10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2018

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

For the transition period from ________ to ________

Commission File Number: 000-52635

ACCELERIZE INC.

(Exact name of registrant as specified in its charter)

Delaware	20-3858769
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

20411 SW BIRCH STREET, SUITE 250

NEWPORT BEACH

CALIFORNIA 92660

 (Address of principal executive offices) (Zip code)

(949) 548 2253

 (Registrant’s Telephone Number, including Area Code)

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 check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X]  No [  ]

Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if smaller reporting company)	Smaller reporting company [X]
	Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

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 number of shares outstanding of the registrant’s Common Stock, $0.001 par value per share, as of May 15, 2018, was 65,939,709.

When used in this quarterly report, the terms “Accelerize,” “the Company,” “we,” “our,” and “us” refer to Accelerize Inc., a Delaware corporation. 

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

This quarterly report on Form 10-Q contains certain forward-looking statements. Forward-looking statements may include our statements regarding our goals, beliefs, strategies, objectives, plans, including product and service developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms, or other comparable terminology. For example, when we discuss our expectations that our revenues will increase in 2018, and that we intend to continue to grow revenues by investing in sales, marketing, product, development and innovation, we are using forward-looking statements. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. These factors include, but are not limited to, our ability to implement our strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. The business and operations of Accelerize Inc. are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under “Item 1A. Risk Factors” in our annual report on Form 10-K as filed with the Securities and Exchange Commission, or the SEC, on March 27, 2018. Readers are also urged to carefully review and consider the various disclosures we have made in this report and in our annual report on Form 10-K.  

ACCELERIZE INC.

INDEX

	Page
PART I - FINANCIAL INFORMATION:	1
Item 1. Financial Statements (Unaudited)	1
Item 2. Management’s Discussion and Analysis of Financial Position and Results of Operations	16
Item 4. Controls and Procedures	26
PART II - OTHER INFORMATION:	27
Item 6. Exhibits	27
SIGNATURES	28

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ACCELERIZE INC. 

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2018			December 31, 2017
	(Unaudited)
ASSETS
Current Assets:
Cash	$	805,880		$	166,883
Restricted cash		50,000			50,000
Accounts receivable, net of allowance for bad debt of $235,703 and $471,144, respectively		2,856,152			2,692,636
Prepaid expenses and other assets		445,449			548,343
Total current assets		4,157,481			3,457,862
Property and equipment, net of accumulated depreciation of $794,189 and $775,152, respectively		82,043			69,405
Intangible assets, net of accumulated amortization of $2,617,203 and $2,512,203, respectively		4,195,523			3,925,523
Other assets		125,906			123,124
Total assets	$	8,560,953		$	7,575,914
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses	$	2,242,116		$	2,479,083
Deferred revenues		476,831			299,937
Credit facility, short term		3,243,367			3,055,812
Other short-term loan, net of unamortized deferred financing cost of $0 and $0, respectively		-			1,224,194
Total current liabilities		5,962,314			7,059,026
Credit facility, net of unamortized deferred financing cost of $1,457,249 and $245,584, respectively		6,841,709			4,402,988
Other long-term loan, net of unamortized deferred financing cost of $0 and $82,868, respectively		-			267,938
Other liabilities		956,250			1,062,500
Total liabilities		13,760,273			12,792,452
Stockholders' Deficit:
Series A Preferred stock; $0.001 par value; 54,000 shares authorized; None issued and outstanding.		-			-
Series B Preferred stock; $0.001 par value; 1,946,000 shares authorized; None issued and outstanding.		-			-
Common stock; $0.001 par value; 100,000,000 shares authorized; 65,939,709 and 65,939,709 shares issued and outstanding, respectively		65,938			65,938
Additional paid-in capital		27,557,795			26,301,748
Accumulated deficit		(32,799,143	)		(31,542,684	)
Accumulated other comprehensive loss		(23,910	)		(41,540	)
Total stockholders’ deficit		(5,199,320	)		(5,216,538	)
Total liabilities and stockholders’ deficit	$	8,560,953		$	7,575,914

See Notes to Unaudited Condensed Consolidated Financial Statements. 

1

ACCELERIZE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

	Three-month periods ended March 31,
	2018			2017
Revenues:	$	5,992,748		$	5,956,724
Cost of revenue		2,353,860			1,545,345
Gross profit		3,638,888			4,411,379
Operating expenses:
Research and development		1,122,623			1,043,119
Sales and marketing		1,170,484			1,216,490
General and administrative		1,999,886			1,926,242
Total operating expenses		4,292,993			4,185,851
Operating (loss) income		(654,105	)		225,528
Other income (expense):
Other income (loss)		761			(300	)
Other expense		(603,115	)		(280,452	)
Total other (expenses)		(602,354	)		(280,752	)
Net loss	$	(1,256,459	)	$	(55,224	)
Net loss per share:
Basic	$	(0.02	)	$	(0.00	)
Diluted	$	(0.02	)	$	(0.00	)
Basic weighted average common shares outstanding		65,939,709			65,262,289
Diluted weighted average common shares outstanding		65,939,709			65,262,289

See Notes to Unaudited Condensed Consolidated Financial Statements.

2

ACCELERIZE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

	Three-month periods ended March 31,
	2018			2017
Net loss:	$	(1,256,459	)	$	(55,224	)
Foreign currency translation loss		17,630			4,080
Total other comprehensive loss		17,630			4,080
Comprehensive loss	$	(1,238,829	)	$	(51,144	)

See Notes to Unaudited Condensed Consolidated Financial Statements.

3

ACCELERIZE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three-month periods ended March 31,
	2018			2017
Cash flows from operating activities:
Net loss	$	(1,256,459	)	$	(55,224	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		119,059			169,028
Amortization of deferred financing cost		202,898			59,807
Provision for bad debt		(235,441	)		2,386
Fair value of options and warrants		99,352			219,700
Loss on sale and disposal of fixed assets		-			902
Changes in operating assets and liabilities:
Accounts receivable		71,925			(95,718	)
Prepaid expenses		32,894			(140,115	)
Accounts payable and accrued expenses		(308,112	)		(860,096	)
Deferred revenues		176,894			40,583
Other assets		(2,783	)		(813	)
Net cash used in operating activities		(1,099,773	)		(659,560	)
Cash flows from investing activities:
Capitalized software for internal use		(375,000	)		(515,454	)
Capital expenditures		(13,402	)		(9,799	)
Proceeds from sale of assets		-			795
Net cash used in investing activities		(388,402	)		(524,458	)
Cash flows from financing activities:
Principal repayment of credit facility and loan		(662,058	)		(486,548	)
Proceeds from credit facility		3,771,600			500,000
Repayments of promissory notes		(1,000,000	)		-
Net cash provided by financing activities		2,109,542			13,452
Effect of exchange rate changes on cash		17,630			4,080
Net increase (decrease) in cash		638,997			(1,166,486	)
Cash, beginning of period		166,883			1,680,127
Cash, end of period	$	805,880		$	513,641
Supplemental disclosures of cash flow information:
Cash paid for interest	$	373,257		$	196,590
Cash paid for income taxes	$	-		$	-
Non-cash investing and financing activities:
Fair value of warrants issued in connection with credit facility	$	1,156,695		$	-
Principal loan payments included in accounts payable	$	-		$	25,000
Shares issued for cashless exercise of options and warrants	$	-		$	1,868
Capital expenditure included in payables	$	6,622		$	-
Accrued payables and short-term loan directly paid off by credit facility	$	623,399		$	-
Prepaid expenses reclassed to deferred financing cost	$	70,000		$	-

See Notes to Unaudited Condensed Consolidated Financial Statements. 

4

ACCELERIZE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: ORGANIZATION, DESCRIPTION OF BUSINESS, AND BASIS OF PRESENTATION

Accelerize Inc., a Delaware corporation, incorporated on November 22, 2005, owns and operates CAKE, a Software-as-a-Service, or SaaS, platform providing online tracking and analytics solutions for advertisers and online marketers.

The Company provides software solutions for businesses interested in expanding their online advertising spend.

These unaudited condensed consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America, or GAAP. These unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the years ended December 31, 2017 and 2016, respectively, which are included in the Company’s December 31, 2017 Annual Report on Form 10-K filed with the United States Securities and Exchange Commission on March 27, 2018.  The Company assumes that the users of the interim financial information herein have read, or have access to, the audited consolidated financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation of these may be determined in that context. The results of operations for the three-month period ended March 31, 2018 are not necessarily indicative of results for the entire year ending December 31, 2018.

The accompanying consolidated financial statements have been prepared on a going concern basis which implies the Company will continue to meet its obligations for the next 12 months as of the date these financial statements are issued.  

The Company had a working capital deficit of $1,804,833 and an accumulated deficit of $32,799,143 as of March 31, 2018.  The Company also had a net loss of $1,256,459 and cash used in operating activities of $1,099,773.

Management’s plan to continue as a going concern includes raising capital in the form of debt or equity, increased gross profit from revenue growth and managing and reducing operating and overhead costs.  However, management cannot provide any assurances that the Company will be successful in accomplishing its plans. Management also cannot provide any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter will not increase the need for the Company to raise additional capital on an immediate basis.

However, based upon its plans, management believes that the Company is a going concern.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the results of operations of Cake Marketing UK Ltd., or the Subsidiary. All material intercompany accounts and transactions between the Company and its Subsidiary have been eliminated in consolidation.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of unaudited condensed consolidated 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. Included in these estimates are assumptions about collection of accounts receivable, useful life of fixed assets, and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate.

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. The Company has restricted cash as a result of its corporate card program through its bank. The bank requires a collateral which is placed in a money market account and can be increased or decreased at any time at the discretion of the Company. The Company’s restricted cash amounted to $50,000 at March 31, 2018 and December 31, 2017.

Accounts Receivable

The Company’s accounts receivable are due primarily from advertisers and marketers. Collateral is currently not required. The Company also maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make payments. The Company periodically reviews these estimated allowances, including an analysis of the customers’ payment history and creditworthiness, the age of the trade receivable balances and current economic conditions that may affect a customer’s ability to make payments as well as historical collection trends for its customers as a whole. Based on this review, the Company specifically reserves for those accounts deemed uncollectible or likely to become uncollectible. When receivables are determined to be uncollectible, principal amounts of such receivables outstanding are deducted from the allowance.

	March 31, 2018		December 31, 2017
Allowance for doubtful accounts	$	235,703	$	471,144

5

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 a financial institution and are insured by the Federal Deposit Insurance Corporation, or the FDIC, up to $250,000. During the three-month period ended March 31, 2018, 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 institution in which it holds deposits.

The Company's accounts receivable are due from customers, generally located in the United States, Europe, Asia, and Canada. None of the Company’s customers accounted for more than 10% of its accounts receivable at March 31, 2018 or December 31, 2017.  The Company does not require any collateral from its customers.

Revenue Recognition

The Company recognizes revenue on arrangements in accordance with ASC 2014-09, Revenue from Contracts with Customers, Topic 606, which supersedes the revenue recognition requirements in FASB ASC 605. The guidance primarily states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Revenue is recognized 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 SaaS revenues are generated from implementation and training fees and a monthly license fee, supplemented by per transaction fees paid by customers for monthly platform usage. The initial term of the customer contract is generally one year with one of two general cancellation policies. Each party may cancel the contract within the initial period or after the initial period, with 30-days’ prior notice. The Company does not provide any general right of return for its delivered items. Services associated with the implementation and training fees have standalone value to the Company’s customers, as there are third-party vendors who offer similar services to the Company’s services. Accordingly, they qualify as separate units of accounting. The Company allocates a fair value to each element deliverable at the recognition date and recognize such value when the services are provided. The Company bases the fair value of the implementation and training fees on third-party evidence and the monthly license fee on vendor-specific objective evidence. Fees charged by third-party vendors for implementation and training services do not vary significantly from the fees charged by the Company. Services associated with implementation and training fees are generally rendered within a month from the initial contract date. The value attributed to the monthly license fees as well as the fees associated with monthly transaction-based platform usage are recognized in the corresponding period.

Product Concentration

The Company generates its revenues from software licensing, usage, and related transaction fees.

Fair Value of Financial Instruments

The Company accounts for assets and liabilities measured at fair value on a recurring basis in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. 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.

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 liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

6

Additional Disclosures Regarding Fair Value Measurements

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and lines of credit approximate their fair value due to the short-term maturity of these items.

Advertising

The Company expenses advertising costs as incurred.

	Three-month periods ended March 31,
	2018		2017
Advertising expense	$	133,548	$	86,416

Income Taxes

Income taxes are accounted for in accordance with the provisions of ASC Topic 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.

Foreign Currency Translation

The Company’s reporting currency is U.S. Dollars. The functional currency of the Company’s Subsidiary in the United Kingdom is British Pounds. The translation from British Pounds to U.S. dollars is performed for asset and liability accounts using exchange rates in effect at the balance sheet date, equity accounts using historical exchange rates or rates in effect at the balance sheet date, and for revenue and expense accounts using the average exchange rate in effect during the period. The resulting translation adjustments are recorded as a component of Accumulated Other Comprehensive Income (Loss). Foreign currency translation gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations.

Software Development Costs

Costs incurred in the research and development of software products and significant upgrades and enhancements thereto during the preliminary project stage and the post-implementation operation stage are expensed as incurred. Costs incurred for maintenance and relatively minor upgrades and enhancements are expensed as incurred. Costs associated with the application development stage of new software products and significant upgrades and enhancements thereto are capitalized when 1) management implicitly or explicitly authorizes and commits to funding a software project and 2) it is probable that the project will be completed and the software will be used to perform the function intended. The Company capitalized internal-use software development costs of $375,000 during the three-month period ended March 31, 2018. The Company amortizes such costs once the new software products and significant upgrades and enhancements are completed. The unamortized internal-use software development costs amounted to approximately $4,196,000 and $3,926,000 at March 31, 2018 and December 31, 2017, respectively. The Company’s amortization expenses associated with capitalized software development costs amounted to approximately $105,000 and $134,000 during the three-month period ended March 31, 2018 and 2017, respectively. Amortization of internal-use software is reflected in cost of revenues.

Share-Based Payment

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation, or ASC 718. 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 an expense on a straight-line basis over the requisite service period, which is the vesting period.

The Company has elected to use the 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 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.

7

Common stock awards

The Company has granted common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of comprehensive loss in the same manner and charged to the same account as if such settlements had been made in cash.

Warrants

In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 6, Stockholders’ Equity.  

Segment Reporting

The Company generated revenues from one source, its SaaS business, during the three-month periods ended March 31, 2018 and 2017. The Company's chief operating decision maker evaluates the performance of the Company based upon revenues and expenses by functional areas as disclosed in the Company's statements of operations.

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350), which simplifies the goodwill impairment test. The effective date for ASU 2017-04 is for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of the new guidance on its financial statements.

In January 2016, the FASB issued ASU No. 2016‑01, Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance is effective in the first quarter of fiscal 2019. Early adoption is permitted for the accounting guidance on financial liabilities under the fair value option. The Company is currently evaluating the impact of the new guidance on its financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and subsequently amended the guidance relating largely to transition considerations under the standard in January 2017. The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company is currently evaluating the impact of the new guidance on its financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. Since the Company has not acquired any material businesses, this standard has no impact on its financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The objective of this ASU is to eliminate the diversity in practice related to the classification of restricted cash or restricted cash equivalents in the statement of cash flows. For public business entities, this ASU is effective for annual and interim reporting periods beginning after December 15, 2017. The Company has adopted this standard on January 1, 2018, and it has had no material impact on its financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (ASU 2016-09), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This pronouncement is effective for annual reporting periods beginning after December 15, 2017. The Company has adopted this standard on January 1, 2018 and it has had no material impact on its financial statements.

Other accounting pronouncements have been issued but deemed by management to be outside the scope of relevance to the Company. 

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).  

	Three-month periods ended March 31,
	2018			2017
Numerator:
Net loss	$	(1,256,459	)	$	(55,224	)
Denominator:
Denominator for basic earnings per share-weighted average shares		65,939,709			65,262,289
Effect of dilutive securities-when applicable:
Stock options		-			-
Warrants		-			-
Denominator for diluted earnings per share-adjusted weighted-average shares and assumed conversions		65,939,709			65,262,289
Loss per share:
Basic	$	(0.02	)	$	(0.00	)
Diluted	$	(0.02	)	$	(0.00	)
Weighted-average anti-dilutive common share equivalents		23,063,359			16,275,714

8

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 consist of the following at:

	March 31, 2018			December 31, 2017
Computer equipment and software	$	450,858		$	431,497
Office furniture and equipment		130,205			120,420
Leasehold improvements		295,169			292,640
Total (1)		876,232			844,557
Accumulated depreciation (2)		(794,189	)		(775,152	)
Total		82,043			69,405
(1)  Includes (11,651) in foreign exchange translation
(2)  Includes 4,977 in foreign exchange translation
Intangible assets		6,812,726			6,437,726
Accumulated amortization		(2,617,203	)		(2,512,203	)
Total	$	4,195,523		$	3,925,523

	Three-month periods ended March 31,
	2018		2017
Depreciation expense	$	14,059	$	35,455
Amortization expense on internal software	$	105,000	$	133,573

During the three-month period ended March 31, 2017, the Company disposed of approximately $7,500 in computer equipment with a net book value of approximately $1,700 for proceeds of approximately $800. There were no such disposals in 2018.

NOTE 3: PREPAID EXPENSES

At March 31, 2018 and December 31, 2017, the Company’s prepaid expenses consisted primarily of prepaid insurance and tradeshow costs.

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NOTE 4: DEFERRED REVENUES

The Company’s deferred revenues consist of prepayments made by certain of the Company’s customers and undelivered implementation and training fees.  The Company decreases the deferred revenues by the amount of the services it renders to such clients when provided.

	March 31, 2018		December 31, 2017
Deferred revenues	$	476,831	$	299,937

NOTE 5: CREDIT FACILITY AND LOAN

Agility Loan 

	March 31, 2018			December 31, 2017
Agility Loan		625,000			625,000
Amendment, added to balance		400,000			400,000
Principal Payment of Agility Loan		(450,000	)		(425,000	)
Less Loan repayment		(575,000	)		-
Less: Deferred financing cost		-			-
	$	-		$	600,000

On March 11, 2016, the Company entered into a subordinated loan, or the Agility Loan, with Agility Capital II, LLC, or Agility Capital, which provides for total availability of $625,000 and was to originally mature, prior to amendment, on March 31, 2017. The Agility Loan has a fixed interest rate of 12% per year and requires $25,000 monthly amortization payments beginning on June 1, 2016. The Agility Loan also requires fees of approximately $130,000 over the life of the loan, and is subject to a total aggregate minimum interest of $50,000 in the event of a prepayment. The Agility Loan contains covenants to achieve specified Adjusted EBITDA levels, as defined, limiting capital expenditures, restricting the Company’s ability to pay dividends, purchase and sell assets outside the ordinary course and incur additional indebtedness. As of December 31, 2017, and at repayment of the Agility Loan, the Company was in compliance with these covenants. The Agility Loan requires a security interest in all of the Company’s personal property and intellectual property, second in priority to the Lender and to SaaS Capital Funding II, LLC.

In connection with the Agility Loan, on June 30, 2016, as a result of outstanding amounts under the Agility Loan, the Company issued to Agility Capital a warrant to purchase up to 69,444 shares of the Company’s Common Stock at an exercise price of $0.45 per share. This warrant expires on March 11, 2021. The fair value of the warrant amounted to $15,880 and was capitalized as deferred financing costs, of which $0 and $3,970 was expensed during the three-month period ended March 31, 2018 and 2017, respectively.

On November 29, 2016, the Company entered into an amendment of the Agility Loan which waived any event of default and the breach of any covenant, representation, warranty, and any other agreement contained in the Agility Loan as a result of the entering into of the Settlement Agreement. On the date of the amendment, a loan modification fee in the amount of $100,000, fully earned and non-refundable, was added to the outstanding loan balance and shall accrue interest, expensed in the statement of operations. Additionally, the maturity date was extended to December 31, 2017. On November 29, 2016, the Company issued to Agility Capital a warrant to purchase up to 187,500 shares of the Company’s Common Stock at an exercise price of $0.40 per share. This warrant expires on November 29, 2021. The fair value of the warrant amounted to $42,427 and was capitalized as deferred financing costs, of which $0 and $9,791 was expensed during the three-month period ended March 31, 2018 and 2017, respectively.

On August 14, 2017, the Company entered into a consent to waiver of the Agility Loan, to permit the issuance of promissory notes to lenders, as further described below.

On November 8, 2017, the Company entered into the Third Amendment of the Agility Loan whereby Agility Capital agreed to loan an additional $300,000 to the Company, such that the aggregate principal amount owing to Agility Capital as of November 9, 2017 was $625,000. The Third Amendment extended the maturity date of the Agility Loan from December 31, 2017 to December 31, 2018. A loan modification fee of $125,000 was deducted from the Additional Loan amount. This arrangement was treated as a substantial modification of existing debt pursuant to the guidance of ASC 470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50”). Because the net present value of the modified notes was greater than 10% of the present value of the remaining cash flows under the old debt, the transaction was treated as a debt extinguishment and reissuance of a new debt instrument, with the fair value of $606,034 and therefore recorded $106,034 as a loss on debt extinguishment.  The carrying value of the $625,000 did not change as a result of the extinguishment since the discounts recognized at inception of these new notes were fully amortized at the time of the issuance. 

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On January 26, 2018, the Company repaid the Agility Loan by paying Agility Capital approximately $581,000 which terminated the loan agreement between the Company and Agility Capital and released Agility Capital’s security interest in Company assets. The Company owed $0 and $600,000 under the Agility Loan at March 31, 2018 and December 31, 2017, respectively.

Credit Facility - SaaS Capital Loan 

	March 31, 2018			December 31, 2017
SaaS Capital Loan, Total advances	$	9,903,000		$	9,903,000
Principal Payment of SaaS Capital Loan		(2,860,674	)		(2,198,616	)
Less: Deferred financing cost		(253,214	)		(245,584	)
Less: SaaS Capital Loan, short term (1)		(3,243,367	)		(3,055,812	)
	$	3,545,744		$	4,402,988

(1) Short-term portion constitutes scheduled amortization payments for the next 12 months which create immediate access to additional borrowing availability equal to the amount of amortization payments

On May 5, 2016, the Company entered into a loan and security agreement, or the SaaS Capital Loan, with SaaS Capital Funding II, LLC to borrow up to a maximum of $8,000,000. Initial amounts borrowed will accrue interest at the rate of 10.25% per annum with future amounts borrowed bearing interest at the greater of 10.25% or 9.21% plus the three-year treasury rate at the time of advance. Accrued interest on amounts borrowed is payable monthly for the first six months and thereafter 36 equal monthly payments of principal and interest is payable. Prepayments will be subject to a 10%, 6% or 3% of principal premium if prepaid prior to 12 months, between 12 and 24 months, or between 24 months and maturity, respectively. Advances may be requested until May 5, 2018. The initial minimum advance amount of $5,000,000, on May 5, 2016, was used to repay the outstanding Line of Credit balance of $4,572,223. A facility fee of $80,000 was paid by the Company in connection with the initial advance and an additional $80,000 is payable on May 5, 2017.

The SaaS Capital Loan contains customary covenants including, but not limited to, covenants to achieve specified Adjusted EBITDA levels and revenue renewal levels, limiting capital expenditures and restricting the Company's ability to pay dividends, purchase and sell assets outside the ordinary course and incur additional indebtedness. As of March 31, 2018, the Company was in compliance with such covenants. The occurrence of a material adverse change will be an event of default under the SaaS Capital Loan, in addition to other customary events of default. The Company granted SaaS Capital Funding II, LLC a security interest in all of the Company's personal property and intellectual property through the SaaS Capital Loan and the Patent, Trademark and Copyright Security Agreement between the Company and SaaS Capital Funding II, LLC.

On May 5, 2016, in connection with the SaaS Capital Loan, the Company issued to SaaS Capital Partners II, LP, an affiliate of SaaS Capital Funding II, LLC, a warrant to purchase up to 1,333,333 shares of the Company's common stock at an exercise price of $0.45 per share subject to certain adjustments for dividends, splits or reclassifications. The Warrant is exercisable until the earlier of May 5, 2026, or the date that is 5 years from the date the Company’s equity securities are first listed for trading on NASDAQ. The Company paid approximately $169,000 in financing costs through September 30, 2016. The fair value of the warrant amounted to $383,128 and was capitalized as deferred financing costs, of which $31,927 was expensed during the three-month periods ended March 31, 2018 and 2017.

On November 29, 2016, the Company entered into an amendment of the SaaS Capital Loan to receive consent from SaaS Capital to enter into the Settlement Agreement. The amendment required a loan modification fee of $120,000, payable at $10,000 a month for one year, expensed in the statement of operations. In connection with this amendment, the Company agreed to issue SaaS Capital a warrant to purchase up to 200,000 shares of our Common Stock at an exercise price of $0.36 per share. This warrant expires on November 29, 2026. The fair value of the warrant amounted to $60,185 which was fully expensed at December 31, 2016.

On May 10, 2017, the Company entered into a second amendment of the SaaS Capital Loan with SaaS Capital which adjusted the Minimum Adjusted EBITDA covenant of the SaaS Capital Loan from $0 to ($150,000) until August 31, 2017 to give the Company added flexibility in completing our hosting migration to a new platform and to allow for potentially augmented marketing and sales efforts.

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On June 16, 2017, the Company entered into a third amendment of the SaaS Capital Loan with SaaS Capital to provide that any advance made within 6 months of the final advance date will be for a 36-month period with interest only payments due from the date of advance until the final advance date.

On August 14, 2017, the Company entered into a fourth amendment of the SaaS Capital Loan with SaaS Capital to permit the issuance of promissory notes to lenders, further described below.

On November 8, 2017, the Company entered into a fifth amendment, or the Fifth Amendment, of the SaaS Capital Loan with SaaS Capital which adjusted the Minimum Adjusted EBITDA covenant of the SaaS Capital Loan from $0 to ($170,000) until October 31, 2017, to ($150,000) from November 1, 2017 to December 31, 2017, to ($100,000) from January 1, 2018 to May 31, 2018, to ($50,000) from June 1, 2018 to August 31, 2018, and to $0 thereafter. The Fifth Amendment added a new minimum liquidity covenant for a cash balance of $600,000 effective January 31, 2018. The Fifth Amendment also memorialized SaaS Capital’s waiver of the Minimum Adjusted EBITDA covenant for September 2017. In connection with the Fifth Amendment, the Company agreed to pay to SaaS Capital a fee of $375,000 upon the payment in full of all outstanding advances. 

On January 25, 2018, the Company entered into a sixth amendment, or the Sixth Amendment, of the SaaS Capital Loan to permit the Company to enter into the Beedie Credit Agreement, further described below, and to permit the repayment of Agility Capital and of the promissory notes to lenders, further described below. The Sixth Amendment also amended the Company’s adjusted EBITDA covenant and added covenants requiring a minimum gross margin and specified debt to monthly recurring revenue ratios. This arrangement was treated as a normal modification of existing debt pursuant to the guidance of ASC 470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50”). Because the net present value of the modified notes was lesser than 10% of the present value of the remaining cash flows under the old debt, the transaction was treated as a debt modification. In connection with the Sixth Amendment, the Company agreed to issue SaaS Capital a warrant to purchase up to 200,000 shares of its Common Stock at an exercise price of $0.35 per share, subject to certain adjustments for dividends, splits or reclassifications. The fair value of the warrant amounted to $56,834 and was capitalized as deferred financing costs, of which $3,157 and $0 was expensed during the three-month period ended March 31, 2018 and 2017, respectively.

During the three months ended March 31, 2018, the Company borrowed $0 from the SaaS Capital Loan, and made principal payments of $662,058.

The Company owed $7,042,326 and $7,704,384 under the SaaS Capital Loan at March 31, 2018 and December 31, 2017, respectively.

Promissory Notes

	March 31, 2018			December 31, 2017
Promissory Notes, Total	$	1,000,000		$	1,000,000
Principal Payment of Promissory Notes		(1,000,000	)		-
Promissory Notes, Outstanding balance		-			1,000,000
Less: Deferred financing cost		-			(82,868	)
Less: Promissory Notes, short term		-			(649,194	)
	$	-		$	267,938

On August 14, 2017, the Company borrowed an aggregate of $1,000,000 from seven lenders, or the Lenders, and issued promissory notes, or the Promissory Notes, for the repayment of the amounts borrowed. The Lenders are all accredited investors, certain of the Lenders are shareholders of the Company, one of the Lenders is an affiliate of the Company’s director, Greg Akselrud, and two of the lenders are each affiliated with a partner of Mr. Akselrud’s in the law firm of Stubbs Alderton and Markiles, LLP. The Promissory Notes are unsecured, have a maturity date of August 14, 2019 and all principal is due upon maturity. Amounts borrowed accrue interest at 12% per annum and accrued interest is payable monthly. The Company also issued to the Lenders three-year warrants to purchase an aggregate of 1,000,000 shares of the Company’s Common Stock at an exercise price of $0.35 per share. The fair value of the warrant amounted to $104,676 and was capitalized as deferred financing costs, of which $82,868 and $0 was expensed during the three-month period ended March 31, 2018 and 2017, respectively.

On January 26, 2018, the Company paid approximately $1,074,000 to repay the Promissory Notes issued to the Lenders, which includes approximately $65,000 in additional interest expenses due to the repayment date which was prior to the maturity date. The Company owed $0 and $1,000,000 under the Promissory Notes at March 31, 2018 and December 31, 2017 respectively.

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Beedie Credit Agreement

On January 25, 2018, the Company entered into a non-revolving term credit agreement, or the Beedie Credit Agreement, with Beedie Investments Limited, or Beedie, to borrow up to a maximum of $7,000,000. Outstanding principal will accrue interest at the rate of 12% per annum increasing to 14% per annum if the Company’s gross margins fall below amounts specified in the Beedie Credit Agreement. Accrued interest on outstanding principal is payable monthly in arrears. The Company paid Beedie a commitment fee of $175,000 and will pay to Beedie a monthly standby fee of 0.325% on the unadvanced and available amount. Advances may be requested until July 25, 2020 and outstanding principal must be paid in full on January 25, 2021. Prepayment, which if at the Company’s option must be made in full and is otherwise required following certain asset dispositions, will be subject to a fee of 24 months accrued interest less all interest previously paid by the Company on the outstanding principal amount if paid prior to January 25, 2020. The initial minimum advance amount of $4,500,000 was advanced on January 26, 2018. Approximately $581,000 of the initial advance was used to repay Agility Capital to terminate the loan agreement between the Company and Agility dated March 11, 2016, as amended, and to release Agility Capital’s security interest in Company assets. Approximately $1,074,000 of the initial advance was used to repay the Promissory Notes issued to the Lenders on August 14, 2017. The $175,000 commitment fee was capitalized as deferred financing costs, of which $9,722 and $0 was expensed during the three-month period ended March 31, 2018 and 2017, respectively.

The Beedie Credit Agreement contains customary covenants including, but not limited to, covenants to achieve specified adjusted EBITDA levels, to maintain minimum revenue renewal and liquidity levels, to maintain minimum gross margins, to maintain specified debt to monthly recurring revenue ratios, that limit capital expenditures and restrict the Company's ability to pay dividends, purchase and sell assets outside the ordinary course, and that limit the Company’s ability to incur additional indebtedness. The occurrence of a material adverse change will be an event of default under the Beedie Credit Agreement, in addition to other customary events of default. Default interest will be charged at 18% per annum. The Company granted Beedie a security interest, subordinated to the security interest of SaaS Capital, in all of the Company's assets through a pledge and security agreement, patent security agreement and trademark security agreement, each between the Company and Beedie. As additional security, the Company’s Subsidiary issued an unlimited guarantee to Beedie. Beedie is entitled to board of director observation rights during the term of the Beedie Credit Agreement. 

In connection with the Beedie Credit Agreement, the Company issued to Beedie a warrant, or the Beedie Warrant, to purchase up to 4,500,000 shares of the Company's common stock at an exercise price of $0.35 per share subject to certain adjustments for dividends, splits or reclassifications, and a weighted average adjustment for certain issuances of common stock below the exercise price prior to January 26, 2019. Up to 2,500,000 additional shares of common stock under the Beedie Warrant will be exercisable on a pro rata basis to additional amounts borrowed if and when advanced under the Beedie Credit Agreement. The Company adopted ASU 2017-11 which revises ASC 815-10-15-74 to allow instruments with a down round features to qualify for equity classification. Under the new guidance, the issuer would recognize the value of the feature only when it is activated and there is an actual reduction of the strike price or conversion feature.  The value of the adjustment is then to be recorded as deemed dividend and a reduction of income available to common stockholders. The fair value of the warrant amounted to $1,099,861 and was capitalized as deferred financing costs, of which $61,103 and $0 was expensed during the three-month period ended March 31, 2018 and 2017, respectively.

The Company recognized amortization and interest expenses in connection with the credit facility and loans as follows. 

	Three-month periods ended
	March 31,
	2018		2017
Amortization expense associated with the credit facility and loan	$	202,898	$	59,807
Interest expense associated with the credit facility and loan	$	373,257	$	196,590
Other finance fees associated with the credit facility and loan	$	28,655	$	24,125

NOTE 6: STOCKHOLDERS’ DEFICIT

Common Stock

There were no exercises of options during the three-month period ended March 31, 2018. During the three-month period ended March 31, 2017, the Company issued 1,707,692 shares of its Common Stock pursuant to the cashless exercise of 2,400,000 options.

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As of March 31, 2018, and December 31, 2017, there were 65,939,709 shares of Common Stock issued and outstanding.

Restricted Stock

During 2017 and 2016, the Company issued 120,000 restricted shares of its Common Stock, at a value of $0.50 per share, vesting in 4 equal quarterly increments commencing on July 1, 2017 and July 1, 2016, to each of its non-employee directors as partial annual compensation for services as a director. As of March 31, 2018 and 2017, these restricted shares were fully issued. The Company recorded expenses of $30,000 during the three-month periods ended March 31, 2018 and 2017. $30,000 remained unvested as of March 31, 2018 and 2017.

Warrants

There were no exercises of warrants during the three-month period ended March 31, 2018. During the three-month period ended March 31, 2017, the Company issued 160,096 shares of its Common Stock pursuant to the cashless exercise of 225,000 warrants.

During the three months ended March 31, 2018, the Company issued 200,000 and 4,500,000 warrants exercisable at a price of $0.35 per share and which expire on January 25, 2028 and January 25, 2024, respectively. The fair value of these warrants amounted to $56,834 and $1,099,861, respectively, and were recognized as deferred financing costs and amortized using the effective interest method over the terms of the associated loan. During this same period, 58,824 warrants expired. 

During the three months ended March 31, 2017, no new warrants were issued and 46,875 warrants expired. 

As of March 31, 2018, and December 31, 2017, there were 16,110,517 and 11,469,341 warrants issued and outstanding, respectively, with a weighted average price $0.62 and $0.74, respectively.

The Company recorded expenses of $61,050 and $125,867 during the three months ended March 31, 2018 and 2017, respectively, related to warrants granted to employees in prior years.

Options

The Company generally recognizes its share-based payment over the vesting terms of the underlying options.

	Three-month periods ended March 31,
	2018			2017
Weighted-average grant date fair value	$	0.40		$	0.43
Fair value of options, recognized as selling, general, and administrative expenses	$	8,303		$	63,832
Number of options granted		-			-
Number of options expired or forfeited		(45,000	)		(257,500	)

As of March 31, 2018 and December 31, 2017, there were 8,257,500 and 8,302,500 options, respectively, issued and outstanding with a weighted average price of $0.40.

The total compensation cost related to non-vested awards not yet recognized amounted to $35,382 at March 31, 2018 and the Company expects that it will be recognized over the following 30 months.

NOTE 7: COMPREHENSIVE LOSS

Comprehensive loss includes changes in equity related to foreign currency translation adjustments. The following table sets forth the reconciliation from net loss to comprehensive loss for the three-month periods ended March 31, 2018 and 2017:

	Three-month periods ended March 31,
	2018			2017
Net loss	$	(1,256,459	)	$	(55,224	)
Other comprehensive loss:
Foreign currency translation adjustment		17,630			4,080
Comprehensive loss	$	(1,238,829	)	$	(51,144	)

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The following table sets forth the balance in accumulated other comprehensive loss as of March 31, 2018 and December 31, 2017, respectively:

	March 31, 2018			December 31, 2017
Accumulated other comprehensive loss	$	(23,910	)	$	(41,540	)

NOTE 8: SEGMENTS

The Company operates in one business segment. Percentages of sales by geographic region for the three-month periods ended March 31, 2018 and 2017 were approximately as follows:

	Three-month periods ended March 31,
	2018			2017
United States		60	%		59	%
Europe		20	%		21	%
Other		20	%		20	%

NOTE 9: COMMITMENTS AND CONTINGENCIES

During August 2017, the Company entered into an amendment to its original January 2014 lease for certain office space in Newport Beach.  Pursuant to the lease amendment, effective March 1, 2018, the premises shall be expanded to include an additional 1,332 usable square feet such that the premises shall consist of 11,728 usable square feet in the aggregate. In addition, pursuant to the terms of the lease amendment, the Company extended the term of the lease agreement until June 30, 2023. Commencing on March 1, 2018, the initial base rent for the premises will be $38,702 per month for the first year and increasing to $44,566 per month by the end of the term.

During October 2016, the Company amended its original May 2014 sublease and entered into a 21-month sublease in Newport Beach, effective June 1, 2016. The monthly base rent was approximately $4,100 through the end of the sublease term, in February 2018. As of March 31, 2018, this sublease has expired.

During July 2014, the Company entered into a five-year lease for certain office space in a business center in London, England, which commenced on July 30, 2014. The base rent is GBP 89,667 (approximately $115,000) per year and the estimated service charges for the lease are GBP 45,658 (approximately $56,000) per year.

Legal Proceedings

From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company is not presently a party to any legal proceedings that it currently believes, if determined adversely to the Company, would individually or taken together have a material adverse effect on the Company’s business, operating results, financial condition or cash flows.

On November 29, 2016, the Company entered into the Settlement Agreement with Jeff McCollum, or McCollum, to settle pending litigation between the Company and McCollum in the Superior Court of the State of California related to McCollum’s termination as an executive officer of the Company on September 8, 2014. In connection with the Settlement Agreement, McCollum surrendered to the Company a stock certificate representing 1,890,000 shares of the Company’s Common Stock, or the Shares, and for dismissal with prejudice of the cross-complaint and action against the Company brought by McCollum. The Company agreed to pay McCollum a total of $2,700,000. $1,000,000 of this total has already been paid as of January 18, 2017, of which the Company’s insurance carrier contributed $500,000. The remaining $1,700,000 will be paid in 48 equal monthly installments starting on July 1, 2017. The Company previously cancelled McCollum’s options to purchase up to 6,600,000 shares of the Company’s Common Stock at exercise prices of $0.15 or $0.31 per share. The Company cancelled the 1,890,000 Shares and thereafter the Company’s issued and outstanding common stock decreased by approximately 3%. During 2016, the Company recorded a loss on legal settlement of $2,200,000, net of the reimbursement of $500,000, which the Company received from its insurance carrier in December 2016. The outstanding settlement balance amounted to $1,381,250 as of March 31, 2018 pursuant to the Settlement Agreement, of which $425,000 has been classified as accounts payable and accrued expenses and $956,250 as other long-term liabilities, in the accompanying condensed consolidated balance sheet.

NOTE 10: SUBSEQUENT EVENTS  

On May 11, 2018, the Company granted a five-year warrant to Paul Dumais, its Senior Vice President Product Development, to purchase up to 500,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share, vesting in equal quarterly installments over 3 years commencing on July 1, 2018, which may be exercised in full or part for cash or via cashless exercise.

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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2017. Certain statements in this discussion and elsewhere in this report constitute forward-looking statements. See “Cautionary Statement Regarding Forward Looking Information’’ elsewhere in this report. Because this discussion involves risk and uncertainties, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We own and operate CAKE and getcake.com, a marketing technology company that provides a proprietary solution for advanced analytics, attribution and campaign optimization for digital marketers. Our powerful software-as-a service, or SaaS, is an enterprise solution that has been an industry standard for advertisers, agencies, networks and publishers to measurably analyze and improve digital advertising spend. We currently have over 500 customers driving billions of consumer actions monthly through the CAKE enterprise platform.

In late 2017, we introduced Journey by CAKE, a new product family created specifically for brand advertisers and digital agencies. Journey by CAKE is a cloud-based solution that collects and analyzes customer journey data using multi-touch attribution for marketing campaign optimization. Journey by CAKE delivers accurate and actionable insights about the previously missing steps of the anonymous customer journey. With this extended view into vital customer interactions, Journey provides the intelligence needed to move unknown consumers to known customers, boosting campaign performance and return on advertising spend (RoAS). The main features are: Insights, a centralized dashboard which provides valuable customer journey insights that drive real-time decisions; Attribution, campaign spend optimization based on positional and data-driven attribution of key steps in the customer journey; and Connections, seamless integrations with digital media and marketing tools which make collecting customer journey data easier than ever. Journey by CAKE enables brands to move beyond the confines of siloed data and provides customer journey analytics for marketers, in real time.

On January 12, 2017, we announced that the CAKE platform was significantly enhanced with a new unified technical architecture and platform to collect and support high-traffic volumes. Now our industry-leading technology not only gathers granular information about the customer path to conversion, but also leverages data science and machine learning to further understand and maximize RoAS. Additionally, our patent-pending algorithmic attribution for predictive analytics clearly and accurately show marketers how to optimize campaigns. These new capabilities enhance our existing rules-driven attribution to programmatically allow marketers to analyze complex customer journeys; arming advertisers with more actionable insights needed to effectively measure the true impact of each media channel and maximize revenue for any given level of spending. 

The CAKE SaaS proprietary marketing platform is used by some of the world’s leading companies and largest customer-base of enterprise performance marketing networks and advertisers. CAKE’s platform is based on reliable, feature rich technology and is bolstered by the industry’s leading customer service and top-tier technology partners, assuring the highest level of uptime.

On February 14, 2017, Gartner, Inc. once again named us as a Vendor to Watch in its “Magic Quadrant for Digital Marketing Hubs” report. This research is intended for chief marketing officers (CMOs), chief marketing technologists and other digital marketing leaders involved in the selection of core systems to support digital marketing business requirements. According to Gartner, our solution enables hub-like multichannel data management and onboarding capabilities. CAKE is for enterprise performance marketers looking to track attribution and optimize data-driven lead generation and customer acquisition through affiliate and other digital marketing channels.  

Our revenue model is based on monthly recurring license fees, usually pursuant to an annual contract. The contracts typically include a prescribed volume of clicks, impressions, or other events, and are subject to overage charges for volumes in excess of the included amounts. We also charge training and implementation fees, and in certain cases, professional services fees and royalties. A majority of our revenue is derived from clients in the United States. During November 2012, we formed Cake Marketing UK Ltd, or the Subsidiary, a private limited company, which is our wholly-owned subsidiary located in the United Kingdom in order to better provide our services in the European market.

Our business is currently headquartered in Newport Beach, California, with operations in Santa Monica, California, London, England and New Delhi, India, allowing us to provide global support to our client base. The CAKE platform supports multiple languages and currencies so online marketers can track the performance of their marketing campaigns and better target their digital spend on a global scale.

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Our training, support personnel, hosting and cloud-based infrastructure contribute to our cost of operating the business. We anticipate more spending in these areas while we continue to grow, and we can foresee some savings in infrastructure cost due to economies of scale. In addition, development resources were required to continue to enhance our products. Those resources were used to extend our software platform and to create deeper integrations to third-party technologies that include, but are not limited to, Google AdWords, Bing Ads, Facebook, DoubleClick Campaign Manager (DCM), Marketo and others. 

We intend to continue to grow revenues by investing in sales, marketing, and product development and innovation. We allocated a portion of our marketing budget to being present at tradeshows, securing coverage in industry publications, and providing the support documentation required by sales initiatives. Additional efforts will be made to speak at industry events, write for media outlets and implement digital marketing campaigns, increasing awareness of the CAKE solutions and the thought leadership driving product development.

Our principal offices are located at 20411 SW Birch Street, Suite 250, Newport Beach, CA 92660. Our telephone number there is: (949) 548-2253. Our corporate website is: www.accelerize.com, the contents of which are not part of this quarterly report.

Our Common Stock is quoted on the OTCQB Marketplace under the symbol "ACLZ." 

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Results of Operations

ACCELERIZE INC.

UNAUDITED CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

							Increase/			Increase/
	Three-month periods ended						(Decrease)			(Decrease)
	March 31,						in $ 2018			in % 2018
	2018			2017			vs 2017			vs 2017
Revenues	$	5,992,748		$	5,956,724		$	36,024			0.6	%
Cost of revenues		2,353,860			1,545,345			808,515			52.3	%
Gross Profit		3,638,888			4,411,379			(772,491	)		-17.5	%
Operating expenses:
Research and development		1,122,623			1,043,119			79,504			7.6	%
Sales and marketing		1,170,484			1,216,490			(46,006	)		-3.8	%
General and administrative		1,999,886			1,926,242			73,644			3.8	%
Total operating expenses		4,292,993			4,185,851			107,142			2.6	%
Operating (loss) income		(654,105	)		225,528			(879,633	)		-390.0	%
Other income (expense):
Other income (loss)		761			(300	)		1,061			353.7	%
Other expense		(603,115	)		(280,452	)		(322,663	)		-115.1	%
Total other expenses		(602,354	)		(280,752	)		(321,602	)		-114.6	%
Net loss	$	(1,256,459	)	$	(55,224	)	$	(1,201,235	)		-2175.2	%

18

Discussion of Results for Three-Month Periods Ended March 31, 2018 and 2017

Revenues

	Three Months Ended March 31,				%
	2018		2017		Change
Revenues	$	5,992,748	$	5,956,724		0.6	%

We generate revenues from monthly recurring license fees, overage fees (based on volume of clicks, impressions, or leads), training and implementation fees, and in certain cases, professional services fees and royalties. Our revenue breakdown for the three-month periods ended March 31, 2018 and 2017 were as follows.

	Three Months Ended March 31,				%
	2018		2017		Change
License	$	4,650,688	$	4,934,155		-5.7	%
Overage		1,075,618		797,431		34.9	%
Other		266,442		225,138		18.3	%
Total	$	5,992,748	$	5,956,724		0.6	%

The slight increase in total revenues during the three-month period ended March 31, 2018, when compared to the same period in 2017, is mainly due to a 35% increase in overage fees from our existing customers resulting from greater adoption and higher usage of our SaaS platform and a 20% increase in other revenue, which consists primarily of professional service fees and other partner revenue which was offset by a 6% decrease in license fees when compared to the same period in 2017. Our monthly license fee revenue constitutes the contractually recurring portion of our revenue and comprises the bulk of our total revenue, or 78% during the three-month period ended March 31, 2018. Our number of clients increased 3% during the three-month period ended March 31, 2018, when compared to the same period in 2017 and our average monthly revenue per customer decreased 3% during the three-month period ended March 31, 2018 when compared to the same period in 2017.

We believe that our SaaS revenues will continue to increase during the remainder of 2018.

Cost of Revenues

	Three Months Ended March 31,				%
	2018		2017		Change
Cost of revenues	$	2,353,860	$	1,545,345		52.3	%

Cost of revenues consists primarily of web hosting and personnel costs associated with supporting customer on-boarding and training activities, consisting of salaries, benefits, and related infrastructure costs. Web hosting fees are partially correlated to our revenues, depending on each specific agreement we have with our clients. The majority of our clients’ services are hosted on non-dedicated servers, on which capacity can be maximized by server, while certain customers prefer to have their services hosted on dedicated servers, on which capacity can only be maximized by customer and by server. Additionally, our resources associated with on-boarding are usually allocated at the beginning of the relationship with the new customer (usually, the first two months). Accordingly, our personnel costs associated with supporting customer on-boarding activities are not necessarily correlated with our revenues.

During the three-month period ended March 31, 2018, when compared to the same period in 2017, cost of revenues increased mainly as a result of higher web hosting fees incurred to support our operations, which increased by approximately $860,000.

We believe that our cost of revenues will stabilize during the remainder of 2018.

Research and Development Expenses

	Three Months Ended March 31,				%
	2018		2017		Change
Research and development	$	1,122,623	$	1,043,119		7.6	%

19

Research and development expenses consist primarily of personnel costs associated with the enhancement and the maintenance of our SaaS product offerings, consisting of salaries, benefits, and related infrastructure costs, offset by capitalized software development costs.  

Our research and development expenses increased during the three-month period ended March 31, 2018, when compared to the same period in 2017 mainly due to lower capitalized software expenses of approximately $140,000.

We believe that our research and development expenses will remain flat during the remainder of 2018.

 Sales and Marketing Expenses

	Three Months Ended March 31,				%
	2018		2017		Change
Sales and marketing	$	1,170,484	$	1,216,490		-3.8	%

Sales and marketing expenses primarily consist of personnel costs associated with the sale and the marketing of our SaaS products, including salaries, benefits, and related infrastructure, as well as the costs of related marketing programs, such as trade shows and public relations.

We experienced a slight decrease in sales and marketing expenses during the three-month period ended March 31, 2018, when compared to the same period in 2017.

We believe that our sales and marketing expenses will increase slightly in 2018 as we continue to execute on proven marketing programs.

General and Administrative Expenses

	Three Months Ended March 31,				%
	2018		2017		Change
General and administrative	$	1,999,886	$	1,926,242		3.8	%

General and administrative expenses primarily consist of personnel costs associated with the support of our operations consisting of salaries, benefits, and related infrastructure. Also included are non-personnel costs, such as audit and legal fees, as well as professional fees, insurance, investor relations, and other corporate expenses.

General and administrative expenses during the three-month period ended March 31, 2018, when compared to the same period in 2017, remained relatively unchanged.

We believe that our general and administrative expenses will increase during the remainder of 2018 at lower percentages than our anticipated increase in revenues as we continue to increase the scope of our operations.

Other (Loss) Income

	Three Months Ended March 31,					%
	2018		2017			Change
Other (loss) income	$	761	$	(300	)		353.7	%

Other Income during the three-month periods ended March 31, 2018 and 2017 consisted mainly of the sale of non-inventory assets.

20

Other Expense

	Three Months Ended March 31,				%
	2018		2017		Change
Other expense	$	603,115	$	280,452		-115.1	%

Other expenses consist of interest charges and amortization of deferred financing costs associated with our loans.

The increase in interest expenses during the three-month period ended March 31, 2018 when compared to the same period in 2017, is primarily due to higher levels of borrowings we have made from time to time under the credit facility.

Liquidity and Capital Resources

We had a working capital deficit of $1,804,833 and an accumulated deficit of $32,799,143 as of March 31, 2018.  We also had a net loss of $1,256,459 and cash used in operating activities of $1,099,773.

Our plan to continue as a going concern includes raising capital in the form of debt or equity, increased gross profit from revenue growth and managing and reducing operating and overhead costs.  However, we cannot provide any assurances that we will be successful in accomplishing our plans. We also cannot provide any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter will not increase the need for us to raise additional capital on an immediate basis.

However, based upon our plans, we believe that we are a going concern. 

	Ending balance at March 31,						Average balance during three months ended March 31,
	2018			2017			2018		2017
Cash	$	805,880		$	513,641		$	486,382	$	1,096,884
Restricted cash		50,000			50,000			50,000		50,000
Accounts receivable		2,856,152			2,322,942			2,774,394		2,276,276
Accounts payable and accrued expenses		2,242,116			1,910,041			2,360,600		2,274,525
Short term line of credit, net of deferred financing cost		3,243,367	(1)		2,221,312	(1)		3,149,590		2,130,129
Short term loan, net of deferred financing cost		-			445,628			612,097		476,248
Long term loan, net of deferred financing cost		6,841,709			4,515,359			5,622,349		4,551,793
Long term other liabilities		956,250			1,381,250			1,009,375		1,434,375

(1) Short-term portion constitutes scheduled amortization payments for the next 12 months which create immediate access to additional borrowing availability equal to the amount of amortization payments

At March 31, 2018 and 2017, 43% and 42%, respectively, of our total assets consisted of cash and cash equivalents and accounts receivable.

We extend unsecured credit in the normal course of business to our customers. The determination of the appropriate amount of the reserve for uncollectible accounts is based upon a review of the amount of credit extended, the length of time each receivable has been outstanding, and the specific customers from whom the receivables are due.

The objective of liquidity management is to ensure that we have ready access to sufficient funds to meet commitments while implementing our growth strategy. Our primary sources of liquidity historically include the sale of our securities and borrowings from our loans and credit facilities.

We do not have any material commitments for capital expenditures of tangible items.

Agility Loan

On March 11, 2016, we entered into a subordinated loan with Agility Capital which provides for total availability of $625,000 and was to originally mature, prior to amendment, on March 31, 2017. The Agility Loan has a fixed interest rate of 12% per year and requires $25,000 monthly amortization payments beginning on June 1, 2016. The Agility Loan also requires fees of approximately $130,000 over the life of the loan, and is subject to a total aggregate minimum interest of $50,000 in the event of a prepayment. The Agility Loan contains covenants to achieve specified Adjusted EBITDA levels, as defined, limiting capital expenditures, restricting our ability to pay dividends, purchase and sell assets outside the ordinary course and incur additional indebtedness. As of December 31, 2017, and at repayment of the Agility Loan, we were in compliance with these covenants. The Agility Loan requires a security interest in all of our personal property and intellectual property, second in priority to SaaS Capital Funding II, LLC.

In connection with the Agility Loan, on June 30, 2016, as a result of outstanding amounts under the Agility Loan, we issued to Agility Capital a warrant to purchase up to 69,444 shares of our Common Stock at an exercise price of $0.45 per share. This warrant expires on March 11, 2021. The fair value of the warrant amounted to $15,880 and was capitalized as deferred financing costs, of which $3,970 and $0 was expensed during the three-month periods ended March 31, 2017 and 2016, respectively.

On November 29, 2016, we entered into an amendment of our Agility Loan, or the Agility Loan Amendment, which waived any event of default and the breach of any covenant, representation, warranty, and any other agreement contained in the Agility Loan as a result of our entering into the Settlement Agreement. On the date of the amendment, a loan modification fee in the amount of $100,000, fully earned and non-refundable, was added to the outstanding loan balance and shall accrue interest, expensed in the statement of operations. Additionally, the maturity date was extended to December 31, 2017. On November 29, 2016, we issued to Agility Capital a warrant to purchase up to 187,500 shares of our Common Stock at an exercise price of $0.40 per share. This warrant expires on November 29, 2021. The fair value of the warrant amounted to $42,427 and was capitalized as deferred financing costs, of which $9,791 and $0 was expensed during the three-month periods ended March 31, 2017 and 2016, respectively.

21

On August 14, 2017, we entered into a consent to waiver of the Agility Loan, to permit the issuance of the Promissory Notes to the Lenders, as further described below.

On November 8, 2017, we entered into the Third Amendment of the Agility Loan whereby Agility Capital agreed to loan an additional $300,000 to us, such that the aggregate principal amount owing to Agility Capital as of November 9, 2017 was $625,000. The Third Amendment extended the maturity date of the Agility Loan from December 31, 2017 to December 31, 2018. A loan modification fee of $125,000 was deducted from the Additional Loan amount. This arrangement was treated as a substantial modification of existing debt pursuant to the guidance of ASC 470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50”). Because the net present value of the modified notes was greater than 10% of the present value of the remaining cash flows under the old debt, the transaction was treated as a debt extinguishment and reissuance of a new debt instrument, with the fair value of $606,034 and therefore recorded $106,034 as a loss on debt extinguishment.  The carrying value of the $625,000 did not change as a result of the extinguishment since the discounts recognized at inception of these new notes were fully amortized at the time of the issuance. 

On January 26, 2018, we repaid the Agility Loan by paying Agility Capital approximately $581,000 which terminated the loan agreement between us and Agility Capital and released Agility Capital’s security interest in our assets. We owed $0 and $600,000 under the Agility Loan at March 31, 2018 and December 31, 2017, respectively.

Credit Facility - SaaS Capital Loan

On May 5, 2016, we entered into the SaaS Capital Loan, with SaaS Capital Funding II, LLC to borrow up to a maximum of $8,000,000. Initial amounts borrowed will accrue interest at the rate of 10.25% per annum with future amounts borrowed bearing interest at the greater of 10.25% or 9.21% plus the three-year treasury rate at the time of advance. Accrued interest on amounts borrowed is payable monthly for the first six months and thereafter 36 equal monthly payments of principal and interest is payable. Prepayments will be subject to a 10%, 6% or 3% of principal premium if prepaid prior to 12 months, between 12 and 24 months, or between 24 months and maturity, respectively. Advances may be requested until May 5, 2018. The initial minimum advance amount of $5,000,000, on May 5, 2016, was used to repay the outstanding Line of Credit balance of $4,572,223. A facility fee of $80,000 was paid by us in connection with the initial advance and an additional $80,000 is payable on May 5, 2017. Additionally, the Company incurred initial financing costs of $160,000 which was capitalized as deferred financing costs, of which $13,333 and $0 was expensed during the three-month periods ended March 31, 2017 and 2016, respectively.

The SaaS Capital Loan contains customary covenants including, but not limited to, covenants to achieve specified Adjusted EBITDA levels and revenue renewal levels, limiting capital expenditures and restricting our ability to pay dividends, purchase and sell assets outside the ordinary course and incur additional indebtedness. As of March 31, 2017, we were in compliance with such covenants. The occurrence of a material adverse change will be an event of default under the SaaS Capital Loan, in addition to other customary events of default. We granted SaaS Capital Funding II, LLC a security interest in all of our personal property and intellectual property through the SaaS Capital Loan and the Patent, Trademark and Copyright Security Agreement between us and SaaS Capital Funding II, LLC.

On May 5, 2016, in connection with the SaaS Capital Loan, we issued to SaaS Capital Partners II, LP, an affiliate of SaaS Capital Funding II, LLC, a warrant to purchase up to 1,333,333 shares of our common stock at an exercise price of $0.45 per share subject to certain adjustments for dividends, splits or reclassifications. The Warrant is exercisable until the earlier of May 5, 2026, or the date that is 5 years from the date our equity securities are first listed for trading on NASDAQ. We paid approximately $169,000 in financing costs through December 31, 2016. The fair value of the warrant amounted to $383,128 and was capitalized as deferred financing costs, of which $31,927 and $0 was expensed during the three-month periods ended March 31, 2017 and 2016, respectively.

On November 29, 2016, we entered into an amendment of our SaaS Capital Loan to receive consent from SaaS Capital to enter into the Settlement Agreement. The amendment required a loan modification fee of $120,000, payable at $10,000 a month for one year, expensed in the statement of operations. In connection with this amendment, we agreed to issue SaaS Capital a warrant to purchase up to 200,000 shares of our Common Stock at an exercise price of $0.36 per share. This warrant expires on November 29, 2026. The fair value of the warrant amounted to $60,185 and was fully expensed at December 31, 2016.

22

On May 10, 2017, we entered into a second amendment of the SaaS Capital Loan with SaaS Capital which adjusted the Minimum Adjusted EBITDA covenant of the SaaS Capital Loan from $0 to ($150,000) until August 31, 2017 to give us added flexibility in completing our hosting migration to a new platform and to allow for potentially augmented marketing and sales efforts.

On June 16, 2017, we entered into a third amendment of the SaaS Capital Loan with SaaS Capital to provide that any advance made within 6 months of the final advance date will be for a 36-month period with interest only payments due from the date of advance until the final advance date.

On August 14, 2017, we entered into a fourth amendment of the SaaS Capital Loan with SaaS Capital to permit the issuance of the Promissory Notes to the Lenders.

On November 8, 2017, we entered into the Fifth Amendment which adjusted the Minimum Adjusted EBITDA covenant of the SaaS Capital Loan from $0 to ($170,000) until October 31, 2017, to ($150,000) from November 1, 2017 to December 31, 2017, to ($100,000) from January 1, 2018 to May 31, 2018, to ($50,000) from June 1, 2018 to August 31, 2018, and to $0 thereafter. The Fifth Amendment added a new minimum liquidity covenant for a cash balance of $600,000 effective January 31, 2018. The Fifth Amendment also memorialized SaaS Capital’s waiver of the Minimum Adjusted EBITDA covenant for September 2017. In connection with the Fifth Amendment, we agreed to pay to SaaS Capital a fee of $375,000 upon the payment in full of all outstanding advances. 

On January 25, 2018, we entered into the Sixth Amendment to permit us to enter into the Beedie Credit Agreement and to permit the repayment of Agility Capital and of the Promissory Notes to the Lenders. The Sixth Amendment also amended our adjusted EBITDA covenant and added covenants requiring a minimum gross margin and specified debt to monthly recurring revenue ratios. This arrangement was treated as a normal modification of existing debt pursuant to the guidance of ASC 470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50”). Because the net present value of the modified notes was lesser than 10% of the present value of the remaining cash flows under the old debt, the transaction was treated as a debt modification. In connection with the Sixth Amendment, we agreed to issue SaaS Capital a warrant to purchase up to 200,000 shares of our Common Stock at an exercise price of $0.35 per share, subject to certain adjustments for dividends, splits or reclassifications. The fair value of the warrant amounted to $56,834 and was capitalized as deferred financing costs, of which $3,157 and $0 was expensed during the three-month period ended March 31, 2018 and 2017, respectively.

During the three months ended March 31, 2018, we borrowed $0 from the SaaS Capital Loan, and made principal payments of $662,058.

We owed $7,042,326 and $7,704,384 under the SaaS Capital Loan at March 31, 2018 and December 31, 2017, respectively.

Promissory Notes

On August 14, 2017, we borrowed an aggregate of $1,000,000 from the Lenders, and issued the Promissory Notes for the repayment of the amounts borrowed. The Lenders are all accredited investors, certain of the Lenders are our shareholders, one of the Lenders is an affiliate of our director, Greg Akselrud, and two of the lenders are each affiliated with a partner of Mr. Akselrud’s in the law firm of Stubbs Alderton and Markiles, LLP. The Promissory Notes are unsecured, have a maturity date of August 14, 2019 and all principal is due upon maturity. Amounts borrowed accrue interest at 12% per annum and accrued interest is payable monthly. We also issued to the Lenders three-year warrants to purchase an aggregate of 1,000,000 shares of our Common Stock at an exercise price of $0.35 per share. The fair value of the warrant amounted to $104,676 and was capitalized as deferred financing costs, of which $82,868 and $0 was expensed during the three-month period ended March 31, 2018 and 2017, respectively.

On January 26, 2018, we paid approximately $1,074,000 to repay the Promissory Notes issued to the Lenders, which includes approximately $65,000 in additional interest expenses due to the repayment date which was prior to the maturity date. We owed $0 and $1,000,000 under the Promissory Notes at March 31, 2018 and December 31, 2017 respectively.

23

Beedie Credit Agreement

On January 25, 2018, we entered into the Beedie Credit Agreement to borrow up to a maximum of $7,000,000. Outstanding principal will accrue interest at the rate of 12% per annum increasing to 14% per annum if our gross margins fall below amounts specified in the Beedie Credit Agreement. Accrued interest on outstanding principal is payable monthly in arrears. We paid Beedie a commitment fee of $175,000 and will pay to Beedie a monthly standby fee of 0.325% on the unadvanced and available amount. Advances may be requested until July 25, 2020 and outstanding principal must be paid in full on January 25, 2021. Prepayment, which if at our option must be made in full and is otherwise required following certain asset dispositions, will be subject to a fee of 24 months accrued interest less all interest previously paid by us on the outstanding principal amount if paid prior to January 25, 2020. The initial minimum advance amount of $4,500,000 was advanced on January 26, 2018. Approximately $581,000 of the initial advance was used to repay Agility Capital to terminate the loan agreement between us and Agility dated March 11, 2016, as amended, and to release Agility Capital’s security interest in our assets. Approximately $1,074,000 of the initial advance was used to repay the Promissory Notes issued to the Lenders on August 14, 2017. The $175,000 commitment fee was capitalized as deferred financing costs, of which $9,722 and $0 was expensed during the three-month period ended March 31, 2018 and 2017, respectively.

The Beedie Credit Agreement contains customary covenants including, but not limited to, covenants to achieve specified adjusted EBITDA levels, to maintain minimum revenue renewal and liquidity levels, to maintain minimum gross margins, to maintain specified debt to monthly recurring revenue ratios, that limit capital expenditures and restrict the Company's ability to pay dividends, purchase and sell assets outside the ordinary course, and that limit the Company’s ability to incur additional indebtedness. As of March 31, 2018, we were in compliance with these covenants. The occurrence of a material adverse change will be an event of default under the Beedie Credit Agreement, in addition to other customary events of default. Default interest will be charged at 18% per annum. We granted Beedie a security interest, subordinated to the security interest of SaaS Capital, in all of our assets through a pledge and security agreement, patent security agreement and trademark security agreement, each between us and Beedie. As additional security, the Subsidiary issued an unlimited guarantee to Beedie. Beedie is entitled to board of director observation rights during the term of the Beedie Credit Agreement. 

In connection with the Beedie Credit Agreement, we issued the Beedie Warrant to purchase up to 4,500,000 shares of our common stock at an exercise price of $0.35 per share subject to certain adjustments for dividends, splits or reclassifications, and a weighted average adjustment for certain issuances of common stock below the exercise price prior to January 26, 2019. Up to 2,500,000 additional shares of common stock under the Beedie Warrant will be exercisable on a pro rata basis to additional amounts borrowed if and when advanced under the Beedie Credit Agreement. We adopted ASU 2017-11 which revises ASC 815-10-15-74 to allow instruments with a down round features to qualify for equity classification. Under the new guidance, the issuer would recognize the value of the feature only when it is activated and there is an actual reduction of the strike price or conversion feature.  The value of the adjustment is then to be recorded as deemed dividend and a reduction of income available to common stockholders. The fair value of the warrant amounted to $1,099,861 and was capitalized as deferred financing costs, of which $61,103 and $0 was expensed during the three-month period ended March 31, 2018 and 2017, respectively.

Changes in Cash Flows

	Three-month periods ended March 31,
	2018			2017
Cash flows from operating activities:
Net loss	$	(1,256,459	)	$	(55,224	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		119,059			169,028
Amortization of deferred financing cost		202,898			59,807
Provision for bad debt		(235,441	)		2,386
Fair value of options and warrants		99,352			219,700
Loss on sale and disposal of fixed assets		-			902
Changes in operating assets and liabilities:
Accounts receivable		71,925			(95,718	)
Prepaid expenses		32,894			(140,115	)
Accounts payable and accrued expenses		(308,112	)		(860,096	)
Deferred revenues		176,894			40,583
Other assets		(2,783	)		(813	)
Net cash used in operating activities		(1,099,773	)		(659,560	)
Cash flows from investing activities:
Capitalized software for internal use		(375,000	)		(515,454	)
Capital expenditures		(13,402	)		(9,799	)
Proceeds from sale of assets		-			795
Net cash used in investing activities		(388,402	)		(524,458	)
Cash flows from financing activities:
Principal repayment of credit facility and loan		(662,058	)		(486,548	)
Proceeds from credit facility		3,771,600			500,000
Repayments of promissory notes		(1,000,000	)		-
Net cash provided by financing activities		2,109,542			13,452
Effect of exchange rate changes on cash		17,630			4,080
Net increase (decrease) in cash		638,997			(1,166,486	)
Cash, beginning of period		166,883			1,680,127
Cash, end of period	$	805,880		$	513,641

24

Comparison of three months ended March 31, 2018 to March 31, 2017

As of March 31, 2018, we had cash of approximately $806,000.

Net cash used in operating activities was approximately $1.1 million during the three-month period ended March 31, 2018 compared to net cash provided by operations of approximately $660,000 during the same period in 2017. The change in operating cash flow was primarily due to a decrease in accounts payable and accrued expenses.

Net cash used in investing activities was approximately $390,000 for the three-month period ended March 31, 2018 compared to $525,000 for the same period in 2017. The decrease in capitalization of development costs for internal-use software of $140,000 offset by an increase in capital expenditures of approximately $4,000 accounted for the decrease in cash used in investing activities.

Net cash provided by financing activities was approximately $2.1 million for the three-month period ended March 31, 2018 compared to approximately $13,000 for the same period in 2017. The increase in cash provided by financing activities is primarily due to proceeds from our credit facility of $4.5 million, offset by related financing costs of $175,000 and repayments of short-term loan and promissory notes of approximately $1.6 million.

Exercise of warrants and options

There were no proceeds generated from the exercise of warrants or options during the three-month period ended March 31, 2018.

Other outstanding obligations at March 31, 2018

Warrants

As of March 31, 2018, 16,110,517 shares of our Common Stock are issuable pursuant to the exercise of warrants.

Options

As of March 31, 2018, 8,257,500 shares of our Common Stock are issuable pursuant to the exercise of options.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements. 

25

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer, who is our principal executive officer, and our Chief Financial Officer, who is our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2018, our disclosure controls and procedures are effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2018, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  

26

PART II - OTHER INFORMATION

Item 6.  Exhibits

4.1	Form of Warrant to Purchase Stock issued on January 25, 2018 (incorporated by reference to the Company’s Current Report on Form 8-K filed on January 31, 2018).
4.2	Form of Warrant to Purchase Stock issued on January 25, 2018 (incorporated by reference to the Company’s Current Report on Form 8-K filed on January 31, 2018).
10.1	Sixth Amendment to Loan and Security Agreement, dated January 25, 2018, between Accelerize Inc. and SaaS Capital Funding II, LLC (incorporated by reference to the Company’s Annual Report on Form 10-K filed on March 27, 2018).
10.2	Credit Agreement, dated January 25, 2018, between Accelerize Inc. and Beedie Investments Limited (incorporated by reference to the Company’s Annual Report on Form 10-K filed on March 27, 2018).
10.3	Pledge and Security Agreement, dated January 25, 2018, between Accelerize Inc. and Beedie Investments Limited (incorporated by reference to the Company’s Annual Report on Form 10-K filed on March 27, 2018).
10.4	Guarantee Made by Cake Marketing UK Ltd. in favor of Beedie Investments Limited, dated January 25, 2018 (incorporated by reference to the Company’s Annual Report on Form 10-K filed on March 27, 2018).
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and15d-14(a).*
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a).*
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350.**
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350.**
101.	The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Comprehensive Loss, (iv) the Statements of Cash Flows, and (v) related notes to these financial statements.*

*	Filed herewith.
**	Furnished herewith.

27

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ACCELERIZE INC.
Dated: May 15, 2018	By:	/s/ Brian Ross
		Brian Ross President and Chief Executive Officer (Principal Executive Officer)
Dated: May 15, 2018	By:	/s/ Anthony Mazzarella
		Anthony Mazzarella
		Chief Financial Officer
		(Principal Financial Officer)

  28

EX-31.1

 Exhibit 31.1

CERTIFICATION

Pursuant to Rule 13a-14(a) and 15d-14(a)

Under the Securities Exchange Act of 1934, as Amended

I, Brian Ross, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2018 of Accelerize Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 15, 2018

/s/ Brian Ross

Brian Ross

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

Pursuant to Rule 13a-14(a) and 15d-14(a)

Under the Securities Exchange Act of 1934, as Amended

I, Anthony Mazzarella, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2018 of Accelerize Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 15, 2018

/s/ Anthony Mazzarella

Anthony Mazzarella

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report (the “Report”) of Accelerize Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof, I, Brian Ross, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2018	By: /s/ Brian Ross
	Brian Ross President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report (the “Report”) of Accelerize Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof, I, Anthony Mazzarella, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2018	By: /s/ Anthony Mazzarella
	Anthony Mazzarella Chief Financial Officer (Principal Financial Officer)

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 15, 2018
Document Information [Line Items]
Entity Registrant Name	ACCELERIZE INC.
Entity Central Index Key	0001352952
Trading Symbol	aclz
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		65,939,709
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Assets
Cash	$ 805,880	$ 166,883
Restricted cash	50,000	50,000
Accounts receivable, net of allowance for bad debt of $235,703 and $471,144, respectively	2,856,152	2,692,636
Prepaid expenses and other assets	445,449	548,343
Total current assets	4,157,481	3,457,862
Property and equipment, net of accumulated depreciation of $794,189 and $775,152, respectively	82,043	69,405
Intangible assets, net of accumulated amortization of $2,617,203 and $2,512,203, respectively	4,195,523	3,925,523
Other assets	125,906	123,124
Total assets	8,560,953	7,575,914
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable and accrued expenses	2,242,116	2,479,083
Deferred revenues	476,831	299,937
Credit facility, short term	3,243,367	3,055,812
Other short-term loan, net of unamortized deferred financing cost of $0 and $0, respectively		1,224,194
Total current liabilities	5,962,314	7,059,026
Credit facility, net of unamortized deferred financing cost of $1,457,249 and $245,584, respectively	6,841,709	4,402,988
Other long-term loan, net of unamortized deferred financing cost of $0 and $82,868, respectively		267,938
Other liabilities	956,250	1,062,500
Total liabilities	13,760,273	12,792,452
Stockholders' Deficit:
Common stock; $0.001 par value; 100,000,000 shares authorized; 65,939,709 and 65,939,709 shares issued and outstanding, respectively	65,938	65,938
Additional paid-in capital	27,557,795	26,301,748
Accumulated deficit	(32,799,143)	(31,542,684)
Accumulated other comprehensive loss	(23,910)	(41,540)
Total stockholders’ deficit	(5,199,320)	(5,216,538)
Total liabilities and stockholders’ deficit	8,560,953	7,575,914
Series A Preferred Stock [Member]
Stockholders' Deficit:
Preferred stock
Series B Preferred Stock [Member]
Stockholders' Deficit:
Preferred stock

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)		Mar. 31, 2018	Dec. 31, 2017
Accounts receivable, allowance for bad debt		$ 235,703	$ 471,144
Property and equipment, accumulated depreciation	[1]	794,189	775,152
Intangible assets, accumulated amortization		2,617,203	2,512,203
Deferred financing cost, current		0	0
Deferred financing cost, credit facility		1,457,249	245,584
Deferred financing cost, noncurrent		$ 0	$ 82,868
Common stock, par value (in dollars per share)		$ 0.001	$ 0.001
Common stock, shares authorized (in shares)		100,000,000	100,000,000
Common stock, shares issued (in shares)		65,939,709	65,939,709
Common stock, shares outstanding (in shares)		65,939,709	65,939,709
Series A Preferred Stock [Member]
Preferred stock, par value (in dollars per share)		$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)		54,000	54,000
Preferred stock, shares issued (in shares)		0	0
Preferred stock, shares outstanding (in shares)		0	0
Series B Preferred Stock [Member]
Preferred stock, par value (in dollars per share)		$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)		1,946,000	1,946,000
Preferred stock, shares issued (in shares)		0	0
Preferred stock, shares outstanding (in shares)		0	0

[1] Includes 4,977 in foreign exchange translation

XML

Unaudited Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenues:	$ 5,992,748	$ 5,956,724
Cost of revenue	2,353,860	1,545,345
Gross profit	3,638,888	4,411,379
Operating expenses:
Research and development	1,122,623	1,043,119
Sales and marketing	1,170,484	1,216,490
General and administrative	1,999,886	1,926,242
Total operating expenses	4,292,993	4,185,851
Operating (loss) income	(654,105)	225,528
Other income (expense):
Other income (loss)	761	(300)
Other expense	(603,115)	(280,452)
Total other (expenses)	(602,354)	(280,752)
Net loss	$ (1,256,459)	$ (55,224)
Loss per share:
Basic (in dollars per share)	$ (0.02)	$ 0
Diluted (in dollars per share)	$ (0.02)	$ 0
Basic weighted average common shares outstanding (in shares)	65,939,709	65,262,289
Diluted weighted average common shares outstanding (in shares)	65,939,709	65,262,289

XML

Unaudited Condensed Consolidated Statements of Comprehensive Loss - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net loss	$ (1,256,459)	$ (55,224)
Foreign currency translation loss	17,630	4,080
Total other comprehensive loss	17,630	4,080
Comprehensive loss	$ (1,238,829)	$ (51,144)

XML

Unaudited Condensed Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Net loss	$ (1,256,459)	$ (55,224)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	119,059	169,028
Amortization of deferred financing cost	202,898	59,807
Provision for bad debt	(235,441)	2,386
Fair value of options and warrants	99,352	219,700
Loss on sale and disposal of fixed assets		902
Changes in operating assets and liabilities:
Accounts receivable	71,925	(95,718)
Prepaid expenses	32,894	(140,115)
Accounts payable and accrued expenses	(308,112)	(860,096)
Deferred revenues	176,894	40,583
Other assets	(2,783)	(813)
Net cash used in operating activities	(1,099,773)	(659,560)
Cash flows from investing activities:
Capitalized software for internal use	(375,000)	(515,454)
Capital expenditures	(13,402)	(9,799)
Proceeds from sale of assets		795
Net cash used in investing activities	(388,402)	(524,458)
Cash flows from financing activities:
Principal repayment of credit facility and loan	(662,058)	(486,548)
Proceeds from credit facility	3,771,600	500,000
Repayments of promissory notes	(1,000,000)
Net cash provided by financing activities	2,109,542	13,452
Effect of exchange rate changes on cash	17,630	4,080
Net increase (decrease) in cash	638,997	(1,166,486)
Cash, beginning of period	166,883	1,680,127
Cash, end of period	805,880	513,641
Supplemental disclosures of cash flow information:
Cash paid for interest	373,257	196,590
Cash paid for income taxes	0	0
Non-cash investing and financing activities:
Fair value of warrants issued in connection with credit facility	1,156,695
Principal loan payments included in accounts payable		25,000
Shares issued for cashless exercise of options and warrants		1,868
Capital expenditure included in payables	6,622
Accrued payables and short-term loan directly paid off by credit facility	623,399
Prepaid expenses reclassed to deferred financing cost	$ 70,000

XML

Note 1 - Organization, Description of Business, and Basis of Presentation

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE

1:

ORGANIZATION, DESCRIPTION OF BUSINESS, AND BASIS OF PRESENTATION

Accelerize Inc., a Delaware corporation, incorporated on

November 22, 2005,

owns and operates CAKE, a Software-as-a-Service, or SaaS, platform providing online tracking and analytics solutions for advertisers and online marketers.

The Company provides software solutions for businesses interested in expanding their online advertising spend.

These unaudited condensed consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America, or GAAP. These unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the years ended

December 31, 2017

and

2016,

respectively, which are included in the Company’s

December 31, 2017

Annual Report on Form

10

-K filed with the United States Securities and Exchange Commission on

March 27, 2018.  

The Company assumes that the users of the interim financial information herein have read, or have access to, the audited consolidated financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation of these

may

be determined in that context. The results of operations for the

three

-month period ended

March 31, 2018

are

not

necessarily indicative of results for the entire year ending

December 31, 2018.

The accompanying consolidated financial statements have been prepared on a going concern basis which implies the Company will continue to meet its obligations for the next

12

months as of the date these financial statements are issued.  

The Company had a working capital deficit of

$1,804,833

and an accumulated deficit of

$32,799,143

as of

March 31, 2018. 

The Company also had a net loss of

$1,256,459

and cash used in operating activities of

$1,099,773.

Management’s plan to continue as a going concern includes raising capital in the form of debt or equity, increased gross profit from revenue growth and managing and reducing operating and overhead costs.  However, management cannot provide any assurances that the Company will be successful in accomplishing its plans. Management also cannot provide any assurance that unforeseen circumstances that could occur at any time within the next

twelve

months or thereafter will

not

increase the need for the Company to raise additional capital on an immediate basis.

However, based upon its plans, management believes that the Company is a going concern.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the results of operations of Cake Marketing UK Ltd., or the Subsidiary. All material intercompany accounts and transactions between the Company and its Subsidiary have been eliminated in consolidation.

XML

Note 2 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

NOTE

2:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of unaudited condensed consolidated 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. Included in these estimates are assumptions about collection of accounts receivable, useful life of fixed assets, and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate.

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. The Company has restricted cash as a result of its corporate card program through its bank. The bank requires a collateral which is placed in a money market account and can be increased or decreased at any time at the discretion of the Company. The Company’s restricted cash amounted to

$50,000

at

March 31, 2018

and

December 31, 2017.

Accounts Receivable

The Company’s accounts receivable are due primarily from advertisers and marketers. Collateral is currently

not

required. The Company also maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make payments. The Company periodically reviews these estimated allowances, including an analysis of the customers’ payment history and creditworthiness, the age of the trade receivable balances and current economic conditions that

may

affect a customer’s ability to make payments as well as historical collection trends for its customers as a whole. Based on this review, the Company specifically reserves for those accounts deemed uncollectible or likely to become uncollectible. When receivables are determined to be uncollectible, principal amounts of such receivables outstanding are deducted from the allowance.

	March 31, 2018		December 31, 2017
Allowance for doubtful accounts	$	235,703	$	471,144

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 a financial institution and are insured by the Federal Deposit Insurance Corporation, or the FDIC, up to

$250,000.

During the

three

-month period ended

March 31, 2018,

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 institution in which it holds deposits.

The Company's accounts receivable are due from customers, generally located in the United States, Europe, Asia, and Canada.

None

of the Company’s customers accounted for more than

10%

of its accounts receivable at

March 31, 2018

or

December 31, 2017.  

The Company does

not

require any collateral from its customers.

Revenue Recognition

The Company recognizes revenue on arrangements in accordance with ASC

2014

-

09,

Revenue from Contracts with Customers, Topic

606,

which supersedes the revenue recognition requirements in FASB ASC

605.

The guidance primarily states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Revenue is recognized 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 SaaS revenues are generated from implementation and training fees and a monthly license fee, supplemented by per transaction fees paid by customers for monthly platform usage. The initial term of the customer contract is generally

one

year with

one

of

two

general cancellation policies. Each party

may

cancel the contract within the initial period or after the initial period, with

30

-days’ prior notice. The Company does

not

provide any general right of return for its delivered items. Services associated with the implementation and training fees have standalone value to the Company’s customers, as there are

third

-party vendors who offer similar services to the Company’s services. Accordingly, they qualify as separate units of accounting. The Company allocates a fair value to each element deliverable at the recognition date and recognize such value when the services are provided. The Company bases the fair value of the implementation and training fees on

third

-party evidence and the monthly license fee on vendor-specific objective evidence. Fees charged by

third

-party vendors for implementation and training services do

not

vary significantly from the fees charged by the Company. Services associated with implementation and training fees are generally rendered within a month from the initial contract date. The value attributed to the monthly license fees as well as the fees associated with monthly transaction-based platform usage are recognized in the corresponding period.

Product Concentration

The Company generates its revenues from software licensing, usage, and related transaction fees.

Fair Value of Financial Instruments

The Company accounts for assets and liabilities measured at fair value on a recurring basis in accordance with ASC Topic

820,

Fair Value Measurements and Disclosures, or ASC

820.

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.

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 liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

Additional Disclosures Regarding Fair Value Measurements

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and lines of credit approximate their fair value due to the short-term maturity of these items.

Advertising

The Company expenses advertising costs as incurred.

	Three-month periods ended March 31,
	2018		2017
Advertising expense	$	133,548	$	86,416

Income Taxes

Income taxes are accounted for in accordance with the provisions of ASC Topic

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.

Foreign Currency Translation

The Company’s reporting currency is U.S. Dollars. The functional currency of the Company’s Subsidiary in the United Kingdom is British Pounds. The translation from British Pounds to U.S. dollars is performed for asset and liability accounts using exchange rates in effect at the balance sheet date, equity accounts using historical exchange rates or rates in effect at the balance sheet date, and for revenue and expense accounts using the average exchange rate in effect during the period. The resulting translation adjustments are recorded as a component of Accumulated Other Comprehensive Income (Loss). Foreign currency translation gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations.

Software Development Costs

Costs incurred in the research and development of software products and significant upgrades and enhancements thereto during the preliminary project stage and the post-implementation operation stage are expensed as incurred. Costs incurred for maintenance and relatively minor upgrades and enhancements are expensed as incurred. Costs associated with the application development stage of new software products and significant upgrades and enhancements thereto are capitalized when

1

) management implicitly or explicitly authorizes and commits to funding a software project and

2

) it is probable that the project will be completed and the software will be used to perform the function intended. The Company capitalized internal-use software development costs of

$375,000

during the

three

-month period ended

March 31, 2018.

The Company amortizes such costs once the new software products and significant upgrades and enhancements are completed. The unamortized internal-use software development costs amounted to approximately

$4,196,000

and

$3,926,000

at

March 31, 2018

and

December 31, 2017,

respectively. The Company’s amortization expenses associated with capitalized software development costs amounted to approximately

$105,000

and

$134,000

during the

three

-month period ended

March 31, 2018

and

2017,

respectively. Amortization of internal-use software is reflected in cost of revenues.

Share-Based Payment

The Company accounts for stock-based compensation in accordance with ASC Topic

718,

Compensation-Stock Compensation, or ASC

718.

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 an expense on a straight-line basis over the requisite service period, which is the vesting period.

The Company has elected to use the 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 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.

Common stock awards

The Company has granted common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of comprehensive loss in the same manner and charged to the same account as if such settlements had been made in cash.

Warrants

In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are

not

puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is

not

a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note

6,

Stockholders’ Equity.  

Segment Reporting

The Company generated revenues from

one

source, its SaaS business, during the

three

-month periods ended

March 31, 2018

and

2017.

The Company's chief operating decision maker evaluates the performance of the Company based upon revenues and expenses by functional areas as disclosed in the Company's statements of operations.

Recent Accounting Pronouncements

In

January 2017,

the FASB issued ASU

2017

-

04,

Intangibles-Goodwill and Other (Topic

350

), which simplifies the goodwill impairment test. The effective date for ASU

2017

-

04

is for fiscal years beginning after

December 15, 2019.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after

January 1, 2017.

The Company is currently evaluating the impact of the new guidance on its financial statements.

In

January 2016,

the FASB issued ASU

No.

 

2016‑01,

Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.

The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance is effective in the

first

quarter of fiscal

2019.

Early adoption is permitted for the accounting guidance on financial liabilities under the fair value option. The Company is currently evaluating the impact of the new guidance on its financial statements.

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases (Topic

842

)

and subsequently amended the guidance relating largely to transition considerations under the standard in

January 2017.

The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company is currently evaluating the impact of the new guidance on its financial statements.

In

January 2017,

the FASB issued ASU

No.

2017

-

01,

Business Combinations (Topic

805

): Clarifying the Definition of a Business. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is

not

a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is

not

a business. Since the Company has

not

acquired any material businesses, this standard has

no

impact on its financial statements.

In

November 2016,

the FASB issued ASU

No.

 

2016

-

18,

Statement of Cash Flows (Topic

230

): Restricted Cash

. The objective of this ASU is to eliminate the diversity in practice related to the classification of restricted cash or restricted cash equivalents in the statement of cash flows. For public business entities, this ASU is effective for annual and interim reporting periods beginning after

December 

15,

2017.

The Company has adopted this standard on

January 1, 2018,

and it has had

no

material impact on its financial statements.

In

May 2017,

the FASB issued ASU

2017

-

09,

Compensation - Stock Compensation (Topic

718

)

:

 

Scope of Modification Accounting

(ASU

2016

-

09

),which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic

718.

This pronouncement is effective for annual reporting periods beginning after

December 15, 2017.

The Company has adopted this standard on

January 1, 2018

and it has had

no

material impact on its financial statements.

Other accounting pronouncements have been issued but deemed by management to be outside the scope of relevance to the Company. 

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).  

	Three-month periods ended March 31,
	2018			2017
Numerator:
Net loss	$	(1,256,459	)	$	(55,224	)
Denominator:
Denominator for basic earnings per share-weighted average shares		65,939,709			65,262,289
Effect of dilutive securities-when applicable:
Stock options		-			-
Warrants		-			-
Denominator for diluted earnings per share-adjusted weighted-average shares and assumed conversions		65,939,709			65,262,289
Loss per share:
Basic	$	(0.02	)	$	(0.00	)
Diluted	$	(0.02	)	$	(0.00	)
Weighted-average anti-dilutive common share equivalents		23,063,359			16,275,714

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 consist of the following at:

	March 31, 2018			December 31, 2017
Computer equipment and software	$	450,858		$	431,497
Office furniture and equipment		130,205			120,420
Leasehold improvements		295,169			292,640
Total (1)		876,232			844,557
Accumulated depreciation (2)		(794,189	)		(775,152	)
Total		82,043			69,405
(1)  Includes (11,651) in foreign exchange translation
(2)  Includes 4,977 in foreign exchange translation
Intangible assets		6,812,726			6,437,726
Accumulated amortization		(2,617,203	)		(2,512,203	)
Total	$	4,195,523		$	3,925,523

	Three-month periods ended March 31,
	2018		2017
Depreciation expense	$	14,059	$	35,455
Amortization expense on internal software	$	105,000	$	133,573

During the

three

-month period ended

March 31, 2017,

the Company disposed of approximately

$7,500

in computer equipment with a net book value of approximately

$1,700

for proceeds of approximately

$800.

There were

no

such disposals in

2018.

XML

Note 3 - Prepaid Expenses

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Other Assets Disclosure [Text Block]

NOTE

3:

PREPAID EXPENSES

At

March 31, 2018

and

December 31, 2017,

the Company’s prepaid expenses consisted primarily of prepaid insurance and tradeshow costs.

XML

Note 4 - Deferred Revenues

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Deferred Revenue Disclosure [Text Block]

NOTE

4:

DEFERRED REVENUES

The Company’s deferred revenues consist of prepayments made by certain of the Company’s customers and undelivered implementation and training fees.  The Company decreases the deferred revenues by the amount of the services it renders to such clients when provided.

	March 31, 2018		December 31, 2017
Deferred revenues	$	476,831	$	299,937

XML

Note 5 - Credit Facility and Loan

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE

5:

CREDIT

FACILITY

AND LOAN

Agility Loan 

	March 31, 2018			December 31, 2017
Agility Loan		625,000			625,000
Amendment, added to balance		400,000			400,000
Principal Payment of Agility Loan		(450,000	)		(425,000	)
Less Loan repayment		(575,000	)		-
Less: Deferred financing cost		-			-
	$	-		$	600,000

On

March 11, 2016,

the Company entered into a subordinated loan, or the Agility Loan, with Agility Capital II, LLC, or Agility Capital, which provides for total availability of

$625,000

and was to originally mature, prior to amendment, on

March 31, 2017.

The Agility Loan has a fixed interest rate of

12%

per year and requires

$25,000

monthly amortization payments beginning on

June 1, 2016.

The Agility Loan also requires fees of approximately

$130,000

over the life of the loan, and is subject to a total aggregate minimum interest of

$50,000

in the event of a prepayment. The Agility Loan contains covenants to achieve specified Adjusted EBITDA levels, as defined, limiting capital expenditures, restricting the Company’s ability to pay dividends, purchase and sell assets outside the ordinary course and incur additional indebtedness. As of

December 31, 2017,

and at repayment of the Agility Loan, the Company was in compliance with these covenants. The Agility Loan requires a security interest in all of the Company’s personal property and intellectual property,

second

in priority to the Lender and to SaaS Capital Funding II, LLC.

In connection with the Agility Loan, on

June 30, 2016,

as a result of outstanding amounts under the Agility Loan, the Company issued to Agility Capital a warrant to purchase up to

69,444

shares of the Company’s Common Stock at an exercise price of

$0.45

per share. This warrant expires on

March 11, 2021.

The fair value of the warrant amounted to

$15,880

and was capitalized as deferred financing costs, of which

$0

and

$3,970

was expensed during the

three

-month period ended

March 31, 2018

and

2017,

respectively.

On

November 29, 2016,

the Company entered into an amendment of the Agility Loan which waived any event of default and the breach of any covenant, representation, warranty, and any other agreement contained in the Agility Loan as a result of the entering into of the Settlement Agreement. On the date of the amendment, a loan modification fee in the amount of

$100,000,

fully earned and non-refundable, was added to the outstanding loan balance and shall accrue interest, expensed in the statement of operations. Additionally, the maturity date was extended to

December 31, 2017.

On

November 29, 2016,

the Company issued to Agility Capital a warrant to purchase up to

187,500

shares of the Company’s Common Stock at an exercise price of

$0.40

per share. This warrant expires on

November 29, 2021.

The fair value of the warrant amounted to

$42,427

and was capitalized as deferred financing costs, of which

$0

and

$9,791

was expensed during the

three

-month period ended

March 31, 2018

and

2017,

respectively.

On

August 14, 2017,

the Company entered into a consent to waiver of the Agility Loan, to permit the issuance of promissory notes to lenders, as further described below.

On

November 8, 2017,

the Company entered into the Third Amendment of the Agility Loan whereby Agility Capital agreed to loan an additional

$300,000

to the Company, such that the aggregate principal amount owing to Agility Capital as of

November 9, 2017

was

$625,000.

The Third Amendment extended the maturity date of the Agility Loan from

December 31, 2017

to

December 31, 2018.

A loan modification fee of

$125,000

was deducted from the Additional Loan amount. This arrangement was treated as a substantial modification of existing debt pursuant to the guidance of ASC

470

-

50

“Debt – Modifications and Extinguishments” (“ASC

470

-

50”

). Because the net present value of the modified notes was greater than

10%

of the present value of the remaining cash flows under the old debt, the transaction was treated as a debt extinguishment and reissuance of a new debt instrument, with the fair value of

$606,034

and therefore recorded

$106,034

as a loss on debt extinguishment.  The carrying value of the

$625,000

did

not

change as a result of the extinguishment since the discounts recognized at inception of these new notes were fully amortized at the time of the issuance. 

On

January 26, 2018,

the Company repaid the Agility Loan by paying Agility Capital approximately

$581,000

which terminated the loan agreement between the Company and Agility Capital and released Agility Capital’s security interest in Company assets. The Company owed

$0

and

$600,000

under the Agility Loan at

March 31, 2018

and

December 31, 2017,

respectively.

Credit Facility - SaaS Capital Loan 

	March 31, 2018			December 31, 2017
SaaS Capital Loan, Total advances	$	9,903,000		$	9,903,000
Principal Payment of SaaS Capital Loan		(2,860,674	)		(2,198,616	)
Less: Deferred financing cost		(253,214	)		(245,584	)
Less: SaaS Capital Loan, short term (1)		(3,243,367	)		(3,055,812	)
	$	3,545,744		$	4,402,988

( 1 ) Short-term portion constitutes scheduled amortization payments for the next 12 months which create immediate access to additional borrowing availability equal to the amount of amortization payments

On

May 5, 2016,

the Company entered into a loan and security agreement, or the SaaS Capital Loan, with SaaS Capital Funding II, LLC to borrow up to a maximum of

$8,000,000.

Initial amounts borrowed will accrue interest at the rate of

10.25%

per annum with future amounts borrowed bearing interest at the greater of

10.25%

or

9.21%

plus the

three

-year treasury rate at the time of advance. Accrued interest on amounts borrowed is payable monthly for the

first

six

months and thereafter

36

equal monthly payments of principal and interest is payable. Prepayments will be subject to a

10%,

6%

or

3%

of principal premium if prepaid prior to

12

months, between

12

and

24

months, or between

24

months and maturity, respectively. Advances

may

be requested until

May 5, 2018.

The initial minimum advance amount of

$5,000,000,

on

May 5, 2016,

was used to repay the outstanding Line of Credit balance of

$4,572,223.

A facility fee of

$80,000

was paid by the Company in connection with the initial advance and an additional

$80,000

is payable on

May 5, 2017.

The SaaS Capital Loan contains customary covenants including, but

not

limited to, covenants to achieve specified Adjusted EBITDA levels and revenue renewal levels, limiting capital expenditures and restricting the Company's ability to pay dividends, purchase and sell assets outside the ordinary course and incur additional indebtedness. As of

March 31, 2018,

the Company was in compliance with such covenants. The occurrence of a material adverse change will be an event of default under the SaaS Capital Loan, in addition to other customary events of default. The Company granted SaaS Capital Funding II, LLC a security interest in all of the Company's personal property and intellectual property through the SaaS Capital Loan and the Patent, Trademark and Copyright Security Agreement between the Company and SaaS Capital Funding II, LLC.

On

May 5, 2016,

in connection with the SaaS Capital Loan, the Company issued to SaaS Capital Partners II, LP, an affiliate of SaaS Capital Funding II, LLC, a warrant to purchase up to

1,333,333

shares of the Company's common stock at an exercise price of

$0.45

per share subject to certain adjustments for dividends, splits or reclassifications. The Warrant is exercisable until the earlier of

May 5, 2026,

or the date that is

5

years from the date the Company’s equity securities are

first

listed for trading on NASDAQ. The Company paid approximately

$169,000

in financing costs through

September 30, 2016.

The fair value of the warrant amounted to

$383,128

and was capitalized as deferred financing costs, of which

$31,927

was expensed during the

three

-month periods ended

March 31, 2018

and

2017.

On

November 29, 2016,

the Company entered into an amendment of the SaaS Capital Loan to receive consent from SaaS Capital to enter into the Settlement Agreement. The amendment required a loan modification fee of

$120,000,

payable at

$10,000

a month for

one

year, expensed in the statement of operations. In connection with this amendment, the Company agreed to issue SaaS Capital a warrant to purchase up to

200,000

shares of our Common Stock at an exercise price of

$0.36

per share. This warrant expires on

November 29, 2026.

The fair value of the warrant amounted to

$60,185

which was fully expensed at

December 31, 2016.

On

May 10, 2017,

the Company entered into a

second

amendment of the SaaS Capital Loan with SaaS Capital which adjusted the Minimum Adjusted EBITDA covenant of the SaaS Capital Loan from

$0

to (

$150,000

) until

August 31, 2017

to give the Company added flexibility in completing our hosting migration to a new platform and to allow for potentially augmented marketing and sales efforts.

On

June 16, 2017,

the Company entered into a

third

amendment of the SaaS Capital Loan with SaaS Capital to provide that any advance made within

6

months of the final advance date will be for a

36

-month period with interest only payments due from the date of advance until the final advance date.

On

August 14, 2017,

the Company entered into a

fourth

amendment of the SaaS Capital Loan with SaaS Capital to permit the issuance of promissory notes to lenders, further described below.

On

November 8, 2017,

the Company entered into a

fifth

amendment, or the Fifth Amendment, of the SaaS Capital Loan with SaaS Capital which adjusted the Minimum Adjusted EBITDA covenant of the SaaS Capital Loan from

$0

to (

$170,000

) until

October 31, 2017,

to (

$150,000

) from

November 1, 2017

to

December 31, 2017,

to (

$100,000

) from

January 1, 2018

to

May 31, 2018,

to (

$50,000

) from

June 1, 2018

to

August 31, 2018,

and to

$0

thereafter. The Fifth Amendment added a new minimum liquidity covenant for a cash balance of

$600,000

effective

January 31, 2018.

The Fifth Amendment also memorialized SaaS Capital’s waiver of the Minimum Adjusted EBITDA covenant for

September 2017.

In connection with the Fifth Amendment, the Company agreed to pay to SaaS Capital a fee of

$375,000

upon the payment in full of all outstanding advances. 

On

January 25, 2018,

the Company entered into a

sixth

amendment, or the Sixth Amendment, of the SaaS Capital Loan to permit the Company to enter into the Beedie Credit Agreement, further described below, and to permit the repayment of Agility Capital and of the promissory notes to lenders, further described below. The Sixth Amendment also amended the Company’s adjusted EBITDA covenant and added covenants requiring a minimum gross margin and specified debt to monthly recurring revenue ratios. This arrangement was treated as a normal modification of existing debt pursuant to the guidance of ASC

470

-

50

“Debt – Modifications and Extinguishments” (“ASC

470

-

50”

). Because the net present value of the modified notes was lesser than

10%

of the present value of the remaining cash flows under the old debt, the transaction was treated as a debt modification. In connection with the Sixth Amendment, the Company agreed to issue SaaS Capital a warrant to purchase up to

200,000

shares of its Common Stock at an exercise price of

$0.35

per share, subject to certain adjustments for dividends, splits or reclassifications. The fair value of the warrant amounted to

$56,834

and was capitalized as deferred financing costs, of which

$3,157

and

$0

was expensed during the

three

-month period ended

March 31, 2018

and

2017,

respectively.

During the

three

months ended

March 31, 2018,

the Company borrowed

$0

from the SaaS Capital Loan, and made principal payments of

$662,058.

The Company owed

$7,042,326

and

$7,704,384

under the SaaS Capital Loan at

March 31, 2018

and

December 31, 2017,

respectively.

Promissory Notes

	March 31, 2018			December 31, 2017
Promissory Notes, Total	$	1,000,000		$	1,000,000
Principal Payment of Promissory Notes		(1,000,000	)		-
Promissory Notes, Outstanding balance		-			1,000,000
Less: Deferred financing cost		-			(82,868	)
Less: Promissory Notes, short term		-			(649,194	)
	$	-		$	267,938

On

August 14, 2017,

the Company borrowed an aggregate of

$1,000,000

from

seven

lenders, or the Lenders, and issued promissory notes, or the Promissory Notes, for the repayment of the amounts borrowed. The Lenders are all accredited investors, certain of the Lenders are shareholders of the Company,

one

of the Lenders is an affiliate of the Company’s director, Greg Akselrud, and

two

of the lenders are each affiliated with a partner of Mr. Akselrud’s in the law firm of Stubbs Alderton and Markiles, LLP. The Promissory Notes are unsecured, have a maturity date of

August 14, 2019

and all principal is due upon maturity. Amounts borrowed accrue interest at

12%

per annum and accrued interest is payable monthly. The Company also issued to the Lenders

three

-year warrants to purchase an aggregate of

1,000,000

shares of the Company’s Common Stock at an exercise price of

$0.35

per share. The fair value of the warrant amounted to

$104,676

and was capitalized as deferred financing costs, of which

$82,868

and

$0

was expensed during the

three

-month period ended

March 31, 2018

and

2017,

respectively.

On

January 26, 2018,

the Company paid approximately

$1,074,000

to repay the Promissory Notes issued to the Lenders, which includes approximately

$65,000

in additional interest expenses due to the repayment date which was prior to the maturity date. The Company owed

$0

and

$1,000,000

under the Promissory Notes at

March 31, 2018

and

December 31, 2017

respectively.

Beedie Credit Agreement

On

January 25, 2018,

the Company entered into a non-revolving term credit agreement, or the Beedie Credit Agreement, with Beedie Investments Limited, or Beedie, to borrow up to a maximum of

$7,000,000.

Outstanding principal will accrue interest at the rate of

12%

per annum increasing to

14%

per annum if the Company’s gross margins fall below amounts specified in the Beedie Credit Agreement. Accrued interest on outstanding principal is payable monthly in arrears. The Company paid Beedie a commitment fee of

$175,000

and will pay to Beedie a monthly standby fee of

0.325%

on the unadvanced and available amount. Advances

may

be requested until

July 25, 2020

and outstanding principal must be paid in full on

January 25, 2021.

Prepayment, which if at the Company’s option must be made in full and is otherwise required following certain asset dispositions, will be subject to a fee of

24

months accrued interest less all interest previously paid by the Company on the outstanding principal amount if paid prior to

January 25, 2020.

The initial minimum advance amount of

$4,500,000

was advanced on

January 26, 2018.

Approximately

$581,000

of the initial advance was used to repay Agility Capital to terminate the loan agreement between the Company and Agility dated

March 11, 2016,

as amended, and to release Agility Capital’s security interest in Company assets. Approximately

$1,074,000

of the initial advance was used to repay the Promissory Notes issued to the Lenders on

August 14, 2017. 

The

$175,000

commitment fee was capitalized as deferred financing costs, of which

$9,722

and

$0

was expensed during the

three

-month period ended

March 31, 2018

and

2017,

respectively.

The Beedie Credit Agreement contains customary covenants including, but

not

limited to, covenants to achieve specified adjusted EBITDA levels, to maintain minimum revenue renewal and liquidity levels, to maintain minimum gross margins, to maintain specified debt to monthly recurring revenue ratios, that limit capital expenditures and restrict the Company's ability to pay dividends, purchase and sell assets outside the ordinary course, and that limit the Company’s ability to incur additional indebtedness. The occurrence of a material adverse change will be an event of default under the Beedie Credit Agreement, in addition to other customary events of default. Default interest will be charged at

18%

per annum. The Company granted Beedie a security interest, subordinated to the security interest of SaaS Capital, in all of the Company's assets through a pledge and security agreement, patent security agreement and trademark security agreement, each between the Company and Beedie. As additional security, the Company’s Subsidiary issued an unlimited guarantee to Beedie. Beedie is entitled to board of director observation rights during the term of the Beedie Credit Agreement. 

In connection with the Beedie Credit Agreement, the Company issued to Beedie a warrant, or the Beedie Warrant, to purchase up to

4,500,000

shares of the Company's common stock at an exercise price of

$0.35

per share subject to certain adjustments for dividends, splits or reclassifications, and a weighted average adjustment for certain issuances of common stock below the exercise price prior to

January 26, 2019.

Up to

2,500,000

additional shares of common stock under the Beedie Warrant will be exercisable on a pro rata basis to additional amounts borrowed if and when advanced under the Beedie Credit Agreement. The Company adopted ASU

2017

-

11

which revises ASC

815

-

10

-

15

-

74

to allow instruments with a down round features to qualify for equity classification. Under the new guidance, the issuer would recognize the value of the feature only when it is activated and there is an actual reduction of the strike price or conversion feature.  The value of the adjustment is then to be recorded as deemed dividend and a reduction of income available to common stockholders. The fair value of the warrant amounted to

$1,099,861

and was capitalized as deferred financing costs, of which

$61,103

and

$0

was expensed during the

three

-month period ended

March 31, 2018

and

2017,

respectively.

The Company recognized amortization and interest expenses in connection with the credit facility and loans as follows. 

	Three-month periods ended
	March 31,
	2018		2017
Amortization expense associated with the credit facility and loan	$	202,898	$	59,807
Interest expense associated with the credit facility and loan	$	373,257	$	196,590
Other finance fees associated with the credit facility and loan	$	28,655	$	24,125

XML

Note 6 - Stockholders' Deficit

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE

6:

STOCKHOLDERS’ DEFICIT

Common Stock

There were

no

exercises of options during the

three

-month period ended

March 31, 2018.

During the

three

-month period ended

March 31, 2017,

the Company issued

1,707,692

shares of its Common Stock pursuant to the cashless exercise of

2,400,000

options.

As of

March 31, 2018,

and

December 31, 2017,

there were

65,939,709

shares of Common Stock issued and outstanding.

Restricted Stock

During

2017

and

2016,

the Company issued

120,000

restricted shares of its Common Stock, at a value of

$0.50

per share, vesting in

4

equal quarterly increments commencing on

July 1, 2017

and

July 1, 2016,

to each of its non-employee directors as partial annual compensation for services as a director. As of

March 31, 2018

and

2017,

these restricted shares were fully issued. The Company recorded expenses of

$30,000

during the

three

-month periods ended

March 31, 2018

and

2017.

$30,000

remained unvested as of

March 31, 2018

and

2017.

Warrants

There were

no

exercises of warrants during the

three

-month period ended

March 31, 2018.

During the

three

-month period ended

March 31, 2017,

the Company issued

160,096

shares of its Common Stock pursuant to the cashless exercise of

225,000

warrants.

During the

three

months ended

March 31, 2018,

the Company issued

200,000

and

4,500,000

warrants exercisable at a price of

$0.35

per share and which expire on

January 25, 2028

and

January 25, 2024,

respectively. The fair value of these warrants amounted to

$56,834

and

$1,099,861,

respectively, and were recognized as deferred financing costs and amortized using the effective interest method over the terms of the associated loan. During this same period,

58,824

warrants expired. 

During the

three

months ended

March 31, 2017,

no

new warrants were issued and

46,875

warrants expired. 

As of

March 31, 2018,

and

December 31, 2017,

there were

16,110,517

and

11,469,341

warrants issued and outstanding, respectively, with a weighted average price

$0.62

and

$0.74,

respectively.

The Company recorded expenses of

$61,050

and

$125,867

during the

three

months ended

March 31, 2018

and

2017,

respectively, related to warrants granted to employees in prior years.

Options

The Company generally recognizes its share-based payment over the vesting terms of the underlying options.

	Three-month periods ended March 31,
	2018			2017
Weighted-average grant date fair value	$	0.40		$	0.43
Fair value of options, recognized as selling, general, and administrative expenses	$	8,303		$	63,832
Number of options granted		-			-
Number of options expired or forfeited		(45,000	)		(257,500	)

As of

March 31, 2018

and

December 31, 2017,

there were

8,257,500

and

8,302,500

options, respectively, issued and outstanding with a weighted average price of

$0.40.

The total compensation cost related to non-vested awards

not

yet recognized amounted to

$35,382

at

March 31, 2018

and the Company expects that it will be recognized over the following

30

months.

XML

Note 7 - Comprehensive Loss

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

NOTE

7:

COMPREHENSIVE LOSS

Comprehensive loss includes changes in equity related to foreign currency translation adjustments. The following table sets forth the reconciliation from net loss to comprehensive loss for the

three

-month periods ended

March 31, 2018

and

2017:

	Three-month periods ended March 31,
	2018			2017
Net loss	$	(1,256,459	)	$	(55,224	)
Other comprehensive loss:
Foreign currency translation adjustment		17,630			4,080
Comprehensive loss	$	(1,238,829	)	$	(51,144	)

The following table sets forth the balance in accumulated other comprehensive loss as of

March 31, 2018

and

December 31, 2017,

respectively:

	March 31, 2018			December 31, 2017
Accumulated other comprehensive loss	$	(23,910	)	$	(41,540	)

XML

Note 8 - Segments

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE

8:

SEGMENTS

The Company operates in

one

business segment. Percentages of sales by geographic region for the

three

-month periods ended

March 31, 2018

and

2017

were approximately as follows:

	Three-month periods ended March 31,
	2018			2017
United States		60	%		59	%
Europe		20	%		21	%
Other		20	%		20	%

XML

Note 9 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE

9:

COMMITMENTS AND CONTINGENCIES

During

August 2017,

the Company entered into an amendment to its original

January 2014

lease for certain office space in Newport Beach.  Pursuant to the lease amendment, effective

March 1, 2018,

the premises shall be expanded to include an additional

1,332

usable square feet such that the premises shall consist of

11,728

usable square feet in the aggregate. In addition, pursuant to the terms of the lease amendment, the Company extended the term of the lease agreement until

June 30, 2023. 

Commencing on

March 1, 2018,

the initial base rent for the premises will be

$38,702

per month for the

first

year and increasing to

$44,566

per month by the end of the term.

During

October 2016,

the Company amended its original

May 2014

sublease and entered into a

21

-month sublease in Newport Beach, effective

June 1, 2016.

The monthly base rent was approximately

$4,100

through the end of the sublease term, in

February 2018.

As of

March 31, 2018,

this sublease has expired.

During

July 2014,

the Company entered into a

five

-year lease for certain office space in a business center in London, England, which commenced on

July 30, 2014.

The base rent is GBP

89,667

(approximately

$115,000

) per year and the estimated service charges for the lease are GBP

45,658

(approximately

$56,000

) per year.

Legal Proceedings

From time to time, the Company

may

become involved in legal proceedings arising in the ordinary course of business. The Company is

not

presently a party to any legal proceedings that it currently believes, if determined adversely to the Company, would individually or taken together have a material adverse effect on the Company’s business, operating results, financial condition or cash flows.

On

November 29, 2016,

the Company entered into the Settlement Agreement with Jeff McCollum, or McCollum, to settle pending litigation between the Company and McCollum in the Superior Court of the State of California related to McCollum’s termination as an executive officer of the Company on

September 8, 2014.

In connection with the Settlement Agreement, McCollum surrendered to the Company a stock certificate representing

1,890,000

shares of the Company’s Common Stock, or the Shares, and for dismissal with prejudice of the cross-complaint and action against the Company brought by McCollum. The Company agreed to pay McCollum a total of

$2,700,000.

$1,000,000

of this total has already been paid as of

January 18, 2017,

of which the Company’s insurance carrier contributed

$500,000.

The remaining

$1,700,000

will be paid in

48

equal monthly installments starting on

July 1, 2017.

The Company previously cancelled McCollum’s options to purchase up to

6,600,000

shares of the Company’s Common Stock at exercise prices of

$0.15

or

$0.31

per share. The Company cancelled the

1,890,000

Shares and thereafter the Company’s issued and outstanding common stock decreased by approximately

3%.

During

2016,

the Company recorded a loss on legal settlement of

$2,200,000,

net of the reimbursement of

$500,000,

which the Company received from its insurance carrier in

December 2016.

The outstanding settlement balance amounted to

$1,381,250

as of

March 31, 2018

pursuant to the Settlement Agreement, of which

$425,000

has been classified as accounts payable and accrued expenses and

$956,250

as other long-term liabilities, in the accompanying condensed consolidated balance sheet.

XML

Note 10 - Subsequent Events

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Subsequent Events [Text Block]

NOTE

10:

SUBSEQUENT EVENTS

  

On

May 11, 2018,

the Company granted a

five

-year warrant to Paul Dumais, its Senior Vice President Product Development, to purchase up to

500,000

shares of the Company’s Common Stock at an exercise price of

$0.50

per share, vesting in equal quarterly installments over

3

years commencing on

July 1, 2018,

which

may

be exercised in full or part for cash or via cashless exercise.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of unaudited condensed consolidated 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. Included in these estimates are assumptions about collection of accounts receivable, useful life of fixed assets, and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate.

Cash and Cash Equivalents, Policy [Policy Text Block]

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. The Company has restricted cash as a result of its corporate card program through its bank. The bank requires a collateral which is placed in a money market account and can be increased or decreased at any time at the discretion of the Company. The Company’s restricted cash amounted to

$50,000

at

March 31, 2018

and

December 31, 2017.

Receivables, Policy [Policy Text Block]

Accounts Receivable

The Company’s accounts receivable are due primarily from advertisers and marketers. Collateral is currently

not

required. The Company also maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make payments. The Company periodically reviews these estimated allowances, including an analysis of the customers’ payment history and creditworthiness, the age of the trade receivable balances and current economic conditions that

may

affect a customer’s ability to make payments as well as historical collection trends for its customers as a whole. Based on this review, the Company specifically reserves for those accounts deemed uncollectible or likely to become uncollectible. When receivables are determined to be uncollectible, principal amounts of such receivables outstanding are deducted from the allowance.

	March 31, 2018		December 31, 2017
Allowance for doubtful accounts	$	235,703	$	471,144

Concentration Risk, Credit Risk, Policy [Policy Text Block]

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 a financial institution and are insured by the Federal Deposit Insurance Corporation, or the FDIC, up to

$250,000.

During the

three

-month period ended

March 31, 2018,

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 institution in which it holds deposits.

The Company's accounts receivable are due from customers, generally located in the United States, Europe, Asia, and Canada.

None

of the Company’s customers accounted for more than

10%

of its accounts receivable at

March 31, 2018

or

December 31, 2017.  

The Company does

not

require any collateral from its customers.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company recognizes revenue on arrangements in accordance with ASC

2014

-

09,

Revenue from Contracts with Customers, Topic

606,

which supersedes the revenue recognition requirements in FASB ASC

605.

The guidance primarily states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Revenue is recognized 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 SaaS revenues are generated from implementation and training fees and a monthly license fee, supplemented by per transaction fees paid by customers for monthly platform usage. The initial term of the customer contract is generally

one

year with

one

of

two

general cancellation policies. Each party

may

cancel the contract within the initial period or after the initial period, with

30

-days’ prior notice. The Company does

not

provide any general right of return for its delivered items. Services associated with the implementation and training fees have standalone value to the Company’s customers, as there are

third

-party vendors who offer similar services to the Company’s services. Accordingly, they qualify as separate units of accounting. The Company allocates a fair value to each element deliverable at the recognition date and recognize such value when the services are provided. The Company bases the fair value of the implementation and training fees on

third

-party evidence and the monthly license fee on vendor-specific objective evidence. Fees charged by

third

-party vendors for implementation and training services do

not

vary significantly from the fees charged by the Company. Services associated with implementation and training fees are generally rendered within a month from the initial contract date. The value attributed to the monthly license fees as well as the fees associated with monthly transaction-based platform usage are recognized in the corresponding period.

Product Concentration Policy [Policy Text Block]

Product Concentration

The Company generates its revenues from software licensing, usage, and related transaction fees.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

The Company accounts for assets and liabilities measured at fair value on a recurring basis in accordance with ASC Topic

820,

Fair Value Measurements and Disclosures, or ASC

820.

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.

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 liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

Additional Disclosures Regarding Fair Value Measurements

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and lines of credit approximate their fair value due to the short-term maturity of these items.

Advertising Cost, Policy, Expensed Advertising Cost [Policy Text Block]

Advertising

The Company expenses advertising costs as incurred.

	Three-month periods ended March 31,
	2018		2017
Advertising expense	$	133,548	$	86,416

Income Tax, Policy [Policy Text Block]

Income Taxes

Income taxes are accounted for in accordance with the provisions of ASC Topic

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.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation

The Company’s reporting currency is U.S. Dollars. The functional currency of the Company’s Subsidiary in the United Kingdom is British Pounds. The translation from British Pounds to U.S. dollars is performed for asset and liability accounts using exchange rates in effect at the balance sheet date, equity accounts using historical exchange rates or rates in effect at the balance sheet date, and for revenue and expense accounts using the average exchange rate in effect during the period. The resulting translation adjustments are recorded as a component of Accumulated Other Comprehensive Income (Loss). Foreign currency translation gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations.

Research, Development, and Computer Software, Policy [Policy Text Block]

Software Development Costs

Costs incurred in the research and development of software products and significant upgrades and enhancements thereto during the preliminary project stage and the post-implementation operation stage are expensed as incurred. Costs incurred for maintenance and relatively minor upgrades and enhancements are expensed as incurred. Costs associated with the application development stage of new software products and significant upgrades and enhancements thereto are capitalized when

1

) management implicitly or explicitly authorizes and commits to funding a software project and

2

) it is probable that the project will be completed and the software will be used to perform the function intended. The Company capitalized internal-use software development costs of

$375,000

during the

three

-month period ended

March 31, 2018.

The Company amortizes such costs once the new software products and significant upgrades and enhancements are completed. The unamortized internal-use software development costs amounted to approximately

$4,196,000

and

$3,926,000

at

March 31, 2018

and

December 31, 2017,

respectively. The Company’s amortization expenses associated with capitalized software development costs amounted to approximately

$105,000

and

$134,000

during the

three

-month period ended

March 31, 2018

and

2017,

respectively. Amortization of internal-use software is reflected in cost of revenues.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Share-Based Payment

The Company accounts for stock-based compensation in accordance with ASC Topic

718,

Compensation-Stock Compensation, or ASC

718.

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 an expense on a straight-line basis over the requisite service period, which is the vesting period.

The Company has elected to use the 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 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.

Common stock awards

The Company has granted common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of comprehensive loss in the same manner and charged to the same account as if such settlements had been made in cash.

Warrants

In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are

not

puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is

not

a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note

6,

Stockholders’ Equity.  

Segment Reporting, Policy [Policy Text Block]

Segment Reporting

The Company generated revenues from

one

source, its SaaS business, during the

three

-month periods ended

March 31, 2018

and

2017.

The Company's chief operating decision maker evaluates the performance of the Company based upon revenues and expenses by functional areas as disclosed in the Company's statements of operations.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In

January 2017,

the FASB issued ASU

2017

-

04,

Intangibles-Goodwill and Other (Topic

350

), which simplifies the goodwill impairment test. The effective date for ASU

2017

-

04

is for fiscal years beginning after

December 15, 2019.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after

January 1, 2017.

The Company is currently evaluating the impact of the new guidance on its financial statements.

In

January 2016,

the FASB issued ASU

No.

 

2016‑01,

Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.

The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance is effective in the

first

quarter of fiscal

2019.

Early adoption is permitted for the accounting guidance on financial liabilities under the fair value option. The Company is currently evaluating the impact of the new guidance on its financial statements.

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases (Topic

842

)

and subsequently amended the guidance relating largely to transition considerations under the standard in

January 2017.

The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company is currently evaluating the impact of the new guidance on its financial statements.

In

January 2017,

the FASB issued ASU

No.

2017

-

01,

Business Combinations (Topic

805

): Clarifying the Definition of a Business. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is

not

a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is

not

a business. Since the Company has

not

acquired any material businesses, this standard has

no

impact on its financial statements.

In

November 2016,

the FASB issued ASU

No.

 

2016

-

18,

Statement of Cash Flows (Topic

230

): Restricted Cash

. The objective of this ASU is to eliminate the diversity in practice related to the classification of restricted cash or restricted cash equivalents in the statement of cash flows. For public business entities, this ASU is effective for annual and interim reporting periods beginning after

December 

15,

2017.

The Company has adopted this standard on

January 1, 2018,

and it has had

no

material impact on its financial statements.

In

May 2017,

the FASB issued ASU

2017

-

09,

Compensation - Stock Compensation (Topic

718

)

:

 

Scope of Modification Accounting

(ASU

2016

-

09

),which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic

718.

This pronouncement is effective for annual reporting periods beginning after

December 15, 2017.

The Company has adopted this standard on

January 1, 2018

and it has had

no

material impact on its financial statements.

Other accounting pronouncements have been issued but deemed by management to be outside the scope of relevance to the Company. 

Earnings Per Share, Policy [Policy Text Block]

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).  

	Three-month periods ended March 31,
	2018			2017
Numerator:
Net loss	$	(1,256,459	)	$	(55,224	)
Denominator:
Denominator for basic earnings per share-weighted average shares		65,939,709			65,262,289
Effect of dilutive securities-when applicable:
Stock options		-			-
Warrants		-			-
Denominator for diluted earnings per share-adjusted weighted-average shares and assumed conversions		65,939,709			65,262,289
Loss per share:
Basic	$	(0.02	)	$	(0.00	)
Diluted	$	(0.02	)	$	(0.00	)
Weighted-average anti-dilutive common share equivalents		23,063,359			16,275,714

Property, Plant and Equipment, Policy [Policy Text Block]

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 consist of the following at:

	March 31, 2018			December 31, 2017
Computer equipment and software	$	450,858		$	431,497
Office furniture and equipment		130,205			120,420
Leasehold improvements		295,169			292,640
Total (1)		876,232			844,557
Accumulated depreciation (2)		(794,189	)		(775,152	)
Total		82,043			69,405
(1)  Includes (11,651) in foreign exchange translation
(2)  Includes 4,977 in foreign exchange translation
Intangible assets		6,812,726			6,437,726
Accumulated amortization		(2,617,203	)		(2,512,203	)
Total	$	4,195,523		$	3,925,523

	Three-month periods ended March 31,
	2018		2017
Depreciation expense	$	14,059	$	35,455
Amortization expense on internal software	$	105,000	$	133,573

During the

three

-month period ended

March 31, 2017,

the Company disposed of approximately

$7,500

in computer equipment with a net book value of approximately

$1,700

for proceeds of approximately

$800.

There were

no

such disposals in

2018.

XML

Note 2 - Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	March 31, 2018		December 31, 2017
Allowance for doubtful accounts	$	235,703	$	471,144

Schedule of Advertising Expense [Table Text Block]

	Three-month periods ended March 31,
	2018		2017
Advertising expense	$	133,548	$	86,416

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three-month periods ended March 31,
	2018			2017
Numerator:
Net loss	$	(1,256,459	)	$	(55,224	)
Denominator:
Denominator for basic earnings per share-weighted average shares		65,939,709			65,262,289
Effect of dilutive securities-when applicable:
Stock options		-			-
Warrants		-			-
Denominator for diluted earnings per share-adjusted weighted-average shares and assumed conversions		65,939,709			65,262,289
Loss per share:
Basic	$	(0.02	)	$	(0.00	)
Diluted	$	(0.02	)	$	(0.00	)
Weighted-average anti-dilutive common share equivalents		23,063,359			16,275,714

Property, Plant and Equipment [Table Text Block]

	March 31, 2018			December 31, 2017
Computer equipment and software	$	450,858		$	431,497
Office furniture and equipment		130,205			120,420
Leasehold improvements		295,169			292,640
Total (1)		876,232			844,557
Accumulated depreciation (2)		(794,189	)		(775,152	)
Total		82,043			69,405
(1)  Includes (11,651) in foreign exchange translation
(2)  Includes 4,977 in foreign exchange translation
Intangible assets		6,812,726			6,437,726
Accumulated amortization		(2,617,203	)		(2,512,203	)
Total	$	4,195,523		$	3,925,523

Depreciation Expense [Member]

Notes Tables

Property, Plant and Equipment [Table Text Block]

	Three-month periods ended March 31,
	2018		2017
Depreciation expense	$	14,059	$	35,455
Amortization expense on internal software	$	105,000	$	133,573

XML

Note 4 - Deferred Revenues (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Deferred Revenue, by Arrangement, Disclosure [Table Text Block]

	March 31, 2018		December 31, 2017
Deferred revenues	$	476,831	$	299,937

XML

Note 5 - Credit Facility and Loan (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Debt [Table Text Block]

	March 31, 2018			December 31, 2017
Agility Loan		625,000			625,000
Amendment, added to balance		400,000			400,000
Principal Payment of Agility Loan		(450,000	)		(425,000	)
Less Loan repayment		(575,000	)		-
Less: Deferred financing cost		-			-
	$	-		$	600,000

	March 31, 2018			December 31, 2017
SaaS Capital Loan, Total advances	$	9,903,000		$	9,903,000
Principal Payment of SaaS Capital Loan		(2,860,674	)		(2,198,616	)
Less: Deferred financing cost		(253,214	)		(245,584	)
Less: SaaS Capital Loan, short term (1)		(3,243,367	)		(3,055,812	)
	$	3,545,744		$	4,402,988

	March 31, 2018			December 31, 2017
Promissory Notes, Total	$	1,000,000		$	1,000,000
Principal Payment of Promissory Notes		(1,000,000	)		-
Promissory Notes, Outstanding balance		-			1,000,000
Less: Deferred financing cost		-			(82,868	)
Less: Promissory Notes, short term		-			(649,194	)
	$	-		$	267,938

Schedule of Interest and Amortization Expense Line of Credit [Table Text Block]

	Three-month periods ended
	March 31,
	2018		2017
Amortization expense associated with the credit facility and loan	$	202,898	$	59,807
Interest expense associated with the credit facility and loan	$	373,257	$	196,590
Other finance fees associated with the credit facility and loan	$	28,655	$	24,125

XML

Note 6 - Stockholders' Deficit (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Share-based Compensation, Activity [Table Text Block]

	Three-month periods ended March 31,
	2018			2017
Weighted-average grant date fair value	$	0.40		$	0.43
Fair value of options, recognized as selling, general, and administrative expenses	$	8,303		$	63,832
Number of options granted		-			-
Number of options expired or forfeited		(45,000	)		(257,500	)

XML

Note 7 - Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Comprehensive Income (Loss) [Table Text Block]

	Three-month periods ended March 31,
	2018			2017
Net loss	$	(1,256,459	)	$	(55,224	)
Other comprehensive loss:
Foreign currency translation adjustment		17,630			4,080
Comprehensive loss	$	(1,238,829	)	$	(51,144	)

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	March 31, 2018			December 31, 2017
Accumulated other comprehensive loss	$	(23,910	)	$	(41,540	)

XML

Note 8 - Segments (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	Three-month periods ended March 31,
	2018			2017
United States		60	%		59	%
Europe		20	%		21	%
Other		20	%		20	%

XML

Note 1 - Organization, Description of Business, and Basis of Presentation (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Working Capital (Deficit)	$ (1,804,833)
Retained Earnings (Accumulated Deficit), Ending Balance	(32,799,143)		$ (31,542,684)
Net Income (Loss) Attributable to Parent, Total	(1,256,459)	$ (55,224)
Net Cash Provided by (Used in) Operating Activities, Total	$ (1,099,773)	$ (659,560)

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Note 2 - Summary of Significant Accounting Policies (Details Textual)	3 Months Ended		12 Months Ended
	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)
Restricted Cash and Cash Equivalents, Current, Total	$ 50,000		$ 50,000
Cash, FDIC Insured Amount	250,000
Payments to Develop Software	375,000	$ 515,454
Capitalized Computer Software, Net, Ending Balance	4,196,000		$ 3,926,000
Capitalized Computer Software, Amortization	$ 105,000	$ 133,573
Number of Reportable Segments	1	1
Property, Plant and Equipment, Useful Life	3 years
Property, Plant and Equipment, Disposals	$ 0
Proceeds from Sale of Productive Assets, Total		$ 795
Computer Equipment [Member]
Property, Plant and Equipment, Disposals		7,500
Property, Equipment and Equipment, Net, Disposals		1,700
Proceeds from Sale of Productive Assets, Total		$ 800
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Concentration Risk, Percentage	0.00%		0.00%

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Note 2 - Summary of Significant Accounting Policies - Accounts Receivable (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Allowance for doubtful accounts	$ 235,703	$ 471,144

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Note 2 - Summary of Significant Accounting Policies - Advertising Costs (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Advertising expense	$ 133,548	$ 86,416

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Note 2 - Summary of Significant Accounting Policies - Basic and Diluted Earnings Per Share (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator:
Net loss	$ (1,256,459)	$ (55,224)
Denominator:
Denominator for basic earnings per share-weighted average shares (in shares)	65,939,709	65,262,289
Effect of dilutive securities-when applicable:
Denominator for diluted earnings per share-adjusted weighted-average shares and assumed conversions (in shares)	65,939,709	65,262,289
Loss per share:
Basic (in dollars per share)	$ (0.02)	$ 0
Diluted (in dollars per share)	$ (0.02)	$ 0
Weighted-average anti-dilutive common share equivalents (in shares)	23,063,359	16,275,714
Employee Stock Option [Member]
Effect of dilutive securities-when applicable:
Effect of dilutive securities (in shares)
Warrant [Member]
Effect of dilutive securities-when applicable:
Effect of dilutive securities (in shares)

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Note 2 - Summary of Significant Accounting Policies - Property and Equipment (Details) - USD ($)		Mar. 31, 2018	Dec. 31, 2017
Computer equipment and software	[1]	$ 876,232	$ 844,557
Accumulated depreciation (2)	[2]	(794,189)	(775,152)
Total		82,043	69,405
Intangible assets		6,812,726	6,437,726
Accumulated amortization		(2,617,203)	(2,512,203)
Total		4,195,523	3,925,523
Software Development [Member]
Computer equipment and software		450,858	431,497
Furniture and Fixtures [Member]
Computer equipment and software		130,205	120,420
Leasehold Improvements [Member]
Computer equipment and software		$ 295,169	$ 292,640

[1] Includes (11,651) in foreign exchange translation

[2] Includes 4,977 in foreign exchange translation

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Note 2 - Summary of Significant Accounting Policies - Property and Equipment (Details) (Parentheticals)	3 Months Ended
	Mar. 31, 2018 USD ($)
Foreign exchange translation	$ (11,651)
Foreign exchange translation	$ 4,977

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Note 2 - Summary of Significant Accounting Policies - Property and Equipment, Depreciation Expense (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Depreciation expense	$ 14,059	$ 35,455
Amortization expense on internal software	$ 105,000	$ 133,573

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Note 4 - Deferred Revenues - Deferred Revenues (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Deferred revenues	$ 476,831	$ 299,937

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Note 5 - Credit Facility and Loan (Details Textual) - USD ($)													1 Months Ended	2 Months Ended	3 Months Ended			5 Months Ended		11 Months Ended
	Sep. 01, 2018	Jan. 26, 2018	Jan. 25, 2018	Nov. 08, 2017	Oct. 31, 2017	Oct. 30, 2017	Aug. 14, 2017	May 10, 2017	May 09, 2017	Nov. 29, 2016	May 05, 2016	Mar. 11, 2016	May 31, 2017	Dec. 31, 2017	Aug. 31, 2018	Mar. 31, 2018	Mar. 31, 2017	May 31, 2018	Sep. 30, 2016	Dec. 13, 2017	Jan. 31, 2018	Nov. 09, 2017	Dec. 31, 2016	Jun. 30, 2016
Subordinated Debt, Ending Balance																						$ 625,000
Repayments of Notes Payable																$ 1,000,000
Interest Paid, Excluding Capitalized Interest, Operating Activities																373,257	196,590
Amortization of Debt Issuance Costs																202,898	59,807
Beedie Credit Agreement [Member] | Beedie Investments Limited [Member]
Debt Instrument, Interest Rate, Stated Percentage			12.00%
Debt Instrument, Fee Amount			$ 175,000
Line of Credit Facility, Maximum Borrowing Capacity			$ 7,000,000
Proceeds from Long-term Lines of Credit		$ 4,500,000
Debt Instrument, Interest Rate, Stated Percentage, If Gross Margin Falls Below Specified Amount			14.00%
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage			0.325%
Debt Instrument, Accrued Interest Fee, Period			2 years
Amortization of Debt Issuance Costs																9,722	0
Debt Instrument, Debt Default, Interest Rate, Percentage			18.00%
SaaS Captial Loan [Member]
Debt Instrument, Interest Rate, Stated Percentage											10.25%
Debt Instrument, Fee Amount				$ 375,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights										200,000
Class of Warrant or Right, Exercise Price of Warrants or Rights										$ 0.36
Warrants and Rights Outstanding											$ 383,128												$ 60,185
Amortization of Debt Discount (Premium)																31,927	31,927
Long-term Debt, Gross														$ 7,704,384		7,042,326
Line of Credit Facility, Maximum Borrowing Capacity											$ 8,000,000
Debt Instrument, Reference Rate											9.21%
Prepayment Fee, Percentage Period One											10.00%
Prepayment Fee, Percentage, Period Two											6.00%
Prepayment Fee, Percentage, Period Three											3.00%
Proceeds from Long-term Lines of Credit											$ 5,000,000
Repayments of Long-term Lines of Credit											4,572,223
Line of Credit Facility, Commitment Fee Amount											$ 80,000		$ 80,000
Payments of Financing Costs, Total																			$ 169,000
Debt Instrument, Minimum Adjusted EBITDA					$ (170,000)	$ 0		$ (150,000)	$ 0					(150,000)
Debt Instrument, Minimum Liquidity Covenant for Cash Balance																					$ 600,000
Proceeds from Issuance of Subordinated Long-term Debt																0
Repayments of Subordinated Debt, Total																662,058
SaaS Captial Loan [Member] | Scenario, Forecast [Member]
Debt Instrument, Minimum Adjusted EBITDA	$ 0														$ (50,000)			$ (100,000)
SaaS Captial Loan [Member] | Loan Modification [Member]
Debt Instrument, Periodic Payment, Total										$ 10,000
Debt Instrument, Fee Amount										120,000
Agility Loan Warrants [Member]
Debt Instrument, Fee Amount										$ 100,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights										187,500														69,444
Class of Warrant or Right, Exercise Price of Warrants or Rights										$ 0.40														$ 0.45
Warrants and Rights Outstanding										$ 42,427														$ 15,880
Amortization of Debt Discount (Premium)																0	3,970
Agility Loan Warrants 2 [Member]
Amortization of Debt Discount (Premium)																0	9,791
SaaS Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			200,000								1,333,333
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 0.35								$ 0.45
Warrants and Rights Outstanding			$ 56,834
Amortization of Debt Discount (Premium)																3,157	0
Beedie Warrant [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			4,500,000
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 0.35
Warrants and Rights Outstanding																1,099,861
Amortization of Debt Issuance Costs																61,103	0
Class of Warrant or Right, Number of Additional Securities Called by Warrants or Rights			2,500,000
Subordinated Debt [Member]
Debt Instrument, Face Amount												$ 625,000				625,000				$ 625,000
Debt Instrument, Interest Rate, Stated Percentage												12.00%
Debt Instrument, Periodic Payment, Total												$ 25,000
Debt Instrument, Fee Amount				125,000								130,000				400,000				400,000
Debt Instrument, Minimum Aggregate Interest in the Event of Prepayment												$ 50,000
Proceeds from Issuance of Long-term Debt, Total				300,000
Long-term Debt, Fair Value				606,034
Gain (Loss) on Extinguishment of Debt, Total				$ (106,034)
Repayments of Long-term Debt, Total		581,000
Long-term Debt, Gross														600,000		0
Repayments of Subordinated Debt, Total																575,000
Notes Payable, Other Payables [Member]
Debt Instrument, Face Amount														1,000,000		1,000,000
Debt Instrument, Interest Rate, Stated Percentage							12.00%
Class of Warrant or Right, Number of Securities Called by Warrants or Rights							1,000,000
Class of Warrant or Right, Exercise Price of Warrants or Rights							$ 0.35
Warrants and Rights Outstanding																104,676
Amortization of Debt Discount (Premium)																82,868	$ 0
Long-term Debt, Gross														$ 1,000,000		$ 0
Proceeds from Notes Payable, Total							$ 1,000,000
Derivative, Term of Contract							3 years
Repayments of Notes Payable		1,074,000
Interest Paid, Excluding Capitalized Interest, Operating Activities		$ 65,000

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Note 5 - Credit Facility and Loan - Line of Credit and Loans (Details) - USD ($)	3 Months Ended	11 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 13, 2017	Dec. 31, 2017	Nov. 08, 2017	Mar. 11, 2016
Subordinated Debt [Member]
Loans	$ 625,000	$ 625,000			$ 625,000
Amendment, added to balance	400,000	400,000		$ 125,000	$ 130,000
Principal Payment	(450,000)	(425,000)
Less Loan repayment	(575,000)
Less: Deferred financing cost
		$ 600,000
Outstanding balance	0		$ 600,000
SaaS Captial Loan [Member]
Loans	9,903,000		9,903,000
Principal Payment	(2,860,674)		(2,198,616)
Less: Deferred financing cost	(253,214)		(245,584)
	3,545,744		4,402,988
Less: short term	(3,243,367)		(3,055,812)
Notes Payable, Other Payables [Member]
Loans	1,000,000		1,000,000
Principal Payment	(1,000,000)
Less: Deferred financing cost			(82,868)
			267,938
Less: short term			(649,194)
Outstanding balance	$ 0		$ 1,000,000

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Note 5 - Credit Facility and Loan - Estimated Future Amortization Expense (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Amortization expense associated with the credit facility and loan	$ 202,898	$ 59,807
Interest expense associated with the credit facility and loan	373,257	196,590
Other finance fees associated with the credit facility and loan	$ 28,655	$ 24,125

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Note 6 - Stockholders' Deficit (Details Textual)	3 Months Ended		12 Months Ended
	Mar. 31, 2018 USD ($) $ / shares shares	Mar. 31, 2017 USD ($) shares	Dec. 31, 2017 $ / shares shares	Dec. 31, 2016 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period	0	2,400,000
Stock Issued During Period, Shares, Stock Options Exercised, Noncash		1,707,692
Common Stock, Shares, Issued, Total	65,939,709		65,939,709
Stock Issued During Period, Shares, Warrants Exercised, Noncash		160,096
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance	8,257,500		8,302,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Ending Balance | $ / shares	$ 0.40
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total | $	$ 35,382
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	2 years 180 days
Common Stock, Shares, Outstanding, Ending Balance	65,939,709		65,939,709
Warrants Expiring on January 25, 2028 [Member]
Class of Warrant or Right, Issued During Period	200,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares	$ 0.35
Warrants and Rights Outstanding | $	$ 56,834
Warrants Expiring on January 25, 2024 [Member]
Class of Warrant or Right, Issued During Period	4,500,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares	$ 0.35
Warrants and Rights Outstanding | $	$ 1,099,861
Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		0
Allocated Share-based Compensation Expense, Total | $	$ 61,050	$ 125,867
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Exercised	0	225,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period	58,824	46,875
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number, Ending Balance	16,110,517		11,469,341
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value, Ending Balance | $ / shares	$ 0.62		$ 0.74
Restricted Stock [Member] | Non-employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			120,000	120,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares			$ 0.50	$ 0.50
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Vesting, Number of Equal Quarterly Increments			4	4
Allocated Share-based Compensation Expense, Total | $	$ 30,000	$ 30,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options | $	$ 30,000	$ 30,000

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Note 6 - Stockholders' Deficit - Additional Information Stock Options (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Weighted-average grant date fair value (in dollars per share)	$ 0.40	$ 0.43
Number of options granted (in shares)
Number of options expired or forfeited (in shares)	(45,000)	(257,500)
Selling, General and Administrative Expenses [Member]
Fair value of options, recognized as selling, general, and administrative expenses	$ 8,303	$ 63,832

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Note 7 - Comprehensive Loss - Reconciliation From Net Loss to Comprehensive Loss (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net loss	$ (1,256,459)	$ (55,224)
Other comprehensive loss:
Foreign currency translation adjustment	17,630	4,080
Comprehensive loss	$ (1,238,829)	$ (51,144)

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Note 7 - Comprehensive Loss - Accumulated Other Comprehensive Loss (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Accumulated other comprehensive loss	$ (23,910)	$ (41,540)

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Note 8 - Segments (Details Textual)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Number of Reportable Segments	1	1

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Note 8 - Segments - Sales by Geographic Region (Details) - Sales Revenue, Segment [Member] - Geographic Concentration Risk [Member]	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
UNITED STATES
Percentage of sales	60.00%	59.00%
Europe [Member]
Percentage of sales	20.00%	21.00%
Other [Member]
Percentage of sales	20.00%	20.00%

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Note 9 - Commitments and Contingencies (Details Textual)			1 Months Ended			12 Months Ended
	Aug. 25, 2017 USD ($)	Nov. 29, 2016 USD ($) $ / shares shares	Oct. 31, 2016 USD ($)	Jul. 31, 2014 USD ($)	Jul. 31, 2014 GBP (£)	Dec. 31, 2016 USD ($)	Mar. 31, 2018 USD ($)	Jul. 30, 2014	Jan. 31, 2014 ft²
Estimated Litigation Liability							$ 1,381,250
Common Stock Issued and Outstanding Percentage Decrease		3.00%
Gain (Loss) Related to Litigation Settlement, Total						$ (2,200,000)
Accounts Payable and Accrued Liabilities [Member]
Estimated Litigation Liability							425,000
Other Noncurrent Liabilities [Member]
Estimated Litigation Liability							$ 956,250
Executive Officer [Member]
Stock Cancelled During Period, Shares | shares		1,890,000
Litigation Settlement, Amount Awarded to Other Party		$ 2,700,000
Payments for Legal Settlements		1,000,000
Payments for Legal Settlements by Insurance Carrier		500,000
Estimated Litigation Liability		$ 1,700,000
Payments For Legal Settlements, Installment Terms		48
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period | shares		6,600,000
Minimum [Member] | Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period, Weighted Average Exercise Price | $ / shares		$ 0.15
Maximum [Member] | Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period, Weighted Average Exercise Price | $ / shares		$ 0.31
Office Space In Newport Beach California [Member]
Additional Area of Land | ft²									1,332
Area of Land | ft²									11,728
Office Space In Newport Beach California [Member] | Minimum [Member]
Operating Lease Monthly Rent	$ 38,702
Office Space In Newport Beach California [Member] | Maximum [Member]
Operating Lease Monthly Rent	$ 44,566
Sublease in Newport Beach [Member]
Operating Lease Monthly Rent			$ 4,100
Lessor, Operating Lease, Term of Contract			1 year 270 days
Office Space in London England [Member]
Operating Lease Monthly Rent				$ 115,000	£ 89,667
Lessee, Operating Lease, Term of Contract								5 years
Operating Lease Service Charges				$ 56,000	£ 45,658

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Note 10 - Subsequent Events (Details Textual) - Subsequent Event [Member] - Senior Vice President Product Development [Member]	May 11, 2018 $ / shares shares
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares	500,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares	$ 0.50