UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30,March 31, 20189

For the transition period from ________ to ________

Commission File Number: 000-52635

ACCELERIZE INC.

(Exact name of registrant as specified in its charter)

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)

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

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, a 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.

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 August 14, 2018,May 20, 2019, was 66,179,709.

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-LOOKINGFORWARD 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 to continue as a going concern, our pursuit of strategic transactions including acquisitions, dispositions, capital raising and debt restructuring, that our revenues will increase in 2018,expectations for 2019, and that we intend to continue to grow revenues by investinginvest 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 and in this quarterly report on Form 10-Q.April 16, 2019. 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

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ACCELERIZE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

See Notes to Unaudited Condensed Consolidated Financial Statements.

ACCELERIZE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

See Notes to Unaudited Condensed Consolidated Financial Statements.

ACCELERIZE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

See Notes to Unaudited Condensed Consolidated Financial Statements.

ACCELERIZE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

See Notes to Unaudited Condensed Consolidated Financial Statements.

ACCELERIZE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Unaudited Condensed Consolidated Financial Statements.

ACCELERIZE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 capitalizedcapitalized.

Property and equipment consist of the following at:

During the three and six-month periodsthree-month period ended June 30, 2017, March 31, 2019, the Company disposed of approximately $0 and $7,500$9,000 in computer equipment with a net book value of approximately $0 and $1,700 for proceeds of approximately $0 and $800, respectively.$1,400. There were no such disposals during the three or six-month periods ended June 30,in 2018.

Leases

The Company has identified all leases and reviewed the leases to determine the impact of ASC 842 on its consolidated financial statements. The Company has elected to apply the practical expedient to certain classes of leases, whereby the separation of components of leases into lease and non-lease components is not required and all of the practical expedients to all leases, which include not reassessing (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases. The adoption of the new standard resulted in the recording of a right-of-use asset at January 1, 2019 of $1,569,100 and a lease liability at January 1, 2019 of $1,725,375 and the subsequent amortization of the asset of $65,431 and the lease liability of $66,164. The adoption of ASU 2016-02, as amended, has had no impact on the unaudited condensed consolidated statements of operations or unaudited condensed consolidated statements of cash flows.

Amount of future annual minimum payments under operating lease obligations at March 31, 2019 are as follows:

On May 5, 2016, the Company entered into a loan and security agreement, or the SaaS Capital Loan, with SaaS Capital Funding II, LLC, or SaaS Capital, to borrow up to a maximum of $8,000,000.$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-yearthree-year treasury rate at the time of advance. Accrued interest on amounts borrowed is payable monthly for the firstsix 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,$5,000,000, on May 5, 2016, was used to repay the outstanding Line of Credit balance of $4,572,223.$4,572,223. A facility fee of $80,000$80,000 was paid by the Company in connection with the initial advance and an additional $80,000$80,000 was paid on May 5, 2017. Additionally, the Company incurred initial financing costs of $160,000$160,000 which waswere capitalized as deferred financing costs, of which $13,334 and $26,667$13,333 was expensed during the threeat March 31, 2019 and six-month periods ended June 30, 2018 and 2017, respectively.2018.

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 June 30, 2018, March 31, 2019, the Company was in compliance with such covenants.covenants, except for the minimum liquidity and secured debt covenants, defaults relating to which have been waived by SaaS Capital. 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.Capital.

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$0.45 per share subject to certain adjustments for dividends, splits or reclassifications. The Warrantwarrant 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$169,000 in financing costs through September 30, 2016. and $9,430 was capitalized as deferred financing costs, of which $786 was expensed during the three-month periods ended March 31, 2019 and 2018. The fair value of the warrant amounted to $383,128$383,128 and was capitalized as deferred financing costs, of which $31,927 and $63,854$31,927 was expensed during the three and six-monththree-month periods ended June 30, 2018 March 31, 2019 and 2017, respectively.2018.

On November 29, 2016, the Company entered into an amendment of the SaaS Capital Loan to receive consent from SaaS Capital to enter into a litigation settlement agreement with a former officer, or the Settlement Agreement. The amendment required a loan modification fee of $120,000,$120,000, payable at $10,000$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 ourthe Company’s Common Stock at an exercise price of $0.36$0.36 per share. This warrant expires on November 29, 2026. The fair value of the warrant amounted to $60,185$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, or the Second Amendment, which adjusted the Minimum Adjusted EBITDA covenant of the SaaS Capital Loan from $0$0 to ($150,000)($150,000) until August 31, 2017 to give the Company added flexibility in completing itsour 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, or the Third Amendment, to provide that any advance made within 6 months of the final advance date will be for a 36-month36-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, or the Fourth Amendment, to permit the issuance of promissory notes to lenders,the 2017 Promissory Notes, further described below.

On November 8, 2017, the Company entered into a fifth amendment or the Fifth Amendment, of the SaaS Capital Loan, or the Fifth Amendment, which adjusted the Minimum Adjusted EBITDA covenant of the SaaS Capital Loan from $0$0 to ($170,000)($170,000) until October 31, 2017, to ($150,000)($150,000) from November 1, 2017 to December 31, 2017, to ($100,000)($100,000) from January 1, 2018 to May 31, 2018, to ($50,000)($50,000) from June 1, 2018 to August 31, 2018, and to $0$0 thereafter. The Fifth Amendment added a new minimum liquidity covenant for a cash balance of $600,000$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$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, or the Sixth Amendment, 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.2017 Promissory Notes. 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 470-50470-50 “Debt – Modifications and Extinguishments” (“ASC 470-50”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$0.35 per share, subject to certain adjustments for dividends, splits or reclassifications. The fair value of the warrant amounted to $56,834$56,834 and was capitalized as deferred financing costs, of which $4,736$4,736 and $7,893$3,157 was expensed during the threethree-month period ended March 31, 2019 and six-month periods ended June 30, 2018, respectively, and $0 during 2017.respectively.

On May 31, 2018, the Company entered into a seventh amendment or the Seventh Amendment, of the SaaS Capital Loan, or the Seventh Amendment, to permit the issuance of promissory notes to lenders,the 2018 Promissory Notes, as further described below, to amend the Company’s adjusted EBITDA, revenue renewal and total debt to monthly recurring revenue covenants, to increase the success fee payable upon repayment of the facility by $120,000$120,000 to $495,000,$495,000, and to fix prepayment penalties until October 31, 2018.

On June 13, 2018, the Company entered into an eighth amendment or the Eighth Amendment, of the SaaS Capital Loan, with SaaS Capital,or the Eighth Amendment, to issue additional promissory notes,2018 Promissory Notes.

On August 31, 2018, the Company entered into a ninth amendment of the SaaS Capital Loan, or the Ninth Amendment, to permit the issuance of the August 2018 Promissory Notes, as further described below.below, to amend the Company’s minimum adjusted EBITDA, revenue renewal, total debt to monthly recurring revenue and secured debt to monthly recurring revenue covenants, to increase the success fee payable upon repayment of the facility to $555,000 and to provide for twice monthly reporting of the Company’s projected cash flows.

On January 23, 2019, the Company entered into a tenth amendment of the SaaS Capital Loan, or the Tenth Amendment, to, among other things, defer the Company’s January 15, 2019 principal payment until the earlier of March 15, 2019 or payment of the SaaS Capital Loan in full, amend the Company’s minimum adjusted EBITDA, revenue renewal, and secured debt to monthly recurring revenue covenants, to increase the success fee payable upon repayment of the SaaS Capital Loan to $605,000 and to provide for weekly reporting of the Company’s projected cash flows.

On March 1, 2019, the Company entered into a payment deferral agreement with respect to the SaaS Capital Loan to, among other things, defer a portion of the Company’s January, February and March 2019 principal payments until the earlier of May 15, 2019 or payment of the SaaS Capital Loan in full.

During the six-month periodthree months ended June 30, 2018, March 31, 2019, the Company borrowed $350,000$0 from the SaaS Capital Loan, and made principal payments of $1,582,615.$360,000.

The Company owed $6,471,769$4,450,135 and $7,704,384$4,810,135 under the SaaS Capital Loan at June 30, 2018 March 31, 2019 and December 31, 2017, 2018, respectively.

2017 Promissory Notes

On August 14, 2017, the Company borrowed an aggregate of $1,000,000$1,000,000 from seven lenders, or the 2017 Lenders, and issued promissory notes, or the 2017 Promissory Notes, for the repayment of the amounts borrowed. The 2017 Lenders are all accredited investors, certain of the 2017 Lenders are shareholders of the Company, one of the 2017 Lenders is an affiliate of the Company’s director, Greg Akselrud, and two of the 2017 Lenders are each affiliated with a partner of Mr. Akselrud’s in the law firm of Stubbs Alderton and Markiles, LLP. The 2017 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 2017 Lenders three-yearthree-year warrants to purchase an aggregate of 1,000,000 shares of the Company’s Common Stock at an exercise price of $0.35$0.35 per share. The fair value of the warrant amounted to $104,676$104,676 and was capitalized as deferred financing costs, of which $0$0 and $82,868$82,868 was expensed during the threethree-month period ended March 31, 2019 and six-month periods ended June 30, 2018, respectively, and $0 during 2017.respectively.

On January 26, 2018, the Company paid approximately $1,074,000$1,074,000 to repay the 2017 Promissory Notes issued to the 2017 Lenders, which includes approximately $65,000$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$0 under the 2017 Promissory Notes at June 30, 2018 March 31, 2019 and December 31, 2017 respectively.2018. 

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.$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$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$4,500,000 was advanced on January 26, 2018. Approximately $581,000$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$1,074,000 of the initial advance was used to repay the 2017 Promissory Notes.Notes issued to the 2017 Lenders on August 14, 2017. The $175,000$175,000 commitment fee was capitalized as deferred financing costs, of which $14,583$14,583 and $24,305$9,722 was expensed during the threethree-month period ended March 31, 2019 and six-month periods ended June 30, 2018, respectively, and $0 during 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, 2019, the Company was in compliance with such covenants, except for the minimum liquidity and secured debt covenants, defaults relating to which have been waived by Beedie. 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$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 2017-112017-11 which revises ASC 815-10-15-74815-10-15-74 to allow instruments with a down round featurefeatures 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$1,099,861 and was capitalized as deferred financing costs, of which $91,655$91,655 and $152,758$61,103 was expensed during the threethree-month period ended March 31, 2019 and six-month periods ended June 30, 2018, respectively, and $0 during 2017.respectively.

On May 31, 2018, the Company entered into a first amendment, or the First Beedie Amendment, of the Beedie Credit Agreement to permit the issuance of additional promissory notes to lenders,the 2018 Promissory Notes, as further described below, to amend the Company’s adjusted EBITDA, revenue renewal and total debt to monthly recurring revenue covenants, and to add a secured debt to monthly recurring revenue covenant. In addition, the Company issued to Beedie a warrant to purchase up to 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 25, 2019. 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. The fair value of the warrant amounted to $120,330 and was capitalized as deferred financing costs, of which $3,343$10,027 and $3,343$0 was expensed during the three and six-monththree-month periods ended June 30,March 31, 2019 and 2018, respectively, and $0 during 2017.respectively.

On June 13, 2018, the Company entered into a second amendment, or the Second Beedie Amendment, of the Beedie Credit Agreement to issue additional promissory notes,2018 Promissory Notes, as further described below. In addition, the Company issued to Beedie a warrant to purchase up to 100,000 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 25, 2019. 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. The fair value of the warrant amounted to $24,053 and was capitalized as deferred financing costs, of which $668$2,004 and $668$0 was expensed during the three and six-monththree-month periods ended June 30,March 31, 2019 and 2018, respectively,respectively.

On August 31, 2018, the Company entered into a third amendment, or the Third Beedie Amendment, of the Beedie Credit Agreement to borrow the second tranche of the term loan facility in the amount of $1,500,000, to permit the issuance of the August 2018 Promissory Notes, as further described below, to amend the commitment fee, to amend the Company’s minimum adjusted EBITDA, revenue renewal, total debt to monthly recurring revenue and secured debt to monthly recurring revenue covenants and to provide for twice monthly reporting of the Company’s projected cash flows. In connection with the Third Beedie Amendment, the Company issued to Beedie a warrant to purchase up to 1,500,000 shares of the Company's common stock and a warrant to purchase up to an additional 835,000 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 25, 2019. The fair value of these warrants amounted to $412,484 and was capitalized as deferred financing costs, of which $42,671 and $0 was expensed during 2017.the three-month periods ended March 31, 2019 and 2018, respectively. A commitment fee of $75,000 was capitalized as deferred financing costs, of which $7,759 and $0 was expensed during the three-month periods ended March 31, 2019 and 2018, respectively.

On January 23, 2019, the Company entered into a fourth amendment, or the Fourth Beedie Amendment, of the Beedie Credit Agreement to, among other things, defer the Company’s January 31, 2019 interest payment to Beedie and add it to the amount due at maturity, amend the Company’s minimum adjusted EBITDA, revenue renewal, and secured debt to monthly recurring revenue covenants and to provide for weekly reporting of the Company’s projected cash flows. The Company will pay to Beedie a fee of $50,000 for the Fourth Beedie Amendment to be paid on or before the maturity date of the Beedie Credit Agreement.

On March 1, 2019, the Company entered into a fifth amendment, or the Fifth Beedie Amendment, of the Beedie Credit Agreement to borrow the third tranche of the term loan facility in the amount of $500,000. In connection with the Fifth Beedie Amendment, the Company issued to Beedie a warrant to purchase up to 500,000 shares of the Company's common stock at an exercise price of $0.15 per share subject to certain adjustments for dividends, splits or reclassifications. The fair value of these warrants amounted to $44,670 and was capitalized as deferred financing costs, of which $1,942 and $0 was expensed during the three-month periods ended March 31, 2019 and 2018, respectively. Additionally, per the down round feature of the Beedie Warrants, pursuant to ASU 2017-11 which allows instruments with a down round feature to qualify for equity classification, the Company recognized the value of the feature when it was activated and there was an actual reduction of the strike price or conversion feature. The fair value of the reduction in income of all previously issued warrants to Beedie amounted to $104,638 and was capitalized as deferred financing costs, of which $8,861 and $0 was expensed during the three-month periods ended March 31, 2019 and 2018, respectively.

The Company owed $6,562,379 and $6,000,000 under the Beedie Loan at March 31, 2019 and December 31, 2018, respectively

2018Promissory Notes

On May 31, 2018, and June 15, 2018, the Company borrowed an aggregate of $1,500,000$1,500,000 and $500,000,$500,000, respectively, from thirteen lenders, or the 2018 Lenders, and issued promissory notes, or the 2018 Promissory Notes, for the repayment of the amounts borrowed. The 2018 Lenders are all accredited investors, one of the 2018 Lenders is an affiliate of the Company’s director, Greg Akselrud, onetwo of the 2018 Lenders is an affiliate of the Company’s Chief Financial Officer, Anthony Mazzarella, two of the 2018 Lenders are related to the Company’s Chairman and Chief Executive Officer, Brian Ross, and two of the 2018 Lenders are employees of the Company.Company’s employees. The 2018 Promissory Notes are unsecured, have a maturity date of May 30, 2021 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 2018 Lenders six-yearsix-year warrants to purchase an aggregate of 3,000,000 shares of the Company’s Common Stock at an exercise price of $0.35$0.35 per share. The fair value of the warrants amounted to $737,218$737,218 and was capitalized as deferred financing costs, of which $20,478$61,435 and $20,478$0 was expensed during the three and six-monththree-month periods ended JuneMarch 31, 2019 and 2018, respectively.

August 2018 Promissory Notes

On August 31, 2018, the Company borrowed an aggregate of $1,500,000 from ten lenders, or the August 2018 Lenders and issued promissory notes, or the August 2018 Promissory Notes for the repayment of the amounts borrowed. The August 2018 Lenders are all accredited investors. The August 2018 Promissory Notes are unsecured, have a maturity date of August 30, 2021 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 August 2018 respectively,Lenders six-year warrants to purchase an aggregate of 1,500,000 shares of the Company’s common stock exercisable for cash at an exercise price of $0.35 per share. The fair value of the warrants amounted to $276,798 and $0was capitalized as deferred financing costs, of which $23,066 and $0 was expensed during 2017.the three-month periods ended March 31, 2019 and 2018, respectively.

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