STOCKHOLDERS' EQUITY

Authorized Shares

The Company has 200,000,000 authorized shares of common stock and 10,000,000 authorized shares of preferred stock, each with a par value of $0.0001 per share.

Stock Issued for Acquisitions

On January 30, 2017, the Company issued 200,542 shares of its common stock to satisfy the final annual guaranteed purchase price payment of $938,532 per the terms of a Stock Purchase Agreement dated as of January 27, 2015, by and among IZEA, Ebyline and the stockholders of Ebyline (the “Ebyline Stock Purchase Agreement”). The Company recorded a $10,491 gain on the settlement of the acquisition costs payable for the three months ended March 31, 2017 in the accompanying consolidated statements of operations as a result of the difference between the market price of the stock on the settlement date and the 30-day average price of the stock required by the Ebyline Stock Purchase Agreement. The guaranteed purchase price consideration was originally recorded on the Company's balance sheet discounted to present value using the Company's borrowing rate of prime plus 2%. Interest expense imputed on the remaining acquisition costs payable was $3,804 in the accompanying consolidated statements of operations for the three months ended March 31, 2017 prior to the final guaranteed payment made on January 30, 2017.

Stock Issued for Services

During the twelve months ended December 31, 2017, the Company issued its five independent directors a total of 41,770 shares of restricted common stock initially valued at $125,000 for their annual service as directors of the Company. The stock vested in equal monthly installments for the period issued between January and December 2017. On February 12, 2017, the Company issued 7,109 shares valued at $30,000 as compensation for services a contractor provided.

The Company issued 2,812 shares and 7,543 shares of restricted stock on August 14, 2017 and November 9, 2017, respectively, to Mr. Edward Murphy, its Chief Executive Officer, for amounts owed on his second and third quarter performance bonus. The stock was initially valued at $36,411 and vests in equal monthly installments over 48 months from issuance. The Company issued 662 shares and 1,257 shares of restricted stock on August 14, 2017 and November 9, 2017, respectively, to Mr. Ryan Schram, its Chief Operating Officer, for amounts owed on his second and third quarter performance bonus. The stock was initially valued at $6,446 and vests in equal monthly installments over 48 months from issuance.

During the three months ended March 31, 2018, the Company issued its five independent directors a total of 30,265 shares of restricted common stock initially valued at $125,000 for their annual service as directors of the Company. The stock vests in equal monthly installments from January through December 2018.

On January 11, 2018, the Company issued seventeen employees a total of 55,000 shares of restricted common stock initially valued at $303,600 as incentive compensation for their continued future service. Of these 55,000 shares, 10,000 shares were issued to Ms. LeAnn Hitchcock, the Company's Chief Financial Officer, and 5,000 shares were issued to Mr. Ryan Schram. The stock vests over two years in equal quarterly installments from January 2018 through December 2019.

The following table contains summarized information about nonvested restricted stock outstanding during the year ended December 31, 2017 and the three months ended March 31, 2018:



Restricted Stock	Common Shares		Weighted Average Grant Date Fair Value		Weighted Average Remaining Years to Vest
Nonvested at December 31, 2016	—		$	—
Granted	61,153		3.24
Vested	(49,354	)	3.72
Forfeited	—		—
Nonvested at December 31, 2017	11,799		$	4.52	3.75
Granted	85,265		5.03
Vested	(15,207	)	3.73
Forfeited	—		—
Nonvested at March 31, 2018	81,857		$	3.66	1.8

Total expense recognized on restricted stock issued for services to non-employees during the three months ended March 31, 2018 and 2017 was $28,671 and $60,632, respectively. Total stock-based compensation expense recognized on restricted stock issued to employees during the three months ended March 31, 2018 was $28,069. There was no stock-based compensation expense recognized on restricted stock issued to employees during the three months ended March 31, 2017. The fair value of the services is based on the value of the Company's common stock as it vests over the term of service, which may be different that the value of the stock upon issuance. The change between the Company's stock price upon issuance and the Company's stock price upon the date of vesting, results in a change in the fair value of derivatives during the period. The Company recognized a loss of $125,595 and $618 as a change in the fair value of derivatives during the three months ended March 31, 2018 and 2017, respectively. Future compensation related to issued, but nonvested restricted stock awards as of March 31, 2018 is $301,335, and it is included in prepaid expenses in the accompanying consolidated balance sheets. This value is estimated to be recognized over the weighted-average vesting period of approximately 1.75 years.

Employee Stock Purchase Plan

On April 16, 2014, stockholders holding a majority of the Company's outstanding shares of common stock, upon previous recommendation and approval of the Board, adopted the IZEA, Inc. 2014 Employee Stock Purchase Plan (the “ESPP”) and reserved 75,000 shares of the Company's common stock for issuance thereunder. Any employee regularly employed by the Company for 90 days or more on a full-time or part-time basis (20 hours or more per week on a regular schedule) is eligible to participate in the ESPP. The ESPP operates in successive six months offering periods commencing at the beginning of each fiscal year half. Each eligible employee who elects to participate may purchase up to 10% of their annual compensation in common stock not to exceed $21,250 annually or 1,000 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 trading day of the offering period or (ii) 85% of the fair market value of a share of common stock on the last trading day of the offering period. The ESPP will continue until January 1, 2024, unless otherwise terminated by the Board. As of March 31, 2018, the Company had 33,594 remaining shares of common stock available for future grants under the ESPP.

Stock Options

In May 2011, the Company's Board of Directors (the “Board”) adopted the 2011 Equity Incentive Plan of IZEA, Inc. (the “May 2011 Plan”). At the Company's 2017 Annual Meeting of Stockholders held on June 21, 2017, the stockholders approved the amendment and restatement of the May 2011 Plan which increased the number of shares of common stock available for issuance under the May 2011 Plan by 500,000 shares. The amended May 2011 Plan allows the Company to grant options to purchase up to 1,500,000 shares as an incentive for its employees and consultants. As of March 31, 2018, the Company had 304,835 shares of common stock available for future grants under the May 2011 Plan.

On August 22, 2011, the Company adopted the 2011 B Equity Incentive Plan (the “August 2011 Plan”) reserving 4,375 shares of common stock for issuance under the August 2011 Plan. As of March 31, 2018, the Company had 1,875 shares of common stock available for future grants under the August 2011 Plan.

Under both the May 2011 Plan and the August 2011 Plan (together, the “2011 Equity Incentive Plans”), the Board determines the exercise price to be paid for the shares, the period within which each option may be exercised, and the terms and conditions of each option. The exercise price of the 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 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 purchase price is set at the fair market value of the Company’s common stock on the grant date, the term is set at ten years and the options typically vest on a straight-line basis over the requisite service period as follows: 25% of options shall vest one year from the date of grant and the remaining options shall vest monthly, in equal increments over the following three years. The Company issues new shares to the optionee for any stock awards or options exercised pursuant to its 2011 Equity Incentive Plans.

A summary of option activity under the 2011 Equity Incentive Plans for the year ended December 31, 2017 and the three months ended March 31, 2018 is presented below:



Options Outstanding	Common Shares		Weighted Average Exercise Price		Weighted Average Remaining Life (Years)
Outstanding at December 31, 2016	959,864		$	8.11	6.4
Granted	141,246		3.49
Exercised	—		—
Forfeited	(51,607	)	38.86
Outstanding at December 31, 2017	1,049,503		$	5.97	6.0
Granted	14,917		4.33
Exercised	—		—
Forfeited	(22,494	)	6.17
Outstanding at March 31, 2018	1,041,926		$	5.95	5.8

Exercisable at March 31, 2018	764,181		$	6.24	4.8

During the three months ended March 31, 2018 and 2017 no options were exercised. The fair value of the Company's common stock on March 31, 2018 was $3.66 per share. The intrinsic value on outstanding options as of March 31, 2018 was $89,540. The intrinsic value on exercisable options as of March 31, 2018 was $13,393.

A summary of the nonvested stock option activity under the 2011 Equity Incentive Plans for the year ended December 31, 2017 and the three months ended March 31, 2018 is presented below:



Nonvested Options	Common Shares		Weighted Average Grant Date Fair Value		Weighted Average Remaining Years to Vest
Nonvested at December 31, 2016	414,306		$	3.60	2.6
Granted	141,246		1.76
Vested	(205,469	)	3.36
Forfeited	(27,006	)	3.12
Nonvested at December 31, 2017	323,077		$	2.64	2.7
Granted	14,917		2.48
Vested	(41,585	)	2.96
Forfeited	(18,664	)	3.04
Nonvested at March 31, 2018	277,745		$	2.56	2.7

Stock-based compensation cost related to stock options granted under the 2011 Equity Incentive Plans is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. The Company estimates the fair value of each option award on the date of grant using a Black-Scholes option-pricing model that uses the assumptions stated in Note 1. Total stock-based compensation expense recognized on stock option issuances, including the restricted stock issuance expense disclosed above, during the three months ended March 31, 2018 and 2017 was $146,281 and $158,976, respectively. Stock-based compensation expense was recorded as $3,706 to cost of revenue, $16,298 to sales and marketing, and $126,277 to general and administrative expense in the Company's consolidated statement of operations during the three months ended March 31, 2018. Stock-based compensation expense was recorded as $14,028 to sales and marketing, and $144,948 to general and administrative expense in the Company's consolidated statement of operations during the three months ended March 31, 2017. Future compensation related to nonvested awards as of March 31, 2018 expected to vest of $599,659 is estimated to be recognized over the weighted-average vesting period of approximately 2.7 years.