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Share Name | Share Symbol | Market | Type |
---|---|---|---|
IZEA Worldwide Inc | NASDAQ:IZEA | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.12 | -3.77% | 3.06 | 2.97 | 3.33 | 3.25 | 3.04 | 3.12 | 50,301 | 23:04:07 |
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Nevada
|
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37-1530765
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(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
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480 N. Orlando Avenue, Suite 200
Winter Park, FL
|
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32789
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(Address of principal executive offices)
|
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(Zip Code)
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Large accelerated filer
o
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Accelerated filer
o
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Smaller reporting company
x
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Non-accelerated filer
o
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(Do not check if a smaller reporting company)
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Emerging growth company
o
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Page
|
|
|
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March 31,
2017 |
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December 31,
2016 |
||||
Assets
|
|
|
|
||||
Current:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
4,355,072
|
|
|
$
|
5,949,004
|
|
Accounts receivable, net
|
4,454,657
|
|
|
3,745,695
|
|
||
Prepaid expenses
|
298,402
|
|
|
322,377
|
|
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Other current assets
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10,598
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|
|
11,940
|
|
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Total current assets
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9,118,729
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|
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10,029,016
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|
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|
|
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||||
Property and equipment, net
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408,963
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|
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460,650
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|
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Goodwill
|
3,604,720
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|
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3,604,720
|
|
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Intangible assets, net
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1,412,630
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|
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1,662,536
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|
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Software development costs, net
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1,132,502
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1,103,959
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|
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Security deposits
|
141,982
|
|
|
161,736
|
|
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Total assets
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$
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15,819,526
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$
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17,022,617
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Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
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$
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1,578,416
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$
|
1,438,389
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Accrued expenses
|
1,854,120
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|
|
1,242,889
|
|
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Unearned revenue
|
3,765,479
|
|
|
3,315,563
|
|
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Current portion of deferred rent
|
36,938
|
|
|
34,290
|
|
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Current portion of acquisition costs payable
|
364,171
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|
|
1,252,885
|
|
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Total current liabilities
|
7,599,124
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|
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7,284,016
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||
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|
|
|
||||
Deferred rent, less current portion
|
51,427
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|
|
62,547
|
|
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Acquisition costs payable, less current portion
|
753,991
|
|
|
688,191
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|
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Warrant liability
|
—
|
|
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—
|
|
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Total liabilities
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8,404,542
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|
|
8,034,754
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|
||
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|
|
|
||||
Commitments and Contingencies
|
—
|
|
|
—
|
|
||
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
|
|
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Preferred stock; $.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding
|
—
|
|
|
—
|
|
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Common stock, $.0001 par value; 200,000,000 shares authorized; 5,670,904 and 5,456,118, respectively, issued and outstanding
|
567
|
|
|
545
|
|
||
Additional paid-in capital
|
51,943,358
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|
|
50,797,039
|
|
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Accumulated deficit
|
(44,528,941
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)
|
|
(41,809,721
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)
|
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Total stockholders’ equity
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7,414,984
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|
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8,987,863
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|
|
|
||||
Total liabilities and stockholders’ equity
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$
|
15,819,526
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|
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$
|
17,022,617
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|
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Three Months Ended
March 31, |
||||||
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|
2017
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|
2016
|
||||
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|
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Revenue
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$
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6,202,506
|
|
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$
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5,465,950
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Cost of sales
|
|
3,195,526
|
|
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3,101,369
|
|
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Gross profit
|
|
3,006,980
|
|
|
2,364,581
|
|
||
|
|
|
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
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General and administrative
|
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2,809,524
|
|
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2,580,001
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|
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Sales and marketing
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2,898,355
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|
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2,359,663
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|
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Total operating expenses
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5,707,879
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|
|
4,939,664
|
|
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|
|
|
|
|
||||
Loss from operations
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(2,700,899
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)
|
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(2,575,083
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)
|
||
|
|
|
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
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Interest expense
|
|
(17,076
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)
|
|
(21,339
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)
|
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Change in fair value of derivatives, net
|
|
(618
|
)
|
|
2,852
|
|
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Other income (expense), net
|
|
(627
|
)
|
|
950
|
|
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Total other income (expense), net
|
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(18,321
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)
|
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(17,537
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)
|
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|
|
|
|
|
||||
Net loss
|
|
$
|
(2,719,220
|
)
|
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$
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(2,592,620
|
)
|
|
|
|
|
|
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Weighted average common shares outstanding – basic and diluted
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5,598,200
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|
|
5,300,520
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|
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Basic and diluted loss per common share
|
|
$
|
(0.49
|
)
|
|
$
|
(0.49
|
)
|
|
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Common Stock
|
|
Additional
Paid-In
|
|
Accumulated
|
|
Total
Stockholders’
|
|||||||||||
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Equity
|
|||||||||
Balance, December 31, 2016
|
|
5,456,118
|
|
|
$
|
545
|
|
|
$
|
50,797,039
|
|
|
$
|
(41,809,721
|
)
|
|
$
|
8,987,863
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Stock issued for payment of acquisition liability
|
|
200,542
|
|
|
20
|
|
|
928,021
|
|
|
—
|
|
|
928,041
|
|
||||
Stock issued for payment of services
|
|
14,244
|
|
|
2
|
|
|
61,248
|
|
|
—
|
|
|
61,250
|
|
||||
Stock issuance costs
|
|
—
|
|
|
—
|
|
|
(1,926
|
)
|
|
—
|
|
|
(1,926
|
)
|
||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
158,976
|
|
|
—
|
|
|
158,976
|
|
||||
Net loss
|
|
—
|
|
|
—
|
|
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—
|
|
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(2,719,220
|
)
|
|
(2,719,220
|
)
|
||||
Balance, March 31, 2017
|
|
5,670,904
|
|
|
$
|
567
|
|
|
$
|
51,943,358
|
|
|
$
|
(44,528,941
|
)
|
|
$
|
7,414,984
|
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(2,719,220
|
)
|
|
$
|
(2,592,620
|
)
|
Adjustments to reconcile net loss to net cash used for operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
58,888
|
|
|
60,595
|
|
||
Amortization of software development costs and other intangible assets
|
303,718
|
|
|
235,702
|
|
||
Gain on disposal of equipment
|
(1,953
|
)
|
|
—
|
|
||
Provision for losses on accounts receivable
|
8,333
|
|
|
51,000
|
|
||
Stock-based compensation
|
158,976
|
|
|
204,972
|
|
||
Fair value of stock and warrants issued or to be issued for payment of services
|
60,632
|
|
|
31,250
|
|
||
Increase (decrease) in fair value of contingent acquisition costs payable
|
(39,000
|
)
|
|
—
|
|
||
Gain on settlement of acquisition costs payable
|
(10,491
|
)
|
|
—
|
|
||
Change in fair value of derivatives, net
|
618
|
|
|
(2,852
|
)
|
||
Changes in operating assets and liabilities, net of effects of business acquired:
|
|
|
|
|
|
||
Accounts receivable
|
(717,295
|
)
|
|
890,603
|
|
||
Prepaid expenses and other current assets
|
25,317
|
|
|
(360,205
|
)
|
||
Accounts payable
|
140,027
|
|
|
60,525
|
|
||
Accrued expenses
|
765,849
|
|
|
225,461
|
|
||
Unearned revenue
|
449,916
|
|
|
(206,290
|
)
|
||
Deferred rent
|
(8,472
|
)
|
|
(3,342
|
)
|
||
Net cash used for operating activities
|
(1,524,157
|
)
|
|
(1,405,201
|
)
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
||||
Purchase of equipment
|
(5,248
|
)
|
|
(46,760
|
)
|
||
Increase in software development costs
|
(82,355
|
)
|
|
(82,921
|
)
|
||
Security deposits
|
19,754
|
|
|
1,797
|
|
||
Net cash used for investing activities
|
(67,849
|
)
|
|
(127,884
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
||
Stock issuance costs
|
(1,926
|
)
|
|
(3,622
|
)
|
||
Payments on capital lease obligations
|
—
|
|
|
(7,291
|
)
|
||
Net cash used for financing activities
|
(1,926
|
)
|
|
(10,913
|
)
|
||
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
(1,593,932
|
)
|
|
(1,543,998
|
)
|
||
Cash and cash equivalents, beginning of year
|
5,949,004
|
|
|
11,608,452
|
|
||
|
|
|
|
||||
Cash and cash equivalents, end of period
|
$
|
4,355,072
|
|
|
$
|
10,064,454
|
|
|
|
|
|
||||
Supplemental cash flow information:
|
|
|
|
|
|
||
Cash paid during the period for interest
|
$
|
—
|
|
|
$
|
230
|
|
|
|
|
|
||||
Non-cash financing and investing activities:
|
|
|
|
|
|
||
Acquisition costs paid through issuance of common stock
|
$
|
938,532
|
|
|
$
|
848,832
|
|
|
|
|
|
Computer Equipment
|
3 years
|
Software Costs
|
3 - 5 years
|
Office Equipment
|
3 - 10 years
|
Furniture and Fixtures
|
5 - 10 years
|
•
|
Level 1
–
Valuation based on quoted market prices in active markets for identical assets and liabilities.
|
•
|
Level 2
–
Valuation based on quoted market prices for similar assets and liabilities in active markets.
|
•
|
Level 3
–
Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.
|
|
|
Three Months Ended
|
||
2011 Equity Incentive Plans Assumptions
|
|
March 31,
2017 |
|
March 31,
2016 |
Expected term
|
|
6 years
|
|
6 years
|
Weighted average volatility
|
|
43.97%
|
|
52.68%
|
Weighted average risk free interest rate
|
|
2.09%
|
|
1.62%
|
Expected dividends
|
|
—
|
|
—
|
|
Estimated Gross Purchase Consideration
|
Initial Present and Fair Value
|
Remaining Present and Fair Value
|
Remaining Present and Fair Value
|
||||||||
|
1/30/2015
|
1/30/2015
|
12/31/2016
|
3/31/2017
|
||||||||
Cash paid at closing (a)
|
$
|
1,200,000
|
|
$
|
1,200,000
|
|
$
|
—
|
|
$
|
—
|
|
Guaranteed purchase price (a)
|
2,127,064
|
|
1,982,639
|
|
934,728
|
|
—
|
|
||||
Contingent performance payments (b)
|
2,210,000
|
|
1,834,300
|
|
—
|
|
—
|
|
||||
Acquisition costs payable by Ebyline shareholders (c)
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Total estimated consideration
|
$
|
5,537,064
|
|
$
|
5,016,939
|
|
$
|
934,728
|
|
$
|
—
|
|
|
|
|
|
|
||||||||
Current portion of acquisition costs payable
|
|
|
$
|
934,728
|
|
$
|
—
|
|
||||
Long term portion of acquisition costs payable
|
|
|
—
|
|
—
|
|
||||||
Total acquisition costs payable
|
|
|
$
|
934,728
|
|
$
|
—
|
|
(a)
|
The Ebyline Stock Purchase Agreement required a
$1,200,000
cash payment at closing, a
$250,000
stock payment on July 30, 2015 and a cash or stock payment of up to an additional
$1,900,000
(
subject to proportional reduction in the event Ebyline’s final 2014 revenue was below $8,000,000
). Ebyline's final gross revenue for 2014 was
$7,903,429
. As such, the additional amount owed became
$1,877,064
payable in two equal installments of
$938,532
on January 30, 2016 and January 30, 2017. This guaranteed purchase price consideration was discounted to present value using the Company's
borrowing rate of prime plus 2%
. Interest expense imputed on the acquisition costs payable in the accompanying consolidated statements of operations was
$3,804
and
$15,313
for the
three months
ended
March 31, 2017
and
2016
, respectively. Per the Ebyline Stock Purchase Agreement, the Company issued
31,821
shares of its common stock to satisfy the
$250,000
guaranteed purchase price payment obligation on July 30, 2015. On January 29, 2016, the Company issued
114,398
shares of its common stock to satisfy the
$848,832
annual guaranteed payment of
$938,532
less
$89,700
in closing related expenses (see item (c) below). On January 30, 2017, the Company issued
200,542
shares of common stock to satisfy the final annual guaranteed payment of
$938,532
. The Company recorded a
$10,491
gain on the settlement of the acquisition costs payable in the accompanying consolidated statements of operations as a result of the difference between the market price of the stock on the settlement date and the 30-day average price of the stock required by the Ebyline Stock Purchase Agreement.
|
(b)
|
Total contingent performance payments up to
$5,500,000
are to be paid based on Ebyline meeting certain revenue targets. The performance payments are to be made only if Ebyline achieves at least
90%
of Content Revenue targets of
$17,000,000
in 2015,
$27,000,000
in 2016 and
$32,000,000
in 2017. The initial fair value of the
$5,500,000
of contingent performance payments was calculated using a Monte-Carlo simulation to simulate revenue over three years. Since the contingent consideration has an option like structure, a risk-neutral framework was considered appropriate for the valuation. The Company started with a risk-adjusted measure of forecasted revenue (using a risk-adjusted discount rate of
8.5%
) and assumed it will follow geometric brownian motion to simulate the revenue at future dates. Once the initial revenue was estimated based off of projections made during the acquisition, payout was calculated for each year and present valued to incorporate the credit risk associated with these payments. The Company's initial value conclusion was based on the average payment from
100,000
simulation trials. The volatility used for the simulation was
35%
. The Monte Carlo simulation resulted in an initial calculated fair value of contingent performance payments of
$2,210,000
on
January 30, 2015
. Because the contingent performance payments are subject to a
17%
reduction related to the continued employment of certain key employees, ASC 805-10-55-25 indicates that a portion of these payments be treated as potential compensation to be accrued over the term rather than allocated to the purchase price. Therefore, the Company reduced its overall purchase price consideration by
$357,700
and recorded the initial present value of the contingent performance payments at
$1,834,300
. Based on actual results for and projections for Content Revenue for 2015-2017, the Content Revenue for every year is expected to be below 90% of the required Content Revenues targets. Therefore, the Company reduced the fair value of contingent performance payments to zero by the end of 2015, as no further payments are expected to be owed.
|
(c)
|
According to the Ebyline Stock Purchase Agreement,
$89,700
in closing related expenses paid by Ebyline during the acquisition process were payable by the selling shareholders. These costs were deducted from the guaranteed payment on January 30, 2016.
|
|
Estimated Gross Purchase Consideration
|
Initial Present and Fair Value
|
Remaining Present and Fair Value
|
Remaining Present and Fair Value
|
||||||||
|
7/31/2016
|
7/31/2016
|
12/31/2016
|
3/31/2017
|
||||||||
Cash paid at closing (a)
|
$
|
400,000
|
|
$
|
400,000
|
|
$
|
—
|
|
$
|
—
|
|
Stock paid at closing (a)
|
600,000
|
|
600,000
|
|
—
|
|
—
|
|
||||
Guaranteed purchase price (b)
|
933,565
|
|
566,547
|
|
682,348
|
|
751,828
|
|
||||
Contingent performance payments (c)
|
2,500,000
|
|
230,000
|
|
324,000
|
|
366,334
|
|
||||
Total estimated consideration
|
$
|
4,433,565
|
|
$
|
1,796,547
|
|
$
|
1,006,348
|
|
$
|
1,118,162
|
|
|
|
|
|
|
||||||||
Current portion of acquisition costs payable
|
|
|
$
|
318,157
|
|
$
|
364,171
|
|
||||
Long-term portion of acquisition costs payable
|
|
|
688,191
|
|
753,991
|
|
||||||
Total acquisition costs payable
|
|
|
$
|
1,006,348
|
|
$
|
1,118,162
|
|
(a)
|
The aggregate consideration paid at closing for the acquisition of ZenContent consisted of a cash payment of
$400,000
and the issuance of
86,207
shares of IZEA common stock valued at
$600,000
.
|
(b)
|
Aggregate future consideration consists of (i)
three equal annual installment payments totaling $1,000,000
, commencing 12 months following the closing, less a reduction of
$66,435
due to a customary closing date working capital adjustment ("guaranteed purchase price"), and (ii) contingent performance payments of up to an aggregate of
$2,500,000
over the three 12-month periods following the closing. These payments are also subject to downward adjustment of up to
30%
if Brianna DeMike, ZenContent’s co-founder, is terminated by IZEA for cause or 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 in the Company's consolidated statement of operations was
$61,458
for the
three months
ended
March 31, 2017
. The initial guaranteed purchase price consideration was discounted to present value using the Company's borrowing rate of prime plus
2%
(
5.5%
). Interest expense imputed on the guaranteed acquisition costs payable in the accompanying consolidated statement of operations was
$8,022
for the
three months
ended
March 31, 2017
.
|
(c)
|
The contingent performance payments are subject to ZenContent achieving certain minimum revenue thresholds over 36 months. ZenContent is required to meet minimum revenues of
$2.5 million
,
$3.5 million
and
$4.5 million
in the first, second and third, respective 12-month periods following the closing in order to receive any portion of the contingent performance payments. 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 IZEA common stock at then average stock prices (determined at IZEA’s option). Additionally, these payments are also subject to downward adjustment of up to
30%
if Brianna DeMike is terminated by IZEA for cause or she terminates her employment without good reason. We initially determined the fair value of the
$2,500,000
contingent payments to be
$230,000
. The fair value of the contingent performance payments is required to be revalued each quarter and is calculated using a Monte-Carlo simulation to simulate revenue over the future periods. Since the contingent consideration has an option like structure, a risk-neutral framework is considered appropriate for the valuation. The Company started with a risk-adjusted measure of forecasted revenue (using a risk-adjusted discount rate of
17%
) and assumed it will follow geometric brownian motion to simulate the revenue at future dates. Once the initial revenue was estimated based off of projections, payout was calculated for each year and present valued to incorporate the credit risk associated with these payments. The Company's fair value conclusion was based on the average payment from
250,000
simulation trials. The volatility used for the simulation was
45%
. The interest rate used for the simulation was the Company's current borrowing rate of prime plus
2%
(
6%
). The
|
|
Final Purchase Price Allocation
|
||
Current assets
|
$
|
415,798
|
|
Property and equipment
|
4,551
|
|
|
Identifiable intangible assets
|
722,000
|
|
|
Goodwill
|
1,136,431
|
|
|
Current liabilities
|
(482,233
|
)
|
|
Total estimated consideration
|
$
|
1,796,547
|
|
|
|
|
Accumulated Amortization
|
Useful Life (in years)
|
||||||||
|
Balance
|
|
March 31, 2017
|
|
December 31, 2016
|
|||||||
Content provider networks
|
$
|
160,000
|
|
|
$
|
73,333
|
|
|
$
|
57,083
|
|
1
|
Trade names
|
52,000
|
|
|
48,000
|
|
|
45,000
|
|
1
|
|||
Developed technology
|
530,000
|
|
|
160,667
|
|
|
134,167
|
|
3
|
|||
Self-service content customers
|
210,000
|
|
|
151,667
|
|
|
134,167
|
|
5
|
|||
Managed content customers
|
2,140,000
|
|
|
1,370,555
|
|
|
1,192,222
|
|
3
|
|||
Domains
|
166,469
|
|
|
41,617
|
|
|
33,294
|
|
5
|
|||
Total identifiable intangible assets
|
$
|
3,258,469
|
|
|
$
|
1,845,839
|
|
|
$
|
1,595,933
|
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Ebyline Intangible Assets
|
$
|
2,370,000
|
|
|
$
|
2,370,000
|
|
ZenContent Intangible Assets
|
722,000
|
|
|
722,000
|
|
||
Domains
|
166,469
|
|
|
166,469
|
|
||
Total Intangible Assets
|
3,258,469
|
|
|
3,258,469
|
|
||
Accumulated amortization
|
(1,845,839
|
)
|
|
(1,595,933
|
)
|
||
Intangible Assets, net
|
$
|
1,412,630
|
|
|
$
|
1,662,536
|
|
Year ending December 31:
|
Amortization Expense
|
||
2017 (nine months remaining)
|
$
|
744,722
|
|
2018
|
349,432
|
|
|
2019
|
207,349
|
|
|
2020
|
84,293
|
|
|
2021
|
26,834
|
|
|
Total
|
$
|
1,412,630
|
|
|
March 31,
2017 |
|
December 31, 2016
|
||||
Software development costs
|
$
|
1,575,020
|
|
|
$
|
1,492,665
|
|
Less accumulated depreciation and amortization
|
(442,518
|
)
|
|
(388,706
|
)
|
||
Software development costs, net
|
$
|
1,132,502
|
|
|
$
|
1,103,959
|
|
Year ending December 31:
|
Software Amortization Expense
|
||
2017 (nine months remaining)
|
$
|
211,314
|
|
2018
|
315,004
|
|
|
2019
|
229,672
|
|
|
2020
|
192,822
|
|
|
2021
|
133,811
|
|
|
2022
|
49,879
|
|
|
|
$
|
1,132,502
|
|
Restricted Stock
|
Common Shares
|
Weighted Average
Grant Date Fair Value |
Weighted Average
Remaining Years to Vest |
|||
Nonvested at December 31, 2016
|
—
|
|
$
|
—
|
|
|
Granted
|
14,244
|
|
4.30
|
|
|
|
Vested
|
(14,244
|
)
|
4.26
|
|
|
|
Forfeited
|
—
|
|
—
|
|
|
|
Nonvested at March 31, 2017
|
—
|
|
$
|
—
|
|
|
Options Outstanding
|
Common Shares
|
|
Weighted Average
Exercise Price
|
|
Weighted Average
Remaining Life
(Years)
|
|||
Outstanding at December 31, 2015
|
830,599
|
|
|
$
|
8.65
|
|
|
6.5
|
Granted
|
179,998
|
|
|
6.16
|
|
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
|
|
Forfeited
|
(50,733
|
)
|
|
10.15
|
|
|
|
|
Outstanding at December 31, 2016
|
959,864
|
|
|
$
|
8.11
|
|
|
6.4
|
Granted
|
15,991
|
|
|
4.31
|
|
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
|
|
Forfeited
|
(11,483
|
)
|
|
10.40
|
|
|
|
|
Outstanding at March 31, 2017
|
964,372
|
|
|
$
|
8.02
|
|
|
6.3
|
|
|
|
|
|
|
|||
Exercisable at March 31, 2017
|
596,870
|
|
|
$
|
8.88
|
|
|
5.3
|
Nonvested Options
|
Common Shares
|
|
Weighted Average
Grant Date
Fair Value
|
|
Weighted Average
Remaining Years
to Vest
|
|||
Nonvested at December 31, 2015
|
461,926
|
|
|
$
|
3.84
|
|
|
2.8
|
Granted
|
179,998
|
|
|
2.88
|
|
|
|
|
Vested
|
(187,181
|
)
|
|
4.00
|
|
|
|
|
Forfeited
|
(40,437
|
)
|
|
3.76
|
|
|
|
|
Nonvested at December 31, 2016
|
414,306
|
|
|
$
|
3.60
|
|
|
2.6
|
Granted
|
15,991
|
|
|
1.92
|
|
|
|
|
Vested
|
(55,171
|
)
|
|
3.60
|
|
|
|
|
Forfeited
|
(7,624
|
)
|
|
3.04
|
|
|
|
|
Nonvested at March 31, 2017
|
367,502
|
|
|
$
|
3.28
|
|
|
2.5
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
2017 |
|
March 31,
2016 |
||||
Net loss
|
|
$
|
(2,719,220
|
)
|
|
$
|
(2,592,620
|
)
|
Weighted average shares outstanding - basic and diluted
|
|
5,598,200
|
|
|
5,300,520
|
|
||
Basic and diluted loss per common share
|
|
$
|
(0.49
|
)
|
|
$
|
(0.49
|
)
|
|
|
Three Months Ended
|
||||
|
|
March 31,
2017 |
|
March 31,
2016 |
||
Stock options
|
|
963,867
|
|
|
841,911
|
|
Warrants
|
|
557,421
|
|
|
534,653
|
|
Restricted stock units
|
|
—
|
|
|
—
|
|
Total excluded shares
|
|
1,521,288
|
|
|
1,376,564
|
|
|
March 31,
2016 |
June 30,
2016 |
September 30,
2016 |
December 31,
2016 |
Total 2016
|
||||||||||
Revenue
|
|
|
|
|
|
||||||||||
Managed Services
|
$
|
3,679,000
|
|
$
|
5,225,000
|
|
$
|
5,838,000
|
|
$
|
5,652,000
|
|
$
|
20,394,000
|
|
Content Workflow
|
1,704,000
|
|
1,595,000
|
|
1,576,000
|
|
1,666,000
|
|
6,541,000
|
|
|||||
Service Fees & Other Revenue
|
83,000
|
|
94,000
|
|
83,000
|
|
115,000
|
|
375,000
|
|
|||||
Total Revenue
|
$
|
5,466,000
|
|
$
|
6,914,000
|
|
$
|
7,497,000
|
|
$
|
7,433,000
|
|
$
|
27,310,000
|
|
|
|
|
|
|
|
||||||||||
Cost of Sales
|
|
|
|
|
|
||||||||||
Managed Services
|
$
|
1,518,000
|
|
$
|
1,939,000
|
|
$
|
2,464,000
|
|
$
|
2,245,000
|
|
$
|
8,166,000
|
|
Content Workflow
|
1,583,000
|
|
1,480,000
|
|
1,463,000
|
|
1,550,000
|
|
6,076,000
|
|
|||||
Service Fees & Other Revenue
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||
Total Cost of Sales
|
$
|
3,101,000
|
|
$
|
3,419,000
|
|
$
|
3,927,000
|
|
$
|
3,795,000
|
|
$
|
14,242,000
|
|
|
|
|
|
|
|
||||||||||
Gross Profit
|
|
|
|
|
|
||||||||||
Managed Services
|
$
|
2,161,000
|
|
$
|
3,286,000
|
|
$
|
3,374,000
|
|
$
|
3,407,000
|
|
$
|
12,228,000
|
|
Content Workflow
|
121,000
|
|
115,000
|
|
113,000
|
|
116,000
|
|
465,000
|
|
|||||
Service Fees & Other Revenue
|
83,000
|
|
94,000
|
|
83,000
|
|
115,000
|
|
375,000
|
|
|||||
Total Profit
|
$
|
2,365,000
|
|
$
|
3,495,000
|
|
$
|
3,570,000
|
|
$
|
3,638,000
|
|
$
|
13,068,000
|
|
|
March 31,
2015 |
June 30,
2015 |
September 30,
2015 |
December 31,
2015 |
Total 2015
|
||||||||||
Revenue
|
|
|
|
|
|
||||||||||
Managed Services
|
$
|
2,858,000
|
|
$
|
2,677,000
|
|
$
|
3,543,000
|
|
$
|
4,280,000
|
|
$
|
13,358,000
|
|
Content Workflow
|
1,242,000
|
|
1,886,000
|
|
1,855,000
|
|
1,867,000
|
|
6,850,000
|
|
|||||
Service Fees & Other Revenue
|
35,000
|
|
65,000
|
|
45,000
|
|
115,000
|
|
260,000
|
|
|||||
Total Revenue
|
$
|
4,135,000
|
|
$
|
4,628,000
|
|
$
|
5,443,000
|
|
$
|
6,262,000
|
|
$
|
20,468,000
|
|
|
|
|
|
|
|
||||||||||
Cost of Sales
|
|
|
|
|
|
||||||||||
Managed Services
|
$
|
1,290,000
|
|
$
|
1,168,000
|
|
$
|
1,568,000
|
|
$
|
1,853,000
|
|
$
|
5,879,000
|
|
Content Workflow
|
1,151,000
|
|
1,750,000
|
|
1,723,000
|
|
1,734,000
|
|
6,358,000
|
|
|||||
Service Fees & Other Revenue
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||
Total Cost of Sales
|
$
|
2,441,000
|
|
$
|
2,918,000
|
|
$
|
3,291,000
|
|
$
|
3,587,000
|
|
$
|
12,237,000
|
|
|
|
|
|
|
|
||||||||||
Gross Profit
|
|
|
|
|
|
||||||||||
Managed Services
|
$
|
1,568,000
|
|
$
|
1,509,000
|
|
$
|
1,975,000
|
|
$
|
2,427,000
|
|
$
|
7,479,000
|
|
Content Workflow
|
91,000
|
|
136,000
|
|
132,000
|
|
133,000
|
|
492,000
|
|
|||||
Service Fees & Other Revenue
|
35,000
|
|
65,000
|
|
45,000
|
|
115,000
|
|
260,000
|
|
|||||
Total Profit
|
$
|
1,694,000
|
|
$
|
1,710,000
|
|
$
|
2,152,000
|
|
$
|
2,675,000
|
|
$
|
8,231,000
|
|
|
Three Months Ended
|
|
|
|
|||||||||||||
|
March 31, 2017
|
|
March 31, 2016
|
|
$ Change
|
% Change
|
|||||||||||
Revenue & % of Total
|
|
|
|
|
|
|
|
|
|||||||||
Managed Services
|
$
|
4,684,000
|
|
76
|
%
|
|
$
|
3,679,000
|
|
67
|
%
|
|
$
|
1,005,000
|
|
27.3
|
%
|
Content Workflow
|
1,470,000
|
|
23
|
%
|
|
1,704,000
|
|
31
|
%
|
|
(234,000
|
)
|
(13.7
|
)%
|
|||
Service Fees & Other Revenue
|
48,000
|
|
1
|
%
|
|
83,000
|
|
2
|
%
|
|
(35,000
|
)
|
(42.2
|
)%
|
|||
Total Revenue
|
$
|
6,202,000
|
|
100
|
%
|
|
$
|
5,466,000
|
|
100
|
%
|
|
$
|
736,000
|
|
13.5
|
%
|
|
|
|
|
|
|
|
|
|
|||||||||
Cost of Sales & % of Total
|
|
|
|
|
|
|
|
|
|||||||||
Managed Services COS
|
$
|
1,827,000
|
|
57
|
%
|
|
$
|
1,518,000
|
|
49
|
%
|
|
$
|
309,000
|
|
20.4
|
%
|
Content Workflow COS
|
1,368,000
|
|
43
|
%
|
|
1,583,000
|
|
51
|
%
|
|
(215,000
|
)
|
(13.6
|
)%
|
|||
Service Fees & Other COS
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
—
|
|
100.0
|
%
|
|||
Total Cost of Sales
|
$
|
3,195,000
|
|
100
|
%
|
|
$
|
3,101,000
|
|
100
|
%
|
|
$
|
94,000
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
|||||||||
Gross Profit & Profit %
|
|
|
|
|
|
|
|
|
|||||||||
Managed Services
|
$
|
2,857,000
|
|
61
|
%
|
|
$
|
2,161,000
|
|
59
|
%
|
|
$
|
696,000
|
|
32.2
|
%
|
Content Workflow
|
102,000
|
|
7
|
%
|
|
121,000
|
|
7
|
%
|
|
(19,000
|
)
|
(15.7
|
)%
|
|||
Service Fees & Other Revenue
|
48,000
|
|
100
|
%
|
|
83,000
|
|
100
|
%
|
|
(35,000
|
)
|
(42.2
|
)%
|
|||
Total Profit
|
$
|
3,007,000
|
|
48
|
%
|
|
$
|
2,365,000
|
|
43
|
%
|
|
$
|
642,000
|
|
27.1
|
%
|
•
|
do not include stock-based compensation expense, which 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 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 vendors and other parties who provide us with services;
|
•
|
do 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 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,
which is a non-cash expense, but will continue to be a recurring expense for our business on certain business contracts where the amounts can vary; and
|
•
|
do 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.
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Total operating expenses
|
$
|
5,707,879
|
|
|
$
|
4,939,664
|
|
Less:
|
|
|
|
||||
Non-cash stock-based compensation
|
158,976
|
|
|
204,972
|
|
||
Non-cash stock issued for payment of services
|
60,632
|
|
|
31,250
|
|
||
(Gain) loss on disposal of equipment
|
(1,953
|
)
|
|
—
|
|
||
(Gain) loss on settlement of acquisition costs payable
|
(10,491
|
)
|
|
—
|
|
||
Increase (decrease) in value of acquisition costs payable
|
103,792
|
|
|
—
|
|
||
Depreciation and amortization
|
362,606
|
|
|
296,297
|
|
||
Total excluded expenses
|
673,562
|
|
|
532,519
|
|
||
|
|
|
|
||||
Cash Opex
|
$
|
5,034,317
|
|
|
$
|
4,407,145
|
|
|
|
|
|
||||
Revenue
|
$
|
6,202,506
|
|
|
$
|
5,465,950
|
|
Cash Opex / Revenue
|
81
|
%
|
|
81
|
%
|
|
Three Months Ended
|
||||||
|
March 31,
2017 |
|
March 31,
2016 |
||||
Net loss
|
$
|
(2,719,220
|
)
|
|
$
|
(2,592,620
|
)
|
Non-cash stock-based compensation
|
158,976
|
|
|
204,972
|
|
||
Non-cash stock issued for payment of services
|
60,632
|
|
|
31,250
|
|
||
(Gain) loss on disposal of equipment
|
(1,953
|
)
|
|
—
|
|
||
(Gain) loss on settlement of acquisition costs payable
|
(10,491
|
)
|
|
—
|
|
||
Increase (decrease) in value of acquisition costs payable
|
103,792
|
|
|
—
|
|
||
Depreciation and amortization
|
362,606
|
|
|
296,297
|
|
||
Interest expense
|
17,076
|
|
|
21,339
|
|
||
Change in fair value of derivatives
|
618
|
|
|
(2,852
|
)
|
||
Adjusted EBITDA
|
$
|
(2,027,964
|
)
|
|
$
|
(2,041,614
|
)
|
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
|
March 31, 2017
|
|
15,991
|
|
|
$4.31
|
|
6.0 years
|
|
43.97%
|
|
2.09%
|
|
$1.92
|
2.1
|
|
Stock Purchase Agreement, dated as of January 27, 2015, by and among IZEA, Inc., Ebyline, Inc. and the Stockholders of Ebyline, Inc. listed on the signature pages thereto (Incorporated by reference to the Company’s current report on Form 8-K filed with the SEC on January 29, 2015).
|
2.2
|
|
Stock Purchase Agreement, dated as of July 31, 2016, by and among IZEA, Inc., ZenContent, Inc. and the Stockholders of ZenContent, Inc. (Incorporated by reference to the Company’s current report on Form 8-K filed with the SEC on August 2, 2016).
|
3.1
|
|
Amended and Restated Articles of Incorporation of IZEA, Inc., filed with the Nevada Secretary of State on November 28, 2011 (incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 23, 2011).
|
3.2
|
|
Certificate of Change of IZEA, Inc., filed with the Nevada Secretary of State on July 30, 2012 (Incorporated by reference to the Company’s current report on Form 8-K filed with the SEC on August 1, 2012).
|
3.3
|
|
Certificate of Amendment to Articles of Incorporation filed with the Secretary of State of the State of Nevada on April 17, 2014 (Incorporated by reference to the Company’s current report on Form 8-K filed with the SEC on April 18, 2014).
|
3.4
|
|
Certificate of Withdrawal of Certificate of Designation filed with the Secretary of State of the State of Nevada effective January 23, 2015 (Incorporated by reference to the Company’s current report on Form 8-K filed with the SEC on January 29, 2015).
|
3.5
|
|
Certificate of Amendment filed with the Secretary of State of the State of Nevada effective January 11, 2016 (Incorporated by reference to the Company’s current report on Form 8-K filed with the SEC on January 12, 2016).
|
3.6
|
|
Amended and Restated Bylaws (incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 23, 2011).
|
3.7
|
|
Certificate of Designation (Incorporated by reference to the Company’s current report on Form 8-K filed with the SEC on May 27, 2011).
|
3.8
|
|
Articles of Merger of IZEA Innovations, Inc. filed with the Secretary of State of the State of Nevada effective April 5, 2016 (Incorporated by reference to Form 10-Q, filed with the SEC on May 11, 2016).
|
4.1
|
|
Form of Warrant to Purchase Common Stock of IZEA, Inc. issued to Investors in the 2013 Private Placement (Incorporated by reference to Form 8-K, filed with the SEC on August 21, 2013).
|
4.2
|
|
Form of Warrant to Purchase Common Stock of IZEA, Inc. issued to Investors in the 2014 Private Placement (Incorporated by reference to Form 8-K, filed with the SEC on February 24, 2014).
|
4.3
|
|
Form of Warrant Amendment and Exercise Agreement dated July 20, 2015 between the Company and Warrant Holders (Incorporated by reference to Form 8-K, filed with the SEC on July 23, 2015).
|
10.1
|
(a)
|
Amended 2011 Equity Incentive Plan as of February 6, 2013 (Incorporated by reference to Form 10-K, filed with the SEC on March 29, 2013).
|
10.2
|
|
Financing Agreement between the Company and Bridge Bank, dated March 1, 2013 (Incorporated by reference to Form 10-K, filed with the SEC on March 29, 2013).
|
10.3
|
|
Form of Securities Purchase Agreement executed by IZEA, Inc. and Investors in the 2013 Private Placement (Incorporated by reference to Form 8-K, filed with the SEC on August 21, 2013).
|
10.4
|
|
Form of Securities Purchase Agreement, dated as of February 12, 2014, by and among IZEA, Inc. and the Investors (Incorporated by reference to Form 8-K, filed with the SEC on February 19, 2014).
|
10.5
|
|
Form of Registration Rights Agreement, dated as of February 21, 2014, among IZEA, Inc. and each of the Investors (Incorporated by reference to Form 8-K, filed with the SEC on February 24, 2014).
|
10.6
|
(a)
|
Amended and Restated 2011 Equity Incentive Plan as of April 16, 2014 (Incorporated by reference to the Company’s current report on Form 8-K filed with the SEC on April 18, 2014).
|
10.7
|
(a)
|
2014 Employee Stock Purchase Plan (Incorporated by reference to the Company’s current report on Form 8-K filed with the SEC on April 18, 2014).
|
10.8
|
(a)
|
Employment Agreement between IZEA, Inc. and LeAnn Hitchcock dated August 25, 2014 (Incorporated by reference to the Company’s current report on Form 8-K filed with the SEC on August 25, 2014).
|
10.9
|
(a)
|
Employment Agreement between IZEA, Inc. and Edward Murphy dated December 26, 2014 (Incorporated by reference to the Company’s current report on Form 8-K filed with the SEC on December 31, 2014).
|
10.10
|
(a)
|
Employment Agreement between IZEA, Inc. and Ryan Schram dated January 25, 2015 (Incorporated by reference to the Company’s current report on Form 8-K filed with the SEC on January 29, 2015).
|
10.11
|
|
Business Financing Modification Agreement between IZEA, Inc., Ebyline, Inc. and Bridge Bank, NA, dated as of April 13, 2015 (Incorporated by reference to the Company's current report on Form 8-K filed with the SEC on April 14, 2015).
|
*
|
Filed 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.
|
|
IZEA, Inc.
a Nevada corporation |
|
|
|
|
May 10, 2017
|
By:
|
/s/ Edward H. Murphy
|
|
|
Edward H. Murphy
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
May 10, 2017
|
By:
|
/s/ LeAnn C. Hitchcock
|
|
|
LeAnn C. Hitchcock
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
1 Year IZEA Worldwide Chart |
1 Month IZEA Worldwide Chart |
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