The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2011. Certain statements in this discussion and elsewhere in this report constitute forward-looking statements. See ''Cautionary Statement Regarding Forward Looking Information'' elsewhere in this report. Because this discussion involves risk and uncertainties, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We are a multifaceted online marketing services company specializing in the development of performance-based marketing programs and related software solutions for businesses interested in expanding their online advertising presence. We own and operate www.cakemarketing.com, an internally-developed Software-as-a-Service, or SaaS, platform. Cake Marketing is a hosted software solution that provides an all-inclusive suite of management services for online marketing campaigns. From tracking and reporting to lead distribution, our patent-pending software enables advertisers, affiliate marketers and lead generators a fully scalable and accurate platform developed with a combination of innovative technology and an imaginative approach to doing business online.

We have an extensive portfolio of approximately 5,500 URLs, also known as domain names. Our URL portfolio is currently used to build consumer-based financial portals, microsites, blogs, and landing pages used for lead generation initiatives. In addition, we own and develop various portals, and websites, including: www.secfilings.com, which provides to subscribers real-time alerts based on reports filed by various companies and individuals with the Securities and Exchange Commission, or the SEC. Also through www.accelerizefinancial.com, we offer advertisers access to an audience of active individual investors, institutional investors, financial planners, registered advisors, journalists, investment bankers and brokers. Our financial portals and URL portfolio target a niche demographic that is qualified by the content they seek. This media strategy drives new membership, which results in recurring user traffic to our websites and allows us to generate highly relevant responses and leads for our online advertising and lead generation customers.

In February 2011 we decided to discontinue our Lead Generation Division, in order to focus our efforts and resources on our SaaS products and services. After careful review by our management, it became clear that although the Lead Generation Division was a substantial source of revenue for us, it was only marginally profitable, and required substantial management attention and financial resources, which would otherwise be invested in more profitable channels. In addition, we decided to discontinue our Lead Generation Division to avoid potential conflicts of interest with our SaaS customers, who are providing similar lead generation services. Subsequently, we sold certain assets related to our Lead Generation Division. Commencing March 1, 2011, we discontinued offering lead generation marketing services.

Our principal offices are located at 2244 West Coast Highway, Suite 250, Newport Beach, CA 92663. Our telephone number there is: (949) 515-2141. Our corporate website is: www.accelerizenewmedia.com, the contents of which are not part of this quarterly report.

Business Environment

SaaS
The business environment for our SaaS platform is characterized as follows:

· Larger advertisers are evaluating mission-critical software, such as ours, to manage their online performance-based initiatives. Such companies are factoring whether it is more beneficial to them to either develop their own technology or license it from third-parties, such as us;

· As the online performance-based market grows, there are new entrants as solution providers, who are competing mostly on price and less on richness of features and performance tools; and

· We believe that our existing and potential customer base continues to look for more measureable results in their online performance-based growth and more flexible contractual terms.

Online Marketing Services
We market our online marketing services primarily to small publicly-traded companies. The market conditions which negatively impacted our online marketing services as well as our peers during the first-half of 2012 were as follows:

· High US unemployment, tax and other regulatory and economic uncertainties impacted the operating results and financing opportunities for companies in the micro, small and midcap market in which we are active; and

· Lack of predictability in the market recovery resulted in declining interest in various sectors in which our online marketing services are focused, which translated into unusual volatility and lack of liquidity in the capital markets in general, and by extension, the capital markets of our prospective and existing clients.

                           ACCELERIZE NEW MEDIA, INC.
                             RESULTS OF OPERATIONS

                                                               Increase/          Increase/                                           Increase/          Increase/
                            Three-month periods ended          (Decrease)         (Decrease)         Six-month periods ended          (Decrease)        (Decrease)
                                     June 30,                 in $ 2012 vs       in % 2012 vs                June 30,                in $ 2012 vs      in % 2012 vs
                               2012              2011             2011               2011              2012            2011              2011              2011

Revenue:
Software-as-a-Service     $    1,294,720      $  487,698     $      807,022              165.5 %   $  2,343,085     $   821,760     $    1,521,325             185.1 %
Online marketing
services                         242,150         323,629            (81,479 )            -25.2 %        375,183         691,880           (316,697 )           -45.8 %
Total revenues:                1,536,870         811,327            725,543               89.4 %      2,718,268       1,513,640          1,204,628              79.6 %
                                                                                                              -               -
Operating expenses:                                                                                           -               -
Cost of revenues                 278,691         147,504            131,187               88.9 %        461,298         257,931            203,367              78.8 %
Research and
development                      149,392         122,380             27,012               22.1 %        381,996         241,101            140,895              58.4 %
Selling, general and
administrative                 1,013,881         562,969            450,912               80.1 %      2,011,677       1,254,471            757,206              60.4 %
Total operating
expenses                       1,441,964         832,853            609,111               73.1 %      2,854,971       1,753,503          1,101,468              62.8 %
                                                                                                              -               -
Operating income (loss)           94,906         (21,526 )         (116,432 )           -540.9 %       (136,703 )      (239,863 )         (103,160 )           -43.0 %
                                                                                                              -               -
Other expense:                                                                                                -               -
Interest expense                 (45,708 )      (134,320 )           88,612              -66.0 %        (99,088 )      (331,458 )          232,370             -70.1 %

Net income (loss) from
continuing operations             49,198        (155,846 )         (205,044 )             -132 %       (235,791 )      (571,321 )         (335,530 )             -59 %

Discontinued operations
Income from
discontinued operations                -           5,854             (5,854 )             -100 %              -           3,059             (3,059 )            -100 %
Gain from the disposal
of discontinued
operations                             -          16,621             20,000           NM                      -          36,621             20,000          NM
Net income from
discontinued operations                -          22,475             14,146                 63 %              -          39,680             16,941                43 %

Net income (loss)         $       49,198      $ (133,371 )   $     (182,569 )             -137 %   $   (235,791 )   $  (531,641 )   $     (295,850 )             -56 %

NM: Not Meaningful

Discussion of Results for Three-Month and Six-Month Periods Ended June 30, 2012

Revenues

We generate revenues from the following sources: the licensing of our SaaS and online marketing services.

The increase in our software licensing revenues during the three-month and six-month periods ended June 30, 2012, when compared to the prior year periods, is due to the increased number of customers using our SaaS products and services, as well as increased revenues from our existing customers resulting from higher usage of our SaaS platform. The increase in the number of customers using our SaaS products during the three-month and six-month periods ended June 30, 2012 is primarily due to the increased resources we have devoted to customer acquisition for our SaaS products. The higher usage by our existing customers of the same products is primarily due to the higher market acceptance among our larger users who generate a higher volume of transactions.

The decrease in our online marketing services during the three-month and six-month periods ended June 30, 2012, when compared to the prior year period, is due to the aforementioned slightly more difficult business environment and an increased focus on our growing software licensing products and services. We temporarily diverted some of our marketing resources from online marketing services to the SaaS platform during the three-month period ended March 31, 2012, which decreased our revenues during such quarter.

We believe that our Saas revenues will continue to increase sequentially for the remainder of 2012 and our online marketing services revenues will remain at levels comparable to the second quarter of 2012 for the remainder of 2012.

Cost of Revenues

Cost of revenue consists primarily of web hosting, web-based customer acquisition costs, such as search management, domain registration, and list management. Our increase in cost of revenue during the three-month and six-month periods ended June 30, 2012, when compared to the prior year periods, is due primarily to an increase in our web hosting expenses resulting from increased customer usage of our SaaS platform and online marketing services.

We believe that our cost of revenues will continue to increase commensurate with our anticipated increase in revenues for the remainder of 2012.

Research and Development Expenses

Research and development expenses consist primarily of payroll expenses and related benefits and facility costs associated with enhancement of our software services. Our research and development expenses increased during the three-month and six-month periods ended June 30, 2012, when compared to the prior year periods, due to increased staff assigned to the enhancement of our software services, which translated into increased payroll costs and related benefits.

We believe that our research and development expenses will continue to increase sequentially as we continue to enhance some of the features of our Saas platform for the remainder of 2012.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses primarily consist of payroll expenses associated with supporting customer acquisition activities, as well as other general and administrative expenses, including payroll expenses, necessary to support our existing and anticipated growth in our revenues, and legal expenses and professional fees.

The increase in selling, general and administrative expenses during the three-month and six-month periods ended June 30, 2012, when compared with the prior year periods, is primarily due to the increased number of employees assigned to support customer acquisition activities, such as training and account management, which resulted in increased payroll costs and related benefits as well as increased expenses recognized due to increased fair value of options granted during the same period in 2011.

We believe that our selling, general, and administrative expenses will continue to increase sequentially as we continue to hire to increase our training and account management capacity for the remainder of 2012. Additionally, we have recently granted options to three of our executive officers which start vesting in the fourth quarter of 2012. Upon vesting of such options we will record an additional stock-based compensation of approximately $105,000 per quarter.

Interest

Interest expense consists of interest charges and amortization of debt discount associated with our convertible notes payable and note payable. The decrease in interest expense during the three-month and six-month periods ended June 30, 2012, when compared to the prior year period, is primarily due to inducement to holders of certain convertible promissory notes which amounted to $159,000 which occurred in the three-month period ended March 31, 2011, which were not granted during the three-month and six-month periods ended June 30, 2012, and, to a lesser extent, a decrease in the weighted-average principal balance of our interest-bearing obligations, of which a substantial portion was converted into shares of our common stock during the three-month period ended March 31, 2012.

We believe that our interest expense will continue at the same levels as the first half of 2012 for the remainder of 2012.

Net income from discontinued operations

The net income from discontinued operations consists of revenues and operating expenses from our lead generation division which was sold in February of 2011, as well as a gain on the sale during the three-month and six-month periods ended June 30, 2011. The income from discontinued operations during the second quarter of 2011 consists primarily of contingent receipts resulting pursuant to the disposition of our lead generation division. We did not have any discontinued operations during the six-month period ended June 30, 2012. We do not anticipate receiving additional proceeds related to our former lead generation division.

Liquidity and Capital Resources

Sources of liquidity and capital
resources
                                                                                 Average balance during
                                             Ending balance at June 30,               first half of
                                                2012               2011           2012             2011
Cash                                       $       45,040       $  159,991     $   74,895       $  125,797
Accounts receivable                        $      542,039       $  398,227     $  530,192       $  328,668

Accounts payable and accrued expenses      $      540,995       $  227,890     $  478,508       $  267,153
Convertible notes payable excluding debt
discount                                   $      184,500       $  655,145     $  410,750       $  921,540
Notes payable, excluding debt discount     $      320,000       $  440,000     $  410,000       $  470,000

At June 30, 2012 and 2011, 80% and 82%, respectively, of our total assets consisted of cash and cash equivalents and accounts receivable.

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

The objective of liquidity management is to ensure that we have ready access to sufficient funds to meet commitments while implementing our growth strategy. Our primary sources of liquidity include the sale of our securities and other financing activities, such as the issuance of a note payable of $500,000 in January 2011. We cannot ascertain that we have sufficient funds from operations to fund our ongoing operating requirements through December 31, 2012. We may need to raise funds to enhance our working capital and use them for strategic purposes. If such need arises, we intend to generate proceeds from either debt or equity financing.

We do not have any material commitments for capital expenditures. We routinely purchase computer equipment and technology to maintain or enhance the productivity of our employees and such capital expenditures have ranged between $11,000 and $16,000 during the six-month periods ended June 30, 2012 and 2011.