to various brands, links and
      delivers real-time attributes to drive smarter customer
      interactions on the Web, over the phone and at the point of
      sale.
  ●
              The Planet, a leading
      provider of On Demand IT Infrastructure solutions, hosting more than
      20,000 small- and medium-size businesses and 15.7 million Web sites
      worldwide.


Advertising
Partners





●
            Zacks Investment Research
      Inc. markets segments of our ad inventory. Zacks is a Chicago based
      firm with over 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.




5


Web
Properties





We own
and operate an extensive portfolio of approximately 6,000 domain names (commonly
referred to as URLs). Our URL portfolio is currently used to build
consumer-based financial portals, microsites, blogs, and landing pages used for
lead generation initiatives.  This media strategy drives new
membership, which results in recurring user traffic to our websites and allows
us to generate highly relevant responses and leads for our online advertising
and lead generation customers.





Our online publishing group includes
the following financial portals:





·
            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;





·
            www.theotcinvestor.com,
      is a leading provider of OTC-BB and Pinksheet news, research and insights.
      The growing number of members can give many micro-cap companies the
      exposure they are looking for while an expert team of financial writers
      produces quality content to keep investors coming back for
      more;





·
            www.form10-k.com, is an
      example of one of our "micro-site" properties, offering to customers and
      users select functionality from our main portals including the ability to
      search financial information and drive targeted leads for our customers;
      and





·
            www.chinesepubliccompanies.com,
      a leading source of information on Chinese stocks and U.S. listed Chinese
      ADR securities listed both on central exchanges and OTC. In an uncertain
      and difficult to interpret market, the website provides an independent,
      unbiased source for news, research, insights and other information about
      foreign companies based in or operating in
  China.





Our lead generation and
software-as-a-service destinations include:





·
            www.accelerizenewmedia.com/offers/index.aspx,
      by 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;




·
              www.cakemarketing.com, offers
      a patent-pending, Software-as-a-Service-based lead generation, validation,
      and distribution platform for performance based marketing companies,
      online publishers, advertising agencies, and corporations. The company's
      scalable, easy-to-use platform makes online marketing easy and accessible
      to all
industries.





Discontinued
Products





During
2008 we decided to cease the provision of our debt settlement referral division
effective January 1, 2009. We continued to receive commissions for debt
settlement solutions provided to past clients, on a diminishing scale during
2009 and expect to continue to receive commissions in 2010, but will not be
adding additional clients or have any further financial obligations with respect
to our Debt Settlement Referral Division.





Industry/Market
Trends





Industry
participants are shifting more of their marketing budgets from traditional media
channels such as direct mail, television, radio, and newspapers to the Internet
because of increasing usage of the Internet by their potential customers. We
believe that direct marketing is the most applicable and relevant marketing
segment to us because it is targeted and measurable.





We
believe that our business depends upon the continuing consumer and business use
of the Internet as a primary tool to facilitate research, communications, and
transactions, especially in the following segments:





●
            Online
      Advertising;





●
            Lead
      Generation/Performance Based
  Marketing;  and





●
            Software-as-a-Service
      for Performance Based Marketing





6





Market
Information & Statistics





According
to the July 2009 research report, “Consumer Behavior Online: A 2009 Deep Dive,”
by Forrester Research, Americans spend 33% of their time with media on the
Internet, but online direct marketing represents only 16% of the
$149 billion in total annual U.S. direct marketing spending in 2009,
as reported by the Direct Marketing Association. The Internet is an effective
direct marketing medium due to its targeting and measurability characteristics.
If direct marketing budgets shift to the Internet in proportion to Americans’
share of time spent with media on the Internet — from 16% to 33% of the
$149 billion in total spending in 2009 — that could represent an
increased market opportunity of $25 billion. In addition, as traditional
media categories such as television and radio shift from analog to digital
formats, they then become channels for the targeted and measurable marketing
techniques and capabilities we have developed for the Internet, thus expanding
our addressable market opportunity. Further future market potential may also
come from international markets.





Online
Advertising and Performance Based Marketing Statistics


·
            AMR
      International, according to a March 4, 2010 article in eMarketer Digital
      Intelligence, predicts that business to business online advertising
      spending will increase at a compounded annual growth rate of 12% between
      2009 and 2013.




·
            According
      to AMR International, lead generation will increase at a compound annual
      growth rate of 17% between 2009 and 2013 for business to business
      marketing.




·
            62%
      of businesses have insufficient ability to measure effectiveness of their
      advertising campaigns, according to Marketing and Media Ecosystem's 2010
      Survey.




·
            58%
      of leading companies believe that direct partnerships with media companies
      are important, according to Marketing and Media Ecosystem's 2010
      Survey.




·
            71%
      of advertising agencies expect digital to reach 25% of media mix in 2010,
      according to Marketing and Media Ecosystem's 2010
  Survey.




·
            JP
      Morgan in a research note issued January 2, 2008 stated that it expects
      online advertising to grow 10.5% in 2010 to $8.3
  billion.




·
            JP
      Morgan in the research note issued January 2, 2008 noted that U.S.
      consumers spend about 38% of their time online, but the sector attracts
      only 8% of advertising dollars, leaving substantial
  upside.




·
            Online
      advertising revenues decreased 5.3% to $10.9 billion in the first half of
      2009 versus the same period in 2008, according to the IAB Internet
      Advertising Revenue Report for the first half of 2009, published October
      5, 2009 by PricewaterhouseCoopers LLP and the Interactive Advertising
      Bureau, or IAB.




·
            Lead
      generation revenues came in at $728 million for the first half of 2009
      down 7% versus the comparable period in 2008, according to the IAB
      Internet Advertising Revenue Report for the first half of
      2009.




·
            Pay
      for performance deals continue to be the leading pricing model, with a 58%
      share, according to the IAB Internet Advertising Revenue Report for the
      first half of 2009.







Source:IAB
Internet Advertising Revenue Report for the first half of
2009





Intellectual
Property





Our
employees are required to execute confidentiality and non-use agreements that
transfer any rights they may have in copyrightable works or patentable
technologies to us. In addition, prior to entering into discussions with
potential business partners or customers regarding our business and
technologies, we generally require that such parties enter into nondisclosure
agreements with us. If these discussions result in a license or other business
relationship, we also generally require that the agreement setting forth the
parties’ respective rights and obligations include provisions for the protection
of our intellectual property rights. For example, the standard language in our
agreements provides that we retain ownership of all patents and copyrights in
our technologies and requires our customers to display our copyright and
trademark notices. We do not currently have any registered or pending patents or
trademarks, except the trademark “Knockout Debt” (USPTO Reg. No. 2,810,014) and
a US Provisional Patent Application (S/N 61/301, 811) which was filed on Feb 5,
2010, encompassing our lead generation management software.





7


Competition





Our
primary competitors include:





Edgar Online, Inc., which
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. Edgar Online, Inc., is also one of our
business partners providing us with SEC filings and other data.





TheStreet.com, Inc., which
together with its wholly-owned subsidiaries, operates as a financial media
company. Its flagship site, TheStreet.com, provides financial commentary,
analysis, and news with financial coverage to individual investors.
TheStreet.com also offers investigative journalism, commentary on market trends,
specific stock and mutual fund analysis, and personal finance and lifestyle
sections.





ValueClick, Inc., which
provides online advertising campaigns and programs for advertisers and
advertising agency customers in the United States and internationally. It
operates in four segments: Media, Affiliate Marketing, Comparison Shopping, and
Technology. ValueClick Inc. customers include advertisers, advertising agencies,
and traffic distribution partners.





QuinStreet, Inc. provides
online direct marketing and media services. The company offers online messaging,
email broadcasting, search engine marketing, and brand management services. It
caters to education, financial services, healthcare, advertising, and tourism
sectors. QuinStreet, Inc. also operates web portal which offers comprehensive
consumer information service and companion insurance brokerage service to
self-directed insurance shoppers. The company was founded in 1999 and is based
in Foster City, California.





Other
large competitors in the business information industry are Reuters, Standard & Poor’sandThomson
Financial. Competition for information focused on financial data or
credit risk comes from companies such as S&P’s Capital IQ, Dun & Bradstreet and
Factset. Competition
for legal information comes from companies such as Thompson’s Global Securities
Information. Other competitors include companies such as 10-K Wizard Technology, which
focus on simple SEC data offerings, and MSN Money and Yahoo! Finance, which are
more focused on serving individual investors.





Other
competitors in the Software-as-a-Service industry include www.hitpath.com, www.linktrust.com,
www.pontiflex.com.





The
principal competitive factors relating to attracting and retaining users include
the quality and relevance of our search results, and the usefulness,
accessibility, integration and personalization of the online services that we
offer.  In the case of attracting advertisers, the principal competitive
factors are reach, effectiveness and efficiency of our marketing
services.





Our
competitors have significantly greater capital, technology, resources, and brand
recognition than we do.   However, we believe that based
upon past performance and our unique blend of web assets we will remain highly
competitive in our industry.





Government
Regulation





Although
there are currently relatively few laws and regulations directly applicable to
the Internet, it is possible that new laws and regulations will be adopted in
the United States and elsewhere. The adoption of restrictive laws or regulations
could slow or otherwise affect Internet growth. The adoption of laws or
regulations restricting or limiting debt settlement could affect our lead
generation business. The application of existing laws and regulations governing
Internet issues such as property ownership, libel and personal privacy is also
subject to substantial uncertainty. There can be no assurance that current or
new government laws and regulations, or the application of existing laws and
regulations (including laws and regulations governing issues such as property
ownership, taxation, defamation and personal injury), will not expose us to
significant liabilities, slow Internet growth or otherwise hurt us
financially.





Research
and Development





We expended no resources on research
and development activities during the last two fiscal years.





8





Employees





As of
December 31, 2009, we had 10 full-time employees, and 3 consultants, including
all of our executive officers . None of our employees are covered by collective
bargaining agreements, and we believe our relationships with our employees to be
good.





Item 1A. Risk
Factors





If
we are unable to obtain financing necessary to support our operations, we may be
unable to continue as a going concern.





We have
generated revenues since inception but they were not an adequate source of cash
to fund future operations. Historically we have relied on private placement
issuances of equity and debt. We will need to raise additional working capital
to fund our ongoing operations and growth. The amount of our future capital
requirements depends primarily on the rate at which we increase our revenues and
correspondingly decrease our use of cash to fund operations. Cash used for
operations will be affected by numerous known and unknown risks and
uncertainties including, but not limited to, our ability to successfully market
our products and services and the degree to which competitive products and
services are introduced to the market. As long as our cash flow from operations
remains insufficient to completely fund operations, we will continue depleting
our financial resources and seeking additional capital through equity and/or
debt financing. If we raise additional capital through the issuance of debt,
this will result in increased interest expense. If we raise additional funds
through the issuance of equity or convertible debt securities, the percentage
ownership of our company held by existing stockholders will be reduced and those
stockholders may experience significant dilution. In addition, new securities
may contain rights, preferences or privileges that are senior to those of our
common stock. There can be no assurance that acceptable financing to fund our
ongoing operations can be obtained on suitable terms, if at all. If we are
unable to obtain the financing necessary to support our operations, we may be
unable to continue as a going concern. In that event, we may be forced to cease
operations and our stockholders could lose their entire investment in us. Our
audited financial statements included in this annual report for the period ended
December 31, 2009 contain additional note disclosures describing the
circumstances that lead to this disclosure by our independent
auditors.





We
have a history of losses, and we expect to continue to operate at a loss and to
have negative cash flow from operations for the foreseeable future.





We have a
history of continuing losses and negative cash flow from operations. At December
31, 2008 and December 31, 2009, we had cumulative net losses of approximately
$5.4 million and $2.4 million, respectively. Our operations have been financed
primarily through proceeds from the issuance of equity and borrowings under
promissory notes. On December 31, 2008 and December 31, 2009, we had
approximately $253,000 and $128,000 in cash, respectively. We expect that our
expenses will increase substantially as we continue to develop and market our
products and services. As a result, we expect to continue to incur losses for
the foreseeable future.





Because we expect to continue to
incur net losses, we may not be able to implement our business strategy and the
price of our stock may decline.





While we
are hopeful of becoming profitable by the end of 2010, we hoped to be profitable
in 2009, and there is no assurance that this objective can be attained.
Accordingly, our ability to operate our business and implement our business
strategy may be hampered by negative cash flows in the future, and the value of
our stock may decline as a result. Our capital requirements may vary materially
from those currently planned if, for example, we incur unforeseen capital
expenditures, unforeseen operating expenses or make investments to maintain our
competitive position. If this is the case, we may have to delay or abandon some
or all of our development plans or otherwise forego market opportunities. We
will need to generate significant additional revenues to be profitable in the
future, and we may not generate sufficient revenues to be profitable on either a
quarterly or annual basis in the future.





Our
quarterly financial results will fluctuate, making it difficult to forecast our
results of operation.





Our
revenues and operating results may vary significantly from quarter to quarter
due to a number of factors, many of which are beyond our control,
including:




●
              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.





Our
current and future levels of expenditures are based primarily on our growth
plans and estimates of expected future revenues. If our operating results fall
below the expectation of investors, our stock price will likely decline
significantly.





9





We
face risks related to the recent credit crisis.





Current
uncertainty in the global economic conditions resulting from the recent
disruption in credit markets poses a risk to the overall economy and has
adversely affected the online advertising market, which is now highly
competitive. These economic conditions have impacted consumer and customer
demand for our products, as well as our ability to borrow money to finance our
operations, to maintain our key employees, and to manage normal commercial
relationships with our customers, suppliers and creditors. For example,
customers spend less on on-line advertising and other services, and may extend
the payment periods for our lead generation services. If another economic crisis
were to occur, our business and results of operations will continue to be
negatively impacted.





We
face intense competition from other providers of business and financial
information.





We
compete with many providers of business and financial information, including
other Internet companies, for consumers' and advertisers' attention and
spending. Our primary competitors are Edgar Online, Inc. and The Street.com,
Inc., both of which provide services similar to ours and each of which has a
well-established market presence. These and other competitors have substantially
greater capital, longer operating histories, greater brand recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. These competitors may also engage in more extensive
development of their technologies, adopt more comprehensive marketing and
advertising campaigns than we can. Our competitors may develop products and
service offerings that we do not offer or that are more sophisticated or more
cost effective than our own. For these and other reasons, our competitors'
products and services may achieve greater acceptance in the marketplace than our
own, limiting our ability to gain market share and customer loyalty and to
generate sufficient revenues to achieve a profitable level of operations. Our
failure to adequately address any of the above factors could harm our business
and operating results.





In
addition, as the barriers to entry in our market segment are not substantial, an
unlimited number of new competitors could emerge, thereby making our goal of
establishing a market presence even more difficult. Because our management
expects competition in our market segment to continue to intensify, there can be
no assurances we will ever establish a competitive position in our market
segment.





We continue to rely on a limited
number of major customers for most of our revenues.





For the
fiscal year ended December 31, 2009, sales to one of our customers, a debt
settlement referral division customer, accounted for approximately 14% of our
revenues. For the fiscal year ended December 31, 2008, three of our customers
accounted for 20%, 13%, and 12% of our revenues, respectively. The loss of any
customer that accounts for a significant portion of our revenues from time to
time, could adversely affect our business, operating results and financial
condition due to the substantial decrease in revenue such loss would
represent.





We
may not be successful in marketing our new proprietary software.





In
2010, we expanded into the rapidly growing performance based software business
through the formation of our new Cake Marketing Software Division. Our
proprietary software streamlines the management of large scale online marketing
campaigns for affiliate marketers and advertisers, while its unique ability to
simplify online marketing efforts generates immediate cost saving for clients.
The software is available for a monthly licensing fee to affiliate marketers,
advertising agencies and corporations using a Software-as-a-Service or SaaS,
model. We have invested a substantial amount of time and money in developing and
launching our proprietary platform. There is no assurance that we will be
successful in marketing this platform. In addition, various technical delays and
malfunctions may result in additional expenses and difficulties.





We
may not be successful in increasing our brand awareness.





Our
future success will depend, in part, on our ability to increase brand awareness
of our websites. In order to build brand awareness, we must succeed in our
marketing efforts, provide high quality services and increase traffic to our
websites. There is no assurance that we will be able to achieve these
goals.





We
may not be successful in improving our existing products or in developing new
products.





We have
not yet completed development and testing of certain proposed new products and
proposed enhancements to our systems, some of which are still in the planning
stage or in relatively early stages of development. Our success will depend in
part upon our ability to timely introduce new products into the marketplace. We
must commit considerable time, effort and resources to complete development of
our proposed products, service tools and product enhancements. Our product
development efforts are subject to all of the risks inherent in the development
of new products and technology, including unanticipated delays, expenses and
difficulties, as well as the possible insufficiency of funding to complete
development.





10


Our
product development efforts may not be successfully completed. In addition,
proposed products may not satisfactorily perform the functions for which they
are designed, they may not meet applicable price or performance objectives and
unanticipated technical or other problems may occur which result in increased
costs or material delays in development. Despite testing by Accelerize and
potential end users, problems may be found in new products, tools and services
after the commencement of commercial delivery, resulting in loss of, or delay
in, market acceptance and other potential damages.





We
may not be successful in developing new and enhanced services and features for
our websites.





Our
market is characterized by rapidly changing technologies, evolving industry
standards, frequent new product and service introductions and changing customer
demands. To be successful, we must adapt to the rapidly changing market by
continually enhancing our existing services and adding new services to address
customers' changing demands. We could incur substantial costs if we need to
modify our services or infrastructure to adapt to these changes. Our business
could be adversely affected if we were to incur significant costs without
generating related revenues or if we cannot adapt rapidly to these changes. Our
business could also be adversely affected if we experience difficulties in
introducing new or enhanced services or if these services are not favorably
received by users. We may experience technical or other difficulties that could
delay or prevent us from introducing new or enhanced services.





Our
operations depend on third parties and our systems are susceptible to delays,
failures and errors, which could adversely impact our operations and financial
results.





Our
operations depend on receipt of timely feeds from our content providers, and any
failure or delay in the transmission or receipt of such feeds could disrupt our
operations. We also depend on Web browsers, ISPs and online service providers to
provide access over the Internet to our product and service offerings. Many of
these providers have experienced significant outages or interruptions in the
past, and could experience outages, delays and other difficulties due to system
failures unrelated to our systems. These types of interruptions could continue
or increase in the future.





Our
digital distribution activities are managed by sophisticated software and
computer systems. We must continually develop and update these systems over time
as our business and business needs grow and change, and these systems may not
adequately reflect the current needs of our business. We may encounter delays in
developing these systems, and the systems may contain undetected errors that
could cause system failures. Any system error or failure that causes
interruption in availability of products or content or an increase in response
time could result in a loss of potential or existing business services
customers, users, advertisers or content providers. If we suffer sustained or
repeated interruptions, our products, services and Web sites could be less
attractive to such entities or individuals and our business could be
harmed.





Our
servers are currently hosted with Maximum ASP, Inc. in Louisville,
Kentucky. Maximum ASP, Inc. handles the failover process we have put in
place. We intend to notify them immediately of any outage and upon such
notice they are assigned to immediately implement our failover strategy. We may
not have adequate business interruption insurance to compensate us for losses
that may occur from a system outage. Despite our efforts, our network
infrastructure and systems could be subject to service interruptions or damage
and any resulting interruption of services could harm our business, operating
results and reputation.





Our
future performance and success depend on our ability to retain our key
personnel.





Our
future performance and success is heavily dependent upon the continued active
participation of our current senior management team, including, our President
and Chief Executive Officer, Brian Ross, our General Counsel, Damon Stein and
our Head of Lead Generation, Jeff McCollum. The loss of any of their services
could have a material adverse effect on our business development and our ability
to execute our growth strategy, resulting in loss of sales and a slower rate of
growth. We do not maintain any "key person" life insurance for any of our
employees.





We
may be subject to infringement claims on proprietary rights of third parties for
software and other content that we distribute or make available to our
customers.





We may be
liable or alleged to be liable to third parties for software and other content
that we distribute or make available to our customers:





●
            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.





Any
alleged liability could harm our business by damaging our reputation, requiring
us to incur legal expenses in defense, exposing us to awards of damages and
costs including treble damages for willful infringement and diverting
management's attention which could have an adverse effect on our business,
results of operations and financial condition.





11


We cannot
assure you that third parties will not claim infringement by us with respect to
past, current, or future technologies. Participants in our markets may be
increasingly subject to infringement claims as the number of services and
competitors in our industry segment grows. In addition, these risks are
difficult to quantify in light of the continuously evolving nature of laws and
regulations governing the Internet. Any claim relating to proprietary rights,
whether meritorious or not, could be time-consuming, result in costly
litigation, cause service upgrade delays or require us to enter into royalty or
licensing agreements, and we cannot assure you that we will have adequate
insurance coverage or that royalty or licensing agreements will be available on
terms acceptable to us or at all. Further, we plan to offer our services and
applications to customers worldwide including customers in foreign countries
that may offer less protection for our intellectual property than the United
States. Our failure to protect against misappropriation of our intellectual
property, or claims that we are infringing the intellectual property of third
parties could have a negative effect on our business, revenues, financial
condition and results of operations.





Dilutive
securities may adversely impact our stock price.





As of
March 22, 2010, the following securities issuable, convertible or exercisable
into shares of our Common Stock were outstanding:





●
            5,400,000
      shares of Common Stock issuable upon the possible conversion of
      outstanding 10% Series A Convertible Preferred
  Stock;





●
            11,662,500
      shares of Common Stock issuable upon the possible conversion of
      outstanding 8% Series B Convertible Preferred
  Stock;





●
            1,897,694
      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;





●
            1,870,324
      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 450,000 shares of our Common Stock at a price
      of $0.15 per share, or the TDRG
Warrants;





●
            Warrants
      to purchase up to a total of 719,422 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 - $0.55 per share;





●
            Convertible
      Promissory Notes in a total principal amount of $637,000, 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 583,500 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 1,426,250 shares of our Common Stock
      at  a price of $0.65 per share, issued in connection with a
      private placement;





●
            Warrants
      to purchase up to a total of 3,408,333 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.




These
securities represent as of March 22, 2010, approximately 60% of our Common Stock
on a fully diluted, as converted basis. The exercise of these options or
warrants and the conversion of the preferred stock, both of which have fixed
prices, may materially adversely affect the market price of our Common Stock and
will have a dilutive effect on our existing stockholders.





12


Acquisitions
of businesses and our failure to successfully integrate these businesses can
disrupt our business, dilute your holdings in us and harm our financial
condition and operating results.





In
January 2007 we acquired substantially all of the assets of TDRG. We intend to
pursue future strategic acquisitions of complementary companies, products or
technologies using our available cash and stock. Such acquisitions could disrupt
our business. In addition, your holdings in our company would be diluted if we
issue equity securities in connection with any acquisition as we did with the
TDRG acquisition when we issued approximately 18% of our then outstanding shares
of Common Stock. Acquisitions involve numerous other risks,
including:





●
            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.





Further,
products that we acquire from third parties often require significant
expenditures of time and resources to upgrade and integrate with our existing
product suite. If we fail to integrate acquired applications into our product
offering in a timely manner, we may be unable to fully realize the expected
benefits of the acquisition. We may not be able to successfully integrate any
business, technologies or personnel that we have acquired or that we might
acquire in the future, and this could harm our financial condition and operating
results. For example, in January 2007, we acquired substantially all of the
assets of TDRG, which provided debt-referral solutions and as of the end of 2008
we have discontinued this line of business.





Our internal control over financial
reporting was not considered effective as of December 31, 2009 and may continue
to be ineffective in the future, which could result in our financial statements
being unreliable, government investigation or loss of investor confidence in our
financial reports.





Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish an
annual report by our management assessing the effectiveness of our internal
control over financial reporting. This assessment must include disclosure of any
material weaknesses in our internal control over financial reporting identified
by management. Management's report as of the end of 2009 identified several
material weaknesses and concluded that we did not have effective internal
control over financial reporting. Ineffective internal controls can result in
errors or other problems in our financial statements. Even if material
weaknesses identified do not cause our financial statements to be unreliable, if
we continue to be unable to assert that our internal controls are effective, our
investors could still lose confidence in the accuracy and completeness of our
financial reports, which in turn could cause our stock price to decline. Failure
to maintain effective internal control over financial reporting could also
result in investigation or sanctions by regulatory authorities.





In
addition, our internal control over financial reporting has not yet been audited
by our independent registered public accounting firm. In the event that our
independent registered public accounting firm is unable to rely on our internal
controls in connection with their audit of our financial statements, and in the
further event that they are unable to devise alternative procedures in order to
satisfy themselves as to the material accuracy of our financial statements and
related disclosures, it is possible that we would receive a qualified or an
adverse audit opinion on those financial statements which could also adversely
affect the market price of our Common Stock and our ability to secure additional
financing as needed.





We
have not voluntarily implemented various corporate governance measures, in the
absence of which, stockholders may have more limited protections against
interested director transactions, conflicts of interest and similar
matters.





Federal
legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the
adoption of various corporate governance measures designed to promote the
integrity of the corporate management and the securities markets. Some of these
measures have been adopted in response to legal requirements. Others have been
adopted by companies in response to the requirements of national securities
exchanges, such as the New York Stock Exchange or the Nasdaq Stock Market, on
which their securities are listed. Among the corporate governance measures that
are required under the rules of national securities exchanges are those that
address board of directors' independence, audit committee oversight, and the
adoption of a code of ethics. We have not yet adopted some of these corporate
governance measures and, since our securities are not listed on a national
securities exchange, we are not required to do so. We have not adopted corporate
governance measures such as an audit or other independent committees of our
board of directors. We intend to expand our board membership to include
additional independent directors and we may then seek to establish an audit and
other committees of our board of directors. It is possible that if we were to
adopt some or all of these corporate governance measures, stockholders would
benefit from somewhat greater assurances that internal corporate decisions were
being made by disinterested directors and that policies had been implemented to
define responsible conduct. For example, in the absence of audit, nominating and
compensation committees comprised of at least a majority of independent
directors, decisions concerning matters such as compensation packages to our
senior officers and recommendations for director nominees may be made by a
majority of directors who have an interest in the outcome of the matters being
decided. Prospective investors should bear in mind our current lack of corporate
governance measures in formulating their investment decisions.





13


Government
regulation could adversely affect our business prospects.





We do not
know with certainty how existing laws governing issues such as property
ownership, debt-settlement, copyright and other intellectual property issues,
taxation, illegal or obscene content, retransmission of media, personal privacy
and data protection will apply to the Internet or to the distribution of
multimedia and other proprietary content over the Internet. Most of these laws
were adopted before the advent of the Internet and related technologies and
therefore do not address the unique issues associated with the Internet and
related technologies. Depending on how these laws developed and are interpreted
by the judicial system, they could have the effect of:





●
            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.





Because
of this rapidly evolving and uncertain regulatory environment, both domestically
and internationally, we cannot predict how existing or proposed laws and
regulations might affect our business.





The
limited market for our Common Stock will make our stock price more
volatile.  Therefore, you may have difficulty selling your
shares.





The
market for our Common Stock is limited and we cannot assure you that a larger
market will ever be developed or maintained. Currently, our Common Stock is
traded on the OTCBB.  Securities traded on the OTCBB typically have
low trading volumes.  Market fluctuations and volatility, as well as
general economic, market and political conditions, could reduce our market
price.  As a result, this may make it difficult or impossible for our
shareholders to sell our Common Stock.





There
are no restrictions on the sale of our outstanding Common
Stock.  Sales by existing shareholders may depress the share price of
our Common Stock and may impair our ability to raise additional capital through
the sale of equity securities when needed.





As of
March 22, 2010 we had 30,430,816 shares of Common Stock issued and outstanding,
of which  28,686,287 shares were freely tradable under Rule 144 under
the Securities Act, or registered for re-sale. The possibility that substantial
amounts of outstanding Common Stock may be sold in the public market may
adversely affect prevailing market prices for our Common Stock.  This
could negatively affect the market price of our Common Stock and could impair
our ability to raise additional capital through the sale of equity
securities.





Our
Common Stock is subject to the “penny stock” rules of the SEC, and the trading
market in our Common Stock is limited.  This makes transactions in our
Common Stock cumbersome and may reduce the value of your shares.





The SEC
has adopted Rule 3a51-1 which establishes the definition of a "penny stock," for
the purposes relevant to us, as any equity security that has a market price of
less than $5.00 per share or with an exercise price of less than $5.00 per
share, subject to certain exceptions.  For any transaction involving a
penny stock, unless exempt, Rule 15g-9 requires:





·
            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.





In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must:





·
            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.





The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the SEC relating to the penny stock market,
which, in highlight form:





·
            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.





14


Generally,
brokers may be less willing to execute transactions in securities subject to the
"penny stock" rules. This may make it more difficult for investors to dispose of
our common stock and cause a decline in its market value.





Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.





Item
1B. Unresolved Staff Comments.





None.





Item
2. Properties.





On
January 27, 2004, we entered into a 3-year lease for a 2,769 square foot office
facility in Los Angeles, California, which commenced on March 15, 2004. Under
the terms of the lease, we are required to pay initial monthly base rent of
$6,092. The base rent increased annually by 3%. On March 12, 2007, the lease was
amended, extending the lease for another 3 years.  Under the new terms
of the lease, we are required to pay initial monthly base rent of $7,337,
increasing annually by 4%. At December 31, 2009, we subleased the office
facility in Los Angeles to two subtenants.  The subleases require
payments aggregating to $7,337 through June 2010. We do not intend to renew our
lease upon expiration in 2010.





During January 2009, we entered into a
lease for certain office space in Newport Beach, California, effective on
February 1, 2009.  Under the terms of the lease, we pay monthly base
rent of $4,100.  The lease is renewable every month.





Item
3. Legal Proceedings.





We are
currently not a party to any material pending litigation, government
investigation or any other legal proceedings.





15




Item 4.(Removed and
Reserved)





PART
II





Item
5.  Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities





Our
Common Stock began quotation on the Over-the-Counter Bulletin Board on January
9, 2008, and is quoted under the symbol "ACLZ.OB". Prior to such date our common
stock was not traded on any established public trading market, nor was it quoted
on any automated quotation system. The following sets forth the high and low bid
quotations for the common stock as reported on the Over-the-Counter Bulletin
Board for each quarter during the last two fiscal years. These quotations
reflect prices between dealers, do not include retail mark-ups, markdowns, and
commissions and may not necessarily represent actual transactions.





Fiscal Year Ended December 31,
      2008
            High
            LowFirst
      Quarter Ended March 31, 2008
            $0.80
            $0.50Second
      Quarter Ended June 30, 2008
            $0.78
            $0.72Third
      Quarter Ended September 30, 2008
            $0.75
            $0.45Fourth
      Quarter Ended December 31, 2008
            $0.50
            $0.25





Fiscal Year Ended December 31,
      2009
            High
            LowFirst
      Quarter Ended March 31, 2009
            $0.38
            $0.20Second
      Quarter Ended June 30, 2009
            $0.52
            $0.25Third
      Quarter Ended September 30, 2009
            $0.60
            $0.40Fourth
      Quarter Ended December 31, 2009
            $0.80
            $0.52





High
            LowFirst
      Quarter through March 22, 2010
            $0.65
            $0.51








Stockholders





As of
March 22, 2010, there were 112 stockholders of record of our Common
Stock.





Dividend
Policy





We have
not declared or paid any cash dividends on our Common Stock since inception and
we do not intend to pay any cash dividends in the foreseeable future. We intend
to retain any future earnings for use in the operation and expansion of our
business. Any future decision to pay dividends on Common Stock will be at the
discretion of our Board of Directors and will be dependent upon our fiscal
condition, results of operations, capital requirements and other factors our
Board of Directors may deem relevant.





The
holders of our 10% Series A Preferred Stock are entitled to receive a cumulative
preferential dividend of 10% per annum on the stated value of the 10% Series A
Preferred Stock owned by them. The dividend is payable at our option in cash or
shares of Common Stock valued at $0.15 per share.  We do not intend to
pay any cash dividend in the near future. Dividends are payable on a quarterly
basis on each of September 1, December 1, March 1, and June 1, and commenced
September 1, 2006.





The
holders of our 8% Series B Preferred Stock are entitled to receive a cumulative
preferential dividend of 8% per annum on the stated value of the 8% Series A
Preferred Stock owned by them. The dividend is payable at our option in cash or
shares of Common Stock valued at $0.35 per share.  We do not intend to
pay any cash dividend in the near future. Dividends are payable on a quarterly
basis on each of September 1, December 1, March 1, and June 1, and commenced
December 1, 2007.





Unregistered
issuance of Securities





On
December 1, 2009 we issued a total of 134,642 shares of Common Stock as PIK
Dividends to the holders of our Series A Preferred and 148,039 shares of Common
Stock as PIK Dividends to the holders of our Series B Preferred.





On
December 30, 2009 we issued a total of 45,529 shares of Common Stock to note
holders for interest pursuant to our 10% and 12% convertible notes
payable.





During November and December 2009 we
issued a total of 585,000 shares of Common Stock pursuant to a private
placement.





16





S hare
Repurchases





On December 18, 2009 we repurchased and
retired 20,000 shares of Common Stock from Christopher Meredith, one of our
directors.





Item
6. Selected Financial Data.





Not
Applicable.





Item
7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.





The
following information should be read in conjunction with our financial
statements and accompanying notes included in this Annual Report on Form
10-K.





Overview





We offer
a comprehensive online media solution for clients to reach their target audience
on the Internet. We provide lead generation and performance based customer
acquisition solutions via our network of financial, news, and business
networking portals, blogs, targeted e-mail, banners, search engine optimization,
and co-registration opportunities. We primarily make money from the following
two lines of business: (1) Online advertising - Our financial content
network is available over the Internet, and our revenues are generated
through the sale of display advertisings, list management, targeted lead
generation, and web consulting services, and (2) Lead generation/Performance
based marketing - Utilizing our internally designed and developed lead
generation platform, we deliver buyers to sellers by providing vendors with
opportunities to contact qualified and interested potential customers, and
essentially crafting high-quality new-business leads for such vendors, and in
return we receive fees. Our current lead generation focus surrounds, but is not
limited to, the industry of debt settlement, credit repair/reports, and tax
settlements.





We own and operate an extensive
portfolio of approximately 6,000 domain names (commonly referred to as URLs).
Our URL portfolio is currently used to build consumer-based financial portals,
microsites, blogs, and landing pages used for lead generation
initiatives.  This media strategy drives new membership, which
results in recurring user traffic to our websites and allows us to generate
highly relevant responses and leads for our online advertising and lead
generation customers.





In 2010 we expanded into the rapidly
growing performance based software business through the formation of our new
Cake Marketing Software Division. Our proprietary software streamlines the
management of large scale online marketing campaigns for affiliate marketers and
advertisers, while its unique ability to simplify online marketing efforts
generates immediate cost saving for clients. The software is available for a
monthly licensing fee to affiliate marketers, advertising agencies and
corporations using a Software-as-a-Service (SaaS) model.





As of the
end of 2008 we closed our debt settlement referrals division, however in 2009 we
still received fees for sales and marketing support we provided in connection
with debt settlement solutions prior to closing this unit. These payments
gradually decreased in 2009 and we expect that they will continue to decrease in
2010.





Our
principal offices are located at: 12121 Wilshire Blvd., Suite 322, Los Angeles,
CA 90025, and our telephone number there is: (310) 903 4001. Our corporate
website is: www.accelerizenewmedia.com.





17





Results of
Operations





ACCELERIZE
      NEW MEDIA, INC.RESULTS
      OF OPERATIONS





Year
      ended
            
            
            Increase/
            
            
            Increase/December
      31,
            
            
            (Decrease)
            
            
            (Decrease)2009
            
            
            2008
            
            
            in
      $ 2009
            
            
            in
      % 2009vs
      2008
            
            
            vs
      2008Revenue:Lead
      generation revenues
            
            $
            2,724,706
            
            
            $
            2,216,302
            
            
            $
            508,404
            
            
            
            22.9
            %Debt
      solution revenues
            
            
            701,285
            
            
            
            1,190,966
            
            
            
            (489,681
            )
            
            
            -41.1
            %Advertising
      and other revenues
            
            
            447,586
            
            
            
            388,095
            
            
            
            59,491
            
            
            
            15.3
            %Total
      revenues:
            
            
            3,873,577
            
            
            
            3,795,363
            
            
            
            78,214
            
            
            
            2.1
            %Operating
      expenses:Selling,
      general and administrative
            
            
            5,767,368
            
            
            
            8,754,657
            
            
            
            (2,987,289
            )
            
            
            -34.1
            %Total
      operating expenses
            
            
            5,767,368
            
            
            
            8,754,657
            
            
            
            (2,987,289
            )
            
            
            -34.1
            %Operating
      loss
            
            
            (1,893,791
            )
            
            
            (4,959,294
            )
            
            
            3,065,503
            
            
            
            -61.8
            %Other
      expense, net:Interest
      expense, net
            
            
            (119,693
            )
            
            
            (32,302
            )
            
            
            (87,391
            )
            
            
            270.5
            %(119,693
            )
            
            
            (32,302
            )
            
            
            (87,391
            )
            
            
            270.5
            %Net
      loss
            
            
            (2,013,484
            )
            
            
            (4,991,596
            )
            
            
            2,978,112
            
            
            
            -59.7
            %Less
      dividends issued for series A and B preferred stock
            
            
            410,812
            
            
            
            415,206
            
            
            $
            (4,394
            )
            
            
            -1.1
            %Net
      loss attributable to common stock
            
            $
            (2,424,296
            )
            
            $
            (5,406,802
            )
            
            $
            2,982,506
            
            
            
            -55.2
            %





Revenues





Revenues
primarily consist of fees generated from lead generation, sales and marketing of
debt settlement referrals, and, to a lesser extent, from online advertising and
other revenues generated from our online publishing group.





Our
increase in lead generation revenues during the year ended December 31, 2009,
when compared to the prior year is due primarily to an increase in the number of
leads we sold.





Our
decrease in debt solution revenues during the year ended December 31, 2009, when
compared to the prior year is primarily due to our decision to cease operating
our Debt Settlement Referral Division effective January 1, 2009. During 2010, we
expect to continue to receive commissions for debt settlement solutions provided
to past clients to a lesser extent.





Our
increase in advertising and other services revenues during the year ended
December 31, 2009 when compared to the prior year is due to the increased number
of customers using our advertising and other services.





Selling,
General, and Administrative Expenses





Selling,
general, and administrative expenses primarily consist of consultant fees
related to the marketing and enhancement of our websites, advertising, as well
as other general and administrative expenses, such as payroll expenses,
necessary to support our existing and anticipated growth in our revenues and
legal and professional fees.





18




The
decrease in selling, general and administrative expenses during the year ended
December 31, 2009 when compared with the prior year is primarily due to the
following:





·
            a
      decrease in lead acquisition costs and  sales acquisition costs
      of approximately $463,000; this decrease is primarily due to a
      concentrated effort by management to acquire leads of higher
      quality;·
            a
      decrease in payroll expenses of approximately $714,000; this decrease is
      primarily due to the termination of a number of employees in September
      2008, resulting from  our  decreased involvement in
      the sales and marketing of debt settlement solutions;·
            a
      decrease in advertising expenses of approximately $932,000; this decrease
      is primarily due to the issuance of  2.5 million warrants to a
      marketing consultant during 2008, which did not occur in
    2009;·
            a
      decrease in warrant expense of approximately $1,148,000 resulting from the
      issuance of warrants in September 2008 to induce the exercise of Series B
      Preferred Stock  warrants; offset by·
            an
      increase in impairment of goodwill of approximately $622,000, resulting
      from our decision to cease operating our Debt Settlement Referral
      Division;





Interest





Interest
expense consists of interest charges associated with the 10% and 12% notes
payable issued in 2008 and 2009.  The increase in interest expense
during the year ended December 31, 2009 is primarily due to the increase in the
weighted-average debt outstanding. During 2009, as compared to 2008, we issued
notes payable aggregating an additional $637,000.





Liquidity
and Capital Resources





At
December 31, 2009, our cash amounted to approximately $128,000 and our working
deficit amounted to approximately $411,000. During the year ended December 31,
2009, cash decreased due to cash used in operating and investing activities,
offset by cash provided by financing activities.





During
the year ended December 31, 2009, we used cash in our operating activities
amounting to approximately $870,000. Our cash used in operating activities was
comprised of our net loss of approximately $2,013,000 adjusted for the
following:





·
            Fair
      value of options granted to employees, including modification of terms of
      approximately $344,000;·
            Amortization
      of capitalized web development and discount on notes payable, and
      depreciation of fixed assets of approximately $314,000;·
            Impairment
      of goodwill of approximately $622,000;·
            Fair
      value of shares or warrants issued for services of $98,000;
      and·
            Fair
      value of shares issued for interest payment of approximately
      $50,000.





Additionally,
      the following variations in operating assets and liabilities impacted our
      cash used in operating activities:·
            Decrease
      in accounts payable and accrued expenses of approximately $47,000,
      resulting from a decrease in expenditures; and·
            Decrease
      in deferred revenue of approximately $243,000, resulting from a decreased
      number of consumers successfully referred to debt settlement
      agencies.





During
the year ended December 31, 2009, we incurred website development costs of
approximately $400 in connection with development and enhancement of our
websites and capital expenditures of approximately $4,000.





During
the year ended December 31, 2009, we generated cash from financing activities of
approximately $750,000, which primarily consisted of the proceeds from notes
payable of $637,000, net proceeds from the issuance of common stock for cash of
approximately $205,000 and proceeds from the exercise of warrants of
approximately $24,000, offset by the payment of finder’s fees related to the
issuance of notes payable of $63,700 and the repurchase of shares of common
stock of $52,000.





During
the year ended December 31, 2008, we used cash in our operating activities
amounting to approximately $1,961,000. Our cash used in operating activities was
comprised of our net loss of approximately $4,992,000 adjusted for the
following:





·
            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.





19


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.





During
the year ended December 31, 2008, we incurred website development costs of
approximately $51,000 in connection with development and enhancement of our
websites and capital expenditures of approximately $10,000.





During
the year ended December 31, 2008, we generated cash from financing activities of
approximately $1,324,000, which primarily consisted of the proceeds from notes
payable of $530,000 and proceeds from the exercise of warrants of approximately
$822,000, offset by the payment to a former partner of TDRG of approximately
$29,000.





Capital Raising
Transactions





We have
undertaken the following transactions to provide ourselves with working capital
in the last two years:





Common
Stock





From 2006
through December 31, 2008, we issued an aggregate of 27,184,854 shares of Common
Stock to founders, consultants, investors, as PIK dividends on our Series A and
Series B Preferred Stock and to the founders of TDRG.





During the year ended December 31,
2009, we:





·
            paid PIK dividends to our Series
      A and B preferred stock holders amounting to 1,327,241 shares of Common
      Stock, which were valued at
$410,812;


·
            issued 250,000 shares of Common
      Stock to a service provider valued at
  $50,000;


·
            issued 313,873 shares of Common
      Stock to warrant holders, pursuant to cashless exercises of warrants
      issued to them in connection with our  Series A Preferred
      financing;


·
            issued 225,000 shares of Common
      Stock to a holder of Preferred Stock Series B, pursuant to a conversion of
      2,250 shares of Series B Preferred
Stock;


·
            issued 168,00 shares of Common
      Stock, aggregating $23,940 after finder’s fees as a result of certain
      stockholders exercised their warrants associated with Series A Preferred
      Stock at an exercise price per share of
  $0.15;


·
            issued 95,599 shares of Common
      Stock to note holders for interest pursuant to the 10% and 12%
      convertible promissory notes, aggregating
  $50,070;


·
            repurchased
      520,000 shares of our Common Stock from a Director;
  and


·
            issued
      585,000 shares of Common Stock pursuant to a private placement which
      generated gross proceeds of $234,000. In connection with these private
      placements, we paid commissions to our placement agents of $29,170 in
      cash.





On March
1, 2010 we paid PIK dividends to our Series A and B preferred stock holders
amounting to 282,291 shares of Common Stock, which are valued at
$100,492.





On March
1, 2010 we issued 40,074 shares of Common Stock to note holders for interest
pursuant to the 10% and 12% convertible promissory notes, aggregating
$25,035.





During
January and February 2010 we repurchased 40,000 shares of our Common Stock from
a Director for an aggregate of $4,000.





From
January to March 22, 2010, we have agreed to issue 841,250 shares of Common
Stock at $.40 per share pursuant to a private placement which generated gross
proceeds of $336,500. In connection with this private placement, we shall issue
841,250 warrants exercisable at a price of $0.65 per share. The warrants shall
expire three years from the date of grant. In connection with these private
placements, we paid commissions to our placement agent of $27,495 in cash and
will issue 77,875 warrants exercisable at a price of $0.65 per share. The
warrants will expire three years from the date of grant.





10%
Series A Convertible Preferred Stock





Between
August 2006 and October, 2006 we issued an aggregate of 54,000 shares of 10%
Series A Convertible Preferred Stock resulting in gross proceeds to us of
$810,000. In addition, we issued to the holders of the Series A Preferred Stock
seven-year Warrants to purchase an aggregate of up to 810,000 shares of our
Common Stock at an exercise price of $0.15 per share.





20


8%
Series B Convertible Preferred Stock





On August
31, 2007 we completed an offering consisting of 40 Units, or the Units, offered
at a price of $105,000 per Unit. Each Unit was comprised of 3,000 shares of 8%
Series B Convertible Preferred Stock, and Warrants to purchase up to 105,000
shares of our Common Stock for a period of seven years with an exercise price of
$0.35 per share. The Units were sold to certain accredited investors for
aggregate gross proceeds of $4,160,625, of which $416,062.50 were paid as
commission to the placement agent, Skyebanc, Inc., and an additional $100,000
was paid to Skyebanc, Inc. as reimbursement for their expenses; Skyebanc also
received warrants to purchase 1,188,750 shares of our Common Stock, with an
exercise price of $0.35 per share. In addition, we issued 4 Units to certain of
our existing stockholders in consideration of forgiveness of a $400,000 debt
which was owed by us to such stockholders and additional $20,000 paid in cash by
such stockholders.





Warrants





From 2006
through December 31, 2008, we issued an aggregate of 10,772,708 warrants to
Series A and B Preferred Stock stockholders, note holders of our First
Convertible Promissory Notes, founders of TDRG, and service providers. During
2008, 2,350,000 warrants were exercised by Series B Preferred Stock
stockholders.





During February 2009 the board approved
the reduction of the exercise price of the warrants issued in connection with
the First Convertible Promissory Notes from $0.75 to
$0.55.





During the year ended December 31,
2009, the Second Convertible Promissory Note holders described below also
received warrants to purchase an aggregate of 318,500 shares of our Common
Stock.  The warrants are exercisable for 5 years and expire in 2014,
with an exercise price of $0.55 per share. The exercise price of the warrants
and the number of shares issuable upon the exercise of the warrants is subject
to adjustment in the event of stock splits, stock dividends and reorganizations,
or in the event we issue shares of Common Stock or securities convertible or
exchange for shares of Common Stock at an effective price less than the then
exercise price of the warrants in which event the exercise price would be
adjusted downward. We have the right to call the warrants, at a redemption price
of $0.001 per warrant share, commencing on the first trading day after our
Common Stock has traded for ten consecutive days on the OTC.BB at an average
closing price at or exceeding $1.25 per share.





During the year ended December 31,
2009, in consideration for services, we issued to service providers warrants to
purchase 600,000 shares of Common Stock exercisable at a price of $0.35 per
share.  The warrants expire in March 2014.





During the year ended December 31,
2009, in connection with the private placement, we issued warrants to purchase
up to 585,000 shares of Common Stock exercisable at a price of $0.65 to the
stockholders. The warrants expire between November and December 2012. We also
issued 57,250 warrants as part of commission to the placement agents, which are
exercisable at $0.65 and expire between November and December 2012.





During the year ended December 31,
2009, certain stockholders of our Series A Preferred Stock exercised 168,000
warrants at an exercise price of $0.15.





During the year ended December 31,
2009, certain stockholders exercised their right to a cashless exercise of
462,578 warrants for 313,873 shares of our Common Stock. These warrants were
originally issued as part of the Series A Preferred Stock issuance.





From January to March 22, 2010, in
connection with the private placement, we shall issue warrants to purchase up to
841,250 shares of Common Stock exercisable at a price of $0.65 to the
stockholders. The warrants will expire in between January and March 2013. We
also will issue 77,875 warrants as part of commission to the placement agents,
which are exercisable at $0.65 and expire between January and March
2013.





First
Convertible Promissory Note.





During
2008, we issued convertible promissory notes aggregating $530,000 to seven
different stockholders. The notes bear interest at a rate of 10% per annum and
mature in March 2011. Interest is payable commencing June 1, 2008 and every
quarter thereafter, until the obligations under the notes are satisfied.
Principal and interest are payable either in cash or shares of our Common Stock
as follows: (1) if the average closing price of the common stock on the last
five trading days prior to the maturity date is $0.50 or more, then the lender
may elect to have the principal paid in shares of common stock. In such case,
the number of shares of common stock to be issued to the lender shall be
determined by dividing the principal amount outstanding on the maturity date by
$0.50, (2) if the average closing price of the common stock on the last five
trading days prior to maturity date is less than $0.50, then the principal may
only be paid in cash. The notes are convertible at the lower of the following
rate: (i) $0.75 per share; (ii) the average of the closing price, as quoted on
the OTC.BB for the last five trading days prior to conversion, but in no event
less than $0.50 per share; or (iii) at the fair value of any Common Stock shares
issued by us prior to the maturity date in connection with a new transaction,
except for shares issued pursuant to our stock option plan.





21


We may
prepay the notes at any time on or after July 30, 2008 but prior to the maturity
date without any premium or penalty. In such case, the noteholder has the option
to have the principal and accrued interest paid in cash or shares of our Common
Stock. If the notes are paid in shares, the notes are convertible using the same
rate as described above.





In
addition, we issued to the lenders Common Stock purchase warrants to purchase an
aggregate of 265,000 shares as described more fully above.





The
interest and amortization expense associated with the notes payable amounted to
$197,612 during the year ended December 31, 2009, as compared to $62,314 during
the year ended December 31, 2008.





Second Convertible Promissory
Note.





During
2009, we issued convertible promissory notes aggregating $637,000 to various
persons. The notes bear interest at a rate of 12% per annum and mature in March
2012. Interest is payable commencing June 1, 2009 and every quarter thereafter,
until the obligations under the notes are satisfied. Principal and interest are
payable either in cash or shares of our Common Stock, at the noteholder’s
option. At maturity, the principal is payable in cash or shares of our Common
Stock as follows: (1) if the average closing price of the Common Stock on the
last five trading days prior to the maturity date is $0.50 or more, then the
lender may elect to have the principal paid in shares of common stock. In such
case, the number of shares of Common Stock to be issued to the lender shall be
determined by dividing the principal amount outstanding on the maturity date by
$0.50, (2) if the average closing price of the Common Stock on the last five
trading days prior to maturity date is less than $0.50, then the principal may
only be paid in cash.  The notes are convertible at the lower of the
following rate: (i) $0.50 per share; (ii) at the fair value of any Common Stock
shares issued by us prior to the maturity date in connection with a new
transaction, except for shares issued pursuant to our stock option
plan.





We may
prepay the notes at any time on or after July 30, 2009 but prior to the maturity
date without any premium or penalty. In such case, the noteholder has the option
to have the principal and accrued interest paid in cash or shares of our common
stock. If the notes are paid in shares, the notes are convertible using the same
rate as described above.





In
addition, we issued to the lenders common stock purchase warrants to purchase an
aggregate of 318,500 shares, as described more fully above.





We used
the cash proceeds from the offerings, the promissory notes and the line of
credit advances to finance our ongoing operations, including, development,
sales, marketing and support services.





The
interest and amortization expense associated with the notes payable amounted to
$108,968 during the year ended December 31, 2009.





In
accordance with FASB ASC 740 Debt- Debt with Conversion Options, we recorded a
beneficial conversion feature related to the First Convertible Promissory Notes
and the Second Convertible Promissory Notes. Under the terms of these notes, the
intrinsic value of the beneficial conversion feature was calculated assuming
that the conversion date was the same as the issue date. During the years ended
December 31, 2009 and 2008, respectively, the beneficial conversion feature
amounted to $194,703 and $179,450. This beneficial conversion feature is
reflected in the accompanying financial statements as additional paid-in capital
and corresponding debt discount.





Stock
Options





During
the year ended December 31, 2009, we granted to certain of our employees options
to purchase 495,000 shares of Common Stock under the Accelerize New Media Stock
Option Plan.





Contractual
Obligations and Commitments





As of December 31, 2009, we have
amended and extended by three additional years the employment agreements with
two of our officers, Brian Ross and Damon Stein. The agreements are renewable
for an additional two-year period at the option of the applicable officer. The
aggregate compensation to be paid under such agreements amounts to $300,000 per
year. If the employment or consulting arrangement is terminated without cause by
us, we are under the obligation, subject to certain restrictions, to pay the
greater of the amount remaining on the term or one-year compensation of
$150,000, to the respective employee or consultant. If the employment or
consulting arrangement is terminated with cause, we have no liability for
further payments. In addition, on January 1, 2010, we entered into an employment
agreement with Daniel Minton for a three-year term. The aggregate compensation
paid thereunder is $100,000 per year. If the employment or consulting
arrangement is terminated without cause by us, we are under the obligation,
subject to certain restrictions, to pay the greater of the amount remaining on
the term or one-year compensation of $100,000.





22


Off-Balance
Sheet Arrangements





We have
no off-balance sheet arrangements.





Critical Accounting
Policies





Website
Development Costs





We have
capitalized certain internal use software and website development costs
amounting to approximately $400 and $51,000 as of December 31, 2009 and 2008,
respectively.  The estimated useful life of costs capitalized is
evaluated for each specific project and ranges from one to three
years.





We
exercise judgment in estimating the useful life of costs capitalized, based on
the complexity of the technical enhancements.





Share-Based
Payment





We account for stock-based compensation
in accordance with Accounting Standards Codification, or ASC, Topic 718, Compensation-Stock
Compensation, orASC 718, for all the
stock awards granted after December 31, 2005, and granted prior to but not
yet vested as of December 31, 2005. Under the fair value recognition
provisions of this topic, stock-based compensation cost is measured at the grant
date based on the fair value of the award and is recognized as expense on a
straight-line basis over the requisite service period, which is the vesting
period. See Note 7 in our footnotes for further information regarding our
stock-based compensation assumptions and expenses. We elected to use the
modified prospective transition method as permitted by ASC 718.





Effective January 1, 2006, we
changed our method of attributing the value of stock-based compensation to
expense from the accelerated multiple-option approach to the straight-line
single option method. Compensation expense for all share-based payment awards
granted prior to January 1, 2006 will continue to be recognized using the
accelerated multiple-option approach while compensation expense for all
share-based payment awards granted on or subsequent to January 1, 2006 has
been and will continue to be recognized using the straight-line single-option
approach.





We have elected to use the
Black-Scholes-Merton, or BSM, option-pricing model to estimate the fair value of
our options, which incorporates various subjective assumptions including
volatility, risk-free interest rate, expected life, and dividend yield to
calculate the fair value of stock option awards. Compensation expense recognized
in the consolidated statements of operations is based on awards ultimately
expected to vest and reflects estimated forfeitures. ASC 718 requires
forfeitures to be estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those
estimates.





We exercise judgment in selecting
benchmark companies for our expected volatility.





Going
Concern





We have
generated revenues since inception but they were not an adequate source of cash
to fund future operations. Historically we have relied on private placement
issuances of equity and promissory notes.





It is
likely that we will need to raise additional working capital to fund our ongoing
operations and growth. The amount of our future capital requirements depends
primarily on the rate at which we increase our revenues and correspondingly
decrease our use of cash to fund operations. Cash used for operations will be
affected by numerous known and unknown risks and uncertainties including, but
not limited to, our ability to successfully market our products and services and
the degree to which competitive products and services are introduced to the
market. As long as our cash flow from operations remains insufficient to
completely fund operations, we will continue depleting our financial resources
and seeking additional capital through equity and/or debt financing. If we raise
additional capital through the issuance of debt, this will result in increased
interest expense. If we raise additional funds through the issuance of equity or
convertible debt securities, the percentage ownership of our company held by
existing stockholders will be reduced and those stockholders may experience
significant dilution. In addition, new securities may contain rights,
preferences or privileges that are senior to those of our common
stock.





There can
be no assurance that acceptable financing to fund our ongoing operations can be
obtained on suitable terms, if at all. If we are unable to obtain the financing
necessary to support our operations, we may be unable to continue as a going
concern. In that event, we may be forced to cease operations and our
stockholders could lose their entire investment in us.





Item
7A.  Quantitative and Qualitative Disclosures About Market
Risk





Not
applicable.





Item
8.  Financial Statements and Supplementary Data





The
information required by this item is included in Item 15 of this Annual Report
on Form 10-K.





23


Item
9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure





None.








Item
9A(T).  Controls and Procedures





Evaluation of Disclosure Controls and
Procedures





Our
management, with the participation of our Chief Executive Officer and our Chief
Financial Officer, has evaluated our disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act
of 1934, as amended). Based upon the evaluation conducted by management in
connection with the audit of our financial statements for the year ended
December 31, 2009, we identified material weaknesses in our internal control
over financial reporting as described below. As a result of these material
weaknesses, our Chief Executive Officer and our Chief Financial Officer
concluded that our disclosure controls and procedures were not effective as of
December 31, 2009, to ensure that information required to be disclosed in our
SEC reports is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to our management as appropriate to allow timely
decisions regarding required disclosures.





A
material weakness is "a significant deficiency, or a combination of significant
deficiencies, that result in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected by us in a timely manner." A significant deficiency, is a deficiency
or a combination of deficiencies, in internal control over financial reporting
that is less severe than a material weakness, yet important enough to merit
attention by those responsible for oversight of the registrant’s financial
reporting.





Management Report on Internal Control
over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934 as amended.  Our management assessed
the effectiveness of our internal control over financial reporting as of
December 31, 2009.  In making this assessment, our management used
criteria issued by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control Over Financial Reporting – Guidance for Smaller
Public Companies.





During
our assessment of the design and the effectiveness of internal control over
financial reporting as of December 31,  2009, management identified
the following material weaknesses:





·
            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
      we have 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;





·
            We
      lacked the resources and personnel to implement proper segregation of
      duties or other risk mitigation
systems.





We intend
to gradually improve our internal control over financial reporting to the extent
that we can allocate resources to such improvements.  We intend to
prioritize the design of our internal control over financial reporting starting
with our control environment and risk assessments and ending with control
activities, information and communication activities, and monitoring
activities.   Although we believe the time to adapt in the next
year will help position us to provide improved internal control functions into
the future, in the interim, these changes caused control deficiencies, which in
the aggregate resulted in a material weakness.  Due to the existence of
these material weaknesses, our management concluded that our internal control
over financial reporting was not effective as of December 31, 2009.





Auditor
Attestation





This
annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting.  Our management's report was not subject to attestation by
our independent registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permit us to provide only
management's report in this annual report.





24





Changes
in Internal Control over Financial Reporting





There was
no change in our internal control over financial reporting during the fiscal
quarter ended December 31, 2009, that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.





Item
9B.  Other Information





None.





PART
III





Item
10.  Directors, Executive Officers and Corporate
Governance





The
following table sets forth the names, ages and principal position of our
executive officers and directors as of March 22, 2010:





Name
            Age
            PositionBrian
      Ross
            35
            President,
      Chief Executive Officer, Treasurer, DirectorChris
      Meredith
            39
            DirectorDaniel
      Minton
            34
            Head
      of Financial PortalsDamon
      Stein
            34
            General
      Counsel and SecretaryJeff
      McCollum
            38
            Head
      of Lead Generation Division








The
biographies of each of the continuing directors, Mr. Ross and Mr. Meredith,
below contains information regarding the person’s service as a director,
business experience, director positions held currently or at any time during the
last five years, information regarding involvement in certain legal or
administrative proceedings, if applicable, and the experiences, qualifications,
attributes or skills that caused us to determine that the person should continue
to serve as a director for the Company beginning in 2010.




Brian Ross. Mr. Ross has
served as our President, Chief Executive Officer and director since November
2005. He served as Senior Vice President of Business Development for iMall, Inc.
from 1994 and became Director of Investor Relations in June 1997. iMall, Inc.
was acquired by Excite@Home in October 1999. Mr. Ross then served as a Business
Development Manager in Excite@Home’s E-Business Services Group until December
1999. After the sale of iMall, Mr. Ross was a founding investor of GreatDomains
Inc. which was sold in October 2000 to Verisign. From March 2000, he was
Director of Business Development for Prime Ventures Inc., a leading Venture
Partner firm focusing on early stage companies in Southern California. In July
2004, Mr. Ross became a founding investor in E-force Media, a diversified online
marketing company where he acted as interim Director of Business Development.
Mr. Ross attended the University of Santa Barbara.





Chris Meredith. Mr. Meredith
founded Accelerize’s predecessors in 2001 to provide cutting-edge Internet
development services. Mr. Meredith served as our Chief Technology Officer from
November 2005 until April 2009, and as a director since December 2006. Mr.
Meredith brings over ten years of Internet technology and product development in
the financial, competitive intelligence, marketing and telecommunications
industries. He was instrumental in creating Accelerize’s core consumer product
EDGAR Index, an RSS-based SEC filing alert service. Prior to his work at
Accelerize, Mr. Meredith led product development at Intelligence Data, a
division of Thompson Financial. Mr. Meredith also led product development at
mBLAST marketing portal and Senior Technical Lead at TNCI, a leading
telecommunications provider. Mr. Meredith attended the University of
Massachusetts, Amherst and Massachusetts College of Art, and received a Diploma
in Professional Photography from New England School of Photography.





Daniel Minton. Mr. Minton has
managed our online publishing group and financial portals since inception. Mr.
Minton started in the internet industry in the late 1990s as lead programmer for
Watershed Consulting. In 2002 Watershed Consulting was hired by The Coleman
Company to develop an Outdoor Recreation Community on the Internet. He was
instrumental in designing the National Recreation Database which was published
as the Coleman Outernet. From 2004 until he joined us. Mr. Minton served as Vice
President of Seed Advertising where he was responsible for all lead generation
initiatives, sales, and interactive marketing. Mr. Minton’s responsibility at
Accelerize includes all lead generation initiatives, as well as on line
advertising and media purchasing. Mr. Minton attended Washington State
University, where he studied English and Philosophy.





Damon Stein. Mr. Stein has
served as our General Counsel since January 2007. He worked as Director of
Marketing/Player Affairs at Beach Sports Group, LLC, a successful sports agency,
from 1997 through 2001. After working as a sports agent, Mr. Stein served as a
Contract Lawyer for Alschuler, Grossman, Stein & Kahan before joining TDRG
in 2002. Mr. Stein was a founder and partner, and served as General
Counsel/President for TDRG until it was acquired by us. Mr. Stein was integrally
responsible for growing TDRG from a startup company to a prominent debt
negotiation and Internet marketing firm. While at TDRG, Mr. Stein was
responsible for legal and financial affairs, while also aiding in many marketing
initiatives. Mr. Stein received his BA from the University of California at
Berkeley. He was then awarded a partial academic scholarship to Pepperdine
University where he received his JD/MBA. Mr. Stein is licensed to practice law
in California.





25


Jeff McCollum. Mr. McCollum
has served as our Head of Lead Generation since March 2007. He worked at
Netscape Communications from 1995 through 1998. He was Director of Business
Development at NBCi where he identified, negotiated and closed deals and managed
relationships with NBC broadcasting and studio operations from 1999 through
2001. He was co-founder of Ecological Technologies where he also served as Vice
President of Business Development and Sales from 2001 through 2004. He was Vice
President of Sales for eForce Media, where he was responsible for creating a
market, understanding the technology, and generating demand for sales leads
within several industries from 2004 through 2007. Mr. McCollum attended
University of Southern California.





Section
16(a) Beneficial Ownership Reporting Compliance





Section
16(a) of the Securities Exchange Act of 1934 requires that our executive
officers, directors and persons who own more than ten percent of a registered
class of our equity securities file reports of ownership on Form 3 and changes
in ownership on Form 4 or 5 with the SEC. Such executive officers, directors and
ten percent stockholders are also required by the SEC rules to furnish to us
copies of all Section 16(a) reports that they file. Based solely on its review
of the copies of such forms received by us, or written representations from
certain reporting persons that they were not required to file a Form 5, we
believe that during the fiscal year ended December 31, 2009, our executive
officers, directors and ten percent stockholders complied with all Section 16(a)
filing requirements applicable to such persons.





Committees
of the Board of Directors





Our Board
of Directors has not yet established any committees, including an Audit
Committee, a Compensation Committee or a Nominating Committee. We plan to expand
our board in the future and we will seek to establish an Audit Committee and a
Compensation Committee, but this will depend on our ability to attract and
retain new directors. The typical functions of such committees are currently
being undertaken by the entire board as a whole.





Audit
Committee Financial Expert





Currently
no member of our board is an audit committee financial expert. We do not
currently have the resources to recruit a board member who would also be a
financial expert. We may start our recruiting process for such board member
during 2010 if our financial position improves.





Code
of Ethics





We have
adopted a Code of Business Conduct Ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. We will provide
a copy of our Code of Ethics, free of charge, upon request.





Employment
Agreements





We have
written employment agreement with most of our employees. The main terms of the
executive employment or consulting agreements of Brian Ross, our President,
Chief Executive Officer, Treasurer, and Director, Damon Stein, our General
Counsel and Secretary, Jeff McCollum, our Head of Lead Generation Division, and
Daniel Minton, our Head of Financial Portals, are summarized below.





Mr.
Ross’s employment agreement was amended, effective as of January 1, 2010, and
continues until the earlier of January 1, 2013 or its earlier termination or
expiration, with an option to renew for an additional 2 years upon 30-day prior
notice. The agreement is renewable for additional periods thereafter. Under the
agreement Mr. Ross is entitled to an annual base salary of $150,000. If we do
not make monthly salary payments during the term of his employment, such salary
will accrue without interest. Mr. Ross is entitled to other benefits, including,
reimbursement for reasonable business expenses and health insurance premiums. In
addition, Mr. Ross was granted non-qualified stock options to purchase up to
2,000,000 of our shares. The agreement may be terminated by either party without
cause upon a 30-day prior written notice. If we elect to terminate Mr. Ross’s
employment without cause during the term, he shall be entitled to severance
payment of the greater of the remaining payments due on the term of the
agreement or an annual base salary of one year.  We may also terminate
the agreement and Mr. Ross’s employment upon his illness or disability for a
continuous period of more than 45 days, his death or for cause. The agreement
contains customary non-solicitation, non-competition, no recruiting,
confidentiality and assignment of work product provisions.





26


Mr.
Stein’s employment agreement was amended, effective as of January 1, 2010, and
continues until the earlier of January 1, 2013 or its earlier termination or
expiration, with an option to renew for an additional 2 years upon 30-day prior
notice. The agreement is renewable for additional periods thereafter. Under the
agreement Mr. Stein is entitled to an annual base salary of $150,000.If we do
not make monthly salary payments during the term of his employment, such salary
will accrue without interest. Mr. Stein is entitled to other benefits,
including, reimbursement for reasonable business expenses and health insurance
premiums. In addition, Mr. Stein  was granted non-qualified stock
options to purchase up to an aggregate of  675,000 of our shares, of
which 400,000 are currently exercisable . The agreement may be terminated by
either party without cause upon a 30-day prior written notice. If we elect to
terminate Mr. Stein’s employment without cause during the term, he shall be
entitled to severance payment of the greater of the remaining payments due on
the term of the agreement or an annual base salary of one year as well as any
unvested options or bonuses. We may also terminate the agreement and Mr. Stein’s
employment immediately upon receipt of a written notice from Mr. Stein that he
intends to terminate his employment, and upon his illness or disability for a
continuous period of more than 45 days, his death or for cause. The agreement
contains customary non-solicitation, non-competition, no recruiting,
confidentiality and assignment of work product provisions.





Mr.
McCollum's employment agreement is effective as of March 15, 2007 and continues
until termination.  Mr. McCollum’s employment is “at will”, meaning that
both parties shall have the right to terminate the agreement at any time without
cause by giving notice of such termination to the other party. Under the
agreement Mr. McCollum is entitled to an annual base salary of $150,000.
 Mr. McCollum is entitled to other benefits, including, reimbursement for
reasonable business expenses and health insurance premiums. In addition, Mr.
McCollum was granted non-qualified stock options to purchase up to 3,500,000 of
our shares as of April 1, 2010. The agreement contains customary
non-solicitation, non-competition, no recruiting, confidentiality and assignment
of work product provisions.





Mr.
Minton’s employment agreement is effective as of January 1, 2010 and continues
until the earlier of January 1, 2013 or its earlier termination or expiration,
with an option to renew for an additional 2 years upon 60-day prior notice. The
agreement is renewable for additional periods thereafter. Under the agreement,
Mr. Minton is entitled to an annual base salary of $100,000. Mr. Minton is
entitled to other benefits, including, reimbursement for reasonable business
expenses and health insurance premiums. In addition, Mr. Minton will be entitled
to grants under our stock option plan. The agreement may be terminated by either
party without cause upon a 30-day prior written notice. If we elect to terminate
Mr. Minton’s employment without cause during the term, he shall be entitled to
severance payment of the greater of the remaining payments due on the term of
the agreement or an annual base salary of one year as well as any unvested
options or bonuses. We may also terminate the agreement and Mr. Minton’s
employment immediately upon receipt of a written notice from Mr. Minton that he
intends to terminate his employment, and upon his illness or disability for a
continuous period of more than 45 days, his death or for cause. The agreement
contains customary non-solicitation, non-competition, no recruiting,
confidentiality and assignment of work product provisions.





Item
11. Executive Compensation





The
following table sets forth, for the last three completed fiscal years, all
compensation paid, distributed or accrued for services rendered to us by
(i) all individuals serving as our principal executive officer or acting in
a similar capacity during the last completed fiscal year, regardless of
compensation level; (ii) our two most highly compensated executive
officers other than the principal executive officer who were serving as
executive officers at the end of the last completed fiscal year; and (iii) up to two additional individuals for whom
disclosure would have been provided pursuant to (ii) above but for the fact that
the individual was not serving as our executive officer at the end of the last
completed fiscal year:





Summary Compensation
Table





Name
      and Principal Position
            
            Year
            
            Salary
              ($)
            
            
            Option
      Awards
              ($)(1)
            
            
            Total
      ($)Brian
      Ross, President, Chief
            
            2007
            
            
            90,000
            
            
            
            49,000
            (3)
            
            
            139,000Executive
      Officer, and Treasurer (2)
            
            2008
            
            
            93,000
            
            
            
            -
            
            
            
            93,0002009
            
            
            90,000
            
            
            
            -
            
            
            
            90,000Damon
      Stein, General Counsel,
            
            2007
            
            
            135,833
            
            
            
            9,800
            (5)
            
            
            145,633Head
      of the Debt Division and Secretary (4)
            
            2008
            
            
            152,950
            
            
            
            -
            
            
            
            152,9502009
            
            
            150,000
            
            
            
            116,600
            (6)
            
            
            266,600Jeff
      McCollum
            
            2007
            
            
            118,750
            
            
            
            85,750
            (8)
            
            
            204,500Head
      of Lead Generation Division (7)
            
            2008
            
            
            154,000
            
            
            
            -
            
            
            
            154,0002009
            
            
            150,000
            
            
            
            -
            
            
            
            150,000





27


(1)           The
dollar value recognized for the stock option awards was determined in accordance
with ASC 718.For a disclosure of the assumptions made in the valuation please refer to
footnote 6 in our financial statements filed under Item 8 of this Annual Report
on Form 10-K.





(2)           During
the fiscal years ended December 31, 2008 and 2009, only $78,375 (taking into
account a deferral of salary) and $ 90,000, was paid to Mr. Ross, respectively
in monthly salary payments. In accordance with the terms of his employment
agreement, his unpaid salary for this year is accruing without interest. Mr.
Ross’s employment agreement is effective as of January 1, 2010 and continues
until the earlier of January 1, 2013 or its earlier termination or expiration.
See “Management Employment Agreements.”





(3)           
Options to purchase 2,000,000 shares of our Common Stock at an exercise price of
$0.15 per share, vesting on a quarterly basis over a period of 24 months
(250,000 options every quarter) commencing April 1, 2007.





(4)           During
the fiscal years ended December 31, 2008 and 2009, only $132,325 (with a
deferral of salary) and $150,000, was paid to Mr. Stein, respectively in monthly
salary payments. In accordance with the terms of his employment agreement, his
unpaid salary for this year is accruing without interest. Mr. Stein’s employment
agreement is effective as of January 1, 2010 and continues until the earlier of
January 1, 2013 or its earlier termination or expiration, with an option to
renew for additional 2 years upon 60-day prior notice. See “Management
Employment Agreements.”





(5)           Options
to purchase 400,000 shares of our Common Stock at an exercise price of $0.15 per
share, vesting on a quarterly basis over a period of 24 months (50,000 options
every quarter) commencing April 1, 2007.





(6)           Options
to purchase 275,000 shares of our Common Stock at an exercise price of $0.55 per
share, vesting on a quarterly basis over a period of 24 months (34,375 options
every quarter) commencing January 1, 2010.





(7)          During
the fiscal years ended December 31, 2008 and 2009, only $133,375 (taking into
account a deferral of salary) and $ 150,000, was paid to Mr. McCollum,
respectively in monthly salary payments. In accordance with the terms of his
employment agreement, his unpaid salary for this year is accruing without
interest.  Mr. McCollum’s employment agreement is effective as of March 15,
2007 and may be terminated at will for any reason. See “Management Employment
Agreements.”





(8)           Options
to purchase 3,500,000 shares of our Common Stock at an exercise price of $0.15
per share, vesting on a quarterly basis over a period of 36 months (25% on
January 1, 2008 and then 8% each quarter there after) commencing January 1,
2008.





We have no plans or arrangements with
respect of remuneration received or that may be received by our executive
officers to compensate such officers in the event of termination of employment
(as a result of resignation, retirement or change of control) or a change of
responsibilities following a change of control, except for the following: (i)
if  we elect to terminate Mr. Ross’s employment without cause during
the term, he shall be entitled to severance payment of the greater of the
remaining payments due on the term of the agreement or an annual base salary of
one year, (ii) if  we elect to terminate Mr. Minton’s employment
without cause during the term, he shall be entitled to severance payment of the
greater of the remaining payments due on the term of the agreement or an annual
base salary of one year, and (iii) if  we elect to terminate Mr.
Stein’s employment without cause during the term, he shall be entitled to
severance payment of the greater of the remaining payments due on the term of
the agreement or an annual base salary of one year as well as any unvested
options and bonuses.





Pension,
Retirement or Similar Benefit Plans





There are
no arrangements or plans in which we provide pension, retirement or similar
benefits for directors or executive officers. Our directors and executive
officers may receive stock options at the discretion of our Board in the
future.





Outstanding
Equity Awards at Fiscal Year-End





The
following table presents the outstanding equity awards held as of December 31,
2009 by our Executive Officers and Directors.





OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-ENDOPTION
      AWARDSName
            Number
      of Securities
              Underlying
      Unexercised
              Options
              (#)
              Exercisable
            Number
      of Securities
              Underlying
      Unexercised
              Options
              (#)
              Unexercisable
            Option
              Exercise
              Price
              ($)
            Option
              Expiration
              DateBrian
      Ross
            2,000,000
            -0-
            $0.15
            1/1/2017Damon
      Stein
            400,000
            275,000
      (1)
            $0.15
      - $0.55
            1/1/2017
      & 12/4/2019Jeff
      McCollum(2)
            2,916,666
            583,334
            $0.15
            4/1/2017





28


(1)
Options to purchase 275,000 shares of Common Stock, vesting on a quarterly basis
over a period of 24 months commencing March 31, 2010.





(2)
Options to purchase shares of Common Stock, vesting on a quarterly basis over a
period of 36 months commencing January 1, 2008 through April 1,
2010.





Director
Compensation





The two
members of our Board of Directors, Mr. Brian Ross and Mr. Chris Meredith do not
receive any additional compensation for their services as directors, except
reimbursement for their reasonable expenses for attending board and board
committee meetings.  Mr. Ross is a current executive officer and Mr.
Meredith is a former executive officer. Mr. Ross's compensation is fully
reflected in the Summary Compensation Table above.





Item 12. Security Ownership of
Certain Beneficial Owners and Management and Related Stockholders
Matters.





As of
March 22, 2010 we had 30,430,816 shares of our Common Stock issued and
outstanding. The following table sets forth information regarding the beneficial
ownership of our Common Stock as of March 22, 2010 by:





·
            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
              STOCKNAME
      (1)
            #
      OF
              SHARES
            %
      OF
              CLASS
            #
      OF
              SHARES
            %
      OF
              CLASS
            #
      OF
              SHARES
            %
      OF
              CLASS
            %
      OF VOTEBrian
      Ross (3)
            8,100,000
            
            25.0%
            
            -0-
            
            n/a
            
            -0-
            
            n/a
            
            16.4%Jeff
      McCollum (4)
            2,916,666
            
            8.8%
            
            -0-
            
            n/a
            
            -0-
            
            n/a
            
            5.8%Chris
      Meredith (5)
            2,690,000
            
            8.8%
            
            -0-
            
            n/a
            
            -0-
            
            n/a
            
            5.7%Daniel
      Minton (6)
            825,000
            
            2.7%
            
            -0-
            
            n/a
            
            -0-
            
            n/a
            
            1.7%Damon
      Stein (7)
            2,375,000
            
            7.7%
            
            -0-
            
            n/a
            
            -0-
            
            n/a
            
            4.9%All
      officers and directors as a group (five persons) (8)
            16,906,666
            
            53.0%
            
            -0-
            
            n/a
            
            -0-
            
            n/a
            
            34.5%Dan
      Goldberg (9)
            2,375,000
            
            7.7%
            
            -0-
            
            n/a
            
            -0-
            
            n/a
            
            4.9%





(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)
            Consists
      of 2,916,666 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
      5,741,666 options, exercisable at $.15 per share.(9)
            Includes
      400,000 options, exercisable at $.15 per share, whose address is 206 East
      Patcong Ave, Linwood, NJ 
08221





29


Securities
authorized for issuance under equity compensation plans.





The table
below provides information regarding all compensation plans as of the end of the
most recently completed fiscal year (including individual compensation
arrangements) under which equity securities of the registrant are authorized for
issuance.  Our equity compensation plan was adopted effective as of
December 15, 2006 and options may be granted under the  plan through
December 14, 2016.  The plan was amended to increase the number of
shares available under the plan for non-qualified stock options from 4,300,000
to 10,000,000 effective as of May 17, 2006. In any year, no optionee may be
granted options to acquire in the aggregate more than 500,000 shares. The plan
permits the grant of both incentive stock options and non-qualified stock
options.










Equity
      Compensation Plan InformationPlan
      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/aEquity
      compensation plans not approved by security holders
            7,602,500
            $0.18
            2,397,500Total
            7,602,500
            $0.18
            2,397,500





Item
13. Certain Relationship and Related Party Transactions, and Director
Independence.





Related
Party Transactions





As part
of Christopher Meredith's severance agreement, we paid an aggregate amount of
$19,196 for Mr. Meredith's health insurance from April 30, 2009 through December
31, 2009. During this same period, we repurchased 520,000 shares of Mr.
Meredith’s Common Stock in the Company at a price of $52,000.




Director
Independence







As our
common stock is currently traded on the OTC.BB, we are not subject to the rules
of any national securities exchange which require that a majority of a listed
company’s directors and specified committees of the board of directors meet
independence standards prescribed by such rules. Neither of our current
directors would qualify as "independent" if we were subject to the rules of the
Nasdaq Stock Market.





Item
14. Principal Accountant Fees and Services





The
following table summarizes the fees of Sherb & Co. LLC, our independent
registered public accounting firm, billed for each of the last two fiscal years
for audit services and other services:





Fee
      Category
            
            2008
            
            
            2009Audit
      Fees (1)
            
            $
            76,000
            
            
            $
            80,000Audit
      Related Fees
            
            
            -
            
            
            
            -Tax
      Fees (2)
            
            
            5,000
            
            
            
            5,000All
      Other Fees
            
            
            2,125(3)
            
            
            
            -Total
      Fees
            
            $
            83,125
            
            
            $
            85,000





(1)  Consists
of fees for professional services rendered in connection with the review of our
three quarterly reports on Form 10-Q and the financial statements included in
our annual report on Form 10-K


(2)  Consists
of fees relating to our tax compliance and tax planning.


(3)  Consists
of fees relating to review of our registration statement on form S-1, which was
withdrawn.





We do not
have an Audit Committee. Our Board of Directors pre-approves all auditing
services and permissible non-audit services provided to us by our independent
registered public accounting firm. All fees listed above were pre-approved in
accordance with this policy.





30


PART
IV





Item
15.  Exhibits and Financial Statement Schedules





a.
            Index
      to Financial Statements and Financial Statement
  Schedules





PageReport
      of Independent Registered Public Accounting Firm
            F-2Balance
      Sheet as of December 31, 2008 and 2009
            F-3Statement
      of Operations for each of the two years in the period ended December 31,
      2009
            F-4Statement
      of Shareholders’ Equity for each of the two years in the period ended
      December 31, 2009
            F-5Statement
      of Cash Flows for each of the two years in the period ended December 31,
      2009
            F-6Notes
      to Consolidated Financial Statements
            F-7
      – 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.
            DESCRIPTION3.1
            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.)







31


4.3
            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.)4.4
            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*
            Amendment
      No.1 to Employment Agreement of Brian Ross, dated January 1, 2010 (filed
      herewith).10.6*
            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.)10.7*
            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.)10.8*
            Amendment
      No.1 to Employment Agreement of Damon Stein, dated January 1, 2010 (filed
      herewith).10.9*
            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.)10.10*
            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.)10.11*
            Employment
      Agreement of Daniel Minton, dated January 1, 2010 (filed
      herewith).10.12
            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.) as amended by that
      amendment (incorporated by reference to the Company's Current Report on
      Form 8-K (file no. 000-52635) filed on May 29, 2009).10.13
            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.)10.14*
            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.)10.15
            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.) as amended by that amendment (incorporated by reference to the
      Company's Current Report on Form 8-K (file no. 000-52635) filed on May 29,
      2009).10.16
            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.)





*  Management
contract or compensatory plan or arrangement





32





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)











33




SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





ACCELERIZE
NEW MEDIA, INC.





By:              /S/ Brian
Ross


Brian
Ross


President,
Chief Executive Officer and Treasurer





Date:
March 26, 2010





In
accordance with the Exchange Act, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.





SIGNATURE
            
            TITLE
            DATEBy:
      /S/ Brian Ross
            
            President,
      Chief Executive Officer, Treasurer and Director
            March
      26, 2010(Principal
      executive and accounting officer)By:
      /S/ Chris Meredith
            
            Chief
      Technology Officer, Assistant Treasurer,
            March
      26, 2010Assistant
      Secretary
      and Director








34


ACCELERIZE
NEW MEDIA, INC.
 
 FINANCIAL
STATEMENTS
 
 AS
OF DECEMBER 31, 2009
  Index to Financial
Statements and Financial Statement Schedules
 
 The
      following consolidated financial statements and financial statement
      schedules are included on the pages indicated:PageReport
      of Independent Registered Public Accounting Firm
              F-2Balance
      Sheets as of December 31, 2009 and 2008
              F-3Statements
      of Operations for each of the two years in the periods ended December 31,
      2009 and 2008
              F-4Statements
      of Stockholders’ Equity (Deficit) for each of the two years in the periods
      ended December 31, 2009 and 2008
              F-5Statements
      of Cash Flows for each of the two years in the periods ended December 31,
      2009 and 2008
              F-6Notes
      to Financial Statements
              F-7
      – F-20
 
 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.
 
 F-1
 Report of Independent
Registered Public Accounting Firm
  To the
Board of Directors
 Accelerize
New Media, Inc.
 Los
Angeles, CA
 
 We have
audited the accompanying balance sheets of Accelerize New Media, Inc. as of
December 31, 2009 and 2008 and the related statements of operations,
stockholders' deficit and cash flows for the years ended December 31, 2009 and
2008.  These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company has determined that it
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Accelerize New Media, Inc. as of
December 31, 2009 and 2008 and the results of their operations and their cash
flows for the years ended December 31, 2009 and 2008, in conformity with
accounting principles generally accepted in the United States of
America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  The Company has incurred
significant losses as more fully described in Note 1. These issues raise
substantial doubt about the Company's ability to continue as a going
concern.  Management's  plans
in  regard  to  these  matters  are  also  described  in
Note 1.  The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
  /s/ Sherb & Co.,
LLP
 Certified
Public Accountants
 
 New York,
New York
 March 26,
2010
 
 F-2
 ACCELERIZE
      NEW MEDIA, INC.BALANCE
      SHEETSDecember
      31,
                
                
                December
      31,ASSETS
                
                2009
                
                
                2008Current
      Assets:Cash
                
                $
                128,167
                
                
                $
                252,921Accounts
      receivable, net of allowance for bad debt of $20,525 and $6,857
      atDecember
      31, 2009 and 2008, respectively
                
                
                154,928
                
                
                
                177,752Prepaid
      expenses and other assets
                
                
                30,656
                
                
                
                30,224Domain
      name rights
                
                
                20,548
                
                
                
                20,411Deferred
      tax asset
                
                
                29,216
                
                
                
                56,030Total
      current assets
                
                
                363,515
                
                
                
                537,338Website
      development costs, net of accumulated amortization of $273,809
      and$206,410
      at December 31, 2009 and 2008, respectively
                
                
                73,041
                
                
                
                140,075Property
      and equipment, net of accumulated depreciation of $39,224 and $24,436
      atDecember
      31, 2009 and 2008, respectively
                
                
                6,890
                
                
                
                17,527Deferred
      financing fees
                
                
                45,817
                
                
                
                -Goodwill
                
                
                64,000
                
                
                
                685,547Total
      assets
                
                $
                553,263
                
                
                $
                1,380,487LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      Liabilities:Accounts
      payable and accrued expenses
                
                $
                396,049
                
                
                $
                442,565Deferred
      revenues- short-term
                
                
                349,541
                
                
                
                580,920Deferred
      tax liability
                
                
                29,216
                
                
                
                56,030Total
      current liabilities
                
                
                774,806
                
                
                
                1,079,515Convertible
      notes payable and accrued interest, net of debt discount of
      $174,154and
      $156,852 at December 31, 2009 and 2008, respectively
                
                
                1,003,633
                
                
                
                375,787Deferred
      revenue- long-term
                
                
                74,897
                
                
                
                86,110Total
      liabilities
                
                
                1,853,336
                
                
                
                1,541,412Stockholders'
      Deficit:Preferred
      stock, $0.001 par value, 2,000,000 shares authorized:Series
      A,  54,000 issued and outstanding at December 31, 2009 and 2008,
      respectively
                
                
                728,567
                
                
                
                728,567Series
      B, 116,625 and 118,875 issued and outstanding at December 31, 2009 and
      2008, respectively
                
                
                3,565,813
                
                
                
                3,644,563Common
      stock; $.001 par value; 100,000,000 shares authorized;30,149,567
      issued and 29,629,567 outstandingat
      December 31, 2009; 27,184,854 issued and outstanding at December 31,
      2008
                
                
                30,150
                
                
                
                27,185Additional
      paid-in capital
                
                
                7,965,205
                
                
                
                6,552,272Treasury
      stock - at cost
                
                
                (52,000
                )
                
                
                -Accumulated
      deficit
                
                
                (13,537,808
                )
                
                
                (11,113,512
                )Total
      stockholders’ deficit
                
                
                (1,300,073
                )
                
                
                (160,925
                )Total
      liabilities and stockholders’ deficit
                
                $
                553,263
                
                
                $
                1,380,487
  See Notes
to Financial Statements.
  F-3
 ACCELERIZE
      NEW MEDIA, INC.STATEMENTS
      OF OPERATIONSYear
      endedDecember
      31,2009
              
              
              2008Revenues:Lead
      generation revenues
              
              $
              2,724,706
              
              
              $
              2,216,302Debt
      solution revenues
              
              
              701,285
              
              
              
              1,190,966Advertising
      and other revenues
              
              
              447,586
              
              
              
              388,095Total
      revenue:
              
              
              3,873,577
              
              
              
              3,795,363Operating
      expenses:Selling,
      general and administrative
              
              
              5,767,368
              
              
              
              8,754,657Total
      operating expenses
              
              
              5,767,368
              
              
              
              8,754,657Operating
      loss
              
              
              (1,893,791
              )
              
              
              (4,959,294
              )Other
      expense:Interest
      expense
              
              
              (119,693
              )
              
              
              (32,302
              )(119,693
              )
              
              
              (32,302
              )Net
      loss
              
              
              (2,013,484
              )
              
              
              (4,991,596
              )Less
      dividends series A and B preferred stock
              
              
              410,812
              
              
              
              415,206Net
      loss attributable to common stock
              
              $
              (2,424,296
              )
              
              $
              (5,406,802
              )Basic
      and diluted loss per common share
              
              $
              (0.09
              )
              
              $
              (0.21
              )Basic
      and diluted weighted average commonshares
      outstanding
              
              
              27,712,414
              
              
              
              25,220,571See
      Notes to Financial Statements.
  F-4
 
 ACCELERIZE
NEW MEDIA, INC.
 STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 From
January 1, 2008 to December 31, 2009
 TotalSeries A
                  
                  
                  Series B
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  Additional
                  
                  
                  
                  
                  
                  
                  Stockholders'Preferred Stock
                  
                  
                  Preferred Stock
                  
                  
                  Common Stock
                  
                  
                  Treasury
                  
                  
                  Paid-in
                  
                  
                  Accumulated
                  
                  
                  
                  EquityShares
                  
                  
                  
                  $
                  
                  
                  
                  Shares
                  
                  
                  
                  $
                  
                  
                  
                  Shares
                  
                  
                  
                  $
                  
                  
                  Stock
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  
                  (Deficit)Balance,
      January 1, 2008
                  
                  
                  54,000
                  
                  
                  $
                  728,567
                  
                  
                  
                  118,875
                  
                  
                  $
                  3,644,563
                  
                  
                  
                  21,779,294
                  
                  
                  $
                  21,779
                  
                  
                  $
                  -
                  
                  
                  $
                  2,418,062
                  
                  
                  $
                  (5,706,710
                  )
                  
                  $
                  1,106,261Stock
      issued for DRG acquisition
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,750,000
                  
                  
                  
                  1,750
                  
                  
                  
                  -
                  
                  
                  
                  103,250
                  
                  
                  
                  -
                  
                  
                  
                  105,000Fair
      value of warrants issued
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,239,204
                  
                  
                  
                  -
                  
                  
                  
                  1,239,204Fair
      value of warrants issued for DRG acquisition
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  174,420
                  
                  
                  
                  -
                  
                  
                  
                  174,420Beneficial
      conversion features of convertible notes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  179,450
                  
                  
                  
                  -
                  
                  
                  
                  179,450Fair
      value of warrants issued for services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  909,908
                  
                  
                  
                  -
                  
                  
                  
                  909,908Fair
      value of options granted
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  222,528
                  
                  
                  
                  -
                  
                  
                  
                  222,528Exercise
      of warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,350,000
                  
                  
                  
                  2,350
                  
                  
                  
                  -
                  
                  
                  
                  820,150
                  
                  
                  
                  -
                  
                  
                  
                  822,500Stock
      based compensation
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  105,000
                  
                  
                  
                  105
                  
                  
                  
                  -
                  
                  
                  
                  71,295
                  
                  
                  
                  -
                  
                  
                  
                  71,400Preferred
      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
                  )Net
      proceeds from issuance of common stock for cash
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  585,000
                  
                  
                  
                  585
                  
                  
                  
                  -
                  
                  
                  
                  204,245
                  
                  
                  
                  -
                  
                  
                  
                  204,830Beneficial
      conversion features of convertible notes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  205,895
                  
                  
                  
                  -
                  
                  
                  
                  205,895Conversion
      of Series B Preferred Stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (2,250
                  )
                  
                  
                  (78,750
                  )
                  
                  
                  225,000
                  
                  
                  
                  225
                  
                  
                  
                  -
                  
                  
                  
                  78,525
                  
                  
                  
                  -
                  
                  
                  
                  -Fair
      value of warrants issued for services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  47,640
                  
                  
                  
                  -
                  
                  
                  
                  47,640Fair
      value of options granted
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  86,643
                  
                  
                  
                  -
                  
                  
                  
                  86,643Fair
      value of option modifications
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  257,318
                  
                  
                  
                  -
                  
                  
                  
                  257,318Fair
      value of shares issued for services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  250,000
                  
                  
                  
                  250
                  
                  
                  
                  -
                  
                  
                  
                  49,750
                  
                  
                  
                  -
                  
                  
                  
                  50,000Fair
      value of shares issued for interest payement
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  95,599
                  
                  
                  
                  96
                  
                  
                  
                  -
                  
                  
                  
                  49,974
                  
                  
                  
                  -
                  
                  
                  
                  50,070Exercise
      of warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  168,000
                  
                  
                  
                  168
                  
                  
                  
                  -
                  
                  
                  
                  23,772
                  
                  
                  
                  -
                  
                  
                  
                  23,940Cashless
      exercise of warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  313,873
                  
                  
                  
                  314
                  
                  
                  
                  -
                  
                  
                  
                  (314
                  )
                  
                  
                  -
                  
                  
                  
                  -Preferred
      stock dividends
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,327,241
                  
                  
                  
                  1,327
                  
                  
                  
                  -
                  
                  
                  
                  409,485
                  
                  
                  
                  (410,812
                  )
                  
                  
                  -Repurchase
      of common stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (520,000
                  )
                  
                  
                  -
                  
                  
                  
                  (52,000
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (52,000
                  )Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (2,013,484
                  )
                  
                  
                  (2,013,484
                  )Ending
      balance, December 31, 2009
                  
                  
                  54,000
                  
                  
                  $
                  728,567
                  
                  
                  
                  116,625
                  
                  
                  $
                  3,565,813
                  
                  
                  
                  29,629,567
                  
                  
                  $
                  30,150
                  
                  
                  $
                  (52,000
                  )
                  
                  $
                  7,965,205
                  
                  
                  $
                  (13,537,808
                  )
                  
                  $
                  (1,300,073
                  )See
      Notes to Financial
Statements.
 F-5
 
 ACCELERIZE
      NEW MEDIA, INC.STATEMENTS
      OF CASH FLOWSYear
      endedDecember
      31,2009
                
                
                2008Cash
      flows from operating activities:Net
      loss
                
                $
                (2,013,484
                )
                
                $
                (4,991,596
                )Adjustments
      to reconcile net loss to net cash used inoperating
      activities:Depreciation
      and amortization
                
                
                313,526
                
                
                
                341,219Amortization
      of deferred compensation
                
                
                -
                
                
                
                71,400Impairment
      of goodwill
                
                
                621,547
                
                
                
                -Fair
      value of shares issued for services
                
                
                50,000
                
                
                
                -Fair
      value of warrants issued for services
                
                
                47,640
                
                
                
                909,908Fair
      value of warrants issued for TDRG acquisition
                
                
                -
                
                
                
                174,420Fair
      value of warrants issued
                
                
                -
                
                
                
                1,239,204Fair
      value of options granted
                
                
                86,643
                
                
                
                222,528Fair
      value of option modifications
                
                
                257,318Fair
      value of shares issued for interest payment
                
                
                50,070
                
                
                
                -Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                22,824
                
                
                
                (127,253
                )Prepaid
      expenses
                
                
                2,068
                
                
                
                (24,437
                )Domain
      name rights
                
                
                (25,000
                )
                
                
                (25,000
                )Deferred
      tax asset
                
                
                39,443
                
                
                
                23,996Other
      assets
                
                
                (2,500
                )
                
                
                (300
                )Accrued
      interest
                
                
                8,148
                
                
                
                (4,693
                )Accounts
      payable and accrued expenses
                
                
                (46,517
                )
                
                
                227,987Deferred
      tax liability
                
                
                (39,443
                )
                
                
                (23,996
                )Deferred
      revenues
                
                
                (242,591
                )
                
                
                25,731Net
      cash used in operating activities
                
                
                (870,308
                )
                
                
                (1,960,882
                )Cash
      flows used in investing activities:Capital
      expenditures
                
                
                (4,151
                )
                
                
                (9,894
                )Website
      development costs
                
                
                (365
                )
                
                
                (51,137
                )Net
      cash used in investing activities
                
                
                (4,516
                )
                
                
                (61,031
                )Cash
      flows from financing activities:Proceeds
      from notes payable
                
                
                637,000
                
                
                
                530,000Payment
      of finders fee for notes payable
                
                
                (63,700
                )
                
                
                -Net
      proceeds from issuance of common stock for cash
                
                
                204,830
                
                
                
                -Payment
      to former member
                
                
                -
                
                
                
                (28,983
                )Net
      Proceeds from exercise of warrants
                
                
                23,940
                
                
                
                822,500Repurchase
      of shares of common stock
                
                
                (52,000
                )
                
                
                -Net
      cash provided by financing activities
                
                
                750,070
                
                
                
                1,323,517Net
      decrease in cash
                
                
                (124,754
                )
                
                
                (698,396
                )Cash,
      beginning of year
                
                
                252,921
                
                
                
                951,317Cash,
      end of year
                
                $
                128,167
                
                
                $
                252,921Supplemental
      disclosures of cash flow information:Cash
      paid for interest
                
                $
                109,839
                
                
                $
                38,055Cash
      paid for income taxes
                
                $
                -
                
                
                $
                -Non-cash
      investing and financing activities:Beneficial
      conversion feature associated with convertible notes
    payable
                
                $
                194,703
                
                
                $
                179,450Revaluation
      of beneficial conversion feature associated withconvertible
      notes payable
                
                $
                11,192
                
                
                $
                -Conversion
      of preferred stock Series B to common stock
                
                $
                78,750
                
                
                $
                -Cashless
      exercise of warrants
                
                $
                314
                
                
                $
                -Preferred
      stock dividends
                
                $
                410,812
                
                
                $
                415,206Goodwill
      resulting from acquisition and correspondingincrease
      (decrease) in:
                
                $
                -
                
                
                $
                105,000Assets
                
                $
                -
                
                
                $
                -Common
      stock and additional paid-in capital
                
                $
                -
                
                
                $
                105,000See
      Notes to Financial Statements.
  F-6
 ACCELERIZE
NEW MEDIA, INC.
 NOTES
TO FINANCIAL STATEMENTS
 
 NOTE
1: ORGANIZATION, DESCRIPTION OF BUSINESS AND GOING CONCERN
 
 Accelerize
New Media, Inc., orthe Company, a Delaware
Corporation, incorporated on November 22, 2005, is an online based media and
customer acquisition solutions provider.
 
 The
Company offers a comprehensive online media solution for clients to reach their
target audience on the Internet. The Company provides lead generation and
performance based customer acquisition solutions via the Company’s network of
financial, news, and business networking portals, blogs, targeted e-mail,
banners, search engine optimization, and co-registration opportunities. The
Company primarily makes money from the following two lines of business: (1) Lead
generation/Performance based marketing - Utilizing the Company’s internally
designed and developed lead generation platform, the Company delivers buyers to
sellers by providing vendors with opportunities to contact qualified and
interested potential customers, and essentially crafting high-quality
new-business leads for such vendors, and in return the Company receives fees.
The Company’s current lead generation focus surrounds, but is not limited to,
the industry of debt settlement, credit repair/reports, and tax settlements, and
(2.) Online advertising – the Company’s financial content network is
available over the Internet, and the Company’s revenues are generated through
the sale of display advertisings, list management, targeted lead generation, and
web consulting services.
 
 The accompanying financial statements
have been prepared on a going concern basis. The Company has used net cash in
its operating activities of approximately $870,000 during the year ended
December 31, 2009. The Company's ability to continue as a going concern is
dependent upon its ability to obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business operations
when they come due, to fund possible future acquisitions, and to generate
profitable operations in the future. Management plans to continue to provide for
its capital requirements by issuing additional equity securities and debt. The
outcome of these matters cannot be predicted at this time and there are no
assurances that if achieved, the Company will have sufficient funds to execute
its business plan or generate positive operating results.
 
 During
December 2006, the Company entered into an Asset Purchase Agreement to acquire a
substantial portion of the operating assets of The Debt Reduction Group, LLC, or
DRG. Pursuant to the Asset Purchase Agreement entered into by the Company in
January 2007, the accounts receivable and substantially all intangible assets of
DRG in consideration of issuing 3,500,000 shares of its common stock to the
managing members of DRG, as well as granting up to 500,000 warrants to certain
of DRG’s employees which may be earned based upon certain milestones related to
target revenues and operating margins covering 18 months after closing. During
October 2008, the Company determined that such DRG employees met certain
performance targets and issued to them warrants to purchase 450,000 shares of
common stock.
 
 The
acquisition of the operations of DRG was accounted for pursuant to the FASB ASC
805 Business Combinations, which provides that the assets and liabilities
acquired and the equity interest issued are initially recognized at the date of
acquisition and measured at the fair value of the net assets acquired and
consideration exchanged. Additionally, ASC 805 provides that the results of
operations of the acquired entity after the effective date of acquisition be
consolidated in the results of operations of the acquirer.
 
 The total
aggregate purchase price of DRG amounted to $729,652, which consisted of (i)
3,500,000 shares of common stock issued in 2007 and 2008, and valued at an
aggregate of $210,000, and (i) assumption of $519,652 of liabilities. The
purchase price has been allocated as follows:
 
 AmountAccounts
      receivable
              
              $
              12,036Property
      and equipment
              
              
              32,069Goodwill
              
              
              685,547Total
      Purchase Price
              
              $
              729,652
 
 The fair
value of the shares issued in 2007 pursuant to this transaction was based on a
valuation of the Company’s shares prepared by an independent valuation
specialist, using the discounted cash flow approach.
 
 The fair
value of the shares issued in 2008 pursuant to this transaction was based on the
fair value of the shares as quoted on the over-the-counter bulletin board on the
Company’s first day of trading.
 
 NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Use of
Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reporting amounts of revenues and expenses
during the reported period. Actual results will differ from those
estimates.
 
 F-7
 Cash and Cash
Equivalents
 
 The
Company considers all highly liquid temporary cash investments with an original
maturity of three months or less when purchased, to be cash
equivalents.
 
 Concentration of Credit
Risks
 
 The
Company is subject to concentrations of credit risk primarily from cash and cash
equivalents and accounts receivable.
 
 The
Company’s cash and cash equivalents accounts are held at financial institutions
and are insured by the Federal Deposit Insurance Corporation, or the FDIC, up to
$250,000. During the year ending December 31, 2009, the Company has reached bank
balances exceeding the FDIC insurance limit. To reduce its risk associated with
the failure of such financial institutions, the Company periodically evaluates
the credit quality of the financial institutions in which it holds
deposits.
 
 The
Company's accounts receivable are due from a few customers, all located in the
United States. Two of the Company’s customers accounted for 13% and 19% of its
accounts receivables at December 31, 2009.  Three of the customers
accounted for 24%, 15%, and 11% of its accounts receivables at December 31,
2008.
 
 Property and
Equipment
 
 Property
and equipment are recorded at cost and are depreciated on a straight-line basis
over their estimated useful lives of three years. Maintenance and repairs are
charged to expense as incurred. Significant renewals and betterments are
capitalized.
 
 Property
and equipment consists of the following:
 
 December
      31, 2009
              
              
              December
      31, 2008Computer
      equipment and software
              
              $
              15,509
              
              
              $
              11,358Phone
      equipment
              
              
              19,155
              
              
              
              19,155Office
      furniture and equipment
              
              
              11,450
              
              
              
              11,45046,114
              
              
              
              41,963Accumulated
      depreciation
              
              
              (39,224
              )
              
              
              (24,436
              )$
              6,890
              
              
              $
              17,527
 
 Depreciation
expense amounted to approximately $14,778 and $13,747 during fiscal 2009 and
2008, respectively.
 
 Revenue
Recognition
 
 The
Company recognizes revenue on arrangements in accordance with FASB ASC
605-10-S99-Revenue Recognition-Overall-SEC Materials. Revenue is recognized only
when the price is fixed or determinable, persuasive evidence of an arrangement
exists, the service is performed, and collectability of the resulting receivable
is reasonably assured.
 
 The
Company’s online advertising revenues are generated from the pay-per-click,
cost-per-action listings, and banner ad sales of its portfolio of web sites.
When an online user navigates to one of the Company’s owned and operated
Websites and clicks and or visits on a particular listing/web page or completes
the specified action, the Company receives a fee.
 
 The
Company’s lead generation network revenues are primarily generated using
third-party distribution networks to deliver the merchant advertisers’ listings.
The distribution network includes search engines, shopping engines, directories,
destination sites, Internet domains or Web sites, and other targeted Web-based
content. The Company generates revenue upon delivery of a qualified lead to the
Company’s merchant advertisers or partner. Other revenues include the Company’s
lead generation web services, paid search optimization, landing page development
services, and creative design.
 
 Since
January 1, 2007, the Company generates a substantial portion of its revenues
from fees earned from the sale and marketing of debt reduction solutions offered
to consumers by debt settlement agencies. The consumers generally enter in a
debt solution program with a debt settlement agency which provides for monthly
payments by the consumers over a period of up to 3 years. The commission earned
by the Company will vary between 7.5% and 8.9% of the total debt of the consumer
to be negotiated by the respective debt settlement agency. For consumers
enrolled prior to March 1, 2007 the Company receives its fees from debt
settlement agencies upon payment by consumers to the debt settlement agencies
within the first 8 months of the debt solution program, assuming that all
consumers make all their payments. This payment was subject to a partial refund
by the Company to the debt settlement agencies if: 1) the debt settlement agency
does not receive all scheduled monthly payments for the duration of the contract
during the first 15 months of such contract, or 2) the debt settlement agencies
issue a refund to the consumer over the term of the respective contract. For
consumers enrolled since March 1, 2007, the Company receives its fee from debt
settlement agencies upon payment by consumers to the debt settlement agencies
within the first 18 months of the debt solution program, assuming that all
consumers make all their payments.  Accordingly, the fee earned by the
Company is recognized over the terms of the underlying contract between the debt
settlement agencies and the consumer, which is generally 3 years. Consequently,
the Company defers the fees received from the debt settlement agency in excess
of the revenues recognized over the term of the underlying contract between the
debt settlement agencies and the consumer. Such excess amounted to approximately
$424,000 and $667,000 at December 31, 2009 and 2008, respectively, and is
recorded as deferred revenue on the balance sheet.
 
 F-8
 Since
September 2007, the payment to the Company is subject to a partial refund only
if a debt settlement agency issues a refund to the consumer over the term of the
respective contract.
 
 The
Company ceased operating its Debt Settlement Referral Division effective January
1, 2009. During 2010 it will continue to receive commissions for debt settlement
solutions provided to clients.
 
 Customer
Concentration
 
 One of
the Company's customers accounted for approximately 14% of its revenues during
the year ending December 31, 2009. Three of the Company’s customers accounted
for 20%, 13%, and 12% of the Company’s revenue during the year ending December
31, 2008.
 
 Product
Concentration
 
 The
Company offers online media solutions for U.S. based businesses to reach their
target audience on the Internet. The Company provides lead generation and
performance based customer acquisition solutions via Internet marketing
communications offerings, such as portals, blogs, and search engine
optimization.  The Company’s primary revenue sources are as follows:
(1) Lead generation/Performance based marketing - utilizing the Company’s
internally designed and developed lead generation platform, the Company delivers
information to sellers by providing vendors with opportunities to contact
qualified and interested potential customers, and new-business leads for such
vendors, and in return the Company receives fees, and (2) Online advertising –
the Company’s financial content network is available over the Internet, and
the Company’s revenues are generated through the sale of display advertisings,
list management, targeted lead generation, and web consulting services. The
Company’s current lead generation focus surrounds, but is not limited to, the
industry of debt settlement, credit repair/reports, and tax
settlements.
 
 Fair Value of Financial
Instruments
 
 Effective
January 1, 2008, the Company adopted FASB ASC 820-Fair Value Measurements
and Disclosures, for assets and liabilities measured at fair value on a
recurring basis. ASC 820 establishes a common definition for fair value to be
applied to existing generally accepted accounting principles that require the
use of fair value measurements establishes a framework for measuring fair value
and expands disclosure about such fair value measurements. The adoption of ASC
820 did not have an impact on the Company’s financial position or operating
results, but did expand certain disclosures.
 
 ASC 820
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. Additionally, ASC 820 requires the use of valuation
techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs. These inputs are prioritized below:
 
 Level 1:
              Observable
      inputs such as quoted market prices in active markets for identical assets
      or liabilitiesLevel 2:
              Observable
      market-based inputs or unobservable inputs that are corroborated by market
      dataLevel 3:
              Unobservable
      inputs for which there is little or no market data, which require the use
      of the reporting entity’s own
assumptions.
 
 The
Company did not have any Level 2 or Level 3 assets or liabilities as of
December 31, 2009 and 2008, with the exception of its convertible promissory
notes.  The carrying amount of the convertible promissory notes at December
31, 2009 and 2008, approximate their respective fair value based on the
Company’s incremental borrowing rate.
 
 Cash and
cash equivalents include money market securities that are considered to be
highly liquid and easily tradable as of December 31, 2009 and 2008,
respectively. These securities are valued using inputs observable in active
markets for identical securities and are therefore classified as Level 1
within our fair value hierarchy.
 
 In
addition, FASB ASC 825-10-25 Fair Value Option was effective for January 1,
2008. ASC 825-10-25 expands opportunities to use fair value measurements in
financial reporting and permits entities to choose to measure many financial
instruments and certain other items at fair value. The Company did not elect the
fair value options for any of its qualifying financial
instruments.
 
 F-9
 Advertising
 
 The
Company expenses advertising costs as incurred. Advertising expense amounted to
$192,325 and $1,037,145 during the years ending December 31, 2009 and 2008,
respectively.
 
 Website Development
Costs
 
 The
Company has capitalized certain internal use software and website development
costs amounting to approximately $400 and $51,000 as of December 31, 2009 and
2008, respectively.  The estimated useful life of costs capitalized is
evaluated for each specific project and ranges from one to three
years.
 
 Income
Taxes
 
 Income
taxes are accounted for in accordance with the provisions of FASB ASC 740,
Accounting for Income Taxes. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the
amounts expected to be realized, but no less than quarterly.
 
 Share-Based
Payment
 
 The
Company accounts for stock-based compensation in accordance with ASC Topic 718,
Compensation-Stock Compensation(“ASC 718”) for all the
stock awards granted after December 31, 2005, and granted prior to but not
yet vested as of December 31, 2005. Under the fair value recognition
provisions of this topic, stock-based compensation cost is measured at the grant
date based on the fair value of the award and is recognized as expense on a
straight-line basis over the requisite service period, which is the vesting
period. See Note 7 for further information regarding the Company’s stock-based
compensation assumptions and expenses. The Company elected to use the modified
prospective transition method as permitted by ASC 718.
 
 Effective
January 1, 2006, the Company changed its method of attributing the value of
stock-based compensation to expense from the accelerated multiple-option
approach to the straight-line single option method. Compensation expense for all
share-based payment awards granted prior to January 1, 2006 will continue
to be recognized using the accelerated multiple-option approach while
compensation expense for all share-based payment awards granted on or subsequent
to January 1, 2006 has been and will continue to be recognized using the
straight-line single-option approach.
 
 The
Company has elected to use the Black-Scholes-Merton (“BSM”) option-pricing model
to estimate the fair value of its options, which incorporates various subjective
assumptions including volatility, risk-free interest rate, expected life, and
dividend yield to calculate the fair value of stock option awards. Compensation
expense recognized in the consolidated statements of operations is based on
awards ultimately expected to vest and reflects estimated forfeitures. ASC 718
requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates.
 
 Segment
Reporting
 
 The
Company generates  revenues from the following sources: (1) Lead
generation/Performance based marketing - utilizing the Company’s internally
designed and developed lead generation platform, the Company delivers
information to sellers by providing vendors with opportunities to contact
qualified and interested potential customers, and new-business leads for such
vendors, and in return the Company receives fees, and (2) Online advertising –
the Company’s financial content network is available over the Internet, and
the Company’s revenues are generated through the sale of display advertisings,
list management, targeted lead generation, and web consulting
services.
 
 Recent Accounting
Pronouncements
  In
October 2009, the FASB issued guidance for amendments to FASB Emerging Issues
Task Force on EITF Issue No. 09-1 “ Accounting for Own-Share Lending
Arrangements in Contemplation of a Convertible Debt Issuance or Other Financing”
( Subtopic 470-20 ) “Subtopic”. This accounting standards update establishes the
accounting and reporting guidance for arrangements under which own-share lending
arrangements issued in contemplation of convertible debt issuance.
  This
Statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2009. Earlier adoption is not
permitted.  Management believes this Statement will have no impact on
the financial statements of the Company once adopted.
 
 Basic and Diluted Earnings
Per Share
 
 Basic
earnings per share are calculated by dividing income available to stockholders
by the weighted-average number of common shares outstanding during each period.
Diluted earnings per share are computed using the weighted average number of
common and dilutive common share equivalents outstanding during the period.
Dilutive common share equivalents consist of shares issuable upon the exercise
of stock options and warrants (calculated using the modified-treasury stock
method). The outstanding options and warrants amounted to 18,898,130 at December
31, 2009, and have been excluded from the earnings per share computation due to
their anti-dilutive effect.
 
 F-10
 The
following sets forth the computation of basic and diluted earnings per share for
the years ending December 31, 2009 and 2008:
 
 For
      the years endingDecember
      31,2009
              
              
              2008Numerator:Net
      loss attributable to common stock
              
              $
              (2,424,296
              )
              
              $
              (5,406,802
              )Denominator:Denominator
      for basic earnings per share-Weighted
      average shares outstanding
              
              
              27,712,414
              
              
              
              25,220,571Denominator
      for diluted earnings per share-Weighted
      average shares outstanding
              
              
              27,712,414
              
              
              
              25,220,571Basic
      earnings per share
              
              $
              (0.09
              )
              
              $
              (0.21
              )Diluted
      earnings per share
              
              $
              (0.09
              )
              
              $
              (0.21
              )
 
 NOTE
3: PREPAID EXPENSES
 
 At
December 31, 2009, the prepaid expenses consisted primarily of prepaid placement
agent fees.
 
 NOTE
4: DOMAIN NAME RIGHTS
 
 During
2009, the Company renewed the domain name rights for $25,000 for an additional
year.  The Company recognized amortization expense of $24,863 and
$167,329 in connection with the domain name rights during the years ended
December 31, 2009 and 2008, respectively.
 
 NOTE
5: WEBSITE DEVELOPMENT COSTS
 
 Website
development costs, net of accumulated amortization are as follows:
 
 December
      31,
              
              
              December
      31,2009
              
              
              2008Website
      development costs
              
              $
              346,850
              
              
              $
              346,485Less:
      accumulated amortization
              
              
              (273,809
              )
              
              
              (206,410
              )Website
      development costs, net
              
              $
              73,041
              
              
              $
              140,075
 
 During
2008, the Company wrote off fully amortized capitalized web development costs
amounting to $141,546.  Amortization expense of the website
development costs amounted to $67,399 and $138,545 during the years ending
December 31, 2009 and 2008, respectively.
 
 The
website development costs, net, as of December 31, 2009 will be amortized over
the future periods as follows:
 
 2010
              
              $
              69,1302011
              
              
              3,8952012
              
              
              16$
              73,041
 
 NOTE
6: GOODWILL
 
 At
December 31, 2009, the Company wrote-down the value of its goodwill. Goodwill
represents the excess of the purchase price over the fair value of net assets
acquired in business combinations. ASC 350-30-35-4 requires that goodwill be
tested for impairment at the reporting unit level (operating segment or one
level below an operating segment) on an annual basis and between annual tests
when circumstances indicate that the recoverability of the carrying amount of
goodwill may be in doubt. Application of the goodwill impairment test requires
judgment, including the identification of reporting units, assigning assets and
liabilities to reporting units, assigning goodwill to reporting units, and
determining the fair value. Significant judgments required to estimate the fair
value of reporting units include estimating future cash flows, determining
appropriate discount rates and other assumptions. Changes in these estimates and
assumptions could materially affect the determination of fair value and/or
goodwill impairment for each reporting unit.  The Company wrote-down
approximately $622,000 during the year ended December 31, 2009.
  F-11
 NOTE
7: CONVERTIBLE NOTES PAYABLE
 
 During
the year ended December 31, 2008, the Company issued convertible promissory
notes aggregating $530,000 to certain stockholders.  The notes bear
interest at 10% per annum.  Accrued interest may be payable, at the
noteholder’s option, in cash or in shares of common stock. If the accrued
interest is paid in shares of common stock, the number of shares issuable to
satisfy the accrued interest is primarily based on the closing price, as quoted
on the Over-the-Counter Bulletin Board (“OTCBB”) of the trading day immediately
prior to the interest payment date.  The interest is payable
commencing June 1, 2008 and every quarter thereafter, until the obligations
under the convertible promissory notes are satisfied.  The convertible
promissory notes are due ranging from March 15, 2011 to March 31,
2011.   Effective May 29, 2009, on the maturity date, the lender has
the option of having the note paid in cash or shares of common stock as follows:
1) if the average closing price of the common stock on the last five trading
days prior to the maturity date is $0.50 or more, then the lender may elect to
have the principal paid in shares of common stock. In such case, the number of
shares of common stock to be issued to the lender shall be determined by
dividing the principal amount outstanding on the maturity date by $0.50, 2) if
the average closing price of the common stock on the last five trading days
prior to maturity date is less than $0.50, then the principal may only be paid
in cash. The Company may prepay the convertible promissory notes without
premium.  Each noteholder may convert, at his option, the outstanding
principal of the convertible promissory note, after July 30, 2008 and prior to
maturity at the lesser of: 1) $0.75 or 2) the average closing price of the
Company’s common stock, but in no event less than $0.50, or 3) the effective
price per share of a subsequent financing of the Company occurring prior to
March 2011.
 
 During
the year ended December 31, 2009, the Company issued convertible promissory
notes aggregating $637,000 to certain stockholders.  The notes bear
interest at 12% per annum.  Accrued interest may be payable, at the
noteholder’s option, in cash or in shares of common stock. If the accrued
interest is paid in shares of common stock, the number of shares issuable to
satisfy the accrued interest is primarily based on the closing price, as quoted
on the OTCBB of the trading day immediately prior to the interest payment
date.  The interest is payable commencing June 1, 2009 and every
quarter thereafter, until the obligations under the convertible promissory notes
are satisfied.  The maturity dates of the convertible promissory notes
range from February to April 2012.   Effective May 29, 2009, on the
maturity date, the lender has the option of having the note prepaid in cash or
share of common stock as follows: 1) if the average closing price of the common
stock on the last five trading days prior to the maturity date is $0.50 or more,
then the lender may elect to have the principal paid in shares of common stock.
In such case, the number of shares of common stock to be issued to the lender
shall be determined by dividing the principal amount outstanding on the maturity
date by $0.50, 2) if the average closing price of the common stock on the last
five trading days prior to maturity date is less than $0.50, then the principal
may only be paid in cash.  The Company may prepay the convertible
promissory notes without premium.  Each noteholder may convert, at his
option, the outstanding principal of the convertible promissory note, after July
1, 2009 and prior to maturity at the lesser of: 1)  $0.50 or 2) the
effective price per share of a subsequent financing of the Company occurring
prior to the maturity date.
 
 In
accordance with FASB ASC 740 Debt- Debt with Conversion Options, the Company
recorded a beneficial conversion feature related to the Convertible promissory
notes. Under the terms of these notes, the intrinsic value of the beneficial
conversion feature was calculated assuming that the conversion date was the same
as the issue date. During the years ended December 31, 2009 and 2008,
respectively, the beneficial conversion feature amounted to $194,703 and
$179,450. This beneficial conversion feature is reflected in the accompanying
financial statements as additional paid-in capital and corresponding debt
discount.
 
 The
interest and amortization expense associated with the notes payable amounted to
$306,580 and $62,314 during the years ended December 31, 2009 and 2008,
respectively. The unamortized debt discount amounted to $174,154 at December 31,
2009.
 
 During
February 2009, the Company reduced the exercise price of the 10% convertible
promissory notes from $0.75 to $0.55. As a result, the Company recognized a
beneficial conversion feature in excess of that previously recognized, which
amounted to $11,192.  The revised beneficial conversion feature is
partly based on the following assumptions for the valuation of warrants
associated with the convertible promissory notes, using Black Scholes Model:
term: 4.1 to 4.3 years; exercise price: $0.55 to $0.75; risk-free interest rate:
1.99%; expected volatility: 62.10%; market value: $0.31. The expected volatility
of the beneficial conversion features was based on the average historical
volatility of comparable publicly-traded companies.  Associated with
the convertible notes payable issued during the year ended December 31, 2009,
the Company paid finder’s fees of $63,700 that were deferred and amortized over
the period of the loans.  At December 31, 2009, the Company had
recognized amortization of $17,883 for the fees.
 
 NOTE
8: STOCKHOLDERS’ DEFICIT
 
 Common
Stock
 
 On
January 1, 2008, the Company issued 1,750,000 shares of common stock valued at
$105,000, pursuant to its acquisition of DRG.
 
 F-12
 During
the year ended December 31, 2008, the Company entered into a six-month contract
for banking and financial services.  Pursuant to the contract, the
Company issued 105,000 shares of common stock valued at $71,400.  At
December 31, 2008, the Company had fully expensed the $71,400.
 
 During
the year ended December 31, 2008, the Company paid dividends on its preferred
stock amounting to 1,200,560 shares of the common stock, which were valued at
$415,206.
 
 During
the year ended December 31, 2008, certain stockholders exercised their warrants
associated with Series B Preferred Stock at an exercise price per share of
$0.35.  As a result, the Company issued 2,350,000 shares of common
stock, aggregating $822,500.
 
 During
the year ended December 31, 2009, the Company paid dividends on its preferred
stock amounting to 1,327,241 shares of common stock, which were valued at
$410,812.
 
 During
the year ended December 31, 2009, the Company issued 250,000 shares of common
stock to a service provider valued at $50,000.
 
 During
the year ended December 31, 2009, the Company issued 313,873 shares of common
stock to warrant holders pursuant to cashless exercises of warrants issued to
them in connection with the Company’s Series A Preferred financing.
 
 During
the year ended December 31, 2009, the Company issued 225,000 shares of common
stock to a holder of Preferred Stock Series B, pursuant to a conversion of 2,250
shares of Preferred Stock Series B stock.
 
 During
the year ended December 31, 2009, certain stockholders exercised their warrants
associated with Series A Preferred Stock at an exercise price per share of
$0.15.  As a result, the Company issued 168,000 shares of common
stock, aggregating $23,940 after finder’s fees.
 
 During
the year ended December 31, 2009, the Company issued 95,599 shares of common
stock to note holders for interest pursuant to the 10% and 12% convertible
notes payable, aggregating $50,070.
 
 During
the year ended December 31, 2009, the Company repurchased 520,000 shares of its
common stock from a stockholder for an aggregate of $52,000.
 
 During
the year ended December 31, 2009, the Company issued 585,000 shares of common
stock pursuant to a private placement which generated gross proceeds of
$234,000. In connection with this private placement, the Company issued 585,000
warrants exercisable at a price of $0.65 per share. The warrants expire three
years from the date of grant. In connection with these private placements, the
Company paid commissions to its placement agent of $29,170 in cash and issued
57,250 warrants exercisable at a price of $0.65 per share. The warrants expire
three years from the date of grant.
 
 Preferred Stock- Series
A
 
 Between
August 2006 and October 2006 the Company issued 54,000 shares of 10% Series A
Convertible Preferred Stock, or Series A Preferred Stock, with a par value of
$0.001 per share, resulting in gross proceeds of $728,567 to the Company after
financing fees of $81,433.
 
 The
holders of the Series A Preferred Stock are entitled to cumulative preferential
dividends at the rate of 10% per annum, payable quarterly in arrears on each of
September 1, December 1, March 1, and June 1, commencing on the first quarter
after the issuance date beginning September 1, 2006 in cash or shares of the
Company’s Common Stock. If the Company elects to pay any dividend in shares of
Common Stock, the number of shares of Common Stock to be issued to each holder
shall be an amount equal to the quotient of (i) the dividend payment divided by
(ii) $0.15 per share.
 
 The
shares of Series A Preferred Stock include a liquidation preference
corresponding to the amount invested. All issued or accrued but unpaid dividends
may also be converted at the election of the holder, and converted at $0.15 per
share. The shares of Series A Preferred Stock are convertible into shares of
common stock, at any time, at the option of the holder and a conversion price of
$0.15 per share, at an initial rate of conversion of 100 shares of common stock
for each one share of Series A Preferred Stock, subject to anti-dilution
provisions in the case of stock splits, dividends or if the Company issues
shares of common stock or other securities convertible into shares of common
stock at an effective price less than $0.15 per share. In the event a public
market is established for the Company’s common stock, the 10% Series A Preferred
Stock is subject to mandatory conversion by the Company upon a 30 day notice if
the average closing price of its common stock is $0.40 or more per share for 10
consecutive trading days and the average daily volume is at least 100,000
shares. This has not occurred as of December 31, 2009.
 
 F-13
 The
Company granted the Series A Preferred Stockholders piggyback registration
rights covering the common shares underlying the Series A Preferred Stock and
common stock underlying warrants. Resalesof such underlying
shares were registered on a registration statement on Form SB-2 declared
effective by the SEC on May 9, 2007.
 
 Preferred Stock- Series
B
 
 Between
June 2007 and September 2007, the Company issued 118,875 shares of 8% Series B
Convertible Preferred Stock, or Series B Preferred Stock, with a par value of
$0.001 per share, which generated net proceeds of $3,244,563 to the Company,
after financing fees of $516,063 and conversion of notes payable of
$400,000.
 
 The
holders of the Series B Preferred Stock are entitled to cumulative preferential
dividends at the rate of 8% per annum, payable quarterly in arrears on each of
September 1, December 1, March 1, and June 1, commencing on December 1, 2007. If
the Company elects to pay any dividend in shares of Common Stock, the number of
shares of Common Stock to be issued to each holder shall be an amount equal to
the higher of (i) the average of the closing bid prices for the common stock
over the five trading days immediately prior to the dividend date or (ii)
$0.35.
 
 The
shares of Series B Preferred Stock include a liquidation preference
corresponding to the amount invested. All issued or accrued but unpaid dividends
may also be converted at the election of the Holder, and converted at $0.35 per
share. The shares of Series B Preferred Stock are convertible into shares of
common stock, at any time, at the option of the holder and a conversion price of
$0.35 per share, at an initial rate of conversion of 100 shares of common stock
for each one share of Series B Preferred Stock, subject to anti-dilution
provisions in the case of stock splits, dividends or if the Company issues
shares of common stock or other securities convertible into shares of common
stock at an effective price less than $0.35 per share.  In the event a
public market is established for the Company’s common stock, the Series B
Preferred Stock is subject to mandatory conversion by the Company upon a 30 day
notice if the average closing price of its common stock is $1.00 or more per
share for 10 consecutive trading days. This has not occurred as of December 31,
2009.
 
 The
rights of the holders of the Series B Preferred Stock are subordinate to the
rights of the holders of Series A Preferred Stock.
 
 During
the year ended December 31, 2009, the Company issued 225,000 shares of common
stock to a holder of Preferred Stock Series B, pursuant to a conversion of 2,250
shares of Preferred Stock Series B stock.
 
 Warrants
 
 In
connection with the acquisition of DRG in January 2007, the Company granted to
certain DRG employees warrants to purchase up to 500,000 shares of common stock,
which may be earned based upon certain milestones related to target revenues and
operating margins covering 18 months after closing. The warrants are exercisable
at a price of $0.15 per share. The warrants expire between January 2012 and
March 2013. During October 2008, the Company determined that such DRG employees
met certain performance targets and issued to them warrants to purchase 450,000
shares of common stock.  The fair value of the warrants amounted to
$174,420.
 
 In
connection with the issuance of notes payable, the Company issued warrants to
purchase 265,000 shares of common stock exercisable at a price of $0.75 per
share at December 31, 2008. The warrants expire in March 2013.
 
 The fair
value of the warrants issued in connection with the issuance of the notes
payable amounted to $179,450.  The fair value is based on the
following assumptions, using Black Scholes Model: term: 5 years; exercise price:
$0.75; risk-free interest rate: 2.46% to 3.34%; expected volatility: 63.12% to
66.28%; market value: $0.72 to $0.75.
 
 The
expected volatility of the warrants issued in connection with the notes payable
was based on the average historical volatility of comparable publicly-traded
companies.
 
 The fair
value of the warrants was recorded as a debt discount and as an increase to
additional paid-in capital.
 
 During
2008, in consideration for services, the Company issued to a marketing firm
warrants to purchase 5,000,000 shares of common stock exercisable at a price of
$0.55 per share.  2,708,333 warrants were vested at December 31,
2008.  The remaining warrants will vest at a rate of 4.17% every three
months there after. The warrants expire in September 2013.
 
 The fair
value of the vested warrants issued in consideration for services amounted to
$880,708.  The fair value is based on the following assumptions, using
Black Scholes Model: term: 5 years; exercise price: $0.55; risk-free interest
rate: 1.05% to 2.45%; expected volatility: 68.04% to 68.54%; market value: $0.35
to $0.55.
 
 The
expected volatility of the warrants issued in consideration for services was
based on the average historical volatility of comparable publicly-traded
companies.
 
 The fair
value of the warrants was recorded as a selling, general, and administrative
expense and as an increase to additional paid-in capital.
 
 During
October 2008, in consideration for services, the Company issued to an investor
relations firm warrants to purchase 100,000 shares of common stock exercisable
at a price of $0.50 per share.  The warrants expire in October
2013.
 
 The fair
value of the warrants issued in consideration for services amounted to
$29,200.  The fair value is based on the following assumptions, using
Black Scholes Model: term: 5 years; exercise price: $0.50; risk-free interest
rate: 2.57%; expected volatility: 68.04%; market value: $0.50.
 
 The
expected volatility of the warrants issued in consideration for services was
based on the average historical volatility of comparable publicly-traded
companies.
 
 F-14
 The fair
value of the warrants was recorded as a selling, general, and administrative
expense and as an increase to additional paid-in capital.
 
 In
connection with the exercise of warrants associated with Series B Preferred
Stock, the Company issued warrants to purchase 2,350,000 share of common stock
to the exercising stockholders. The new warrants have the same terms and
conditions as the warrants exercised by the stockholders, except that they
contain a cashless exercise and a forced conversion feature.
 
 The fair
value of the warrants issued in connection with the exercise of warrants
associated with Series B Preferred Stock amounted to $1,239,204.  The
fair value is based on the following assumptions, using Black Scholes Model:
term: 7 years; exercise price: $0.35; risk-free interest rate: 3.40% to 3.73%;
expected volatility: 68.54% market value: $0.60 to $0.75.
 
 The
expected volatility of the warrants issued in association with Series B
Preferred Stock was based on the average historical volatility of comparable
publicly-traded companies.
 
 The fair
value of the warrants was recorded as an expense and as an increase to
additional paid-in capital.
  In
connection with the issuance of notes payable with a 12% per annum interest, the
Company issued warrants to purchase 318,500 shares of common stock exercisable
at a price of $0.55 per share at June 30, 2009. The warrants expire in March and
April 2014.
 
 The fair
value of the warrants issued in connection with the issuance of the notes
payable amounted to $194,703.  The fair value is based on the
following assumptions, using Black Scholes Model: term: 5 years; exercise price:
$0.55; risk-free interest rate: 1.67% to 1.83%; expected volatility: 61.33% to
62.10%; market value: $0.32.
 
 The
expected volatility of the warrants issued in connection with the notes payable
was based on the average historical volatility of comparable publicly-traded
companies.
 
 The fair
value of the warrants was recorded as a debt discount and as an increase to
additional paid-in capital.
 
 During
the year ended December 31, 2009, in consideration for services, the Company
issued to a service provider warrants to purchase 600,000 shares of common stock
exercisable at a price of $0.35 per share.  The warrants expire in
March 2014.
 
 The fair
value of the warrants issued in consideration for services amounted to
$47,640.  The fair value is based on the following assumptions, using
Black Scholes Model: term: 5 years; exercise price: $0.35; risk-free interest
rate: 1.69%; expected volatility: 62.10%; market value: $0.20.
 
 The
expected volatility of the warrants issued in consideration for services was
based on the average historical volatility of comparable publicly-traded
companies.
 
 The fair
value of the warrants issued was recorded as an expense and as an increase to
additional paid-in capital.
 
 Stock Option
Plan
 
 On
December 15, 2006, the Company's Board of Directors and stockholders approved
the Accelerize New Media, Inc. Stock Option Plan (the "Plan"). The total number
of shares of capital stock of the Company that may be subject to options under
the Plan was initially 4,300,000 shares of common stock, and on May 16, 2007 was
increased to 10,000,000 shares of common stock, $.001 par value per share, from
either authorized but unissued shares or treasury shares. The individuals who
are eligible to receive option grants under the Plan are employees, directors
and other individuals who render services to the management, operation or
development of the Company or its subsidiaries and who have contributed or may
be expected to contribute to the success of the Company or a subsidiary. Every
option granted under the Plan shall be evidenced by a written stock option
agreement in such form as the Board shall approve from time to time, specifying
the number of shares of common stock that may be purchased pursuant to the
option, the time or times at which the option shall become exercisable in whole
or in part, whether the option is intended to be an incentive stock option or a
non-incentive stock option, and such other terms and conditions as the Board
shall approve.
 
 F-15
 During
the year ended December 31, 2009, the Company granted 495,000 options to certain
of its employees.
 
 At
December 31, 2009, options to purchase 6,409,153 shares of Common Stock were
outstanding. The
outstanding options are exercisable at a weighted average price per share of
$0.18 per share. The options outstanding vest over periods ranging from two to
three years.
 
 During
February and December 2009, the Company extended the exercise period for certain
option holders. At December 31, 2009, these options, aggregating 582,500, expire
on December 31, 2010.
 
 During
the years ended December 31, 2009 and 2008, the Company recorded a share-based
payment expense amounting to approximately $344,000 and $222,500,
respectively, in
connection with all options granted at the respective measurement
dates.
 
 The
share-based payment is based on the fair value of the outstanding options
amortized over the requisite period of service for option holders, which is
generally the vesting period of the options. The fair value of the options
granted during the year ended December 31, 2009 is based on the Black Scholes
Model using the following assumptions:
 
 2009
              
              
              2008Exercise
      price:
              
              $
              0.35
      to 0.55
              
              
              $
              0.47
      to 0.72Market
      price at date of grant:
              
              $
              0.35
      to 0.65
              
              
              $
              0.50
      to 0.72Expected
      volatility:
              
              68
      to 75%
              
              
              68
      to 69%Expected
      dividend rate:
              
              
              0%
              
              
              
              0%Risk-free
      interest rate:
              
              $
              1.67
      to 2.61
              
              
              2.55
      to 3.41%
  The
expected volatility is based on the historical volatility of publicly-traded
companies comparable to the Company.
 
 The
weighted-average grant-date fair value of options granted during the year ending
December 31, 2009 amounted to $0.42.
 
 The
following table summarizes information concerning currently outstanding and
exercisable options as of December 31, 2009:
 
 Options
              
              
              Weighted
      Average
                Exercise
      Price
              
              
              Weighted
      Average
                Contractual
      Terms
              
              
              Aggregate
                Intrinsic
      ValueOutstanding
      at January 1, 2008
              
              
              7,532,500
              
              
              $
              0.16
              
              
              
              4.40
              
              
              $
              1,397,500Granted
              
              
              173,500
              
              
              
              0.68Exercised
              
              
              -
              
              
              
              -Expired
              
              
              555,000
              
              
              
              0.32Outstanding
      at December 31, 2008
              
              
              7,151,000
              
              
              
              0.16
              
              
              
              4.40
              
              
              
              1,397,500Granted
              
              
              495,000
              
              
              
              0.54
              
              
              
              
              
              
              
              47,500Exercised
              
              
              -
              
              
              
              -Expired
              
              
              43,500
              
              
              
              0.44Outstanding
      at December 31, 2009
              
              
              7,602,500
              
              
              $
              0.18
              
              
              
              3.98
              
              
              $
              3,554,055Exercisable
      and vested at
                December
      31, 2009
              
              
              6,409,153
              
              
              $
              0.15
              
              
              
              7.94
              
              
              $
              3,177,486
 
 The total
compensation cost related to non-vested awards not yet recognized amounted to
approximately $194,000 and $77,000 at December 31, 2009 and 2008, respectively
and the Company expects that it will be recognized over the following
weighted-average period of 24 months.
 
 If any
options granted under the Plan expire or terminate without having been exercised
or cease to be exercisable, such options will be available again under the Plan.
All employees of the Company and its subsidiaries are eligible to receive
incentive stock options and non-qualified stock options. Non-employee directors
and outside consultants who provided bona-fide services not in connection with
the offer or sale of securities in a capital raising transaction are eligible to
receive non-qualified stock options. Incentive stock options may not be granted
below their fair market value at the time of grant or, if to an individual who
beneficially owns more than 10% of the total combined voting power of all stock
classes of the Company or a subsidiary, the option price may not be less than
110% of the fair value of the common stock at the time of grant. The expiration
date of an incentive stock option may not be longer than ten years from the date
of grant. Option holders, or their representatives, may exercise their vested
options up to three months after their employment termination or one year after
their death or permanent and total disability. The Plan provides for adjustments
upon changes in capitalization.
 
 F-16
 The
Company’s policy is to issue shares pursuant to the exercise of stock options
from its available authorized but unissued shares of common stock. It does not
issue shares pursuant to the exercise of stock options from its treasury
shares.
 
 NOTE
9: INCOME TAXES
 
 A
reconciliation of the Company’s effective tax rate to the statutory federal rate
is as follows:
 
 2009
              
              
              2008Tax
      at US statutory rate
              
              
              35.0
              %
              
              
              35.0
              %State
      tax rate, net of federal benefits
              
              
              5.0
              
              
              
              5.0Permanent
      differences – principally beneficial conversion feature
              
              
              (54.0
              )
              
              
              (28.4
              )Change
      in valuation allowance
              
              
              14.0
              
              
              
              (11.6
              )Effective
      tax rate
              
              
              0.0
              %
              
              
              0.0
              %
 
 Management
believes it is more likely than not that it will be able to offset its deferred
tax liability against its net operating losses.
 
 The
components of the deferred tax assets and liabilities are as
follows:
 
 2009
              
              
              2008Deferred
      tax assets:Net
      operating losses
              
              $
              2,806,000
              
              
              $
              2,646,000Depreciation
              
              
              177,000
              
              
              
              112,000Options
      issued for services
              
              
              547,000
              
              
              
              492,000Other
              
              
              99,000
              
              
              
              68,0003,629,000
              
              
              
              3,318,000Less:
      valuation allowance
              
              
              (3,600,000
              )
              
              
              (3,262,000
              )Net
      deferred tax assets
              
              $
              29,000
              
              
              $
              56,000Deferred
      tax liability:Software
      development costs
              
              $
              29,000
              
              
              $
              56,000
 
 The
components of the deferred tax liability are as follows:
 
 Website
      development costs
              
              $
              29,216Total
      deferred tax liability-current
              
              $
              29,216
 
 At
December 31, 2009 the Company had estimated tax net operating loss carryforwards
of approximately $10.4 million, which expire through its tax year ending in
2029.
 
 NOTE
10: COMMITMENTS
 
 On
January 27, 2004, the Company entered into a 3-year lease for a 2,769 square
foot office facility in Los Angeles, California, which commences on March 15,
2004. Under the terms of the lease, the Company is required to pay initial
monthly base rent of $6,092. The base rent will be increased annually by 3%. On
March 12, 2007, the lease was amended, extending the lease for another 3
years.  Under the new terms of the lease, the Company is required to
pay initial monthly base rent of $7,337, increasing annually by 4%.
 
 At
December 31, 2009, the Company subleases the office facility in Los Angeles to
two subtenants.  The subleases require payments aggregating to $7,337
through June 2010.
 
 During
January 2009, the Company entered into a lease for certain office space in
Newport Beach, California, effective on February 1, 2009.  Under the
terms of the lease, the Company pays monthly base rent of $4,100.  The
lease is renewable every month.
  F-17
 Future
annual minimum payments, net of sublease income, required under operating lease
obligations at December 31, 2009 are as follows:
 
 Future
      Minimum
                Lease
      Payments
              Sublease
      Income
              Net
      Minimum
                Lease
      Payments2010
              47,620
              (38,157)
              9,463
  As of
December 31, 2009, the Company has amended and extended by three additional
years the employment agreements with two of its officers. The agreements are
renewable for an additional two-year period at the option of the applicable
officer. The aggregate compensation to be paid under such agreements amounts to
$300,000 per year. If the employment or consulting arrangement is terminated
without cause by the Company, the Company is under the obligation, subject to
certain restrictions, to pay the greater of the amount remaining on the term or
one-year compensation of $150,000, to the respective employee or consultant. If
the employment or consulting arrangement is terminated with cause, the Company
has no liability for further payments.
 
 As of
December 31, 2009, the Company entered into a three-year employment agreement
with an employee. The agreement is renewable for an additional two-year period
at the option of the employee.  The aggregate compensation to be paid
under the agreement amounts to $100,000 per year.  If the employment
arrangement is terminated without cause by the Company, the Company is under the
obligation, subject to certain restrictions, to pay the greater of the amount
remaining on the term or one-year compensation. If the employment arrangement is
terminated with cause, the Company has no liability for further
payments.
 
 The
commitments under such agreements over the next two years are as
follows:
 
 Year
              Commitments2010
              $        400,0002011
              400,0002012
              400,000
 
 
 NOTE
11: SUBSEQUENT EVENTS
 
 At March
26, 2010, the date the financial statements were issued, the following items
were considered significant subsequent events.
 
 The
Company has agreed to issue 841,250 shares of common stock pursuant to a private
placement which generated gross proceeds of $336,500. In connection with this
private placement, the Company will issue 841,250 warrants exercisable at a
price of $0.65 per share. The warrants will expire three years from the date of
grant. In connection with this private placement, the Company paid commissions
to its placement agent of $27,495 in cash and will issue 77,875 warrants
exercisable at a price of $0.65 per share. The warrants will expire three years
from the date of grant.
 
 During
March 2010, the Company paid dividends on its preferred stock amounting to
282,291 shares of common stock, which were valued at $100,492
 
 During
March 2010, the Company issued 40,074 shares of common stock to note holders for
interest pursuant to the 10% and 12% convertible notes payable, aggregating
$25,035.
 
 During
January and February 2010, the Company repurchased 40,000 shares of its common
stock from a stockholder for an aggregate of $4,000.