UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 20192020

For the transition period from ________ to ________

Commission File Number: 000-52635

ACCELERIZECFN ENTERPRISES INC.

(Exact name of registrant as specified in its charter)

20411 SW BIRCH600 E. 8^TH STREET SUITE 250

NEWPORT BEACH

CALIFORNIA 92660WHITEFISH, MT 59937

 (Address of principal executive offices) (Zip code)

(949) 548 2253(833) 420-2636

 (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 every Interactive Data File required to be submitted 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 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 May 20, 2019,June 30, 2020, was 66,179,709.99,929,709.

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

EXPLANATORY NOTE

As previously disclosed in the Current Report on Form 8-K filed by CFN Enterprises Inc. (the "Company") with the Securities and Exchange Commission (the "SEC") on May 18, 2020, the filing of the Company's Quarterly Report on 10-Q for the period ended March 31, 2020 was delayed as a result of disruptions caused by the novel coronavirus ("COVID-19").  To delay the filing of the Form 10-Q, the Company has relied on the Order of the SEC, dated March 25, 2020, pursuant to Section 36 of the Securities Exchange Act of 1934 modifying exemptions from the reporting and proxy delivery requirements for public companies (Release No. 34-88465).

Mandatory closures of businesses imposed by the federal, state and local governments to control the spread of the COVID-19 pandemic has disrupted the operations of the Company’s management, business and finance teams.  This has, in turn, impacted the Company’s ability to complete and file this Quarterly Report with the SEC by its original due date of May 15, 2020.

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

Organization

CFN Enterprises Inc., formerly known as Accelerize Inc., or the Company, is a Delaware corporation incorporated on November 22, 2005 ownswhich owned and operatesoperated CAKE, a Software-as-a-Service or SaaS, platform providing online tracking and analytics solutions for advertisers and online marketers.

The Company providesprovided software solutions for businesses interested in expanding their online advertising spend. Effective October 22, 2019, the Company filed a certificate of amendment to its certificate of incorporation with the Secretary of State of the State of Delaware to change its corporate name to CFN Enterprises Inc.

These unaudited condensed consolidated financial statements reflectOn May 15, 2019, the Company entered into an asset purchase agreement, or the Asset Purchase Agreement, with CAKE Software, Inc., a Delaware corporation and a subsidiary of Constellation Software Inc., an Ontario, Canada corporation (TSX: CSU), or Constellation, pursuant to which the Company agreed to sell substantially all adjustments including normal recurring adjustments, which,of the assets associated with its CAKE and Journey by CAKE business, or the CAKE Business, to Constellation for a base purchase price of $19,400,000 plus or minus an estimated closing date adjustment based on the net tangible assets of the CAKE Business at the closing, a holdback of $500,000 adjusted pursuant to the terms of the Asset Purchase Agreement and payable on the first anniversary of the closing date, and a three year earnout equal to 30% of the amount that the annual net revenue of the CAKE Business exceeds $13,750,000 and payable within 120 days on each of the first, second and third end of month anniversaries of the closing date. The sale of the assets of the CAKE Business pursuant to the Asset Purchase Agreement closed on June 18, 2019, and the Company received proceeds of $20,892,667, net of the estimated closing date adjustment.

As of the closing date, Constellation acquired all of the assets used by the Company in the opinion of management, are necessaryCAKE Business and assumed the Company’s post-closing obligations under certain vendor, customer and other commercial contracts related to present fairly the financial position, results of operations,CAKE Business, including the Company’s lease for its headquarters in Newport Beach, California. The Company’s cash and cash flowsequivalents, and the assets associated with its Accelerize trademark, are excluded from the sale of the CAKE Business. Constellation offered employment to certain of the Company’s employees following the closing date.

On May 15, 2019, the Company entered into the Emerging Growth Agreement with Emerging Growth, LLC, or the Seller, pursuant to which the Company acquired certain assets from the Seller related to its sponsored content and marketing business for a purchase price consideration consisting of $420,000 in cash, 30,000,000 shares of the periods presented in accordanceCompany’s common stock, and 3,000 shares of Series B preferred stock with accounting principles generally accepteda total stated value of $3,000,000 which bears interest at 6% per annum and is convertible into the Company’s common stock at a conversion price to be mutually agreed in the United Statesfuture, without voting rights or a liquidation preference except with respect to default interest.  The securities were issued pursuant to an exemption under Section 4(a)(2) of America, or GAAP. These unaudited condensed consolidated financial statements and notes included herein should be read in conjunction withthe Securities Act of 1933, as amended. The closing of the purchase of the assets pursuant to the Emerging Growth Agreement occurred on June 20, 2019.

Subsequent to the closing of the Asset Purchase Agreement on June 18, 2018, the Company’s consolidated financial statements and notes thereto for the years ended December 31, 2018 and 2017, respectively, which are included in the Company’s December 31, 2018 Annual Report on Form 10-K filed with the United States Securities and Exchange Commission on April 16, 2019.  The Company assumes that the userscontinuing operations consist of the interim financial information herein have read, or have accesssponsored content and marketing business from the assets acquired pursuant 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, 2019 are not necessarily indicative of results for the entire year ending December 31, 2019.Emerging Growth Agreement.

Going Concern

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 $4,557,359$569,430 and an accumulated deficit of $43,973,761$35,099,480 as of March 31, 2019.2020.  The Company also had a net loss from continuing operations of $1,013,637 and cash provided by operating activities of $374,140$318,331 during the three months ended March 31, 2019.2020.

Management’s plan to continue as a going concern includes raising capital in the form of debt or equity, increased gross profit from revenue growthgrowing its existing business acquired under the Emerging Growth Agreement and managing and reducing operating and overhead costs. During the second quarter of 2018,On May 6, 2020, the Company engagedreceived $263,000 in the form of a nationally recognized investment bank to assist managementloan from the PPP, as well $150,000 in pursuing strategic transactions including acquisitions, dispositions, capital raising and debt restructuring. On May 15, 2019,proceeds from a loan with the Company entered into an asset purchase agreement to sell substantially all of the Company’s assets. This agreement is subject to stockholder approvalSBA on June 24, 2020 (see Note 10, Subsequent Events)9).  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.

These matters, among others, raise substantial doubt about the ability of the Company to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.  

PrinciplesCOVID-19

In March 2020, the outbreak of ConsolidationCOVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States, including each of the areas in which the Company operates. While to date the Company has not been required to stop operating, COVID-19 has had and is expected to continue to have an adverse effect on the financial condition of the Company and its customers. While it is unknown how long these conditions will last and what the complete financial effect will be to the Company, it is expected to have a significant adverse impact to the Company’s revenue and ability to obtain financing.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the results of operations of the Company and Cake Marketing UK Ltd., or the Subsidiary. The Company discontinued its operations associated with its CAKE Business and the operations of its Subsidiary in May 2019. These accounts have been presented as discontinued operations in the accompanying unaudited condensed consolidated financial statements. Continuing operations presented in periods prior reflect administrative expenses associated with business insurance, legal and accounting fees that the Company will continue to incur. All material intercompany accounts and transactions between the Company and its Subsidiary have been eliminated in consolidation.

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, 2019 and 2018, respectively, which are included in the Company’s December 31, 2019 Annual Report on Form 10-K filed with the United States Securities and Exchange Commission on June 15, 2020.  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 period ended March 31, 2020 are not necessarily indicative of results for the entire year ending December 31, 2020.

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 intangible assets, borrowing rate considered for operating lease right-of-use asset and related operating lease liability, and assumptions used in Black-Scholes-Merton, or BSM,Black-Scholes valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate.

Financial Statement Reclassification

Certain account balances from prior periods have been reclassified in these unaudited condensed consolidated financial statements to conform to current period classifications. The prior year amounts have also been reclassified in these financial statements to properly report amounts under current operations and discontinued operations (see note 7).

Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less when purchased, to be cash equivalents. The Company hashad restricted cash as a result of its corporate card program through its bank. The bank, requires awhich required collateral which is placed in a money market account and can be increased or decreased at any time ataccount. The corporate card program was terminated in 2019, which resulted in the discretion of the Company. The Company’s restricted cash amountedbalance being transferred back to the Company for its general use. The Company had a restricted cash balance of $50,000 atincluded as a component of total cash and restricted cash as presented on the accompanying unaudited condensed consolidated statement of cash flows for the three months ended March 31, 2019 and2019. The Company had no restricted cash as of March 31, 2020 or December 31, 2018.2019.

Accounts Receivable

The Company’s accounts receivableaccount receivables are due primarily from advertisers and marketers.customers relating to contracts to provide investor relation services. 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. The allowance for doubtful accounts as of March 31, 2020 and December 31, 2019 amounted to $183,750 and $163,750, respectively.

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. DuringFrom time-to-time, the three-month period ended March 31, 2019, the Company has reachedCompany’s bank balances exceedingexceed 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. The Company had aone customer whowhich accounted for 17%100% of its net accounts receivable at March 31, 20192020. The Company had five customers who each accounted for 32.3%, 13.8%, 13.8%, 13.8% and none10.3%, respectively, of its net accounts receivable at December 31, 2018.  The Company does not require any collateral from its customers.2019. 

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification, or ASC, 606, the core principle of which is 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 to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation.

The Company accounts for revenues when both parties to the contract have approved the contract, the rights and obligations of the parties are identified, payment terms are identified, and collectability of consideration is probable. Payment terms vary by client and the services offered.

The Company’s SaaS revenues arerevenue is generated from implementationthe sale of promotional service packages to its customers ranging from 3 to 6 months. The Company offers different packages tailored to the type and training fees and a monthly license fee, supplemented by per transaction fees paid by customers for monthly platform usage. The initial termstage of the potential 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 valuesuch as public companies looking 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 recognizes 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 feesincrease their shareholder base, as well as private companies potentially looking to go public and attract capital and publicity. The services provided by the feesCompany include advertising, publishing of interviews and articles across its network and featuring of client content on its newsletters and social media. The packages all have fixed prices that are billed monthly over the terms of the agreement in even amounts. The Company recognizes revenue for its performance obligation associated with monthly transaction-based platform usageits contracts with customers over time as work is performed, which is deemed to occur evenly throughout the duration of the contract. This also reflects the pattern in which costs are incurred on performing the contracts. To the extent revenue recognized inon contracts at each period end exceeds collections, the corresponding period.

Product Concentration

The Company generates its revenues from software licensing, usage, and related transaction fees.amounts are reflected as accounts receivable. To the extent collections on contracts at each period end exceeds revenue recognized, the amounts are reflected as deferred revenue.

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:

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. Advertising expenses relating to continuing operations amounted to $47,966 and $0 for the three months ended March 31, 2020 and 2019, respectively. Advertising expenses reported as a component of discontinued operations amounted to $0 and $98,967 for the three months ended March 31, 2020 and 2019, respectively.

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 iswas 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 CostsProperty and Equipment

At December 31, 2018,Property and equipment are recorded at cost and are depreciated on a straight-line basis over their estimated useful lives of five years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized. 

Long-Lived Assets

In accordance with ASC 360-10, the Company impairedevaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the entire balance of unamortized internal-use software development costs which amounted to approximately $4,725,000 and did not capitalize internal-use software development costs in 2019. Costs incurred inCompany compares 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. Prior to the December 31, 2018 impairment, costsprojected undiscounted future cash flows associated with the application development stagerelated asset or group of new software productsassets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and significant upgrades and enhancements thereto were capitalized when 1) management implicitly or explicitly authorized and committed to funding a software project and 2) itis recorded in the period in which the determination is made. There was probable that the project would be completed and the software would be used to perform the function intended. The Company capitalized internal-use software development costsno impairment of $375,000long-lived assets identified during the three-month periodthree months ended March 31, 2018. The Company amortized such costs once2020 or 2019.

Basic and Diluted Earnings Per Share

Basic earnings per share are calculated by dividing income available to stockholders by the new software productsweighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and significant upgradesdilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon the exercise of stock options and enhancements were completed. The unamortized internal-use software development costs amounted to approximately $4,196,000 atwarrants (calculated using the modified-treasury stock method). As of March 31, 2018. The Company’s amortization expenses associated with capitalized software development costs amounted to approximately $105,000 during2020, the three-month period endedCompany had 3,160,000 outstanding stock options and 7,543,944 outstanding warrants which were excluded from the calculation of diluted earnings per share because their effects were anti-dilutive. As of March 31, 20182019, the Company had 7,130,000 outstanding stock options and was reflected in cost25,545,517 outstanding warrants which were excluded from the calculation of revenues. Therediluted earnings per share because their effects were no expenses associated with capitalized software development costs duringanti-dilutive. As a result, the three-month period ended March 31, 2019.basic and diluted earnings per share are the same for each of the periods presented.

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 BSMBlack-Scholes 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.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date fair value on the grant date. The probability of satisfying performance conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. This update to this standard has no impact in the Company’s Condensed Consolidated Financial Statements.

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’ Deficit.  

Segment Reporting

The Company generated revenues from one source, its SaaS business, during the three-month periods ended March 31, 2019 and 2018. 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 February 2016,December 2019, the FASB issued Accounting Standards Update, or ASU, 2016-02, “Leases” (Topic 842).2019-12, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes, or ASC 740. This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance will beto improve consistent application of ASC 740. This update is effective for public entities for fiscal years beginning after December 15, 2018 including the interim periods within those fiscal years. Early2021.  The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application is permitted. Under the new provisions, all lessees will report a right-of-use asset and a liability for the obligation to make payments for all leases with the exception of those leases with a term of 12 months or less.  All other leases will fall into one of two categories: (i) Financing leases, similar to capital leases, which will require the recognition of an asset and liability, measured at the present value of the lease payments and (ii) Operating leases which will require the recognition of an asset and liability measured at the present value of the lease payments.  The Company has adoptedis currently evaluating the effect of this standard on January 1, 2019 and has recognized assts and liabilities arising from any leases that meet the requirements under this standard on the adoption date and included qualitative and quantitative disclosures in the Company’s Notes to the Condensed Consolidated Financial Statements.

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. This standard has no impact on the Company’s financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall: Recognitionstatements 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. This standard has no impact on the Company’s 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.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees and supersedes the guidance in Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date fair value on the grant date. The probability of satisfying performance conditions must be considered for equity-classified nonemployee share-based payment awards with such conditions. This update to this standard has no impact in the Company’s Condensed Consolidated Financial Statements.disclosures.

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).  

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:

During the three-month period ended March 31, 2019, the Company disposed of approximately $9,000 in computer equipment with a net book value of approximately $1,400. There were no such disposals 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:

NOTE 3: PREPAID EXPENSESPROPERTY AND EQUIPMENT

AtThe Company’s property and equipment relating to continuing operations consisted of the following at March 31, 20192020 and December 31, 2018,2019.

Depreciation expense from continuing operations for the Company’s prepaid expenses consisted primarily of prepaid insurancethree months ended March 31, 2020 and tradeshow costs.2019 amounted to $350 and $0, respectively.

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.

NOTE 5: CREDIT FACILITY AND LOAN

Agility Loan 

On March 11, 2016, the Company entered into a subordinated loan, or the Agility Loan with Agility Capital II, LLC, or Agility, which provided for total availability of $625,000 and was to originally mature, prior to amendment, on March 31, 2017. The Agility Loan had a fixed interest rate of 12% per year and required $25,000 monthly amortization payments beginning on June 1, 2016. The Agility Loan also required 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 contained 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. At the time of repayment of the Agility Loan, in January 2018, the Company was in compliance with these covenants.

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, the entirety of which was expensed prior to 2018.ACQUISITONS

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, the entirety of which was expensed prior to 2018.

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,May 15, 2019, the Company entered into the third amendmentEmerging Growth Agreement with Emerging Growth, LLC (see Note 1), which closed on June 20, 2019. Pursuant to the terms of the Agility Loan whereby Agility Capital agreed to loan an additional $300,000 toEmerging Growth Agreement, 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 deductedacquired certain assets from the Additional Loan amount. This arrangement was treated asSeller related to its sponsored content and marketing business for a substantial modificationpurchase price consideration consisting 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$420,000 in 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 under the Agility Loan at March 31, 2019 and December 31, 2018.

Credit Facility - SaaS Capital Loan 

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. 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 was paid on May 2017. Additionally, the Company incurred initial financing costs of $160,000 which were capitalized as deferred financing costs, of which $13,333 was expensed at March 31, 2019 and 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 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 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 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.

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, 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 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 and was capitalized as deferred financing costs, of which $31,927 was expensed during the three-month periods ended March 31, 2019 and 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, 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 200,00030,000,000 shares of the Company’s Common Stockcommon stock valued at an exercise$2,700,000, and 3,000 shares of Series B preferred stock valued at $687,000. As a result, the total purchase price amounted to $3,807,000.

A summary of $0.36 per share. This warrant expires on November 29, 2026. Thethe purchase price allocation at fair value is below. 

The intangible assets and goodwill acquired in this transaction were fully impaired at the end of the warrant amounted to $60,185 which was fully expensed at December 31, 2016.2019.

On May 10, 2017,The following are the Company entered into a second amendmentunaudited pro forma results of the SaaS Capital Loan, or the Second Amendment, 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 allowoperations 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-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 the 2017 Promissory Notes, further described below.

On November 8, 2017, the Company entered into a 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 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 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 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 470-50 “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 $4,736 and $3,157 was expensed during the three-month period ended March 31, 2019 and 2018, respectively.

On May 31, 2018, the Company entered into a seventh amendment of the SaaS Capital Loan, or the Seventh Amendment, to permit the issuance of 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 to $495,000, and to fix prepayment penalties until October 31, 2018.

On June 13, 2018, the Company entered into an eighth amendment of the SaaS Capital Loan, or the Eighth Amendment, to issue additional 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, 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 three months ended March 31, 2019 as if the Company borrowed $0 fromassets purchased in the SaaS Capital Loan, and made principal paymentsEmerging Growth Agreement had been acquired on January 1, 2019.  The amounts presented on the accompanying unaudited condensed consolidated statement of $360,000.

The Company owed $4,450,135 and $4,810,135 under the SaaS Capital Loan at March 31, 2019 and December 31, 2018, respectively.

2017 Promissory Notes

On August 14, 2017, the Company borrowed an aggregate of $1,000,000 from seven lenders, or the 2017 Lenders, and issued promissory notes, or the 2017 Promissory Notes,operations 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-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 $0 and $82,868 was expensed during the three-month periodthree months ended March 31, 20192020 already reflect the impact of the acquisition for the full period. The pro forma results include estimates and 2018, respectively.assumptions which management believes are reasonable.  However, pro forma results do include any anticipated cost savings or other effects of the planned integration of these entities, and are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the dates indicated.

NOTE 5: NOTE PAYABLE

On January 26, 2018, the Company paid approximately $1,074,000 to repay the 2017 Promissory Notes issued to the 2017 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 under the 2017 Promissory Notes at March 31,September 10, 2019, and December 31, 2018. 

Beedie Credit Agreement

On January 25, 2018, the Company entered into a non-revolving term credit agreement, orpromissory note payable whereby the Beedie Credit Agreement, with Beedie Investments Limited, or Beedie, to borrow up to a maximumCompany borrowed $500,000 bearing interest at 8% per annum. Interest on the note is payable quarterly on the first business day of $7,000,000.December, March, June and September commencing December 1, 2019. 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 paidnote is due 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 2017 Promissory Notes issued to the 2017 Lenders on August 14, 2017. The $175,000 commitment fee was capitalized as deferred financing costs, of which $14,583 and $9,722 was expensed during the three-month period ended March 31, 2019 and 2018, respectively.September 30, 2022.

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 specifiedFuture scheduled maturities of long-term 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. are as follows.

In connection with the Beedie Credit Agreement,promissory note on September 10, 2019, the Company issued to Beedie a warrant, or the Beedie Warrant,warrants 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 $91,655 and $61,103 was expensed during the three-month period ended March 31, 2019 and 2018, 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 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 $10,027 and $0 was expensed during the three-month periods ended March 31, 2019 and 2018, 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 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 $2,004 and $0 was expensed during the three-month periods ended March 31, 2019 and 2018, 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$0.10 per share subject to certain adjustments for dividends, splits or reclassifications,share. The warrants expire on September 10, 2024 and a weighted average adjustment for certain issuancesare fully vested upon issuance. The note was discounted by $17,624 allocated from the valuation of common stock below the exercise price prior to January 25, 2019.warrants issued. The fair value of these warrantsdiscount recorded on the note is being amortized as interest expense through the maturity date, which amounted to $412,484 and was capitalized as deferred financing costs, of which $42,671 and $0 was expensed during$1,463 for the three-month periodsthree months ended March 31, 2019 and 2018, respectively. A commitment fee2020. As of $75,000 was capitalized as deferred financing costs,March 31, 2020, the net book value of which $7,759 and $0 was expensed during the three-month periodspromissory note amounted to $485,640 including the principal amount outstanding of $500,000 net of the remaining discount of $14,360. Total interest expense for the three months ended March 31, 20192020 relating to this promissory note payable amounted to $11,463, including $1,463 of discount amortization. Accrued interest as of March 31, 2020 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 JanuaryDecember 31, 2019 interest payment to Beediewas $13,192 and add it to$3,192, respectively, which is reflected in accounts payable and accrued expenses on 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.accompanying unaudited condensed consolidated balance sheet.

The Company owed $6,562,379 and $6,000,000 underwarrants issued with the Beedie Loan at March 31, 2019 and December 31, 2018, respectivelypromissory note were valued using the Black-Scholes pricing method using the following assumptions below. 

2018 Promissory Notes

On May 31, 2018, and June 15, 2018, the Company borrowed an aggregate of $1,500,000 and $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, 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 the 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-year warrants to purchase an aggregate of 3,000,000 shares of the Company’s Common Stock at an exercise price of $0.35 per share. The fair value of the warrants amounted to $737,218 and was capitalized as deferred financing costs, of which $61,435 and $0 was expensed during the three-month periods ended March 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 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 was capitalized as deferred financing costs, of which $23,066 and $0 was expensed during 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. 

NOTE 6: STOCKHOLDERS’ DEFICIT

Common Stock

There were no exercises of options during the three-month periods ended March 31, 2019 or 2018.

As of March 31, 2019, and December 31, 2018, there were 66,179,709 shares of Common Stock issued and outstanding.

Restricted Stock Issued as Compensation

During 2018, and 2017, the Company issued 120,000an aggregate total of 240,000 restricted shares of its Common Stock,common stock to its non-employee directors as partial director compensation, at a value of $0.50 per share, vesting in 4 equal quarterly increments commencing on July 1, 2018 and July 1, 2017, to each of its non-employee directors as partial annual compensation for services as a director. As of March 31, 2019 and 2018, these restricted shares were fully issued.ending June 30, 2019. The Company recorded expenses of $0 and $30,000 during the three-month periodsthree months ended March 31, 2020 and 2019, and 2018. $30,000 remained unvestedrespectively. There was no remaining unrecorded compensation expense related to restricted stock as of March 31, 2020.

Preferred Stock

The Company is authorized to issue 2,000,000 shares of preferred stock with a par value of $0.001 per share, of which 500 have been authorized as Series A Preferred Stock and 3,000 have been authorized as Series B Preferred Stock. The Series A Preferred Stock bears interest at 12% per annum, and is convertible into the Company’s common stock at the election of the holder at a conversion price per share to be mutually agreed between the Company and the holder in the future, and be redeemable at the Company’s option following the third year after issuance, without voting rights or a liquidation preference. The Series B Preferred Stock bears interest at 6% per annum and is convertible into the Company’s common stock at the election of Emerging Growth, LLC at a conversion price per share to be mutually agreed between the Company and Emerging Growth, LLC in the future, without voting rights or a liquidation preference, except with respect to accrued penalty interest.

For the three months ended March 31, 2020 and 2019, the Company incurred interest from the outstanding preferred stock of $60,000 and 2018.$0, respectively.

Warrants

There were no exercises of warrants duringThe following summarizes the three-month periodCompany’s warrant activity for the three months ended March 31, 2019 or 2018.2020.

During the three months ended March 31, 2019, the Company issued 500,000 warrants exercisable at a price of $0.15 per share which expire on January 25, 2024. The fair value of these warrants amounted to $44,670, and was recognized as deferred financing costs using the effective interest method during the three-month period ended March 31, 2019. Additionally, per the down round feature of the Beedie Warrants,7,935,000 warrants issued in connection with a prior credit agreement, 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 reduction in income of all previously issued warrants to Beedie amounted to $104,638 and was capitalized as deferred financing costs during the three-month period ended March 31, 2019.

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 thesesuch 7,935,000 warrants amounted to $56,834 and $1,099,861, respectively, and were recognized as deferred financing costs and amortized using$104,638. In connection with the effective interest method over the termsclosing of the associated loan. During this same period, 58,824Asset Purchase Agreement for the sale of the CAKE Business on June 18, 2019, the above warrants expired. 

As of March 31, 2019, and December 31, 2018, there were 25,545,517 and 16,110,517 warrants issued and outstanding, respectively, with a weighted average price $0.53 and $0.62, respectively.cancelled.

The Company recorded expenses of $89,119$0 and $61,050$89,119 during the three months ended March 31, 20192020 and 2018,2019, respectively, related to warrants granted.granted for compensation. As of March 31, 2020, all outstanding warrants were fully vested and there was no remaining unrecorded compensation expense.

Options

The Company generally recognizes its share-based payment overfollowing summarizes the vesting terms ofCompany’s stock option activity for the underlying options.three months ended March 31, 2020.

The Company recorded expenses of $0 and $6,578 during the three months ended March 31, 2020 and 2019, respectively, related to stock options. As of March 31, 20192020, all outstanding options were fully vested and December 31, 2018, there were 7,130,000 and 8,257,500 options, respectively, issued and outstanding with a weighted average price of $0.39.

The totalwas no remaining unrecorded compensation cost related to non-vested awards not yet recognized amounted to $2,095 at March 31, 2019 and the Company expects that it will be recognized over the following 18 months.expense.

NOTE 7: COMPREHENSIVE LOSSDISCONTINUED OPERATIONS

Comprehensive loss includes changes in equity relatedDuring May 2019, the Company decided to foreign currency translation adjustments. The following table sets forthdiscontinue most of its operating activities pursuant to the reconciliation from net loss to comprehensive loss for the three-month periods ended March 31, 2019 and 2018:Asset Purchase Agreement entered into with CAKE Software, Inc. (see Note 1).

The following table sets forthIn accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the unaudited condensed consolidated balance in accumulated other comprehensive losssheets, and consist of the following as of March 31, 20192020 and December 31, 2018, respectively:2019.

In accordance with the provisions of ASC 205-20, the Company has excluded the results of discontinued operations from its results of continuing operations in the accompanying unaudited condensed consolidated statements of operations. The results of the discontinued operations of the CAKE Business for the three months ended March 31, 2020 have been reflected as discontinued operations in the consolidated statements of operations, and consist of the following: