x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Nevada | 37-1530765 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
501 N. Orlando Avenue, Ste 313, PMB 247 Winter Park, FL | 32789 | |
(Address of principal executive offices) | (Zip Code) |
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 |
Large accelerated filer o | Accelerated filer o | |
Non-accelerated filer x | Smaller reporting company x | |
Emerging growth company o |
Page | |
PART I. FINANCIAL INFORMATION | |
PART II. OTHER INFORMATION | |
March 31, 2020 | December 31, 2019 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 5,634,441 | $ | 5,884,629 | |||
Accounts receivable, net | 3,977,571 | 5,596,719 | |||||
Prepaid expenses | 423,419 | 400,181 | |||||
Other current assets | 37,097 | 153,031 | |||||
Total current assets | 10,072,528 | 12,034,560 | |||||
Property and equipment, net | 317,154 | 309,780 | |||||
Goodwill | 4,016,722 | 8,316,722 | |||||
Intangible assets, net | 1,246,526 | 1,611,516 | |||||
Software development costs, net | 1,470,334 | 1,519,980 | |||||
Security deposits | 151,184 | 151,803 | |||||
Total assets | $ | 17,274,448 | $ | 23,944,361 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,130,791 | $ | 2,252,536 | |||
Accrued expenses | 1,604,588 | 1,377,556 | |||||
Contract liabilities | 5,597,479 | 6,466,766 | |||||
Line of credit | 1,162,924 | — | |||||
Right-of-use liability | — | 83,807 | |||||
Total current liabilities | 9,495,782 | 10,180,665 | |||||
Finance obligation, less current portion | 65,609 | 45,673 | |||||
Total liabilities | 9,561,391 | 10,226,338 | |||||
Commitments and Contingencies (Note 6) | — | — | |||||
Stockholders’ equity: | |||||||
Preferred stock; $.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding | — | — | |||||
Common stock; $.0001 par value; 200,000,000 shares authorized; 34,773,051 and 34,634,172, respectively, issued and outstanding | 3,477 | 3,464 | |||||
Additional paid-in capital | 74,257,810 | 74,099,328 | |||||
Accumulated deficit | (66,548,230 | ) | (60,384,769 | ) | |||
Total stockholders’ equity | 7,713,057 | 13,718,023 | |||||
Total liabilities and stockholders’ equity | $ | 17,274,448 | $ | 23,944,361 |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Revenue | $ | 4,763,668 | $ | 4,793,756 | ||||
Costs and expenses: | ||||||||
Cost of revenue (exclusive of amortization) | 2,140,517 | 2,099,291 | ||||||
Sales and marketing | 1,523,143 | 1,357,667 | ||||||
General and administrative | 2,417,838 | 2,612,054 | ||||||
Impairment of goodwill | 4,300,000 | — | ||||||
Depreciation and amortization | 501,269 | 436,224 | ||||||
Total costs and expenses | 10,882,767 | 6,505,236 | ||||||
Loss from operations | (6,119,099 | ) | (1,711,480 | ) | ||||
Other income (expense): | ||||||||
Interest expense | (6,618 | ) | (128,464 | ) | ||||
Other income (expense), net | (37,744 | ) | 9,364 | |||||
Total other expense, net | (44,362 | ) | (119,100 | ) | ||||
Net loss | $ | (6,163,461 | ) | $ | (1,830,580 | ) | ||
Weighted average common shares outstanding – basic and diluted | 34,681,198 | 12,575,458 | ||||||
Basic and diluted loss per common share | $ | (0.18 | ) | $ | (0.15 | ) |
Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||
Shares | Amount | Capital | Deficit | Equity | |||||||||||||||
Balance, December 31, 2018 | 12,075,708 | $ | 1,208 | $ | 60,311,756 | $ | (53,094,649 | ) | $ | 7,218,315 | |||||||||
Stock issued for payment of acquisition liability | 660,136 | 66 | 1,075,956 | — | 1,076,022 | ||||||||||||||
Stock issued for payment of services | 22,188 | 2 | 37,496 | — | 37,498 | ||||||||||||||
Stock issuance costs | — | — | (2,190 | ) | — | (2,190 | ) | ||||||||||||
Stock-based compensation | 54,076 | 5 | 111,693 | — | 111,698 | ||||||||||||||
Net loss | — | — | — | (1,830,580 | ) | (1,830,580 | ) | ||||||||||||
Balance, March 31, 2019 | 12,812,108 | $ | 1,281 | $ | 61,534,711 | $ | (54,925,229 | ) | $ | 6,610,763 |
Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||
Shares | Amount | Capital | Deficit | Equity | |||||||||||||||
Balance, December 31, 2019 | 34,634,172 | $ | 3,464 | $ | 74,099,328 | $ | (60,384,769 | ) | $ | 13,718,023 | |||||||||
Stock issued for payment of services | 97,655 | 10 | 31,240 | — | 31,250 | ||||||||||||||
Stock issuance costs | — | — | (2,326 | ) | — | (2,326 | ) | ||||||||||||
Stock-based compensation | 41,224 | 3 | 129,568 | — | 129,571 | ||||||||||||||
Net loss | — | — | — | (6,163,461 | ) | (6,163,461 | ) | ||||||||||||
Balance, March 31, 2020 | 34,773,051 | $ | 3,477 | $ | 74,257,810 | $ | (66,548,230 | ) | $ | 7,713,057 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (6,163,461 | ) | $ | (1,830,580 | ) | |
Adjustments to reconcile net loss to net cash (used for) provided by operating activities: | |||||||
Depreciation and amortization | 35,629 | 38,476 | |||||
Amortization of software development costs and other intangible assets | 465,640 | 397,748 | |||||
Impairment of intangible assets | 4,300,000 | — | |||||
Loss on disposal of equipment | — | (515 | ) | ||||
Provision for (recovery of) losses on accounts receivable | 33,305 | (29,940 | ) | ||||
Stock-based compensation, net | 129,571 | 151,214 | |||||
Fair value of stock issued for payment of services | 31,250 | 37,498 | |||||
Gain on settlement of acquisition costs payable | — | 191,439 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 1,585,843 | 1,035,594 | |||||
Prepaid expenses and other current assets | (15,135 | ) | 133,594 | ||||
Accounts payable | (1,121,745 | ) | (369,100 | ) | |||
Accrued expenses | 215,375 | 655,823 | |||||
Contract liabilities | (869,287 | ) | 506,974 | ||||
Right-of-use asset | 24,024 | (33,026 | ) | ||||
Net cash (used for) provided by operating activities | (1,348,991 | ) | 885,199 | ||||
Cash flows from investing activities: | |||||||
Purchase of equipment | — | (2,383 | ) | ||||
Software development costs | (51,004 | ) | (346,789 | ) | |||
Security deposits | 619 | 2,987 | |||||
Net cash used for investing activities | (50,385 | ) | (346,185 | ) | |||
Cash flows from financing activities: | |||||||
Net proceeds from (repayments on) line of credit | 1,162,924 | (190,041 | ) | ||||
Payments on finance obligation | (11,410 | ) | — | ||||
Stock issuance costs | (2,326 | ) | (2,190 | ) | |||
Net cash provided by (used for) financing activities | 1,149,188 | (192,231 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (250,188 | ) | 346,783 | ||||
Cash and cash equivalents, beginning of year | 5,884,629 | 1,968,403 | |||||
Cash and cash equivalents, end of period | $ | 5,634,441 | $ | 2,315,186 | |||
Supplemental cash flow information: | |||||||
Interest paid | $ | 1,368 | $ | 125,194 | |||
Non-cash financing and investing activities: | |||||||
Equipment acquired with financing arrangement | $ | 43,003 | $ | — | |||
Common stock issued for payment of acquisition liability | $ | — | $ | 1,076,022 | |||
Fair value of common stock issued for future services, net | $ | 125,000 | $ | 192,550 |
Computer Equipment | 3 years |
Office Equipment | 3 - 10 years |
Furniture and Fixtures | 5 - 10 years |
• | Level 1 – Valuation based on quoted market prices in active markets for identical assets and liabilities. |
• | Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets. |
• | Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value. |
Three Months Ended | |||
2011 Equity Incentive Plans Assumptions | March 31, 2020 | March 31, 2019 | |
Expected term | 6 years | 6 years | |
Weighted average volatility | 101.92% | 63.37% | |
Weighted average risk-free interest rate | 1.71% | 2.52% | |
Expected dividends | — | — | |
Weighted average expected forfeiture rate | 15.32% | 7.82% |
March 31, 2020 | December 31, 2019 | ||||||
Furniture and fixtures | $ | 298,205 | $ | 298,205 | |||
Office equipment | 86,884 | 86,884 | |||||
Computer equipment | 498,011 | 455,008 | |||||
Leasehold improvements | 338,018 | 338,018 | |||||
Total | 1,221,118 | 1,178,115 | |||||
Less accumulated depreciation and amortization | (903,964 | ) | (868,335 | ) | |||
Property and equipment, net | $ | 317,154 | $ | 309,780 |
March 31, 2020 | December 31, 2019 | Useful Life (in years) | |||||||||||||||
Balance | Accumulated Amortization | Balance | Accumulated Amortization | ||||||||||||||
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 | 758,667 | 820,000 | 622,167 | 5 | ||||||||||||
Self-service content customers | 2,810,000 | 1,654,444 | 2,810,000 | 1,437,778 | 3 | ||||||||||||
Managed content customers | 2,140,000 | 2,140,000 | 2,140,000 | 2,140,000 | 3 | ||||||||||||
Domains | 166,469 | 141,499 | 166,469 | 133,175 | 5 | ||||||||||||
Embedded non-compete provision | 28,000 | 23,333 | 28,000 | 19,833 | 2 | ||||||||||||
Total | $ | 6,211,469 | $ | 4,964,943 | $ | 6,211,469 | $ | 4,599,953 |
March 31, 2020 | December 31, 2019 | ||||||
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 | |||||
Total | $ | 6,211,469 | $ | 6,211,469 | |||
Less accumulated amortization | (4,964,943 | ) | (4,599,953 | ) | |||
Intangible assets, net | $ | 1,246,526 | $ | 1,611,516 |
Intangible Asset Amortization Expense | ||||
Remainder of 2020 | $ | 714,137 | ||
2021 | 532,389 | |||
Total | $ | 1,246,526 |
Amount | ||||
Balance on December 31, 2019 | 8,316,722 | |||
Acquisitions, impairments or other changes during 2020 | (4,300,000 | ) | ||
Balance on March 31, 2020 | $ | 4,016,722 |
March 31, 2020 | December 31, 2019 | ||||||
Software development costs | $ | 2,724,021 | $ | 2,673,017 | |||
Less accumulated amortization | (1,253,687 | ) | (1,153,037 | ) | |||
Software development costs, net | $ | 1,470,334 | $ | 1,519,980 |
Software Development Amortization Expense | |||
Remainder of 2020 | $ | 304,039 | |
2021 | 393,283 | ||
2022 | 337,916 | ||
2023 | 297,127 | ||
2024 | 115,206 | ||
Thereafter | 22,763 | ||
Total | $ | 1,470,334 |
March 31, 2020 | December 31, 2019 | ||||||
Accrued payroll liabilities | $ | 1,395,847 | $ | 1,202,765 | |||
Accrued taxes | 112,675 | 117,698 | |||||
Current portion of finance obligation | 28,603 | 26,837 | |||||
Accrued other | 67,463 | 30,256 | |||||
Total accrued liabilities | $ | 1,604,588 | $ | 1,377,556 |
Restricted Stock | Common Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Years to Vest | |||
Nonvested at December 31, 2018 | 57,984 | $ | 3.70 | 1.4 | ||
Granted | 120,512 | 1.60 | ||||
Vested | (139,157 | ) | 2.24 | |||
Forfeited | (8,057 | ) | 3.18 | |||
Nonvested at December 31, 2019 | 31,282 | $ | 2.15 | 1.9 | ||
Granted | 390,625 | 0.32 | ||||
Vested | (104,833 | ) | 0.42 | |||
Forfeited | — | |||||
Nonvested at March 31, 2020 | 317,074 | $ | 0.47 | 0.8 |
Restricted Stock Units | Common Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Years to Vest | |||
Nonvested at December 31, 2018 | 160,000 | $ | 1.04 | 1.0 | ||
Granted | 410,437 | 0.40 | ||||
Vested | (149,290 | ) | 0.79 | |||
Forfeited | (54,335 | ) | 1.04 | |||
Nonvested at December 31, 2019 | 366,812 | $ | 0.42 | 3.2 | ||
Granted | 684,994 | 0.28 | ||||
Vested | (34,046 | ) | 0.31 | |||
Forfeited | (5,000 | ) | 0.28 | |||
Nonvested at March 31, 2020 | 1,012,760 | $ | 0.32 | 1.8 |
Options Outstanding | Common Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | |||||
Outstanding at December 31, 2018 | 1,040,477 | $ | 5.23 | 6.5 | ||||
Granted | 586,552 | 0.67 | ||||||
Expired | (147,313 | ) | 7.59 | |||||
Forfeited | (121,879 | ) | 2.70 | |||||
Outstanding at December 31, 2019 | 1,357,837 | $ | 3.24 | 7.2 | ||||
Granted | 8,917 | 0.25 | ||||||
Expired | — | — | ||||||
Forfeited | (20,399 | ) | 5.36 | |||||
Outstanding at March 31, 2020 | 1,346,355 | $ | 3.18 | 7.0 | ||||
Exercisable at March 31, 2020 | 795,928 | $ | 4.64 | 5.7 |
Nonvested Options | Common Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Years to Vest | |||||
Nonvested at December 31, 2018 | 300,510 | $ | 0.80 | 2.4 | ||||
Granted | 586,552 | 0.40 | ||||||
Vested | (197,202 | ) | 1.44 | |||||
Forfeited | (89,081 | ) | 0.80 | |||||
Nonvested at December 31, 2019 | 600,779 | $ | 0.64 | 3.0 | ||||
Granted | 8,917 | 0.16 | ||||||
Vested | (56,128 | ) | 1.20 | |||||
Forfeited | (3,141 | ) | 0.88 | |||||
Nonvested at March 31, 2020 | 550,427 | $ | 0.56 | 2.8 |
Period Ended | Total Stock Options Granted | Weighted-Average Exercise Price | Weighted-Average Expected Term | Weighted-Average Volatility | Weighted-Average Risk-Free Interest Rate | Weighted-Average Grant Date Fair Value | ||||||
March 31, 2019 | 30,542 | $1.46 | 6 years | 63.37% | 2.52% | $0.91 | ||||||
March 31, 2020 | 8,917 | $0.25 | 6 years | 101.92% | 1.71% | $0.16 |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Cost of revenue | $ | 7,004 | $ | 2,886 | ||||
Sales and marketing | $ | 22,056 | $ | 6,336 | ||||
General and administrative | $ | 100,511 | $ | 151,655 | ||||
Total stock-based compensation | $ | 129,571 | $ | 160,877 |
Three Months Ended | ||||||||
March 31, 2020 | March 31, 2019 | |||||||
Net loss | $ | (6,163,461 | ) | $ | (1,830,580 | ) | ||
Weighted average shares outstanding - basic and diluted | 34,681,198 | 12,575,458 | ||||||
Basic and diluted loss per common share | $ | (0.18 | ) | $ | (0.15 | ) |
Three Months Ended | ||||||
March 31, 2020 | March 31, 2019 | |||||
Stock options | 1,358,501 | 1,032,095 | ||||
Restricted stock units | 812,687 | 142,385 | ||||
Restricted stock | 386,209 | 106,891 | ||||
Warrants | 13,709 | 17,500 | ||||
Total excluded shares | 2,571,106 | 1,298,871 |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Managed Services Revenue | $ | 4,125,061 | $ | 3,867,232 | ||||
Legacy Workflow Fees | — | 47,330 | ||||||
Marketplace Spend Fees | 166,293 | 374,653 | ||||||
License Fees | 416,816 | 491,094 | ||||||
SaaS Services Revenue | 583,109 | 913,077 | ||||||
Other Revenue | 55,498 | 13,447 | ||||||
Total Revenue | $ | 4,763,668 | $ | 4,793,756 |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
United States | $ | 4,578,008 | $ | 4,275,419 | ||||
Canada | 185,660 | 518,337 | ||||||
Total | $ | 4,763,668 | $ | 4,793,756 |
March 31, 2020 | December 31, 2019 | ||||||
Accounts receivable, net | $ | 3,977,571 | $ | 5,596,719 | |||
Contract liabilities (unearned revenue) | $ | 5,597,479 | $ | 6,466,766 |
• | our ability to raise additional funding needed to fund our business operation in the future; |
• | the impact of the COVID-19 pandemic on our operations, financial condition and the worldwide economy; |
• | our ability to maintain effective disclosure controls and procedures and internal control over financial reporting; |
• | our ability to regain compliance with the requirements for continued listing of our common stock on the Nasdaq Capital Market; |
• | our ability to protect our intellectual property; |
• | customer cancellations; |
• | our ability to maintain and grow our business; |
• | results of any present or future arbitration or litigation; |
• | competition in the industry; |
• | variability of operating results; |
• | our ability to satisfy the requirements for continued listing of our common stock on the Nasdaq Capital Market; |
• | our ability to maintain and enhance our brand; |
• | accuracy of tracking the number of user accounts; |
• | our development and introduction of new products and services; |
• | 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; |
• | economic conditions, including as a result of health and safety concerns; |
• | dependence on key personnel; |
• | the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the service requirements of our customers; |
• | the potential liability with respect to actions taken by our existing and past employees; |
• | risks associated with international sales; |
• | and the other risks and uncertainties described in the Risk Factors section of this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2019. |
Three Months Ended March 31, | |||||||||||||
2020 | 2019 | $ Change | % Change | ||||||||||
Revenue | $ | 4,763,668 | $ | 4,793,756 | $ | (30,088 | ) | (1 | )% | ||||
Costs and expenses: | |||||||||||||
Cost of revenue (exclusive of amortization) | 2,140,517 | 2,099,291 | 41,226 | 2 | % | ||||||||
Sales and marketing | 1,523,143 | 1,357,667 | 165,476 | 12 | % | ||||||||
General and administrative | 2,417,838 | 2,612,054 | (194,216 | ) | (7 | )% | |||||||
Impairment of goodwill | 4,300,000 | — | 4,300,000 | 100 | % | ||||||||
Depreciation and amortization | 501,269 | 436,224 | 65,045 | 15 | % | ||||||||
Total costs and expenses | 10,882,767 | 6,505,236 | 4,377,531 | 67 | % | ||||||||
Loss from operations | (6,119,099 | ) | (1,711,480 | ) | (4,407,619 | ) | 258 | % | |||||
Other income (expense): | |||||||||||||
Interest expense | (6,618 | ) | (128,464 | ) | 121,846 | (95 | )% | ||||||
Other income (expense), net | (37,744 | ) | 9,364 | (47,108 | ) | (503 | )% | ||||||
Total other expense, net | (44,362 | ) | (119,100 | ) | 74,738 | (63 | )% | ||||||
Net loss | $ | (6,163,461 | ) | $ | (1,830,580 | ) | $ | (4,332,881 | ) | 237 | % |
Three Months Ended March 31, | |||||||||||||||||
2020 | 2019 | $ Change | % Change | ||||||||||||||
Managed Services Revenue | $ | 4,125,061 | 87 | % | $ | 3,867,232 | 81 | % | $ | 257,829 | 7 | % | |||||
Legacy Workflow Fees | — | — | % | 47,330 | 1 | % | (47,330 | ) | (100 | )% | |||||||
Marketplace Spend Fees | 166,293 | 3 | % | 374,653 | 8 | % | (208,360 | ) | (56 | )% | |||||||
License Fees | 416,816 | 9 | % | 491,094 | 10 | % | (74,278 | ) | (15 | )% | |||||||
SaaS Services Revenue | 583,109 | 12 | % | 913,077 | 19 | % | (329,968 | ) | (36 | )% | |||||||
Other Revenue | 55,498 | 1 | % | 13,447 | — | % | 42,051 | 313 | % | ||||||||
Total Revenue | $ | 4,763,668 | 100 | % | $ | 4,793,756 | 100 | % | $ | (30,088 | ) | (1 | )% |
• | Legacy Workflow Fees revenue represents self-service transactions through the Ebyline platform for professional custom content workflow. After the migration of the last customers from the Ebyline platform to IZEAx in December 2019, there is no longer any revenue generated from Legacy Workflow Fees as all such revenue is reported as Marketplace Spend Fees under the IZEAx platform. |
• | Marketplace Spend Fees revenue primarily results from marketers and partners using the IZEAx, and from July 2018 - February 2020, the TapInfluence, platforms on a SaaS basis to distribute content for marketing and influencer marketing campaigns. Our revenue from Marketplace Spend Fees decreased by $208,360 for the three months ended March 31, 2020 when compared with the same period of 2019, primarily as a result of lower spend levels from our marketers and as a result of competitive pricing efforts which reduced our margins on those spends. Revenue from Marketplace Spend Fees represents our net margins received on this business. After the migration of the last customers from the TapInfluence platform to IZEAx in February 2020, all revenue is solely generated from the IZEAx platform. |
• | License Fees revenue is generated primarily through the granting of limited, non-exclusive, non-transferable licenses to customers for the use of the IZEAx and TapInfluence technology platforms for an agreed-upon subscription period. Customers license the platforms to manage their own influencer marketing campaigns. Fees for subscription or licensing services are recognized straight-line over the term of the service. License Fees revenue decreased during the three months ended March 31, 2020 to $416,816 compared to $491,094 in the same period of the prior year. The decrease was partly due to former TapInfluence customers who churned during 2019 who are not producing revenue in 2020, but also, we implemented a competitive standardized pricing system for all IZEAx customers that was at a lower price point than the former TapInfluence licensing contracts. |
Three Months Ended March 31, | |||||||||||||||||
2020 | 2019 | $ Change | % Change | ||||||||||||||
Managed Services Gross Billings | $ | 4,125,061 | 68% | $ | 3,867,232 | 50% | $ | 257,829 | 7% | ||||||||
Legacy Workflow Fees | — | —% | 654,925 | 8% | (654,925 | ) | (100)% | ||||||||||
Marketplace Spend Fees | 1,499,774 | 24% | 2,802,521 | 36% | (1,302,747 | ) | (46)% | ||||||||||
License Fees | 416,816 | 7% | 491,094 | 6% | (74,278 | ) | (15)% | ||||||||||
SaaS Services Gross Billings | 1,916,590 | 31% | 3,948,540 | 50% | (2,031,950 | ) | (51)% | ||||||||||
Other Revenue | 55,498 | 1% | 13,447 | —% | 42,051 | 313% | |||||||||||
Total Gross Billings | $ | 6,097,149 | 100% | $ | 7,829,219 | 100% | $ | (1,732,070 | ) | (22)% |
Three Months Ended March 31, | ||||||||||||||
2020 | 2019 | $ Change | % Change | |||||||||||
Revenue | $ | 4,763,668 | $ | 4,793,756 | $ | (30,088 | ) | (1)% | ||||||
Plus payments made to third-party creators (1) | 1,333,481 | 3,035,463 | (1,701,982 | ) | (56)% | |||||||||
Gross billings | $ | 6,097,149 | $ | 7,829,219 | $ | (1,732,070 | ) | (22)% |
(1) | Payments made to third-party creators for the Legacy Workflow and Marketplace Spend components of our revenue reported on a net basis for GAAP. |
• | does not include stock-based compensation expense, which is a non-cash expense, but has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy; |
• | 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 changes in acquisition cost estimates as a result of the allocation of acquisition costs payable to compensation expense which may be a significant recurring expense for our business if we continue to make business acquisitions; |
• | does not include gains or losses on the settlement of acquisition costs payable or liabilities when the stock value, as agreed upon in the agreement, varies from the market price of our stock on the settlement date. This is a non-cash expense, but was a recurring expense for our business on certain business contracts where the amounts could vary; |
• | 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. |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Net loss | $ | (6,163,461 | ) | $ | (1,830,580 | ) | |
Non-cash stock-based compensation | 129,571 | 160,877 | |||||
Non-cash stock issued for payment of services | 31,250 | 37,498 | |||||
Gain on settlement of acquisition costs payable | — | 191,439 | |||||
Increase in value of acquisition costs payable | — | 2,664 | |||||
Interest expense | 6,618 | 128,464 | |||||
Depreciation and amortization | 501,269 | 436,224 | |||||
Impairment on intangible assets | 4,300,000 | — | |||||
Other non-cash items | — | (515 | ) | ||||
Adjusted EBITDA | $ | (1,194,753 | ) | $ | (873,929 | ) | |
Revenue | $ | 4,763,668 | $ | 4,793,856 | |||
Adjusted EBITDA as a % of Revenue | (25 | )% | (18 | )% |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Net cash (used for)/provided by: | |||||||
Operating activities | $ | (1,348,991 | ) | $ | 885,199 | ||
Investing activities | (50,385 | ) | (346,185 | ) | |||
Financing activities | 1,149,188 | (192,231 | ) | ||||
Net increase/(decrease) in cash and cash equivalents | $ | (250,188 | ) | $ | 346,783 |
Exhibit No. | Description | |
3.1 | ||
3.2 | ||
3.3 | ||
3.4 | ||
3.5 | ||
3.6 | ||
3.7 | ||
3.8 | ||
3.9 | ||
3.10 | ||
10.1 | (a) | |
10.2 | (a) | |
10.3 | ||
31.1 | * | |
31.2 | * | |
32.1 | * (b) | |
32.2 | * (b) | |
101 | * (c) | The following materials from IZEA Worldwide, Inc.'s Quarterly Report for the quarter ended March 31, 2020 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Unaudited Consolidated Balance Sheets, (ii) the Unaudited Consolidated Statements of Operations, (iii) the Unaudited Consolidated Statement of Stockholders' Equity, (iv) the Unaudited Consolidated Statements of Cash Flow, and (iv) the Unaudited Notes to the 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. |
IZEA Worldwide, Inc. a Nevada corporation | ||
May 14, 2020 | By: | /s/ Edward H. Murphy |
Edward H. Murphy Chairman, President and Chief Executive Officer (Principal Executive Officer) | ||
May 14, 2020 | By: | /s/ LeAnn C. Hitchcock |
LeAnn C. Hitchcock Interim Chief Financial Officer (Principal Financial and Accounting Officer) |
/s/ Edward H. Murphy | |
Edward H. Murphy | |
Chairman, President and Chief Executive Officer | |
(Principal Executive Officer) |
/s/ LeAnn C. Hitchcock | |
LeAnn C. Hitchcock | |
Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
/s/ Edward H. Murphy | |
Edward H. Murphy Chairman, President and Chief Executive Officer (Principal Executive Officer) |
/s/ LeAnn C. Hitchcock | |
LeAnn C. Hitchcock Chief Financial Officer (Principal Financial and Accounting Officer) |
Stockholders' Equity - Employee Stock Purchase Plan (Detailsl) - 2014 Employee Stock Purchase Plan [Member] |
Apr. 16, 2014
USD ($)
hours
shares
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Mar. 31, 2020
shares
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Common stock, capital shares reserved for future issuance (shares) | 500,000 | 410,817 |
Share-based compensation arrangement by share-based payment award, award vesting period (in days) | 90 days | |
Minimum hour requirement for employees participation in the ESSP (hours) | hours | 20 | |
Employee stock ownership plan (ESOP), successive offering period | 6 months | |
Annual compensation limit percentage, employee stock purchase plan (percentage) | 10.00% | |
Annual compensation limit, employee stock purchase plan (dollars) | $ | $ 21,250 | |
Shares issuance limit per offering period, employee stock purchase plan | 2,000 | |
Fair market value of shares available for issuance (percentage) | 85.00% |
Intangible Assets - Schedule of Other Acquired Assets (Details) - USD ($) |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Total | $ 6,211,469 | $ 6,211,469 |
Less accumulated amortization | (4,964,943) | (4,599,953) |
Intangible assets, net | 1,246,526 | 1,611,516 |
Domains [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total | 166,469 | 166,469 |
Less accumulated amortization | (141,499) | (133,175) |
ZenContent [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total | 722,000 | 722,000 |
TapInfluence, Inc. [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total | 2,953,000 | 2,953,000 |
Ebyline, Inc. [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total | $ 2,370,000 | $ 2,370,000 |
Company and Summary of Significant Accounting Policies - Advertising Costs (Details Textual) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Selling and Marketing Expense [Member] | ||
Significant Accounting Policies [Line Items] | ||
Advertising costs | $ 167,650 | $ 78,078 |
Company and Summary of Significant Accounting Policies - Intangible Assets (Details Textual) |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Minimum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Useful life (in years) | 12 years |
Maximum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Useful life (in years) | 60 years |
Stockholders' Equity (Notes) |
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Text Block] | STOCKHOLDERS’ EQUITY Authorized Shares The Company has 200,000,000 authorized shares of common stock and 10,000,000 authorized shares of preferred stock, each with a par value of $0.0001 per share. Stock Issued for Acquisitions On January 26, 2019, pursuant to a Merger Agreement with TapInfluence, the Company issued 660,136 shares of its common stock valued at $884,583, or $1.34 per share, using the 30-day VWAP as reported by the Nasdaq Capital Market prior to the issuance date. The Company recorded a $191,439 loss on the settlement of this acquisition cost payable as a result of the difference between the actual closing market price of the common stock of $1.63 on the settlement date and the 30-day VWAP of $1.34 required by the Merger Agreement. Equity Incentive Plans In May 2011, the Company’s Board of Directors (the “Board”) adopted the 2011 Equity Incentive Plan of IZEA Worldwide, Inc. (the “May 2011 Plan”). At the Company’s 2019 Annual Meeting of Stockholders held on December 12, 2019, the stockholders approved an amendment and restatement of the May 2011 Plan which increased the number of shares of common stock available for issuance under the May 2011 Plan. The amended and restated May 2011 Plan allows the Company to award restricted stock, restricted stock units and stock options covering up to 4,500,000 shares of common stock as incentive compensation for its employees and consultants. As of March 31, 2020, the Company had 1,275,732 shares of common stock available for issuance pursuant to future grants under the May 2011 Plan. In August 2011, the Company adopted the 2011 B Equity Incentive Plan (the “August 2011 Plan”) reserving 4,375 shares of common stock for issuance under the August 2011 Plan. As of March 31, 2020, the Company had 4,375 shares of common stock available for future grants under the August 2011 Plan. Restricted Stock Under both the May 2011 Plan and the August 2011 Plan (together, the “2011 Equity Incentive Plans”), the Board determines the terms and conditions of each restricted stock issuance, including any future vesting restrictions. The Company issued 27,184 shares of restricted stock on March 28, 2019 to Mr. Edward Murphy, its Chief Executive Officer, for amounts owed on his fourth quarter 2018 performance bonus. The stock was initially valued at $36,427 and vests in equal monthly installments over 12 months from issuance. The Company issued 4,570 shares of restricted stock on March 28, 2019 to Mr. Ryan Schram, its Chief Operating Officer, for amounts owed on his fourth quarter 2018 performance bonus. The stock was initially valued at $6,124 and vests in equal monthly installments over 48 months from issuance. On January 31, 2019, the Company issued its six independent directors a total of 88,758 shares of restricted common stock initially valued at $150,000 for their annual service as directors of the Company. The stock vested in equal monthly installments from January through December 2019. Ms. Golder forfeited 4,932 of these shares valued at $8,335 upon her resignation from the board of directors in September 2019. On January 31, 2020, the Company issued its five independent directors a total of 390,625 shares of restricted common stock initially valued at $125,000 for their annual service as directors of the Company. The stock vests in equal monthly installments from January through December 2020. The following table contains summarized information about restricted stock issued during the year ended December 31, 2019 and the three months ended March 31, 2020:
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 earnings per share until such time as the restricted stock vests. Expense recognized on restricted stock issued to non-employees for services during the three months ended March 31, 2020 and 2019 was $31,250 and $37,498, respectively. Expense recognized on restricted stock issued to employees during the three months ended March 31, 2020 and 2019 was $13,535 and $38,412, respectively. The fair value of the Company’s common stock on March 31, 2020 was $0.20 per share and the intrinsic value on the non-vested restricted stock as of March 31, 2020 was $63,415. Future compensation expense related to issued, but nonvested restricted stock awards as of March 31, 2020 is $148,282. This value is estimated to be recognized over the weighted-average vesting period of approximately 10 months. Restricted Stock Units The Board determines the terms and conditions of each restricted stock unit award issued under the May 2011 Plan. The Company issued 84,994 restricted stock units on January 3, 2020 to Mr. Ryan Schram, its Chief Operating Officer, under the terms of his employment agreement. The restricted stock units were initially valued at $23,739 and vest in equal monthly installments over 48 months from issuance. The Company also issued 100,000 restricted stock units on January 3, 2020 to Mr. Schram as additional incentive compensation. The restricted stock units were initially valued at $27,930 and vest in a lump sum 12 months from issuance. On January 3, 2020, the Company issued a total of 500,000 shares of restricted common stock initially valued at $139,650 to twenty employees as additional incentive compensation. The restricted stock units vest in a lump sum 12 months from issuance. The following table contains summarized information about restricted stock units during the year ended December 31, 2019 and the three months ended March 31, 2020:
The fair value of the Company’s common stock on March 31, 2020 was $0.20 per share and the intrinsic value on the non-vested restricted units as of March 31, 2020 was $202,552. Expense recognized on restricted stock units issued to employees during the three months ended March 31, 2020 and 2019 was $56,607 and $32,465, respectively. As of March 31, 2020, future compensation related to restricted stock units expected to vest of $327,493 is estimated to be recognized over the weighted-average vesting period of approximately 1.8 years. Stock Options Under the 2011 Equity Incentive Plans, 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 Plans. A summary of option activity under the 2011 Equity Incentive Plans during the year ended December 31, 2019 and the three months ended March 31, 2020, is presented below:
During the three months ended March 31, 2020 and 2019, no options were exercised. The fair value of the Company's common stock on March 31, 2020 was $0.20 per share and the intrinsic value on outstanding options as of March 31, 2020 was $0. The intrinsic value on exercisable options as of March 31, 2020 was $0. A summary of the nonvested stock option activity under the 2011 Equity Incentive Plans during the year ended December 31, 2019 and the three months ended March 31, 2020, is presented below:
Expense recognized on stock options issued to employees during the three months ended March 31, 2020 and 2019 was $59,051 and $90,000, respectively. Future compensation related to nonvested awards as of March 31, 2020 expected to vest of $285,236 is estimated to be recognized over the weighted-average vesting period of approximately 3.0 years. The following table shows the number of stock options granted under the Company’s 2011 Equity Incentive Plans and the assumptions used to determine the fair value of those options during the three months ended March 31, 2020 and 2019:
There were outstanding options to purchase 1,346,355 shares with a weighted average exercise price of $3.18 per share, of which options to purchase 795,928 shares were exercisable with a weighted average exercise price of $4.64 per share as of March 31, 2020. Employee Stock Purchase Plan At the Company’s 2018 Annual Meeting of Stockholders held on December 18, 2018, stockholders holding a majority of the Company’s outstanding shares of common stock, upon previous recommendation and approval of the Board, adopted the amended and restated IZEA Worldwide, Inc. 2014 Employee Stock Purchase Plan (the “ESPP”), which provides for the issuance of up to 500,000 shares of the Company’s common stock thereunder. Any employee 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) is eligible to participate in the ESPP. The ESPP operates in successive six months offering 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. As of March 31, 2020, the Company had 410,817 remaining shares of common stock available for future grants under the ESPP. Summary Stock-Based Compensation 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. 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 stated in Note 1. Total stock-based compensation expense recognized on restricted stock, restricted stock units, stock options and the employee stock purchase plan issuances during the three months ended March 31, 2020 and 2019 was recorded in the Company’s consolidated statements of operations as follows:
Share Repurchase Program On July 1, 2019, the Board authorized and approved a share repurchase program under which the Company may repurchase up to $3,500,000 of its common stock from time to time through December 31, 2020, subject to market conditions. As of March 31, 2020, the Company had not repurchased any shares of common stock under the share repurchase program. |
Company and Summary of Significant Accounting Policies (Policies) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
Nature of Business [Policy Text Block] | Nature of Business IZEA Worldwide, Inc. (together with its wholly-owned subsidiaries, “we,” “us,” “our,” “IZEA” or the “Company”) is a public company incorporated in the state of Nevada. In January 2015, IZEA purchased all of the outstanding shares of capital stock of Ebyline, Inc. (“Ebyline”). In July 2016, IZEA purchased all the outstanding shares of capital stock of ZenContent, Inc. (“ZenContent”). The legal entity of ZenContent was dissolved in December 2017 and the legal entity of Ebyline was dissolved in December 2019 after all assets and transactions were transferred to IZEA. In March 2016, the Company formed IZEA Canada, Inc., a wholly-owned subsidiary, incorporated in Ontario, Canada, to operate as a sales and support office for IZEA’s Canadian customers. On July 26, 2018, the Company merged with TapInfluence, Inc. (“TapInfluence”) pursuant to the terms of an Agreement and Plan of Merger dated as of July 11, 2018, as amended. The Company creates and operates online marketplaces that connect marketers with content creators. The creators are compensated by the Company 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 personal websites, blogs, and social media channels. Marketers receive influential consumer content and engaging, shareable stories that drive awareness. The Company’s primary technology platform, The IZEA Exchange (“IZEAx”), enables transactions to be completed at scale through the management of custom content workflow, creator search and targeting, bidding, analytics, and payment processing. IZEAx is designed to provide a unified ecosystem that enables the creation and publication of multiple types of custom content through a creator’s personal websites, blogs, or social media channels including Twitter, Facebook, Instagram, and YouTube, among others. Until December 2019 when it was merged into IZEAx, the Company operated the Ebyline technology platform, which was originally designed as a self-service content marketplace to replace editorial newsrooms in news agencies with a “virtual newsroom” to handle their content workflow. In July 2016, the Company acquired the ZenContent technology platform to use as an in-house workflow tool that enables the Company to produce highly scalable, multi-part production of content for both e-commerce entities and brand customers. The TapInfluence technology platform, acquired in 2018, performed in a similar manner to IZEAx and was being utilized by the majority of the TapInfluence customers as a self-service platform via a licensing arrangement, allowing access to the platform and its creators for self-managed marketing campaigns. After the migration of the last customers to IZEAx from the Ebyline platform in December 2019 and from the TapInfluence platform in February 2020, all marketplace revenue is solely generated from the IZEAx platform. |
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Liquidity and Going Concern [Policy Text Block] | On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (COVID-19) as a global pandemic and recommended containment and mitigation measures worldwide. As the spread continued throughout the United States, the Company directed all of its staff to work from home effective March 16, 2020. All of the Company’s business operations and ability to support its customers is fully functional while its employees are working from remote locations. However, the Company has begun to see impacts on its operations due to changes in advertising decisions, timing and spending priorities from customers, which will result in a negative impact to Company bookings and future revenue. While the disruption is currently expected to be temporary, there is uncertainty around the duration and the total economic impact. Therefore, while the Company expects this matter to negatively impact its business, such events are generally outside of the Company’s control and could have a material adverse impact on the Company’s business, results of operations, and financial position in future periods. As a result, the Company is leveraging its balance sheet and has drawn on its secured credit facility to increase the Company’s cash position and help preserve its financial flexibility. In light of the adverse economic conditions caused by the COVID-19 pandemic, the Company implemented average temporary salary and wage reductions of 20%, including a 21% reduction in base salary agreed to by the Company’s Chief Executive Officer and Chief Operating Officer. These salary reductions were effective as of April 6, 2020 until the earlier of December 31, 2020 or the Company’s restoring normal payroll rates to the majority of its employees. Members of the Company’s Board of Directors also agreed to a similar temporary reduction to their fees. Additionally, the Company did not renew leases for its headquarters and temporary office spaces as additional means to reduce fixed costs during this time. The Company intends to have all employees to work from home for the foreseeable future to protect the health and safety of its workers. There can be no assurance that the Company will return to a typical office environment in the future, nor can the Company say what that office environment may look like. In addition to salary reductions, the Company has also temporarily reduced certain employee benefits, implemented a new employee hiring freeze, reduced and shifted marketing expense, and eliminated travel expense for the near term future. These measures may not be sustainable and could prove detrimental long term. Therefore, management will be reviewing these initial actions and other options in conjunction with the changing internal and external economic conditions on an ongoing basis. Liquidity and Going Concern The Company’s consolidated financial statements are prepared using GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred significant net losses and negative cash flow from operations for most periods since its inception, which has resulted in a total accumulated deficit of $66,548,230 as of March 31, 2020. For the three months ended March 31, 2020, the Company had a net loss of $6,163,461. The Company's cash balance as of March 31, 2020 was $5,634,441 and the Company's operating activities used cash of $1,348,991 for the three months ended March 31, 2020. Given the Company’s small market cap, extreme volatility and uncertainty in the financial markets, along with a line of credit that is only available on eligible accounts receivable invoices, coupled with expected reductions in future orders and receivables upon which to access funding, the Company applied for and on April 23, 2020 received a loan from Western Alliance Bank in the principal amount of $1,905,100 (the “SBA Loan”), under the Paycheck Protection Program, which was established under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), in order to retain its employees during this time of uncertainty. With the cash on hand as of March 31, 2020, in addition to the SBA Loan (see Note 10), along with expected future draws on our credit line with Western Alliance Bank using future receivables, as available, we expect to have sufficient cash reserves and financing sources available to cover expenses at least one year from the issuance of this Quarterly Report based on our current estimates of revenue and expenses for 2020. |
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Basis of Accounting, Policy [Policy Text Block] | Basis of Presentation The accompanying consolidated balance sheet as of March 31, 2020, the consolidated statements of operations for the three months ended March 31, 2020 and 2019, the consolidated statements of stockholders' equity for the three months ended March 31, 2020 and 2019, and the consolidated statements of cash flows for the three months ended March 31, 2020 and 2019 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, 2019 has been derived from the audited consolidated financial statements at that date but, in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"), does not include all of the information and notes required by GAAP for complete financial statements. Operating results for the three months ended March 31, 2020 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, 2019 included in the Company's Annual Report on Form 10-K filed with the SEC on March 30, 2020. |
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Consolidation, Policy [Policy Text Block] | 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. The consolidated financial statements were prepared using the acquisition method of accounting with IZEA considered the accounting acquirer of Ebyline, ZenContent and TapInfluence. Under the acquisition method of accounting, the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair market values with any excess purchase price allocated to goodwill. |
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Use of Estimates, Policy [Policy Text Block] | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of 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. |
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Cash and Cash Equivalents, Policy [Policy Text Block] | 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. |
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Receivable [Policy Text Block] | Accounts Receivable and Concentration of Credit Risk The Company’s accounts receivable balance consists of net trade receivables and unbilled receivables. Trade receivables are customer obligations due under normal trade terms. Unbilled receivables represent amounts owed for work that has been performed, but not yet billed. The Company had trade receivables of $3,706,756 and unbilled receivables of $270,815 at March 31, 2020. The Company had trade receivables of $5,106,314 and unbilled receivables of $490,405 at December 31, 2019. Management considers an account to be delinquent when the customer has not paid an amount due by its associated due date. Uncollectibility of accounts receivable is not significant since most customers are bound by contract and are required to fund the Company for all the costs of an “opportunity,” defined as an order created by a marketer for a creator to develop or share content on behalf of a marketer. 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. Management determines the collectibility of accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. The Company had a reserve of $175,000 and $145,000, for doubtful accounts as of March 31, 2020 and December 31, 2019, respectively. Management believes that this estimate is reasonable, but there can be no assurance that the estimate will not change as a result of a change in economic conditions or business conditions within the industry, the individual customers or the Company. Any adjustments to this account are reflected in the consolidated statements of operations as a general and administrative expense. Bad debt expense was less than 1% of revenue for the three months ended March 31, 2020 and 2019. |
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Concentration Risk, Credit Risk, Policy [Policy Text Block] | Concentrations of credit risk with respect to accounts receivable have been typically limited because a large number of geographically diverse customers make up the Company’s customer base, thus spreading the trade credit risk. However, with the Company’s acquisition of TapInfluence, it 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 had one customer that accounted for more than 12% of total accounts receivable at March 31, 2020 and no customers that accounted for an aggregate of more than 10% of total accounts receivable at December 31, 2019. The Company had no customers that accounted for more than 10% of its revenue during the three months ended March 31, 2020 or 2019. |
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Property, Plant and Equipment, Policy [Policy Text Block] | Property and Equipment Property and equipment are recorded at cost, or if acquired in a business combination, at the acquisition date fair value. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets as follows:
Leasehold improvements are amortized over the shorter of the term of the lease or the estimated useful lives of the improvements. Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for betterments and major improvements are capitalized and depreciated over the remaining useful lives of the assets. 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. There were no material impairment charges associated with the Company’s long-lived tangible assets during the three months ended March 31, 2020 and 2019. |
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Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block] | Goodwill Goodwill represents the excess of the purchase consideration of an acquired business over the fair value of the underlying net tangible and intangible assets. The Company has goodwill in connection with its acquisitions of Ebyline, ZenContent and 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 for the amount of impairment 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. For instance, in March 2020, the Company identified triggering events, including the reduction in its projected revenue related to COVID-19 and the continuation of a market capitalization below the Company’s carrying value and uncertainty for recovery given the volatility of the capital markets surrounding COVID-19, and performed an interim assessment of goodwill, as described in Note 3. 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, which is 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 has one reporting unit as of March 31, 2020. In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). To address concerns over the cost and complexity of the two-step goodwill impairment test, the new standard removes the requirement for the second step of the goodwill impairment test for certain entities. An entity may apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The Company adopted this method in the third quarter of 2019 and there were no changes to its financial statements as a result of the adoption. |
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Intangible Assets, Finite-Lived, Policy [Policy Text Block] | Intangible Assets The Company acquired the majority of its intangible assets through its acquisitions of Ebyline, ZenContent and TapInfluence. The Company is amortizing the identifiable intangible assets over periods of 12 to 60 months. See Note 3 for further details. Management reviews long-lived assets, including property and equipment, 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 fair value of the asset and the carrying value. Estimates of future undiscounted cash flows are based on expected growth rates for the business, anticipated future economic conditions and estimates of residual values. Fair values take into consideration 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. |
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Software Development Costs, Policy [Policy Text Block] | 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 infrastructure development stage, including significant enhancements and upgrades, are capitalized. These costs include personnel and related employee benefits expenses for employees or consultants who are directly associated with and who devote time to software projects, and external direct costs of materials obtained in developing the software. These software development and acquired technology 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. See Note 4 for further details. |
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Lessee, Leases [Policy Text Block] | Leases Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). As permitted under the standard, the Company elected the package of practical expedients which permit the Company to carryforward its prior conclusions about lease identification, lease classification and initial direct costs. Additionally, the Company adopted the practical expedient that allows comparative periods to be reported under the lease accounting guidance in effect at the time prior period financial statements were previously issued. Effectively, the Company elected to apply the guidance as of the adoption date whereas financial information for prior periods has not been updated, and the disclosures required under the new standard herein have not been provided for dates and periods before January 1, 2019. This ASU establishes 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 will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company has not recorded leases on the balance sheet that at the commencement date have a lease term of 12 months or less. Upon the January 1, 2019 adoption of this standard, the Company had one material lease greater than 12 months in duration which is associated with its Corporate headquarters in Winter Park, Florida. The adoption of this standard resulted in the Company recording a right-of-use asset of $410,852 and an associated right-of-use liability of $399,892. The right-of-use asset is being amortized to rent expense over the remaining term of the lease. The right-of-use liability was determined by discounting the Company’s remaining obligations under the lease using its average incremental borrowing rate and will be increased through the recording of rent expense and reduced by payments made under the lease. |
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Revenue [Policy Text Block] | Revenue Recognition The Company historically generated revenue from five 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 IZEAx and TapInfluence platforms (“Marketplace Spend Fees”); (3) revenue from fees charged to access the IZEAx, Ebyline, and TapInfluence platforms (“License Fees”) (4) revenue from transactions generated by the self-service use of the Company's Ebyline platform for professional custom content workflow (“Legacy Workflow Fees”); and (5) revenue derived from other fees such as inactivity fees, early cash-out fees, and plan fees charged to users of the Company's platforms (“Other”). After the migration of the last customers from the Ebyline platform to IZEAx in December 2019, there is no longer any revenue generated from Legacy Workflow Fees and all such revenue is reported as Marketplace Spend Fees under the IZEAx platform. 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 which are 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 an agent or a principal for each identified performance obligation. The determination of whether the Company acts as the principal or the agent is highly subjective and requires the Company to evaluate a number of 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 the Company 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 specifies 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 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 agreement is canceled by the customer prior to completion of services. Billings in advance of completed services are recorded as a contract liability until earned. The Company assesses collectibility based on a number of factors, including the creditworthiness of the customer and payment and transaction history. The allocation of the transaction price to the performance obligations in the contract is based on a cost-plus methodology. Managed Services Revenue For Managed Services Revenue, the Company enters into an agreement 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 for the purpose of providing public awareness or advertising buzz regarding the marketer’s brand and they purchase custom content for internal and external use. The Company may provide one type or a combination of all types of these performance obligations on a statement of work for a lump sum fee. The Company allocates revenue to each performance obligation in the contract at inception based on its relative standalone selling price. These performance obligations are to be provided over a stated period that generally ranges from one day to one year. Revenue is accounted for when the performance obligation has been satisfied depending on the type of service provided. 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 delivery of custom content represents a distinct performance obligation that is satisfied over time as the Company has no alternative for the custom content and the Company has an enforceable right to payment for performance completed to date under the contracts. The Company considers custom content to be a series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, and revenue is recognized over time using an output method based on when each individual 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 and Legacy Workflow Fees Revenue For Marketplace Spend Fees and Legacy Workflow Fees Revenue, the self-service customer instructs 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 solely arranging for the third-party creator or influencer to provide the services directly to the self-service customer through the platform or by posting the requested content. License Fees Revenue License Fees Revenue is generated through the granting of limited, non-exclusive, non-transferable licenses to customers for the use of the IZEAx and TapInfluence technology platforms for an agreed-upon subscription period. Customers license the platforms to manage their own influencer marketing campaigns. Fees for subscription or licensing services are recognized straight-line over the term of the service. Other Revenue Other Revenue is generated when fees are charged to customers 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 either below certain minimum thresholds or with accelerated 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. |
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Advertising Cost [Policy Text Block] | Advertising Costs Advertising costs are charged to expense as they are incurred, including payments to content creators to promote the Company. Advertising costs charged to operations for the three months ended March 31, 2020 and 2019 were approximately $168,000 and $78,000, respectively. Advertising costs are included in sales and marketing expense in the accompanying consolidated statements of operations. |
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Income Tax, Policy [Policy Text Block] | Income Taxes The Company has not recorded federal income tax expense due to the generation 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 minimal state franchise tax in four states, which is included in general and administrative expense in the consolidated statements of operations. 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 to be 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 by the Internal Revenue Service are 2016 through 2019. On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. It also appropriated funds for the SBA loans that are forgivable in certain situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19. We are currently examining the impact that the CARES Act may have on our business and tax positions. |
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Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair Value of Financial Instruments The Company’s financial instruments are recorded at fair value. Fair value 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:
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The Company does not have any Level 1 or 2 financial assets or liabilities. The Company’s Level 3 financial liabilities measured at fair value included its right-of-use liability as of December 31, 2019. The respective carrying values of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable, contract liabilities, and accrued expenses. Unless otherwise disclosed, the fair values of the Company’s long-term debt obligations approximate their carrying value based upon current rates available to the Company. |
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Share-based Payment Arrangement [Policy Text Block] | Stock-Based Compensation Stock-based compensation cost related to stock options granted under the 2011 Equity Incentive Plan and the 2011 B Equity Incentive Plan (together, the “2011 Equity Incentive Plans”) (see Note 7) 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 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 comparable peer companies that are publicly traded and have had a longer trading history than itself. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. 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 Plans during the three months ended March 31, 2020 and 2019:
The Company estimates forfeitures when recognizing compensation expense and this estimate of forfeitures is adjusted over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment, which is recognized in the period of change, and a revised amount of unamortized compensation expense to be recognized in future periods. The Company may issue shares of restricted stock or restricted stock units which 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 7 for additional information related to these shares. |
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New Accounting Pronouncements, Policy [Policy Text Block] | Recently Issued Accounting Pronouncements Recently Adopted Accounting Pronouncements Fair Value Measurements: In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The new guidance amends the disclosure requirements for recurring and nonrecurring fair value measurements by removing, modifying, and adding certain disclosures on fair value measurements in ASC 820. The amendments on changes to the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company fair valued its right-of-use liability outstanding at December 31, 2019 as a Level 3. The adoption of ASU 2018-13 on January 1, 2020 was not material to the Company’s consolidated financial statements. Collaborative Arrangements: In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the interaction between Topic 808 and Topic 606 (“ASU 2018-18”). The guidance makes targeted improvements to GAAP for collaborative arrangements including: (i) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606 when the collaborative arrangement participant is a customer in the context of a unit of account, (ii) adding unit-of-account guidance in ASC 808 to align with the guidance in ASC 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of ASC 606, and (iii) requiring that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under ASC 606 is precluded if the collaborative arrangement participant is not a customer. The amendments in this update are effective for public entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments should be applied retrospectively to the date of initial application of ASC 606. An entity may elect to apply the practical expedient for contract modifications that is permitted for entities using the modified retrospective transition method in ASC 606. The Company adopted ASU 2018-18 on January 1, 2020 and applied the amendments only to contracts that were not completed as of such date. The adoption of ASU 2018-18 was not material to the Company’s consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted 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 replaced 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 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 the ASU 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. The Company is currently evaluating the expected impact of adopting ASU 2016-13 on its consolidated financial statements and disclosures. Income Taxes: In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact on its consolidated financial statements and related disclosures. Reference Rate Reform: In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company believes this guidance will not have a material impact on its financial statements. |
Software Development Costs (Tables) |
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Schedule of Finite-Lived Intangible Assets [Table Text Block] | The identifiable intangible assets, other than Goodwill, consists of the following assets:
Total identifiable intangible assets from the Company’s acquisitions and other acquired assets net of accumulated amortization thereon consists of the following:
Software development costs consists of the following:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block] | As of March 31, 2020, future estimated amortization expense related to identifiable intangible assets is set forth in the following schedule:
As of March 31, 2020, future estimated amortization expense related to software development costs is set forth in the following schedule:
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Revenue (Tables) |
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Disaggregation of Revenue [Table Text Block] | he following table illustrates the Company’s revenue by product service type:
The following table provides the Company’s revenues as determined by the country of domicile:
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Contract with Customer, Asset and Liability [Table Text Block] | The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
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Company and Summary of Significant Accounting Policies - Goodwill (Details) |
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Accounting Policies [Abstract] | |
Number of reporting units | 1 |
Unaudited Consolidated Balance Sheets Parentheticals - $ / shares |
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Preferred stock, par value (per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (shares) | 200,000,000 | 200,000,000 |
Common stock, shares, issued (shares) | 34,773,051 | 34,634,172 |
Common stock, shares outstanding (shares) | 34,773,051 | 34,634,172 |
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Significant Accounting Policies [Text Block] | COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business IZEA Worldwide, Inc. (together with its wholly-owned subsidiaries, “we,” “us,” “our,” “IZEA” or the “Company”) is a public company incorporated in the state of Nevada. In January 2015, IZEA purchased all of the outstanding shares of capital stock of Ebyline, Inc. (“Ebyline”). In July 2016, IZEA purchased all the outstanding shares of capital stock of ZenContent, Inc. (“ZenContent”). The legal entity of ZenContent was dissolved in December 2017 and the legal entity of Ebyline was dissolved in December 2019 after all assets and transactions were transferred to IZEA. In March 2016, the Company formed IZEA Canada, Inc., a wholly-owned subsidiary, incorporated in Ontario, Canada, to operate as a sales and support office for IZEA’s Canadian customers. On July 26, 2018, the Company merged with TapInfluence, Inc. (“TapInfluence”) pursuant to the terms of an Agreement and Plan of Merger dated as of July 11, 2018, as amended. The Company creates and operates online marketplaces that connect marketers with content creators. The creators are compensated by the Company 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 personal websites, blogs, and social media channels. Marketers receive influential consumer content and engaging, shareable stories that drive awareness. The Company’s primary technology platform, The IZEA Exchange (“IZEAx”), enables transactions to be completed at scale through the management of custom content workflow, creator search and targeting, bidding, analytics, and payment processing. IZEAx is designed to provide a unified ecosystem that enables the creation and publication of multiple types of custom content through a creator’s personal websites, blogs, or social media channels including Twitter, Facebook, Instagram, and YouTube, among others. Until December 2019 when it was merged into IZEAx, the Company operated the Ebyline technology platform, which was originally designed as a self-service content marketplace to replace editorial newsrooms in news agencies with a “virtual newsroom” to handle their content workflow. In July 2016, the Company acquired the ZenContent technology platform to use as an in-house workflow tool that enables the Company to produce highly scalable, multi-part production of content for both e-commerce entities and brand customers. The TapInfluence technology platform, acquired in 2018, performed in a similar manner to IZEAx and was being utilized by the majority of the TapInfluence customers as a self-service platform via a licensing arrangement, allowing access to the platform and its creators for self-managed marketing campaigns. After the migration of the last customers to IZEAx from the Ebyline platform in December 2019 and from the TapInfluence platform in February 2020, all marketplace revenue is solely generated from the IZEAx platform. Impact of COVID-19 On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (COVID-19) as a global pandemic and recommended containment and mitigation measures worldwide. As the spread continued throughout the United States, the Company directed all of its staff to work from home effective March 16, 2020. All of the Company’s business operations and ability to support its customers is fully functional while its employees are working from remote locations. However, the Company has begun to see impacts on its operations due to changes in advertising decisions, timing and spending priorities from customers, which will result in a negative impact to Company bookings and future revenue. While the disruption is currently expected to be temporary, there is uncertainty around the duration and the total economic impact. Therefore, while the Company expects this matter to negatively impact its business, such events are generally outside of the Company’s control and could have a material adverse impact on the Company’s business, results of operations, and financial position in future periods. As a result, the Company is leveraging its balance sheet and has drawn on its secured credit facility to increase the Company’s cash position and help preserve its financial flexibility. In light of the adverse economic conditions caused by the COVID-19 pandemic, the Company implemented average temporary salary and wage reductions of 20%, including a 21% reduction in base salary agreed to by the Company’s Chief Executive Officer and Chief Operating Officer. These salary reductions were effective as of April 6, 2020 until the earlier of December 31, 2020 or the Company’s restoring normal payroll rates to the majority of its employees. Members of the Company’s Board of Directors also agreed to a similar temporary reduction to their fees. Additionally, the Company did not renew leases for its headquarters and temporary office spaces as additional means to reduce fixed costs during this time. The Company intends to have all employees to work from home for the foreseeable future to protect the health and safety of its workers. There can be no assurance that the Company will return to a typical office environment in the future, nor can the Company say what that office environment may look like. In addition to salary reductions, the Company has also temporarily reduced certain employee benefits, implemented a new employee hiring freeze, reduced and shifted marketing expense, and eliminated travel expense for the near term future. These measures may not be sustainable and could prove detrimental long term. Therefore, management will be reviewing these initial actions and other options in conjunction with the changing internal and external economic conditions on an ongoing basis. Liquidity and Going Concern The Company’s consolidated financial statements are prepared using GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred significant net losses and negative cash flow from operations for most periods since its inception, which has resulted in a total accumulated deficit of $66,548,230 as of March 31, 2020. For the three months ended March 31, 2020, the Company had a net loss of $6,163,461. The Company's cash balance as of March 31, 2020 was $5,634,441 and the Company's operating activities used cash of $1,348,991 for the three months ended March 31, 2020. Given the Company’s small market cap, extreme volatility and uncertainty in the financial markets, along with a line of credit that is only available on eligible accounts receivable invoices, coupled with expected reductions in future orders and receivables upon which to access funding, the Company applied for and on April 23, 2020 received a loan from Western Alliance Bank in the principal amount of $1,905,100 (the “SBA Loan”), under the Paycheck Protection Program, which was established under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), in order to retain its employees during this time of uncertainty. With the cash on hand as of March 31, 2020, in addition to the SBA Loan (see Note 10), along with expected future draws on our credit line with Western Alliance Bank using future receivables, as available, we expect to have sufficient cash reserves and financing sources available to cover expenses at least one year from the issuance of this Quarterly Report based on our current estimates of revenue and expenses for 2020. Basis of Presentation The accompanying consolidated balance sheet as of March 31, 2020, the consolidated statements of operations for the three months ended March 31, 2020 and 2019, the consolidated statements of stockholders' equity for the three months ended March 31, 2020 and 2019, and the consolidated statements of cash flows for the three months ended March 31, 2020 and 2019 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, 2019 has been derived from the audited consolidated financial statements at that date but, in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"), does not include all of the information and notes required by GAAP for complete financial statements. Operating results for the three months ended March 31, 2020 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, 2019 included in the Company's Annual Report on Form 10-K filed with the SEC on March 30, 2020. 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. The consolidated financial statements were prepared using the acquisition method of accounting with IZEA considered the accounting acquirer of Ebyline, ZenContent and TapInfluence. Under the acquisition method of accounting, the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair market values with any excess purchase price allocated to goodwill. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of 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. The Company has considered the effect of COVID-19 on the assumptions and estimates used in the preparation of the March 31, 2020 financial statements and determined that there were no other material adverse effects on the Company’s results of operations and financial position as of March 31, 2020 other than the goodwill impairment disclosed in Note 3. 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. Accounts Receivable and Concentration of Credit Risk The Company’s accounts receivable balance consists of net trade receivables and unbilled receivables. Trade receivables are customer obligations due under normal trade terms. Unbilled receivables represent amounts owed for work that has been performed, but not yet billed. The Company had trade receivables of $3,706,756 and unbilled receivables of $270,815 at March 31, 2020. The Company had trade receivables of $5,106,314 and unbilled receivables of $490,405 at December 31, 2019. Management considers an account to be delinquent when the customer has not paid an amount due by its associated due date. Uncollectibility of accounts receivable is not significant since most customers are bound by contract and are required to fund the Company for all the costs of an “opportunity,” defined as an order created by a marketer for a creator to develop or share content on behalf of a marketer. 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. Management determines the collectibility of accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. The Company had a reserve of $175,000 and $145,000, for doubtful accounts as of March 31, 2020 and December 31, 2019, respectively. Management believes that this estimate is reasonable, but there can be no assurance that the estimate will not change as a result of a change in economic conditions or business conditions within the industry, the individual customers or the Company. Any adjustments to this account are reflected in the consolidated statements of operations as a general and administrative expense. Bad debt expense was less than 1% of revenue for the three months ended March 31, 2020 and 2019. Concentrations of credit risk with respect to accounts receivable have been typically limited because a large number of geographically diverse customers make up the Company’s customer base, thus spreading the trade credit risk. However, with the Company’s acquisition of TapInfluence, it 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 had one customer that accounted for more than 12% of total accounts receivable at March 31, 2020 and no customers that accounted for an aggregate of more than 10% of total accounts receivable at December 31, 2019. The Company had no customers that accounted for more than 10% of its revenue during the three months ended March 31, 2020 or 2019. Property and Equipment Property and equipment are recorded at cost, or if acquired in a business combination, at the acquisition date fair value. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets as follows:
Leasehold improvements are amortized over the shorter of the term of the lease or the estimated useful lives of the improvements. Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for betterments and major improvements are capitalized and depreciated over the remaining useful lives of the assets. 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. There were no material impairment charges associated with the Company’s long-lived tangible assets during the three months ended March 31, 2020 and 2019. Goodwill Goodwill represents the excess of the purchase consideration of an acquired business over the fair value of the underlying net tangible and intangible assets. The Company has goodwill in connection with its acquisitions of Ebyline, ZenContent and 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 for the amount of impairment 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. For instance, in March 2020, the Company identified triggering events, including the reduction in its projected revenue related to COVID-19 and the continuation of a market capitalization below the Company’s carrying value and uncertainty for recovery given the volatility of the capital markets surrounding COVID-19, and performed an interim assessment of goodwill, as described in Note 3. 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, which is 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 has one reporting unit as of March 31, 2020. In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). To address concerns over the cost and complexity of the two-step goodwill impairment test, the new standard removes the requirement for the second step of the goodwill impairment test for certain entities. An entity may apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The Company adopted this method in the third quarter of 2019 and there were no changes to its financial statements as a result of the adoption. Intangible Assets The Company acquired the majority of its intangible assets through its acquisitions of Ebyline, ZenContent and TapInfluence. The Company is amortizing the identifiable intangible assets over periods of 12 to 60 months. See Note 3 for further details. Management reviews long-lived assets, including property and equipment, 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 fair value of the asset and the carrying value. Estimates of future undiscounted cash flows are based on expected growth rates for the business, anticipated future economic conditions and estimates of residual values. Fair values take into consideration 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. 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 infrastructure development stage, including significant enhancements and upgrades, are capitalized. These costs include personnel and related employee benefits expenses for employees or consultants who are directly associated with and who devote time to software projects, and external direct costs of materials obtained in developing the software. These software development and acquired technology 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. See Note 4 for further details. Leases Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). As permitted under the standard, the Company elected the package of practical expedients which permit the Company to carryforward its prior conclusions about lease identification, lease classification and initial direct costs. Additionally, the Company adopted the practical expedient that allows comparative periods to be reported under the lease accounting guidance in effect at the time prior period financial statements were previously issued. Effectively, the Company elected to apply the guidance as of the adoption date whereas financial information for prior periods has not been updated, and the disclosures required under the new standard herein have not been provided for dates and periods before January 1, 2019. This ASU establishes 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 will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company has not recorded leases on the balance sheet that at the commencement date have a lease term of 12 months or less. Upon the January 1, 2019 adoption of this standard, the Company had one material lease greater than 12 months in duration which is associated with its Corporate headquarters in Winter Park, Florida. The adoption of this standard resulted in the Company recording a right-of-use asset of $410,852 and an associated right-of-use liability of $399,892. The right-of-use asset is being amortized to rent expense over the remaining term of the lease. The right-of-use liability was determined by discounting the Company’s remaining obligations under the lease using its average incremental borrowing rate and will be increased through the recording of rent expense and reduced by payments made under the lease. Revenue Recognition The Company historically generated revenue from five 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 IZEAx and TapInfluence platforms (“Marketplace Spend Fees”); (3) revenue from fees charged to access the IZEAx, Ebyline, and TapInfluence platforms (“License Fees”) (4) revenue from transactions generated by the self-service use of the Company's Ebyline platform for professional custom content workflow (“Legacy Workflow Fees”); and (5) revenue derived from other fees such as inactivity fees, early cash-out fees, and plan fees charged to users of the Company's platforms (“Other”). After the migration of the last customers from the Ebyline platform to IZEAx in December 2019, there is no longer any revenue generated from Legacy Workflow Fees and all such revenue is reported as Marketplace Spend Fees under the IZEAx platform. 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 which are 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 an agent or a principal for each identified performance obligation. The determination of whether the Company acts as the principal or the agent is highly subjective and requires the Company to evaluate a number of 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 the Company 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 specifies 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 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 agreement is canceled by the customer prior to completion of services. Billings in advance of completed services are recorded as a contract liability until earned. The Company assesses collectibility based on a number of factors, including the creditworthiness of the customer and payment and transaction history. The allocation of the transaction price to the performance obligations in the contract is based on a cost-plus methodology. Managed Services Revenue For Managed Services Revenue, the Company enters into an agreement 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 for the purpose of providing public awareness or advertising buzz regarding the marketer’s brand and they purchase custom content for internal and external use. The Company may provide one type or a combination of all types of these performance obligations on a statement of work for a lump sum fee. The Company allocates revenue to each performance obligation in the contract at inception based on its relative standalone selling price. These performance obligations are to be provided over a stated period that generally ranges from one day to one year. Revenue is accounted for when the performance obligation has been satisfied depending on the type of service provided. 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 delivery of custom content represents a distinct performance obligation that is satisfied over time as the Company has no alternative for the custom content and the Company has an enforceable right to payment for performance completed to date under the contracts. The Company considers custom content to be a series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, and revenue is recognized over time using an output method based on when each individual 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 and Legacy Workflow Fees Revenue For Marketplace Spend Fees and Legacy Workflow Fees Revenue, the self-service customer instructs 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 solely arranging for the third-party creator or influencer to provide the services directly to the self-service customer through the platform or by posting the requested content. License Fees Revenue License Fees Revenue is generated through the granting of limited, non-exclusive, non-transferable licenses to customers for the use of the IZEAx and TapInfluence technology platforms for an agreed-upon subscription period. Customers license the platforms to manage their own influencer marketing campaigns. Fees for subscription or licensing services are recognized straight-line over the term of the service. Other Revenue Other Revenue is generated when fees are charged to customers 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 either below certain minimum thresholds or with accelerated 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. Advertising Costs Advertising costs are charged to expense as they are incurred, including payments to content creators to promote the Company. Advertising costs charged to operations for the three months ended March 31, 2020 and 2019 were approximately $168,000 and $78,000, 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 the generation 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 minimal state franchise tax in four states, which is included in general and administrative expense in the consolidated statements of operations. 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 to be 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 by the Internal Revenue Service are 2016 through 2019. On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. It also appropriated funds for the SBA loans that are forgivable in certain situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19. We are currently examining the impact that the CARES Act may have on our business and tax positions. Fair Value of Financial Instruments The Company’s financial instruments are recorded at fair value. Fair value 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:
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The Company does not have any Level 1 or 2 financial assets or liabilities. The Company’s Level 3 financial liabilities measured at fair value included its right-of-use liability as of December 31, 2019. The respective carrying values of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable, contract liabilities, and accrued expenses. Unless otherwise disclosed, the fair values of the Company’s long-term debt obligations approximate their carrying value based upon current rates available to the Company. Stock-Based Compensation Stock-based compensation cost related to stock options granted under the 2011 Equity Incentive Plan and the 2011 B Equity Incentive Plan (together, the “2011 Equity Incentive Plans”) (see Note 7) 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 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 comparable peer companies that are publicly traded and have had a longer trading history than itself. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. 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 Plans during the three months ended March 31, 2020 and 2019:
The Company estimates forfeitures when recognizing compensation expense and this estimate of forfeitures is adjusted over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment, which is recognized in the period of change, and a revised amount of unamortized compensation expense to be recognized in future periods. The Company may issue shares of restricted stock or restricted stock units which 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 7 for additional information related to these shares. Recently Issued Accounting Pronouncements Recently Adopted Accounting Pronouncements Fair Value Measurements: In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The new guidance amends the disclosure requirements for recurring and nonrecurring fair value measurements by removing, modifying, and adding certain disclosures on fair value measurements in ASC 820. The amendments on changes to the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company fair valued its right-of-use liability outstanding at December 31, 2019 as a Level 3. The adoption of ASU 2018-13 on January 1, 2020 was not material to the Company’s consolidated financial statements. Collaborative Arrangements: In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the interaction between Topic 808 and Topic 606 (“ASU 2018-18”). The guidance makes targeted improvements to GAAP for collaborative arrangements including: (i) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606 when the collaborative arrangement participant is a customer in the context of a unit of account, (ii) adding unit-of-account guidance in ASC 808 to align with the guidance in ASC 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of ASC 606, and (iii) requiring that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under ASC 606 is precluded if the collaborative arrangement participant is not a customer. The amendments in this update are effective for public entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments should be applied retrospectively to the date of initial application of ASC 606. An entity may elect to apply the practical expedient for contract modifications that is permitted for entities using the modified retrospective transition method in ASC 606. The Company adopted ASU 2018-18 on January 1, 2020 and applied the amendments only to contracts that were not completed as of such date. The adoption of ASU 2018-18 was not material to the Company’s consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted 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 replaced 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 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 the ASU 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. The Company is currently evaluating the expected impact of adopting ASU 2016-13 on its consolidated financial statements and disclosures. Income Taxes: In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact on its consolidated financial statements and related disclosures. Reference Rate Reform: In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company believes this guidance will not have a material impact on its financial statements. |
Stockholders' Equity - Authorized Shares (Details Textual) - $ / shares |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Statement of Stockholders' Equity [Abstract] | ||
Common stock, shares authorized (shares) | 200,000,000 | 200,000,000 |
Series A Preferred stock, shares authorized (shares) | 10,000,000 | 10,000,000 |
Series A Preferred stock, par value (per share) | $ 0.0001 | $ 0.0001 |
Software Development Costs (Details Textual) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
Dec. 31, 2019 |
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Finite-Lived Intangible Assets [Line Items] | |||
Capitalized computer software, additions | $ 51,004 | $ 346,789 | |
Capitalized computer software, gross | 2,724,021 | $ 2,673,017 | |
Depreciation and Amortization Expense [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Capitalized computer software, amortization | $ 100,650 | $ 74,842 | |
Developed Technology Rights [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life (in years) | 5 years | ||
Maximum [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life (in years) | 60 years | ||
Maximum [Member] | Software Development [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life (in years) | 5 years |
Intangible Assets - Schedule of Future Estimated Amortization Expense for Identifiable Intangible Assets (Details) |
Mar. 31, 2020
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
Finite-lived intangible assets, remainder of 2020 | $ 714,137 |
Finite-lived intangible assets, 2021 | 532,389 |
Finite-lived intangible assets, Total | $ 1,246,526 |
Company and Summary of Significant Accounting Policies - Property and Equipment (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Significant Accounting Policies [Line Items] | ||
Tangible Asset Impairment Charges | $ 0 | $ 0 |
Computer Equipment [Member] | ||
Significant Accounting Policies [Line Items] | ||
Property, plant and equipment, useful life (in years) | 3 years | |
Office Equipment [Member] | Minimum [Member] | ||
Significant Accounting Policies [Line Items] | ||
Property, plant and equipment, useful life (in years) | 3 years | |
Office Equipment [Member] | Maximum [Member] | ||
Significant Accounting Policies [Line Items] | ||
Property, plant and equipment, useful life (in years) | 10 years | |
Furniture and Fixtures [Member] | Minimum [Member] | ||
Significant Accounting Policies [Line Items] | ||
Property, plant and equipment, useful life (in years) | 5 years | |
Furniture and Fixtures [Member] | Maximum [Member] | ||
Significant Accounting Policies [Line Items] | ||
Property, plant and equipment, useful life (in years) | 10 years |
Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets [Table Text Block] | The identifiable intangible assets, other than Goodwill, consists of the following assets:
Total identifiable intangible assets from the Company’s acquisitions and other acquired assets net of accumulated amortization thereon consists of the following:
Software development costs consists of the following:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block] | As of March 31, 2020, future estimated amortization expense related to identifiable intangible assets is set forth in the following schedule:
As of March 31, 2020, future estimated amortization expense related to software development costs is set forth in the following schedule:
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Schedule of Goodwill [Table Text Block] | The Company’s goodwill balance changed as follows:
In March 2020, the Company identified triggering events due to the reduction in its projected revenue related to COVID-19 and the continuation of a market capitalization below the Company’s carrying value and uncertainty for recovery given the volatility of the capital markets surrounding COVID-19. The Company performed an interim assessment of goodwill using the income approach of the discounted cash flow method and the market approach of the guideline transaction method and determined that the carrying value of the Company as of March 31, 2020 exceeded the fair value. As a result of the valuation, the Company recorded a $4.3 million impairment of goodwill in the three months ended March 31, 2020. |
Loss Per Common Share (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] | Diluted loss per share is computed by dividing the net income or loss by the sum of the total of the basic weighted-average number of shares of common stock outstanding plus the additional dilutive securities that could be exercised or converted into common shares during each period presented less the amount of shares that could be repurchased using the proceeds from the exercises.
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] | The Company excluded the following weighted average items from the above computation of diluted loss per common share, as their effect would be anti-dilutive:
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Loss Per Common Share (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Earnings Per Share [Abstract] | ||
Net loss | $ (6,163,461) | $ (1,830,580) |
Weighted average common shares outstanding – basic and diluted | 34,681,198 | 12,575,458 |
Basic and diluted loss per common share | $ (0.18) | $ (0.15) |
Subsequent Events (Details) - Apr. 23, 2020 - Subsequent Event [Member] |
CAD ($) |
USD ($) |
---|---|---|
Canada Emergency Business Account Term Loan [Member] | ||
Subsequent Event [Line Items] | ||
Proceeds from Loans | $ 40,000 | $ 28,000 |
Debt instrument, accrued interest during initial term | 0 | |
Debt instrument, periodic payment during initial term | $ 0 | |
Percentage of loan to be repaid for debt forgiveness | 75.00% | 75.00% |
Amount of loan to be repaid for debt forgiveness | $ 30,000 | |
Debt instrument, debt forgiveness date | December 31, 2022 | December 31, 2022 |
Debt Instrument, Decrease, Forgiveness | $ 10,000 | |
SBA Loan - Paycheck Protection Program [Member] | ||
Subsequent Event [Line Items] | ||
Proceeds from Loans | $ 1,905,100 |
Accrued Expenses (Details) - USD ($) |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued payroll liabilities | $ 1,395,847 | $ 1,202,765 |
Accrued taxes | 112,675 | 117,698 |
Current portion of finance obligation | 28,603 | 26,837 |
Accrued other | 67,463 | 30,256 |
Total accrued liabilities | $ 1,604,588 | $ 1,377,556 |
Intangible Assets - Goodwill Balance (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill, beginning balance | $ 8,316,722 | |
Acquisitions, impairments or other changes during 2020 | (4,300,000) | $ 0 |
Goodwill, ending balance | $ 4,016,722 |
Stockholders' Equity - Stock Issued for Acquisitions (Details) - TapInfluence, Inc. [Member] |
Jan. 26, 2019
USD ($)
$ / shares
shares
|
---|---|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Business acquisition, equity interest issued or issuable, number of shares | shares | 660,136 |
Business acquisition equity interest issued or issuable, value assigned | $ | $ 884,583 |
Business acquisition share price | $ / shares | $ 1.34 |
Loss on settlement of acquisition payments | $ | $ 191,439 |
Actual closing market price of common stock | $ / shares | $ 1.63 |
Stockholders' Equity - Stock Option Assumptions (Details) - Equity Incentive 2011 Plan [Member] - $ / shares |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
Dec. 31, 2019 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total stock options granted | 8,917 | 30,542 | 586,552 |
Weighted average exercise price, granted | $ 0.25 | $ 1.46 | $ 0.67 |
Weighted-average expected term (in years) | 6 years | 6 years | |
Weighted average volatility (percentage) | 101.92% | 63.37% | |
Weighted average risk free interest rate (percentage) | 1.71% | 2.52% | |
Weighted average grant date fair value, granted | $ 0.16 | $ 0.91 | $ 0.40 |
Company and Summary of Significant Accounting Policies - Stock-Based Compensation (Details) - Equity Incentive 2011 Plan [Member] |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Significant Accounting Policies [Line Items] | ||
Expected term (in years) | 6 years | 6 years |
Weighted average volatility (percentage) | 101.92% | 63.37% |
Weighted average risk free interest rate (percentage) | 1.71% | 2.52% |
Expected dividends | 0.00% | 0.00% |
Weighted-average expected forfeiture rate (percentage) | 15.32% | 7.82% |
Company and Summary of Significant Accounting Policies - Software Development Costs (Details Textual) |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Amortization period of software development costs (in years) | 5 years |
Intangible Assets - (Details Textuals) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Finite-Lived Intangible Assets [Line Items] | ||
Impairment of Intangible Assets, Finite-lived | $ 0 | |
Impairment of intangible assets | $ 4,300,000 | 0 |
Acquired finite-lived intangible assets, weighted average useful life (years) | 1 year 4 months | |
Cost of Acquired Technology [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortization of intangible assets | $ 136,500 | 56,500 |
Depreciation and Amortization Expense [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortization of intangible assets | $ 364,990 | $ 322,907 |
Commitments and Contingencies (Notes) |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies Disclosure [Text Block] | COMMITMENTS AND CONTINGENCIES Secured Credit Facility The Company has a secured credit facility agreement (also referred to herein as “line of credit”) with Western Alliance Bank, the parent company of Bridge Bank, N.A. of San Jose, California, which it obtained on March 1, 2013 and expanded on April 13, 2015. Pursuant to the secured credit facility agreement, as amended, the Company may submit requests for funding up to 80% of its eligible accounts receivable up to a maximum credit limit of $5 million. This agreement is secured by the Company’s accounts receivable and substantially all of the Company’s other assets. The Modification Agreement automatically renews in April of each year and requires the Company to pay an annual facility fee of $20,000 (0.4% of the credit limit) and an annual due diligence fee of $1,000. Interest accrues on the advances at the rate of prime plus 1.5% per annum and the default rate of interest is prime plus 7%. The Company had $1,162,924 outstanding under this secured credit facility as of March 31, 2020 and $0 outstanding as of December 31, 2019. This outstanding balance was secured by trade accounts receivable balances of $1,453,655 as of March 31, 2020. As of March 31, 2020, the Company had a net trade accounts receivable balance of $3,706,756 of which $1,453,655 was used to secure the outstanding balance under the credit facility as of March 31, 2020. Assuming that all of the Company’s remaining trade accounts receivable balance was eligible for funding, the Company would have approximately $1.8 million in available credit under the agreement as of March 31, 2020. The annual fees are capitalized in the Company’s consolidated balance sheet within other current assets and are amortized to interest expense over one year. During the three months ended March 31, 2020 and 2019, the Company amortized $5,250 and $8,411 of the secured credit facility costs through interest expense. The remaining value of the capitalized loan costs related to the secured credit facility as of March 31, 2020 is $1,750; this amount will be amortized to interest expense over the next month. Lease Commitments The Company’s corporate headquarters were located at 480 N. Orlando Avenue, Suite 200 in Winter Park, Florida until its lease expired on April 30, 2020. The Company has not yet entered into any new lease agreement for its headquarters due to its current work from home policy enacted on March 16, 2020 as a result of the outbreak of the novel coronavirus (COVID-19). The Company also occupied flexible office space under monthly, quarterly or semi-annual membership contracts in Los Angeles, San Francisco, Denver, Chicago, and Toronto during the three months ended March 31, 2020, but the contracts for Los Angeles, San Francisco and Toronto were not renewed upon expiration of their terms on April 30, 2020. Upon the January 1, 2019 adoption of ASU No. 2016-02, Leases, the Company had one material lease greater than 12 months in duration which is associated with its corporate headquarters in Winter Park, Florida. The adoption of this standard resulted in the Company recording a right-of-use asset of $410,852 and an associated right-of-use liability of $399,892. The operating right-of-use liability was determined based on the present value of the remaining minimum rental payments using the Company’s average incremental borrowing rate 9.5% and the operating lease right-of-use asset was determined based on the value of the lease liabilities, adjusted for a deferred rent balance, which was previously included in current liabilities. The right-of-use asset and liability was fully amortized as of March 31, 2020. During the three months ended March 31, 2020, the Company recorded $24,024 of accretion on this right-of-use liability through rent expense in general and administrative expenses. The Company has no obligations under finance leases as of March 31, 2020. Total operating lease expense and other short-term lease expense recorded in general and administrative expense in the accompanying consolidated statements of operations was $147,983 and $154,697 for the three months ended March 31, 2020 and 2019, respectively. Cash paid for the one operating lease was approximately $85,000 during each of the three months ended March 31, 2020 and 2019, respectively. 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 these or other matters may arise from time to time that may harm the Company’s business. The Company is currently not aware of any other 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 final outcomes, however, any such proceedings or claims may nonetheless impose a significant burden on management and employees and may come with costly defense costs or unfavorable preliminary interim rulings. |
Subsequent Events (Notes) |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | SUBSEQUENT EVENTS On April 22, 2020, the Company received a Canadian dollar loan in the principal amount of 40,000 CAD (approximately $28,000 USD), from TD Canada Trust Bank pursuant to the Canada Emergency Business Account term loan agreement (the “CEBA Loan”). The CEBA Loan has an initial term from inception through December 31, 2022 (the “Initial Term”) and an extended term from January 1, 2023 through December 31, 2025 (the “Extended Term”). No interest is accrued and no payments are due on the loan during the Initial Term. If the Company repays 75% of the CEBA Loan (30,000 CAD) on or prior to December 31, 2022, the remaining 10,000 CAD balance will be forgiven. Otherwise, interest will begin to accrue on the unpaid balance on January 1, 2023 with monthly interest payments commencing on January 31, 2023 until the CEBA Loan is paid in full on or before the end of the Extended Term. The Company applied for and on April 23, 2020, received a loan from Western Alliance Bank (the “Lender”) in the principal amount of $1,905,100 (the “SBA Loan”), under the Paycheck Protection Program (“PPP”), which was established under the recently enacted CARES Act administered by the U.S. Small Business Administration (the “SBA”). The SBA Loan is evidenced by a promissory note issued by the Company (the “Note”) to the Lender. The term of the Note is two years, though it may be payable sooner in connection with an event of default under the Note. The SBA Loan carries a fixed interest rate of one percent per year, with the first payment due seven months from the date of initial cash receipt. Under the CARES Act and the PPP, certain amounts of loans made under the PPP may be forgiven if the recipients use the loan proceeds for eligible purposes, including payroll costs and certain rent or utility costs, and meet other requirements regarding, among other things, the maintenance of employment and compensation levels. The application for these funds requires the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account its current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on its future adherence to the forgiveness criteria. |
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