# IZEA Worldwide, Inc.: Form 10-Q for the period ended Mar 31, 2023

- Company: [IZEA Worldwide, Inc.](/companies/izea.md) (CIK 1495231)
- Form: 10-Q
- Filed: 2023-05-15
- Accepted by EDGAR: May 15, 2023, 16:39 ET
- Period: 2023-03-31
- Accession: 0001495231-23-000090
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1495231/000149523123000090/izea-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1495231/000149523123000090/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $8.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $6.0m | us-gaap:CostOfRevenue |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | −$3.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $1.6k | us-gaap:InterestExpense |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$2.8m | us-gaap:NetIncomeLoss |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | −$2.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $47.4k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-03-31 | $26.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $52.4m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $82.3m | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $14.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $14.4m | us-gaap:Liabilities |
| Long-term debt | at 2023-03-31 | $177.8k | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-03-31 | $67.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,104 characters.

### Cautionary Note Regarding Forward-Looking Information

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

- adverse economic or market conditions may harm our business;
- the impact of the Ukraine crisis and ramifications of sanctions against Russia;
- customer cancellations;
- any erroneous or inaccurate estimates or judgments relating to our critical accounting policies;
- our ability to raise the additional funding needed to fund our business operation in the future;
- our ability to satisfy the requirements for continued listing of our common stock on the Nasdaq Capital Market;
- our ability to remediate the material weakness in our internal control over financial reporting and establish effective disclosure controls and procedures;
- our ability to protect our intellectual property and other proprietary rights;
- our ability to maintain and grow our business;
- results of any future litigation and costs incurred in connection with any such litigation;
- competition in the industry;
- variability of operating results;
- our ability to maintain and enhance our brand;
- accuracy of tracking the number of user accounts;
- any security breaches or other disruptions compromising our proprietary information and exposing us to liability;
- our development and introduction of new products and services;
- our reliance on, and compliance with, open-source software;
- the successful integration of acquired companies, technologies, and assets into our portfolio of software and services;
- marketing and other business development initiatives;
- general government regulation;
- 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 concerning actions taken by our existing and past employees;
- any losses or issues we may encounter as a consequence of accepting or holding digital assets;
- risks associated with doing business internationally; and
- the other risks and uncertainties described in the Risk Factors section of our Annual Report for the year ended December 31, 2022, as amended, and filed with the SEC on April 19, 2023.

All forward-looking statements in this document are based on current expectations, intentions, and beliefs using information available to us as of the date of this Quarterly Report; we assume no obligation to update any forward-looking statements, except as required by law. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results to differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statements.

### Company Overview

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

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

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

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

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

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

### Key Components of Results of Operations

Overall consolidated results of operations are evaluated based on Revenue, Cost of Revenue, Sales and Marketing expenses, General and Administrative expenses, Depreciation and Amortization, and Other Income (Expense), net.

### Revenue

We generate revenue from four primary sources: (1) revenue from our managed services when a marketer (typically a brand, agency, or partner) pays us to provide custom content, influencer marketing, amplification, or other campaign management services (“Managed Services”); (2) revenue from fees charged to software customers on their marketplace spend within our platforms (“Marketplace Spend Fees”); (3) revenue from license and subscription fees charged to access our platforms (“License Fees”); and (4) revenue derived from other fees such as inactivity fees, early cash-out fees, and other miscellaneous fees charged to users of our platforms (“Other Fees”).

As discussed in more detail within “Critical Accounting Policies and Use of Estimates” under “Note 1. Company and Summary of Significant Accounting Policies,” under Part I, Item 1 herein, revenue from Marketplace Spend Fees are reported on a net basis, and revenue from all other sources, including Managed Services, License Fees, and Other Fees are reported on a gross basis. We further categorize these sources into two primary groups: (1) Managed Services and (2) SaaS Services, which includes revenue from Marketplace Spend Fees, License Fees, and Other Fees.

### Cost of Revenue

Our cost of revenue consists of direct costs paid to our third-party creators who provide the custom content, influencer marketing, or amplification services for our Managed Service customers, where we report revenue on a gross basis. It also includes internal costs for our campaign fulfillment and SaaS support departments. These costs include salaries, bonuses, commissions, stock-based compensation, employee benefit costs, and miscellaneous departmental costs related to the personnel responsible for supporting our customers and ultimately fulfilling our obligations under our contracts with customers.

### Sales and Marketing

Our sales and marketing expenses consist primarily of salaries, bonuses, commissions, stock-based compensation, employee benefit costs, travel and miscellaneous departmental costs for our marketing, sales, and sales support personnel, as well as marketing expenses such as brand marketing, public relations events, trade shows, and marketing materials, and travel expenses.

### General and Administrative

Our general and administrative (“G&A”) expense consists primarily of salaries, bonuses, commissions, stock-based compensation, employee benefit costs, and miscellaneous departmental costs related to our executive, finance, legal, human resources, and other administrative personnel. It also includes travel, public company, investor relations expenses, accounting, legal professional services fees, leasehold facilities, and other corporate-related expenses. G&A expense also includes our technology and development costs consisting primarily of our payroll costs for our internal engineers and contractors responsible for developing, maintaining, and improving our technology, as well as hosting and software subscription costs. These costs are expensed as incurred, except to the extent that they are associated with internal-use software that qualifies for capitalization, which is then recorded as software development costs in the consolidated balance sheet. We also capitalize costs that are related to our acquired intangible assets. Depreciation and amortization related to these costs are separately stated under depreciation and amortization in our consolidated statements of operations and comprehensive loss. G&A expense also includes current period gains and losses on our acquisition costs payable and gains and losses from the sale of fixed assets. Impairments on fixed assets, intangible assets, and goodwill are included as part of general and administrative expense when they are not material and broken out separately in our consolidated statements of operations and comprehensive loss when they are material.

### Depreciation and Amortization

Depreciation and amortization expense consists primarily of amortization of our internal-use software and acquired intangible assets from our business acquisitions. To a lesser extent, we also have depreciation and amortization on equipment used by our personnel. Costs are amortized or depreciated over the estimated useful lives of the associated assets.

### Other Income (Expense)

*Interest Expense.* Interest expense is primarily related to the payment plans for the purchase of computer equipment.

*Other Income.* Other income consists primarily of interest income for interest earned on investments, or changes in the value of our foreign assets and liabilities and foreign currency exchange gains and losses on foreign currency transactions, primarily related to the Canadian Dollar.

### Results of Operations for the Three Months Ended March 31, 2023 and 2022

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

|  | Three Months Ended March 31, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $8,737,722 | $8,890,336 | $(152,614) | (2)% |
| Costs and expenses: |  |  |  |  |
| Cost of revenue | 5,960,162 | 5,179,724 | 780,438 | 15% |
| Sales and marketing | 2,404,551 | 2,520,343 | (115,792) | (5)% |
| General and administrative | 3,403,608 | 3,502,435 | (98,827) | (3)% |
| Depreciation and amortization | 346,262 | 138,829 | 207,433 | 149% |
| Total costs and expenses | 12,114,583 | 11,341,331 | 773,252 | 7% |
| Loss from operations | (3,376,861) | (2,450,995) | (925,866) | 38% |
| Other income (expense): |  |  |  |  |
| Interest expense | (1,564) | (965) | (599) | 62% |
| Other income (expense), net | 572,086 | (24,283) | 596,369 | (2,456)% |
| Total other income (expense), net | 570,522 | (25,248) | 595,770 | (2,360)% |
| Net Loss | $(2,806,339) | $(2,476,243) | $(330,096) | 13% |

### Revenue

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

|  | Three Months Ended March 31, 2023 |  | 2022 |  | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| **Managed Services Revenue** | 8,502,754 | 97% | 8,372,456 | 94% | $130,298 | 2% |
| Marketplace Spend Fees | 36,474 | —% | 54,100 | 1% | (17,626) | (33)% |
| License Fees | 190,382 | 2% | 374,441 | 4% | (184,059) | (49)% |
| Other Fees | 8,112 | —% | 89,339 | 1% | (81,227) | (91)% |
| **SaaS Services Revenue** | 234,968 | 3% | 517,880 | 6% | (282,912) | (55)% |
| **Total Revenue** | $8,737,722 | 100% | $8,890,336 | 100% | $(152,614) | (2)% |

*Managed Services* revenue during the three months ended March 31, 2023, increased 2% from the same period in 2022. Approximately $3.5 million of the current period Managed Services revenue comes from one large customer (the ‘non-recurring customer’), which was 95% higher than the revenue received from such customer in the same period in 2022. In January 2023, we announced that we are parting ways with this customer as soon as our related contract backlog, which totaled $7.8 million on December 31, 2022, is completed during 2023. Managed Services revenue from our ongoing customer base (our ‘core customers’) totaled approximately $5.0 million in the current period, or 24% lower than the same period in 2022, primarily due to softer bookings from these core customers in recent quarters.

*SaaS Services* revenue, which includes license and support fees to access the platform services, and fees earned on the marketers’ self-service use of our technology platforms to manage their content workflow and influencer marketing campaigns declined 55% from the same period in 2022, due to:

- *Marketplace Spend Fees* decreased by $17,626 for the three months ended March 31, 2023, compared to the same period in 2022, due to lower overall spending levels from our marketers and to a gradual winding down of IZEAx. Revenue from Marketplace Spend Fees represents our net margins received on this business.
- *License Fees* revenue decreased by $184,059 for the three months ended March 31, 2023, when compared to the same period of 2022. The decrease in license fees is due to lower licensee counts and lower average revenue per licensee. The decline in both licensee counts and revenues is heavily related to the gradual sunsetting our legacy IZEAx and BrandGraph platforms before we transition to *Flex*, which is planned for completion in the second quarter of 2023.
- *Other Fees* revenue consists of other fees, such as inactivity fees, early cash-out fees, and subscription plan fees charged to users of our platforms. Other Fees revenue decreased 91% for the three months ended March 31, 2023 compared to the same period in 2022, due primarily to a customer deposit forfeiture in the prior year quarter. Nonrefundable deposits are collected from certain customers due to defined minimum spend per the contract or prepayment required for identified credit issues. Customers do not typically forfeit deposits held on account.

### Cost of Revenue

Cost of revenue for the three months ended March 31, 2023 increased by $780,438, or approximately 15%, compared to the same period in 2022 primarily due to contract deliveries related to our non-recurring customer. Cost of revenue as a percentage of revenue increased from 58% in 2022 to 68% in 2023, due to higher cost contract deliveries related to our non-recurring customer in the current period.

### Sales and Marketing

Sales and marketing expense for the three months ended March 31, 2023 decreased by $115,792, or approximately 5%, compared to the same period in 2022, due to reduced payroll costs tied to performance.

### General and Administrative

General and administrative expense for the three months ended March 31, 2023 decreased by $98,827, or approximately 3%, compared to the same period in 2022. The decrease in general and administrative expense for the three months ended March 31, 2023 was primarily due to lower overall compensation costs, partly offset by an increase in audit-related professional fees.

### Depreciation and Amortization

Depreciation and amortization expense for the three months ended March 31, 2023 increased by $207,433, or approximately 149%, compared to the same period in 2022.

Depreciation and amortization expense on property and equipment was $18,786 and $32,933 for the three months ended March 31, 2023 and 2022, respectively. Depreciation expense decreased due to the disposal of aging equipment in 2022 offset partially by the purchase of new equipment in the fourth quarter of 2022 and first quarter of 2023.

Amortization expense was $327,476 and $105,896 for the three months ended March 31, 2023 and 2022, respectively. There was no amortization expense related to intangible assets acquired in the Ebyline, ZenContent, and TapInfluence acquisitions recognized for the three months ended March 31, 2023 and 2022, respectively. The intangible assets acquired in acquisitions were fully amortized as of July 31, 2021. Amortization expense related to internal use software development costs was $327,476 and $105,896 for the three months ended March 31, 2023 and 2022, respectively, higher in the current period to fully amortize capitalized costs associated with IZEAx.

### Other Income (Expense)

Interest expense increased by $599 to $1,564 during the three months ended March 31, 2023 compared to the same period in 2022 due primarily to interest incurred on our financed computers.

Other income, net totaled $572,086 for the three months ended March 31, 2023, primarily from investment portfolio interest income, which was funded in the second quarter of 2022. Other income, net totaled a loss of $24,283 for the three months ended March 31, 2022, primarily due to a write-down on digital assets offset by interest income.

### Net Loss

Net loss for the three months ended March 31, 2023 was $2,806,339, a $330,096 increase compared to the net loss of $2,476,243 for the same period in 2022. The increase in net loss was a result of the changes discussed above.

### Key Metrics

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

### Managed Services Bookings

Managed Services Bookings is a measure of all sales orders received during a time period less any cancellations received, or refunds given during the same time period. Sales order contracts vary in complexity with each customer and range from custom content delivery to integrated marketing services; our contracts generally run from several months for smaller contracts up to twelve months for larger contracts. We recognize revenue from our Managed Services contracts on a percentage of completion basis as we deliver the content or services over time, which can vary greatly. Historically, bookings have converted to revenues over a 6-month period on average. However, since late 2020, we have been receiving increasingly larger and more complex sales orders which, in turn, has lengthened the average revenue period to approximately 9-months, with the largest contracts taking longer to complete. For this reason, Managed Services Bookings, while an overall indicator of the health of our business, may not be used to predict quarterly revenues, and could be subject to future adjustment. Managed Services Bookings is useful information as it reflects the amount of orders received in one period, even though revenue from those orders may be reflected over varying amounts of time. We use the Managed Services Bookings metric to plan operational staffing, to identify key customer group trends to enlighten go-to-market activities, and to inform its product development efforts. Managed Services Bookings for the three months ended March 31, 2023 and 2022 was $6.1 million and $12.1 million, respectively.

### Gross Billings by Revenue Type

We evaluate our operations and makes strategic decisions based, in part, on our key metric of gross billings from our two primary types of revenue, Managed Services, and SaaS Services. We define gross billings as the total dollar value of the amounts charged to our customers for the services we perform, and the amounts billed to our SaaS customers for their self-service purchase of goods and services on our platforms. The amounts billed to our SaaS customers are on a cost-plus basis. Gross billings are therefore the amounts of our reported revenue plus the cost of payments we made to third-party creators providing the content or sponsorship services, which are netted against revenue for generally accepted accounting principles in the U.S. (“GAAP”) reporting purposes.

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

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

We consider gross billings to be an important indicator of our potential performance as it measures the total dollar volume of transactions generated through our marketplaces. Tracking gross billings allows us to monitor the percentage of gross billings that we retain after payments to our creators. Additionally, tracking gross billings is critical as it pertains to our credit risk and cash flows. We invoice our customers based on our services performed or based on their self-service transactions plus our fee. Then we remit the agreed-upon transaction price to the creators. If we do not collect the money from our customers prior to paying our creators, we could experience large swings in our cash flows. Additionally, we incur the credit risk to collect amounts owed from our customers for all services performed by us or by the creators. Finally, gross billings allow us to evaluate our transaction totals on an equal basis to see our contribution margins by revenue stream so that we can better understand where we should be allocating our resources.

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

|  | Three Months Ended March 31, 2023 |  | 2022 |  | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| **Managed Services Gross Billings** | $8,502,754 | 87% | $8,372,456 | 87% | $130,298 | 2% |
| Marketplace Spend Fees | 1,023,685 | 11% | 747,244 | 8% | 276,441 | 37% |
| License Fees | 190,382 | 2% | 374,441 | 4% | (184,059) | (49)% |
| Other Fees | 8,112 | —% | 89,339 | 1% | (81,227) | (91)% |
| **SaaS Services Gross Billings** | 1,222,179 | 13% | 1,211,024 | 13% | 11,155 | 1% |
| **Total Gross Billings** | $9,724,933 | 100% | $9,583,480 | 100% | $141,453 | 1% |

### Non-GAAP Financial Measure

### Adjusted EBITDA

Adjusted EBITDA is a “non-GAAP financial measure” under the rules of the Securities and Exchange Commission (the “SEC”). We define Adjusted EBITDA as earnings or loss before interest, taxes, depreciation and amortization, non-cash stock-based compensation, gain or loss on asset disposals or impairment, and certain other unusual or non-cash income and expense items such as gains or losses on settlement of liabilities and exchanges, and changes in the fair value of derivatives, if applicable.

We use Adjusted EBITDA as a measure of operating performance, for planning purposes, to allocate resources to enhance the financial performance of our business and in communications with our Board of Directors regarding our financial performance. We believe that Adjusted EBITDA also provides valuable information to investors as it excludes non-cash transactions, and it provides consistency to facilitate period-to-period comparisons.

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

- does not include stock-based compensation expense, which is a non-cash expense, but has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an essential part of our compensation strategy;
- does not include stock issued for payment of services, which is a non-cash expense, but has been, and is expected to be for the foreseeable future, an important means for us to compensate our directors, vendors, and other parties who provide us with services;
- does not include depreciation and intangible assets amortization expense, impairment charges and gains or losses on disposal of equipment, which is not always a current period cash expense, but the assets being depreciated and amortized may have to be replaced in the future; and
- does not include interest expense and other gains, losses, and expenses that we believe are not indicative of our ongoing core operating results, but these items may represent a reduction or increase in cash available to us.

Because of these limitations, Adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the operation and growth of our business or as a measure of cash that will be available to us to meet our obligations. You should compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP financial measures as supplements. In evaluating this non-GAAP financial measure, you should be aware that in the future, we may incur expenses similar to those for which adjustments are made in calculating Adjusted EBITDA. Our presentation of this non-GAAP financial measure should also not be construed to infer that our future results will be unaffected by unusual or non-recurring items.

The following table sets forth a reconciliation from the GAAP measurement of net loss to our non-GAAP financial measure of Adjusted EBITDA for the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net loss | $(2,806,339) | $(2,476,243) |
| Gain on the forgiveness of debt | — | — |
| Gain on the sale of digital assets | — | — |
| Impairment of digital assets | — | 62,976 |
| Non-cash stock-based compensation | 195,524 | 117,192 |
| Non-cash stock issued for payment of services | 75,000 | 31,223 |
| Interest expense | 1,564 | 965 |
| Depreciation and amortization | 346,262 | 138,829 |
| Other non-cash items | — | (663) |
| Adjusted EBITDA | $(2,187,989) | $(2,125,721) |
| Revenue | $8,737,722 | $8,890,336 |
| Adjusted EBITDA as a % of Revenue | (25)% | (24)% |

### Liquidity and Capital Resources

### Near-Term Liquidity and Capital Resources

Historically, our primary cash needs have been funding the development and integration of our technology platforms used in its business, marketing expenses, and general and administrative (“G&A”) expenses including salaries, bonuses, and commissions. We have incurred losses and negative cash flow from operations for most periods since inception, primarily the result of costs associated with third-party creators, salaries, bonuses and stock-based compensation, and other G&A expenses, including technology and development costs, which has resulted in a total accumulated deficit of $80.9 million as of March 31, 2023. While we have not achieved profitability, we believe we have sufficient resources to fund operations and planned investments for at least the next twelve months.

We had cash and cash equivalents of $26.2 million as of March 31, 2023, as compared to $24.6 million as of December 31, 2022. This increase of $1.6 million is primarily due to shortening maturities in our investment portfolio, partly offset by cash used to fund operating losses.

| Net cash (used for)/provided by: | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $(2,436,879) | $(2,726,806) |
| Investing activities | 4,023,000 | (127,913) |
| Financing activities | (30,871) | (19,730) |
| Net increase in cash and cash equivalents | $1,555,250 | $(2,874,449) |

Net cash used for operating activities was $2.4 million during the three months ended March 31, 2023 and is primarily the result of continued use of cash to cover operating losses and to meet working capital requirements. Net cash used for investing activities was $4.0 million during the three months ended March 31, 2023, primarily due to the purchase and sale of marketable securities. Net cash used for financing activities during the three months ended March 31, 2023, was $30.9 thousand, which consisted of payments on shares withheld for taxes.

### Long-Term Liquidity

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

### Financial Condition and Outlook

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

### Critical Accounting Policies and Use of Estimates

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

### Recent Accounting Pronouncements

See “Note 1. Company and Summary of Significant Accounting Policies,” of this Quarterly Report for information on additional recent pronouncements.

## Market risk

As filed, 688 characters.

From time to time, we may become involved in various other lawsuits and legal proceedings that arise in the ordinary course of our business. Litigation is subject to inherent uncertainties and an adverse result in any such litigation that may arise from time to time that may harm our business. As of May 8, 2023, we are not aware of any legal proceedings or claims that we believe would or could have, individually or in the aggregate, a material adverse effect on us. Regardless of outcomes, however, any such proceedings or claims may nonetheless impose a significant burden on management and employees and may come with costly defense costs or unfavorable preliminary interim rulings.

## Controls and procedures

As filed, 4,568 characters.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that the Company files under the Exchange Act is accumulated and communicated to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Furthermore, controls and procedures could be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Misstatements due to error or fraud may occur and not be detected on a timely basis.

### Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-Q for the period ended March 31, 2023, an

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

officer and principal financial officer to determine the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2023. Based on this evaluation, our management concluded that our disclosure controls and procedures were effective as designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.

### Changes in Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by our Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company’s transactions;

(ii) provide reasonable assurance that transactions are recorded as necessary for the preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are made only in accordance with authorizations of our management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of any unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect financial statement misstatements. Also, projections of any evaluation of internal control effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the fiscal quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 2,411 characters.

You should carefully consider the factors discussed under this item and under Item 1A of Part I to our Annual Report on Form 10-K for the year ended December 31, 2022 regarding the numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks occur, our business, financial condition, or results of operation may be materially and adversely affected. In such a case, the trading price of our common stock could decline, and investors could lose all or part of their investment. These risk factors may not identify all risks that we face, and our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations.

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

A significant portion of our gross billings and accounts receivable are attributable to a small number of customers. At March 31, 2023, one customer accounted for 41% of gross billings for the quarter and three customers accounted for 61% of total accounts receivable. During the three months ended March 31, 2022, one customer accounted for 21% of gross billings and two customers accounted for 58% of accounts receivable. In January 2023, we announced that we began the process of parting ways with the customer accounting for the large portion of our gross billings and accounts receivable for the quarter ended March 31, 2023. The concentration of our sales with a relatively small number of customers makes us particularly dependent on factors, both positive and negative, affecting those customers. If demand for our services from these customers increases, our results are favorably impacted, while if their demand for our services decreases, they may reduce their purchases of, or stop purchasing, our services and our operating results would suffer. The Company does not typically engage in contracts are longer than one year, and so most of our customers can cease reduce or cease business with us on a relatively short basis. The loss of a large customer and failure to add new customers to replace lost revenue would have a material adverse effect on our business, financial condition, and results of operations.

Filed May 15, 2023.
Source: SEC EDGAR, the filing index for accession 0001495231-23-000090. Last ingested by Listed: Nov 2, 2026, 16:20 ET. No prices; not investment advice.