- Company Name
- IZEA, Inc.
- Stock Symbol
- Class Period
- May 15, 2015 to April 3, 2018
- Motion Deadline
- June 3, 2018
- Central District of California
The complaint charges IZEA and certain of its officers with violations of the Securities Exchange Act of 1934. IZEA operates online marketplaces that facilitate transactions between marketers and content creators.
The complaint alleges that throughout the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding IZEA’s financial statements, including that, as a result of the Company’s inadequate internal controls, IZEA was misreporting revenue from the Company’s Content Workflow services as gross amounts billed to marketers instead of on a net transaction basis, and the amount IZEA had previously reported as gross profit on Content Workflow should have been reported as revenue. As a result of defendants’ false statements and/or omissions, IZEA securities traded at artificially inflated prices of as high as $10 per share during the Class Period.
On April 2, 2018, IZEA announced that it was postponing the release of its fourth quarter and full year 2017 financial results because it needed more time to file its Form 10-K as a result of additional review procedures necessitated by the need for accounting adjustments. According to the Company, its Audit Committee had “determined that there was an error in accounting for revenue and cost of sales related to the self-service Content Workflow portion of the company’s revenue. Historically, the company has reported revenue from the company’s Content Workflow services as gross amounts billed to marketers for their transactions. Upon further review, the Audit Committee determined that this portion of the company’s revenue should have been reported on a net transaction basis. Therefore, the amount that the company previously reported as the gross profit on Content Workflow should be the amount reported as revenue.” On this news, the price of IZEA shares fell over 18%, to close at $3 per share on April 2, 2018.
Then on April 3, 2018, IZEA filed a Form 8-K with the SEC disclosing that the Company’s financial statements from 2015 onward should no longer be relied upon and that the amount IZEA had previously reported as gross profit on Content Workflow should have been reported as revenue. On this news, the price of IZEA shares fell another 19%, to close at $2.42 per share on April 3, 2018.