IZEA Worldwide, Inc. - Quarter Report: 2023 June (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to _________________

Commission File No.: 001-37703

IZEA WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)


Nevada						37-1530765
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


1317 Edgewater Dr., # 1880, Orlando, FL						32804
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (407) 674-6911

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol (s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

IZEA

The Nasdaq Capital Market

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-Accelerated Filer

☒

Smaller reporting company

☒

Emerging growth company

☐

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of August 7, 2023, there were 15,385,470 shares of our common stock outstanding.

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Quarterly Report on Form 10-Q for the period ended June 30, 2023

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			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			1
Unaudited Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022			1
Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022			2
Unaudited Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2023 and 2022			3
Unaudited Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022			4
Unaudited Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2023 and 2022			6
Notes to the Unaudited Consolidated Financial Statements			7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			34
Item 4. Controls and Procedures			34

PART II. OTHER INFORMATION
Item1. Legal Proceedings			36
Item 1A. Risk Factors			36
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchasers of Equity Securities			24
Item 3. Defaults Upon Senior Securities			36
Item 4. Mine Safety Disclosures			36
Item 5. Other Information			37
Item 6. Exhibits			38

Signatures			39

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PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

IZEA Worldwide, Inc.

Unaudited Consolidated Balance Sheets


	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	31,223,220	$	24,600,960
Accounts receivable, net	6,317,873		5,664,727
Prepaid expenses	1,496,599		3,927,453
Short term investments	14,084,241		16,106,758
Other current assets	29,581		66,441
Total current assets	53,151,514		50,366,339

Property and equipment, net of accumulated depreciation	234,517		156,774
Goodwill	4,016,722		4,016,722
Intangible assets, net	64,953		64,953
Software development costs, net	1,801,162		1,774,033
Long term investments	19,754,238		29,296,069
Total assets	$	79,023,106	$	85,674,890

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,117,072	$	1,968,322
Accrued expenses	2,200,731		2,130,702
Contract liabilities	8,257,166		11,247,746
Total current liabilities	12,574,969		15,346,770

Finance obligation, less current portion	93,112		62,173
Total liabilities	$	12,668,081	$	15,408,943

Commitments and Contingencies (Note 8)	—		—

Stockholders’ equity:
Preferred stock; $0.0001 par value; 2,500,000 shares authorized; no shares issued and outstanding	—		—
Common stock; $0.0001 par value; 50,000,000 shares authorized; shares issued: 15,734,680 and 15,603,597, respectively; shares outstanding: 15,489,397 and 15,603,597, respectively	1,574		1,560
Treasury stock at cost: 245,283 and 0 shares at June 30, 2023 and December 31, 2022, respectively	(705,403)		—
Additional paid-in capital	149,646,200		149,148,248
Accumulated deficit	(81,942,831)		(78,103,066)
Accumulated other comprehensive income (loss)	(644,515)		(780,795)
Total stockholders’ equity	66,355,025		70,265,947
Total liabilities and stockholders’ equity	$	79,023,106	$	85,674,890

See accompanying notes to the consolidated financial statements.

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IZEA Worldwide, Inc.

Unaudited Consolidated Statements of Operations


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue	$	10,689,059	$	12,577,011	$	19,426,781	$	21,467,347

Costs and expenses:
Cost of revenue	6,254,517		7,211,922		12,214,679		12,391,646
Sales and marketing	2,831,949		2,289,769		5,236,500		4,810,112
General and administrative	3,167,941		3,378,988		6,571,549		6,881,423
Depreciation and amortization	110,432		138,492		456,694		277,321
Total costs and expenses	12,364,839		13,019,171		24,479,422		24,360,502

Loss from operations	(1,675,780)		(442,160)		(5,052,641)		(2,893,155)

Other income (expense):
Interest expense	(3,155)		(815)		(4,719)		(1,780)
Other income (expense), net	645,509		273,085		1,217,595		248,802
Other income (expense), net	642,354		272,270		1,212,876		247,022

Net loss	$	(1,033,426)	$	(169,890)	$	(3,839,765)	$	(2,646,133)

Weighted average common shares outstanding – basic and diluted	15,520,700		15,551,617		15,551,785		15,539,663
Basic and diluted loss per common share	$	(0.07)	$	(0.01)	$	(0.25)	$	(0.17)

See accompanying notes to the consolidated financial statements.

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IZEA Worldwide, Inc.

Unaudited Consolidated Statements of Comprehensive Loss


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net loss	$	(1,033,426)	$	(169,890)	$	(3,839,765)	$	(2,646,133)

Other comprehensive income
Unrealized gain/(loss) on securities held	10,100		(267,482)		136,280		(267,482)
Total other comprehensive income	10,100		(267,482)		136,280		(267,482)

Total comprehensive income (loss)	$	(1,023,326)	$	(437,372)	$	(3,703,485)	$	(2,913,615)

See accompanying notes to the consolidated financial statements.

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IZEA Worldwide, Inc.

Unaudited Consolidated Statements of Stockholders’ Equity

Three Months Ended June 30, 2023 and 2022


	Common Stock			Additional Paid-In		Treasury		Accumulated		Accumulated Other Comprehensive		Total Stockholders’
	Shares	Amount		Capital		Stock		Deficit		Income (Loss)		Equity
Balance, March 31, 2022	15,528,125	$	1,553	$	148,595,014	$	—	$	(76,109,811)	$	—	$	72,486,756
Stock purchase plan & option exercise issuances	8,269	1		12,026		—		—		—		12,027
Stock issued for payment of services	6,623	—		31,259		—		—		—		31,259
Stock-based compensation	14,099	2		156,704		—		—		—		156,706
Shares withheld to cover statutory taxes	(5,387)	(1)		(21,281)		—		—		—		(21,282)
Reverse stock split fractional share adjustment	—	—		—		—		—		—		—
Treasury stock	—	—		—		—		—		—		—
Other comprehensive income (loss)	—	—		—		—		—		(267,482)		(267,482)
Net loss	—	—		—		—		(169,890)		—		(169,890)
Balance, June 30, 2022	15,551,729	$	1,555	$	148,773,722	$	—	$	(76,279,701)	$	(267,482)	$	72,228,094


	Common Stock			Additional Paid-In		Treasury		Accumulated		Accumulated Other Comprehensive		Total Stockholders’
	Shares	Amount		Capital		Stock		Deficit		Income (Loss)		Equity
Balance, March 31, 2023	15,650,235	$	1,565	$	149,387,894	$	—	$	(80,909,405)	$	(654,615)	$	67,825,439
Stock purchase plan & option exercise issuances	4,329	1		7,991		—		—		—		7,992
Stock issued for payment of services	30,990	3		75,006		—		—		—		75,009
Stock-based compensation	38,229	4		207,873		—		—		—		207,877
Shares withheld to cover statutory taxes	(12,892)	(1)		(32,562)		—		—		—		(32,563)
Reverse stock split fractional share adjustment	23,789	2		(2)		—		—		—		—
Treasury stock	—	—		—		(705,403)		—		—		(705,403)
Other comprehensive income (loss)	—	—		—		—		—		10,100		10,100
Net comprehensive income (loss)	—	—		—		—		(1,033,426)		—		(1,033,426)
Balance, June 30, 2023	15,734,680	$	1,574	$	149,646,200	$	(705,403)	$	(81,942,831)	$	(644,515)	$	66,355,025

See accompanying notes to the consolidated financial statements.

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IZEA Worldwide, Inc.

Unaudited Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2023 and 2022


	Common Stock			Additional Paid-In		Treasury		Accumulated		Accumulated Other Comprehensive		Total Stockholders’
	Shares	Amount		Capital		Stock		Deficit		Income (Loss)		Equity
Balance, December 31, 2021	15,511,332	$	1,551	$	148,457,152	$	—	$	(73,633,568)	$	—	$	74,825,135
Stock purchase plan & option exercise issuances	9,519	1		18,726		—		—		—		18,727
Stock issued for payment of services	13,238	1		62,481		—		—		—		62,482
Stock-based compensation	26,399	3		273,895		—		—		—		273,898
Shares withheld to cover statutory taxes	(8,759)	(1)		(38,532)		—		—		—		(38,533)
Reverse stock split fractional share adjustment	—	—		—		—		—		—		—
Treasury stock	—	—		—		—		—		—		—
Other comprehensive income (loss)	—	—		—		—		—		(267,482)		(267,482)
Net comprehensive income (loss)	—	—		—		—		(2,646,133)		—		(2,646,133)
Balance, June 30, 2022	15,551,729	$	1,555	$	148,773,722	$	—	$	(76,279,701)	$	(267,482)	$	72,228,094


	Common Stock			Additional Paid-In		Treasury		Accumulated		Accumulated Other Comprehensive		Total Stockholders’
	Shares	Amount		Capital		Stock		Deficit		Income (Loss)		Equity
Balance, December 31, 2022	15,603,597	$	1,560	$	149,148,248	$	—	$	(78,103,066)	$	(780,795)	$	70,265,947
Stock purchase plan & option exercise issuances	4,329	1		7,991		—		—		—		7,992
Stock issued for payment of services	59,797	6		150,003		—		—		—		150,009
Stock-based compensation	67,446	7		403,392		—		—		—		403,399
Shares withheld to cover statutory taxes	(24,278)	(2)		(63,432)		—		—		—		(63,434)
Reverse stock split fractional share adjustment	23,789	2		(2)		—		—		—		—
Treasury stock	—	—		—		(705,403)		—		—		(705,403)
Other comprehensive income (loss)	—	—		—		—		—		136,280		136,280
Net comprehensive income (loss)	—	—		—		—		(3,839,765)		—		(3,839,765)
Balance, June 30, 2023	15,734,680	$	1,574	$	149,646,200	$	(705,403)	$	(81,942,831)	$	(644,515)	$	66,355,025

See accompanying notes to the consolidated financial statements.

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IZEA Worldwide, Inc.

Unaudited Consolidated Statements of Cash Flows


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	(3,839,765)	$	(2,646,133)
Adjustments to reconcile net income (loss) to net cash used for operating activities:
Impairment of digital assets	—		140,727
Depreciation	45,946		65,528
Amortization	410,748		211,793
Stock-based compensation	403,399		273,898
Value of stock issued for payment of services	150,009		62,482
(Gain)/Loss on disposal of equipment	—		18,555
Changes in operating assets and liabilities:
Accounts receivable	(653,146)		20,121
Prepaid expenses and other current assets	2,467,714		(539,639)
Accounts payable	148,750		(284,920)
Accrued expenses	43,082		(82,325)
Contract liabilities	(2,990,579)		(1,806,859)
Net cash provided by and (used for) operating activities	(3,813,842)		(4,566,772)
Cash flows from investing activities:
Purchase of short term investments	(172,865,911)		(33,069,694)
Proceeds from the sale of short term investments	174,848,157		—
Purchase of long term investments	—		(26,121,522)
Proceeds from the sale of long term investments	9,718,381		—
Purchase of property and equipment, net	(65,803)		(31,310)
Proceeds from sale of property and equipment	—		10,344
Increase in software development costs	(437,877)		(277,369)
Net cash provided by and (used for) investing activities	11,196,947		(59,489,551)
Cash flows from financing activities:
Proceeds from exercise of stock options & ESPP issuances	7,992		18,727
Payments on notes payable and capital leases	—		(10,096)
Purchase of treasury stock	(705,403)		—
Payments on shares withheld for statutory taxes	(63,434)		(38,533)
Net cash provided by financing activities	(760,845)		(29,902)

Net increase (decrease) in cash and cash equivalents	6,622,260		(64,086,225)
Cash and cash equivalents, beginning of period	24,600,960		75,433,295
Cash and cash equivalents, end of period	$	31,223,220	$	11,347,070

Supplemental cash flow information:
Interest paid	$	4,553	$	1,894

Non-cash financing and investing activities:
Equipment acquired with financing arrangement	83,508		$	—
Fair value of common stock issued for future services	$	150,009	$	125,000

See accompanying notes to the consolidated financial statements.

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

NOTE 1. COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

IZEA Worldwide, Inc. (“IZEA,” “we,” “us,” or “our”) creates and operates online marketplaces that connect marketers, including brands, agencies, and publishers, with content creators such as bloggers and tweeters (“creators”). Our technology brings the marketers and creators together, enabling their transactions to be completed at scale by managing 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 individuals to celebrities and accredited journalists the opportunity to monetize their content, creativity, and influence through our marketers. IZEA compensates these creators for producing unique content such as long and short-form text, videos, photos, status updates, and illustrations for marketers or distributing such content on behalf of marketers through their websites, blogs, and social media channels.

We provide value through managing custom content workflow, creator search and targeting, bidding, analytics, and payment processing. While the majority of the marketers engage us to perform these services (the “Managed Services”) on their behalf, they may also use our marketplaces to engage creators for influencer marketing campaigns or to produce custom content on a self-service basis by licensing our technology.

Our primary technology platform, The IZEA Exchange (“IZEAx”), is designed to provide a unified ecosystem that enables the creation and publication of multiple types of custom content through its creators’ websites, blogs, and social media channels, including, among others, Twitter, Facebook, YouTube, Twitch, and Instagram. We extensively use this platform to manage influencer marketing campaigns on behalf of the Company’s marketers. During 2022, we re-engineered our influencer marketing platform to align more closely with user requirements, announcing the initial rollout of IZEA Flex (“Flex”) in September 2022, and we announced the commercial launch of Flex in January 2023. Flex, which introduces end-to-end tracking of social commerce, enabling influencer impact at scale, includes eight modules allowing pricing plans that meet a range of users, will replace IZEAx as our primary platform. IZEAx was sunset in the second quarter of 2023.

Flex is designed with flexibility as a core tenet, allowing marketers to use any combination of independent applications as they see fit. The result is a comprehensive suite of tools that, individually, supercharge influencer marketing efforts and become even more powerful when combined. Flex offers eight core modules: Discover, ContentMine, ShareMonitor, Integrations, Tracking Links, Contacts, Transactions, and Campaigns.

Flex allows marketers to easily measure the impact of individual influencers on e-commerce revenue at scale, and integrates key functions of The Creator Marketplace on IZEA.com. Modules in Flex include Discover, which allows marketers to search through content from millions of influencer social profiles while filtering across channels, demographics, and interests; ContentMine, a content management tool that collects and measures influencer content, providing real-time insights and A.I. content analysis from BrandGraph; ShareMonitor, a multi-platform social monitoring tool that allows marketers to monitor hashtags, keywords and brand mentions across leading social platforms; Integrations provides deep integrations such as with Google Analytics and Shopify, providing marketers the capability to track influencer campaign metrics such as time on site, engagement, and revenue; and, Tracking Links provides real-time tracking metrics for influencer marketing and can track customer conversions, spend, and purchases when used with other Flex modules.

In 2020, we launched two platforms, BrandGraph and Shake. BrandGraph is a social media intelligence platform that is heavily integrated with IZEAx and now Flex, which relies largely on data from the other platforms but is also available as a stand-alone platform. The BrandGraph platform maps and classifies the complex hierarchy of corporation-to-brand relationships by category and associates social content with brands through a proprietary content analysis engine. Shake was sunset in October of 2022 in conjunction with the launch of The Creator Marketplace, which replaces and improves upon Shake’s functionality. Shake was aimed at digital creatives seeking freelance “gig” work. Creators listed available “Shakes” on their accounts in the platform and marketers could select and purchase creative packages from them through a streamlined chat experience, assisted by ShakeBot - a proprietary artificial intelligence assistant.

In October 2022, we launched The Creator Marketplace (“Marketplace”) on IZEA.com, which provides powerful tools for creators to showcase their social handles and the brands and topics they post about, and marketers to easily search and filter creator listing that meet requirements of their influencer marketing campaigns, including creator specific predictive audience demographics. Marketplace features include Casting Calls, which give marketers and creators a two-way marketplace to connect and collaborate; marketers use Casting Calls to solicit creators for everything from influencing campaigns to full-time employment; creators respond directly to Casting Calls with video and text responses.

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

Basis of Presentation

The accompanying consolidated balance sheet as of June 30, 2023, the consolidated statements of operations for the three and six months ended June 30, 2023 and 2022, the consolidated statements of comprehensive loss for the three and six months ended June 30, 2023 and 2022, the consolidated statements of stockholders' equity for the three and six months ended June 30, 2023 and 2022, and the consolidated statements of cash flows for the six months ended June 30, 2023 and 2022 are unaudited but include all adjustments that are, in the opinion of management, necessary for a fair presentation of its financial position at such dates and its results of operations and cash flows for the periods then ended in conformity with generally accepted accounting principles in the United States (GAAP). The consolidated balance sheet as of December 31, 2022 has been derived from the audited consolidated financial statements at that date but, in accordance with the rules and regulations of the SEC, does not include all of the information and notes required by GAAP for complete financial statements. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of results that may be expected for the entire fiscal year. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 31, 2022, included in the Company's Annual Report on Form 10-K filed with the SEC on March 31, 2023.

Principles of Consolidation

The consolidated financial statements include the accounts of IZEA Worldwide, Inc. and its wholly-owned subsidiaries, subsequent to the subsidiaries’ individual acquisition, merger, or formation dates, as applicable. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Preparing financial statements that conform with GAAP may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less from the date of purchase to be cash equivalents. The FDIC insures deposits made to the Company bank accounts up to a maximum of $250,000 at each bank. The CDIC insures deposits made to the Company bank accounts in Canada up to CAD 100,000. Deposit balances exceeding these limits were approximately $30.6 million and $24.4 million as of June 30, 2023, and December 31, 2022, respectively.

Investment in Debt Securities

Our investments in debt securities are carried at either amortized cost or fair value. The cost basis is determined by the specific identification method. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading debt securities as well as realized gains and losses on available-for-sale debt securities are included in net income. Unrealized gains and losses, net of tax, on available-for-sale debt securities are included in our consolidated balance sheet as a component of accumulated other comprehensive income (loss).

Accounts Receivable and Concentration of Credit Risk

The Company’s accounts receivable balance consists of trade receivables and a reserve for credit losses. Trade receivables are customer obligations due under normal trade terms. The Company had net trade receivables of $6.3 million at June 30, 2023. The Company had net trade receivables of $5.7 million at December 31, 2022.

Management determines the collectability of accounts receivable by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions. An account is deemed delinquent when the customer has not paid an amount due by its associated due date. If a portion of the account balance is deemed uncollectible, the Company will either write off the amount owed or provide a reserve based on its best estimate of the uncollectible portion of the account. The Company had a reserve for credit losses of $155,000 as of June 30, 2023, and December 31, 2022. Management believes this estimate is reasonable, but there can be no assurance that the estimate will not change due to a change in economic conditions or business conditions within the industry, the individual customers, or the Company. Any adjustments to this account are reflected in the consolidated statements of operations as a general and administrative expense. The Company did not recognize any bad debt expense for the three and six months ended June 30, 2023 and 2022.

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

Credit risk concentration concerning accounts receivable has been typically limited because many geographically diverse customers make up the Company’s customer base, thus spreading the trade credit risk. However, the Company’s addition of SaaS customers has increased credit exposure on certain customers who carry significant credit balances related to their marketplace spend. The Company controls credit risk through credit approvals, credit limits, and monitoring procedures. The Company performs credit evaluations of its customers but generally does not require collateral to support accounts receivable. The Company currently has two customers that each accounted for more than 10% of total accounts receivable at June 30, 2023, and three customers that each accounted for more than 10% of total accounts receivable at December 31, 2022. The Company had one customer that accounted for more than 10% of its gross billings during the three months ended June 30, 2023 and two customers that each accounted for more than 10% of its gross billings during the three months ended June 30, 2022. The Company had one customer that accounted for more than 10% of its gross billings during the six months ended June 30, 2023 and two customers that each accounted for more than 10% of its gross billings during the six months ended June 30, 2022.

Property and Equipment

Property and equipment are recorded at cost, or if acquired in a business combination, at the acquisition date fair value. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:


Computer Equipment			3 years
Office Equipment			3 - 10 years
Furniture and Fixtures			5 - 10 years

The carrying amounts of assets sold or retired and the related accumulated depreciation are eliminated in the year of disposal, with resulting gains or losses included in general and administrative expense in the consolidated statements of operations.

Goodwill

Goodwill represents the excess of the consideration transferred for an acquired business over the fair value of the underlying identifiable net assets. The Company has goodwill in connection with its acquisitions of Ebyline, Inc. (“Ebyline”), ZenContent, Inc. (“ZenContent”), and TapInfluence, Inc. (“TapInfluence”). Goodwill is not amortized but instead, it is tested for impairment at least annually. In the event that management determines that the value of goodwill has become impaired, the Company will record a charge in an amount equal to the excess of the reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit during the fiscal quarter in which the determination is made.

The Company performs its annual impairment tests of goodwill as of October 1 of each year, or more frequently, if certain indicators are present. Goodwill is required to be tested for impairment at the reporting unit level. A reporting unit is an operating segment or one level below the operating segment level, referred to as a component. Management identifies its reporting units by assessing whether components (i) have discrete financial information available, (ii) engage in business activities, and (iii) whether a segment manager regularly reviews the component’s operating results. Net assets and goodwill of acquired businesses are allocated to the reporting unit associated with the acquired business based on the anticipated organizational structure of the combined entities. If two or more components are deemed economically similar, those components are aggregated into one reporting unit when performing the annual goodwill impairment review. The Company had one reporting unit as of June 30, 2023. No indicators were present and no impairment was recorded during the three and six months ended June 30, 2023.

Intangible Assets

The Company acquired the most of its intangible assets through its acquisitions of Ebyline, ZenContent, and TapInfluence, and amortized the identifiable intangible assets over periods of 12 to 60 months. See Note 4 for further details.

The Company accounts for its digital assets held as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. The Company maintains ownership of and control over its digital assets and may use third-party custodial services to secure them. Digital assets are initially recorded at cost and evaluated for any impairment losses incurred since acquisition. The Company did not recognize any impairment of digital assets during the three and six months ended June 30, 2023. The Company recognized an impairment of $140,727 on digital assets during the six months ended June 30, 2022.

The Company reviews long-lived assets, including software development costs and other intangible assets, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared with the asset's carrying amount to determine if there has been an impairment, which is calculated as the difference between the assets fair value and the carrying value. Estimates of future undiscounted cash flows are based on expected growth rates for the business,

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

anticipated future economic conditions, and estimates of residual values. Fair values depend upon management estimates of risk-adjusted discount rates, which are believed to be consistent with assumptions that marketplace participants would use in their estimates of fair value. The Company did not recognize any impairment charges associated with the Company’s acquired intangible assets during the three and six months ended June 30, 2023, and 2022.

Software Development Costs

In accordance with Accounting Standards Codification (“ASC”) 350-40, Internal Use Software, the Company capitalizes certain internal-use software development costs associated with creating and enhancing internally developed software related to its platforms. Software development activities generally consist of three stages (i) the research and planning stage, (ii) the application and development stage, and (iii) the post-implementation stage. Costs incurred in the research and planning stage and in the post-implementation stage of software development, or other maintenance and development expenses that do not meet the qualification for capitalization, are expensed as incurred. Costs incurred in the application and development stage, including significant enhancements and upgrades, are capitalized. These costs include personnel and related employee benefits expenses for employees or consultants directly associated with and who devote time to software projects and external direct costs of materials obtained in developing the software. The Company also capitalizes certain costs associated with cloud computing arrangements (CCAs). These software developments, acquired technology, and CCA costs are amortized on a straight-line basis over the estimated useful life of five years upon initial release of the software or additional features. The Company reviews the software development costs for impairment when circumstances indicate that their carrying amounts may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess of carrying value over the fair value in its consolidated statements of operations. See Note 5 for further details.

Leases

Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), established a right-of-use model that requires a lessee to record a right-of-use asset and a right-of-use liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company does not record leases on the balance sheet with a lease term of 12 months or less at the commencement date.

Revenue Recognition

The Company generates revenue from four primary sources: (1) revenue from its managed services when a marketer (typically a brand, agency, or partner) pays the Company 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 the Company's platforms (“Marketplace Spend Fees”); (3) revenue from license and subscription fees charged to access our platforms (“License Fees”); and, (4) revenue derived from other fees such as inactivity fees, early cash-out fees, and other miscellaneous fees charged to users of the Company's platforms (“Other Fees”).

The Company recognizes revenue in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, revenue is recognized based on a five-step model as follows: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) performance obligations are satisfied. The core principle of ASC 606 is that revenue is recognized when the transfer of promised goods or services to customers is made in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are distinct performance obligations.

The Company also determines whether it acts as agent or principal for each identified performance obligation. The determination of whether the Company acts as principal or agent is highly subjective and requires the Company to evaluate several indicators individually and as a whole in order to make its determination. For transactions in which the Company acts as a principal, revenue is reported on a gross basis as the amount paid by the marketer for the purchase of content or sponsorship, promotion, and other related services and the Company records the amounts it pays to third-party creators as cost of revenue. For transactions in which the Company acts as an agent, revenue is reported on a net basis as the amount charged to the self-service marketer using the Company’s platforms, less the amounts paid to the third-party creators providing the service.

The Company maintains separate arrangements with each marketer and content creator either in the form of a master agreement or terms of service, which specify the terms of the relationship and access to its platforms or by statement of work, which specify the price and the services to be performed, along with other terms. The transaction price is determined based on the fixed fee stated in the statement of work and does not contain variable consideration. Marketers who contract with the

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

Company to manage their advertising campaigns or custom content requests may prepay for services or request credit terms. Payment terms are typically 30 days from the invoice date. The agreement typically provides for either a non-refundable deposit or a cancellation fee if the customer cancels the agreement before the completion of services. Billings in advance of completed services are recorded as a contract liability until earned. The Company assesses collectability based on several factors, including the creditworthiness of the customer and payment and transaction history.

Managed Services Revenue

For Managed Services Revenue, the Company enters into agreements to provide services that may include multiple distinct performance obligations in the form of (i) an integrated marketing campaign to provide influencer marketing services, which may include the provision of blogs, tweets, photos, or videos shared through social network offerings and content promotion, such as click-through advertisements appearing in websites and social media channels, and (ii) custom content items, such as a research or news article, informational material or videos. Marketers typically purchase influencer marketing services to provide public awareness or advertising buzz regarding the marketer’s brand and purchase custom content for internal and external use.

The Company views its obligation to deliver influencer marketing services, including management services, as a single performance obligation that is satisfied over time as the customer receives the benefits from the services. Revenue is recognized using an input method of costs incurred compared to total expected costs to measure the progress towards satisfying the overall performance obligation of the marketing campaign. The Company may provide one type or a combination of all types of these influencer marketing services on a statement of work for a lump sum fee. When multiple types of performance obligations exist in a contract, the Company allocates revenue to each distinct performance obligation at contract inception based on its relative standalone selling price. These performance obligations are to be provided over a period that generally ranges from one day to one year. The delivery of custom content represents a distinct performance obligation that is satisfied at a point in time when each piece of content is delivered to the customer. Based on the Company’s evaluations, revenue from Managed Services is reported on a gross basis because the Company has the primary obligation to fulfill the performance obligations, and it creates, reviews, and controls the services. The Company takes on the risk of payment to any third-party creators, and it establishes the contract price directly with its customers based on the services requested in the statement of work.

Marketplace Spend Fees Revenue

For Marketplace Spend Fees Revenue, the self-service customers instruct creators found through the Company’s platforms to provide and/or distribute custom content for an agreed-upon transaction price. The Company’s platforms control the contracting, description of services, acceptance of, and payment for the requested content. This service is used primarily by news agencies or marketers to control the outsourcing of their content and advertising needs. The Company charges the self-service customer the transaction price plus a fee based on the contract. Revenue is recognized when the transaction is completed by the creator and accepted by the marketer or verified as posted by the system. Based on the Company’s evaluations, this revenue is reported on a net basis since the Company is acting as an agent through its platform for the third-party creator to provide the services or content directly to the self-service customer or to post approved content through one or more social media platforms.

License Fees Revenue

License Fees Revenue is generated by granting customers limited, non-exclusive, non-transferable access to the Company’s technology platforms for an agreed-upon subscription period. Customers access the platforms to manage their influencer marketing campaigns. Fees for subscription or licensing services are recognized straight-line over the term of the service.

Other Fees Revenue

Other Fees Revenue is generated when fees are charged to the Company’s platform users primarily related to monthly plan fees, inactivity fees, and early cash-out fees. Plan fees are recognized within the month they relate to, inactivity fees are recognized at a point in time when the account is deemed inactive, and early cash-out fees are recognized when a cash-out is either below certain minimum thresholds or when accelerated payout timing is requested.

The Company does not typically engage in contracts that are longer than one year. Therefore, the Company does not capitalize costs to obtain its customer contracts as these amounts generally would be recognized over a period of less than one year and are not material.

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

Advertising Costs

Advertising costs are charged to expense as they are incurred. Advertising costs for the three months ended June 30, 2023 and 2022 were approximately $0.8 million and $0.5 million, respectively. Advertising costs charged to operations for the six months ended June 30, 2023, and 2022 were approximately $1.3 million and $1.0 million, respectively. Advertising costs are included in sales and marketing expense in the accompanying consolidated statements of operations.

Income Taxes

The Company has not recorded federal income tax expense due to its history of net operating losses. Deferred income taxes are accounted for using the balance sheet approach, which requires recognition of deferred tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized. The Company incurs state franchise tax in twelve states, which is included in general and administrative expense in the consolidated statements of operations and comprehensive loss.

The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed unrecognized tax benefits, and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company’s tax years subject to examination based on the statute of limitations by the IRS is generally three years; however, the IRS may examine records and other evidence from the year the net operating loss was generated when the Company utilizes net operating loss carryforwards in future periods. The tax years subject to examination by the Canadian Revenue Agency is generally four years.

Fair Value of Financial Instruments

The Company records investments in financial instruments at fair value, which is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect certain market assumptions. There are three levels of inputs that may be used to measure fair value:

•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.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. As of June 30, 2023, the Company holds Level 1 and Level 2 financial assets; this is discussed further in Note 2 - Financial Instruments.

Stock-Based Compensation

Stock-based compensation cost related to stock options granted under the 2011 Equity Incentive Plan, as amended, (see Note 9) is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period on a straight-line basis. The Company estimates the fair value of each option award on the date of grant using a Black-Scholes option-pricing model that uses the assumptions noted in the table below. The Company uses the simplified method to estimate the expected term of employee stock options because it does not believe historical exercise data will provide a reasonable basis for estimating the expected term for the current share options granted. The simplified method assumes that employees will exercise share options evenly between the period when the share options are vested and ending on the date when the options would expire. The Company uses the closing stock price of its common stock on the date of the grant as the associated fair value of its common stock. The Company estimates the volatility of its common stock at the date of grant based on the volatility of its stock during the period. The Company uses 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. The Company has never paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future.

The Company used the following assumptions for stock options granted under the 2011 Equity Incentive Plan during the three and six months ended June 30, 2023, and 2022:

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements


	Three Months Ended June 30,		Six Months Ended June 30,
2011 Equity Incentive Plan Assumptions	2023	2022	2023	2022
Expected term	5 years	6 years	5 years	6 years
Weighted average volatility	—%	—%	75.27%	120.48%
Weighted average risk-free interest rate	2.62%	2.11%	2.55%	1.70%
Expected dividends	—	—	—	—
Weighted average expected forfeiture rate	37.00%	37.00%	37.00%	37.00%

The Company estimates forfeitures when recognizing compensation expense and adjusts the estimate 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 Company may issue shares of restricted stock or restricted stock units that vest over future periods. The value of shares is recorded as the fair value of the stock or units upon the issuance date and is expensed on a straight-line basis over the vesting period. See Note 9 for additional information related to these shares.

Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Reference Rate Reform: In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), and further issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), in January 2021 to provide optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 and ASU 2021-01 also provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions impacted by reference rate reform if certain criteria are met. Additionally, they only apply to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. ASU 2020-04 is effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. As of June 30, 2023, the Company does not have any contracts that reference LIBOR rates and this guidance has not had a material impact on its financial statements.

Credit Losses: In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 requires the use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. In May 2019, the FASB issued ASU 2019-05, which provides transition relief for entities adopting ASU 2016-13. For entities that have adopted ASU 2016-13, the amendments in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods therein. An entity may early adopt ASU No. 2019-05 in any interim period after its issuance if the entity has adopted ASU 2016-13. For all other entities, the effective date will be the same as the effective date of ASU 2016-13. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As of June 30, 2023, the Company does not have any significant amounts of loans, receivables, and debt securities with expected credit losses and this guidance has not had a material impact on its financial statements. The Company will recognize any future expected credit losses as a provision for credit losses on the income statement, as needed.

NOTE 2. FINANCIAL INSTRUMENTS

Cash, Cash Equivalents, and Marketable Securities (Available for Sale)

Per a revised investment strategy policy, the Company engaged a third party registered investment advisor and appointed a leading national bank for custody services with respect to investment securities, making an initial deposit of $60 million on April 18, 2022. Investments comply with the Company’s revised investment strategy policy, designed to preserve capital, minimize investment risks, and maximize returns.

The following table shows the Company’s cash, cash equivalents, and marketable securities by significant investment category as of June 30, 2023:

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements


	Adjusted Cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Marketable Securities (1)		Non-Current Marketable Securities (2)
Cash	$	8,953,122	$	—	$	—	$	8,953,122	$	8,953,122	$	—	$	—
Level 1 (3)
Commercial paper	22,272,325		—		(2,227)		22,270,098		22,270,098		—		—

US Treasury securities	10,011,762		—		(174,598)		9,837,164		—		4,956,517		4,880,647
Subtotal	32,284,087		—		(176,825)		32,107,262		22,270,098		4,956,517		4,880,647
Level 2 (4)
Asset backed securities	6,271,417		—		(108,263)		6,163,154		—		2,073,351		4,089,803
Corporate debt securities	18,197,588		3,390		(362,817)		17,838,161		—		7,054,373		10,783,788
Subtotal	24,469,005		3,390		(471,080)		24,001,315		—		9,127,724		14,873,591
Total	$	65,706,214	$	3,390	$	(647,905)	$	65,061,699	$	31,223,220	$	14,084,241	$	19,754,238

(1) Current Marketable Securities have a holding period under one year.

(2) Non-Current Marketable Securities have a holding period over one year. The securities held by IZEA Worldwide, Inc. mature between one and five years.

(3) Level 1 fair value estimates are based on quoted prices in active markets for identical assets and liabilities.

(4) Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets and liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities.

The Company records the fair value of cash equivalents and marketable securities on the balance sheet. The adjusted cost, which includes unrealized gains and losses, reflects settlement amounts if all investments are held to maturity. The Company recognized $104 realized gains (net of losses) for the three and six months ended June 30, 2023 and did not recognize any realized gains (net of losses) for the three and six months ended June 30, 2022. Realized gains and losses are a component of other income (expense), net. Unrealized gains and losses are a component of other comprehensive income (loss) (“OCI”).

The following table summarizes the estimated fair value of investments in marketable debt securities by stated contractual maturity dates:


	June 30, 2023		December 31, 2022
Due in 1 year or less	$	14,084,241	$	16,106,758
Due in 1 year through 5 years	19,754,238		29,296,069
Total	$	33,838,479	$	45,402,827

The following table presents fair values and net unrealized gains (losses) recorded to OCI, aggregated by investment category:


	June 30, 2023				December 31, 2022
	Fair Value		Net Unrealized Gain (Loss)		Fair Value		Net Unrealized Gain (Loss)
Cash and cash equivalents	$	31,223,220	$	(2,227)	$	24,600,960	$	(2,131)
Government bonds	9,837,164		(174,598)		11,765,597		(206,439)
Corporate debt securities	17,838,161		(359,427)		21,618,613		(417,649)
Asset backed securities	6,163,154		(108,263)		12,018,617		(154,576)
Total	$	65,061,699	$	(644,515)	$	70,003,787	$	(780,795)

During the three and six ended June 30, 2023 and 2022, the Company did not recognize any significant credit losses and had no ending allowance balance for credit losses.

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:


	June 30, 2023		December 31, 2022
Furniture and fixtures	$	29,848	$	—
Office equipment	3,843		3,843
Computer equipment	411,683		323,700
Total	445,374		327,543
Less accumulated depreciation	(210,857)		(170,769)
Property and equipment, net	$	234,517	$	156,774

Depreciation expense on property and equipment recorded in depreciation and amortization expense in the consolidated statements of operations and comprehensive loss was $27,160 and $32,595 for the three months ended June 30, 2023 and 2022, respectively, and was $45,946 and $65,528 for the six months ended June 30, 2023 and 2022, respectively.

NOTE 4. INTANGIBLE ASSETS

The identifiable intangible assets, other than Goodwill, consists of the following assets:


	June 30, 2023				December 31, 2022
	Balance		Accumulated Amortization		Balance		Accumulated Amortization		Useful Life (in years)
Content provider networks	$	160,000	$	160,000	$	160,000	$	160,000	2
Trade names	87,000		87,000		87,000		87,000		1
Developed technology	820,000		820,000		820,000		820,000		5
Self-service content customers	2,810,000		2,810,000		2,810,000		2,810,000		3
Managed content customers	2,140,000		2,140,000		2,140,000		2,140,000		3
Domains	166,469		166,469		166,469		166,469		5
Embedded non-compete provision	28,000		28,000		28,000		28,000		2
Total definite-lived intangible assets	$	6,211,469	$	6,211,469	$	6,211,469	$	6,211,469
Digital assets	64,953		—		64,953		—		Indefinite
Total intangible assets	$	6,276,422	$	6,211,469	$	6,276,422	$	6,211,469

Total identifiable intangible assets from the Company’s acquisitions and other acquired assets net of accumulated amortization thereon consists of the following:


	June 30, 2023		December 31, 2022
Ebyline Intangible Assets	$	2,370,000	$	2,370,000
ZenContent Intangible Assets	722,000		722,000
Domains	166,469		166,469
TapInfluence Intangible Assets	2,953,000		2,953,000
Digital Assets	64,953		64,953
Total	$	6,276,422	$	6,276,422
Less accumulated amortization	(6,211,469)		(6,211,469)
Intangible assets, net	$	64,953	$	64,953

There were no impairment charges associated with the Company’s identifiable intangible assets, other than digital assets mentioned below, in the three and six months ended June 30, 2023 and 2022.

No amortization expense related to intangibles was recorded in depreciation and amortization in the accompanying consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023, and 2022.

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

During the three months ended June 30, 2023 and 2022, the Company did not purchase, receive, or sell any digital assets. No impairment of the Company’s digital assets was required in the three and six months ended June 30, 2023. The Company impaired the value of its digital assets by $77,751 and $140,727 in the three and six months ended June 30, 2022 as the fair market value decreased from its carrying value. The impairment of digital assets is presented as a non-cash operating expense within general and administrative on the consolidated statements of operations and comprehensive loss. The fair market value of such digital assets held as of June 30, 2023, was $64,953.

The Company determines the fair value of its digital assets on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that has been determined to be the principal market for such assets (Level 1 inputs). The Company performs an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that the digital assets are impaired. In determining if an impairment has occurred, the Company considers the lowest market price of one unit of the digital asset quoted on the active exchange since acquiring the digital asset. If the then-current carrying value of a digital asset exceeds the fair value so determined, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying value and the price determined.

Impairment losses on digital assets are recognized within general and administrative expenses in the consolidated statements of operations and comprehensive loss in the period in which the impairment is identified. The impaired digital assets are written down to the lowest market price at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale, at which point they are presented net of any impairment losses for the same digital assets held. In determining the gain to be recognized upon sale, the Company calculates the difference between the sales price and carrying value of the digital assets sold immediately prior to sale.

The Company’s goodwill balance has not changed for the periods presented in this Quarterly Report on Form 10-Q. The Company’s goodwill balance as of June 30, 2023 was $4,016,722.

The Company performs an annual impairment assessment of goodwill in October each year, or more frequently, if certain indicators are present. As of June 30, 2023, the Company determined that no goodwill impairment existed.

NOTE 5. SOFTWARE DEVELOPMENT COSTS

Software development costs consists of the following:


	June 30, 2023		December 31, 2022
Software development costs	$	4,947,681	$	4,509,804
Less accumulated amortization	(3,146,519)		(2,735,771)
Software development costs, net	$	1,801,162	$	1,774,033

The Company developed its web-based influencer marketing platform, IZEAx, to enable influencer marketing and content creation campaigns on a greater scale. In 2022, the Company developed two new web-based influencer marketing platforms, Flex and Marketplace. These new platforms will replace IZEAx and Shake. IZEAx will be sunset in the third quarter of 2023 and Shake was sunset in the fourth quarter of 2022. The Company capitalized software development costs of $281,009 and $437,877 during the three and six months ended June 30, 2023. The Company capitalized software development costs of $177,943 and $277,369 during the three and six months ended June 30, 2022, respectively. As a result, the Company has capitalized a total of $4,947,681 in direct materials, consulting, payroll, and benefit costs to its internal-use software development costs in the consolidated balance sheet as of June 30, 2023.

The Company amortizes its software development costs, commencing upon initial release of the software or additional features, on a straight-line basis over the estimated useful life of five years, which is consistent with the amount of time its legacy platforms were in service, or its actual useful life, if shorter. The Company recorded amortization expense associated with its capitalized software development cost of $83,272 and $105,897 during the three months ended June 30, 2023, and 2022, respectively. The Company recorded amortization expense associated with its capitalized software development cost of $410,748 and $211,793 during the six months ended June 30, 2023, and 2022, respectively.

As of June 30, 2023, future estimated amortization expense related to software development costs is set forth in the following schedule:

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements


	Software Development Amortization Expense
2023	$	179,000
2024	405,899
2025	390,704
2026	384,955
2027	350,920
2028	89,684
Total	$	1,801,162

NOTE 6. ACCRUED EXPENSES

Accrued expenses consist of the following:


	June 30, 2023		December 31, 2022
Accrued payroll liabilities	$	1,976,080	$	1,967,677
Accrued taxes	36,717		39,405
Current portion of finance obligation	69,806		42,858
Accrued other	118,128		80,762
Total accrued expenses	$	2,200,731	$	2,130,702

NOTE 7. NOTES PAYABLE

Finance Obligation

The Company pays for its laptop computer equipment through long-term payment plans, using an imputed interest rate of 12.9%, based on its incremental borrowing rate, to determine the present value of its financial obligation and to record interest expense over the term of the plan. The Company refreshed a portion of its computer inventory during the fourth quarter of 2022 and in the first quarter of 2023, entering into two new three-year payment plans with the same vendor. The total balance owed was $162,918 and $105,031 as of June 30, 2023, and December 31, 2022, respectively, with the short-term portion of $69,806 and $42,858 recorded under accrued expenses in the consolidated balance sheets as of June 30, 2023, and December 31, 2022, respectively.

Summary

Interest expense on financing arrangements recorded in the Company’s unaudited consolidated statements of operations was $3,103 and $1,780 during the six months ended June 30, 2023, and 2022, respectively. As of June 30, 2023, the future contractual maturities of the Company’s long-term payment obligations by year is set forth in the following schedule:


2023	$	40,113
2024	59,386
2025	56,683
2026	6,736
Total	$	162,918

NOTE 8. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company has no operating or finance leases greater than 12 months in duration, or any leasehold rent or operating lease expenses as of June 30, 2023.

Retirement Plans

The Company offers a 401(k) plan to all of its eligible employees. The Company matches participant contributions in an amount equal to 50% of each participant’s contribution up to 8% of the participant’s salary. The participants become vested in

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

20% annual increments after two years of service, or fully vest upon the age of 60. Total expense for employer matching contributions during the three and six months ended June 30, 2023, and 2022 was recorded in the Company’s consolidated statements of operations as follows:


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Cost of revenue	$	19,643	$	15,894	$	44,276	$	44,967
Sales and marketing	17,799		29,749		33,416		73,481
General and administrative	41,875		28,855		77,827		73,617
Total contribution expense	$	79,317	$	74,498	$	155,519	$	192,065

Litigation

From time to time, the Company may become involved in various other lawsuits and legal proceedings that arise in the ordinary course of its business. Litigation is, however, subject to inherent uncertainties, and an adverse result in any such litigation that may arise from time to time that may harm the Company’s business. The Company is currently not aware of any legal proceedings or claims that it believes would or could have, individually or in the aggregate, a material adverse effect on the Company. Regardless of the outcome, 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.

NOTE 9. STOCKHOLDERS’ EQUITY

Reverse Stock Split

In June 2023, the number of authorized shares and shares of common stock held by each stockholder of the Company were consolidated automatically into the number of shares of common stock equal to the number of issued and outstanding shares of common stock held by each such stockholder immediately prior to the reverse split divided by four (4): effecting a four (4) old for one (1) new reverse stock split. Any fractional shares resulting from the reverse stock split were rounded up to the nearest whole share, resulting in 23,789 additional shares being issued. No shares of preferred stock were outstanding at the time of the reverse stock split.

Additionally, all options and unvested restricted share grants of the Company outstanding immediately prior to the reverse split were adjusted by dividing the number of shares of common stock into which the options are exercisable by four (4) and multiplying the exercise price by four (4), in accordance with the terms of the plans and agreements governing such options and subject to rounding up to the nearest whole share.

All shares of common stock, stock options, restricted stock and restricted stock unit grants, and their corresponding price per share amounts have been presented to reflect the reverse split in all periods presented within this Quarterly Report on Form 10-Q.

Authorized Shares

The Company has 50,000,000 authorized shares of common stock and 2,500,000 authorized shares of preferred stock, each with a par value of $0.0001 per share.

Share Repurchase

On March 30, 2023, the Company announced that its Board of Directors had authorized a $1 million share repurchase program of the company’s common stock. IZEA may repurchase shares of common stock from time to time through open market purchases, in privately negotiated transactions, or by other means including through the use of trading plans intended to qualify under Rule 10b-18 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase program has a term of eighteen (18) months and may be suspended or discontinued at any time and does not obligate the company to acquire any amount of common stock.

As of June 30, 2023, the Company has repurchased $705,403 of its common stock out of the $1.0 million authorization. 245,283 shares of the Company’s common stock have been repurchased on the open market with an average price per share of $2.88. The number of shares purchased prior to June 16, 2023, have been adjusted for the reverse stock split. Repurchased shares have the status of treasury shares and may be used, if and when needed, for general corporate purposes.

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

Equity Incentive Plan

In May 2011, the Company’s Board of Directors (the “Board”) adopted the 2011 Equity Incentive Plan of IZEA Worldwide, Inc. (as amended, the “2011 Equity Incentive Plan”). The Company’s stockholders approved an amendment and restatement of the 2011 Equity Incentive Plan at the Company’s 2020 Annual Meeting of Stockholders held on December 18, 2020, to allow the Company to award restricted stock, restricted stock units, and stock options covering up to 1,875,000 shares of common stock as incentive compensation for its employees and consultants. As of June 30, 2023, the Company had 381,966 remaining shares of common stock available for issuance pursuant to future grants under the 2011 Equity Incentive Plan.

Restricted Stock

Under the 2011 Plan, the Board determines the terms and conditions of each restricted stock issuance, including any future vesting restrictions.

In 2022, the Company issued its five independent directors a total of 26,483 shares of restricted common stock initially valued at $125,000 for their annual service as directors of the Company. The stock vested in equal monthly installments from January through December 2022.

In the three and six months ended June 30, 2023, the Company issued its five independent directors a total of 30,990 and 59,800 shares of restricted common stock valued at $150,009 for their service as directors of the Company. Approximately $75,000 worth of shares are granted on the last day of each quarter and vest immediately.

The following table contains summarized information about restricted stock issued during the year ended December 31, 2022 and six months ended June 30, 2023:


Restricted Stock	Common Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Years to Vest
Nonvested at December 31, 2021	888	$	7.31	0.7
Granted	26,483	4.72
Vested	(27,299)	4.80
Nonvested at December 31, 2022	72	$	5.36	0.3
Granted	59,800	2.51
Vested	(59,872)	2.51
Nonvested at June 30, 2023	—	$	—	0

Although restricted stock is issued upon the grant of an award, the Company excludes restricted stock from the computations within the financial statements of total shares outstanding and basic earnings per share until such time as the restricted stock vests.

Expense recognized on restricted stock issued to directors for services was $75,009 and $31,259 during the three months ended June 30, 2023, and 2022, respectively, and $150,009 and $62,482 for the six months ended June 30, 2023, and 2022, respectively. Expense recognized on restricted stock issued to employees was $0 and $1,526 during the three months ended June 30, 2023, and 2022, respectively, and $376 and $5,355 for the six months ended June 30, 2023, and 2022, respectively.

On June 30, 2023, the fair value of the Company’s common stock was approximately $2.42 per share and the intrinsic value on the non-vested restricted stock was $0. Future compensation expense related to issued, but non-vested, restricted stock awards as of June 30, 2023, is $0.

Restricted Stock Units

The Company’s Board of Directors determine the terms and conditions of each restricted stock unit award issued under the 2011 Equity Incentive Plan.

During the six months ended June 30, 2023, the Company issued a total of 256,649 restricted stock units initially valued at $689,698 to non-executive employees as additional incentive compensation. The restricted stock units vest between 12 and 36 months from issuance. During the six months ended June 30, 2023, the Company issued a total of 46,254 restricted stock units initially valued at $114,197 to executive employees as additional incentive compensation. The restricted stock units have varying vesting schedules ranging from one to four years, depending on the executive’s employment contract. A small subset of the restricted stock units have 100% cliff vesting one year from issuance.

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

The following table contains summarized information about restricted stock units during the year ended December 31, 2022 and the three months ended June 30, 2023:


Restricted Stock Units	Common Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Years to Vest
Nonvested at December 31, 2021	93,994	$	3.83	1.8
Granted	344,108	3.87
Vested	(63,269)	3.52
Forfeited	(45,763)	4.87
Nonvested at December 31, 2022	329,070	$	3.79	2.5
Granted	302,903	2.65
Vested	(67,657)	3.86
Forfeited	(43,871)	3.42
Nonvested at June 30, 2023	520,445	$	3.15	2.4

Expense recognized on restricted stock units issued to employees was $151,733 and $81,450 during the three months ended June 30, 2023, and 2022, respectively. Expense recognized on restricted stock units issued to employees was $281,299 and $124,074 during the six months ended June 30, 2023, and 2022, respectively. On June 30, 2023, the fair value of the Company’s common stock was approximately $2.42 per share and the intrinsic value on the non-vested restricted units was $1,259,477. Future compensation related to the non-vested restricted stock units as of June 30, 2023, is $1,467,566 and it is estimated to be recognized over the weighted-average vesting period of approximately 2.4 years.

Stock Options

Under the 2011 Equity Incentive Plan, the Board determines the exercise price to be paid for the stock option shares, the period within which each stock option may be exercised, and the terms and conditions of each stock option. The exercise price of incentive and non-qualified stock options may not be less than 100% of the fair market value per share of the Company’s common stock on the grant date. If an individual owns stock representing more than 10% of the outstanding shares, the exercise price of each share of an incentive stock option must be equal to or exceed 110% of fair market value. Unless otherwise determined by the Board at the time of grant, the exercise price is set at the fair market value of the Company’s common stock on the grant date (or the last trading day prior to the grant date, if it is awarded on a non-trading day). Additionally, the term is set at ten years and the option typically vests on a straight-line basis over the requisite service period as follows: 25% one year from the date of grant with the remaining vesting monthly in equal increments over the following three years. The Company issues new shares for any stock awards or options exercised under its 2011 Equity Incentive Plan.

On January 28, 2022, in connection with a shift in employee compensation strategy toward restricted stock units, the Compensation Committee of the Board of Directors amended the employment agreement for each of Edward Murphy, Ryan Schram, and Peter Biere to provide for grants of restricted stock units instead of stock options. The Company intends to issue restricted stock units rather than stock options for equity compensation purposes going forward.

A summary of option activity under the 2011 Equity Incentive Plan during the years ended December 31, 2022, and June 30, 2023, is presented below:

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements


Options Outstanding	Common Shares	Weighted Average Exercise Price		Weighted Average Remaining Life (Years)
Outstanding at December 31, 2021	448,204	$	11.13	6.4
Granted	32	4.60
Exercised	(17,772)	1.01
Expired	(9,349)	21.49
Forfeited	(5,553)	13.12
Outstanding at December 31, 2022	415,562	$	11.31	5.3
Granted	—	—
Exercised	—	—
Expired	(15,277)	20.10
Forfeited	(129)	9.11
Outstanding at June 30, 2023	400,156	$	10.97	5.0

Exercisable at June 30, 2023	357,205	$	11.31	4.6

During the six months ended June 30, 2023, no options were exercised. During the six months ended June 30, 2022, 6,834 options were exercised for gross proceeds of $10,528. The intrinsic value of the exercised options was $28,335. The fair value of the Company's common stock on June 30, 2023, was approximately $2.42 per share, and the intrinsic value on outstanding options as of June 30, 2023, was $79,688. The intrinsic value of the exercisable options as of June 30, 2023, was $77,406.

There were outstanding options to purchase 400,156 shares with a weighted average exercise price of $10.97 per share, of which options to purchase 357,205 shares were exercisable with a weighted average exercise price of $11.31 per share as of June 30, 2023.

Expense recognized on stock options issued to employees during the six months ended June 30, 2023, and 2022 was $119,124 and $139,959, respectively, and $54,780 and $71,302 for the three months ended June 30, 2023, and 2022, respectively. Future compensation related to non-vested awards as of June 30, 2023, is $280,120, and it is estimated to be recognized over the weighted-average vesting period of approximately 1.7 years.

The following table shows the number of stock options granted under the Company’s 2011 Equity Incentive Plan and the assumptions used to determine the fair value of those options using a Black-Scholes option-pricing model during the six months ended June 30, 2022; no stock options have been granted in 2023:


Period Ended	Total Options Granted	Weighted Average Exercise Price		Weighted Average Expected Term	Weighted Average Volatility	Weighted Average Risk-Free Interest Rate	Expected Dividends	Weighted Average Grant Date Fair Value		Weighted Average Expected Forfeiture Rate
June 30, 2022	32	$	4.60	6.0 years	—%	2.11%	—	$	1.00	37.00%

Employee Stock Purchase Plan

The amended and restated IZEA Worldwide, Inc. 2014 Employee Stock Purchase Plan (the “ESPP”) provides for the issuance of up to 125,000 shares of common stock to employees regularly employed by the Company for 90 days or more on a full-time or part-time basis (20 hours or more per week on a regular schedule). The ESPP operates in successive six-month periods commencing at the beginning of each fiscal year half. Each eligible employee who elects to participate may purchase up to 10% of their annual compensation in common stock not to exceed $21,250 annually or 2,000 shares per offering period. The purchase price will be the lower of (i) 85% of the fair market value of a share of common stock on the first day of the offering period or (ii) 85% of the fair market value of a share of common stock on the last day of the offering period. The ESPP will continue until January 1, 2024, unless otherwise terminated by the Board of Directors.

The stock compensation expense on ESPP Options was $1,361 and $2,429 for the three months ended June 30, 2023, and 2022, respectively, and $2,599 and $4,511 for the six months ended June 30, 2023, and 2022, respectively. As of June 30, 2023, there was 86,439 remaining shares of common stock available for future issuances under the ESPP.

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

Summary of Stock-Based Compensation

The stock-based compensation cost related to all awards granted to employees 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 utilizing the weighted-average forfeiture rates as disclosed in Note 1. Total stock-based compensation expense recognized on restricted stock, restricted stock units, stock options, and employee stock purchase plan issuances during the three and six months ended June 30, 2023, and 2022 was recorded in the Company’s unaudited consolidated statements of operations as follows:


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Cost of revenue	$	18,085	$	10,544	$	35,255	$	17,649
Sales and marketing	29,743		14,853		47,591		24,712
General and administrative	160,049		131,309		320,553		231,537
Total stock-based compensation	$	207,877	$	156,706	$	403,399	$	273,898

NOTE 10. LOSS PER COMMON SHARE

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 unvested restricted stock from the computations of the weighted-average number of shares of common stock outstanding. Diluted loss per share is computed by dividing the net income or loss by the sum of the total of the basic weighted-average number of shares of common stock outstanding plus the additional dilutive securities that could be exercised or converted into common shares during each period presented less the amount of shares that could be repurchased using the proceeds from the exercises.


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net loss	$	(1,033,426)	$	(169,890)	$	(3,839,765)	$	(2,646,133)
Weighted average shares outstanding - basic and diluted	15,520,700		15,551,617		15,551,785		15,539,663
Basic and diluted loss per common share	$	(0.07)	$	(0.01)	$	(0.25)	$	(0.17)

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:


	Three Months Ended		Six Months Ended
	June 30, 2023	June 30, 2022	June 30, 2023	June 30, 2022
Stock options	400,188	433,001	416,195	439,594
Restricted stock units	426,467	157,055	397,303	135,431
Restricted stock	—	17,966	24	17,075
Total excluded shares	826,655	608,022	813,522	592,100

NOTE 11. REVENUE

The Company has consistently applied its accounting policies with respect to revenue to all periods presented in the consolidated financial statements contained herein. The following table illustrates the Company’s revenue by product service type:

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Managed Services Revenue	$	10,618,381	$	12,176,616	$	19,121,135	$	20,549,072


Marketplace Spend Fees	1,314		52,124		37,788		106,224
License Fees	59,225		335,928		249,607		710,369
Other Fees	10,139		12,343		18,251		101,682
SaaS Services Revenue	70,678		400,395		305,646		918,275

Total Revenue	$	10,689,059	$	12,577,011	$	19,426,781	$	21,467,347

Managed Services revenue is comprised of two types of revenue, Sponsored Social and Content. Sponsored Social revenue, which totaled $10.0 million and $18.2 million for the three and six months ended June 30, 2023, is recognized over time. Content revenue, which totaled $0.6 and $0.9 million during the three and six months ended June 30, 2023, is recognized at a point in time.

The following table illustrates revenues as determined by the country of domicile:


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
United States	$	10,035,693	$	12,384,786	$	18,171,826	$	21,254,424
Canada	653,366		192,225		1,254,955		212,923
Total	$	10,689,059	$	12,577,011	$	19,426,781	$	21,467,347

Contract Balances

The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers reported in the Company’s consolidated balance sheet:


	June 30, 2023		December 31, 2022
Accounts receivable, net	$	6,317,873	$	5,664,727
Contract liabilities (unearned revenue)	8,257,166		11,247,746

The Company does not typically engage in contracts that are longer than one year. Therefore, the Company will recognize substantially all of the contract liabilities recorded at the end of the year in the following year. As of December 31, 2022 the contract liability balance was $11,247,746; of that balance, $8.5 million was carried to revenue during the first two quarters of 2023. The majority of the carryover from the prior year is related to one large prepaid customer account and a few smaller accounts that needed to be extend the campaign completion dates. The Company expects to recognize the associated revenue in 2023. The accounts receivable balance as of December 31, 2022 was $5,664,727. $0.1 million of the outstanding receivables balance from the prior year is still outstanding as of June 30, 2023. The past due portion of the carryforward receivables balance is fully reserved as of June 30, 2023.

Accounts receivable are recognized when the receipt of consideration is unconditional. Contract liabilities relate to the consideration received from customers before the completion of performance obligations under the terms of the contracts, which will be earned in future periods. Contract liabilities increase due to receiving new advance payments from customers and decrease as revenue is recognized upon the Company completing the performance obligations. As a practical expedient, the Company expenses the costs of sales commissions that are paid to its sales force associated with obtaining contracts less than one year in length in the period incurred.

IZEA Worldwide, Inc.

Notes to the Consolidated Financial Statements

NOTE 12. SUBSEQUENT EVENTS

To ensure that the consolidated financial statements include all necessary disclosures, the Company evaluated all subsequent events up to August 14, 2023. The Company determined that no subsequent events occurred that require disclosure, both for events that have been recognized in the consolidated financial statements and for those that have not.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this report, including those contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and the notes to our consolidated financial statements, particularly those that utilize terminology such as “may,” “will,” “would,” “can,” “could,” “continue,” “design,” “should,” “expects,” “aims,” “anticipates,” “estimates,” “believes,” “thinks,” “intends,” “likely,” “projects,” “plans,” “pursue,” “strategy” or “future,” “forecasts,” “goal,” or the negative of these words or other words or expressions of similar meaning, are forward-looking statements. Such statements are based on currently available operating, financial and competitive information, and are subject to inherent risks, uncertainties, and changes in circumstances that are difficult to predict and many of which are outside of our control. Future events and our actual results and financial condition may differ materially from those reflected in these forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause these differences include, but are not limited to, the following:

•adverse economic or market conditions may harm our business;

•the impact of the Ukraine crisis and ramifications of sanctions against Russia;

•customer cancellations;

•any erroneous or inaccurate estimates or judgments relating to our critical accounting policies;

•our ability to raise the additional funding needed to fund our business operation in the future;

•our ability to satisfy the requirements for continued listing of our common stock on the Nasdaq Capital Market;

•our ability to remediate the material weakness in our internal control over financial reporting and establish effective disclosure controls and procedures;

•our ability to protect our intellectual property and other proprietary rights;

•our ability to maintain and grow our business;

•results of any future litigation and costs incurred in connection with any such litigation;

•competition in the industry;

•variability of operating results;

•our ability to maintain and enhance our brand;

•accuracy of tracking the number of user accounts;

•any security breaches or other disruptions compromising our proprietary information and exposing us to liability;

•our development and introduction of new products and services;

•our reliance on, and compliance with, open-source software;

•the successful integration of acquired companies, technologies, and assets into our portfolio of software and services;

•marketing and other business development initiatives;

•general government regulation;

•our dependence on key personnel;

•our ability to attract, hire, and retain personnel who possess the technical skills and experience necessary to meet the service requirements of our customers;

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•the potential liability concerning actions taken by our existing and past employees;

•any losses or issues we may encounter as a consequence of accepting or holding digital assets;

•risks associated with doing business internationally; and

•the other risks and uncertainties described in the Risk Factors section of our Annual Report for the year ended December 31, 2022, as amended, and filed with the SEC on March 31, 2023.

All forward-looking statements in this document are based on current expectations, intentions, and beliefs using information available to us as of the date of this Quarterly Report; 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.

Company Overview

IZEA Worldwide, Inc. (“IZEA”, “Company,” “we”, “us” or “our”) creates and operates online marketplaces that connect marketers, including brands, agencies, and publishers, with content creators such as Instagram influencers, TikTok influencers, YouTube stars, designers, photographers, and writers (“creators”). Our technology brings the marketers and creators together, enabling their transactions to be completed at scale by managing custom content workflow, creator search and targeting, bidding, analytics, and payment processing.

We help power the growing Creator Economy, allowing everyone from college students and stay-at-home individuals to celebrities and accredited journalists the opportunity to monetize their content, creativity, and influence through our marketers. IZEA compensates these creators for producing unique content such as long and short-form text, videos, photos, status updates, and illustrations for marketers or distributing such content on behalf of marketers through their websites, blogs, and social media channels.

We provide value through managing custom content workflow, creator search and targeting, bidding, analytics, and payment processing. While the majority of the marketers engage us to perform these services on their behalf, they may also use our marketplaces to engage creators for influencer marketing campaigns or to produce custom content on a self-service basis by licensing our technology.

Our newest technology platform, IZEA Flex (“Flex”), introduces end-to-end tracking of social commerce, allowing marketers to easily measure the impact of individual influencers on e-commerce revenue at scale, and integrates key functions of The Creator Marketplace (“Marketplace”) on IZEA.com. Modules in Flex include Discover, which allows marketers to search through content from millions of influencer social profiles while filtering across channels, demographics, and interests; ContentMine, a content management tool that collects and measures influencer content, provides real-time insights and A.I. content analysis from BrandGraph; ShareMonitor, a multi-platform social monitoring tool that allows marketers to monitor hashtags, keywords and brand mentions across leading social platforms; Integrations provides deep integrations such as with Google Analytics and Shopify, providing marketers the capability to track influencer campaign metrics such as time on site, engagement and revenue; and Tracking Links provides real-time tracking metrics for influencer marketing and can track customer conversions, spend, and purchases when used with other Flex modules.

In 2022, we also launched Marketplace on IZEA.com, which provides powerful tools for creators to showcase their social handles and the brands and topics they post about, and marketers to easily search and filter creator listings that meet the requirements of their influencer marketing campaigns, including creator-specific predictive audience demographics. Marketplace features include Casting Calls which gives marketers and creators a two-way marketplace to connect and collaborate; marketers use Casting Calls to solicit creators for everything from influencing campaigns to full-time employment; creators respond directly to Casting Calls with video and text responses.

BrandGraph is a social media intelligence platform offering marketers an analysis of share-of-voice, engagement benchmarking, category spending estimates, influencer identification, and sentiment analysis. The BrandGraph platform maps and classifies the complex hierarchy of corporation-to-brand relationships by category and associates social content with brands through a proprietary content analysis engine.

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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 generate revenue from four 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 platforms (“Marketplace Spend Fees”); (3) revenue from license and subscription fees charged to access our platforms (“License Fees”); and (4) revenue derived from other fees such as inactivity fees, early cash-out fees, and other miscellaneous fees charged to users of our platforms (“Other Fees”).

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 are 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 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 for 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 responsible for supporting our customers and ultimately fulfilling our obligations under our contracts with customers.

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 relations events, trade shows, and marketing materials, and travel expenses.

General and Administrative

Our general and administrative (“G&A”) 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, investor relations expenses, accounting, legal professional services fees, leasehold facilities, and other corporate-related expenses. G&A 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 is 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 and comprehensive loss. G&A expense also includes current period gains and losses on our acquisition costs payable and 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 and comprehensive loss 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 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 primarily related to the payment plans for the purchase of computer equipment.

Other Income. Other income consists primarily of interest income for interest earned on investments, 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.

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Results of Operations for the Three Months Ended June 30, 2023 and 2022

The following table sets forth a summary of our consolidated statements of operations and the change between the periods:



	Three Months Ended June 30,
	2023		2022		$ Change		% Change
Revenue	$	10,689,059	$	12,577,011	$	(1,887,952)	(15)	%

Costs and expenses:
Cost of revenue	6,254,517		7,211,922		(957,405)		(13)	%
Sales and marketing	2,831,949		2,289,769		542,180		24	%
General and administrative	3,167,941		3,378,988		(211,047)		(6)	%
Depreciation and amortization	110,432		138,492		(28,060)		(20)	%
Total costs and expenses	12,364,839		13,019,171		(654,332)		(5)	%
Loss from operations	(1,675,780)		(442,160)		(1,233,620)		279	%
Other income (expense):
Interest expense	(3,155)		(815)		(2,340)		287	%
Other income (expense), net	645,509		273,085		372,424		136	%
Total other income (expense), net	642,354		272,270		370,084		136	%
Net Loss	$	(1,033,426)	$	(169,890)	$	(863,536)	508	%

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,
	2023				2022				$ Change		% Change
Managed Services Revenue	$	10,618,381	99	%	$	12,176,616	97	%	$	(1,558,235)	(13)	%

Marketplace Spend Fees	1,314		—	%	52,124		—	%	(50,810)		(97)	%
License Fees	59,225		1	%	335,928		3	%	(276,703)		(82)	%
Other Fees	10,139		—	%	12,343		—	%	(2,204)		(18)	%
SaaS Services Revenue	70,678		1	%	400,395		3	%	(329,717)		(82)	%

Total Revenue	$	10,689,059	100	%	$	12,577,011	100	%	$	(1,887,952)	(15)	%

Managed Services revenue during the three months ended June 30, 2023, decreased 13% from the same period in 2022. Approximately $3.3 million of the quarter’s Managed Services revenue comes from one large customer (the “non-recurring customer”), 37% lower than the revenue received from such customer in the same period in 2022. In January 2023, we announced that we are parting ways with this customer as soon as our related contract backlog is completed during 2023. Managed Services revenue from our ongoing customer base (our “core customers”) totaled approximately $7.2 million in the current period, or 6% higher than the same period in 2022, primarily due to stronger bookings from these core customers in recent quarters.

SaaS Services revenue, which includes license and support fees to access the platform services, and fees earned on the marketers’ self-service use of our technology platforms to manage their content workflow and influencer marketing campaigns declined 82% from the same period in 2022 due to:

•Marketplace Spend Fees decreased by $0.1 million for the three months ended June 30, 2023, compared to the same period in 2022, due to lower overall spending levels from our marketers and to a gradual winding down of IZEAx. Revenue from Marketplace Spend Fees represents our net margins received on this business.

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•License Fees revenue decreased by $0.3 million for the three months ended June 30, 2023, when compared to the same period of 2022. The decrease in license fees is due to lower licensee counts and lower average revenue per licensee. The decline in both licensee counts and revenues is heavily related to sunsetting our legacy IZEAx and BrandGraph platforms while we transition to Flex, which was partially released in January 2023.

•Other Fees revenue consists of other fees, such as inactivity fees, early cash-out fees, and subscription plan fees charged to users of our platforms. Other Fees revenue decreased 18% for the three months ended June 30, 2023 compared to the same period in 2022, due primarily to fewer creators requesting early cash-outs offset by higher plan fees.

Cost of Revenue

Cost of revenue for the three months ended June 30, 2023 decreased by $1.0 million, or approximately 13%, compared to the same period in 2022, primarily due to lower contract deliveries related to our non-recurring customer. Cost of revenue as a percentage of revenue increased from 57% in 2022 to 59% in 2023, partly due to higher comparative cost deliveries for our non-recurring customer.

Sales and Marketing

Sales and marketing expense for the three months ended June 30, 2023 increased by $0.5 million, or approximately 24%, compared to the same period in 2022, due to increased spend on tradeshows and advertising to drive demand for managed services, and contractor expense to develop sales in new global markets.

General and Administrative

General and administrative expense for the three months ended June 30, 2023 decreased by $0.2 million, or approximately 6%, compared to the same period in 2022, primarily due to lower overall compensation costs, partly offset by an increase in web hosting fees and professional fees.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended June 30, 2023 decreased by $28.1 thousand, or approximately 20%, compared to the same period in 2022.

Depreciation expense on property and equipment was $27.2 thousand and $32.6 thousand for the three months ended June 30, 2023 and 2022, respectively. Depreciation expense decreased due to the disposal of aging equipment in 2022 offset partially by the purchase of new equipment in the fourth quarter of 2022 and first quarter of 2023.

Amortization expense related to internal use software development was $83.3 thousand and $105.9 thousand for the three months ended June 30, 2023 and 2022, respectively. There was no amortization expense related to intangible assets acquired in the Ebyline, ZenContent, and TapInfluence acquisitions recognized for the three months ended June 30, 2023 and 2022, respectively. The intangible assets acquired in acquisitions were fully amortized as of July 31, 2021.

Other Income (Expense)

Interest expense increased by $2.3 thousand to $3.2 thousand during the three months ended June 30, 2023 compared to the same period in 2022 due primarily to interest incurred on our financed computers.

Other income, net totaled $0.6 million for the three months ended June 30, 2023, primarily from investment portfolio interest income, which was funded in the second quarter of 2022. Other income, net totaled of $0.3 million for the three months ended June 30, 2022, primarily due to interest income earned.

Net Loss

Net loss for the three months ended June 30, 2023 was $1.0 million, a $0.9 million increase compared to the net loss of $0.2 million for the same period in 2022. The increase in net loss was a result of the changes discussed above.

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Results of Operations for the Six Months Ended June 30, 2023 and 2022

The following table sets forth a summary of our consolidated statements of operations and the change between the periods:



	Six Months Ended June 30,
	2023		2022		$ Change		% Change
Revenue	$	19,426,781	$	21,467,347	$	(2,040,566)	(10)	%

Costs and expenses:
Cost of revenue	12,214,679		12,391,646		(176,967)		(1)	%
Sales and marketing	5,236,500		4,810,112		426,388		9	%
General and administrative	6,571,549		6,881,423		(309,874)		(5)	%
Depreciation and amortization	456,694		277,321		179,373		65	%
Total costs and expenses	24,479,422		24,360,502		118,920		—	%
Loss from operations	(5,052,641)		(2,893,155)		(2,159,486)		75	%
Other income (expense):
Interest expense	(4,719)		(1,780)		(2,939)		165	%
Other income (expense), net	1,217,595		248,802		968,793		389	%
Total other income (expense), net	1,212,876		247,022		965,854		391	%
Net Loss	$	(3,839,765)	$	(2,646,133)	$	(1,193,632)	45	%

Revenue

The following table illustrates our revenue by type, the percentage of total revenue by type, and the change between the periods:



	Six Months Ended June 30,
	2023				2022				$ Change		% Change
Managed Services Revenue	$	19,121,135	98	%	$	20,549,072	96	%	$	(1,427,937)	(7)	%

Marketplace Spend Fees	37,788		1	%	106,224		—	%	(68,436)		(64)	%
License Fees	249,607		1	%	710,369		3	%	(460,762)		(65)	%
Other Fees	18,251		—	%	101,682		—	%	(83,431)		(82)	%
SaaS Services Revenue	305,646		2	%	918,275		4	%	(612,629)		(67)	%

Total Revenue	$	19,426,781	100	%	$	21,467,347	100	%	$	(2,040,566)	(10)	%

Managed Services revenue during the six months ended June 30, 2023 decreased 7% from the same period in 2022, primarily due to a decline in revenue from one large customer contract, which comprised of one-third of managed services revenue. All performance obligations related to the large customer contract will be complete in 2023. Managed Services revenue for our core customer group increased due to growth in orders from new and existing customers expanding their marketing efforts as compared to the prior year.

•Marketplace Spend Fees decreased by approximately $0.1 million for the six months ended June 30, 2023, when compared with the same period in 2022, 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. Revenue from Marketplace Spend Fees represents our net margins received on this business.

•License Fees revenue decreased by approximately $0.5 million for the six months ended June 30, 2023, when compared to the same period of 2022. The decrease in license fees is due to lower licensee counts and lower average

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revenue per licensee. The decline in both licensee counts and revenues is heavily related to the gradual sunsetting our legacy IZEAx and BrandGraph platforms before we transition to Flex, which was completed for customer use in the second quarter of 2023.

•Other Fees revenue decreased by approximately $0.1 million for the six months ended June 30, 2023, compared to the same period in 2022, due to a customer deposit forfeiture. Nonrefundable deposits are collected from certain customers due to defined minimum spend per the contract or prepayment required for identified credit issues. Customers do not typically forfeit deposits held on account.

Cost of Revenue

Cost of revenue for the six months ended June 30, 2023 was relatively flat when compared to the same period in 2022 primarily due to the decrease in Managed Services revenue. Cost of revenue as a percentage of revenue increased from 58% in 2022 to 63% in 2023, due primarily to several large contracts in the current period that carry a lower average margin.

Sales and Marketing

Sales and marketing expense for the six months ended June 30, 2023 increased by $0.4 million, or approximately 9%, compared to the same period in 2022. Advertising and marketing expense, increased over the prior year, with continued efforts promoting brand awareness, and improving customer acquisition, satisfaction, and retention.

General and Administrative

General and administrative expense for the six months ended June 30, 2023 decreased by $0.3 million, or approximately 5%, compared to the same period in 2022. The increase in general and administrative expense was primarily due to $0.2 million higher spend on professional services related to accounting services and $0.1 million higher spend on software, licenses, and web hosting services. Contractor costs decreased by $0.6 million due to the capitalization of software development hours and the reduction of engineers used to supplement our team developing our technology offerings.

Depreciation and Amortization

Depreciation and amortization expense for the six months ended June 30, 2023 increased by $0.2 million, or approximately 65%, compared to the same period in 2022.

Depreciation expense on property and equipment was approximately $0.1 million for the six months ended June 30, 2023, and 2022. Depreciation expense decreased due to the disposal of aging equipment in 2022.

Amortization expense was approximately $0.4 million and $0.2 million for the six months ended June 30, 2023, and 2022, respectively. Amortization expense related to intangible assets acquired in the Ebyline, ZenContent, and TapInfluence acquisitions was $0 for the six months ended June 30, 2023, and 2022. Amortization on our intangible acquisition assets was fully amortized in 2021. Amortization expense related to internal-use software development costs was $0.4 million and $0.2 million for the six months ended June 30, 2023, and 2022, respectively. Amortization on our internal software costs is increasing due to the development of Flex and Marketplace in 2022. Significant development on Flex will continue through the third quarter of 2023.

Other Income (Expense)

Interest expense totaled $4.7 thousand during the six months ended June 30, 2023. Interest expense totaled $1.8 thousand during the six months ended June 30, 2022. Interest expense was incurred on our computer purchase financing arrangements.

Other income, net totaled $1.2 million in investment portfolio interest income for the six months ended June 30, 2023, compared to $0.2 million in the prior year period. Our investment portfolio was added in the second quarter of 2022.

Net Loss from Operations

Net loss for the six months ended June 30, 2023 was $3.8 million, a $1.2 million increase to the net loss of $2.6 million for the same period in 2022. The increase in net loss was the result of the changes discussed above. Net loss from operations increased $2.2 million over the prior year.

Key Metrics

We review the information provided by our key financial metrics, Managed Services Bookings and gross billings, to assess the progress of our business and make decisions on where to allocate our resources. As our business evolves, we may change the key financial metrics in future periods.

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Managed Services Bookings

Managed Services Bookings is a measure of all sales orders received during a time period less any cancellations received, or refunds given during the same time period. Sales order contracts vary in complexity with each customer and range from custom content delivery to integrated marketing services; our contracts generally run from several months for smaller contracts up to twelve months for larger contracts. We recognize revenue from our Managed Services contracts on a percentage of completion basis as we deliver the content or services over time, which can vary greatly. Historically, bookings have converted to revenues over a 6-month period on average. However, since late 2020, we have been receiving increasingly larger and more complex sales orders which, in turn, has lengthened the average revenue period to approximately 9-months, with the largest contracts taking longer to complete. For this reason, Managed Services Bookings, while an overall indicator of the health of our business, may not be used to predict quarterly revenues, and could be subject to future adjustment. Managed Services Bookings is useful information as it reflects the amount of orders received in one period, even though revenue from those orders may be reflected over varying amounts of time. We use the Managed Services Bookings metric to plan operational staffing, to identify key customer group trends to enlighten go-to-market activities, and to inform its product development efforts. Managed Services Bookings for the three months ended June 30, 2023, and 2022 was $7.3 million and $9.3 million, respectively. Managed Services Bookings for the six months ended June 30, 2023, and 2022 was $13.4 million and $21.5 million, respectively.

During the fourth quarter of 2022, the Company began the process of parting ways with a large customer. During the three months ended June 30, 2023, and 2022, net Managed Services Bookings for this customer totaled $65,000 and $3.5 million, respectively. During the six months ended June 30, 2023, and 2022, net Managed Services Bookings for this customer totaled $312,000 and $6.2 million, respectively.

Gross Billings by Revenue Type

We evaluate 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 perform, and the amounts billed to our SaaS customers for their self-service purchase of goods and services on our platforms. The amounts billed to our SaaS customers are on a cost-plus basis. Gross billings are therefore 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 U.S. (“GAAP”) reporting purposes.

Managed Services gross billings include the total dollar value of the amounts billed to our customers for the services we perform. Gross billings for Managed Services are the same as Managed Services Revenue reported for those services in our consolidated statements of operations and comprehensive loss in accordance with GAAP.

SaaS Service gross billings include license and other fees together with the total amounts billed to our SaaS customers for their self-service purchase of goods and services on our platforms, termed ‘Marketplace Spend Fees.’ Our SaaS customers’ marketplace spend is billed on a cost-plus basis. SaaS Services Revenue includes the total of License and Other Fees gross billings, plus the Marketplace Spend Fees gross billings (which includes our third-party creator costs on those billings that are netted against revenue for GAAP reporting purposes).

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 retain after payments to our creators. Additionally, tracking gross billings is critical as it pertains to our credit risk and cash flows. 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 paying our creators, we could experience large swings in our cash flows. Additionally, we incur the credit risk to collect amounts owed from our customers for all services performed by us or by the creators. Finally, gross billings allow us to evaluate our transaction totals on an equal basis to see our contribution margins by revenue stream so that we can better understand where we should be allocating our resources.

The following tables set forth our gross billings by revenue type, the percentage of total gross billings by type, and the change between the periods:

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	Three Months Ended June 30,
	2023			2022			$ Change		% Change
Managed Services Gross Billings	$	10,618,381	97%	$	12,176,616	91%	$	(1,558,235)	(13)%

Marketplace Spend Fees	235,763		2%	833,235		6%	(597,472)		(72)%
License Fees	59,225		1%	335,928		3%	(276,703)		(82)%
Other Fees	10,139		—%	12,343		—%	(2,204)		(18)%
SaaS Services Gross Billings	305,127		3%	1,181,506		9%	(876,379)		(74)%

Total Gross Billings	$	10,923,508	100%	$	13,358,122	100%	$	(2,434,614)	(18)%


	Six Months Ended June 30,
	2023			2022			$ Change		% Change
Managed Services Gross Billings	$	19,121,135	93%	$	20,549,072	90%	$	(1,427,937)	(7)%

Marketplace Spend Fees	1,259,448		6%	1,580,479		7%	(321,031)		(20)%
License Fees	249,607		1%	710,369		3%	(460,762)		(65)%
Other Fees	18,251		—%	101,682		1%	(83,431)		(82)%
SaaS Services Gross Billings	1,527,306		7%	2,392,530		10%	(865,224)		(36)%

Total Gross Billings	$	20,648,441	100%	$	22,941,602	100%	$	(2,293,161)	(10)%

Non-GAAP Financial Measure

Adjusted EBITDA

Adjusted EBITDA is a “non-GAAP financial measure” under the rules of the Securities and Exchange Commission (the “SEC”). We define Adjusted EBITDA as earnings or loss before interest, taxes, depreciation and amortization, non-cash stock-based compensation, gain or loss on asset disposals or impairment, and certain 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 Adjusted EBITDA as a 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 Adjusted EBITDA also provides valuable information to investors as it excludes non-cash transactions, and it provides consistency to facilitate period-to-period comparisons.

You should not consider Adjusted EBITDA in isolation or as a substitute for an analysis of our results of operations as under GAAP. All companies do not calculate Adjusted EBITDA in the same manner, limiting its usefulness as a comparative measure. Moreover, Adjusted EBITDA has limitations as an analytical tool, including that Adjusted EBITDA:

•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 essential part of our compensation strategy;

•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;

•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; and

•does not include interest expense and other gains, losses, and expenses that we believe are not indicative of our ongoing core operating results, but these items may represent a reduction or increase in cash available to us.

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Because of these limitations, Adjusted EBITDA should not be considered 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 this non-GAAP financial measure, you should be aware that in the future, we may incur expenses similar to those for which adjustments are made in calculating Adjusted EBITDA. Our presentation of this non-GAAP financial measure 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 net loss to our non-GAAP financial measure of Adjusted EBITDA for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Net loss	$	(1,033,426)		$	(169,890)		$	(3,839,765)		$	(2,646,133)
Impairment of digital assets	—			77,751			—			140,727
Non-cash stock-based compensation	207,877			156,706			403,399			273,898
Non-cash stock issued for payment of services	75,009			31,259			150,009			62,482
Interest expense	3,155			815			4,719			1,780
Depreciation and amortization	110,432			138,492			456,694			277,321
Other non-cash items	—			19,218			—			18,555
Adjusted EBITDA	$	(636,953)		$	254,351		$	(2,824,944)		$	(1,871,370)

Revenue	$	10,689,059		$	12,577,011		$	19,426,781		$	21,467,347
Adjusted EBITDA as a % of Revenue	(6.0)		%	2.0		%	(14.5)		%	(8.7)		%

Liquidity and Capital Resources

Near-Term Liquidity and Capital Resources

Historically, our primary cash needs have been funding the development and integration of our technology platforms used in its business, marketing expenses, and general and administrative (“G&A”) expenses including salaries, bonuses, and commissions. We have incurred losses and negative cash flow from operations for most periods since inception, primarily the result of costs associated with third-party creators, salaries, bonuses and stock-based compensation, and other G&A expenses, including technology and development costs, which has resulted in a total accumulated deficit of $81.9 million as of June 30, 2023. While we have not achieved profitability, we believe we have sufficient resources to fund operations and planned investments for at least the next twelve months.

We had cash and cash equivalents of $31.2 million as of June 30, 2023, as compared to $24.6 million as of December 31, 2022. This increase of $6.6 million is primarily due to shortening maturities in our investment portfolio, partly offset by cash used to fund operating losses.


	Six Months Ended June 30,
	2023		2022
Net cash (used for)/provided by:
Operating activities	$	(3,813,842)	$	(4,566,772)
Investing activities	11,196,947		(59,489,551)
Financing activities	(760,845)		(29,902)
Net increase in cash and cash equivalents	$	6,622,260	$	(64,086,225)

Net cash used for operating activities was $3.8 million during the six months ended June 30, 2023 and is primarily the result of continued use of cash to cover operating losses and to meet working capital requirements. Net cash used for investing activities was $11.2 million during the six months ended June 30, 2023, primarily due to the purchase and sale of marketable securities. Net cash used for financing activities during the six months ended June 30, 2023, was $0.8 million, which consisted of the purchase of treasury stock and payments on shares withheld for taxes.

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Long-Term Liquidity

We anticipate that our operating expenses will increase in the foreseeable future as we continue to pursue the expansion of our business. We currently believe that we have adequate cash and invested resources to fund our business growth for the next twelve months; however, should additional capital become necessary, we expect these funds would be financed predominately through proceeds from future equity, equity-based, or debt offerings, unless and until our operations are profitable and sustain our ongoing capital needs. As a result, our business success could significantly depend on our ability to obtain the funding necessary to support our operations.

Financial Condition and Outlook

Since 2020, supply-chain issues, labor disruption, business closures, and inflationary pressures have impacted our business operations and results. Additionally, the broadening unenthusiastic economic outlook may be affecting marketing budgets, as evidenced by the softness in bookings we have experienced through the fourth quarter of 2022 and first quarter of 2023, and, to a lesser extent, the second quarter of 2023. We announced in January 2023 that we began the process of parting ways with a single large customer that, while having a significant impact on Managed Services revenue growth, carried significantly lower gross margins than our core business. Apart from this single large customer, demand from ongoing customers during the second quarter of 2023 grew 25% from the first quarter of 2023 and 24% from the second quarter of 2022. While our recent bookings have not met internal expectations, we see evidence of improving demand for influencer marketing services in our pipeline, and, despite opportunities taking longer to close, we believe that our base business is strengthening. However, these matters, taken together, could have a further material adverse impact on our business, results of operations, and financial position in future periods.

Critical Accounting Policies and Use of Estimates

There have been no material changes to our critical accounting policies as set forth in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the year ended December 31, 2022. For a summary of our significant accounting policies, please refer to Note 1 — Company and Summary of Significant Accounting Policies included in Item 1 of this Quarterly Report.

Recent Accounting Pronouncements

See “Note 1. Company and Summary of Significant Accounting Policies,” of this 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 the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the 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 the Company files under the Exchange Act is accumulated and communicated to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures.

In designing and evaluating the disclosure controls and procedures, 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 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 of 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 Report on Form 10-Q for the period ended June 30, 2023, an

evaluation was performed under the supervision and with the participation of our management including our principal executive

officer and 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 June 30, 2023. Based on this

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evaluation, our management concluded that our disclosure controls and procedures were effective as designed to ensure that information required to be disclosed in the reports we file or submit 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 our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining effective 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.

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the fiscal quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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 subject to inherent uncertainties and an adverse result in any such litigation that may arise from time to time that may harm our business. As of August 7, 2023, we are 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 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

You should carefully consider the factors discussed under this item and under Item 1A of Part I to our Annual Report on Form 10-K for the year ended December 31, 2022 regarding the numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks occur, our business, financial condition, or results of operation may be materially and adversely affected. In such a 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.

A few of our customers account for a significant portion of our gross billings and accounts receivable, and the loss of, or reduced purchases from, these or other customers could have a material adverse effect on our operating results.

A significant portion of our gross billings and accounts receivable are attributable to a small number of customers. At June 30, 2023, one customer accounted for 30% of gross billings for the quarter and two customers accounted for 43% of total accounts receivable. During the three months ended June 30, 2022, two customers accounted for 50% of gross billings and one customers accounted for 50% of accounts receivable. In January 2023, we announced that we began the process of parting ways with the customer accounting for the large portion of our gross billings and accounts receivable for the three and six months ended June 30, 2023. The concentration of our sales with a relatively small number of customers makes us particularly dependent on factors, both positive and negative, affecting those customers. If demand for our services from these customers increases, our results are favorably impacted, while if their demand for our services decreases, they may reduce their purchases of, or stop purchasing, our services and our operating results would suffer. The Company does not typically engage in contracts are longer than one year, and so most of our customers can cease reduce or cease business with us on a relatively short basis. The loss of a large customer and failure to add new customers to replace lost revenue would have a material adverse effect on our business, financial condition, and results of operations.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SHARES

Company repurchases shares of equity securities

The following table presents information with respect to purchases of common stock of the Company made during the three months ended June 30, 2023 by the Company.


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan (1)	Approximate Dollar Value of Shares Available under Repurchase Plan
April 1 - April 30, 2023	—	$	—	—	$	1,000,000
May 1 - May 31, 2023	63,486	$	2.9401	63,486	$	813,345
June 1 - June 30, 2023	181,797	$	2.8534	181,797	$	294,597


(1)			On March 30, 2023, the Company announced that its Board of Directors had authorized a $1.0 million share repurchase program. The share repurchase program has a term of eighteen (18) months and may be suspended or discontinued at any time and does not obligate the company to acquire any amount of common stock.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

Not applicable.

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ITEM 6 – EXHIBITS


Exhibit No.		Description
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 Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC 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 Exhibit 3.1 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 Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).
3.4		Certificate of Amendment filed with the Secretary of State of the State of Nevada effective January 11, 2016 (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 12, 2016).
3.5		Amended and Restated Bylaws of IZEA, Inc. (Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC on November 23, 2011).
3.6		First Amendment to Bylaws of IZEA Worldwide, Inc. (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on September 27, 2022).
3.7		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 Exhibit 3.11 to the Company's Quarterly Report on Form 10-Q filed with the SEC on May 11, 2016).
3.8		Articles of Merger of IZEA Worldwide, Inc. filed with the Secretary of State of the State of Nevada effective August 20, 2018 (Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on August 23, 2018).
3.9		Articles of Merger of IZEA Worldwide, Inc. filed with the Secretary of State of the State of Nevada effective December 17, 2019 (Incorporated by reference to Exhibit 3.10 to the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2020).
3.10		Articles of Merger of IZEA Worldwide, Inc. filed with the Secretary of State of the State of Nevada effective December 14, 2020 (Incorporated by reference to Exhibit 3.10 to the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2021).
3.11		Certificate of Change of IZEA Worldwide, Inc., dated June 14, 2023 and effective June 16, 2023 (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 15, 2023.)
31.1	*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	*	Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	* (b)	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	* (b)	Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	* (c)	The following materials from IZEA Worldwide, Inc.'s Quarterly Report for the quarter ended March 31, 2023 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Unaudited Consolidated Balance Sheets, (ii) the Unaudited Consolidated Statements of Operations and Comprehensive Loss, (iii) the Unaudited Consolidated Statement of Stockholders' Equity, (iv) the Unaudited Consolidated Statements of Cash Flow, and (iv) the Unaudited Notes to the Consolidated Financial Statements.

* 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.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


	IZEA Worldwide, Inc. a Nevada corporation

August 14, 2023	By:	/s/ Edward H. Murphy
		Edward H. Murphy Chairman and Chief Executive Officer (Principal Executive Officer)

August 14, 2023	By:	/s/ Peter J. Biere
		Peter J. Biere Chief Financial Officer (Principal Financial and Accounting Officer)