NOTE 5. ACCRUED EXPENSES
A summary of the nonvested stock option activity under the 2011 Equity Incentive Plans forduring the year ended December 31, 20162019 and the ninesix months ended SeptemberJune 30, 2017,2020, is presented below:
Basic earnings (loss) per common share is computed by dividing the net income or loss by the basic weighted-average number of shares of common stock outstanding during each period presented. Although restricted stock is issued upon the grant of an award, the Company excludes restricted stock from the computations of weighted-average number of shares of common
The Company excluded the following weighted average items from the above computation of diluted loss per common share, as their effect would be anti-dilutive:
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All forward-looking statements in this document are based on our current expectations, intentions and beliefs using information currently available to us as of the date of this report,Annual Report, and we assume no obligation to update any forward-looking statements, except as required by law. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.
IZEA was founded in February 2006 under the name PayPerPost, Inc. and became a public company incorporated in the stateTable of Nevada in May 2011. In January 2015, we purchased all of the outstanding shares of capital stock of Ebyline, Inc. and in July 2016, we purchased all the outstanding shares of capital stock of ZenContent, Inc. These entities, which aid in our management and production of custom branded content, now operate as wholly-owned subsidiaries under IZEA, Inc. On March 9, 2016, we formed IZEA Canada, Inc., a wholly-owned subsidiary of IZEA, Inc. incorporated in Ontario, Canada to operate as a sales and support office for our Canadian customers and partners.Contents
Company Overview
IZEA creates and operates online marketplaces that connect marketers, including brands, agencies, and publishers, with influential content creators.creators such as bloggers and tweeters (“creators”). Our technology brings the marketers and creators together, enabling their transactions to be completed at scale through the management of custom content workflow, creator search and targeting, bidding, analytics and payment processing.
We help power the creator economy, allowing everyone from college students and stay at home momsstay-at-home individuals to celebrities and accredited journalists the opportunity to monetize their content, creativity and influence.influence through our marketers. These creators are compensated by IZEA for producing unique content such as long-formlong and short form text, videos, photos, illustrations,status updates, and status updates. In addition to creating contentillustrations for marketers our creators are also compensated for distributionor distributing such content on behalf of that contentmarketers through their personal websites, blogs, and social channels such as Twitter, Facebook and YouTube.
media channels.
Marketers including brands, agencies, and partners, engage us to gain access to our industry expertise, technology, data, analytics, and network of creators. These companies are our primary customers where we generate theThe majority of our revenue. Theythe marketers engage us to perform these services on their behalf, but they also have the ability to use our servicesmarketplaces on a self-service basis by licensing our technology. Our technology is used for two primary purposes: the engagement of creators for influencer marketing campaigns, (also known as “influencer marketing” or "sponsored social"), or the engagement of creators to create stand-alone custom content for the marketer'smarketers’ own use as well as third party content marketing and native advertising efforts (“custom content”).distribution. Marketers receive influential consumer content and engaging, shareable stories that drive awareness.
Our primary technology platform, theThe IZEA Exchange (“(“IZEAx”), enables transactions to be completed at scale through the management of custom content development,workflow, creator search and targeting, bidding, analytics, and payment processing. IZEAx is designed to provide a unified ecosystem that enables the creation and publication of multiple types of custom content including blog posts, status updates, videos, and photos to be provided and further distributed through a wide variety ofcreator’s personal websites, blogs, or social media channels including blogs, Twitter, Facebook, Instagram, and Tumblr,YouTube, among others.
In addition to Until December 2019 when it was merged into IZEAx, we operateoperated the Ebyline technology platform, which we acquired in January 2015. The Ebyline platform iswas originally designed as a self-service content marketplace which was originally designed to replace in-house editorial newsrooms located within newspapersin news agencies with a “virtual newsroom” to source and handle their content workflow.workflow with outside creators. After the acquisition, we began to utilize the creators in the Ebyline platform to produce professional custom content for brands, in addition to the self-service functionality used by newspapers. In July 2016, we acquired the ZenContent technology platform to use as an in-house workflow tool that enables us to produce highly scalable, multi-part production of content for both e-commerce entities and brand customers. The TapInfluence technology platform, acquired in 2018, performed in a similar manner to IZEAx and was being utilized by the majority of the TapInfluence customers as a self-service platform via a licensing arrangement, allowing access to the platform and its creators for self-managed marketing campaigns. After the migration of the last customers to IZEAx from the Ebyline platform in December 2019 and from the TapInfluence platform in February 2020, all marketplace revenue is solely generated from the IZEAx platform.
Impact of COVID-19 on our Business
Although the ultimate impact of COVID-19 on our business is still unknown, our operations, sales and finances have been impacted by the pandemic during the six months ended June 30, 2020. In an effort to protect the health and safety of our employees, we took precautionary action and directed all staff to work from home effective March 16, 2020. During this work-from-home period, we have not renewed leases for our headquarters and temporary office spaces and we do not have any plans to do so prior to the end of 2020 and until circumstances allow.
Although we are able to maintain full operations remotely, the economic conditions caused by COVID-19 have negatively impacted the business activity of our customers. We observed changes in advertising decisions, timing and spending priorities from brand and agency customers, which have resulted in a negative impact to our revenue.
In light of the adverse economic conditions caused by the COVID-19 pandemic, we implemented certain cost-reduction measures, including temporary salary and wage reductions averaging 20%, including a 21% reduction in base salary for our Chief Executive Officer, Chief Operating Officer and fees for our directors, during the entire three months ended June 30, 2020. We reduced and shifted our marketing expense and eliminated travel expense for the near term future. In March 2020, we incurred debt by drawing on our secured credit facility and receiving a loan under the U.S. Small Business Association’s Paycheck Protection Program. After we were able to secure additional capital through sales of our common stock through an at the market offering in June 2020, the secured credit facility was paid down by June 30, 2020 and the employee salary reductions and hiring restrictions were removed effective July 1, 2020.
In an effort to contain COVID-19 or slow its spread, governments around the world have also enacted various measures, including orders to close all businesses not deemed “essential,” isolate residents to their homes or places of residence, and practice social distancing when engaging in essential activities. These measures have impacted the method and timing of certain business meetings and our attendance at industry events.
When COVID-19 is demonstrably contained, we anticipate a rebound in economic activity, depending on the rate, pace, and effectiveness of the containment efforts deployed by various national, state, and local governments; however, the timing and extent of any such rebound is uncertain.
We will continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers, employees, and prospects, or on our financial results for the remainder of fiscal year 2020 or beyond.
Key Components of Results of Operations
Overall consolidated results of operations are evaluated based on Revenue, Cost of Revenue, Sales and Marketing expenses, General and Administrative expenses, Depreciation and Amortization, and Other Income (Expense), net.
Revenue
We historically generated revenue from five primary sources: (1) revenue from our managed services when a marketer (typically a brand, agency or partner) pays us to provide custom content, influencer marketing, amplification or other campaign management services (“Managed Services”); (2) revenue from fees charged to software customers on their marketplace spend within our IZEAx and TapInfluence platforms (“Marketplace Spend Fees”); (3) revenue from fees charged to access the IZEAx, Ebyline, and TapInfluence platforms (“License Fees”); (4) revenue from transactions generated by the self-service use of our Ebyline platform for professional custom content workflow (“Legacy Workflow Fees”); and (5) revenue derived from other fees such as inactivity fees, early cash-out fees, and plan fees charged to users of our platforms (“Other Fees”). After the migration of the last customers from the Ebyline platform to IZEAx in December 2019, there is no longer any revenue generated from Legacy Workflow Fees and all such revenue is reported as Marketplace Spend Fees under the IZEAx platform.
As discussed in more detail within “Critical Accounting Policies and Use of Estimates” under “Note 1. Company and Summary of Significant Accounting Policies,” under Part I, Item 1 herein, revenue from Marketplace Spend Fees and Legacy Workflow Fees is reported on a net basis and revenue from all other sources, including Managed Services, License Fees and Other Fees are reported on a gross basis. We further categorize these sources into two primary groups: (1) Managed Services and (2) SaaS Services, which includes revenue from Marketplace Spend Fees, License Fees and Legacy Workflow Fees, and Other Fees.
Cost of Revenue
Our cost of revenue consists of direct costs paid to our third-party creators who provide the custom content, influencer marketing or amplification services for our Managed Service customers where we report revenue on a gross basis. It also includes internal costs related to our campaign fulfillment and SaaS support departments. These costs include salaries, bonuses, commissions, stock-based compensation, employee benefit costs, and miscellaneous departmental costs related to the personnel who are primarily responsible for providing support to our customers and ultimately fulfillment of our obligations under our contracts with customers. Where appropriate, we capitalize costs that were incurred with software that is developed or acquired for our revenue supporting platforms and amortize these costs over the estimated useful lives of those platforms. This amortization is separately stated under depreciation and amortization in our consolidated statements of operations.
Sales and Marketing
Our sales and marketing expenses consist primarily of salaries, bonuses, commissions, stock-based compensation, employee benefit costs, travel and miscellaneous departmental costs for our marketing, sales and sales support personnel, as well as marketing expenses such as brand marketing, public relation events, trade shows and marketing materials, and travel expenses.
General and Administrative
Our general and administrative expense consists primarily of salaries, bonuses, commissions, stock-based compensation, employee benefit costs, and miscellaneous departmental costs related to our executive, finance, legal, human resources, and other administrative personnel. It also includes travel, public company and investor relations expenses, as well as accounting and legal professional services fees, leasehold facilities,and other corporate-related expenses. General and administrative expense also includes our technology and development costs consisting primarily of our payroll costs for
our internal engineers and contractors responsible for developing, maintaining and improving our technology, as well as hosting and software subscription costs. These costs are expensed as incurred, except to the extent that they are associated with internal use software that qualifies for capitalization, which are then recorded as software development costs in the consolidated balance sheet. We also capitalize costs that are related to our acquired intangible assets. Depreciation and amortization related to these costs are separately stated under depreciation and amortization in our consolidated statements of operations. General and administrative expense also includes current period gains and losses on costs previously accrued related to our acquisitions, as well as gains and losses from the sale of fixed assets. Impairments on fixed assets, intangible assets and goodwill, are included as part of general and administrative expense when they are not material and broken out separately in our consolidated statements of operations when they are material.
Depreciation and Amortization
Depreciation and amortization expense consists primarily of amortization of our internal use software and acquired intangible assets from our business acquisitions. To a lesser extent, we also have depreciation and amortization on equipment and leasehold improvements used by our personnel. Costs are amortized or depreciated over the estimated useful lives of the associated assets.
Other Income (Expense)
Interest Expense. Interest expense is mainly related to the imputed interest on our acquisition costs payable and interest when we use our secured credit facility.
Other Income (Expense). Other income (expense) consists primarily of interest income for interest earned or changes in the value of our foreign assets and liabilities and foreign currency exchange gains and losses on foreign currency transactions, primarily related to the Canadian Dollar.
Results of Operations for the Three Months Ended SeptemberJune 30, 2017 Compared to the Three Months Ended September 30, 20162020 and 2019
Revenues
Historically, we broke out our revenue into categories labeled Sponsored Revenue, Content Revenue and Service Fees. In January 2017, we revised the way we categorize our revenue streams to more closely align the revenue based on margin profiles and how we currently analyze our business. For the revised chart classification by quarterly historical periods in 2015 and 2016, see our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 filed with the SEC on May 10, 2017 and the information set forth under Management's Discussion and Analysis entitled"Results of Operations for the Three Months Ended March 31, 2017 Compared to the Three Months Ended March 31, 2016." Our prior period revenue and cost categories included herein have been reclassified to conform to the current period presentation.
We derive revenue from three sources: revenue from our managed services when a marketer, typically a brand, agency or partner, pays us to provide custom content, influencer marketing or amplification services ("Managed Services"), revenue from the self-service use of our Ebyline platform by news agencies to handle their content workflow from initial content request to payment of content received ("Content Workflow"), and revenue derived from various service and license fees charged to users of our platforms ("Service Fee Revenue").
The following table illustrates our approximate revenue, cost of sales and gross profit by revenue stream for the three months ended September 30, 2017 and 2016:
|
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | | |
| September 30, 2017 | | September 30, 2016 | | $ Change | % Change |
Revenue & % of Total | | | | | | | | |
Managed Services | $ | 6,997,391 |
| 86 | % | | $ | 5,838,139 |
| 78 | % | | $ | 1,159,252 |
| 20 | % |
Content Workflow | 1,141,795 |
| 14 | % | | 1,576,001 |
| 21 | % | | (434,206 | ) | (28 | )% |
Service Fees & Other Revenue | 15,488 |
| — | % | | 82,832 |
| 1 | % | | (67,344 | ) | (81 | )% |
Total Revenue | $ | 8,154,674 |
| 100 | % | | $ | 7,496,972 |
| 100 | % | | $ | 657,702 |
| 9 | % |
| | | | | | | | |
Cost of Sales & % of Total | | | | | | | | |
Managed Services COS | $ | 2,693,803 |
| 72 | % | | $ | 2,464,238 |
| 63 | % | | $ | 229,565 |
| 9 | % |
Content Workflow COS | 1,064,818 |
| 28 | % | | 1,463,041 |
| 37 | % | | (398,223 | ) | (27 | )% |
Service Fees & Other COS | — |
| — | % | | — |
| — | % | | — |
| 100 | % |
Total Cost of Sales | $ | 3,758,621 |
| 100 | % | | $ | 3,927,279 |
| 100 | % | | $ | (168,658 | ) | (4 | )% |
| | | | | | | | |
Gross Profit & Profit % | | | | | | | | |
Managed Services | $ | 4,303,588 |
| 62 | % | | $ | 3,373,901 |
| 58 | % | | $ | 929,687 |
| 28 | % |
Content Workflow | 76,977 |
| 7 | % | | 112,960 |
| 7 | % | | (35,983 | ) | (32 | )% |
Service Fees & Other Revenue | 15,488 |
| 100 | % | | 82,832 |
| 100 | % | | (67,344 | ) | (81 | )% |
Total Gross Profit | $ | 4,396,053 |
| 54 | % | | $ | 3,569,693 |
| 48 | % | | $ | 826,360 |
| 23 | % |
Revenues for the three months ended September 30, 2017 increased by $657,702, or approximately 9%, compared to the same period in 2016. Managed Services revenue increased primarily due to concentrated sales efforts toward larger IZEA-managed campaigns that have components of both custom content and influencer marketing resulting in higher revenue per
salesperson, and repeat business from existing customers. Content Workflow revenue generated from newspaper and traditional publishers through the Ebyline platform on a self-service basis declined compared to the same period in 2016 due to the ongoing consolidation and cutbacks in the newspaper industry. Although revenue from Content Workflow decreased by $434,206, or approximately 28%, in the three months ended September 30, 2017, our gross margin only declined by $35,983, because the margins are fixed at only 7% to 9% with these customers. We expect to see continued declines in Content Workflow revenue up to 35% compared to prior year levels due to the overall decline in this industry. Service Fee revenue decreased in the three months ended September 30, 2017 due to lower licensing fees generated from partners using our platforms.
Our net bookings of $7.9 million for the three months ended September 30, 2017 were 2% higher than the net bookings of $7.7 million for the three months ended September 30, 2016. Net bookings is a measure of sales orders received minus any cancellations or changes in a given period. Management uses net bookings as a leading indicator of future revenue recognition as revenue is typically recognized within 90-120 days of booking, though larger contracts may be recognized over twelve months from the original booking date. Net bookings can be affected by, among other things, cancellations or changes to orders that occur in future periods. Reductions in net bookings or changes in the expected timing of delivery for services due to delays and customer preferences or other considerations may result in fluctuations in expected future revenue.
Cost of Sales and Gross Profit
Our cost of sales is comprised primarily of amounts paid to our content creators to provide custom content or advertising services through the promotion or amplification of sponsored content in a blog post, tweet, click or action.
Cost of sales for the three months ended September 30, 2017 decreased by $168,658, or approximately 4%, compared to the same period in 2016. Cost of sales decreased overall due to the decrease in Content Workflow. However, this decrease was tempered by the increase in costs on Managed Services as a result of the higher revenues generated during the quarter.
Gross profit for the three months ended September 30, 2017 increased by $826,360, or approximately 23%, compared to the same period in 2016. Our gross profit percentage increased nearly 600 basis points in the three months ended September 30, 2017 compared to the same period in 2016. This increase is a result of the increased margins we are receiving on our managed customer content services in 2017. Content Workflow gross margin was consistent at 7% for the three months ended September 30, 2017 and 2016.
The total gross profit increase was primarily attributable to the increase in revenue and contribution margin from our higher margin, Managed Services offset by reduced revenue from our lower margin, Content Workflow. Managed Services contributed approximately 98% to the gross profit during the three months ended September 30, 2017 compared to 95% during the three months ended September 30, 2016. The mix of sales between our higher margin, Managed Services and lower margin, Content Workflow has a significant effect on our overall gross profit percentage.
The following table sets forth a summary of our consolidated statements of operations and the change between the periods:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Three Months Ended June 30, | | | | | |
| 2020 | | 2019 | | $ Change | % Change |
Revenue | $ | 3,135,039 | | | $ | 3,923,864 | | | $ | (788,825) | | (20) | % |
| | | | | | |
Costs and expenses: | | | | | | |
Cost of revenue (exclusive of amortization) | 1,414,249 | | | 1,817,659 | | | (403,410) | | (22) | % |
Sales and marketing | 1,228,691 | | | 1,362,242 | | | (133,551) | | (10) | % |
General and administrative | 1,920,492 | | | 2,232,305 | | | (311,813) | | (14) | % |
Depreciation and amortization | 377,107 | | | 448,105 | | | (70,998) | | (16) | % |
Total costs and expenses | 4,940,539 | | | 5,860,311 | | | (919,772) | | (16) | % |
Loss from operations | (1,805,500) | | | (1,936,447) | | | 130,947 | | (7) | % |
Other income (expense): | | | | | | |
Interest expense | (19,476) | | | (86,737) | | | 67,261 | | (78) | % |
Other income, net | 33,834 | | | 30,798 | | | 3,036 | | 10 | % |
Total other income (expense), net | 14,358 | | | (55,939) | | | 70,297 | | (126) | % |
Net loss | $ | (1,791,142) | | | $ | (1,992,386) | | | $ | 201,244 | | (10) | % |
Revenue
The following table illustrates our revenue by type, the percentage of total revenue by type, and the change between the periods:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Three Months Ended June 30, | | | | | | | |
| 2020 | | | 2019 | | | $ Change | % Change |
Managed Services Revenue | 2,490,343 | | 80 | % | | 2,991,571 | | 76 | % | | $ | (501,228) | | (17) | % |
| | | | | | | | |
Legacy Workflow Fees | — | | — | % | | 44,291 | | 1 | % | | (44,291) | | (100) | % |
Marketplace Spend Fees | 195,894 | | 6 | % | | 314,638 | | 8 | % | | (118,744) | | (38) | % |
License Fees | 408,728 | | 13 | % | | 548,494 | | 14 | % | | (139,766) | | (25) | % |
Other Fees | 40,074 | | 1 | % | | 24,870 | | 1 | % | | 15,204 | | 61 | % |
SaaS Services Revenue | 644,696 | | 20 | % | | 932,293 | | 24 | % | | (287,597) | | (31) | % |
| | | | | | | | |
Total Revenue | $ | 3,135,039 | | 100 | % | | $ | 3,923,864 | | 100 | % | | $ | (788,825) | | (20) | % |
Historically, we have invested the majority of our time and resources in our Managed Services business, which provides the majority of our revenue. Our acquisitions of Ebyline and ZenContent allowed us to expand our product offerings to provide custom content in addition to and in combination with our influencer marketing campaigns to expand our Managed Services. Our July 2018 merger with TapInfluence expanded our SaaS Services and provided the ability to increase revenue derived from Marketplace Spend Fees and License Fees.
Managed Services is generated when a marketer (typically a brand, agency or partner) pays us to provide custom content, influencer marketing, amplification or other campaign management services. Managed Services revenue during the three months ended June 30, 2020, decreased 17% from the same period in 2019, primarily due to marketers canceling or pausing planned advertising campaigns in the second quarter of 2020 as a result of uncertainty or inability to offer their products for sale as a result of business shutdowns due to COVID-19 or in light of civil unrest. Although we saw a decrease in revenue during the quarter, bookings, or sales orders, for our Managed Services increased by 50% from $2.64 million in the in the three months ended June 30, 2019 to $3.96 million in the three months ended June 30, 2020, as marketers who are still advertising shifted more of their spend to influencer marketing campaigns. Managed Service bookings typically convert to
|
| | | | | | | | | | | | | | |
| (Unaudited) | | | | |
| Three Months Ended | | |
| September 30, 2017 | | September 30, 2016 | | $ Change | | % Change |
Revenue | $ | 8,154,674 |
| | $ | 7,496,972 |
| | $ | 657,702 |
| | 9 | % |
Cost of sales | 3,758,621 |
| | 3,927,279 |
| | (168,658 | ) | | (4 | )% |
Gross profit | 4,396,053 |
| | 3,569,693 |
| | 826,360 |
| | 23 | % |
Operating expenses: | | | | | | | |
General and administrative | 2,687,266 |
| | 2,454,555 |
| | 232,711 |
| | 9 | % |
Sales and marketing | 2,342,002 |
| | 2,584,287 |
| | (242,285 | ) | | (9 | )% |
Total operating expenses | 5,029,268 |
| | 5,038,842 |
| | (9,574 | ) | | — | % |
Loss from operations | (633,215 | ) | | (1,469,149 | ) | | 835,934 |
| | 57 | % |
Other income (expense): | | | | | | | |
Interest expense | (15,058 | ) | | (25,511 | ) | | 10,453 |
| | (41 | )% |
Loss on exchange of warrants | — |
| | — |
| | — |
| | 100 | % |
Change in fair value of derivatives, net | 45,160 |
| | (14,705 | ) | | 59,865 |
| | (407 | )% |
Other income (expense), net | 44,308 |
| | (2,238 | ) | | 46,546 |
| | (2,080 | )% |
Total other income (expense), net | 74,410 |
| | (42,454 | ) | | 116,864 |
| | 275 | % |
Net loss | $ | (558,805 | ) | | $ | (1,511,603 | ) | | $ | 952,798 |
| | 63 | % |
future revenue over the next three to twelve months, but the timing of revenue may fluctuate from prior year results or current expectations in the event of continued or additional economic changes.
SaaS Services revenue is generated by the self-service use of our technology platforms by marketers to manage their own content workflow and influencer marketing campaigns. It consists of fees earned on the marketer’s spend within the IZEAx,TapInfluence and Ebyline platforms, along with the license and support fees to access the platform services.
•Legacy Workflow Fees revenue represents self-service transactions through the Ebyline platform for professional custom content workflow. After the migration of the last customers from the Ebyline platform to IZEAx in December 2019, there is no longer any revenue generated from Legacy Workflow Fees. Any activity from former legacy workflow customers is now generated under the IZEAx platform and reported as Marketplace Spend Fees.
Operating Expenses
Operating expenses consist of general•Marketplace Spend Fees revenue primarily results from fees on transaction spending by marketers and administrative expensespartners using the IZEAx and, sales and marketing expenses. Total operating expensesfrom July 2018 - February 2020, the TapInfluence platforms on a SaaS basis to purchase or distribute content for their internal use or advertising purposes. We charge the self-service customer the transaction price plus a fee based on agreed upon rates. Our revenue from Marketplace Spend Fees decreased by $118,744 to $195,894 for the three months ended SeptemberJune 30, 20172020 when compared to $314,638 for the same period in 2019, primarily as a result of lower spend levels from our marketers and lower fees assessed on those spends as a result of competitive pricing efforts and the incorporation of lower margin legacy workflow customers into IZEAx. Revenue from Marketplace Spend Fees represents our net margins received on this business. After the migration of the last customers from the TapInfluence platform to IZEAx in February 2020, all revenue is solely generated from the IZEAx platform.
•License Fees revenue is generated primarily through the granting of limited, non-exclusive, non-transferable licenses to customers for the use of the IZEAx and, until February 2020, the TapInfluence technology platforms for an agreed-upon subscription period. Customers license the platforms to manage their own influencer marketing campaigns. Fees for subscription or licensing services are recognized straight-line over the term of the service. License Fees revenue decreased by $9,574during the three months ended June 30, 2020 to $408,728 compared to $548,494 in the same period of 2019. The decrease was partly due to former TapInfluence customers who churned during the second half of 2019. Additionally, we implemented a competitive standardized pricing system for all IZEAx customers that was at a lower price point than the former TapInfluence licensing contracts.
•Other Fees revenue consists of other fees, such as inactivity fees, early cash-out fees, and plan fees charged to users of our platforms. Other Fees revenue increased 61% for the three months ended June 30, 2020 compared to the same period in 2016.2019 due to an increase in plan subscription fees on certain new self-service offerings such as IZEAx Discovery.
Cost of Revenue
Cost of revenue for the three months ended June 30, 2020 decreased by $403,410, or approximately 22%, compared to the same period in 2019 primarily as a result of the decrease in variable costs associated with the decline in Managed Services revenue. Cost of revenue as a percentage of revenue improved from 46% in 2019 and 45% in 2020 primarily due to a $73,000 reduction in personnel and travel related costs on the fulfillment of customer marketing campaigns.
Sales and Marketing
Sales and marketing expense for the three months ended June 30, 2020 decreased by $133,551, or approximately 10%, compared to the same period in 2019. Although our average number of sales and marketing personnel increased by 3% for the three months ended June 30, 2020 compared to the same period in 2019, we saw a $29,000 decrease in sales and marketing payroll and personnel related expenses including stock compensation due to the salary reductions that were implemented during the three months ended June 30, 2020 as a result of the COVID-19 cost reduction efforts. We also decreased our marketing expenses by $51,000 and travel related expenses by $48,000 due to the impact of COVID-19 restricting travel for the entire quarter in 2020.
General and administrative expenses consist primarily of administrative and engineering personnel costs, general operating costs, public company costs, including non-cash stock compensation, acquisition costs, facilities costs, insurance, depreciation, professional fees, and investor relations costs. Administrative
General and administrative expense for the three months ended September 30, 2017 increased by $232,711 compared to the same period in 2016. We posted a $129,000 increase in fixed personnel costs and in the variable costs related to personnel such as stock based compensation expense, software and subscription costs, communication, travel and supply costs due to higher average salaries and higher bonuses for our administrative and engineering personnel compared to the prior year period. General and administrative expense also increased by approximately $153,000 as a result of the change in our acquisition cost liability related to the ZenContent acquisition in July 2016 as further discussed below. The increases in general and administrative expenses during the three months ended September 30, 2017 were offset by a $27,000 decrease in contractor and professional fees and a $31,000 decrease in investor relation expenses due to the non-renewal of our investor relations firm agreement (effective May 1, 2017).
On July 31, 2016, we purchased all of the outstanding shares of capital stock of ZenContent, Inc. for aggregate consideration up to $4,500,000, consisting of guaranteed payments of $2,000,000 and contingent performance payments up to $2,500,000 based on ZenContent meeting certain revenue targets for each of the three years ending July 31, 2017, 2018 and 2019. These payments are subject to downward adjustment of up to 30% if Brianna DeMike, ZenContent’s co-founder, is terminated by IZEA for cause or if she terminates her employment without good reason. As a result, the Company initially reduced its acquisition cost liability by $300,000 to be accrued as compensation expense over the three-year term rather than allocated to the purchase price in accordance with ASC 805-10-55-25. Compensation expense added to the guaranteed acquisition costs payable and recorded as general and administrative expense was $28,125 and $40,972 during the three months ended September 30, 2017 and 2016, respectively. We estimate the fair value of the $2,500,000 of the future contingent performance payments for the ZenContent purchase each quarter using a Monte-Carlo simulation to simulate revenue based on actual results and future projections. Based on this calculation, we determined that the current fair value of the contingent performance payments was $508,444 as of September 30, 2017 compared to $342,861 as of June 30, 2017. As a result of the change in the value, we recorded a $165,583 non-cash increase in general and administrative expense during the three months ended September 30, 2017. Of this amount, $47,583 was allocated to compensation expense and $118,000 was allocated as an increase in the fair value of the contingent performance payments. To the extent that our future estimates in the value of contingent performance payments changes, this will continue to affect our general and administrative expense.
Sales and marketing expenses consist primarily of personnel costs related to employees and consultants who support sales and marketing efforts, promotional and advertising costs, and trade show expenses. Sales and marketing expenses for the three months ended September 30, 20172020 decreased by $242,285,$311,813, or approximately 9%14%, compared to the same period in 2016. The2019. General and administrative expense for the three months ended June 30, 2020 decreased primarily due to a $338,000 decrease in salespayroll and marketing expense was primarily attributable to a $134,000 decrease in public relations, tradeshows and marketing event attendance in 2017personnel related expenses as a result of our costa 12% reduction efforts for near term profitability, as well as a $74,000in staff compared to the prior year quarter and the 20% average decrease in salaries and variable costs related to sales and sales support personnel due to a 25% reduction in the number of personnel following our implementation of marketing automation and ongoing performance optimizationthat was implemented during 2017.
Other Income (Expense)
Other income (expense) consists primarily of interest expense, loss on exchange of warrants and the change in the fair value of derivatives.
In prior years, we entered into financing transactions that gave rise to derivative liabilities. Additionally, we issue restricted stock that vests over future periods. These financial instruments are carried at fair value in our financial statements. Changes in the fair value of these instruments are required to be recorded in other income (expense) in the period of change. During the three months ended SeptemberJune 30, 2017 and 2016, we recorded income of $45,160 and expense of $15,936, respectively, due to the change in the fair value of our restricted stock2020 as a result of the fluctuationCOVID-19 cost reduction efforts. Rent expense also decreased by $66,000 due to the non-renewal of expiring office facility leases and travel costs decreased by $44,000 as our employees continue to work from home. These decreases were offset by a $92,000 increase in professional services for special projects, a $35,000
increase in moving costs to vacate our stock price between the time of issuanceleasehold premises, and the time when the stock vested. Duringa $9,000 increase in insurance premiums during the three months ended SeptemberJune 30, 2016, we recorded income of $1,231,2020.
Depreciation and Amortization
Depreciation and amortization expense for the three months ended June 30, 2020 decreased by $70,998, or approximately 16%, compared to the same period in 2019.
Depreciation and amortization expense on property and equipment was $34,578 and $35,946 for the three months ended June 30, 2020 and 2019, respectively. Depreciation expense has declined primarily due to certain assets becoming fully depreciated.
Amortization expense was $342,529 and $412,159 for the three months ended June 30, 2020 and 2019, respectively. Amortization expense related to the changeintangible assets acquired in the fair value ofEbyline, ZenContent, and TapInfluence acquisitions was $239,990 and $322,907 for the three months ended June 30, 2020 and 2019, respectively, while amortization expense related to internal use software development costs was $102,539 and $89,252 for the three months ended June 30, 2020 and 2019, respectively. Amortization on our remaining warrant liability. We have no control over the amount of changeintangible acquisition assets decreased in the fair valuethree months ended June 30, 2020 due to completion of amortization on certain intangible assets acquired in prior years. Amortization on our derivative instruments as this is a factor basedinternal use software increased due to the release of IZEAx 3.0 in April 2019.
Other Income (Expense)
Interest expense decreased by $67,261 to $19,476 during the three months ended June 30, 2020 compared to the same period in 2019 due primarily to the elimination of amounts owed on fluctuating interest ratesour acquisition costs payable and stock prices and other market conditions outside of our control.amortization thereon after July 2019.
The $46,546 change$3,036 increase in other income (expense) isduring the three months ended June 30, 2020 when compared to the same period in 2019 resulted primarily the result offrom net currency exchange lossesgains related to our Canadian transactions during the three months ended September 30, 2017.compared to net currency exchange gains on our Canadian transactions in 2019.
Net Loss
Net loss for the three months ended SeptemberJune 30, 20172020 was $558,805, which decreased from$1,791,142, a $201,244 decrease compared to the net loss of $1,511,603$1,992,386 for the same period in 2016.2019. The decrease in net loss was primarily the result of the increase in our gross profit contributioncost reductions implemented as a result of the revenue declines experienced as a result of COVID-19 discussed above.
Results of Operations for the NineSix Months Ended SeptemberJune 30, 2017 Compared to the Nine Months EndedSeptember 30, 20162020 and 2019
Revenues
The following table illustrates our approximate revenue, cost of sales and gross profit by revenue stream for the nine months ended September 30, 2017 and 2016:
|
| | | | | | | | | | | | | | | | | |
| Nine Months Ended | | | |
| September 30, 2017 | | September 30, 2016 | | $ Change | % Change |
Revenue & % of Total | | | | | | | | |
Managed Services | $ | 17,274,314 |
| 81 | % | | $ | 14,741,536 |
| 74 | % | | $ | 2,532,778 |
| 17 | % |
Content Workflow | 3,973,286 |
| 19 | % | | 4,875,237 |
| 25 | % | | (901,951 | ) | (19 | )% |
Service Fees & Other Revenue | 89,801 |
| — | % | | 259,838 |
| 1 | % | | (170,037 | ) | (65 | )% |
Total Revenue | $ | 21,337,401 |
| 100 | % | | $ | 19,876,611 |
| 100 | % | | $ | 1,460,790 |
| 7 | % |
| | | | | | | | |
Cost of Sales & % of Total | | | | | | | | |
Managed Services COS | $ | 6,696,191 |
| 64 | % | | $ | 5,921,107 |
| 57 | % | | $ | 775,084 |
| 13 | % |
Content Workflow COS | 3,700,137 |
| 36 | % | | 4,525,928 |
| 43 | % | | (825,791 | ) | (18 | )% |
Service Fees & Other COS | — |
| — | % | | — |
| — | % | | — |
| 100 | % |
Total Cost of Sales | $ | 10,396,328 |
| 100 | % | | $ | 10,447,035 |
| 100 | % | | $ | (50,707 | ) | — | % |
| | | | | | | | |
Gross Profit & Profit % | | | | | | | | |
Managed Services | $ | 10,578,123 |
| 61 | % | | $ | 8,820,429 |
| 60 | % | | $ | 1,757,694 |
| 20 | % |
Content Workflow | 273,149 |
| 7 | % | | 349,309 |
| 7 | % | | (76,160 | ) | (22 | )% |
Service Fees & Other Revenue | 89,801 |
| 100 | % | | 259,838 |
| 100 | % | | (170,037 | ) | (65 | )% |
Total Gross Profit | $ | 10,941,073 |
| 51 | % | | $ | 9,429,576 |
| 47 | % | | $ | 1,511,497 |
| 16 | % |
Revenues for the nine months ended September 30, 2017increased by $1,460,790, or approximately 7%, compared to the same period in 2016. Managed Services revenue increased $2,532,778, Content Workflow revenue decreased $901,951 and Service Fee Revenue decreased $170,037 during the nine months ended September 30, 2017 compared to the same period in 2016. Managed Services revenue increased primarily due to concentrated sales efforts toward larger IZEA-managed campaigns that have components of both custom content and influencer marketing resulting in higher revenue per salesperson, and repeat business from existing customers. Content Workflow revenue generated from newspaper and traditional publishers through the Ebyline platform on a self-service basis declined compared to the same period in 2016 due to the ongoing consolidation and cutbacks in the newspaper industry. Although revenue from Content Workflow decreased by $901,951, or 19%, in the nine months ended September 30, 2017, our gross margin only declined by $76,160, because the margins are fixed with these customers at only 7% to 9%. We expect to see continued declines in Content Workflow revenue up to 35% compared to prior year levels due to the overall decline in this industry. Service Fee revenue decreased in the nine months ended September 30, 2017 due to lower licensing fees generated from partners using our platforms.
We estimate that revenue from our Managed Services will continue to increase over the prior year, but this increase will be offset by the declines in the self-service Content Workflow revenue noted above. We estimate that total revenue will be between $29-$30 million, with gross margins ranging between 49% to 50% for 2017.
Our net bookings of $22.3 million for the nine months ended September 30, 2017 were higher than the net bookings of $21.9 million for the nine months ended September 30, 2016. This minimal increase is due to a $1.2 million reduction in 2017 bookings from Content Workflow as discussed above.
Cost of Sales and Gross Profit
Our cost of sales is comprised primarily of amounts paid to our content creators to provide custom content or advertising services through the promotion or amplification of sponsored content in a blog post, tweet, click or action.
Cost of sales for the nine months ended September 30, 2017decreased by $50,707 compared to the same period in 2016. Cost of sales decreased due to the decrease in higher cost Content Workflow revenue. However, this decrease was tempered by the increase in costs spent on Managed Services as a result of the higher revenues generated during the quarter.
Gross profit for the nine months ended September 30, 2017increased by $1,511,497, or approximately 16%, compared to the same period in 2016. Our gross profit as a percentage of revenue increased from 47% for the nine months ended September 30, 2016 to 51% for the same period in 2017. The gross margin on our Managed Services for influencer marketing or custom content services was 61%, while the gross margin on Content Workflow was 7% for the nine months ended September 30, 2017. Prior to being acquired by IZEA in 2015, Ebyline generated revenue primarily from newspaper and traditional publishers through their workflow platform on a self-service basis at a fixed 7% to 9% profit. We do not actively sell or market Content Workflow to new customers due to the low margins and challenges facing the newspaper industry. After the acquisition, this revenue stream still contributes a significant portion of our revenue, but we utilize the content creators to promote the sale of custom content to our marketers on a managed basis. These services are sold at comparable margins to our influencer marketing services.
The total gross profit increase was primarily attributable to the increase in revenue and contribution margin from our higher margin, Managed Services versus reduced revenue from our lower margin, Content Workflow. Managed Services contributed approximately 96% to the gross profit during the nine months ended September 30, 2017 compared to 93% during the nine months ended September 30, 2016. The mix of sales between our higher margin, Managed Services and lower margin, Content Workflow has a significant effect on our overall gross profit percentage.
The following table sets forth a summary of our consolidated statements of operations and the change between the periods:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Six Months Ended June 30, | | | | | |
| 2020 | | 2019 | | $ Change | % Change |
Revenue | $ | 7,898,707 | | | $ | 8,717,620 | | | $ | (818,913) | | (9) | % |
| | | | | | |
Costs and expenses: | | | | | | |
Cost of revenue (exclusive of amortization) | 3,554,766 | | | 3,916,950 | | | (362,184) | | (9) | % |
Sales and marketing | 2,751,834 | | | 2,719,909 | | | 31,925 | | 1 | % |
General and administrative | 4,338,330 | | | 4,844,359 | | | (506,029) | | (10) | % |
Impairment of goodwill | 4,300,000 | | | — | | | 4,300,000 | | 100 | % |
Depreciation and amortization | 878,376 | | | 884,329 | | | (5,953) | | (1) | % |
Total costs and expenses | 15,823,306 | | | 12,365,547 | | | 3,457,759 | | 28 | % |
Loss from operations | (7,924,599) | | | (3,647,927) | | | (4,276,672) | | 117 | % |
Other income (expense): | | | | | | |
Interest expense | (26,094) | | | (215,201) | | | 189,107 | | (88) | % |
Other income (expense), net | (3,910) | | | 40,162 | | | (44,072) | | (110) | % |
Total other income (expense), net | (30,004) | | | (175,039) | | | 145,035 | | (83) | % |
Net loss | $ | (7,954,603) | | | $ | (3,822,966) | | | $ | (4,131,637) | | 108 | % |
|
| | | | | | | | | | | | | | |
| (Unaudited) | | | | |
| Nine Months Ended | | |
| September 30, 2017 | | September 30, 2016 | | $ Change | | % Change |
Revenue | $ | 21,337,401 |
| | $ | 19,876,611 |
| | $ | 1,460,790 |
| | 7 | % |
Cost of sales | 10,396,328 |
| | 10,447,035 |
| | (50,707 | ) | | — | % |
Gross profit | 10,941,073 |
| | 9,429,576 |
| | 1,511,497 |
| | 16 | % |
Operating expenses: | | | | | | | |
General and administrative | 8,021,420 |
| | 7,559,302 |
| | 462,118 |
| | 6 | % |
Sales and marketing | 7,666,720 |
| | 7,556,664 |
| | 110,056 |
| | 1 | % |
Total operating expenses | 15,688,140 |
| | 15,115,966 |
| | 572,174 |
| | 4 | % |
Loss from operations | (4,747,067 | ) | | (5,686,390 | ) | | 939,323 |
| | 17 | % |
Other income (expense): | | | | | | | |
Interest expense | (45,406 | ) | | (58,261 | ) | | 12,855 |
| | (22 | )% |
Loss on exchange of warrants | — |
| | — |
| | — |
| | 100 | % |
Change in fair value of derivatives, net | 36,122 |
| | 14,568 |
| | 21,554 |
| | 148 | % |
Other income (expense), net | 31,728 |
| | (485 | ) | | 32,213 |
| | (6,642 | )% |
Total other income (expense), net | 22,444 |
| | (44,178 | ) | | 66,622 |
| | 151 | % |
Net loss | $ | (4,724,623 | ) | | $ | (5,730,568 | ) | | $ | 1,005,945 |
| | 18 | % |
Operating ExpensesRevenue
The following table illustrates our revenue by type, the percentage of total revenue by type, and the change between the periods:
Operating expenses consist | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Six Months Ended June 30, | | | | | | | |
| 2020 | | | 2019 | | | $ Change | % Change |
Managed Services Revenue | $ | 6,615,404 | | 84 | % | | $ | 6,858,803 | | 79 | % | | $ | (243,399) | | (4) | % |
| | | | | | | | |
Legacy Workflow Fees | — | | — | % | | 91,621 | | 1 | % | | (91,621) | | (100) | % |
Marketplace Spend Fees | 362,187 | | 5 | % | | 689,291 | | 8 | % | | (327,104) | | (47) | % |
License Fees | 825,544 | | 10 | % | | 1,039,588 | | 12 | % | | (214,044) | | (21) | % |
Other Fees | 95,572 | | 1 | % | | 38,317 | | — | % | | 57,255 | | 149 | % |
SaaS Services Revenue | 1,283,303 | | 16 | % | | 1,858,817 | | 21 | % | | (575,514) | | (31) | % |
| | | | | | | | |
Total Revenue | $ | 7,898,707 | | 100 | % | | $ | 8,717,620 | | 100 | % | | $ | (818,913) | | (9) | % |
Managed Services revenue during the six months ended June 30, 2020, decreased 4% from the same period in 2019, primarily due to marketers canceling or pausing planned advertising campaigns in March 2020 and throughout the second quarter of general2020 as a result of uncertainty or inability to offer their products for sale as a result of business shutdowns due to COVID-19 or in light of civil unrest.
SaaS Services revenue is generated by the self-service use of our technology platforms by marketers to manage their own content workflow and administrative expensesinfluencer marketing campaigns. It consists of fees earned on the marketer’s spend within the IZEAx,TapInfluence and salesEbyline platforms, along with the license and marketing expenses. Total operating expensessupport fees to access the platform services.
•Legacy Workflow Fees are no longer generated after the migration of the last customers from the Ebyline platform to IZEAx in December 2019. Any activity from former legacy workflow customers is now generated under the IZEAx platform and reported as Marketplace Spend Fees.
•Marketplace Spend Fees decreased by $327,104 for the ninesix months ended SeptemberJune 30, 20172020 when compared with the same period in 2019, primarily as a result of lower spend levels from our marketers and lower fees charged assessed on
those spends as a result of competitive pricing efforts and the incorporation of lower margin legacy workflow customers into IZEAx. Revenue from Marketplace Spend Fees represents our net margins received on this business. After the migration of the last customers from the TapInfluence platform to IZEAx in February 2020, all revenue is solely generated from the IZEAx platform.
•License Fees revenue decreased during the six months ended June 30, 2020 to $825,544 compared to $1,039,588 in the same period of 2019. The decrease was partly due to former TapInfluence customers who churned during the second half of 2019. Additionally, we implemented a competitive standardized pricing system for all IZEAx customers that was at a lower price point than the former TapInfluence licensing contracts.
•Other Fees revenue increased 149% for the six months ended June 30, 2020 compared to the same period in 2019 due to increases in plan subscription fees on certain new self-service offerings such as IZEAx Discovery.
Cost of Revenue
Cost of revenue for the six months ended June 30, 2020 decreased by $572,174,$362,184, or approximately 4%9%, compared to the same period in 2016. The increase was2019 primarily attributable to increased personnel costs and additional marketing costs related to our IZEAFest Conference held in February 2017.
General and administrative expenses consist primarily of administrative and engineering personnel costs, general operating costs, public company costs, including non-cash stock compensation, acquisition costs, facilities costs, insurance, depreciation, professional fees, and investor relations costs. General and administrative expense for the nine months ended September 30, 2017 increased by $462,118, or approximately 6%, compared to the same period in 2016. The increase was primarily attributable to a $234,000 increase in base salary and personnel costs and in variable costs related to personnel such as bonuses, stock-based compensation expense, software and subscription costs, communication, travel and supply costs. Our
depreciation and amortization expense increased by $161,000 as a result of additional amortization on the increase in our intangible assets from software costs and the intangibles acquired in the ZenContent acquisition. As further discussed below, the change in our acquisition cost liability related to the ZenContent acquisition in July 2016 contributed $295,000 to the increase in general and administrative expense. The increases in general and administrative expense during the nine months ended September 30, 2017 were partially offset by a $99,000 decrease in contractor fees related to our software platformsManaged Services revenue. Cost of revenue as a percentage of revenue remained consistent at 45% in 2019 and a $91,000 decrease45% in investor relation expenses due to the non-renewal of our investor relations firm after April 20172020.
Sales and lower NASDAQ filing fees.Marketing
General and administrative expense is affected by the changes in our ZenContent acquisition liability valuation that are allocated to compensation expense each period. On July 31, 2016, we reduced our acquisition cost liability for guaranteed purchase price payments by $300,000 to be accrued as compensation expense over the three-year payment term. The compensation expense recorded as general and administrative expense and accrued to the acquisition cost liability during the nine months ended September 30, 2017 and 2016 was $151,042 and $40,972, respectively. We also determined that the current fair value of the $2,500,000 contingent performance payments for the ZenContent was $508,444 as of September 30, 2017 compared to $324,000 as of December 31, 2016. As a result of the change in the value, we recorded a $184,444 non-cash expense during the nine months ended September 30, 2017. Of this amount, $122,444 was allocated to compensation expense and $62,000 was allocated as an increase in the fair value of the contingent performance payments. To the extent that our future estimates in the value of contingent performance payments changes, this will continue to affect our general and administrative expense.
Sales and marketing expenses consist primarily of personnel costs related to employees and consultants who support sales and marketing efforts, promotional and advertising costs, and trade show expenses. Sales and marketing expensesexpense for the ninesix months ended SeptemberJune 30, 20172020 increased by $110,056,$31,925, or approximately 1%, compared to the same period in 2016. The increase was primarily attributable to a $147,000 increase in personnel costs and related variable costs related to those personnel such as software and subscription costs, communication, travel and supply costs. Although we posted a $361,000 increase in public relations2019. Our average number of sales and marketing costs as a result of our IZEAFest Conference held in February 2017, we decreased public relations and marketing costs more than $377,000 inpersonnel increased by 14% for the second and third quarters of 2017 compared to 2016. This decrease came from the non-renewal of our public relations firm after July 2016 and a decrease in tradeshow attendance and promotional spending as part of our efforts to reduce costs during 2017.
Other Income (Expense)
Other income (expense) consists primarily of interest expense and the change in the fair value of derivatives.
Interest expense during the ninesix months ended SeptemberJune 30, 2017decreased by $12,855 to $45,4062020 compared to the same period in 20162019 which, along with the increase in variable compensation linked with sales performance and stock compensation, contributed to a $67,000 increase in sales and marketing payroll and personnel related expenses. Prior to the cost reduction efforts as a result of COVID-19, we also increased our marketing expenses to generate awareness and future revenue which resulted in an overall increase of $40,000 for the six months ended June 30, 2020 compared to the same period in 2019. These increases were offset by a reduction in travel related expenses of $59,000 due to the impact of COVID-19 restricting travel beginning in March 2020.
General and Administrative
General and administrative expense for the six months ended June 30, 2020 decreased by $506,029, or approximately 10%, compared to the same period in 2019. General and administrative expense for the six months ended June 30, 2020 decreased due to a $550,000 reduction in payroll and personnel related expenses as a result of a 9% reduction in staff compared to the prior year quarter and the 20% average decrease in salaries that was implemented during the three months ended June 30, 2020 as a result of the COVID-19 cost reduction efforts. Rent expense also decreased by $88,000 due to the non-renewal of expiring office facility leases and travel costs decreased by $64,000 as our employees continue to work from home. General and administrative expense also declined due to an expense of $191,439 related to the settlement of our acquisition cost liabilities in 2019 that did not recur in 2020.
On January 26, 2019, pursuant to a Merger Agreement with TapInfluence, Inc., we issued 660,136 shares of our common stock valued at $884,583, or $1.34 per share, using the 30-day VWAP as reported by the Nasdaq Capital Market prior to the issuance date to pay for our purchase obligation. Upon the issuance, we recorded a non-cash loss on the settlement of this acquisition cost payable of $191,439 as a result of the difference between the actual closing market price of the common stock of $1.63 on the settlement date and the 30-day VWAP of $1.34 required by the Merger Agreement. This non-cash expense was not recurring in the current year, thus resulting in a reduction of general and administrative expense in the six months ended June 30, 2020 as compared to the same period in 2019.
These decreases were offset by a $67,000 increase in professional services for special projects, a $35,000 increase in moving costs to vacate our leasehold premises during the six months ended June 30, 2020, and nearly $300,000 less in personnel costs capitalized to internal software costs after the release of IZEAx 3.0 in April 2019 during the six months ended June 30, 2020 as compared to the same period in 2019 .
Impairment of Goodwill
In March 2020, we identified triggering events due to the reduction in our projected revenue due to adverse economic conditions caused by the COVID-19 pandemic, the continuation of a market capitalization below our carrying value, and uncertainty for recovery given the volatility of the capital markets surrounding COVID-19. We performed an interim assessment of goodwill using the income approach of the discounted cash flow method and the market approach of the guideline transaction method and determined that the carrying value of our Company as of March 31, 2020 exceeded the fair
value. As a result of the valuation, we recorded a $4.3 million impairment of goodwill resulting in an expense for the six months ended June 30, 2020.
Depreciation and Amortization
Depreciation and amortization expense for the six months ended June 30, 2020 decreased by $5,953, or approximately 1%, compared to the same period in 2019.
Depreciation and amortization expense on property and equipment was $70,207 and $74,422 for the six months ended June 30, 2020 and 2019, respectively. Depreciation expense has declined primarily due to certain assets becoming fully depreciated.
Amortization expense was $808,169 and $809,907 for the lower imputed interestsix months ended June 30, 2020 and 2019, respectively. Amortization expense related to intangible assets acquired in the Ebyline, ZenContent, and TapInfluence acquisitions was $604,980 and $645,814 for the six months ended June 30, 2020 and 2019, respectively, while amortization expense related to internal use software development costs was $203,189 and $164,093 for the six months ended June 30, 2020 and 2019, respectively. Amortization on our intangible acquisition assets increased in 2020 due to higher amortization of the remaining balanceTapInfluence intangible assets acquired in July 2018 in the first quarter of 2020. However, this expense will decrease in the future periods as these assets were fully amortized by March 2020. Amortization on our internal use software is expected to increase in future periods due to the release of IZEAx 3.0 in April 2019.
Other Income (Expense)
Interest expense decreased by $189,107 to $26,094 during the six months ended June 30, 2020 compared to the same period in 2019 due primarily to the elimination of amounts owed on our acquisition costs payable.
In prior years, we entered into financing transactions that gave risepayable and amortization thereon after July 2019 and partly to derivative liabilities. Additionally, we issue restricted stock that vests over future periods. These financial instruments are carried at fair valuethe reduction in our financial statements. Changesaverage borrowings on our secured credit facility during the six months ended June 30, 2020 compared to the same period in the fair value of derivative financial instruments are required to be recorded2019.
The $44,072 decrease in other income (expense) in the period of change. We recorded income of $36,122 and $14,568 resulting from the change in the fair value of certain warrants and restricted stock during the ninesix months ended SeptemberJune 30, 2017 and 2016, respectively.
The $32,213 change2020 when compared to the same period in other income (expense) is2019 resulted primarily the result offrom net currency exchange losses related to our Canadian transactions duringafter the nine months ended September 30, 2017.sharp decline in rates in March 2020 compared to net currency exchange gains on our Canadian transactions in 2019.
Net Loss
Net loss for the ninesix months ended SeptemberJune 30, 20172020 was $4,724,623, which decreased from$7,954,603, a $4,131,637 increase in the net loss of $5,730,568$3,822,966 for the same period in 2016.2019. The decreaseincrease in net loss was primarily the result of the increased revenuegoodwill impairment discussed above.
Key Metrics and profit margins on our Managed Services offset by the increase in personnel expenses as discussed above.
Non-GAAP Financial Measures
Below are financial measures of cash based operating expenses (“Cash Opex”)our gross billings and Adjusted EBITDA. We use this information to assess the progress of our business and make decisions on where to allocate our resources. As our business evolves, we may make changes in future periods to the key financial metrics that we consider to measure our business.
Gross Billings by Revenue Type
Company management evaluates our operations and makes strategic decisions based, in part, on our key metric of gross billings from our two primary types of revenue, Managed Services and SaaS Services. We define gross billings as the total dollar value of the amounts charged to our customers for the services we performed, or the amounts billed to our customers for their self-service purchase of goods and services on our platforms. Gross billings are the amounts of our reported revenue plus the cost of payments we made to third-party creators providing the content or sponsorship services, which are netted against revenue for generally accepted accounting principles in the United States (“GAAP”) reporting purposes.
Gross billings for Managed Services are the same as revenue reported in our consolidated statements of operations on a GAAP basis, as there is no requirement to net the costs of revenue against the revenue. Gross billings for Marketplace Spend and Legacy Workflow Fees (which are included in SaaS Services) differ from revenue reported for these services in our consolidated statements of operations on a GAAP basis. These services are presented net of the amounts we pay to the third-party creators providing the content or sponsorship services. Gross billings for all other revenue types equal the revenue reported in our consolidated statements of operations.
We consider gross billings to be an important indicator of our potential performance as it measures the total dollar volume of transactions generated through our marketplaces. Tracking gross billings allows us to monitor the percentage of gross billings that we are able to retain after payments to our creators. Additionally, tracking gross billings is critical as it pertains to our credit risk and cash flow. We invoice our customers based on our services performed or based on their self-service transactions plus our fee. Then we remit the agreed-upon transaction price to the creators. If we do not collect the money from our customers prior to the time of payment to our creators, we could experience large swings in our cash flows. Finally, gross billings allow us to evaluate our transaction totals on an equal basis in order for us to see our contribution margins by revenue stream so that we can better understand where we should be allocating our resources.
The following table sets forth our gross billings by revenue type, the percentage of total gross billings by type, and the change between the periods:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | | | | | | |
| 2020 | | | 2019 | | | $ Change | % Change |
Managed Services Gross Billings | $ | 6,615,404 | | 62% | | $ | 6,858,803 | | 47% | | $ | (243,399) | | (4)% |
| | | | | | | | |
Legacy Workflow Fees | — | | —% | | 1,261,681 | | 9% | | (1,261,681) | | (100)% |
Marketplace Spend Fees | 3,096,654 | | 29% | | 5,256,146 | | 37% | | (2,159,492) | | (41)% |
License Fees | 825,544 | | 8% | | 1,039,588 | | 7% | | (214,044) | | (21)% |
Other Fees | 95,572 | | 1% | | 38,317 | | —% | | 57,255 | | 149% |
SaaS Services Gross Billings | 4,017,770 | | 38% | | 7,595,732 | | 53% | | (3,577,962) | | (47)% |
| | | | | | | | |
Total Gross Billings | $ | 10,633,174 | | 100% | | $ | 14,454,535 | | 100% | | $ | (3,821,361) | | (26)% |
Adjusted EBITDA
Adjusted EBITDA is a “non-GAAP financial measures”measure” as defined under the rules of the Securities and Exchange Commission (the “SEC”).
We define Cash Opex as total operating expenses exclusive of unusual or non-cash expenses such as depreciation and amortization, non-cash stock related compensation, gain or loss on asset disposals or impairment and changes in acquisition cost estimates, and gains or losses on settlement of liabilities, if applicable.
We define Adjusted EBITDA as earnings or loss before interest, taxes, depreciation and amortization, non-cash stock relatedstock-based compensation, gain or loss on asset disposals or impairment, changes in acquisition cost estimates, and allcertain other unusual or non-cash income and expense items such as gains or losses on settlement of liabilities and exchanges, and changes in the fair value of derivatives, if applicable.
We use Cash Opex as a percentage of revenue and Adjusted EBITDA as measuresa measure of operating performance, for planning purposes, to allocate resources to enhance the financial performance of our business, and in communications with our Board of Directors regarding our financial performance. We believe that Cash Opex as a percentage of revenue and Adjusted EBITDA also provideprovides useful information to investors as they exclude it excludes
transactions not related to our core cashcash-generating operating business activities, including non-cash transactions, and they provideit provides consistency andto facilitate period-to-period comparisons. We believe that excluding these transactions allows investors to meaningfully trend and analyze the performance of our core cashcash-generating operations.
All companies do not calculate Cash Opex and Adjusted EBITDA in the same manner, and Cash Opex and Adjusted EBITDA as presented by us may not be comparable to Cash Opex and Adjusted EBITDA presented by other companies, which limits theirits usefulness as a comparative measures.
measure. Moreover, Cash Opex and Adjusted EBITDA havehas limitations as an analytical tools,tool, and you should not consider themit in isolation or as a substitute for an analysis of our results of operations as reported under generally accepted accounting principles in the United States (“GAAP”).GAAP. These limitations includeare that Cash Opex and Adjusted EBITDA:
do•does not include stock-based compensation expense, which is a non-cash expense, but has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy;
do•does not include stock issued for payment of services, which is a non-cash expense, but has been, and is expected to be for the foreseeable future, an important means for us to compensate our directors, vendors and other parties who provide us with services;
do•does not include changes in acquisition cost estimates as a result of the allocation of acquisition costs payable to compensation expense or changes in the estimate of contingent acquisition costs payable, which may or may not ever be paid, but may be a significant recurring expense for our business if we continue to make business acquisitions;
do•does not include gains or losses on the settlement of acquisition costs payable or liabilities when the stock value, as agreed upon in the agreement, varies from the market price of our stock on the settlement date, whichdate. This is a non-cash expense, but will continue to bewas a recurring expense for our business on certain business contracts where the amounts cancould vary; and
do•does not include depreciation and intangible assets amortization expense, impairment charges and gains or losses on disposal of equipment, which is not always a current period cash expense, but the assets being depreciated and amortized may have to be replaced in the future.future; and
Furthermore, Adjusted EBITDA excludes changes in fair value of derivatives,•does not include interest expense and other gains, losses, and expenses that we do not believe are not indicative of our ongoing core operating results, but these items may represent a reduction or increase in cash available to us.
Because of these limitations, Cash Opex should not be considered as a measure of our total operating expenses, and Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the operation and growth of our business or as a measure of cash that will be available to us to meet our obligations. You should compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP financial measures as supplements. In evaluating these non-GAAP financial measures, you should be aware that in the future, we may incur expenses similar to those for which adjustments are made in calculating Adjusted EBITDA and Cash Opex.EBITDA. Our presentation of these non-GAAP financial measures should also not be construed to infer that our future results will be unaffected by unusual or non-recurring items.
The following table sets forth a reconciliation from the GAAP measurement of Operating Expenses to our non-GAAP financial measure of Cash Opex and Cash Opex as a percentage of revenue for the three and nine months ended September 30, 2017 and 2016:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Total operating expenses | $ | 5,029,268 |
| | $ | 5,038,842 |
| | $ | 15,688,140 |
| | $ | 15,115,966 |
|
Less: | | | | | | | |
Non-cash stock-based compensation | 182,796 |
| | 170,818 |
| | 509,642 |
| | 576,144 |
|
Non-cash stock issued for payment of services | 60,074 |
| | 34,970 |
| | 143,536 |
| | 107,440 |
|
(Gain) loss on disposal of equipment | (1,775 | ) | | (484 | ) | | (5,462 | ) | | (484 | ) |
(Gain) loss on settlement of acquisition costs payable | — |
| | — |
| | (10,491 | ) | | — |
|
Increase (decrease) in value of acquisition costs payable | 193,708 |
| | 40,972 |
| | 335,486 |
| | 40,972 |
|
Depreciation and amortization | 374,965 |
| | 339,589 |
| | 1,095,831 |
| | 935,063 |
|
Total excluded expenses | 809,768 |
| | 585,865 |
| | 2,068,542 |
| | 1,659,135 |
|
| | | | | | | |
Cash Opex | $ | 4,219,500 |
| | $ | 4,452,977 |
| | $ | 13,619,598 |
| | $ | 13,456,831 |
|
| | | | | | | |
Revenue | $ | 8,154,674 |
| | $ | 7,496,972 |
| | $ | 21,337,401 |
| | $ | 19,876,611 |
|
Cash Opex / Revenue | 52 | % | | 59 | % | | 64 | % | | 68 | % |
The following table sets forth a reconciliation from the GAAP measurement of Net Lossnet loss to our non-GAAP financial measure of Adjusted EBITDA for the three and ninesix months ended SeptemberJune 30, 20172020 and 2016:2019:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | Six Months Ended June 30, | | |
| 2020 | | 2019 | | 2020 | | 2019 |
Net loss | $ | (1,791,142) | | | $ | (1,992,386) | | | $ | (7,954,603) | | | $ | (3,822,966) | |
Non-cash stock-based compensation | 118,707 | | | 157,328 | | | 248,278 | | | 318,205 | |
Non-cash stock issued for payment of services | 31,249 | | | 37,497 | | | 62,499 | | | 74,995 | |
Loss on settlement of acquisition costs payable | — | | | — | | | — | | | 191,439 | |
Increase in value of acquisition costs payable | — | | | 2,669 | | | — | | | 5,333 | |
Interest expense | 19,476 | | | 86,737 | | | 26,094 | | | 215,201 | |
Depreciation and amortization | 377,107 | | | 448,105 | | | 878,376 | | | 884,329 | |
Impairment on intangible assets | — | | | — | | | 4,300,000 | | | — | |
Other non-cash items | (23,706) | | | (7,580) | | | (23,706) | | | (8,095) | |
Adjusted EBITDA | $ | (1,268,309) | | | $ | (1,267,630) | | | $ | (2,463,062) | | | $ | (2,141,559) | |
| | | | | | | |
Revenue | $ | 3,135,039 | | | $ | 3,923,864 | | | $ | 7,898,707 | | | $ | 8,717,620 | |
Adjusted EBITDA as a % of Revenue | (40) | % | | (32) | % | | (31) | % | | (25) | % |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net loss | $ | (558,805 | ) | | $ | (1,511,603 | ) | | $ | (4,724,623 | ) | | $ | (5,730,568 | ) |
Non-cash stock-based compensation | 182,796 |
| | 170,818 |
| | 509,642 |
| | 576,144 |
|
Non-cash stock issued for payment of services | 60,074 |
| | 34,970 |
| | 143,536 |
| | 107,440 |
|
(Gain) loss on disposal of equipment | (1,775 | ) | | (484 | ) | | (5,462 | ) | | (484 | ) |
(Gain) loss on settlement of acquisition costs payable | — |
| | — |
| | (10,491 | ) | | — |
|
Increase (decrease) in value of acquisition costs payable | 193,708 |
| | 40,972 |
| | 335,486 |
| | 40,972 |
|
Depreciation and amortization | 374,965 |
| | 339,589 |
| | 1,095,831 |
| | 935,063 |
|
Interest expense | 15,058 |
| | 25,511 |
| | 45,406 |
| | 58,261 |
|
Change in fair value of derivatives | (45,160 | ) | | 14,705 |
| | (36,122 | ) | | (14,568 | ) |
Adjusted EBITDA | $ | 220,861 |
| | $ | (885,522 | ) | | $ | (2,646,797 | ) | | $ | (4,027,740 | ) |
Liquidity and Capital Resources
We had cash and cash equivalents of $3,447,998$20,820,273 as of SeptemberJune 30, 20172020 as compared to $5,949,004$5,884,629 as of December 31, 2016, a decrease2019, an increase of $2,501,006$14,935,644 primarily due to net proceeds received from the fundingsale of our common stock in our at the market offering program offset by operating losses. We have incurred significant net losses and negative cash flow from operations for most periods since our inception, which has resulted in a total accumulated deficit of $46,534,344$68,339,372 as of SeptemberJune 30, 2017.2020. To date, we have financed our operations through internally generated revenue from operations, borrowings under our secured credit facility, the PPP Loan (described below) and the sale and exercise of our equity securities.
| | | | | | | | | | | |
| Six Months Ended June 30, | | |
| 2020 | | 2019 |
Net cash (used for)/provided by: | | | |
Operating activities | $ | (1,932,159) | | | $ | (161,146) | |
Investing activities | 38,492 | | | (464,261) | |
Financing activities | 16,829,311 | | | 7,982,196 | |
Net increase/(decrease) in cash and cash equivalents | $ | 14,935,644 | | | $ | 7,356,789 | |
Cash used for operating activities was $3,227,788$1,932,159 during the ninesix months ended SeptemberJune 30, 20172020 and is primarily the result of expenses exceedingour net loss for the amount of gross marginperiod. Net cash provided from our revenues. Cash used forby investing activities was $88,913$38,492 during the ninesix months ended SeptemberJune 30, 20172020 due to a return of deposits on our leasehold facilities and sales of fixed assets offset by the payment of $93,000 related to$97,129 in the development of our proprietary software and purchases of computer and office equipment for our expanded staff. These payments were offset by a net decrease of $4,000 in leasehold deposits on our California and Canadian space. Cashsoftware. Net cash provided by financing activities during the ninesix months ended SeptemberJune 30, 20172020 was $815,695,$16,829,311, which amount consisted primarily of advances receivednet proceeds of approximately $15.1 million from our line of credit with Western Alliance Bank. We also received cash of $16,232 from employee stock purchases offset by stock issuance costs of $10,913.
On January 30, 2015, we purchased all of the outstanding shares of capital stock of Ebyline. The Ebyline Stock Purchase Agreement required a cash payment at closing of $1,200,000, a stock issuance of $250,000 paid on July 30, 2015, and $1,877,064 paid in cash or stock in two equal installments of $938,532 on the first and second anniversaries of the closing. On January 29, 2016, we issued 114,398 sharessale of our common stock to satisfyin our at the first annual guaranteed payment of $938,532 less $89,700 in closing related expenses. On January 30, 2017, we issued 200,542 shares of our common stock to satisfymarket offering program and approximately $1.9 million from the second and final annual guaranteed payment of $938,532. The Ebyline Stock Purchase Agreement also required contingent performance payments up to $5,500,000 to be paid if Ebyline met certain revenue targets in the three years following the closing. None of these targets were met in the first two years following the closing and it is not expected that they will be met in the third year. Therefore, we do not believe that we will be required to make any of the $5,500,000 in contingent performance payments and we currently expect that the total consideration to be paid for the Ebyline acquisition will be $3,327,064.PPP Loan (described below).
On July 31, 2016, we purchased all of the outstanding shares of capital stock of ZenContent. Upon closing we paid a cash payment of $400,000 and issued 86,207 shares of our common stock valued at $600,000. The agreement also requires (i) three equal annual installment payments totaling $1,000,000, commencing 12 months following the closing and (ii) contingent performance payments of up to an aggregate of $2,500,000 over the three 12-month periods following the closing, based upon ZenContent achieving certain minimum revenue thresholds. Of these payments, 33% of each such annual installment or contingent performance payment will be in the form of cash and the remainder of such payment will be in the form of either cash or additional shares of our common stock (determined at our option). If we decide to issue stock rather than make cash payments, this may result in the issuance of substantial amount of shares because the number of shares will be determined using the 30 trading-day volume-weighted average closing price of our common stock prior to the payment. On July 31, 2017, we paid $266,898 all in cash for the first annual installment of $333,333 less $66,435 in working capital adjustments.Secured Credit Facility
We have a secured credit facility agreement with Western Alliance Bank.Bank, the parent company of Bridge Bank, National Association. Pursuant to this agreement, we may submit requests for funding up to 80% of our eligible accounts receivable up to a maximum credit limit of $5 million. Effective August 30, 2018, as a result of IZEA’s merger with TapInfluence, we entered into a Business Financing Modification Agreement and Consent with Western Alliance Bank to add TapInfluence as an additional borrower on the credit facility. As of SeptemberJune 30, 2017,2020, we had $810,376no amounts outstanding under this agreement. Assuming that all of our unfunded remaining trade accounts receivable balance was eligible for funding, we had remainingapproximately $2.4 million in available credit of $3,392,362 under the agreement as of SeptemberJune 30, 2017.2020.
We believe that, with our current cash and our available credit line withPPP Loan
On April 23, 2020, we received a loan from Western Alliance Bank (the “Lender”) in the principal amount of $1,905,100 (the “PPP Loan”) under the Paycheck Protection Program (“PPP”), which was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). The term of the promissory note (the “Note”) issued in respect of the loan is two years, though it may be payable sooner in connection with an event of default under the Note. The PPP Loan carries a fixed interest rate of one percent per year, with the first payment due seven months from the date of initial cash receipt. Under the CARES Act and the PPP, certain amounts of loans made under the PPP may be forgiven if the recipients use the loan proceeds for eligible purposes, including payroll costs and certain rent or utility costs, and meet other requirements regarding, among other things, the maintenance of employment and compensation levels. We intend to use the PPP Loan for qualifying expenses such that we are eligible to apply for forgiveness of the PPP Loan in accordance with the terms of the CARES Act. However, no assurance is provided that we will obtain forgiveness of the PPP Loan in whole or in part.
At the Market (ATM) Offering
On June 4, 2020, we entered into an ATM Sales Agreement (the “Sales Agreement”) with National Securities Corporation, as sales agent (“National Securities”), pursuant to which we may offer and sell, from time to time, through National Securities, shares of our common stock, by any method deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended (the “ATM Offering”). As of June 30, 2020, we had sold 6,856,241 shares at an average price of $2.24 per share for total gross proceeds of $15,361,853. By August 10, 2020, we had sold a total of 13,258,172 shares at an average price of $1.94 per share for total gross proceeds of $25,740,293 in the ATM Offering under our shelf registration statement on Form S-3 (File No. 333-238619).
Financial Condition
We have seen impacts on our operations due to changes in advertising decisions, timing and spending priorities from our customers as a result of COVID-19, which has had and may continue to have a negative impact to our expected future sales and valuation estimates. With our cash on hand as of June 30, 2020, we expect to have sufficient cash reserves and financing sources available to cover expenses at least one year from the issuance of this Quarterly Report based on our current estimates of revenue and expenses for longer than the next twelve months. GivenWhile the volatility in U.S. equity marketsdisruption caused by COVID-19 is currently expected to be temporary, there is uncertainty around the duration and the total economic impact. Therefore, while we expect this matter to negatively impact our normal working capital fluctuations, we may seek to raise additional capital at any time to supplement our operating cash flows to the extent we can do so on competitive market terms. In such event, an equity financing may dilute the ownership interestsbusiness, such events are generally outside of our common stockholders.control and could have a further material adverse impact on our business, results of operations, and financial position.
Off-Balance Sheet Arrangements
As of SeptemberJune 30, 2017,2020, we dodid not engage in any activities involving variable interest entities or off-balance sheet arrangements.
Critical Accounting Policies and Use of Estimates
The preparation of the accompanying financial statements and related disclosures in conformity with GAAP requires us There have been no material changes to make judgments, assumptions and estimates that affect the amounts reported in the accompanying financial statements and the accompanying notes. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, tax positions and stock-based compensation. When making these estimates and assumptions, we consider our historical experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The following critical accounting policies are significantly affected by judgments, assumptionsas set forth in Item 7, “Management’s Discussion and estimates usedAnalysis of Financial Condition and Results of Operations,” included in the preparation of the financial statements.
Accounts receivable are customer obligations due under normal trade terms. Uncollectability of accounts receivable is not significant since most customers are bound by contract and are required to fund us for all the costs of an “opportunity,” defined as an order created by a marketer for a creator to develop or share contentour Annual Report on behalf of a marketer. If a portion of the account balance is deemed uncollectible, we will either write-off the amount owed or provide a reserve based on the uncollectible portion of the account. Management determines the collectability of accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. We have a reserve of $220,000 for doubtful accounts as of September 30, 2017. We believe that this estimate is reasonable, but there can be no assurance that the estimate will not change as a result of a change in economic conditions or business conditions within the industry, the individual customers or our Company. Any adjustments to this account are reflected in the consolidated statements of operations as a general and administrative expense. Bad debt expense was less than 1% of revenueForm 10-K for the three and nine monthsyear ended September 30, 2017 and 2016.
Throughout 2013 and the first quarter of 2014, we developed our new web-based advertising exchange platform, IZEAx. This platform is being utilized both internally and externally to facilitate native advertising campaigns onDecember 31, 2019. For a greater scale. We continue to add new features and additional functionality to this platform each year. These new features will enable IZEAx to facilitate the contracting, workflow, and delivery of direct custom content as well as provide for invoicing, collaborating, and direct payments for our SaaS customers. In accordance with ASC 350-40, Internal Use Software and ASC 985-730, Computer Software Research and Development, research phase costs should be expensed as incurred and development phase costs including direct materials and services, payroll and benefits and interest costs may be capitalized. As a result, we have capitalized $1,578,125 in direct materials, consulting, payroll and benefit costs to software development costs in the consolidated balance sheet as of September 30, 2017. We estimate the useful lifesummary of our softwaresignificant accounting policies, please refer to be 5 years, consistent with the amountNote 1 — Company and Summary of time our legacy platforms were in-service, and we are amortizing the software development costs overSignificant Accounting Policies included in Item 1 of this period.Quarterly Report.
We derive revenue from three sources: Managed Services, Content Workflow, and Service Fee Revenue. Managed Services is when a marketer, typically a brand, agency or partner, contracts IZEA to provide custom content, influencer marketing or amplification services. Content Workflow is derived from the self-service use of our Ebyline platform by news agencies to handle their content workflow from initial content request to payment of content received. Service Fee Revenue is generated when fees are charged to customers primarily related to subscription fees for different levels of service within a platform, licensing fees for white-label use of IZEAx, early cash-out fees if a creator wishes to take proceeds earned for services from their account when the account balance is below certain minimum balance thresholds and inactivity fees for dormant accounts. We recognize revenue at various times depending on the service that is being performed.
For our Managed Services, we enter into an agreement to provide services that may require multiple deliverables in the form of: (a) sponsored social items, such as blogs, tweets, photos or videos shared through social network offerings that provide awareness or advertising buzz regarding the marketer's brand; (b) content promotion, such as click-through advertisements appearing in websites and social media channels and (c) original content items, such as a research or news article, informational material or videos that a publisher or other marketer can use. We may provide one type or a combination of all types of these deliverables including a management fee on a statement of work for a lump sum fee. These deliverables are to be provided over a stated period that may range from one day to one year. Each item is considered delivered once the custom content has been delivered to the customer or once the content is distributed live through a public or social network. Revenue is accounted for separately on each of the deliverables depending on the type of service provided. We recognize revenue related to influencer marketing services after a marketer's sponsored content is posted through IZEAx and shared through a creator's social network for a requisite period of time. The requisite period ranges from 3 days for a tweet to 30 days for a blog, video or other form of content. Management fees from advertising campaigns managed by us are recognized ratably over the term of the campaign which may range from a few days to one year. Revenue related to custom content provided to a
marketer is recognized when the content is delivered to and accepted by the customer. Payment terms are typically 30 days from the invoice date. If we are unable to provide a portion of the services, we may agree with the customer to provide a different type of service or to provide a credit for the value of those services, which may be applied to the existing order or used for future services. The statement of work typically provides for a cancellation fee if the agreement is canceled by the customer prior to our completion of services.
For Content Workflow services, the self-service marketer contracts the creators directly to provide custom content. The Ebyline platform controls the contracting, description of services, acceptance of and payment for the requested content. This service is used primarily by news agencies to control the outsourcing of their content needs. Revenue is recognized when the transaction is completed by the creator and accepted by the marketer.
Service Fee Revenue is recognized immediately when the service is performed or at the time an account becomes dormant or is cashed out. Service Fee Revenue for subscription or licensing fees is recognized straight-line over the term of service.
Marketers who use us to manage their social advertising campaigns or custom content requests may prepay for services or request credit terms. Payments received or billings in advance of completed services are recorded as unearned revenue until earned as described above.
All of our revenues are generated through the rendering of services. We recognize revenue under the general guidelines of Staff Accounting Bulletin Topic 13 A.1, which states that revenue will be recognized when it is realized or realizable and earned. We consider our revenue as generally realized or realizable and earned once (i) persuasive evidence of an arrangement exists, (ii) services have been rendered, (iii) the price to the marketer or customer is fixed (required to be paid at a set amount that is not subject to refund or adjustment) and determinable, and (iv) collectability is reasonably assured. We record revenue on the gross amount earned since we generally are the primary obligor in the arrangement, take on credit risk, establish the pricing and determine the service specifications.
Stock-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. We estimate the fair value of each stock option as of the date of grant using the Black-Scholes pricing model. Options typically vest ratably over four years with one-fourth of options vesting one year from the date of grant and the remaining options vesting monthly, in equal increments over the remaining three-year period and generally have five or ten-year contract lives. We estimate the fair value of our common stock using the closing stock price of our common stock on the date of the grant. We estimate the volatility of our common stock at the date of grant based on the volatility of comparable peer companies that are publicly traded and have had a longer trading history than us. We determine the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. We use the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. We have never paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. We estimate forfeitures when recognizing compensation expense and this estimate of forfeitures is adjusted over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment, which is recognized in the period of change, and a revised amount of unamortized compensation expense to be recognized in future periods.
The following table shows the number of options granted under our 2011 Equity Incentive Plans and the assumptions used to determine the fair value of those options during the nine months ended September 30, 2017 and 2016:
2011 Equity Incentive Plans - Options Granted |
| | | | | | | | | | | | | |
Period Ended | | Total Options Granted | | Weighted Average Exercise Price | | Weighted Average Expected Term | | Weighted Average Volatility | | Weighted Average Risk Free Interest Rate | | Weighted Average Grant Date Fair Value |
December 31, 2016 | | 179,998 |
| | $6.16 | | 6.0 years | | 47.95% | | 1.58% | | $2.88 |
September 30, 2017 | | 94,246 |
| | $3.64 | | 6.0 years | | 43.49% | | 1.98% | | $1.28 |
There were outstanding options to purchase 1,011,575 shares with a weighted average exercise price of $6.05 per share, of which options to purchase 683,642 shares were exercisable with a weighted average exercise price of $6.24 per share as of September 30, 2017. The intrinsic value on outstanding options as of September 30, 2017 was $1,354,688. The intrinsic value on exercisable options as of September 30, 2017 was $815,179.
We account for derivative instruments in accordance with ASC 815, Derivatives and Hedging, which requires additional disclosures about the objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for, and how the derivative instruments and related hedging items affect the financial statements. We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of equity instruments are reviewed to determine whether or not they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the host contract, and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required to be classified as equity or as a derivative liability.
Recent Accounting Pronouncements
See "Note“Note 1. Company and Summary of Significant Accounting Policies,"” under Part I, Item 1 in Part I of this Form 10-Q.Quarterly Report for information on additional recent pronouncements.
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
ITEM 4 – CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer,officers, as appropriate to allow timely decisions regarding required disclosures.
In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Furthermore, controls and procedures could be circumvented by the individual acts of some persons, by collusion or two or more people or by management override of the control. Misstatements due to error or fraud may occur and not be detected on a timely basis.
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this quarterly reportQuarterly Report on Form 10-Q for the period ended SeptemberJune 30, 2017,2020, an evaluation was performed under the supervision and with the participation of our management including our Chief Executive Officer ("CEO")principal executive officer and Chief Financial Officer ("CFO")principal financial officer to determine the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of SeptemberJune 30, 2017.2020. Based on this evaluation, our management concluded that our disclosure controls and procedures were effective as of September 30, 2017designed to provide reasonable assuranceensure that the information required to be disclosed by us in the reports we file or submittedsubmit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including the Company's CEOour principal executive officer and CFO, as appropriate,principal financial officer, to allow timely decisions regarding required disclosure.disclosures.
Changes in Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequateeffective internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company’s transactions;
(ii) provide reasonable assurance that transactions are recorded as necessary for the preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are made only in accordance with authorizations of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of any unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect financial statement misstatements. Also, projections of any evaluation of internal control effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
During the quarter ended September 30, 2017, there There were no significant changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurredduring the fiscal quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II -– OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
From time to time, we may become involved in various other lawsuits and legal proceedings that arise in the ordinary course of our business. Litigation is, however, subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. WeAs of August 10, 2020, we are currently not aware of any legal proceedings or claims that we believe would or could have, individually or in the aggregate, a material adverse effect on us. Regardless of final outcomes, however, any such proceedings or claims may nonetheless impose a significant burden on management and employees and may come with costly defense costs or unfavorable preliminary interim rulings.
ITEM 1A – RISK FACTORS
In addition to the information set forth in this report, you should carefully consider the factors discussed under Item 1A of Part I to our Annual Report on Form 10-K for the year ended December 31, 2016,2019 regarding the information set forth at the beginning of Management's Discussion and Analysis entitled "Special Note Regarding Forward-Looking Information," and updates noted below, you should consider that there are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially and adversely affected. In such case, the trading price of our common stock could decline, and investors could lose all or part of their investment. These risk factors may not identify all risks that we face, and our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations.
Risks Related to our Business and Industry
We have a history of annual net losses, expect future losses and cannot assure you that we will achieve profitability.
We have incurred significant net losses and negative cash flow from operations for most periods since our inception, which has resulted in a total accumulated deficit of $46,534,344$68,339,372 as of SeptemberJune 30, 2017.2020. For the ninesix months ended SeptemberJune 30, 2017,2020, we had a net loss of $4,724,623,$7,954,603, including a $4,747,067$7,924,599 loss from operations and we expect to incur a net loss for the fiscal year 2017. Although our revenue has increased since inception, weoperations. We have not achieved profitability and cannot be certain that we will be able to maintain these growth rates or realize sufficient revenue to achieve profitability. If we achieve profitability, we may not be able to sustain it.
If Therefore, we failmay need to retain existing customersraise capital through new financings, which could include equity financing, such as additional issuances of common stock under our at the market offering program, which may be dilutive to stockholders, or add new customers, our revenue and business will be harmed.
We depend ondebt financing, which would likely restrict our ability to attract and retain customers that are preparedborrow from other sources. In addition, securities we issue may contain rights, preferences or privileges senior to offer products or services on compelling terms through IZEAx. Additionally, we rely on customers who purchase direct custom content from our creators in our platforms. We must continue to attract and retain customers in order to increase revenue and achieve profitability. We had no customers that accounted for more than 10%those of the rights of our revenue and one customercurrent stockholders. There can be no assurance that accounted for 11%additional funds will be available on terms attractive to us, or at all. If adequate funds are not available, we may be required to curtail or reduce our operations or forced to sell or dispose of our revenue during the nine months ended September 30, 2017 and 2016, respectively. The loss of customersrights or a significant reduction in revenue from our major customers couldassets. An inability to raise adequate funds on commercially reasonable terms would have a material adverse effect on our business, results of operation. Moreover, ifoperation and financial condition, including the possibility that a lack of funds could cause our business to fail and liquidate with little or no return to investors.
Unfavorable global economic conditions, including as a result of health and safety concerns, could adversely affect our business, financial condition or results of operations.
On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (COVID-19) as a global pandemic and recommended containment and mitigation measures worldwide. As the spread continues throughout the United States, we have directed all of our staff to work from home effective March 16, 2020. We believe our business operations and ability to support our customers do not findare fully functional while our marketingemployees are working from remote locations; however, their productivity and promotional services effective, they are not satisfied with content they receive, or if they do not believe that utilizing our platforms provides them with a long-term increase in value, revenue or profit, theyefficiency may stop using our platforms or managed services. In addition,be negatively affected, and we may face increased risk of interruptions. While the disruption is currently expected to be temporary, there is uncertainty around the duration and the total economic impact.
Our business relies heavily on people, and adverse events such as health-related concerns experienced by our employees, the inability to travel and other matters affecting the general work environment will impact our business near term. We may lose the services of a number of our employees or experience attrition insystem interruptions, which could lead to diminishment of our regular business operations, inefficiencies and reputational harm. Additionally, the economic conditions caused by COVID-19 have negatively impacted the business activity of our customers, and we have observed declining demand and changes in their advertising decisions, timing and spending priorities, which will result in a negative impact to our sales. We cannot fully quantify the impact to our business operations as a result of COVID-19 at this time. Any of the foregoing could
harm our business and we cannot anticipate all the ways in which the current global health crisis and financial market conditions could adversely impact our business.
The outbreak and attempts to slow the spread of COVID-19 have resulted in extreme volatility and disruptions in the ordinary coursecapital and credit markets. A severe or prolonged economic downturn could result in a variety of additional risks to our business, resultingincluding weakened demand from several factors, including lossesour customers and delays in client payments. Given the current conditions, we may not have the ability to competitors, mergers, closures or bankruptcies.raise additional capital from the financial markets if additional capital is needed to sustain us for extended periods of lost revenue. If we are unable to attract new customers in numbersobtain such additional financing on a timely basis or generate sufficient revenues from operations, we may have to growcurtail our activities, reduce expenses, and/or sell assets, perhaps on unfavorable terms, which would have a material adverse effect on our business, or if too many customers are unwillingfinancial condition and results of operations, and ultimately we could be forced to offer products or services with compelling terms todiscontinue our creators throughoperations and liquidate.
Impairment of our platforms or if too many large customers seek extended payment terms,intangible assets has resulted in significant charges that adversely impact our operating results will be adversely affected.results.
Risks Relating to our Common Stock
Exercise of stock options, warrants and other securities will dilute your percentage of ownership and could cause our stock price to fall.
AsWe assess the potential impairment of November 3, 2017, we had 5,726,336 shares of common stock issued, outstanding stock options to purchase 1,009,191 shares ofgoodwill and our common stock atfinite-lived intangible assets on an average exercise price of $6.03 per share, and outstanding warrants to purchase 516,919 shares of our common stock at an average exercise price of $8.45 per share.
We also have reserved shares to issue stock options, restricted stock or other awards to purchase or receive up to 441,020 shares of common stock under our May 2011 Equity Incentive Plan and 39,764 shares of common stock under our 2014 Employee Stock Purchase Plan. In the future, we may grant additional stock options, restricted stock units, warrants and convertible securities,annual basis, as well as issue additional shareswhenever events or changes in circumstances indicate that the carrying value may not be recoverable. In March 2020, we identified a triggering event due to the reduction in projected revenue related to COVID-19 and the continuation of a market capitalization below our carrying value and uncertainty for recovery given the volatility of the capital markets surrounding COVID-19. We performed an interim assessment of goodwill and determined that the carrying value of the Company as of March 31, 2020 exceeded the fair value. Therefore, we recorded a $4.3 million impairment of goodwill in the three months ended March 31, 2020. Future adverse changes in these or other unforeseeable factors could result in further impairment charges that would impact our results of operations and financial position in the reporting period identified.
We have not extended our monthly arrangements for flexible office space in our remote offices, nor signed a new lease for our headquarters, which could negatively impact our business.
In light of the uncertain and rapidly evolving situation relating to the spread of the COVID-19 - specifically stay-at-home orders imposed by certain states and localities - we did not enter into a new lease for our corporate headquarters in Winter Park, Florida and our Canadian headquarters in Toronto, Canada, for which both leases expired on April 30, 2020. Additionally, we plan to vacate and cancel the various co-working facilities our team members use around the country as their terms expire in the next three months. As a result, our management team and all of our employees will work remotely at least through the end of 2020. While our employees are accustomed to working with other remote employees and customers, our workforce has not previously been fully remote prior to March 16, 2020, when we proactively instituted a work-from-home policy in response to COVID-19 concerns. Although we continue to monitor the situation and may adjust our current plans as more information and guidance become available, not doing business in-person could negatively impact our marketing efforts, challenge our ability to enter into customer contracts in a timely manner, slow down our recruiting efforts, or create operational or other challenges as we adjust to a fully-remote workforce, any of which could harm our business. Additionally, when we determine it prudent to end our work-from-home policy, we will need to enter into a new lease for office space and/or arrangements for the use of co-working facilities. Although we believe suitable office space will be readily available when this time comes, we may encounter difficulties or delays in finalizing the terms of such lease arrangements or in obtaining rent prices at acceptable rates.
Our common stock pursuantmay be delisted if we fail to maintain compliance with the earn-out provisions ofrequirements for continued listing on the stock purchase agreements in connection with our EbylineNasdaq Capital Market, and ZenContent acquisitions. The exercise, conversion or exchange by holders of stock options, restricted stock units, warrants or convertible securities for shares of common stock, and the issuance of new shares pursuant to acquisition earn-out provisions, will dilute the percentage ownership of our other stockholders. Sales of a substantial number of shares of our common stock could cause the price of our common stock and our ability to fallaccess the capital markets could be negatively impacted.
Our common stock is listed for trading on the Nasdaq Capital Market (“Nasdaq”). To maintain this listing, we must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per share for continued inclusion on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule").
On June 13, 2019, we received a notification letter from Nasdaq informing us that for the prior 30 consecutive business days, the bid price of our common stock had closed below $1.00 per share. This notice had no immediate effect on our Nasdaq listing, and we had 180 calendar days, or until December 10, 2019, to regain compliance. Our common stock had not regained compliance with Bid Price Rule as of such date. Therefore, by letter dated December 10, 2019, we requested an additional 180 days in which to regain compliance, including by effecting a reverse stock split, if necessary.
On December 11, 2019, we received a notification letter from the Listing Qualifications Department of Nasdaq stating that we had been granted an additional 180-day period, or until June 8, 2020, to regain compliance with the Bid Price Rule. Then on April 17, 2020, we received a notification letter from Nasdaq stating that, in response to the COVID-19 pandemic and
related market conditions, Nasdaq had filed a rule change with the Securities and Exchange Commission to suspend the compliance period for the Bid Price Rule through June 30, 2020.
On June 22, 2020, we received notification from Nasdaq that we had regained compliance with the Bid Price Rule after the closing bid price of our common stock was at $1.00 per share or greater for the prior 10 consecutive business days.
Although we are now in compliance with the Bid Price Rule, if we fail to meet this or any of the other continued listing requirements in the future, our common stock may be delisted from Nasdaq, which could impairreduce the liquidity of our common stock materially and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by sellinginvestors, employees and business development opportunities. Such a delisting likely would impair your ability to sell or purchase our common stock when you wish to do so. Further, if we were to be delisted from Nasdaq, our common stock may no longer be recognized as a “covered security” and we would be subject to regulation in each state in which we offer our securities. Thus, delisting from Nasdaq could adversely affect our ability to raise additional securities.financing through the public or private sale of equity securities, would significantly impact the ability of investors to trade our securities and would negatively impact the value and liquidity of our common stock.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
NoneOther than as previously reported in any Current Reports on Form 8-K, the Company did not sell any unregistered securities during the period covered by this report.
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None
None.
ITEM 4 – MINE SAFETY DISCLOSURES
Not applicableapplicable.
ITEM 5 - OTHER INFORMATION
None None.
ITEM 6 – EXHIBITS
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31.1Exhibit No. | * | Description |
3.1 | | |
3.2 | | |
3.3 | | |
3.4 | | |
3.5 | | |
3.6 | | |
3.7 | | |
3.8 | | |
3.9 | | |
3.10 | | |
10.1 | (a) | |
10.2 | (a) | |
10.3 | | |
31.1 | * | |
31.2 | * | |
32.1 | * (a)(b) | |
32.2 | * (a)(b) | |
101 | * (c) | The following materials from IZEA Worldwide, Inc.'s AnnualQuarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 20172020 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Unaudited Consolidated Balance Sheets, (ii) the Unaudited Consolidated Statements of Operations, (iii) the Unaudited Consolidated Statement of Stockholders' Equity, (iv) the Unaudited Consolidated Statements of Cash Flow, and (iv) the Unaudited Notes to the Unaudited Consolidated Financial Statements. |
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* | Filed or furnished herewith. |
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(a) | In accordance with Item 601of Regulation S-K, this Exhibit is hereby furnished to the SEC as an accompanying document and is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933. |
* Filed or furnished herewith.
(a) Denotes management contract or compensatory plan or arrangement.
(b) In accordance with Item 601of Regulation S-K, this Exhibit is hereby furnished to the SEC as an accompanying document and is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933.
(c) In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| IZEA Worldwide, Inc. a Nevada corporation | |
| | |
August 13, 2020 | By: | /s/ Edward H. Murphy |
| | Edward H. Murphy Chairman, President and Chief Executive Officer (Principal Executive Officer) |
| | |
August 13, 2020 | IZEA, Inc.
a Nevada corporation |
By: | | |
November 7, 2017 | By: | /s/ Edward H. Murphy |
| | Edward H. Murphy
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
|
| | |
November 7, 2017 | By: | /s/ LeAnn C. Hitchcock |
| | LeAnn C. Hitchcock Interim Chief Financial Officer
(Principal Financial and Accounting Officer)
|