Company Overview
IZEA Worldwide, Inc. (“IZEA”, “we”, “us” or “our”) creates and operates on-line
marketplaces that join entrepreneurs, together with manufacturers, businesses, and publishers,
with content material creators comparable to bloggers and tweeters (“creators”). Our know-how
brings the entrepreneurs and creators collectively, enabling their transactions to be
accomplished at scale by managing customized content material workflow, creator search and
focusing on, bidding, analytics, and cost processing.
We assist energy the creator financial system, permitting everybody from school college students and
stay-at-home people to celebrities and accredited journalists the
alternative to monetize their content material, creativity, and affect by means of our
entrepreneurs. IZEA compensates these creators for producing distinctive content material comparable to
lengthy and short-form textual content, movies, images, standing updates, and illustrations for
entrepreneurs or distributing such content material on behalf of entrepreneurs by means of their
web sites, blogs, and social media channels.
We present worth by means of managing customized content material workflow, creator search and
focusing on, bidding, analytics, and cost processing. While nearly all of the
entrepreneurs have interaction us to carry out these companies (the “Managed Services”) on their
behalf, they might additionally use our marketplaces to interact creators for influencer
advertising and marketing campaigns or to supply customized content material on a self-service foundation by
licensing our know-how.
Our main know-how platform, The IZEA Exchange (“IZEAx”), is designed to
present a unified ecosystem that allows the creation and publication of
a number of varieties of customized content material by means of our creators’ web sites, blogs, and
social media channels, together with, amongst others, Twitter, Facebook, YouTube,
Twitch, and Instagram. We extensively use this platform to handle influencer
advertising and marketing campaigns on behalf of our entrepreneurs. This platform can be obtainable
on to our entrepreneurs as a self-service instrument and a licensed white label
product. IZEAx was engineered from the bottom as much as change all of our earlier
platforms with an built-in providing that’s improved and extra environment friendly.
In 2020, we launched two new platforms, BrandGraph and Shake. BrandGraph is a
social media intelligence platform providing entrepreneurs an evaluation of
share-of-voice, engagement benchmarking, class spending estimates, influencer
identification, and sentiment evaluation. The BrandGraph platform maps and
classifies the advanced hierarchy of corporation-to-brand relationships by
class and associates social content material with manufacturers by means of a proprietary content material
evaluation engine. Shake is a web based market the place patrons can shortly and
simply rent creators of every kind for influencer advertising and marketing, images,
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design, and different digital companies. The Shake platform is geared toward digital
creatives in search of freelance “gig” work. Creator’s checklist obtainable “Shakes” in
their accounts on the platform. Marketers choose and buy artistic packages
from them by means of a streamlined chat expertise, assisted by ShakeBot – a
proprietary, synthetic intelligence assistant.
Impact of COVID-19 on our Business
The COVID-19 pandemic impacted our operations, gross sales, and funds starting
in 2020. To shield the well being and security of our workers, we took
precautionary motion and directed all employees to make money working from home efficient March
16, 2020. We allowed the leases for our firm headquarters and momentary
workplace areas to run out on the finish of their phrases all through 2020. We haven’t
skilled any main declines in working effectivity in our distant working
setting and have determined to proceed our work-from-home coverage indefinitely
as a virtual-first employer.
We will proceed to actively monitor the COVID-19 scenario and will take additional
actions altering the enterprise operations that we decide are in the very best
pursuits of our workers, clients, companions, suppliers, and stakeholders, or
as required by federal, state, or native authorities. It shouldn’t be clear what the
potential results any such alterations or modifications might have on our
enterprise, together with the consequences on our clients, workers, and prospects, or
on our future monetary outcomes.
Key Components of Results of Operations
Overall consolidated outcomes of operations are evaluated based mostly on Revenue, Cost
of Revenue, Sales and Marketing bills, General and Administrative bills,
Depreciation and Amortization, and Other Income (Expense), web.
Revenue
We generate income from 4 main sources: (1) income from our managed
companies when a marketer (usually a model, company, or companion) pays us to
present customized content material, influencer advertising and marketing, amplification, or different marketing campaign
administration companies (“Managed Services”); (2) income from charges charged to
software program clients on their market spend inside our IZEAx and Shake
platforms (“Marketplace Spend Fees”); (3) income from license and subscription
charges charged to entry the IZEAx and BrandGraph platforms (“License Fees”); and
(4) income derived from different charges comparable to inactivity charges, early cash-out
charges, and different miscellaneous charges charged to customers of our platforms (“Other
Fees”).
As mentioned in additional element inside “Critical Accounting Policies and Use of
Estimates” underneath “Note 1. Company and Summary of Significant Accounting
Policies,” underneath Part I, Item 1 herein, income from Marketplace Spend Fees are
reported on a web foundation, and income from all different sources, together with Managed
Services, License Fees, and Other Fees are reported on a gross foundation. We additional
categorize these sources into two main teams: (1) Managed Services and (2)
SaaS Services, which incorporates income from Marketplace Spend Fees, License Fees,
and Other Fees.
Cost of Revenue
Our value of income consists of direct prices paid to our third-party creators
who present the customized content material, influencer advertising and marketing, or amplification companies
for our Managed Service clients, the place we report income on a gross foundation. It
additionally consists of inside prices associated to our marketing campaign achievement and SaaS
help departments. These prices embrace salaries, bonuses, commissions,
stock-based compensation, worker profit prices, and miscellaneous departmental
prices associated to the personnel liable for offering help to our
clients and finally fulfilling our obligations underneath our contracts with
clients. Where applicable, we capitalize prices incurred with software program
developed or acquired for our revenue-supporting platforms and amortize these
prices over the estimated helpful lives of these platforms. This amortization is
individually said underneath depreciation and amortization in our consolidated
statements of operations and complete loss.
Sales and Marketing
Our gross sales and advertising and marketing bills consist primarily of salaries, bonuses,
commissions, stock-based compensation, worker profit prices, journey and
miscellaneous departmental prices for our advertising and marketing, gross sales, and gross sales help
personnel, in addition to advertising and marketing bills comparable to model advertising and marketing, public
relations occasions, commerce reveals, and advertising and marketing supplies, and journey bills.
General and Administrative
Our basic and administrative (“G&A”) expense consists primarily of salaries,
bonuses, commissions, stock-based compensation, worker profit prices, and
miscellaneous departmental prices associated to our govt, finance, authorized, human
sources, and different administrative personnel. It additionally consists of journey, public
firm, investor relations bills, accounting, authorized skilled companies
charges, leasehold services, and different corporate-related bills. G&A expense
additionally consists of our know-how and improvement prices consisting primarily of our
payroll prices for our inside engineers and contractors liable for
growing, sustaining, and enhancing our know-how, in addition to internet hosting and
software program subscription prices. These prices are expensed as incurred, besides to the
extent that they’re related to internal-use software program that qualifies for
capitalization, which is then recorded as software program improvement prices within the
consolidated stability sheet. We additionally capitalize prices
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which are associated to our acquired intangible belongings. Depreciation and
amortization associated to those prices are individually said underneath depreciation and
amortization in our consolidated statements of operations and complete
loss. G&A expense additionally consists of present interval beneficial properties and losses on our
acquisition prices payable and beneficial properties and losses from the sale of mounted belongings.
Impairments on mounted belongings, intangible belongings, and goodwill are included as
a part of basic and administrative expense when they aren’t materials and damaged
out individually in our consolidated statements of operations and complete
loss when they’re materials.
Depreciation and Amortization
Depreciation and amortization expense consists primarily of amortization of our
internal-use software program and bought intangible belongings from our enterprise
acquisitions. To a lesser extent, we even have depreciation and amortization on
gear and leasehold enhancements utilized by our personnel. Costs are amortized
or depreciated over the estimated helpful lives of the related belongings.
Other Income (Expense)
Interest Expense. Interest expense is primarily associated to the imputed curiosity
on our secured credit score facility, accrued curiosity for the PPP mortgage, and curiosity
on the financing of computer systems.
Other Income. Other revenue consists primarily of curiosity revenue for curiosity
earned on investments, or adjustments within the worth of our overseas belongings and
liabilities and overseas forex trade beneficial properties and losses on overseas forex
transactions, primarily associated to the Canadian Dollar. For 2021, it additionally
features a acquire on the forgiveness of debt associated to our PPP mortgage (see
“Liquidity and Capital Resources – PPP Loan” under) and a acquire on the sale of
digital belongings.
Results of Operations for the Twelve Months Ended December 31, 2021 and 2020
The following desk units forth a abstract of our consolidated statements of
operations and the change between the durations:
Twelve Months Ended December 31,
2021 2020 $ Change % Change
Revenue $ 30,022,377 $ 17,967,207 $ 12,055,170 67 %
Costs and bills:
Cost of income 14,461,702 7,896,078 6,565,624 83 %
Sales and advertising and marketing 8,795,038 5,999,671 2,795,367 47 %
General and administrative 11,034,246 8,611,423 2,422,823 28 %
Impairment of goodwill – 4,300,000 (4,300,000) (100) %
Depreciation and amortization 1,089,118 1,652,126 (563,008) (34) %
Total prices and bills 35,380,104 28,459,298 6,920,806 24 %
Loss from operations (5,357,727) (10,492,091) 5,134,364 (49) %
Other revenue (expense):
Interest expense (25,320) (63,012) 37,692 (60) %
Other revenue, web 2,242,426 46,708 2,195,718 4,701 %
Total different revenue (expense), web 2,217,106 (16,304) 2,233,410 (13,699) %
Net revenue (loss) $ (3,140,621) $ (10,508,395) $ 7,367,774 (70) %
Revenue
The following desk illustrates our income by sort, the proportion of complete
income by sort, and the change between the durations:
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Twelve Months Ended December 31,
2021 2020 $ Change % Change
Managed Services Revenue $ 28,203,556 94 % $ 15,625,273 87 % $ 12,578,283 80 %
Marketplace Spend Fees 319,419 2 % 621,536 3 % (302,117) (49) %
License Fees 1,454,874 5 % 1,667,662 9 % (212,788) (13) %
Other Fees 44,528 – % 52,736 – % (8,208) (16) %
SaaS Services Revenue 1,818,821 6 % 2,341,934 13 % (523,113) (22) %
Total Revenue $ 30,022,377 100 % $ 17,967,207 100 % $ 12,055,170 67 %
Managed Services income throughout the twelve months ended December 31, 2021,
elevated 80% from the identical interval in 2020, primarily on account of elevated orders
from new and present clients returning to and increasing their advertising and marketing
efforts by means of sponsored social advertising and marketing as in comparison with the prior-year interval.
SaaS Services income, which incorporates license and help charges to entry the
platform companies, and charges earned on the entrepreneurs’ self-service use of our
know-how platforms to handle their content material workflow and influencer advertising and marketing
campaigns, declined 22% from the identical interval in 2020, on account of:
•Marketplace Spend Fees decreased by roughly $0.3 million for the twelve
months ended December 31, 2021, in comparison with the identical interval in 2020,
primarily on account of decrease spend ranges from our entrepreneurs and decrease charges
assessed on these spends on account of aggressive pricing efforts in IZEAx.
Revenue from Marketplace Spend Fees represents our web margins obtained on this
enterprise.
•License Fees income decreased throughout the twelve months ended December 31, 2021
to $1.5 million in comparison with $1.7 million in the identical interval of 2020. The
lower in IZEAx license charges was partially offset by a rise in
subscribers for BrandGraph and IZEAx Discovery companies, albeit at decrease charges.
Additionally, we carried out a aggressive standardized pricing system for all
IZEAx license charge clients. Prior to 2021, the subscription charges for BrandGraph
and IZEAx Discovery had been categorized underneath Other Fees, however these quantities from
2020 have been reclassified underneath License Fees to evolve with their 2021
classification.
•Other Fees income decreased (16)% for the twelve months ended December 31,
2021, in comparison with the identical interval in 2020 on account of a discount in inactivity
service charges.
Cost of Revenue
Cost of income for the twelve months ended December 31, 2021, elevated by $6.6
million, or roughly 83%, in comparison with the identical interval in 2020 primarily due
to the rise in Managed Services income. Cost of income as a share of
income elevated from 44% in 2020 to 48% in 2021, due primarily to a number of
massive contracts within the present interval that carry a decrease common margin.
Sales and Marketing
Sales and advertising and marketing bills for the twelve months ended December 31, 2021,
elevated by $2.8 million, or roughly 47%, in comparison with the identical interval in
2020. Advertising and advertising and marketing bills elevated $1.2 million to additional
promote model consciousness and enhance buyer acquisition, satisfaction, and
retention. Payroll, personnel-related bills, and inventory compensation for gross sales
and advertising and marketing personnel elevated $1.3 million on account of increased commissions and
bonuses pushed by elevated bookings.
General and Administrative
General and administrative expense for the twelve months ended December 31,
2021, elevated by $2.4 million, or roughly 28%, in comparison with the identical
interval in 2020. The enhance typically and administrative expense was primarily
on account of $1.4 million in increased compensation prices related to further
personnel and better fee and bonus expense linked to efficiency.
Contractor prices elevated $1.1 million for extra engineers to complement
our staff working to increase our know-how choices.
Impairment of Goodwill
In March 2020, we recognized triggering occasions as a result of discount in our
projected income on account of antagonistic financial circumstances attributable to the COVID-19
pandemic, the continuation of a market capitalization under our carrying worth,
and uncertainty for restoration given the volatility of the capital markets
surrounding COVID-19. We carried out an interim
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evaluation of goodwill, utilizing the discounted money stream technique underneath the revenue
strategy and the rule of thumb transaction technique underneath the market strategy, and
decided that the carrying worth of our Company’s reporting unit as of March
31, 2020 exceeded the honest worth. As a results of the valuation, we recorded a
$4.3 million impairment of goodwill leading to an expense for the twelve
months ended December 31, 2020.
Based upon our evaluation of goodwill in late 2021, there was no additional
impairment as of December 31, 2021.
Depreciation and Amortization
Depreciation and amortization expense for the twelve months ended December 31,
2021 decreased by $0.6 million, or roughly 34%, in comparison with the identical
interval in 2020.
Depreciation expense on property and gear was $0.13 million and $0.14
million for the twelve months ended December 31, 2021, and 2020, respectively.
Depreciation expense decreased barely as a result of disposal of growing older gear
in 2021.
Amortization expense was $1.0 million and $1.5 million for the twelve months
ended December 31, 2021, and 2020, respectively. Amortization expense associated to
intangible belongings acquired within the Ebyline, ZenContent, and FaucetInfluence
acquisitions was $0.5 million and $1.1 million for the twelve months ended
December 31, 2021, and 2020, respectively, whereas amortization expense associated to
internal-use software program improvement prices was $0.5 million and $0.4 million for
the twelve months ended December 31, 2021, and 2020, respectively. Amortization
on our intangible acquisition belongings is reducing as a result of completion of
amortization on sure intangible belongings acquired in prior years whereas
amortization on our inside software program prices is growing on account of continued
improvement and the discharge of BrandGraph and Shake in 2020.
Other Income (Expense)
Interest expense decreased by $0.04 million to $0.03 million throughout the twelve
months ended December 31, 2021 in comparison with the identical interval in 2020 due primarily
to the elimination of quantities owed on our acquisition prices payable and the
discount in our common borrowings on our secured credit score facility throughout the
twelve months ended December 31, 2021, in comparison with the identical interval in 2020.
Other revenue, web elevated by $2.2 million throughout the twelve months ended
December 31, 2021, when in comparison with the identical interval in 2020, primarily from the
acquire on the forgiveness of debt. together with principal of $1.9 million and
curiosity of $0.02 million, totaling $1.92 million on the PPP Loan and a acquire of
$0.19 million on the sale of digital belongings.
Net Loss
Net loss for the twelve months ended December 31, 2021, was $3.1 million, a $7.4
million lower within the web lack of $10.5 million for a similar interval in
2020. The lower in web loss was the results of elevated web income and the
acquire on the forgiveness of debt associated to the $1.9 million PPP Loan.
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Key Metric
We evaluate the knowledge supplied by our key monetary metrics, Managed
Services Bookings, and gross billings, to evaluate the progress of our enterprise
and make selections on the place to allocate our sources. As our enterprise evolves,
we might change the important thing monetary metrics in future durations.
Managed Services Bookings
Managed Services Bookings is a measure of all gross sales orders obtained throughout a
time interval much less any cancellations obtained, or refunds given throughout the identical
time interval. Sales order contracts fluctuate in complexity with every buyer and
vary from customized content material supply to built-in advertising and marketing companies; our
contracts typically run from a number of months for smaller contracts as much as twelve
months for bigger contracts. We acknowledge income from our Managed Services
contracts on a share of completion foundation as we ship the content material or
companies over time, which might fluctuate vastly. Historically, bookings have
transformed to revenues over a 6-month interval on common. However, since late
2020, we’ve been receiving more and more bigger and extra advanced gross sales orders
which, in flip, has lengthened the common income interval to roughly
9-months, with the biggest contracts taking longer to finish. For this motive,
Managed Services Bookings, whereas an total indicator of the well being of our
enterprise, will not be used to foretell quarterly revenues, and might be topic to
future adjustment. Managed Services Bookings is beneficial data because it
displays the quantity of orders obtained in a single interval, though income from
these orders could also be mirrored over various quantities of time. Management makes use of the
Managed Services Bookings metric to plan its working employees, to establish key
buyer group developments to enlighten go-to-market actions, and to tell its
product improvement efforts. Managed Services Bookings for the twelve months
ended December 31, 2021 and 2020 was $39.5 million and $17.3 million,
respectively.
Gross Billings by Revenue Type
Company administration evaluates our operations and makes strategic selections based mostly,
partially, on our key metric of gross billings from our two main varieties of
income, Managed Services, and SaaS Services. We outline gross billings because the
complete greenback worth of the quantities charged to our clients for the companies we
carry out, and the quantities billed to our SaaS clients for his or her self-service
buy of products and companies on our platforms. The quantities billed to our SaaS
clients are on a cost-plus foundation. Gross billings are the quantities of our
reported income plus the price of funds we made to third-party creators
offering the content material or sponsorship companies, that are netted towards income
for typically accepted accounting rules within the United States (“GAAP”)
reporting functions.
Managed Services gross billings embrace the overall greenback worth of the quantities
billed to our clients for the companies we carry out. Gross billings for Managed
Services are the identical as Managed Services Revenue reported for these companies in
our consolidated statements of operations and complete loss in accordance
with GAAP.
SaaS Service gross billings embrace license and different charges along with the
complete quantities billed to our SaaS clients for his or her self-service buy of
items and companies on our platforms, termed ‘Marketplace Spend Fees.’ Our SaaS
clients’ market spend is billed on a cost-plus foundation. SaaS Services
Revenue consists of the overall of License and Other Fees gross billings, plus the
Marketplace Spend Fees gross billings (which incorporates our third-party creator
prices on these billings which are netted towards income for GAAP reporting
functions).
We think about gross billings to be an essential indicator of our potential
efficiency because it measures the overall greenback quantity of transactions generated
by means of our marketplaces. Tracking gross billings permits us to watch the
share of gross billings that we retain after funds to our creators.
Additionally, monitoring gross billings is crucial because it pertains to our credit score
danger and money flows. We bill our clients based mostly on our companies carried out or
based mostly on their self-service transactions plus our charge. Then we remit the
agreed-upon transaction worth to the creators. If we don’t accumulate the cash
from our clients previous to paying our creators, we might expertise massive
swings in our money flows. Additionally, we incur the credit score danger to gather
quantities owed from our clients for all companies carried out by us or by the
creators. Finally, gross billings permit us to judge our transaction totals on
an equal foundation to see our contribution margins by income stream in order that we will
higher perceive the place we ought to be allocating our sources.
The following tables set forth our gross billings by income sort, the
share of complete gross billings by sort, and the change between the durations:
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Twelve Months Ended December 31,
2021 2020 $ Change % Change
Managed Services Gross
Billings $ 28,203,556 84% $ 15,625,273 65% $ 12,578,283 80%
Marketplace Spend Fees 3,970,308 12% 6,607,425 28% (2,637,117) (40)%
License Fees 1,454,874 4% 1,667,662 7% (212,788) (13)%
Other Fees 44,528 -% 52,736 1% (8,208) (16)%
SaaS Services Gross Billings 5,469,710 16% 8,327,823 35% (2,858,113) (34)%
Total Gross Billings $ 33,673,266 100% $ 23,953,096 100% $ 9,720,170 41%
Non-GAAP Financial Measure
Adjusted EBITDA
Adjusted EBITDA is a “non-GAAP monetary measure” underneath the foundations of the
Securities and Exchange Commission (the “SEC”). We outline Adjusted EBITDA as
earnings or loss earlier than curiosity, taxes, depreciation and amortization, non-cash
stock-based compensation, acquire or loss on asset disposals or impairment, and
sure different uncommon or non-cash revenue and expense gadgets comparable to beneficial properties or
losses on settlement of liabilities and exchanges, and adjustments within the honest worth
of derivatives, if relevant.
We use Adjusted EBITDA as a measure of working efficiency, for planning
functions, to allocate sources to reinforce the monetary efficiency of our
enterprise and in communications with our Board of Directors relating to our
monetary efficiency. We consider that Adjusted EBITDA additionally supplies beneficial
data to buyers because it excludes non-cash transactions, and it supplies
consistency to facilitate period-to-period comparisons.
You shouldn’t think about Adjusted EBITDA in isolation or as an alternative choice to an
evaluation of our outcomes of operations as underneath GAAP. All firms don’t
calculate Adjusted EBITDA in the identical method, limiting its usefulness as a
comparative measure. Moreover, Adjusted EBITDA has limitations as an analytical
instrument, together with that Adjusted EBITDA:
•doesn’t embrace stock-based compensation expense, which is a non-cash expense,
however has been, and can proceed to be for the foreseeable future, a big
recurring expense for our enterprise and an important a part of our compensation
technique;
•doesn’t embrace inventory issued for cost of companies, which is a non-cash
expense, however has been, and is anticipated to be for the foreseeable future, an
essential means for us to compensate our administrators, distributors, and different events
who present us with companies;
•doesn’t embrace depreciation and intangible belongings amortization expense,
impairment costs and beneficial properties or losses on disposal of kit, which isn’t
at all times a present interval money expense, however the belongings being depreciated and
amortized might have to get replaced sooner or later; and
•doesn’t embrace curiosity expense and different beneficial properties, losses, and bills that we
consider are usually not indicative of our ongoing core working outcomes, however these
gadgets might characterize a discount or enhance in money obtainable to us.
Because of those limitations, Adjusted EBITDA shouldn’t be thought-about a measure
of discretionary money obtainable to us to put money into the operation and development of
our enterprise or as a measure of money that might be obtainable to us to fulfill our
obligations. You ought to compensate for these limitations by relying totally on
our GAAP outcomes and utilizing these non-GAAP monetary measures as dietary supplements. In
evaluating this non-GAAP monetary measure, you ought to be conscious that within the
future, we might incur bills just like these for which changes are made in
calculating Adjusted EBITDA. Our presentation of this non-GAAP monetary measure
must also not be construed to deduce that our future outcomes might be unaffected
by uncommon or non-recurring gadgets.
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The following desk units forth a reconciliation from the GAAP measurement of web
loss to our non-GAAP monetary measure of Adjusted EBITDA for the twelve months
ended December 31, 2021, and 2020:
Twelve Months Ended
December 31,
2021 2020
Net loss $ (3,140,621) $ (10,508,395)
Gain on the forgiveness of debt (1,927,220) –
Gain on the sale of digital belongings (185,895) –
Non-cash stock-based compensation 878,739 477,993
Non-cash inventory issued for cost of companies 147,329 125,000
Interest expense 25,320 63,012
Depreciation and amortization 1,089,118 1,652,126
Impairment of goodwill and intangible belongings – 4,300,000
Other non-cash gadgets (22,022) (22,598)
Adjusted EBITDA $ (3,135,252) $ (3,912,862)
Revenue $ 30,022,377 $ 17,967,207
Adjusted EBITDA as a % of Revenue (10) % (22) %
Liquidity and Capital Resources
We had money and money equivalents of $75.4 million as of December 31, 2021, as
in comparison with $33.0 million as of December 31, 2020, a rise of $42.4 million,
primarily on account of web proceeds obtained from the sale of our widespread inventory in our
“on the market providing” program, offset by working losses. We have incurred
vital web losses and damaging money stream from operations for many durations
since our inception, which has resulted in a complete amassed deficit of $73.6
million as of December 31, 2021. To date, we’ve primarily financed our
operations by means of income from operations, and the sale of our fairness
securities.
Twelve Months Ended December 31,
2021 2020
Net money (used for)/supplied by:
Operating actions $ (2,566,999) $ (2,095,651)
Investing actions (26,169) (354,407)
Financing actions 44,981,238 29,610,654
Net enhance in money and money equivalents $ 42,388,070
$ 27,160,596
Cash used for working actions was $2.6 million throughout the twelve months
ended December 31, 2021 and is primarily the results of continued use of money to
cowl working losses. Net money used for investing actions was $0.03 million
throughout the twelve months ended December 31, 2021, primarily as a result of buy
of digital belongings. Net money supplied by financing actions throughout the twelve
months ended December 31, 2021, was $45.0 million, which consisted primarily of
proceeds of roughly $46.5 million from the sale of our widespread inventory in our
on the market providing program offset by $1.1 million in inventory issuance prices
and $0.5 million of funds on shares withheld for taxes.
At the Market (ATM) Offering
On June 4, 2020 and January 25, 2021, we entered into ATM Sales Agreements with
National Securities Corporation, as gross sales agent (“National Securities”),
pursuant to which we might supply and promote shares of our widespread inventory by means of
National Securities, by any technique deemed to be an “on the market providing” as
outlined in Rule 415 underneath the Securities Act of 1933, as amended (the
“Securities Act”), for combination buy costs of as much as $40 million and $35
million, respectively (the “ATM Offerings”). During the twelve months ended
December 31, 2021, we bought 11,186,084 shares at a median worth of $4.16 per
share for complete gross proceeds of $46.5 million. From June 4, 2020 by means of April
15, 2021, we bought a complete of 26,005,824 shares at a median worth of $2.88 per
share for complete gross proceeds of $75.0 million within the ATM Offerings underneath our
shelf registration assertion on Form S-3 (File No. 333-238619). The June 2020
and January 2021 Sales Agreements had been every terminated following the sale of all
shares of widespread inventory obtainable to be bought thereunder.
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On June 21, 2021, we entered into a 3rd ATM Sales Agreement with National
Securities, as gross sales agent, pursuant to which we might supply and promote shares of
our widespread inventory, occasionally, by means of National Securities, for combination
buy costs as much as $100 million by any technique deemed to be an “on the market
providing” as outlined in Rule 415 underneath the Securities Act underneath our shelf
registration assertion on Form S-3 (File No. 333-256078). No gross sales had been made
underneath this settlement as of December 31, 2021.
PPP Loan
On April 23, 2020, we obtained a mortgage underneath the Paycheck Protection Program (the
“PPP Loan”) within the principal quantity of $1.9 million. On June 18, 2021, we had been
notified by the lender that the PPP Loan had been forgiven by the Small Business
Administration in full, together with accrued curiosity. The principal quantity of $1.9
million and accrued curiosity of $0.02 million was recorded as a acquire on
forgiveness of debt in different revenue (expense) in our consolidated statements of
operations and complete loss in June 2021.
Financial Condition
Our enterprise operations and outcomes have been impacted by COVID-19, which within the
first half of 2020 had a cloth impact on our clients, their promoting
commitments, bookings cancellations, revenues, and money flows. Since late 2020,
whereas the financial system continues to really feel the impacts of supply-chain, labor
disruption, and enterprise closures, the Company has seen a cloth enhance in
the general social media advertising and marketing spend by massive and small clients, which has
benefited our bookings and income development charges, money flows and future
prospects. We are nonetheless feeling some results of the pandemic in our every day
operations, regardless of the expansion we’re experiencing. While the disruption prompted
by COVID-19 is presently anticipated to be momentary, it’s typically outdoors of
our management, and there may be uncertainty across the length and the overall financial
influence. Therefore, this matter might have an extra materials antagonistic influence on
our enterprise, outcomes of operations, and monetary place in future durations.
Critical Accounting Policies and Use of Estimates
We put together our monetary statements in accordance with accounting rules
typically accepted within the United States (“GAAP”). Certain accounting insurance policies
require that we apply vital judgment in defining the suitable
assumptions for calculating monetary estimates. These judgments might be topic
to an inherent diploma of uncertainty by their nature. Our judgments are based mostly
upon the historic expertise of the Company, phrases of present contracts,
observance of developments within the trade, the knowledge supplied by our clients,
and knowledge obtainable from different outdoors sources, as applicable. For a
abstract of our vital accounting insurance policies, please confer with Note 1 – Company
and Summary of Significant Accounting Policies and Note 2 – Restatement and
Revision included in Item 8 of this Annual Report. We think about accounting
estimates to be crucial accounting insurance policies when:
•The estimates contain issues which are extremely unsure on the time the
accounting estimate is made; and
•Different estimates or adjustments to estimates might have a cloth influence on the
reported monetary place, adjustments in monetary place, or outcomes of
operations.
When multiple accounting precept, or technique of its software, is
typically accepted, we choose the precept or technique that we think about essentially the most
applicable when given the particular circumstances. The software of those
accounting rules requires us to estimate the long run decision of present
uncertainties. Due to the inherent uncertainty involving estimates, precise
outcomes reported sooner or later might differ from our estimates. The following
crucial accounting insurance policies are considerably affected by judgments,
assumptions, and estimates used to organize the monetary statements.
Accounts Receivable and Concentration of Credit Risk
Accounts receivable are buyer obligations due underneath regular commerce phrases. We
think about an account delinquent when the client has not paid its stability due by
the related due date. Uncollectibility of accounts receivable shouldn’t be
vital since most clients are sure by contract and are required to fund
us for all the prices of an “alternative,” outlined as an order created by a
marketer for a creator to develop or share content material on behalf of a marketer. If a
portion of the account stability is deemed uncollectible, we’ll both write off
the quantity owed or present a reserve based mostly on our greatest estimate of the
uncollectible portion of the account. Management estimates the collectability of
accounts by commonly evaluating particular person buyer receivables and contemplating
a buyer’s monetary situation, credit score historical past, and present financial
circumstances. We had a reserve of $0.2 million for uncertain accounts as of
December 31, 2021. We consider that this estimate is affordable, however there could be
no assurance that the estimate won’t change on account of a shift in financial or
enterprise circumstances inside the trade, the person clients, or our
Company. Any changes to this account are mirrored within the consolidated
statements of operations as a basic and administrative expense. Bad debt
expense was lower than 1% of income for every of the twelve months ended
December 31, 2021 and 2020.
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Concentrations of credit score danger in accounts receivable had been usually restricted
as a result of many geographically various clients make up our buyer base, thus
spreading the commerce credit score danger. However, with our acquisition of FaucetInfluence,
we elevated credit score publicity on sure clients who carry vital credit score
balances associated to their Marketplace Spend. We management credit score danger by means of
credit score approvals, credit score limits, and monitoring procedures. We carry out credit score
evaluations of our clients however typically don’t require collateral to help
accounts receivable. We had three clients that accounted for 38% of complete
accounts receivable on December 31, 2021 and 2020. We had one buyer that
accounted for 14% of our income throughout the twelve months ended December 31,
2021. One buyer accounted for 13% of our income throughout the twelve months
ended December 31, 2020.
Software Development Costs and Acquired Intangible Software
In accordance with Accounting Standards Codification (“ASC”) 350-40, Internal
Use Software, we capitalize sure internal-use software program improvement prices
related to creating and enhancing internally developed software program associated to
our platforms. Software improvement actions typically encompass three levels
(i) the analysis and starting stage, (ii) the appliance and improvement stage,
and (iii) the post-implementation stage. Costs incurred within the analysis and
starting stage and the post-implementation stage of software program improvement or
different upkeep and improvement bills that don’t meet the qualification
for capitalization are expensed as incurred. Costs incurred within the software
and improvement stage, together with vital enhancements and upgrades, are
capitalized. These prices embrace personnel and associated worker advantages
bills for workers or consultants immediately related to and who dedicate
time to software program tasks and exterior direct prices of supplies obtained in
growing the software program. We additionally capitalize sure prices associated to cloud
computing preparations (“CCAs”). We have capitalized software program improvement prices
of $3.0 million within the consolidated stability sheet as of December 31, 2021. These
prices are mirrored as intangible belongings within the consolidated stability sheet as of
December 31, 2021. We don’t switch possession of our software program to 3rd
events. These software program developments and CCA prices are amortized on a
straight-line foundation over the estimated helpful life of 5 years upon preliminary
launch of the software program or further options. We evaluate the software program
improvement prices for impairment when circumstances point out that their carrying
quantities will not be recoverable. If the carrying worth of an asset group shouldn’t be
recoverable, we acknowledge an impairment loss for the surplus of carrying worth
over the honest worth in our consolidated statements of operations and
complete loss.
Goodwill
Goodwill represents the surplus of the consideration transferred for an acquired
enterprise over the honest worth of the underlying identifiable web belongings. We have
goodwill in reference to our acquisitions of Ebyline, ZenContent, and
FaucetInfluence. Goodwill shouldn’t be amortized, however as a substitute, it’s examined for
impairment a minimum of yearly. If administration determines that the worth of
goodwill has change into impaired, we’ll document a cost for the quantity of
impairment throughout the fiscal quarter wherein the dedication is made.
We carry out our annual impairment checks of goodwill as of October 1 of every 12 months,
or extra ceaselessly, if sure indicators are current. For occasion, in March
2020, we recognized triggering occasions, together with the discount in our projected
income on account of antagonistic financial circumstances attributable to the COVID-19 pandemic, the
continuation of a market capitalization under our carrying worth, and
uncertainty for restoration given the volatility of the capital markets surrounding
COVID-19. Therefore, we carried out an interim evaluation of goodwill, utilizing the
discounted money stream technique underneath the revenue strategy and the rule of thumb
transaction technique underneath the market strategy, and decided that the carrying
worth of our Company’s reporting unit as of March 31, 2020 exceeded the honest
worth. As a results of the March 2020 valuation, we recorded a $4.3 million
impairment of goodwill which is mirrored as an expense within the consolidated
statements of operations for the twelve months ended December 31, 2020.
Goodwill is required to be examined for impairment on the reporting unit degree. A
reporting unit is an working phase or one degree under the working phase
degree, which is known as a element. Management identifies its reporting
models by assessing whether or not parts (i) have discrete monetary data
obtainable; (ii) have interaction in enterprise actions; and (iii) whether or not a phase
supervisor commonly evaluations the element’s working outcomes. Net belongings and
goodwill of acquired companies are allotted to the reporting unit related
with the acquired enterprise based mostly on the anticipated organizational construction of
the mixed entities. If two or extra parts are deemed economically
comparable, these parts are aggregated into one reporting unit when performing
the annual goodwill impairment evaluate. We have decided that we’ve one
reporting unit.
Management performs a qualitative evaluation within the fourth quarter, or extra
ceaselessly if occasions or adjustments in circumstances point out it could be impaired, by
evaluating the carrying worth to the honest worth. For the 12 months ending December 31,
2021 Management decided that no indicators had been current that may set off an
impairment take a look at and that there had been no additional impairment.
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Purchase, Disposal, and Impairment of Digital Assets
Historically, we’ve mined digital belongings (mining operations ceased in 2019)
and bought digital belongings on exchanges. We just lately introduced that we’ll
settle for funds in digital belongings for our companies from clients. We can even
pay our creators in digital belongings, if requested.
We will document our digital belongings in accordance with ASC 350, Intangibles –
Goodwill and different, which requires acquired intangible belongings to be recorded at
value. Under FASB ASC 350, an entity ought to decide whether or not an intangible asset
has a finite or indefinite life. FASB ASC 350-30-35-4 states that if no authorized,
regulatory, contractual, aggressive, financial, or different elements restrict the
helpful lifetime of an intangible asset to the reporting entity, the helpful lifetime of
the asset ought to be thought-about indefinite. We will document our digital belongings as
an indefinite-lived intangible asset.
Our transactions have traditionally transacted on Coinbase. Therefore, to-date
Coinbase is decided to be the principal market and might be used to find out
honest values at preliminary recognition and subsequent measurement. If different
exchanges or markets are used, we’ll reevaluate our principal market. We
think about Coinbase to be an energetic market with quoted costs. Based on the honest
worth degree hierarchy, we’ve decided the market to be observable and Level
1.
Purchased digital belongings might be initially recorded at value, together with
transaction charges.
Digital belongings could also be disposed of by means of Coinbase. The conversion of digital
belongings to USD, or different fiat forex, won’t be thought-about odd enterprise
actions and can comply with the steerage inside ASC 610-20. Proceeds won’t be
reported as income, however the extra over carrying worth might be reported as a
acquire. Digital belongings might be topic to impairment testing previous to
derecognition, subsequently vital losses are usually not anticipated upon derecognition.
We will use FIFO for monitoring our digital belongings.
Indefinite-lived intangible belongings are initially carried on the worth decided
in accordance with FASB ASC 350-30-30-1 and isn’t topic to amortization.
Rather, it ought to be examined for impairment yearly or extra ceaselessly if occasions
of adjustments in circumstance point out it’s extra seemingly than not that the asset is
impaired. When an equivalent digital asset is purchased and bought at a worth decrease
than the entity’s present carrying worth, it will function an indicator that
impairment is extra seemingly than not. In figuring out if an impairment has
occurred, we’ll think about the bottom market worth of 1 unit of digital asset
quoted on the energetic trade since buying the digital asset. Each particular person
acquisition of digital asset represents a unit of account for impairment
testing. If the then present carrying worth of our digital belongings is greater than
the honest worth, an impairment loss has occurred. We will alter the carrying
worth and the loss might be mirrored as an working expense.
Revenue Recognition
We generate income from 4 main sources: (1) income from its managed
companies when a marketer (usually a model, company, or companion) pays us to
present customized content material, influencer advertising and marketing, amplification, or different marketing campaign
administration companies (“Managed Services”); (2) income from charges charged to
software program clients on their market spend inside our IZEAx and Shake
platforms (“Marketplace Spend Fees”); (3) income from license and subscription
charges charged to entry the IZEAx and BrandGraph platforms (“License Fees”); and
(4) income derived from different charges comparable to inactivity charges, early cash-out
charges, and different miscellaneous charges charged to customers of the our platforms (“Other
Fees”).
We acknowledge income in accordance with Accounting Standards Codification Topic
606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, income
is acknowledged based mostly on a five-step mannequin as follows: (i) establish the contract
with the client; (ii) establish the efficiency obligations within the contract;
(iii) decide the transaction worth; (iv) allocate the transaction worth to
the efficiency obligations within the contract; and (v) acknowledge income when (or
as) efficiency obligations are glad. The core precept of ASC 606 is that
income is acknowledged when the switch of promised items or companies to
clients is made in an quantity that displays the consideration to which the
entity expects to be entitled in trade for these items or companies. We apply
the five-step mannequin to contracts when it’s possible that it’s going to accumulate the
consideration it’s entitled to in trade for the products or companies it
transfers to the client. At contract inception, as soon as the contract is
decided to be inside the scope of ASC 606, we assess the products or companies
promised inside every contract and decide these which are distinct efficiency
obligations. We additionally decide whether or not it acts as an agent or a principal for
every recognized efficiency obligation. For transactions wherein we act as a
principal, income is reported on a gross foundation as the quantity paid by the
marketer for the acquisition of content material or sponsorship, promotion, and different
associated companies and document the quantities we pay to third-party creators as value
of income. For transactions wherein we act as an agent, income is reported on
a web foundation as the quantity charged to the self-service marketer utilizing our
platforms, much less the quantities paid to the third-party creators offering the
service.
We keep separate preparations with every marketer and content material creator both
within the type of a grasp settlement or phrases of service, which specify the phrases
of the connection and entry to our platforms or by a press release of labor, which
units the worth and the companies to be carried out, together with different phrases. The
transaction worth is decided based mostly on the mounted charge said within the assertion
of labor and doesn’t comprise variable consideration. Marketers who contract with
us to handle their promoting campaigns or customized content material requests might prepay
for companies or request credit score phrases, and cost phrases are
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usually 30 days from the bill date. The settlement usually supplies for
both a non-refundable deposit or a cancellation charge if the client cancels
the settlement previous to finishing the companies. Billings upfront of accomplished
companies are recorded as a contract legal responsibility till earned. We assess
collectibility based mostly on a number of elements, together with the creditworthiness of the
buyer and cost and transaction historical past.
Managed Services Revenue
For Managed Services Revenue, we agree to supply companies that will embrace
a number of distinct efficiency obligations within the type of (i) an built-in
advertising and marketing marketing campaign to supply influencer advertising and marketing companies, which can embrace
the supply of blogs, tweets, images, or movies shared by means of social community
choices and content material promotion, comparable to click-through commercials showing
in web sites and social media channels, and (ii) customized content material gadgets, comparable to a
analysis or information article, informational materials or movies. Marketers usually
buy influencer advertising and marketing companies to supply public consciousness or
promoting buzz relating to the marketer’s model and buy customized content material for
inside and exterior use. We might present one sort or a mixture of every kind
of those efficiency obligations on a press release of labor for a lump sum charge. We
allocate income to every efficiency obligation within the contract at inception
based mostly on its relative standalone promoting worth. These efficiency obligations
are to be supplied over a said interval that typically ranges from in the future to
one 12 months. Revenue is accounted for when the efficiency obligation has been
glad, relying on the kind of service supplied. We view our obligation to
ship influencer advertising and marketing companies, together with administration companies, as a
single efficiency obligation that’s glad over time because the buyer
receives the advantages from the companies. Revenue is acknowledged utilizing an enter
technique of prices incurred in comparison with complete anticipated prices to measure the
progress in the direction of satisfying the general efficiency obligation of the advertising and marketing
marketing campaign. The supply of customized content material represents a definite efficiency
obligation that’s glad over time as we’ve no various for the customized
content material, and we’ve an enforceable proper to cost for efficiency accomplished
to this point underneath the contracts. We think about customized content material to be a sequence of
distinct companies which are considerably the identical and have the identical sample of
switch to the client. Revenue is acknowledged over time utilizing an output technique
based mostly on when each bit of content material is delivered to the client. Based on our
evaluations, income from Managed Services is reported on a gross foundation as a result of
we’ve the first obligation to satisfy the efficiency obligations, and we
create, evaluate, and management the companies. We tackle the danger of cost to any
third-party creators and set up the contract worth immediately with our
clients based mostly on the companies requested within the assertion of labor.
Marketplace Spend Fees Revenue
For Marketplace Spend Fees Revenue, the self-service clients instruct creators
discovered by means of our IZEAx and Shake platforms to supply and/or distribute customized
content material for an agreed-upon transaction worth. Our platforms management the
contracting, description of companies, acceptance, and cost for the requested
content material. This service is used primarily by information businesses or entrepreneurs to handle
the outsourcing of their content material and promoting wants. We cost the
self-service buyer the transaction worth plus a charge based mostly on the contract.
Revenue is acknowledged when the transaction is accomplished by the creator and
accepted by the marketer or, if associated to influencer advertising and marketing companies, over
the content material posting interval as verified by the platform. This income is reported
on a web foundation since we’re performing as an agent by means of our platform for the
third-party creator to supply the companies or content material on to the
self-service buyer or to submit accredited content material by means of a number of social
media platforms.
License Fees Revenue
License Fees Revenue is generated by granting restricted, non-exclusive,
non-transferable licenses to clients to make use of the IZEAx, BrandGraph, and till
February 2020, the FaucetInfluence know-how platforms for an agreed-upon
subscription interval. Customers can also individually subscribe to the IZEAx
Discovery service inside the IZEAx platform. Customers license the platforms to
handle their influencer advertising and marketing campaigns. Fees for subscription or licensing
companies are acknowledged straight-line over the time period of the service.
Other Fees Revenue
Other Fees Revenue is generated when charges are charged to our platform customers
primarily associated to month-to-month plan charges, inactivity charges, and early cash-out
charges. Plan charges are acknowledged inside the month they relate to, inactivity charges
are acknowledged at a time limit when the account is deemed inactive, and early
cash-out charges are acknowledged when a cash-out is both under sure minimal
thresholds or when accelerated payout timing is requested.
We don’t usually have interaction in contracts longer than one 12 months. Therefore, we do
not capitalize prices to acquire its buyer contracts as these quantities typically
could be acknowledged over a interval of lower than one 12 months and are usually not materials.
Stock-Based Compensation
Stock-based compensation is measured on the grant date, based mostly on the award’s
honest worth, and is acknowledged as an expense over the worker’s requisite
service interval. We estimate the honest worth of every inventory choice as of the date
of grant utilizing the Black-Scholes pricing mannequin. Options usually vest ratably
over 4 years, with one-fourth of choices vesting one
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12 months from the date of grant and the remaining choices vesting month-to-month, in equal
increments over the remaining three-year interval and usually having 5 or
ten-year contract lives. We use the simplified technique to estimate the anticipated
time period of worker inventory choices. We don’t consider historic train information will
present an inexpensive foundation for estimating the anticipated time period for the present
share choices granted. The simplified technique assumes that workers will
train share choices evenly between the interval when the share choices are
vested and ending on the date when the choices expire. We use the closing inventory
worth of our widespread inventory on the date of the grant because the related honest worth
of our widespread inventory. For issuances after June 30, 2019, we estimate the
volatility of our widespread inventory on the date of grant based mostly on the volatility of
our inventory throughout the interval. For issuances on or earlier than June 30, 2019, we
estimated the volatility of our widespread inventory on the date of grant based mostly on the
volatility of comparable peer firms that had been publicly traded and had a
longer buying and selling historical past than us. We decide the anticipated life based mostly on
historic expertise with comparable awards, contemplating the contractual phrases,
vesting schedules, and post-vesting forfeitures. We use the risk-free curiosity
charge on the implied yield presently obtainable on U.S. Treasury points with an
equal remaining time period roughly equal to the anticipated lifetime of the award.
We have by no means paid any money dividends on our widespread inventory and don’t anticipate
paying any money dividends within the foreseeable future. We estimate forfeitures
when recognizing compensation expense. This estimate of forfeitures is adjusted
over the requisite service interval based mostly on the extent to which precise
forfeitures differ, or are anticipated to vary, from such estimates. Changes in
estimated forfeitures are acknowledged by means of a cumulative catch-up adjustment,
which is acknowledged within the interval of change, and a revised quantity of unamortized
compensation expense to be acknowledged in future durations.
The following desk reveals the variety of inventory choices granted underneath our 2011
Equity Incentive Plans and the assumptions used to find out the honest worth of
these choices throughout the twelve months ended December 31, 2021, and 2020:
Weighted Weighted
Average Average Weighted common
Weighted Average Weighted Average Risk-Free Grant Date anticipated
Twelve Months Ended Total Options Granted Exercise Price Expected Term Weighted Average Volatility Interest Rate Expected Dividends Fair Value forfeiture charge
December 31, 2020 411,350 $ 0.69 6.0 years 108.58% 0.46% – $ 0.56 7.72%
December 31, 2021 296,569 $ 2.60 6.0 years 120.18% 0.98% – $ 2.25 11.74%
Total stock-based compensation expense recorded in our consolidated
statements of operations for restricted inventory, restricted inventory models, inventory
choices, and worker inventory buy plan issuance throughout the twelve months
ended December 31, 2021, and 2020 had been $0.9 million and $0.5 million,
respectively.
There had been excellent choices to buy 1,795,663 shares with a weighted
common train worth of $2.79 per share, of which choices to buy
1,139,859 shares had been exercisable with a weighted common train worth of
$3.54 per share, as of December 31, 2021. The intrinsic worth on excellent
choices as of December 31, 2021, was $0.4 million. The intrinsic worth on
exercisable choices as of December 31, 2021, was $0.2 million.
As of December 31, 2021, we had unvested restricted inventory models representing
375,444 shares of widespread inventory with an intrinsic worth of $0.5 million and three,553
unvested shares of issued restricted inventory with an intrinsic worth of $4.8
thousand.
Recent Accounting Pronouncements
See “Note 1. Company and Summary of Significant Accounting Policies,” underneath Part
II, Item 8 of this Annual Report for data on further latest
pronouncements.© Edgar Online, supply Glimpses
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