10-Q 1 izea-20240630.htm 10-Q izea-20240630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period June 30, 2024
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _________________ to _________________
 
Commission File No.: 001-37703
 IZEA WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
Nevada 37-1530765
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
1317 Edgewater Dr., # 1880,
Orlando, FL
 32804
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code: (407) 674-6911
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol (s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareIZEA
The Nasdaq Capital Market
Series A Junior Participating Preferred Stock Purchase Rights-
The Nasdaq Capital Market

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  x  No  o
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-Accelerated Filer
 
Smaller reporting company
Emerging growth company
1

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

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

 As of August 9, 2024, there were 16,450,424 shares of our common stock outstanding.

 
2

Quarterly Report on Form 10-Q for the period ended June 30, 2024

Table of Contents
 
 Page
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION
 





















i

PART I - FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

IZEA Worldwide, Inc.
Unaudited Consolidated Balance Sheets
June 30,
2024
December 31,
2023
Assets
Current assets:  
Cash and cash equivalents$44,301,866 $37,446,728 
Accounts receivable, net5,617,269 5,012,373 
Prepaid expenses1,046,154 739,988 
Short term investments11,286,453 17,126,057 
Other current assets43,451 26,257 
Total current assets62,295,193 60,351,403 
Property and equipment, net of accumulated depreciation155,835 205,377 
Goodwill5,281,888 5,280,372 
Intangible assets, net1,624,951 1,749,441 
Digital assets243,020 162,905 
Software development costs, net 2,241,437 2,056,972 
Long term investments897,027 9,618,996 
Total assets$72,739,351 $79,425,466 
Liabilities and Stockholders’ Equity  
Current liabilities:  
Accounts payable$1,306,266 $1,504,348 
Accrued expenses3,161,829 3,083,460 
Contract liabilities7,176,694 8,891,205 
Contingent Liability 114,400 
Total current liabilities11,644,789 13,593,413 
Finance obligation, less current portion33,727 63,419 
Deferred purchase price, less current portion 60,600 
Deferred tax liability287,002 394,646 
Total liabilities11,965,518 14,112,078 
Commitments and Contingencies (Note 9)
Stockholders’ equity:  
Preferred stock; $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding
  
Common stock; $0.0001 par value; 50,000,000 shares authorized; shares issued: 16,770,418 and 16,602,155, respectively, shares outstanding: 16,404,563 and 16,236,300, respectively.
1,677 1,660 
Treasury stock at cost: 365,855 and 365,855 shares at June 30, 2024 and December 31, 2023, respectively
(1,019,997)(1,019,997)
Additional paid-in capital152,809,711 152,027,110 
Accumulated deficit(90,905,472)(85,444,794)
Accumulated other comprehensive income (loss)(112,086)(250,591)
Total stockholders’ equity60,773,833 65,313,388 
Total liabilities and stockholders’ equity$72,739,351 $79,425,466 


See accompanying notes to the consolidated financial statements.
1


IZEA Worldwide, Inc.
Unaudited Consolidated Statements of Operations

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Revenue$9,093,816 $10,689,059 $16,046,699 $19,426,781 
Costs and expenses:
Cost of revenue5,177,600 6,254,517 9,145,575 12,214,679 
Sales and marketing3,206,979 2,831,949 6,263,270 5,236,500 
General and administrative3,372,797 3,167,941 7,155,883 6,571,549 
Depreciation and amortization225,748 110,432 429,934 456,694 
Total costs and expenses11,983,124 12,364,839 22,994,662 24,479,422 
Loss from operations(2,889,308)(1,675,780)(6,947,963)(5,052,641)
Other income (expense):
Change in the fair value of digital assets(26,043) 80,116  
Interest expense(1,999)(3,155)(4,000)(4,719)
Other income (expense), net634,226 645,509 1,304,091 1,217,595 
Total other income (expense), net606,184 642,354 1,380,207 1,212,876 
Net loss before income taxes$(2,283,124)$(1,033,426)$(5,567,756)$(3,839,765)
Tax benefit88,296  107,078  
Net loss(2,194,828)(1,033,426)(5,460,678)(3,839,765)
Weighted average common shares outstanding – basic and diluted16,437,460 15,520,700 16,470,467 15,551,785 
Basic and diluted loss per common share$(0.13)$(0.07)$(0.33)$(0.25)






















See accompanying notes to the consolidated financial statements.
2


IZEA Worldwide, Inc.
Unaudited Consolidated Statements of Comprehensive Loss
 
 Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Net loss$(2,194,828)$(1,033,426)$(5,460,678)$(3,839,765)
Other comprehensive income
Unrealized (gain) loss on securities held(92,630)(10,100)(150,807)(136,280)
Unrealized (gain) loss on currency translation16,472  12,302  
Total other comprehensive income (loss)(76,158)(10,100)(138,505)(136,280)
Total comprehensive income (loss)$(2,118,670)$(1,023,326)$(5,322,173)$(3,703,485)
 







































See accompanying notes to the consolidated financial statements.
3


IZEA Worldwide, Inc.
Unaudited Consolidated Statements of Stockholders’ Equity
Three Months Ended June 30, 2024 and 2023

 Common StockAdditional
Paid-In
TreasuryAccumulatedAccumulated
Other
Comprehensive
Total
Stockholders’
 SharesAmountCapitalStockDeficitIncome (Loss)Equity
Balance, March 31, 202315,650,235 1,565 149,387,894  (80,901,773)(654,615)67,833,071 
Stock purchase plan & option exercise issuances4,329 1 7,991 — — — 7,992 
Stock issued for payment of services30,990 3 75,006 — — — 75,009 
Stock-based compensation38,229 4 207,873 — — — 207,877 
Shares withheld to cover statutory taxes(12,892)(1)(32,562)— — — (32,563)
Reverse stock split fractional share adjustment23,789 2 (2)— — — — 
Treasury stock— — — (705,403)— — (705,403)
Unrealized gain on securities held— — — — — 10,100 10,100 
Net loss— — — — (1,033,426)— (1,033,426)
June 30, 202315,734,680 1,574 $149,646,200 $(705,403)$(81,935,199)$(644,515)$66,362,657 


 Common StockAdditional
Paid-In
TreasuryAccumulatedAccumulated
Other
Comprehensive
Total
Stockholders’
 SharesAmountCapitalStockDeficitIncome (Loss)Equity
Balance, March 31, 202416,666,513 1,667 152,419,065 (1,019,997)(88,710,644)(188,244)62,501,847 
Stock purchase plan & option exercise issuances3,360  5,907 — — — 5,907 
Stock issued for payment of services31,915 3 74,997 — — — 75,000 
Stock-based compensation101,566 10 394,921 — — — 394,931 
Shares withheld to cover statutory taxes(32,936)(3)(85,179)— — — (85,182)
Foreign currency translation adjustment— — — —  (16,472)(16,472)
Unrealized gain on securities held— — — — — 92,630 92,630 
Net loss— — — — (2,194,828)— (2,194,828)
June 30, 202416,770,418 1,677 $152,809,711 (1,019,997)$(90,905,472)$(112,086)$60,773,833 










See accompanying notes to the consolidated financial statements.
4


IZEA Worldwide, Inc.
Unaudited Consolidated Statements of Stockholders’ Equity
Six Months Ended June 30, 2024 and 2023

 Common StockAdditional
Paid-In
TreasuryAccumulatedAccumulated
Other
Comprehensive
Total
Stockholders’
 SharesAmountCapitalStockDeficitIncome (Loss)Equity
December 31, 202215,603,597 1,560 149,148,248 $— (78,103,066)(780,795)70,265,947 
Cumulative Effect Retained Earnings Adjustment (FMV Crypto)— — — — 7,632 — 7,632 
Stock purchase plan & option exercise issuances4,329 1 7,991 — — — 7,992 
Stock issued for payment of services59,797 6 150,003 — — — 150,009 
Stock-based compensation67,446 7 403,392 — — — 403,399 
Shares withheld to cover statutory taxes(24,278)(2)(63,432)— — — (63,434)
Reverse stock split fractional share adjustment23,789 2 (2)— — — — 
Treasury stock— — — (705,403)— — (705,403)
Unrealized gain on securities held— — — — — 136,280 136,280 
Net loss— — — — (3,839,765)— (3,839,765)
June 30, 202315,734,680 1,574 $149,646,200 $(705,403)$(81,935,199)$(644,515)$66,362,657 

 Common StockAdditional
Paid-In
TreasuryAccumulatedAccumulated
Other
Comprehensive
Total
Stockholders’
 SharesAmountCapitalStockDeficitIncome (Loss)Equity
December 31, 202316,602,155 1,660 152,027,110 (1,019,997)(85,444,794)(250,591)65,313,388 
Stock purchase plan & option exercise issuances3,360  5,907 — — — 5,907 
Stock issued for payment of services64,385 6 150,000 — — — 150,006 
Stock-based compensation151,587 15 749,105 — — — 749,120 
Shares withheld to cover statutory taxes(51,069)(4)(122,411)— — — (122,415)
Foreign currency translation adjustment— — — — — (12,302)(12,302)
Unrealized gain on securities held— — — — — 150,807 150,807 
Net loss— — — — (5,460,678)— (5,460,678)
June 30, 202416,770,418 1,677 $152,809,711 (1,019,997)$(90,905,472)$(112,086)$60,773,833 








See accompanying notes to the consolidated financial statements.
5


IZEA Worldwide, Inc.
Unaudited Consolidated Statements of Cash Flows
Six Months Ended June 30,
20242023
Cash flows from operating activities:  
Net loss$(5,460,678)$(3,839,765)
Adjustments to reconcile net loss to net cash used for operating activities:
Adjustment to fair market value of digital assets(80,115) 
Depreciation53,258 45,946 
Amortization376,676 410,748 
Deferred tax benefit(107,644) 
Stock-based compensation749,120 403,399 
Value of stock issued or to be issued for payment of services150,006 150,009 
Changes in operating assets and liabilities:  
Accounts receivable(604,896)(653,146)
Prepaid expenses and other current assets(323,359)2,467,714 
Accounts payable(198,081)148,750 
Accrued expenses(96,633)43,082 
Contract liabilities(1,714,511)(2,990,579)
Net cash used for operating activities(7,256,857)(3,813,842)
Cash flows from investing activities:
Purchase of short term investments(146,697,435)(172,865,911)
Proceeds from the sale of short-term investments152,687,846 174,848,157 
Proceeds from the sale of long term investments8,721,969 9,718,381 
Purchase of property and equipment(29,692)(65,803)
Capitalization of software development costs(437,152)(437,877)
Net cash provided by investing activities14,245,536 11,196,947 
Cash flows from financing activities:  
Proceeds from exercise of stock options & ESPP issuances5,907 7,992 
Purchase of treasury stock (705,403)
Payments on shares withheld for statutory taxes(122,415)(63,434)
Net cash used in financing activities(116,508)(760,845)
Effect of exchange rate changes on cash(17,033) 
Net increase in cash and cash equivalents6,872,171 6,622,260 
Cash and cash equivalents, beginning of period37,446,728 24,600,960 
Cash and cash equivalents, end of period$44,301,866 $31,223,220 
Supplemental cash flow information:  
Interest paid$4,000 $4,553 
Non-cash financing and investing activities:  
Equipment acquired with financing arrangement 83,508 
Fair Value of common stock issued for services150,006 150,009 



See accompanying notes to the consolidated financial statements.
6

IZEA Worldwide, Inc.
Notes to the Consolidated Financial Statements


NOTE 1.    COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Corporate Information and Nature of Business
IZEA Worldwide, Inc. (together with its wholly-owned subsidiaries, “IZEA” or the “Company”) is a Nevada corporation that was founded in February 2006 under the name PayPerPost, Inc. and became a public company in May 2011. In January 2015, IZEA purchased all of the outstanding shares of capital stock of Ebyline, Inc. (“Ebyline”). 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. In July 2016, IZEA purchased all the outstanding shares of capital stock of ZenContent, Inc. (“ZenContent”) and in July 2018, a subsidiary of the Company merged with TapInfluence, Inc. (“TapInfluence”). The ZenContent legal entity was dissolved in December 2017, and Ebyline and TapInfluence were merged into IZEA and the legal entities were dissolved in December 2019 and December 2020, respectively. IZEA purchased all of the outstanding shares of capital stock of Hoozu Holdings, Ltd in December 2023, and completed an asset acquisition from Zuberance, Inc. in December 2023.
The Company helps power the creator economy, by enabling individuals to monetize their content, creativity and influence through global brands and 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.
The Company also provides value through managing custom content workflow, creator search and targeting, bidding, analytics, and payment processing. While the majority of the marketers engage the Company to perform these services (the “Managed Services”) on their behalf, they may also access IZEA’s marketplaces to engage creators for influencer marketing campaigns or to produce custom content on a self-service basis by licensing the Company’s technology.
Basis of Presentation
The accompanying consolidated balance sheet as of June 30, 2024, the consolidated statements of operations for the three and six months ended June 30, 2024 and 2023, the consolidated statements of comprehensive loss for the three and six months ended June 30, 2024 and 2023, the consolidated statements of stockholders' equity for the three and six months ended June 30, 2024 and 2023, and the consolidated statements of cash flows for the six months ended June 30, 2024 and 2023 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, 2023 has been derived from the audited consolidated financial statements at that date but, in accordance with the rules and regulations of the SEC, does not include all of the information and notes required by GAAP for complete financial statements. Operating results for the three and six months ended June 30, 2024 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, 2023, included in the Company's Annual Report on Form 10-K filed with the SEC on April 1, 2024.
Principles of Consolidation
The consolidated financial statements include the accounts of IZEA Worldwide, Inc. and its wholly-owned subsidiaries, subsequent to the subsidiaries’ individual acquisition, merger, or formation dates, as applicable. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
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.
7

IZEA Worldwide, Inc.
Notes to the Consolidated Financial Statements

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. Deposits made to Company bank accounts are insured by the FDIC up to a maximum amount of $250,000. The CDIC insures deposits made to the Company’s bank accounts in Canada up to CAD 100,000. The Australian Financial Claims Scheme insures deposits made to the Company’s accounts in Australia up to AUD $250,000. Deposit balances exceeding this limit were approximately $43.6 million and $36.7 million as of June 30, 2024 and 2023, respectively.
Investment in Debt Securities
Our investments in debt securities are carried at either amortized cost or fair value. The cost basis is determined by the specific identification method. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading debt securities as well as realized gains and losses on available-for-sale debt securities are included in net income. Unrealized gains and losses, net of tax, on available-for-sale debt securities are included in our consolidated balance sheet as a component of accumulated other comprehensive income (loss).
Accounts Receivable and Concentration of Credit Risk
The Company’s accounts receivable balance consists of trade receivables, contract assets, and a reserve for doubtful accounts. Trade receivables are customer obligations due under normal trade terms. Contract assets represent amounts owed for work that has been performed but not yet billed. The Company had net trade receivables of $5.6 million, including $5.6 million of accounts receivable and contract assets of $54,217 on June 30, 2024. The Company had net trade receivables of $5.0 million, including $4.9 million of accounts receivable and contract assets of $83,697 at December 31, 2023.
Management determines the collectability of accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions. An account is deemed delinquent when the customer has not paid an amount due by its associated due date. If a portion of the account balance is deemed uncollectible, the Company will either write off the amount owed or provide a reserve based on its best estimate of the uncollectible portion of the account. We assess collectability risk both generally and by specific aged invoices. Our loss history informs a general reserve percentage, which we apply to all invoices less than 90 days from the invoice due date, currently 1.1% of the outstanding balance. The general reserve, which we update periodically, recognizes that some invoices will likely become a collection risk. When an invoice ages 90 days past its due date, we consider each invoice to determine a reserve for collectability based on our prior history and recent communications with the customer, to determine a reserve amount. Generally, our reserve for such aged invoices will approach 100% of the invoice amount.
The Company had a reserve for doubtful accounts of $205,000 as of June 30, 2024, and $155,000 as of June 30, 2023. Management believes that this estimate is reasonable, but there can be no assurance that the estimate will not change due to a change in economic conditions or business conditions within the industry, the individual customers, or the Company. Any adjustments to this account are reflected in the consolidated statements of operations as a general and administrative expense. The Company did not recognize any bad debt expense in the three and six months ended June 30, 2024 and recognized $50,000 in the twelve months ended December 31, 2023.
     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. 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 10% of total accounts receivable at June 30, 2024 and one customer that accounted for more than 10% of total accounts receivable at December 31, 2023. The Company had two customers each that accounted for more than 10% of its revenue during the six months ended June 30, 2024 and one customer that accounted for more than 10% of its revenue during the six months ended June 30, 2023.

Property and Equipment
Property and equipment are recorded at cost, or if acquired in a business combination, at the acquisition date fair value. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:
Computer Equipment3 years
Office Equipment
3 - 10 years
Furniture and Fixtures
5 - 10 years
8

IZEA Worldwide, Inc.
Notes to the Consolidated Financial Statements

The carrying amounts of assets sold or retired and the related accumulated depreciation are eliminated in the year of disposal, with resulting gains or losses included in general and administrative expense in the consolidated statements of operations.
Goodwill
Goodwill represents the excess of the consideration transferred for an acquired business over the fair value of the underlying identifiable net assets. The Company has goodwill in connection with its acquisitions of Ebyline, ZenContent, TapInfluence, and Hoozu. Goodwill is not amortized but instead, it is tested for impairment at least annually. In the event that management determines that the value of goodwill has become impaired, the Company will record a charge in an amount equal to the excess of the reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit during the fiscal quarter in which the determination is made.
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. Prior to the acquisition of Hoozu on December 1, 2023, IZEA had one business operating segment with one reporting unit for purposes of goodwill impairment testing. Hoozu is being treated as a second, separate reporting unit for goodwill impairment testing.
The Company performs its annual impairment tests of goodwill as of October 1 each year, or more frequently if certain indicators are present. As described in Note 5, there were no impairment charges associated with the Company’s goodwill in the three and six months ended June 30, 2024 and 2023, respectively.
Intangible Assets
The Company acquired the majority of its intangible assets through its acquisitions of Ebyline, ZenContent, TapInfluence, and Hoozu. The Company amortizes identifiable intangible assets over periods of 12 to 60 months. See Note 5 for further details.
The Company accounts for its digital assets held as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. The Company maintains ownership of and control over its digital assets and may use third-party custodial services to secure them. The digital assets are initially recorded at cost and are subsequently evaluated for any changes in the fair market value. The Company did not recognize any impairment of digital assets during the three and six months ended June 30, 2024, and 2023.
In December 2023, the FASB issued ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 requires fair value measurement of certain crypto assets each reporting period with the changes in fair value reflected in net income. The amendments also require disclosures of the name, fair value, units held, and cost bases for each significant crypto asset held and annual reconciliations of crypto asset holdings. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024, with early adoption permitted. The Company has opted to adopt this guidance early.
A cumulative effect adjustment to retained earnings was recognized as of January 1, 2023 for $7,632. This adjustment brings the carrying value in line with the fair market value as of December 31, 2022. Adjustments have been recognized for all quarterly reporting periods for 2023 as of December 31, 2023 to restate the carrying value at the end of each period for the Company’s digital assets, as described in Note 5.
The Company reviews long-lived assets, including software development costs and other intangible assets, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared with the asset's carrying amount to determine if there has been an impairment, calculated as the difference between the asset’s fair value 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. The Company did not recognize any impairment charges associated with the Company’s acquired intangible assets in the three and six months ended June 30, 2024 and 2023.
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
9

IZEA Worldwide, Inc.
Notes to the Consolidated Financial Statements

planning stage and in the post-implementation stage of software development, or other maintenance and development expenses that do not meet the qualification for capitalization, are expensed as incurred. Costs incurred in the application and development stage, including significant enhancements and upgrades, are capitalized. These costs include personnel and related employee benefits expenses for employees or consultants directly associated with and who devote time to software projects and external direct costs of materials obtained in developing the software. The Company also capitalizes certain costs associated with cloud computing arrangements (“CCAs”). These software developments, acquired technology, and CCA costs are amortized on a straight-line basis over the estimated useful life of five years upon the initial release of the software or additional features. The Company reviews the software development costs for impairment when circumstances indicate their carrying amounts may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in its consolidated statements of operations. See Note 6 for further details.
Leases
Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), established a right-of-use model that requires a lessee to record a right-of-use asset and a right-of-use liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company does not record leases on the balance sheet that have a lease term of 12 months or less at the commencement date.
Revenue Recognition
The Company generates revenue from four primary sources: (1) revenue from its managed services when a marketer (typically a brand, agency, or partner) pays the Company to provide custom content, influencer marketing, amplification, or other campaign management services (“Managed Services”); (2) revenue from fees charged to software customers on their marketplace spend within the Company's platforms (“Marketplace Spend Fees”); (3) revenue from license and subscription fees charged to access our platforms (“License Fees”); and, (4) revenue derived from other fees such as inactivity fees, early cash-out fees, and other miscellaneous fees charged to users of the Company's platforms (“Other Fees”).
The Company recognizes revenue in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, revenue is recognized based on a five-step model as follows: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) performance obligations are satisfied. The core principle of ASC 606 is that revenue is recognized when the transfer of promised goods or services to customers is made in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are distinct performance obligations.
The Company also determines whether it acts as an agent or a principal for each identified performance obligation. The determination of whether the Company acts as principal or agent is highly subjective and requires the Company to evaluate 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 the completion of services. Billings in advance of completed services are recorded as a contract liability until earned. The Company assesses collectability based on several factors, including the creditworthiness of the customer and payment and transaction history.
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.

10

IZEA Worldwide, Inc.
Notes to the Consolidated Financial Statements

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 articles, informational material or videos. Marketers typically purchase influencer marketing services to provide public awareness or advertising buzz regarding the marketer’s brand and purchase custom content for internal and external use.
The Company views its obligation to deliver influencer marketing services, including management services, as a single performance obligation that is satisfied over time as the customer receives the benefits from the services. The majority of revenue is recognized using an input method of costs incurred compared to total expected costs to measure the progress towards satisfying the overall performance obligation of the marketing campaign. The Company’s performance obligation in certain contracts with customers may be a stand-ready promise to provide influencer marketing services for an unknown or unspecified quantity of deliverables for a specified term. Under a stand-ready obligation, the Company’s performance obligation is satisfied over time throughout the contract term, and therefore, revenue is recognized straight-line over the life of the contract. The Company may provide one type or a combination of all types of these influencer marketing services on a statement of work for a lump sum fee. When multiple types of performance obligations exist in a contract, the Company allocates revenue to each distinct performance obligation at contract inception based on its relative standalone selling price. These performance obligations are to be provided over a period that generally ranges from one day to one year. The delivery of custom content represents a distinct performance obligation that is satisfied at a point in time when each piece of content is delivered to the customer. Based on the Company’s evaluations, revenue from Managed Services is reported on a gross basis because the Company has the primary obligation to fulfill the performance obligations, and it creates, reviews, and controls the services. The Company takes on the risk of payment to any third-party creators, and it establishes the contract price directly with its customers based on the services requested in the statement of work.
Marketplace Spend Fees Revenue
For Marketplace Spend Fees Revenue, the self-service customers instruct creators found through the Company’s platforms to provide and/or distribute custom content for an agreed-upon transaction price. The Company’s platforms control the contracting, description of services, acceptance of, and payment for the requested content. This service is used primarily by news agencies or marketers to control the outsourcing of their content and advertising needs. The Company charges the self-service customer the transaction price plus a fee based on the contract. Revenue is recognized when the transaction is completed by the creator and accepted by the marketer or verified as posted by the system. Based on the Company’s evaluations, this revenue is reported on a net basis since the Company is acting as an agent through its platform for the third-party creator to provide the services or content directly to the self-service customer or to post approved content through one or more social media platforms.
License Fees Revenue
License Fees Revenue is generated by granting customers limited, non-exclusive, non-transferable access to the Company’s technology platforms for an agreed-upon subscription period. Customers access the platforms to manage their influencer marketing campaigns. Fees for subscription or licensing services are recognized straight-line over the term of the service.
Other Fees Revenue
Other Fees Revenue is generated when fees are charged to the Company’s platform users primarily related to monthly plan fees, which are recognized within the month they relate to.
Advertising Costs
Advertising costs are charged to expense as they are incurred, including payments to content creators to promote the Company. Advertising costs for the three months ended June 30, 2024 and 2023 were approximately $0.9 million and $0.8 million, respectively. Advertising costs charged to operations for the six months ended June 30, 2024, and 2023 were approximately $1.5 million and $1.3 million, respectively. Advertising costs are included in sales and marketing expense in the accompanying consolidated statements of operations.
Income Taxes
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
11

IZEA Worldwide, Inc.
Notes to the Consolidated Financial Statements

tax basis of assets and liabilities. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized. The Company incurs state franchise tax in ten states, which is included in general and administrative expense in the consolidated statements of operations and comprehensive loss.
     The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed 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 based on the statute of limitations by the IRS is generally three years; however, the IRS may examine records and other evidence from the year the net operating loss was generated when the Company utilizes net operating loss carryforwards in future periods. The Company’s tax years subject to examination by the Canadian Revenue Agency and the Australian Taxation Office is generally four years.
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:
Level 1 Valuation based on quoted market prices in active markets for identical assets and liabilities.
Level 2 Valuation based on quoted market prices for similar assets and liabilities in active markets.
Level 3 Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. As of June 30, 2024, the Company holds Level 1 and Level 2 financial assets; this is discussed further in Note 3 - Financial Instruments of Notes to the Consolidated Financial Statements.
Stock-Based Compensation
Stock-based compensation cost related to stock options granted under the 2011 Equity Incentive Plan, as amended, (the “2011 Equity Incentive Plan”), and the Inducement Plan (see Note 10) is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period on a straight-line basis. The Company estimates the fair value of each option award on the date of grant using a Black-Scholes option-pricing model that uses the assumptions noted in the table below. The Company uses the simplified method to estimate the expected term of employee stock options because it does not believe historical exercise data will provide a reasonable basis for estimating the expected term for the current share options granted. The simplified method assumes that employees will exercise share options evenly between the period when the share options are vested and ending on the date when the options would expire. The Company uses the closing stock price of its common stock on the date of the grant as the associated fair value of its common stock. The Company 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 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 (“RSUs”) that vest over future periods. The value of shares is recorded as the fair value of the stock or units upon the issuance date and is expensed on a straight-line basis over the vesting period. See Note 10 for additional information related to these shares.
On November 30, 2023, the IZEA Board of Directors adopted the IZEA Worldwide, Inc. 2023 Inducement Plan (the “Inducement Plan”) to accommodate equity grants to new employees hired by IZEA in connection with acquisition transactions, including the Hoozu acquisition. Under the Inducement Plan, IZEA may grant, subject to certain requirements, RSUs, including performance-based and time-based RSUs, covering up to a total of 1,800,000 shares of IZEA common stock to new employees of IZEA or its subsidiaries. See Note 10 for additional information related to shares issued under both plans.

12

IZEA Worldwide, Inc.
Notes to the Consolidated Financial Statements

Business Combinations and Asset Acquisitions
The Company accounts for business combinations in accordance with Accounting Standards Codification (ASC) Topic 805, “Business Combinations.” The acquisition method of accounting is applied to all business combinations, whereby the identifiable assets acquired, liabilities assumed, and any non-controlling interests in the acquiree are recognized and measured at their fair values as of the acquisition date. Goodwill represents the excess of the purchase price over the fair value of net identifiable assets acquired and liabilities assumed in a business combination. Goodwill is allocated to reporting units, which are expected to benefit from the synergies of the combination and is subject to annual impairment testing. Acquisition-related costs, including advisory, legal, and due diligence fees, are expensed as incurred and are included in general and administrative expenses in the period in which the acquisition occurs. The financial statements include the results of operations and financial position of businesses acquired from their respective acquisition dates. Any adjustments to the preliminary fair values of assets acquired and liabilities assumed, known as measurement period adjustments, are recorded to the period of the adjustment.
Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Credit Losses: In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 requires the use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. In May 2019, the FASB issued ASU 2019-05, which provides transition relief for entities adopting ASU 2016-13. For entities that have adopted ASU 2016-13, the amendments in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods therein. An entity may early adopt ASU No. 2019-05 in any interim period after its issuance if the entity has adopted ASU 2016-13. For all other entities, the effective date will be the same as the effective date of ASU 2016-13. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Effective January 1, 2023, the Company adopted this standard. At present, the exposure to credit losses is considered immaterial to the Company’s financial position.
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers: In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). Under ASU 2021-08, an acquirer in a business combination must apply ASC 606 principles when recognizing and measuring acquired contract assets and contract liabilities. The provisions of ASU 2021-08 are applicable for the Company for fiscal years and interim periods beginning after December 15, 2022. As of June 30, 2024, the Company has ensured that acquired businesses contract assets and contract liabilities have been accounted for in accordance with ASC 2021-08.
Accounting for and Disclosure of Crypto Assets: In December 2023, the FASB issued ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 requires fair value measurement of certain crypto assets each reporting period with the changes in fair value reflected in net income. The amendments also require disclosures of the name, fair value, units held, and cost bases for each significant crypto asset held and annual reconciliations of crypto asset holdings. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024, with early adoption permitted. The Company has opted to early adopt this guidance. A cumulative-effect adjustment to retained earnings was booked as of January 1, 2023 for $7,632. Interim periods and annual periods for 2022 and 2023 have been presented with the change reflected in fair market value. Expanded disclosures for crypto assets have been added to Note 5 - Intangible Assets.
Recently Issued Accounting Pronouncements Not Yet Adopted
Segment Reporting: Improvements to Reportable Segment Disclosures: In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improving Reportable Segment Disclosures. This update is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU also requires all annual disclosures currently required by Topic 280 to be included in the interim periods. The update is effective for fiscal years beginning after December 15, 2023, and interim periods within the fiscal years beginning after December 15, 2024, with early adoption permitted and requiring retrospective application to all prior periods presented in the financial statements. The Company is currently assessing the timing and impact of adopting the updated provisions.
Income Taxes: Improvements to Income Tax Disclosures: In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires additional disclosures of income tax components that affect the rate reconciliation and income taxes paid, broken out by the applicable taxing jurisdictions. The
13

IZEA Worldwide, Inc.
Notes to the Consolidated Financial Statements

Company expects to adopt this ASU for the annual period beginning on January 1, 2025, and does not expect a material impact on the consolidated financial statements.

NOTE 2.    BUSINESS ACQUISITIONS
Hoozu Holdings, LTD.
On December 1, 2023, the Company completed the announced acquisition of Hoozu Holdings, LTD (now Hoozu Holdings Pty Ltd.)(“Hoozu”) from Hoozu investors. Hoozu is a leading Australian influencer marketing company headquartered in Sydney. The company serves a roster of the region’s most innovative brands, including Bunnings, Emma Sleep, Super Cheap Auto, and Ryobi. In addition to its core services, Hoozu’s talent management division, called Huume, represents creators in the Australian market. The net purchase price was approximately $2.5 million, including cash consideration of $0.6 million and 726,210 shares of common stock, valued at approximately $1.7 million at the acquisition date, based on the closing market share price on the acquisition date. Approximately $150,000 of transaction-related costs are separately recorded in general and administrative costs in the accompanying consolidated statement of operations for the year ended December 31, 2023. The Company accounted for the acquisition in accordance with ASC 805, which requires the assets acquired and liabilities assumed to be recognized on the balance sheet at their fair values as of the acquisition date.
Gross Purchase ConsiderationInitial Present and Fair ValueEstimated Remaining Present and Fair Value
12/1/202312/1/202306/30/2024
Cash paid at closing$595,411 $595,411 — 
Stock issued at closing1,746,535 1,746,535 — 
First deferred purchase price installment (1)
114,400 —  
Second deferred purchase price installment (1)
60,600 —  
Total estimated consideration$2,516,946 $2,341,946 $ 

(1) The Company’s acquisition of Hoozu on December 1, 2023, included four equal contingent cash consideration payments totaling $396,940, with twelve-month measurement periods ending December 31, 2024 and 2025. The contingent payments are based on meeting minimum Revenue and Adjusted Earnings before Taxes and Depreciation thresholds for each measurement period. The contingent payments are hit-or-miss, with the first measurement period payments carrying a make-up provision during the second measurement period. The Company determined the fair value of these contingent payments, using Monte Carlo simulation methods, to be $175,000 at the acquisition date, subject to periodic adjustment until both measurement periods are completed. During the quarter that ended June 30, 2024, the Company determined that based upon the lag behind Hoozu’s revenue and profitability growth, achieving the deferred purchase price targets for both 2024 and 2025 is not probable and accordingly reduced these installment balances to their expected payout value.
The table below presents the provisional fair values on December 1, 2023, allocated to the assets acquired and liabilities assumed. The purchase accounting and purchase price allocation for Hoozu are complete. The fair values are presented in the following table:
14

IZEA Worldwide, Inc.
Notes to the Consolidated Financial Statements

Estimated Approximate Fair Value
12/1/2023
Accounts receivable$419,336 
Prepaid expenses15,750 
Property and equipment, net9,033 
Intangible assets
Tradename668,000 
Customer list935,000 
Goodwill1,265,155 
Deferred tax liability(400,750)
Accounts payable(718,515)
Current liabilities(930,655)
Purchase consideration, excluding cash received$1,262,354 
Plus: cash received1,254,592 
Total purchase considerations$2,516,946 
Accounts receivable shown in the table above represent their gross amount, which approximates the fair value, and are expected to be collected in full. The significant fair value estimates included in the provisional allocation of purchase price are discussed below.
Other Intangible Assets
Other intangible assets with definite lives include acquired customer relationships of $0.9 million and tradename of $0.7 million. The preliminary customer-related intangible assets’ fair value was determined by using the income approach, while the tradename fair value was determined utilizing the relief from the royalty method. Acquired customer relationships and tradename generally have useful lives of 10 years, unless shorter periods are warranted, and are amortized to operating costs on an accelerated basis.
Goodwill
The excess of consideration for Hoozu over the preliminary net fair value of assets acquired and liabilities assumed resulted in the provisional recognition of $1.3 million of goodwill, which is not deductible for tax purposes. Goodwill is primarily attributable to the assembled workforce and synergies.
Contingent Liability
Contingent liability purchase price installments, which total $396,940 based on meeting certain revenue and EBITDA milestones for 2024 and 2025, were recorded at their fair value of $175,000 at the acquisition date. The contingent liability value is subject to periodic adjustment until both measurement dates are completed. No adjustment was recorded in December 2023.
As of June 30, 2024, the Company reassessed the fair value of the contingent performance-based consideration related to the earnout provision of the acquisition of Hoozu. Based on actual performance to date, and revised projections of Hoozu’s business performance, it was determined that the contingent milestones were no longer probable of being achieved. Consequently, the contingent liability was adjusted to the expected payout value, resulting in a gain of $175,000 recognized as a reduction to general and administrative expense in the consolidated statements of income. This adjustment reflects our updated expectation of future performance and aligns with the requirements of ASC 805.
Privatization of Hoozu Holdings, Ltd
On March 27, 2024, Hoozu Holdings, Ltd was privatized and restructured to become Hoozu Holdings Pty, Ltd. This change reflects a strategic shift to streamline operations and focus on long-term growth objectives.
Zuberance
On December 1, 2023, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Zuberance, Inc., a Delaware corporation (“Zuberance”). Zuberance is a pioneering advocate marketing software platform. Zuberance provides marketers with the tools to build white-label communities of their customers and influencers while engaging these
15

IZEA Worldwide, Inc.
Notes to the Consolidated Financial Statements

communities to serve as advocates for their brand, leading to low-cost content creation. The net purchase price was $18,400 in cash consideration, allocated to the fair value of assets acquired and liabilities assumed, as shown in the following table:
Estimated Fair Value
12/31/2023
Intangibles-customer relationships$162,725 
Current liabilities(58,138)
Deferred revenue(86,187)
Total purchase price$18,400
The customer-related intangible assets’ fair value was determined by using the income approach, has an estimated useful life of 5 years, and will be amortized to operating expenses on an accelerated basis.

NOTE 3.    FINANCIAL INSTRUMENTS
Cash, Cash Equivalents, and Marketable Securities (Available for Sale)
The Company has engaged a third party registered investment advisor and appointed a leading national bank for custody services with respect to investment securities. Investments comply with the Company’s revised investment strategy policy, designed to preserve capital, minimize investment risks, and maximize returns.
The following table shows the Company’s cash, cash equivalents, and marketable securities by significant investment category as of June 30, 2024:
Adjusted CostUnrealized GainsUnrealized LossesFair ValueCash and Cash Equivalents
Current Marketable Securities (1)
Non-Current Marketable Securities (2)
Cash and cash equivalents$10,223,685 $— $— $10,223,685 $10,223,685 $— $— 
Level 1 (3)
Commercial paper5,199,435  (2,309)5,197,126 5,197,126 — — 
Money market funds28,881,055   28,881,055 28,881,055 — — 
US Treasury securities2,014,955  (21,572)1,993,383  1,993,383  
Subtotal36,095,445  (23,881)36,071,564 34,078,181 1,993,383  
Level 2 (4)
Asset back securities2,375,823  (19,309)2,356,514  1,459,487 897,027 
Corporate debt securities7,890,176 5,275 (61,868)7,833,583  7,833,583  
Subtotal10,265,999 5,275 (81,177)10,190,097  9,293,070 897,027 
Total$56,585,129 $5,275 $(105,058)$56,485,346 $44,301,866 $11,286,453 $897,027 
(1) Current Marketable Securities have a holding period under one year.
(2) Non-Current Marketable Securities have a holding period over one year. The securities held by IZEA Worldwide, Inc. mature between one and five years.
(3) Level 1 fair value estimates are based on quoted prices in active markets for identical assets and liabilities.
(4) Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets and liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities.
The Company records the fair value of cash equivalents and marketable securities on the balance sheet. The adjusted cost, which includes unrealized gains and losses, reflects settlement amounts if all investments are held to maturity. The Company did not recognize any realized gains (net of losses) for the three and six months ended June 30, 2024, and 2023. Realized gains and losses are a component of other income (expense), net. Unrealized gains and losses are a component of other comprehensive income (loss) (“OCI”).
The following table summarizes the estimated fair value of investments in marketable debt securities by stated contractual maturity dates:
16

IZEA Worldwide, Inc.
Notes to the Consolidated Financial Statements

As of June 30, 2024
As of December 31, 2023
Due in 1 year or less$11,286,453 $17,126,057 
Due in 1 year through 5 years897,027 9,618,996 
Total$12,183,480 $26,745,053 
The following table presents fair values and net unrealized gains (losses) recorded to OCI, aggregated by investment category:
June 30, 2024December 31, 2023
Fair ValueNet Unrealized Gain (Loss)Fair ValueNet Unrealized Gain (Loss)
Cash and cash equivalents$44,301,866 $(2,309)$37,446,728 $ 
Government bonds1,993,383 (21,572)6,939,713 (79,840)
Corporate debt securities7,833,583 (56,593)16,196,931 (124,431)
Asset backed securities2,356,514 (19,309)3,608,409 (46,320)
Total$56,485,346 $(99,783)$64,191,781 $(250,591)
During the three and six months ended June 30, 2024, the Company did not recognize any credit losses and had no ending allowance balance for credit losses.

NOTE 4.     PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
June 30, 2024December 31, 2023
Furniture and fixtures$29,848 $29,848 
Office equipment8,506 8,506 
Computer equipment282,898 281,950 
Total321,252 320,304 
Less accumulated depreciation(165,417)(114,927)
Property and equipment, net$155,835 $205,377 
Depreciation expense on property and equipment recorded in depreciation and amortization expense in the consolidated statements of operations and comprehensive loss was $26,701 and $27,160 for the three months ended June 30, 2024 and 2023, respectively, and was $53,258 and $45,946 for the six months ended June 30, 2024 and 2023, respectively.

NOTE 5.     INTANGIBLE ASSETS

Definite Lived Intangible Assets

Definite lived intangible assets, net of amortization as of June 30, 2024 and December 31, 2023 totaled $1.8 million and $1.8 million, respectively.
June 30, 2024December 31, 2023
BalanceAccumulated AmortizationNet Book ValueBalanceAccumulated AmortizationNet Book ValueUseful Life in years
Trade names$668,213 $48,581 $619,632 $668,000 $5,567 $662,433 10
Customer lists
Hoozu935,294 69,010 866,284 935,000 7,791 927,209 10
Zuberance162,508 23,473 139,035 162,508 2,709 159,799 5
Total definite-lived intangible assets$1,766,015 $141,064 $1,624,951 $1,765,508 $16,067 $1,749,441 
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Total intangible assets from the Company’s acquisitions and other acquired assets net of accumulated amortization thereon consists of the following:
June 30, 2024December 31, 2023
Hoozu intangible assets$1,603,507 $1,603,000 
Zuberance intangible assets162,508 162,508 
Total$1,766,015 $1,765,508 
Less accumulated amortization(141,064)(16,067)
Intangible assets, net$1,624,951 $1,749,441 
As of June 30, 2024, future estimated amortization expense related to identifiable assets is set forth in the following schedule:
Future Amortization of Intangible AssetsAmount
Remainder of 2024155,325 
2025257,032 
2026232,877 
2027208,721 
2028184,566 
2029+586,430 
Total$1,624,951 
There were no impairment charges associated with the Company’s identifiable intangible assets, other than digital assets, in the six months ended June 30, 2024, and 2023.
Amortization expense recorded in depreciation and amortization in the accompanying consolidated statements of operations and comprehensive loss was $124,996 and $0 for the six months ended June 30, 2024 and 2023, respectively.
Digital Assets
During the three months ended June 30, 2024 and 2023, the Company did not transact in digital assets nor did the Company impair the value of its digital assets.
As of June 30, 2024, the Company held $143,436 of Bitcoin and $99,584 of Ethereum with total holdings in digital assets of $243,020. The Company recorded a loss of $26,044 and a gain $80,115 for the three and six months ended June 30, 2024, respectively.
The Company determines the fair value of its digital assets on a recurring basis in accordance with ASU 2023-8, Accounting for and Disclosure of Crypto Assets, based on quoted prices on the active exchange(s) that has been determined to be the principal market for such assets (Level 1 inputs). The Company performs an analysis monthly to identify whether the fair market value of the digital assets has changed. If the then-current carrying value of a digital asset is different from the fair value so determined, an adjustment in the amount equal to the difference between their carrying value and the price determined is recognized.
Gains and losses on digital assets are recognized within other income in the consolidated statements of operations and comprehensive loss in the period in which the change to fair market value is identified. In determining the gain to be recognized upon sale, the Company calculates the difference between the sales price and carrying value of the digital assets sold immediately prior to sale.
Goodwill
The Company’s goodwill balance changed as follows:

18



Amount
Balance on December 31, 2022$4,016,722 
Acquisitions during 20231,265,155 
Currency translation adjustment$(1,505)
Balance on December 31, 2023$5,280,372 
Currency translation adjustment1,516 
Balance on June 30, 2024$5,281,888 
The Company completed its acquisition of Hoozu on December 1, 2023. While Hoozu’s business is reported together with our Managed Services business, it will be treated as a separate component for Goodwill impairment testing.
The Company performs an annual impairment assessment of goodwill on October 1 each year or more frequently, if certain indicators are present. There were no impairment charges associated with the Company’s Goodwill in the three and six months ended June 30, 2024 and 2023.

NOTE 6.     SOFTWARE DEVELOPMENT COSTS

Software development costs consist of the following:
June 30, 2024December 31, 2023
Software development costs$5,827,554 $5,390,403 
Less accumulated amortization(3,586,117)(3,333,431)
Software development costs, net$2,241,437 $2,056,972 

In 2022, the Company began developing two new web-based influencer marketing platforms, Flex and Marketplace, to replace IZEAx and Shake, respectively. IZEAx was sunset in mid-2023, and Shake was sunset in Q4 of 2022. The Company capitalized software development costs of $363,474 and $437,152 during the three and six months ended June 30, 2024, respectively. The Company capitalized software development costs of $281,009 and $437,877 during the three and six months ended June 30, 2023, respectively. As a result, the Company has capitalized a total of $5.8 million in direct materials, consulting, payroll, and benefit costs to its internal-use software development costs in the consolidated balance sheet as of June 30, 2024.
The Company amortizes its software development costs, commencing upon initial release of the software or additional features, on a straight-line basis over the estimated useful life of five years, which is consistent with the amount of time its legacy platforms were in service, or its actual useful life, if shorter. The Company recorded amortization expense associated with its capitalized software development cost of $124,381 and $83,272 during the three months ended June 30, 2024 and 2023, respectively. The Company recorded amortization expense associated with its capitalized software development cost of $252,686 and $410,748 during the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, future estimated amortization expense related to software development costs is set forth in the following schedule:
Software Development Amortization Expense
2024249,961 
2025566,654 
2026560,906 
2027526,871 
2028257,843 
202979,202 
Total$2,241,437 


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NOTE 7.     ACCRUED EXPENSES
Accrued expenses consist of the following:
June 30, 2024December 31, 2023
Accrued payroll liabilities$2,469,962 $2,153,617 
Accrued taxes90,773 253,677 
Current portion of finance obligation59,386 59,386 
Accrued other541,708 616,780 
Total accrued expenses$3,161,829 $3,083,460 

NOTE 8.    NOTES PAYABLE
Finance Obligation
The Company pays for its laptop computer equipment through long-term payment plans, using an imputed interest rate of 7.8%, based on its incremental borrowing rate, to determine the present value of its financial obligation and to record interest expense over the term of the plan. The Company refreshed a portion of its computer inventory during the fourth quarter of 2022, entering a new three-year payment plan with the same vendor. The total balance owed was $93,113 and $122,805 as of June 30, 2024 and December 31, 2023, respectively, with the short-term portion of $59,386 and $59,386 recorded under accrued expenses in the consolidated balance sheets as of June 30, 2024 and December 31, 2023, respectively.
Summary
Interest expense on financing arrangements recorded in the Company’s consolidated statements of operations was $4,000 and $3,103 during the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, the future contractual maturities of the Company’s long-term payment obligations by year are set forth in the following schedule:

2024$29,693 
202556,683 
20266,737 
Total$93,113 

NOTE 9.    COMMITMENTS AND CONTINGENCIES

Deferred Purchase Price
The Company’s acquisition of Hoozu on December 1, 2023 included four equal contingent cash consideration payments totaling $396,940, with twelve-month measurement periods ending December 31, 2024 and 2025. The contingent payments are based on meeting minimum Revenue and Adjusted Earnings before Taxes and Depreciation thresholds for each measurement period. The contingent payments are hit-or-miss, with the first measurement period payments carrying a make-up provision during the second measurement period. The Company determined the fair value of these contingent payments to be $175,000, subject to quarterly adjustment until both measurement periods are completed.
As of June 30, 2024, the Company reassessed the fair value of the contingent performance-based consideration related to the earnout provision of the acquisition of Hoozu. Based on actual performance to date, and revised projections of Hoozu’s business performance, it was determined that achieving the contingent milestones was no longer probable. Consequently, the contingent liability was written off, resulting in a gain of $175,000 recognized as a reduction to general and administrative expense in the consolidated statements of income. This adjustment reflects our updated expectation of future performance and aligns with the requirements of ASC 805. The fair value will continue to be subject to quarterly assessment until the completion of both measurement periods.
Lease Commitments
The Company does not have any operating or finance leases greater than 12 months in duration as of June 30, 2024.


20



Retirement Plans
The Company offers a 401(k) plan to all of its eligible employees. The Company matches participant contributions in an amount equal to 50% of each participant’s contribution up to 8% of the participant’s salary. The participants become vested in 20% annual increments after two years of service, or fully vest upon the age of 60. Total expense for employer matching contributions during the three and six months ended June 30, 2024 and 2023 was recorded in the Company’s consolidated statements of operations as follows:
Three Months EndedSix Months Ended
June 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Cost of revenue$19,722 $19,643 $42,200 $44,276 
Sales and marketing17,191 17,799 60,230 33,416 
General and administrative48,018 41,875 92,602 77,827 
Total contribution expense$84,931 $79,317 $195,032 $155,519 
Litigation
From time to time, the Company may become involved in lawsuits and various other legal proceedings that arise in the ordinary course of its business. Litigation is, however, subject to inherent uncertainties, and an adverse result in any such litigation that may arise from time to time that may harm the Company’s business. The Company is currently not party to any legal proceedings or claims that it believes would or could have, individually or in the aggregate, a material adverse effect on the Company.

NOTE 10.    STOCKHOLDERS’ EQUITY
Authorized Shares
The Company has 50,000,000 authorized shares of common stock and 10,000,000 authorized shares of preferred stock, each with a par value of $0.0001 per share. 500,000 shares of preferred stock are designated as Series A Junior Participating Preferred Stock.
Share Repurchase
On March 30, 2023, the Company announced that its Board of Directors had authorized a $1.0 million share repurchase program of the Company’s common stock.
During the repurchase program, the Company purchased 365,855 shares of the Company’s common stock on the open market with an average price per share of $1.23, for a total of $1.0 million. Shares purchased before June 16, 2023 have been adjusted for the reverse stock split. Repurchased shares have the status of treasury shares and may be issued, if and when needed, for general corporate purposes. The repurchase program was completed in August 2023.
On June 28, 2024, the Company announced that its Board of Directors had authorized a $5.0 million share repurchase program of the Company’s common stock. The repurchase program is subject to market conditions and the Company’s inside trading windows. As of June 30, 2024, no shares had been repurchased under the program.
Reverse Stock Split
In June 2023, the number of authorized shares and shares of common stock held by each stockholder of the Company were consolidated automatically into the number of shares of common stock equal to the number of issued and outstanding shares of common stock held by each such stockholder immediately prior to the reverse split divided by four (4): effecting a four (4) old for one (1) new reverse stock split. Any fractional shares resulting from the reverse stock split were rounded up to the nearest whole share, resulting in 23,789 additional shares being issued. No shares of preferred stock were outstanding at the time of the reverse stock split.
Additionally, all options and unvested restricted share grants of the Company outstanding immediately prior to the reverse split were adjusted by dividing the number of shares of common stock into which the options are exercisable by four (4) and multiplying the exercise price by four (4), in accordance with the terms of the plans and agreements governing such options and subject to rounding up to the nearest whole share.
All shares of common stock, stock options, restricted stock, and restricted stock unit grants, and their corresponding price per share amounts have been presented to reflect the reverse split in all periods presented within this Quarterly Report on Form 10-Q.
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Equity Incentive Plan
The Company’s stockholders approved an amendment and restatement of the 2011 Equity Incentive Plan at the Company’s 2023 Annual Meeting of Stockholders held on October 17, 2023, to increase the number of plan shares by 1,800,000 shares, from 1,875,000 to 3,675,000 shares. As of June 30, 2024, the Company had 974,985 remaining shares of common stock available for issuance pursuant to future grants under the 2011 Equity Incentive Plan.
Restricted Stock
Under the 2011 Equity Incentive Plan, the Board determines the terms and conditions of each restricted stock issuance, including any future vesting restrictions.
In 2023, the Company issued its five independent directors a total of shares of restricted common stock initially valued at $300,015 for their annual service as directors of the Company. The stock was granted in installments on the last day of each quarter and vested immediately.
In the three and six months ended June 30, 2024, the Company issued its five independent directors a total of 31,915 and 64,385 shares of restricted common stock, respectively, with an aggregate grant date valuation of $150,006 for their service as directors of the Company. Approximately $75,000 worth of shares are granted on the last day of each quarter and vest immediately.
The following table contains summarized information about restricted stock issued during the year ended December 31, 2023 and the six months ended June 30, 2024:
Restricted StockCommon SharesWeighted Average
Grant Date
Fair Value
Weighted Average
Remaining Years
to Vest
Nonvested at December 31, 202272 $5.36 0.3
Granted131,520 2.28 
Vested(131,592)2.28 
Nonvested at December 31, 2023 $ 0.0
Granted64,385 2.33 
Vested(64,385)2.33 
Nonvested at June 30, 2024 $ 0.0
Although restricted stock is issued upon the grant of an award, the Company excludes restricted stock from the computations within the financial statements of total shares outstanding and basic earnings per share until such time as the restricted stock vests.
Expense recognized on restricted stock issued to directors for services was $75,000 and $75,009 during the three months ended June 30, 2024, and 2023, respectively and $150,006 and $150,009 during the six months ended June 30, 2024, and 2023, respectively. There was no expense recognized on restricted stock issued to employees during the three months ended June 30, 2024, and 2023, respectively and $0 and $376 during the six months ended June 30, 2024, and 2023, respectively.
On June 30, 2024, the fair value of the Company’s common stock was approximately $2.35 per share and the intrinsic value on the non-vested restricted stock was $0. Future compensation expense related to issued, but non-vested, restricted stock awards as of June 30, 2024, is $0.
Restricted Stock Units
The Board determines the terms and conditions of each restricted stock unit award issued under the 2011 Equity Incentive Plan.
During the six months ended June 30, 2024, the Company issued a total of 475,713 restricted stock units initially valued at $1,079,016 to non-executive employees as additional incentive compensation. The restricted stock units vest between 12 and 36 months from issuance.
During the six months ended June 30, 2024, the Company issued a total of 221,232 restricted stock units initially valued at $516,307 to executives as additional incentive compensation. The restricted stock units vest between 12 and 48 months from issuance.

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The following table contains summarized information about restricted stock units during the year ended December 31, 2023 and the six months ended June 30, 2024:
Restricted Stock UnitsCommon SharesWeighted Average
Grant Date
Fair Value
Weighted Average
Remaining Years
to Vest
Nonvested at December 31, 2022329,070 $3.79 2.5
Granted870,191 2.38 
Vested(163,085)3.55 
Forfeited(73,327)3.18 
Nonvested at December 31, 2023962,849 $2.60 2.5
Granted696,945 2.25 
Vested(151,587)3.03 
Forfeited(88,870)2.28 
Nonvested at June 30, 20241,419,337 $2.40 1.2
Expense recognized on restricted stock units issued to employees was $349,385 and $151,733 during the three months ended June 30, 2024 and 2023, respectively and $650,599 and $281,299 during the six months ended June 30, 2024 and 2023, respectively. On June 30, 2024, the fair value of the Company’s common stock was approximately $2.35 per share and the intrinsic value on the non-vested restricted units was $3,335,442. Future compensation related to the non-vested restricted stock units as of June 30, 2024 is $2,930,090 and it is estimated to be recognized over the weighted-average vesting period of approximately 1.2 years.
Stock Options 
Under the 2011 Equity Incentive Plan, the Board determines the exercise price to be paid for the stock option shares, the period within which each stock option may be exercised, and the terms and conditions of each stock option. The exercise price of incentive and non-qualified stock options may not be less than 100% of the fair market value per share of the Company’s common stock on the grant date. If an individual owns stock representing more than 10% of the outstanding shares, the exercise price of each share of an incentive stock option must be equal to or exceed 110% of fair market value. Unless otherwise determined by the Board at the time of grant, the exercise price is set at the fair market value of the Company’s common stock on the grant date (or the last trading day prior to the grant date, if it is awarded on a non-trading day). Additionally, the term is set at ten years and the option typically vests on a straight-line basis over the requisite service period as follows: 25% one year from the date of grant with the remaining vesting monthly in equal increments over the following three years. The Company issues new shares for any stock awards or options exercised under its 2011 Equity Incentive Plan.
A summary of option activity under the 2011 Equity Incentive Plan during the year ended December 31, 2023, and the six months ended June 30, 2024, is presented below:
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Options OutstandingCommon SharesWeighted Average
Exercise Price
Weighted Average
Remaining Life
(Years)
Outstanding at December 31, 2022415,562 $11.31 5.3
Granted  
Exercised(586)0.96 
Expired(71,013)19.99 
Forfeited(362)7.75 
Outstanding at December 31, 2023343,601 $9.53 5.2
Granted  
Exercised(313)2.24 
Expired(458)6.88 
Forfeited(51)6.57 
Outstanding at June 30, 2024342,779 $9.54 4.7
Exercisable at June 30, 2024330,658 $9.55 4.7
During the six months ended June 30, 2024, 313 options were exercised for gross proceeds of $701. The intrinsic value of the exercised options was $50. During the six months ended June 30, 2023, 0 options were exercised for gross proceeds of $0. The intrinsic value of the exercised options was $0. The fair value of the Company's common stock on June 30, 2024 was approximately $2.35 per share, and the intrinsic value on outstanding options as of June 30, 2024 was $74,149. The intrinsic value of the exercisable options as of June 30, 2024 was $74,149.
A summary of the nonvested stock option activity under the 2011 Equity Incentive Plan during the year ended December 31, 2023, and the six months ended June 30, 2024, is presented below:
Nonvested OptionsCommon SharesWeighted Average
Grant Date
Fair Value
Weighted Average
Remaining Years
to Vest
Nonvested at December 31, 202272,474 $5.80 1.7
Granted  
Vested(31,474)9.53 
Forfeited(14,627)19.99 
Nonvested at December 31, 202326,373 $8.83 1.1
Granted  
Exercised— — 
Vested(14,201)9.55 
Forfeited(51)6.57 
Nonvested at June 30, 202412,121 $9.53 0.9
There were outstanding options to purchase 342,779 shares with a weighted average exercise price of $9.54 per share, of which options to purchase 330,658 shares were exercisable with a weighted average exercise price of $9.55 per share as of June 30, 2024.
Expense recognized on stock options issued to employees during the six months ended June 30, 2024 and 2023 was $96,479 and $119,124, respectively and $44,514 and $54,780 for the three months ended June 30, 2024 and 2023, respectively. Future compensation related to non-vested awards as of June 30, 2024 is $93,369, and it is estimated to be recognized over the weighted-average vesting period of approximately 0.9 years.
No stock options were granted under the 2011 Equity Incentive Plan in the six months ended June 30, 2024 and 2023.




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Inducement Plan
On November 30, 2023, the Board of Directors adopted the IZEA Worldwide, Inc. 2023 Inducement Plan (the “Inducement Plan”) to accommodate equity grants to new employees hired by IZEA in connection with acquisition transactions, including the Hoozu acquisition. Under the Inducement Plan, IZEA may grant restricted stock units (“RSUs”), including performance-based and time-based RSUs, with respect to up to a total of 1,800,000 shares of IZEA common stock to new employees of IZEA or its subsidiaries. Pursuant to Rule 5635(c)(4) of the NASDAQ Listing Rules, the Inducement Plan was adopted without stockholder approval. In accordance with Rule 5635(c)(4) of the NASDAQ Listing Rules, awards under the Inducement Plan can only be made to individuals not previously employees or non-employee directors of IZEA (or following such individuals’ bona fide period of non-employment with IZEA), as an inducement material to the individuals’ entry into employment with IZEA or in connection with a merger or acquisition, to the extent permitted by Rule 5635(c)(3) of the NASDAQ Listing Rules.
On December 1, 2023, the Board approved the grant of inducement awards under the Inducement Plan to five employees of Hoozu consisting of an aggregate of 328,354 performance-based RSUs as inducement awards material to such employees’ entering into employment with IZEA, pursuant to Rule 5635(c)(4) of the NASDAQ Listing Rules. The RSU grants, which vest in annual increments over a three-year performance period based upon the achievement of certain revenue and profitability metrics, represent the maximum number of shares that can be earned under the awards. Vesting is also subject to the receipt’s continued service through each annual vesting date. Unearned RSUs will be forfeited if the minimum revenue in each period is not achieved. Each award is subject to the terms and conditions of the Inducement Plan and the terms and conditions of the applicable RSU award agreement covering the grant.
Separately, on December 1, 2023, the IZEA Board approved the grant of an inducement award under the Inducement Plan in connection with the asset purchase from Zuberance consisting of 10,000 time-based RSUs as an inducement award material to such employee’s entering into employment with IZEA.
As of June 30, 2024, an aggregate of 338,354 performance-based and time-based restricted stock unit awards have been granted in conjunction with our acquisitions, none of which have vested.
Employee Stock Purchase Plan
The amended and restated IZEA Worldwide, Inc. 2014 Employee Stock Purchase Plan (the “ESPP”) provides for the issuance of up to 125,000 shares of the Company’s common stock to employees regularly employed by the Company for 90 days or more on a full-time or part-time basis (20 hours or more per week on a regular schedule). The ESPP operates in successive six-month periods commencing at the beginning of each fiscal year half. Each eligible employee who elects to participate may purchase up to 10% of their annual compensation in common stock not to exceed $21,250 annually or 2,000 shares per offering period. The purchase price will be the lower of (i) 85% of the fair market value of a share of common stock on the first day of the offering period or (ii) 85% of the fair market value of a share of common stock on the last day of the offering period. The ESPP will continue until January 1, 2028, unless otherwise terminated by the Board.
During the three months ended June 30, 2024 and 2023, employees paid $5,206 to purchase 3,047 shares of common stock and $7,992 to purchase 4,329 shares of common stock, respectively. During the six months ended June 30, 2024 and 2023, employees paid $5,206 to purchase 3,047 shares of common stock and $7,992 to purchase 4,329 shares of common stock, respectively. The stock compensation expense on ESPP Options was $1,031 and $1,361 for the three months ended June 30, 2024 and 2023, respectively, and $2,041 and $2,599 for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, the Company had 77,931 remaining shares of common stock available for future issuances under the ESPP.
Shareholder Rights Plan
On May 28, 2024, the Board of Directors declared a dividend to the holders of the Company’s common stock outstanding at the close of business on June 7, 2024 (the “Record Date”) of one preferred share purchase right (a “Right”) for each share of common stock. Each Right initially entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share (the “Preferred Shares”), at a price of $8.25 per one one-thousandth of a Preferred Share (the “Purchase Price”), subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement (the “Rights Agreement”), dated May 28, 2024 between the Company and Broadridge Corporate Issuer Solutions, LLC, as rights agent (the “Rights Agent”).
Initially, the Rights are attached to all common stock certificates outstanding as of the Record Date, and evidenced by such shares being registered in the name of the holder thereof together with the Summary of Rights, and no separate certificates evidencing the Rights (“Right Certificates”) will be issued. The Rights Agreement provides that, until the Distribution Date (as defined below), or earlier expiration or redemption of the Rights, (i) the Rights will be transferred with and only with the common stock, (ii) new Common Share certificates issued after the Record Date or upon transfer or new issuance of common stock will contain a legend incorporating the Rights Agreement by reference, and (iii) the surrender for transfer of any
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certificates for common stock outstanding as of the Record Date, even without such legend or a copy of the Summary of Rights, will also constitute the transfer of the Rights associated with the common stock represented by such certificate.
The Rights would separate and begin trading separately from the common stock, and Right Certificates will be caused to evidence the rights on the earlier to occur of (i) the close of business on the tenth (10th) business day after a public announcement that a person or group of affiliated or associated persons (with certain exceptions noted below, an “Acquiring Person”) has acquired beneficial ownership of 15% or more of the outstanding common stock and (ii) the close of business on the tenth (10th) business day after the commencement by any person of, or of the first public announcement of the intention of any person to commence, a tender or exchange offer the consummation of which would result in such person becoming the beneficial owner of 15% or more of the outstanding shares of common stock (the earlier of such dates being called the “Distribution Date”). As soon as practicable following the Distribution Date, separate certificates evidencing the Rights (the “Rights Certificates”) will be mailed to holders of record of common stock as of the close of business on the Distribution Date and such separate Rights Certificates alone will evidence the Rights.
“Acquiring Person” shall not include (i) any person who became an “Acquiring Person” as a result of the events described in (i) through (v) of Section 1 of the Rights Agreement, (ii) any Excluded Persons or Grandfathered Persons, each as defined under the Rights Agreement and (iii) any Exempt Persons (as defined below).
The Rights are not exercisable until the Distribution Date. The Rights will expire at the earliest of (i) the close of business on May 28, 2025 or such later date as may be established by the Board of the Company prior to the expiration of the Rights, (ii) the time at which the Rights are redeemed or exchanged by the Company, and (iii) upon the occurrence of certain transactions.
This description of the Rights Agreement herein does not purport to be complete and is qualified in its entirety by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on May 28, 2024.
Summary of Stock-Based Compensation
The stock-based compensation cost related to all awards granted to employees is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period utilizing the weighted-average forfeiture rates as disclosed in Note 1. Total stock-based compensation expense recognized on restricted stock, restricted stock units, stock options, and employee stock purchase plan issuances during the three and six months ended June 30, 2024 and 2023 was recorded in the Company’s consolidated statements of operations as follows:
Three Months EndedSix Months Ended
June 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Cost of revenue56,874 $18,085 108,445 $35,255 
Sales and marketing64,719 29,743 121,207 47,591 
General and administrative