IZEA WORLDWIDE, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

0


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.
The statements, which are not historical facts 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," "could," "should," "expects," "anticipates," "estimates," "believes,"
"thinks," "intends," "likely," "projects," "plans," "pursue," "strategy" or
"future," 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:

•risks related to the restatement of the Company's previously issued interim
financial statements for the quarterly periods ended March 31, 2020, June 30,
2020, and September 30, 2020 (the "Restatement") included in our Annual Report
for the year ended December 31, 2021, including, without limitation, potential
inquiries from the SEC and/or the Nasdaq Capital Markets, the potential adverse
effect on the price of our common stock, and possible claims by our stockholders
or otherwise;

•the impact of the COVID-19 pandemic on our operations, financial condition, and
the worldwide economy;

•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 maintain effective disclosure controls and procedures and
internal control over financial reporting;

•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;

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

•marketing and other business development initiatives;

                                       21

——————————————————————————–

Table of Contents

•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 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, 2021, filed with the SEC on March
31, 2022.

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", "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"). Marketers also engage
us to gain access to our industry expertise, data, and analytics. Our primary
technology platform, the IZEA Exchange ("IZEAx"), is designed to provide a
unified ecosystem that enables the creation and publication of multiple types of
content to be completed at scale.

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

Influencer Marketing. We work with marketers to enable influencer marketing
campaigns at scale. A subset of influencer marketing known as "Sponsored Social"
is when a company compensates creators to share sponsored content with the
creators' social network followings. This sponsored content is within the body
of the content stream. We believe that we pioneered the concept of a marketplace
for sponsorships on the social web in 2006 with the launch of our first
platform, PayPerPost. We have focused on scaling our product and service
offerings ever since, including by acquiring TapInfluence in July 2018 and
launching Shake and BrandGraph in 2020.

Custom Content. We also work with marketers to augment or replace their content
development efforts. Our network of creators produces editorial and marketing
content that can be published both online and offline. Our network of creators
includes professional journalists, subject matter experts, bloggers, and
everyday content creators, allowing our customers to produce content ranging
from complex white papers to simple product descriptions. Many of our content
customers use this service to create a steady stream of posts for their
corporate blogs. We first began offering custom content services in 2015 after
acquiring Ebyline, a leading marketplace in the editorial content space, and
continued to expand this offering with our acquisition of ZenContent in July
2016, a company that predominantly focused on e-commerce-related asset creation.

Our Platforms


IZEAx. The platform is designed to provide a unified ecosystem that enables the
creation and publication of multiple types of custom content through our
creators' websites, blogs, and social media channels, including, among others,
Twitter, Facebook, YouTube, Twitch, and Instagram. We extensively use this
platform to manage influencer marketing campaigns on behalf of our marketers.
This platform is also available directly to our marketers as a self-service tool
and a licensed white label product. IZEAx was engineered from the ground up to
replace all of our previous platforms with an integrated offering that is
improved and more efficient.

BrandGraph. In March 2020, we launched BrandGraph, a social media intelligence
platform. BrandGraph is heavily integrated with IZEAx, and both platforms rely
heavily on data from each other, but it is also available as a stand-alone
platform. BrandGraph offers marketers an analysis of share-of-voice, engagement
benchmarking, category spending estimates, influencer identification, and
sentiment analysis. The 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. It
                                       22

——————————————————————————–

Table of Contents

aggregates and analyzes content data to provide insights for marketers across
their competitive landscapes that are particularly useful to influencer
marketing professionals, including our managed services team.

Shake. In November 2020, we launched Shake, a new online marketplace where
buyers can quickly and easily hire creators of all types for influencer
marketing, photography, design, and other digital services. The Shake platform
is aimed at digital creators seeking freelance “gig” work. Creator’s list
available “Shakes” on their accounts on the platform. Marketers select and
purchase creative packages from them through a streamlined chat experience,
assisted by ShakeBot – a proprietary, artificial intelligence assistant.

Impact of COVID-19 on our Business


   The COVID-19 pandemic impacted our operations, sales, and finances beginning
in 2020. To protect the health and safety of our employees, we took
precautionary action and directed all staff to work from home effective March
16, 2020. We allowed the leases for our company headquarters and temporary
office spaces to expire at the end of their terms throughout 2020. We have not
experienced any major declines in operating efficiency in our remote working
environment and have decided to continue our work-from-home policy indefinitely
as a virtual-first employer.

We will continue to actively monitor the COVID-19 situation and may take further
actions altering the business operations that we determine are in the best
interests of our employees, customers, partners, suppliers, and stakeholders, or
as required by federal, state, or local authorities. It is not clear what the
potential effects any such alterations or modifications may have on our
business, including the effects on our customers, employees, and prospects, or
on our future financial results.

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 IZEAx and Shake
platforms ("Marketplace Spend Fees"); (3) revenue from license and subscription
fees charged to access the IZEAx and BrandGraph 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 related to 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 providing support to our
customers and ultimately fulfilling our obligations under our contracts with
customers. Where appropriate, we capitalize costs incurred with software
developed or acquired for our revenue-supporting platforms and amortize these
costs over the estimated useful lives of those platforms. This amortization is
separately stated under depreciation and amortization in our consolidated
statements of operations and comprehensive loss.

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,
                                       23

——————————————————————————–

Table of Contents


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 and leasehold improvements 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 prior years has primarily been related to
the imputed interest on our secured credit facility, accrued interest for the
PPP loan, and interest on the financing of computers. The Company is only
recognizing interest expense on the financing of computers in the current year.

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.
                                       24
--------------------------------------------------------------------------------
  Table of Contents
Results of Operations for the Three Months Ended March 31, 2022 and 2021

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

                                                          Three Months Ended March 31,
                                                           2022                     2021                $ Change        % Change
Revenue                                            $     8,890,336$  5,528,166$ 3,362,170               61  %

Costs and expenses:
Cost of revenue                                          5,179,724                2,457,785            2,721,939              111  %
Sales and marketing                                      2,520,343                2,078,323              442,020               21  %
General and administrative                               3,502,435                2,535,147              967,288               38  %
Depreciation and amortization                              138,829                  365,529             (226,700)             (62) %
Total costs and expenses                                11,341,331                7,436,784            3,904,547               53  %
Loss from operations                                    (2,450,995)              (1,908,618)            (542,377)              28  %
Other income (expense):
Interest expense                                              (965)                 (13,793)              12,828              (93) %
Other income, net                                          (24,283)                  29,474              (53,757)            (182) %
Total other income (expense), net                          (25,248)                  15,681              (40,929)            (261) %
Net Loss                                           $    (2,476,243)$ (1,892,937)$  (583,306)              31  %



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,
                                                        2022                             2021                    $ Change        % Change
Managed Services Revenue                   $    8,372,456           94  %       $ 5,034,993       91  %       $ 3,337,463               66  %

Marketplace Spend Fees                             54,100            1  %            98,371        2  %           (44,271)             (45) %
License Fees                                      374,441            4  %           383,041        7  %            (8,600)              (2) %
Other Fees                                         89,339            1  %            11,761        -  %            77,578              660  %
SaaS Services Revenue                             517,880            6  %           493,173        9  %            24,707                5  %

Total Revenue                              $    8,890,336          100  %       $ 5,528,166      100  %       $ 3,362,170               61  %



Historically, we have invested the majority of our time and resources in our
Managed Services business, which provides the majority of our revenue. Our
acquisitions of Ebyline and ZenContent allowed us to expand our product
offerings to provide custom content in addition to and in combination with our
influencer marketing campaigns to expand our Managed Services. Our July 2018
merger with TapInfluence expanded our SaaS Services to derive revenue from
Marketplace Spend Fees and License Fees.

Managed Services revenue is generated 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 revenue
during the three months ended March 31, 2022, increased by $3.3 million or 66%
to $8.4 million compared to $5.0 million for the same period in 2021; nearly
half of the increase comes from one large customer contract dating to early in
the second quarter of 2021, with the balance of the increase due to growth in
orders from new and existing customers expanding their marketing efforts through
sponsored social marketing as compared to the prior-year period.

SaaS Services revenue is generated by the self-service use of our technology
platforms by marketers to manage their own content workflow and influencer
marketing campaigns. It consists of fees earned on the marketer's spend within
the IZEAx, TapInfluence and Ebyline platforms, along with the license and
support fees to access the platform services.
                                       25

——————————————————————————–

Table of Contents


•Marketplace Spend Fees decreased by $44,271 to $54,100 for the three months
ended March 31, 2022 compared to $98,371 for the same period in 2021. The fee
decrease was due to lower spend levels from our marketers and lower average fees
assessed on those spends as a result of competitive pricing efforts in IZEAx.
Revenue from Marketplace Spend Fees represents our net margins received on this
business.

•License Fees revenue decreased during the three months ended March 31, 2022 to
$374,441 compared to $383,041 in the same period of 2021. The decrease in IZEAx
license fees was offset by an increase in subscriptions for BrandGraph and IZEAx
Discovery services.

•Other Fees revenue increased by $77,578 during the three months ended March 31,
2022 compared to the same period in 2021 due to the recognition of a large
forfeited customer deposit offset by lower plan fees accessed on customer
accounts. Nonrefundable deposits are collected from certain customers due to
defined minimum spend per the contract or prepayment required for any 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, 2022 totaled $5.2 million,
or 58.3% of revenue, compared to $2.5 million, or 44.5% of revenue for the same
period in 2021. The increase in the cost of revenue is primarily due to higher
cost deliveries on one large customer contract dating to early in the second
quarter of 2021, which made up approximately 14% of current quarter revenues, as
well as by the overall increase in revenue from other new and existing
customers. Aside from the large customer contract, the cost of revenue was in
range with recent historical averages.

Sales and Marketing


Sales and marketing expense for the three months ended March 31, 2022 increased
by $442,020, or approximately 21%, compared to the same period in 2021. The
increase over prior year is primarily driven by additional headcount and the
associated payroll costs.

General and Administrative

General and administrative expense for the three months ended March 31, 2022
increased by $967,288, or approximately 38%, compared to the same period in
2021. General and administrative expense for the three months ended March 31,
2022 increased $467,000 due to higher payroll and personnel related expenses as
a result of an increase in headcount as well as increased salaries and higher
bonus expense due to the improved company performance. Contractor expenses
increased $220,000 as we are increasing the number of internal and external
engineers working on our technology offerings. Software & licenses increased
$190,000 due to increased hosting and software subscription costs. Professional
services, including legal and accounting contractors, increased $90,000 over the
prior year. This was due in part to the implementation of a new ERP system and
audit fees related to the Restatement.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended March 31, 2022
decreased by $226,700, or approximately 62%, compared to the same period in
2021.


Depreciation and amortization expense on property and equipment was $32,932 and
$32,486 for the three months ended March 31, 2022 and 2021, respectively.
Depreciation expense has increased slightly due to the purchase of new equipment
in the first quarter of 2022.

Amortization expense was $105,896 and $333,043 for the three months ended
March 31, 2022 and 2021, respectively. Amortization expense related to
intangible assets acquired in the Ebyline, ZenContent, and TapInfluence
acquisitions was $216,667 for the three months ended March 31, 2021. There was
no amortization expense related to intangible acquired assets for the three
months ended March 31, 2022, as they were fully amortized during fiscal year
2021. Amortization expense related to internal use software development costs
was $105,896 and $116,376 for the three months ended March 31, 2022 and 2021,
respectively. Amortization on our intangible acquisition assets decreased in the
three months ended March 31, 2022 due to completion of amortization on certain
intangible assets acquired in prior years.

Other Income (Expense)

Interest expense decreased by $12,828 to $965 during the three months ended
March 31, 2022 compared to the same period in 2021 due to the elimination of
amounts owed on our acquisition costs payable and the PPP loan.


The $53,757 decrease in other income during the three months ended March 31,
2022 when compared to the same period in 2021 resulted primarily due to reduced
interest income received on cash balances due to lower interest rates and the
write down of digital assets.


                                       26
--------------------------------------------------------------------------------
  Table of Contents
Net Loss

Net loss for the three months ended March 31, 2022 was $2,476,243, a $583,306
increase compared to the net loss of $1,892,937 for the same period in 2021. The
increase in net loss was a result of the changes discussed above.

Key Metric


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. Management uses the
Managed Services Bookings metric to plan its operating staff, 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, 2022 and 2021 was $12.1 million and $6.4 million, respectively.

Gross Billings by Revenue Type


Company management evaluates 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 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 United States ("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:

                                       27

——————————————————————————–

  Table of Contents

                                                  Three Months Ended March 31,
                                             2022                                  2021                     $ Change       % Change
Managed Services Gross
Billings                      $     8,372,456             87%           $ 5,034,993        76%           $ 3,337,463         66%

Marketplace Spend Fees                747,244             8%              1,226,208        18%              (478,964)       (39)%
License Fees                          374,441             4%                383,041        6%                 (8,600)        (2)%
Other Fees                             89,339             1%                 11,761        1%                 77,578         660%
SaaS Services Gross Billings        1,211,024             13%             1,621,010        24%              (409,986)       (25)%

Total Gross Billings          $     9,583,480            100%           $ 6,656,003       100%           $ 2,927,477         44%


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.
                                       28

——————————————————————————–

Table of Contents


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, 2022, and 2021:

                                                                Three Months Ended March
                                                                          31,
                                                                              2022                  2021
Net loss                                                                 $ (2,476,243)$ (1,892,937)
Write down of digital assets                                                   62,976                     -
Non-cash stock-based compensation                                             117,192               197,986
Non-cash stock issued for payment of services                                  31,223                34,696
Interest expense                                                                  965                13,793
Depreciation and amortization                                                 138,829               365,529
Other non-cash items                                                             (663)               (7,914)
Adjusted EBITDA                                                          $ (2,125,721)$ (1,288,847)

Revenue                                                                  $  8,890,336$  5,528,166
Adjusted EBITDA as a % of Revenue                                                 (24) %                (23) %



Liquidity and Capital Resources

Near-Term Liquidity and Capital Resources


The Company's primary cash needs have historically been funding the development
and integration of IZEAx and other technology platforms used in its business,
marketing expenses, and general and administrative ("G&A") expenses including
salaries, bonuses, commissions and stock-based compensation. We have also
engaged in acquisitions from time to time in the past, most recently of
TapInfluence in July 2018. The Company has 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 $72.5 million as of
March 31, 2022. We have not achieved profitability and, therefore, may need to
raise capital through new financings.

We had cash and cash equivalents of $72.6 million as of March 31, 2022, as
compared to $75.4 million as of December 31, 2021, an decrease of $2.9 million,
primarily due to operating losses.

                                                               March 31, 2022           December 31, 2021
Net cash (used for) provided by:
Operating activities                                         $    (2,726,806)         $         (829,707)
Investing activities                                                (127,913)                    (13,217)
Financing activities                                                 (19,730)                 33,263,287

Net (decrease) increase in cash and cash equivalents $ (2,874,449)$ 32,420,363



Cash used for operating activities was $2.7 million during the three months
ended March 31, 2022 and is primarily the result of continued use of cash to
cover operating losses and changes in working capital. Net cash used for
investing activities was $127,913 during the three months ended March 31, 2022,
primarily due to the purchase of digital assets. Net cash used for financing
activities during the three months ended March 31, 2022, was $19,730, which
consisted primarily of payments on shares withheld for taxes.

In June 2020 and January 2021, we entered into ATM Sales Agreements with
National Securities Corporation, as sales agent ("National Securities"),
pursuant to which we could offer and sell up to $40 million and $35 million,
respectively, of common stock (the "ATM Offerings"). From June 4, 2020 through
April 15, 2021, we sold a total of 26,005,824 shares at an average price of
$2.88 per share for total gross proceeds of $75.0 million in the ATM Offerings .
On June 21, 2021, we entered into a third ATM Sales Agreement with National
Securities, as sales agent, pursuant to which we can offer and sell shares of
our common stock, from time to time for aggregate purchase prices up to $100
million by any method deemed to be an "at the market offering" as defined in
Rule 415 under the Securities Act under our shelf registration statement on Form
S-3 (File No. 333-256078). No sales had been made under this agreement as of
March 31, 2022.


                                       29

——————————————————————————–

Table of Contents

General Liquidity


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

Financial Condition

Our business operations and results have been impacted by COVID-19, which in the
first half of 2020 had a material effect on our customers, their advertising
commitments, bookings cancellations, revenues, and cash flows. Since late 2020,
while the economy continues to feel the impacts of supply-chain, labor
disruption, and business closures, the Company has seen a material increase in
the overall social media marketing spend by large and small customers, which has
benefited our bookings and revenue growth rates, cash flows and future
prospects. We are still feeling some effects of the pandemic in our daily
operations, despite the growth we are experiencing. While the disruption caused
by COVID-19 is currently expected to be temporary, it is generally outside of
our control, and there is uncertainty around the duration and the total economic
impact. Therefore, this matter 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, 2021. 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.

© Edgar Online, source Glimpses



Source link

Leave A Reply

Your email address will not be published.