UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒☒      ANNUAL REPORT UNDERPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: ended December 31, 20192020

or

☐☐TRANSITION REPORT UNDERPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-51872File Number 001-39500

JERRICK MEDIA HOLDINGS,CREATD, INC.

(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Its Charter) 

2050 Center Avenue, Suite 640

Fort Lee, NJ 07024

(Address of principal executive offices)

(201) 258-3770

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered underpursuant to Section 12(b) of the Exchange Act:None

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $0.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐  No ☒

Indicate by check mark whether the registrantregistrant: (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 ☒ No ☐

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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of a “large accelerated filer,” “accelerated filer,”filer” and “smaller reporting company,” and “emergingemerging growth company”company in Rule 12b-2 of the Exchange Act.   (Check One)

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. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 28, 2019, based on a closing price of $3.00 was $19 million.  As of March 30, 2020,31, 2021, the registrantCompany had 9,185,18710,684,514 shares of its common stock, par value $0.001 per share, outstanding.

Documents Incorporated By Reference: None. As of June 30, 2020, the last business day of the registrant’s most recently completed second quarter, the aggregate market value of the shares of common stock, par value $0.001 per share held by non-affiliates of the registrant was approximately $131,469,518 based on $13.20 (on a post-reverse stock split basis), the closing price of the registrant’s common stock, par value $0.001 per share on that date.

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Included in thisThis Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of the federal securities laws. All statements contained in this Annual Report, other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, potential growth or growth prospects, future research and development, sales and marketing and general and administrative expenses, and our objectives for future operations, are “forward-looking”forward-looking statements. Words such as “believes,” “may,” “will,” “estimates,” “potential,” “continues,” “anticipates,” “intends,” “expects,” “could,” “would,” “projects,” “plans,” “targets,” and variations of such words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” in this Annual Report. Readers are urged to carefully review and consider the various disclosures made in this Annual Report and in other documents we file from time to time with the Securities and Exchange Commission (the “SEC”) that disclose risks and uncertainties that may affect our business. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and circumstances discussed in this Annual Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as well as historical information.predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in thesethe forward-looking statements are reasonable, we cannot assure you thatguarantee future results, performance, or achievements. In addition, the expectations reflected in these forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated in forward-looking statementsthis Annual Report are made as a result of certain factors, including matters described in the section titled “Risk Factors.” Forward-looking statements include those that use forward-looking terminology, such as the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “project,” “plan,” “will,” “shall,” “should,” and similar expressions, including when used in the negative. Although we believe that the expectations reflected in these forward-looking statements are reasonable and achievable, these statements involve risks and uncertaintiesdate of this filing, and we cannot assure you that actual results will be consistent with these forward-looking statements. Wedo not undertake, no obligationand expressly disclaim any duty, to update or revise these forward-lookingsuch statements whether to reflect events or circumstancesfor any reason after the date initially filedof this Annual Report or published, to reflect the occurrence of unanticipated eventsconform statements to actual results or otherwise.revised expectations, except as required by law.

You should read this Annual Report and the documents that we reference herein and have filed with the SEC as exhibits to this Annual Report with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.

PART I

ItemITEM 1. Business.BUSINESS

Overview

Jerrick Media Holdings,Creatd, Inc. (“JMDA”CRTD,” “the Company,” or “the Company”“Creatd”) is a creator-first technology company and the parent company and creator of the Vocal platform. The Company develops technology-based solutionsOur mission is to solve problems forempower creators, entrepreneurs, and brands through technology and partnership. We accomplish this through Creatd’s three main business pillars: Vocal Ventures, Creatd Partners, and our newest initiative, Recreatd. At its core, Creatd centers around the philosophy that creators are the driving force that propels success in the digital realm. This philosophy is represented by a framework we call the Creatd Cycle, which operates on the premise that creators produce content that attracts audiences, who in turn attract brands who are interested in reaching those audiences and the ability to generate new installations around bespoke ecosystems such as health and wellness, sports, and education.

Creatd’s first pillar, Vocal Ventures, houses our proprietary technology platforms, including Creatd’s flagship product, the Vocal platform, and its 36 wholly owned-and-operated creator community, connectingcommunities. Through Vocal, creators withcan create and share their stories in a way that helps them get discovered by their ideal audiences and be rewarded for their creativity. Similarly, brands can access their ideal consumers and drive conversions for their products and services. The Vocal platform’s scalable and unique underlying agile framework lends itself well to future acquisitions and white-label opportunities for Creatd’s technology because of the ease with which other platforms can be integrated into our ecosystem.

Creatd Partners, Creatd’s second pillar, houses our brand-oriented initiatives, including our agency businesses, Vocal for Brands and Seller’s Choice, as well as its corporate ventures and investments. Both of these agencies serve a multitude of clients, while the venture arm looks to make direct investments in the ones that have significant upside opportunity. Creatd Partners pairs Creatd’s resources and Vocal’s proprietary technology, which were built to simultaneously amplify creators’ discoverability and potential reward and help direct-to-consumer brands achieve conversions and reach their target audiences, while generating value for all of Creatd’s stakeholders.  

Recreatd is the pillar which houses Creatd’s intellectual property and legacy media assets, including acquired artwork, photographs and media memorabilia. Recreatd represents an initiative by Creatd to revitalize transmedia content, utilizing Vocal Ventures’ technology, data, and marketing capabilities to reboot archival media assets and e-commerce properties. Creatd has a history of successfully executing such acquisition and assimilation projects, including its resuscitation of General Media properties such as the iconic women’s magazine, Viva, into digital communities and absorbing once-defunct content communities like Creators Media (which at one time was valued at $50MM). Creatd has a vast collection of intellectual property and legacy content, including a documentary about the life of Bob Guccione directed by Barry Avrich; Till Human Voices Wake Us, a short film starring Lindsay Lohan and directed by famed photographer Indrani; No One’s Pet, the biography of Penthouse Pet Sheila Kennedy authored by renown film critic Glenn Kenny; and The Mind’s Eye, The Art of Omni. The Company’s ability to leverage its technology to revitalize this content represents a significant value proposition for media companies and publishers that are sitting on vast collections of content that are of supreme quality but are not in a suitable format for today’s consumer.

Vocal

Vocal, Creatd’s flagship product, is a robust, proprietary technology platform that provides best-in-class tools, safe and curated communities, and monetization opportunities that enable creators to find a receptive audience and get rewarded. Through Vocal, content creators can get discovered and monetize their content by connecting to their ideal audiences and partnering with the brands that want to accessreach those audiences. Through a combination of data analysis, design, and development, the Company conceptualizes, creates, and maintains a suite of technology products and provides services that influence a global audience.

Jerrick is committedSince its initial launch in 2016, Vocal has grown to identifyingbe one of the fastest growing communities for content creators of all kinds, including writers, musicians, podcasters, photographers, and leveraging opportunities within the digital platformmore; as of March 2021, Vocal has reached over 900,000 freemium creators and content monetization space.Its technology is built to organically sustain and scale multiple lines of revenue. In addition, the Company has successfully acquired and integrated complimentary technology platforms and media assets into Vocal’s existing infrastructure, and will continue to make targeted acquisitions of public and private companies. The Vocal technology platform, trademark, and related intellectual property are whollyover 20,000 Vocal+ paid subscribers across its 36 owned and operated by Jerrick.niche communities. 

Our operations are organized intoVocal provides a large stage for creators to connect with fans and find new audiences. In addition to enabling access to millions of unique monthly visitors, the following business segments:platform provides creators with a full suite of tools and services for content creation, discovery, distribution, and monetization, including:

Vocal+ is Creatd’s premium subscription membership program. Vocal+ members pay a membership fee for premium features, including receiving increased earnings for their content, reduced platform processing fees for Tips received, a Vocal+ badge on their creator page, eligibility to participate in exclusive Vocal+ Challenges, and more. Vocal+ offers a strong value proposition for new creators, as well as the over 900,000 freemium users registered to Vocal. Creators may sign up for a Vocal+ membership when they create an account, or they can upgrade an existing Vocal Free account to a Vocal+ account at any time. The current cost of a Vocal+ membership is either $9.99 per month or $99 annually. From time to time, the Company offers Vocal+ subscriptions at a discount for a predetermined number of months as a promotion for new subscribers.

Vocal for Brands

Digital audiences have become increasingly wary of traditional display and programmatic advertising tactics. Intrusive ads like pop-ups have proven to disrupt the consumer experience, leading to trends such as the fact that over 25% of internet users have ad blockers installed. Brands are actively seeking trustworthy and safe platforms like Vocal to drive engagement through non-interruptive brand storytelling and deliver invaluable performance metrics that help optimize their marketing efforts.

Creatd’s internal content studio, Vocal for Brands, pairs leading brands with authentic creators to produce marketing campaigns that are non-interruptive, engaging, and direct-response driven. The key value propositions for brands include:

Vocal’s first-party data enables our team to create highly targeted and segmented audiences for Vocal for Brands campaigns, and help the brand reach their ideal audience. Brands can access story performance data, engagement data, behavioral data, and sentiment data, all of which is used to further optimize the campaign’s success. The combination of Vocal’s hyper-engaged audiences, user-generated communities, and brand-safe environment help brands achieve maximum ROAS (return on ad spend).

Vocal for Brands typically collects fixed fees ranging from $10,000 to $110,000, depending on campaign duration and specific client objectives. To date, Vocal for Brands’ client roster includes up-and-coming direct to consumer (DTC) brands such as IAC’s Vimeo, Moleskine, New York Post’s Decider, Lull, Daily Harvest, Cleancult, and more.

With the introduction of Challenges in early first quarter 2020, brands can now tap into Vocal’s network content creators and encourage them to interact with, learn about and promote their brand while benefiting from Vocal’s brand-safe, moderated, and curated environment. Vocal Challenges have a unique ability to capture the hearts and minds of the creative community and drive meaningful engagement. Challenges combine thought-provoking story prompts and sizable reward potential, which work to inspire creators and drive them toward participation. Brands can similarly capitalize on this combined effect by collaborating with Vocal on a sponsored Challenge, prompting the creation of high-quality stories that are centered around the brand’s mission and further disseminated through creators’ respective social channels and promotional outlets.

Seller’s Choice

In addition to Vocal for Brands, Creatd supports brands by providing managed and performance marketing services through Seller’s Choice. an in-house marketing agency for DTC (direct-to-consumer) and e-commerce clients. Acquired by Creatd in September 2019, Seller’s Choice provides direct-to-consumer brands with design, development, strategy, and sales optimization services. Its status as an Amazon Solution Provider and its weighty operational structure made it an ideal candidate for acquisition in late 2019. Creatd’s business model is built to absorb distressed operational infrastructures, integrate the few best components, and shed the non-essential costs.

Creatd Partners

Creatd Partners is the Company’s corporate venture arm, as well as the business division that encompasses management of Seller’s Choice and Vocal for Brands. Creatd Partners invests in qualified brands who are aligned with our corporate mission, such as direct-to-consumer brands, digital platforms, and technologies that support entrepreneurs and the creator economy. Creatd Partners was established with the aim of nurturing high-potential, early-stage companies that can meaningfully benefit by leveraging Creatd’s technology, resources and proven capacity to optimize visibility, reach, and conversions for direct-to-consumer products and services. Creatd Partners investments are subject to the completion of rigorous due diligence and independent valuation assessment and may encompass a combination of financial and operational support in exchange for an equity stake in the business. 

Creatd Partners’ first investment is Plant Camp, a direct-to-consumer food company that creates healthy and nutritional upgrades to classic foods and was launched in December 2020. The Company has made three further investments, the most notable of which is an equity investment in the health and wellness DTC beverage space. Additionally, Creatd Partners is currently exploring future opportunities that fit its criteria and risk profile, seeking partner companies that combine a quality product, seasoned founders, and the ability to leverage Creatd’s platform technology.

Moderation and Compliance

One of the key differentiating factors between Vocal and most other user-generated content platforms is the fact that each story submitted to Vocal is run through the Company’s proprietary moderation process before it goes live on the platform. The decision to implement moderation into the submission process was in direct response to the rise of misinformation and bad actors on many social platforms. In response to these inherent pitfalls within the content landscape, Vocal’s proprietary moderation system combines the algorithmic detection of copyrighted material, hate speech, graphic violence, and nudity, and human-led curation to ensure the quality and safety of each story published on Vocal, thus fostering a safe and trustworthy environment for creators, audiences, and brands. Moderation and compliance are more important than ever in a world where ambiguity can systematically damage value. Vocal’s enforcement of community guidelines and emphasis on content moderation protects the platform, its creators, and Creatd shareholders.

Trust and safety are paramount to the Vocal ecosystem. We follow best practices when handling personally identifiable information, with guidance from the European Union’s General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), and the Digital Millennium Copyright Act (DMCA).

Platform Compliance Policies include:

Vocal

Vocal is Jerrick’s proprietary flagship technology platform that provides creators with storytelling tools, engaged communities, and opportunities to monetize their content. Vocal’s architecture was engineered to support a scalable and easy-to-update platform that could adapt its capacity to meet the current and growing demand for digital resources and technologies that foster virtual connection and community.

When the Jerrick team first ideated the Vocal platform, we determined that our primary constituents should be creators, and placed them at the center of our mission. We identified their pain points and created a blueprint to solve them.

There are over 4.5 billion internet users; of that, 83% publish some form of content on a monthly basis (blogs, photos, videos, and more), and 3.8 billion of them are active on social media (according to a report published by GlobalWebIndex). In 2020, the internet has become the linchpin of the modern information society, as well as the modern social society. Digital platforms like Vocal exist to help the world find order in a vast ocean of opportunity.

A global crisis like the current COVID-19 coronavirus pandemic only further emphasizes how critical a role digital platforms play in society, as governmental bodies are encouraging social distancing and restricting travel, and employers are widely implementing work-from-home policies. Vocal was born in an environment in which the total addressable market (TAM) for our platform is growing exponentially. With the emerging effects of COVID-19 and other global events, we expect that our TAM will only continue to expand.Technology Development

Vocal’s proprietary technology was developedis built on Keystone, the same underlying open-source framework used by industry-leaders such as Atlassian, a $43-billion Australian technology company. Some of the key differentiating elements of Vocal’s technology are speed, sustainability, and scalability. The Company continues to invest heavily in research and development to continuously improve and innovate its platform, with the helpgoal of Thinkmill, our Sydney-based development partners. We used Thinkmill’s open-source content management framework, Keystone, asoptimizing the user experience for creators. Vocal’s architecture allows it to do more with less cost and provides a foundation for our proprietary technology, which enables us to provide rapid updates and cost effective agile development. Together with Thinkmill, our internal product design and quantitative groups are able to quickly distribute product improvements, updates, and new features to improve our users’ experience.model capable of turning a profit.

We believe thatAdditionally, the Vocal platform and its underlying technology allows us to maintain aan advantageous capital-light infrastructure. By using cloud service providers, we are able to focus on platform and revenue growth rather than building and maintaining the costly internal infrastructures that have materially affected so many legacy media platforms. Vocal’s technology has been specifically designed and built to scale without a material corresponding increase in operational costs. While our users can embed rich media, such as video, audio, and product links, into their Vocal stories, the rich media content is hosted elsewhere (such as YouTube, Instagram, Vimeo, Shopify, Spotify, etc.). Thus, our platform can accommodate rich media content of all kinds without bearing the financial or operational costs associated with hosting the rich media itself. In addition to the benefits this framework affords to the Company, it is the additional benefit to our content creators, in that a creator can increase their monetization; for example, a creator can embed their YouTube video into a Vocal story and thus derive earnings from both platforms when their video is viewed.

Maintaining a sustainableApplication of First-Party Data

Creatd’s business intelligence and capital light infrastructuremarketing teams identify and target individual creators, communities, and brands, utilizing empirical data harnessed from the Vocal platform. The team’s ability to apply its proprietary first-party data works to reduce acquisition costs for new creators and to help provide brands with conversions and an ideal targeted audience. In this way, our ability to apply first-party data is particularly important in tighter capital markets caused by external events that impact liquidityone of the value-drivers for the Company and credit, suchthe key advantages of its closed ecosystem strategy, which we refer to as the current COVID-19 pandemic. Our technology is built to scale, while the rate of growth can be modulated through limits on capital expenditure. This creates a predictive environment in which the Company can continually reassess its capital needs and adjust its course when faced with unforeseen developments.Creatd Cycle.

SinceIn its 2016 launch,simplest definition, first-party data is data that you collect directly from your customers. Even the most simplistic blog website is collecting some degree of first-party data; Creatd’s edge is in its application of that data. Our organization is constantly collecting a tremendous amount of first-party behavioral data extracted from the Vocal has amassed over 565,000 content creators across a wide rangeplatform. To date, we have collected hundreds of mediumsmillions of data points around our customers and backgrounds, such as bloggers, journalists, influencers, musicians, artists, podcasters, gamers, entrepreneurs, and more. Vocal creators provide a steady stream of user-generated, which can be monetized through reads, as well as through tips received fromour audiences.Vocal helps creators fund their creativity and build their personal brand. 

The Vocal content creation process can be broken down into three key steps:

1.Create: Vocal’s storytelling tools make it easy for creators of all kinds to produce beautiful, engaging, rich-media content.

2.Share: Creators share stories on one of Vocal’s 34 genre-specific communities to get discovered and connect with like-minded creators and readers.

3.Earn: Creators can earn money every time their story is read, through participation in Challenges, and through tips received from fans.

Importantly, Jerrick does not see Vocal as a substitute or competitor to segment-specific content platforms, such as Vimeo, YouTube, or SoundCloud. Instead, Vocal is a supplementary tool with which to leverage the vast number of fragmented content creation tools that exist in the digital sphere and to give creators on those platforms the means to monetize. We believe that Vocal is well positioned between the content creation tools and the various distribution channels that creators depend on to publish and amplify their content.  

Vocal employs a number of strategies to collect first-party data around our users’ behavioral activity on the platform. The data is processed and analyzed by our internal business intelligence team with the goal of improving our product, services and users’ experience. Vocal’s growth and marketing strategies make use of these first-party data insights, resulting in a lower creator acquisition cost and reduced subscription churn when targeting third-party networks, such as the big social media platforms. Importantly, we do not sell that data, that being a common monetization opportunity for many other businesses. Instead, we use our users’ information.collected first-party data for the purposes of bettering the platform. Specifically, our data helps us understand the behaviors and attributes that are common among the creators, brands, and audiences within our ecosystem. We utilizethen pair our first-party Vocal data with third-party data from distribution platforms such as Facebook and Snapchat to optimize the successprovide a more granular profile of our creators, brands, and generate revenue when our creators monetize their content and brands reach the right audience. Additionally, unlike traditional publishing platforms, we do not charge the audience for consuming content.

Key User Demographics:

Vocal’s Value for Creators:audiences.

VocalIt is a proprietary technology platform, built to expand its digital audience through content distribution while providing an environment for creators to be rewarded for their content. We believegenerating this valuable first-party data that digital audiences have become increasingly wary of traditional display and programmatic advertising tactics–intrusive ads like pop-ups that disrupt the consumer experience. The Company is therefore focused on building a network of user generated content communities that emphasize discovery, creator monetization, and non-interruptive branded storytelling.

In response to what we recognize as the growing shift away from interruptive ads, brand marketing teams actively seek partners like Vocal, that can deliver key performance metrics in an authentic and safe network. By utilizing Vocal’s first-party behavioral data, we can effectively pair content creators with the right brands to produce predictive strategiescontinually enrich and successful non-interruptive marketing campaigns.

Trust and safety are paramount to the Vocal ecosystem. We follow best practices when handling personally identifiable information, with guidance from the European Union’s General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), and the Digital Millennium Copyright Act (DMCA). 

Platform Compliance Policies include:

Vocal Users: Stories Published

Based on our internal data collected over the last four months, there has been a steady increase in creators who are publishing on our platform, which we believe is a result of the introduction of features like Challenges, which further incentivize content submissions and improve the moderation feedback loop.

Figure 1 - # of Users who Published

Vocal Users: Creator Acquisition Cost

As we continue to collect platform data, we are able to further refine our ideal user profile and hone our targeting strategies, such that the Creator Acquisition Cost (CAC)capabilities for both ‘Vocal Free’ (i.e. unpaid membership) and Vocal+ (i.e. paid premium membership) naturally declines over time. Having spent over three years executingmarketing campaigns to attract Vocal Free users, and refining our strategy, the CAC for Vocal+ subscribers experienced an immediate decline; costs dropped from over $1,100 to approximately $200 in the first 4 months following the launch of Vocal+. Meanwhile, the CAC for Vocal Free creators followed a similarly sharp rate of reduction, dropping from approximately $4.50 down to $2.00 in this same time frame.  

Figure 2 - Vocal+ Creator Acquisition Cost (CAC)

Figure 3 - Vocal Free Creator Acquisition Cost (CAC)

Digital Landscape and Industry

From 2006 through 2016, the online and digital content industry experienced rapid growth. This era resulted in various technology companies within the digital space expanding into some of the largest and most influential companies in the United States and around the world. Even with today’s market dislocation, many of these technology companies remain the industry leaders that will solve for a new era of social distancing.

During this same period of time, countless digital publishing platforms and tools were introduced that enabled creators and their audiences to create, share, and connect. However, hyper-growth in this sector eventually introduced a new series of problems.  The largest issue was that the first wave of media publishing platforms and digital communities were reliant on a single line of revenue: traditional intrusive advertising.

As these companies scaled, so did their costs of operations, which eventually compelled them not only to compromise the integrity of their relationship to users, but to bombard audiences with invasive ads and use some aggressive marketing tactics in order to generate revenues and stay solvent. An intrusive user experience is not a sustainable model. 

Ad technology began experiencing rapidly declining margins and tended to require excessive traffic in order to monetize. Digital content and media asset values have deteriorated rapidly between 2016 and 2018. This compression of margins has, in recent years, led to massive layoffs at those media publishing companies that were dependent on this legacy form of advertising. There is a continued risk of future markdowns in potential asset valuations. 

In designing Vocal, the Jerrick team focused on building a network of communities on a singular platform that would help people discover real stories, from authentic creators. Vocal provides for its users’ needs by always innovating and introducing new features based on two core principles: that creators and brands are our partners, and that we make money when our partners make money.

In the face of this radical disruption in the digital marketing landscape, content distribution is undergoing a significant shift. 

According to Statista, every 60 seconds on the internet:

Further, content monetization has become increasingly oriented toward native and creator-based fees. Facebook, Google, and Amazon already capture nearly 70% of digital ad spending, with that number projected to increase (Source: eMarketer). With these changes, and in light of more recent developments – the shift toward remote workforces, the popularization of freelancing, and social distancing recommendations – we believe that digital content creation is at an all-time high. Additionally, we believe thatthis new era will see these statistics grow rapidly in this new environment of exponentially increasing online activity, resulting in an evaluation of how to support the creation of digital content for creators, readers and audiences. 

At the same time, branded content (a form of native advertising) is on the rise,promotion and experiencing continuing growth year-over-year.

According to data from Pressboard:

Thus, we believe that brands are actively seeking trustworthy and safe platforms like Vocal to drive engagement through non-interruptive brand storytelling, and deliver key performance metrics that help optimize their marketing efforts. We also believe that our Vocal platform provides a needed alternative for creators to participate within a community-first environment and access sustainable revenue sources. We built Vocal on these transparent core values, which continue to inform how we work with creators, readers, brands, and partners. 

History

Jerrick was founded in 2014 by CEO Jeremy Frommer and became publicly listed in February 2016, at which point the Company was renamed Jerrick Media Holdings, Inc. Jerrick began working with its Australia-based development partners, Thinkmill, in early 2014 to begin building its flagship product. The Vocal technology platform was released to the public in December 2016 with six niche communities in its network and a small group of beta creators.

In late 2018, we introduced our in-house creative studio, Vocal for Brands, which partners with direct-to-consumer (DTC) brands to create engaging and campaign-optimized stories on Vocal that build brand affinity and trust, and drive results 

2019 was marked by a series of important milestones for the Company. First, in July 2019, the Vocal+ premium membership offering was introduced on the Vocal platform. This was followed by the completion of ourcreator acquisition, and integration of boutique e-commerce marketing agency, Seller’s Choice, in September 2019. Earlier that year, we successfully tendered for the majority of Jerrick’s outstanding warrants, exchanging over 90% of outstanding warrants for common stock.

In January 2020, Vocal’s product team launched the latest feature for creators and brands, called “Creator Challenges.” Challenges (which are either internally run or sponsored by brands) are themed story contests that incentivize content submissions and engage Vocal’s user base by providing creators with the chancespecifically, to win cash prizes and other rewards. The introduction of creator Challenges, which represents Vocal’s most important product update to date, showcases Jerrick’s unique ability to leverage its powerful network to host unique content experiences that drive success and value for brands, creators, and audiences simultaneously. Moreover, creator Challenges are accretive to Jerrick’s own marketing efforts; Challenges offer further incentivize for new creators to join Vocal and, in particular, to upgrade to Vocal+ (which offers members-only Challenges). As a result, since the launch of creator Challenges, we’ve seenreduce our creator acquisition costs decrease(CAC) and subscriber acquisition costs (SAC). Lower acquisition costs combined with increasing lifetime value (LTV) per subscriber, means that our enterprise value is accelerating each time we acquire a new user. We anticipate the lifetime value of our subscribers to increase as we introduce more features that cater to the needs of our creators. It is Vocal’s unique capability to collect and apply first-party behavioral data that allows us to simultaneously increase the LTV of our subscribers over time.time, while lowering the cost to acquire them. In fact, the link between incentivizing creators and lowering creator acquisition costs is a primary focus of the data science team, and an important consideration for every feature we develop for the Vocal platform.

Competition

The idea for Vocal came as a response to what Jerrick’sCreatd’s founders recognized as systemic flaws inherent to the digital media industry and its operational infrastructures. Depreciating value of digital media business models built on legacy technology platforms created a unique opportunity for development of a creator-centric platform that could appeal to a global community and, at the same time, be capable of acquiring undervalued complimentary technology assets.

JerrickCreatd’s founders built the Vocal platform upon the general thesis that a closed and safe ecosystem utilizing first-party data to increase efficiencies could create a sustainable and defensible business model. Vocal was strategically developed to provide value for content creators, readers, and brands, and to serve as a home for the ever-increasing amount of digital content being produced and the libraries of digital assets lying dormant.

Since 2016, the ‘creator era,’ the industry has been marked by the proliferation of democratized and transparent platforms. The digital space now encompasses an online global audience of over 4.5 billion internet users and over 1.7 billion websites. The “read, write and execute” web, or Web 3.0, is a data-driven and more intelligent web that can adjust its output according to the particular needs and habits of the individual user, fosteringmore intelligent creation, greater personalization and, ultimately, a more satisfied end user.

In this context, legacy sites and platforms are becoming increasingly threatened by factors like fragmented content creation tools, excessive traffic and marketing dollars required to monetize content, and compressing margins for traditional digital advertising. This has led toVocal is most commonly discussed as a qualitative deterioration of online content. In addition, it means that companies operating on these models will continue to struggle with limited paths to scalable profitability.combination of:

There is limited competition that provides the specific type of resources and platform that Vocal provides the creative community. In addition, there are a limited number of digital media companies like Vocal that charge only creators and brands for publishing content, as opposed to charging the audience for accessing content. Jerrick’s management team believes that the primary competition for Vocal are other platforms that can draw attention or time from the creative community in general. These platforms can vary in scope, size, and genre. Simply put, platforms compete for the attention of the digital consumer.

Vocal’s Competitive Strengths

DigitalImportantly, Creatd does not see Vocal as a substitute or competitor to segment-specific content platforms, must differentiate themselves by providing executable solutions and fulfilling users’ empirical needs. Our focus on rewardingsuch as Vimeo, YouTube, Instagram, or SoundCloud. We don’t want to replace anyone; we built Vocal to be accretive to the creator for their content, partnering with them on distribution, and providing opportunities for monetization, isentire digital ecosystem. In fact, one of the key differentiating factors betweenmost powerful components of our technology is the fact that Vocal makes it easy for creators to embed their existing published content, including videos, songs, podcasts, photographs, and legacy publishing platforms.more, directly into Vocal. We see this as a growth opportunity by building partnerships with the world’s greatest technology companies and to further spread our roots deeper into the digital landscape.

Revenue Model

Creatd’s revenues are primarily generated through:

Product Revenues

Our continually expanding network of approximately 565,000 content creators using the Vocal platform drives our primary source of revenue. Quality content submissions from creators attracts audiences and brands, the other primary stakeholders who exist within Vocal’s ecosystem. The continuous interactions between creators, audiences, and brands propel a virtuous cycle of transactions and represents an important element of Vocal’s scale and success.

The Company has designed several revenue touch-points throughout the Vocal ecosystem, ensuring a balanced portfolio of revenue streams, sustainable infrastructures, and compounding scalability.

Revenues are primarily generated through:

Creator Subscriptions:

Vocal+ is a premium subscription membership for Vocal users. Vocal+ members pay a membership fee for premium features, including receiving increased earnings for their content, reduced platform processing fees for tips received, a Vocal+ badge on their creator page, access to additional features on the Vocal Platform, and participation in exclusive programs. Creators may sign up for a Vocal+ membership when they create an account, or they can upgrade an existing Vocal Free account to a Vocal+ account at any time. The current cost of a Vocal+ membership is either $9.99 per month or $99 annually.

Brand Agency:

Our in-house creative studio, Vocal for Brands, focuses on non-interruption based advertising and engaging brand storytelling. Vocal for Brands pairs brands with active creators in the Vocal network to produce bespoke branded content campaigns, brand-sponsored creator Challenges, and other types of branded experiences on the Vocal platform that build brand engagement, trust, and drive results. With the introduction of Challenges, brands can tap into Vocal’s network of approximately 565,000 content creators and encourage them to interact with, learn about and promote their brand while benefiting from Vocal’s brand-safe, moderated, and curated environment. Brand-sponsored Challenges effectively yield a collection of crowdsourced branded content for brands and help them reach a wider audience.

Vocal’s first-party data enables our team to create highly targeted and segmented audiences for Vocal for Brands campaigns, and help the brand reach their ideal audience. Brands can access story performance data, engagement data, behavioral data, and sentiment data, all of which is used to further optimize the campaign’s success.

Fees range from $5,000 to $45,000 for bespoke Vocal for Brands campaigns, depending on duration and other key factors.

Growth Strategy:

Marketing + Consulting Services:

Seller’s Choice, LLC (“Seller’s Choice”), which we acquired in September 2019,Continued growth is a digital marketing solution provider dedicatedlikely to the interests, growth, and profitability of e-commerce brands. Utilizing their integrative next-gen marketing platform, Seller’s Choice focuses cohesively in the four key factors of online sellers – sell-through, differentiation, community and compliance – to help e-commerce businesses establish their brand identity and realize profitable and sustainable growth while maximizing customer engagement and retention.  

Through Jerrick’s acquisition of Seller’s Choice, the Company has further expanded its reach into the direct-to-consumer marketplace, while enabling Seller’s Choice’s clientele to leverage Vocal for Brand’s unique brand storytelling capabilities.

Platform Processing Fees and Microtransactions:

Creators and their audiences have the ability to send and receive tips, or microtransactions, on Vocal. Each tip sent on Vocal generates revenue for the Company in the form of platform processing fees. For Vocal Free creators, we retain a 7% platform processing fee for every tip exchanged. For Vocal+ creators, we retain a 2.9% platform processing fee.

We use the Stripe platform to process tips and payouts to creators on Vocal. Additional features such as gated premium content, recurring tips, affiliate marketing features for brands, and incentivization fees for new creator referrals are currently in development.

Affiliate sales:

We also generate revenue through our affiliate marketing relationships, which pay us a percentage of purchases made on our platform. Affiliate partnerships include Amazon, Skimlinks, Tune, and more.

E-commerce:

Our e-commerce strategy involves revitalizing archival imagery and media content in dormant legacy portfolios. Our curation and data capabilities have helped us create scalable and definable value for our internal collection of media assets through financing, trademarking, licensing, and production opportunities.

Growth Strategy

We intend to continue to growbe achieved by focusing on the following key areas:

Customers

There are three primary categories of stakeholders/customers that interact within Vocal’s ecosystem: creators, brands, and readers.

Creators

Vocal provides a large stage for creators and artists to connect with fans and find new audiences. In addition to enabling access to millions of monthly visitors, we provide creators with a full suite of tools and services for content creation, discovery, distribution, and monetization, including: 

BrandsAcquisition Strategy

Vocal for Brands leverages VocalCreatd’s hybrid finance and design culture is key to produce branded storiesits acquisition strategy. Acquisition targets are companies that meet a set of opportunistic or financial standards or that are part of specific digital environments that are accretive and Challengescan seamlessly integrate into Creatd’s existing revenue lines. Creatd will continue to make strategic acquisitions when presented with opportunities that build affinity and trust, while generating sales and awareness. The key value propositions for brands include:

Readersare in the interest of shareholder value.

We are focused on enabling the discoveryCorporate History and curation of stories for our readers through a range of products and services:

Corporate Information

We were originally incorporated under the laws of the State of Nevada on December 30, 1999 under the name LILM, Inc. The Company changed its name on December 3, 2013 to Great Plains Holdings, Inc.

On February 5, 2016 (the “Merger Closing Date”), we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GPH Merger Sub, Inc., a Nevada corporation and our wholly-owned subsidiary (“Merger Sub”), and Jerrick Ventures, Inc., a privately-held Nevada corporation headquartered in New Jersey (“Jerrick”), pursuant to which the Merger Sub was merged with and into Jerrick, with Jerrick surviving as our wholly-owned subsidiary (the “Merger”). Pursuant to the terms of the Merger Agreement, we acquired, through a reverse triangular merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “Jerrick Shareholders”), pro-rata, a total of 28,500,000475,000 shares of our common stock.stock, par value $0.001 per share (“Common Stock”). Additionally, we assumed 33,415 shares of Jerrick’s Series A Convertible Preferred Stock (the “Jerrick Series A Preferred”) and 8,064 shares of Series B Convertible Preferred Stock (the “Jerrick Series B Preferred”).

Upon closing of the Merger on February 5, 2016, the Company changed its business plan to our current plan.

In connection with the Merger, on the Merger Closing Date, we entered into a Spin-Off Agreement with Kent Campbell (the “Spin-Off Agreement”), pursuant to which Mr. Campbell purchased (i) all of our interest in Ashland Holdings, LLC, a Florida limited liability company, and (ii) all of our interest in Lil Marc, Inc., a Utah corporation, in exchange for the cancellation of 781,81813,030 shares of our common stock held by Mr. Campbell. In addition, Mr. Campbell assumed all of our debts, obligations and liabilities, including any existing prior to the Merger, pursuant to the terms and conditions of the Spin-Off Agreement.

Effective February 28, 2016, we entered into an Agreement and Plan of Merger (the “Statutory Merger Agreement”), pursuant to which we became the parent company of Jerrick Ventures, LLC, our wholly-owned operating subsidiary (the “Statutory Merger”).

Finally, onOn February 28, 2016, we changed our name to Jerrick Media Holdings, Inc. to better reflect our new business strategy.

Our corporate headquarters are locatedOn July 25, 2019, we filed a certificate of amendment to our articles of incorporation, as amended (the “Amendment”), with the Secretary of State of the State of Nevada to effectuate a one-for-twenty (1:20) reverse stock split (the “Reverse Stock Split”) of our common stock without any change to its par value. The Amendment became effective on July 30, 2019. The number of shares of authorized common stock was proportionately reduced as a result of the Reverse Stock Split. The number of shares of authorized preferred stock was not affected by the Reverse Stock Split. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to the next whole share.

All share and per share amounts for the common stock indicated in this Form 10-K have been retroactively restated to give effect to the Reverse Stock Split.

On September 11, 2019, the Company acquired 100% of the membership interests of Seller’s Choice, LLC, a New Jersey limited liability company (“Seller’s Choice”). Seller’s Choice is digital e-commerce agency based in New Jersey (see Note 4).

On July 13, 2020, upon approval from our board of directors and stockholders, we filed Second Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada for the purpose of increasing our authorized shares of Common Stock to 100,000,000.

On August 13, 2020, we filed a certificate of amendment to our second amended and restated articles of incorporation (the “Amendment”), with the Secretary of State of the State of Nevada to effectuate a one-for-three (1:3) reverse stock split (the “August 2020 Reverse Stock Split”) of our common stock without any change to its par value. The Amendment became effective on August 17, 2020. No fractional shares were issued in connection with the August 2020 Reverse Stock Split as all fractional shares were rounded down to the next whole share. All share and per share amounts of our common stock listed in this Form 10-K have been adjusted to give effect to the August 2020 Reverse Stock Split.

On September 9, 2020, the Company filed a certificate of amendment with the Secretary of State of the State of Nevada to change our name to “Creatd, Inc.”, which became effective on September 10, 2020. 

Recent Developments

Nasdaq Letter of Reprimand

On January 4, 2021, the Company received a letter from the staff of The Nasdaq Capital Market (the “Exchange”) notifying the Company that the Exchange had determined to delist the Company’s common stock and warrants from the Exchange based on the Company’s non-compliance with the Exchange’s (i) $5 million stockholders’ equity requirement for initial listing pursuant to Nasdaq Listing Rule 5505(b), (ii) the $2.5 million stockholders’ equity requirement or any of the alternatives for continued listing pursuant to Nasdaq Listing Rule 5550(b), and (iii) the Company’s failure to provide material information to the Exchange pursuant to Nasdaq Listing Rule 5250(a)(1).

On February 11, 2021, the Company met with the Exchange’s Hearings Panel (the “Panel”) with respect to such determination, in accordance with the Exchange’s rules and, pursuant to such request by the Company to appeal, the delisting of the Company’s securities and the Form 25 Notification of Delisting filing was stayed pending the Panel’s decision.

On March 9, 2021, the Exchange notified the Company that the Panel had determined to continue the listing of the Company on the Exchange. Notwithstanding the Panel’s determination to continue the listing of the Company’s securities on the Exchange, the Panel issued a public reprimand letter to the Company, pursuant to Listing Rule 5815(c)(1)(D), based on its finding “that the Company failed to meet the initial listing criteria with respect to stockholders’ equity and failed to provide Nasdaq with material information with respect to that deficiency.” Specifically, the Panel found that the Company failed to comply with Listing Rule 5250(a)(1), requiring it to notify Nasdaq of certain significant developments that led to the Company’s prior representations about its ability to satisfy the initial listing requirements being inaccurate. In reaching its determination to continue the listing of the Company on Nasdaq, the Panel acknowledged that the Company has since demonstrated compliance with the initial listing requirement for stockholders’ equity and all other applicable initial listing requirements. The Panel also determined that the violations were inadvertent and that the Company had relied on advice of counsel at 2050 Center Ave, Suite 640, Fort Lee, NJ 07024. the time in its interactions with the Nasdaq staff (“Staff”). The Panel also acknowledged the Company’s efforts to implement structural changes within the Company to avoid similar misstatements in the future and that would allow for proper accounting and disclosure on an ongoing basis.

A Panel Monitor has been implemented under Listing Rule 5815(d)(4)(A) for a period of one year from the date of the Letter. In the event that the Company becomes deficient with respect to any continued listing requirement, the Company will not be afforded the opportunity to submit a compliance plan for Staff’s consideration and Staff will issue a Delist Determination Letter and promptly schedule a new hearing under Listing Rule 5810(c)(2), at which the Company may present a compliance plan for the Panel’s consideration. In the event of a new hearing, any suspension or delisting action would be stayed pending the completion of the hearings process and the expiration of any additional extension period granted by the Panel following the hearing.

Sale of Series E Convertible Preferred Stock

On December 29, 2020 (the “Effective Date”), the Company entered into securities purchase agreements (the “Purchase Agreement”) with thirty-three accredited investors (the “Investors”), whereby, at the closing, the Investors have agreed to purchase from the Company an aggregate of (i) 7,778 shares of the Company’s Series E Convertible Preferred Stock, par value $0.001 per share (the “Series E Preferred Stock”); and (ii) 2,831,715 warrants (the “Warrants”) to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). The Series E Preferred Stock is convertible into a total of 1,887,810 shares of Common Stock (the “Conversion Shares”). The combined purchase price of one Conversion Share and one and a half Warrant was $4.12. The aggregate purchase price for the Series E Preferred Stock and Warrants was $7,777,777.77. The closing for the purchase of 7,738 shares of Series E Preferred Stock, convertible into 1,878,101 shares of Common Stock, and 2,817,152 Warrants occurred on between December 29 and December 31, 2020. The closing for the remaining 40 shares of Series E Preferred Stock, convertible into 9,709 shares of Common Stock, and 14,563 Warrants occurred on January 4, 2021.

Appointment of New Director

On October 27, 2020, the Board of the Company increased the size of the Board to six members and appointed LaBrena Martin to fill that newly-created vacancy and serve as a member of the Board. In connection with her appointment to the Board, the Board appointed Ms. Martin to serve as a member of the Audit and Compensation Committees and as the Chair of the Nominating and Corporate Governance Committee. Ms. Martin will hold office until the next annual meeting of stockholders, or until her successor is duly elected and qualified or her earlier resignation or removal.

Over-Allotment Option Exercise

As previously reported on a Current Report on Form 8-K of the Company, on September 15, 2020, the Company consummated an underwritten public offering (the “Offering”) of 1,725,000 units of securities (the “Units”), with each Unit consisting of (i) one share of common stock, par value $0.001 per share (“Common Stock”), and (ii) one five-year warrant to purchase one share of Common Stock at an exercise price of $4.50 per share (the “Warrants”), pursuant to that certain Underwriting Agreement, dated September 10, 2020, by and between the Company and The Benchmark Company, LLC, acting as the representative (the “Representative”) of the several underwriters named therein (collectively, the “Underwriters”).

The Units were sold at a price of $4.50 per Unit, generating gross proceeds to the Company of $7.7625 million. The Company granted the Underwriters a 45-day option to purchase up to 258,750 shares of Common Stock and/or 258,750 Warrants to purchase Common Stock to cover over-allotments, if any.

On October 6, 2020, the Underwriters partially exercised the over-allotment option and on October 8, 2020, purchased an additional 258,750 Warrants, generating gross proceeds, before deducting underwriting discounts and commissions, of $2,587.50.

Appointment of Chief Operating Officer

Effective September 28, 2020, the board of directors of the Company appointed Laurie Weisberg as Chief Operating Officer of the Company. Ms. Weisberg also currently serves as a member of the Company’s board of directors.

Employees

As of March 30, 2020,31, 2021, we had 2542 full-time employees and 12 part-time employees. We considerNone of our relationemployees are subject to a collective bargaining agreement, and we believe our relationship with our employees to be good.

We believe that our future success will depend in part on our continued ability to attract, hire and retain qualified personnel. Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

Corporate Information

The Company’s address is 2050 Center Avenue Suite 640 Fort Lee, NJ 07024. The Company’s telephone number is (201) 258-3770. Our website is https://creatd.com. The information on, or that can be accessed through, this website is not part of this Form 10-K, and you should not rely on any such information in making the decision whether to purchase the Common Stock.

ItemITEM 1A. Risk Factors.RISK FACTORS

You should consider carefully consider the risks described below, as well as general economic and business risks andfollowing risk factors, together with all of the other information included or incorporated in this Annual Report on Form 10-K. The occurrenceReport. Each of any of the eventsthese risk factors, either alone or circumstances described below or other adverse eventstaken together, could have a material adverse effect onadversely affect our business, financial condition and results of operations, and financial condition and could causeadversely affect the trading pricevalue of an investment in our common stock to decline. AdditionalCommon Stock. There may be additional risks or uncertaintiesthat we do not presently known to usknow of or that we currently deembelieve are immaterial maythat could also harmimpair our business.business and financial condition.

Risks Related to our Business

The Company is a development stage business and subject to the many risks associated with new businesses.

Our current line of business has a limited operating history and our business is subject to all of the risks inherent in the establishment of a new business enterprise. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with development and expansion of a new business enterprise. We have incurred losses and may continue to operate at a net loss for at least the next several years as we execute our business plan. We had a net loss of approximately $8.0$24.2 million for the year ended December 31, 2019,2020, and a working capital deficit and accumulated deficit of approximately $10.7$3.0 million and approximately $44.6$71.8 million, respectively.

Our financial situation creates doubt whether we will continue as a going concern.

There can be no assurances that we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or obtain funding from this offering or additional financing through private placements, public offerings and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital and no assurance can be given that additional financing will be available, or if available, will be on acceptable terms. These conditions raise substantial doubt about our ability to continue as a going concern. If adequate working capital is not available, we may be forced to discontinue operations, which would cause investors to lose their entire investment.

Based on the report from our independent auditors dated March 30, 2020,31, 2021, management stated that our financial statements for the periodyear ended December 31, 2019,2020, were prepared assuming that we would continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. 

We are not profitable and may never be profitable.

Since inception through the present, we have been dependent on raising capital to support our working capital needs. During this same period, we have recorded net accumulated losses and are yet to achieve profitability. Our ability to achieve profitability depends upon many factors, including our ability to develop and commercialize our websites. There can be no assurance that we will ever achieve any significant revenues or profitable operations. 

Our operating expenses exceed our revenues and will likely continue to do so for the foreseeable future.

We are in an early stage of our development and we have not generated sufficient revenues to offset our operating expenses. Our operating expenses will likely continue to exceed our operating income for the foreseeable future, until such time as we are able to monetize our brands and generate substantial revenues, particularly as we undertake payment of the increased costs of operating as a public company.

We have assumed a significant amount of debt and our operations may not be able to generate sufficient cash flows to meet our debt obligations, which could reduce our financial flexibility and adversely impact our operations.

Currently the Company has considerable obligations under notes, related party notes and lines of credit outstanding with various debtors.lenders. Our ability to make payments on such indebtedness will depend on our ability to generate cash flow. The Company may not generate sufficient cash flow from operations to enable us to repay this indebtedness and to fund other liquidity needs, including capital expenditure requirements. Such indebtedness could affect our operations in several ways, including the following:

A high level of indebtedness increases the risk that we may default on our debt obligations. We may not be able to generate sufficient cash flows to pay the principal or interest on our debt. If we cannot service or refinance our indebtedness, we may have to take actions such as selling significant assets, seeking additional equity financing (which will result in additional dilution to stockholders) or reducing or delaying capital expenditures, any of which could have a material adverse effect on our operations and financial condition. If we do not have sufficient funds and are otherwise unable to arrange financing, our assets may be foreclosed upon which could have a material adverse effect on our business, financial condition and results of operations.

Although our shares and warrants have been approved for listing on The Nasdaq Capital Market, our shares and warrants may be subject to potential delisting if we do not meet or continue to maintain the listing requirements of The Nasdaq Capital Market, and, pursuant to the recent letter of reprimand, we are subject to a Panel Monitor.

Our shares and warrants have been approved for listing on The Nasdaq Capital Market (“Nasdaq”) ; however, to keep our listing on Nasdaq, we are required to maintain: (i) a minimum bid price of $1.00 per share, (ii) a certain public float, (iii) a certain number of round lot shareholders and (iv) one of the following: a net income from continuing operations (in the latest fiscal year or two of the three last fiscal years) of at least $500,000, a market value of listed securities of at least $35 million or a stockholders’ equity of at least $2.5 million.

On January 4, 2021, we were notified by Nasdaq that it had determined to delist our common stock and warrants from Nasdaq based on our non-compliance with Nasdaq’s (i) $5 million stockholders’ equity requirement for initial listing, (ii) the $2.5 million stockholders’ equity requirement or any of the alternatives for continued listing, and (iii) our failure to provide material information to Nasdaq. We appealed Nasdaq’s determination and submitted such appeal to the Exchange’s Hearings Panel (the “Panel”), which request stayed any suspension or delisting action by Nasdaq at least until the hearing process concludes and any extension granted by the Panel expires. In an oral hearing that took place on February 11, 2021, we presented to the Panel a detailed plan to evidence stockholders’ equity of $5 million and addressed the other matters raised by Nasdaq. On March 9, 2021, Nasdaq notified us that our securities would continue to be listed on Nasdaq; however, a letter of reprimand was issued and a Panel Monitor has been implemented under Listing Rule 5815(d)(4)(A) for the period ending on March 9, 2022.

In the event that the Company becomes deficient with respect to any continued listing requirement, the Company will not be afforded the opportunity to submit a compliance plan for Nasdaq’s consideration and Nasdaq will issue a Delist Determination Letter and promptly schedule a new hearing under Listing Rule 5810(c)(2), at which we may present a compliance plan for the Panel’s consideration. In the event of a new hearing, any suspension or delisting action would be stayed pending the completion of the hearings process and the expiration of any additional extension period granted by the Panel following the hearing.

In the event that during the Panel Monitor period we become deficient with respect to any continued listing requirement, we would need to appeal to the Panel, and if such appeal is ultimately unsuccessful, our common stock and warrants could be delisted from Nasdaq. If our securities are delisted, trading will most likely take place on the OTC Marketplace operated by OTC Markets Group Inc. An investor is likely to find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors may not buy or sell our common stock due to difficulty in accessing over-the-counter markets, or due to policies preventing them from trading in securities not listed on a national exchange or other reasons, and our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not traded on a national securities exchange. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified executives and employees and to raise capital.

We will need additional capital, which may be difficult to raise as a result of our limited operating history or any number of other reasons.

We expect that we will have adequate financing for the next 612 months. However, in the event that we exceed our expected growth, we would need to raise additional capital. There is no assurance that additional equity or debt financing will be available to us when needed, on acceptable terms, or even at all. Our limited operating history makes investor evaluation and an estimation of our future performance substantially more difficult. As a result, investors may be unwilling to invest in us or such investment may be offered on terms or conditions that are not acceptable. In the event that we are not able to secure financing, we may have to scale back our growth plans or cease operations.

We face intense competition. If we do not provide digital content that is useful to users, we may not remain competitive, and our potential revenues and operating results could be adversely affected.

Our business is rapidly evolving and intensely competitive, and is subject to changing technologies, shifting user needs, and frequent introductions of new products and services. Our ability to compete successfully depends heavily on providing digital content that is useful and enjoyable for our users and delivering our content through innovative technologies in the marketplace.

We face competition from others in the digital content creation industry and media companies. Our current and potential competitors range from large and established companies to emerging start-ups. Established companies have longer operating histories and more established relationships with customers and users, and they can use their experience and resources in ways that could affect our competitive position, including by making acquisitions, investing aggressively in research and development, aggressively initiating intellectual property claims (whether or not meritorious) and competing aggressively for advertisers and websites. Emerging start-ups may be able to innovate and provide products and services faster than we can.

Additionally, our operating results would suffer if our digital content is not appropriately timed with market opportunities, or if our digital content is not effectively brought to market. As technology continues to develop, our competitors may be able to offer user experiences that are, or that are seen to be, substantially similar to or better than, ours. This may force us to compete in different ways and expend significant resources in order to remain competitive. If our competitors are more successful than we are in developing compelling content or in attracting and retaining users and advertisers, our revenues and operating results could be adversely affected.

If we fail to retain existing users or add new users, or if our users decrease their level of engagement with our products, our revenue, financial results, and business may be significantly harmed.

The size of our user base and our user’s level of engagement are critical to our success. Our financial performance will be significantly determined by our success in adding, retaining, and engaging active users of our products, particularly Vocal. We anticipate that our active user growth rate will generally decline over time as the size of our active user base increases, and it is possible that the size of our active user base may fluctuate or decline in one or more markets, particularly in markets where we have achieved higher penetration rates. If people do not perceive Vocal to be useful, reliable, and trustworthy, we may not be able to attract or retain users or otherwise maintain or increase the frequency and duration of their engagement. A number of other content management systems and publishing platforms that achieved early popularity have since seen their active user bases or levels of engagement decline, in some cases precipitously. There is no guarantee that we will not experience a similar erosion of our active user base or engagement levels. Our user engagement patterns have changed over time, and user engagement can be difficult to measure, particularly as we introduce new and different products and services. Any number of factors could potentially negatively affect user retention, growth, and engagement, including if:

If we are unable to maintain or increase our user base and user engagement, our revenue and financial results may be adversely affected. Any decrease in user retention, growth, or engagement could render our products less attractive to users, marketers, and developers, which is likely to have a material and adverse impact on our revenue, business, financial condition, and results of operations. If our active user growth rate continues to slow, we will become increasingly dependent on our ability to maintain or increase levels of user engagement and monetization in order to drive revenue growth. 

We face competition from traditional media companies, and we may not be included in the advertising budgets of large advertisers, which could harm our operating results.

In addition to internet companies, we face competition from companies that offer traditional media advertising opportunities. Most large advertisers have set advertising budgets, a very small portion of which is allocated to Internet advertising. We expect that large advertisers will continue to focus most of their advertising efforts on traditional media. If we fail to convince these companies to spend a portion of their advertising budgets with us, or if our existing advertisers reduce the amount they spend on our programs, our operating results would be harmed.

Acquisitions may disrupt growth.

We may pursue strategic acquisitions in the future. Risks in acquisition transactions include difficulties in the integration of acquired businesses into our operations and control environment, difficulties in assimilating and retaining employees and intermediaries, difficulties in retaining the existing clients of the acquired entities, assumed or unforeseen liabilities that arise in connection with the acquired businesses, the failure of counterparties to satisfy any obligations to indemnify us against liabilities arising from the acquired businesses, and unfavorable market conditions that could negatively impact our growth expectations for the acquired businesses. Fully integrating an acquired company or business into our operations may take a significant amount of time. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered with acquisitions and other strategic transactions. These risks may prevent us from realizing the expected benefits from acquisitions and could result in the failure to realize the full economic value of a strategic transaction or the impairment of goodwill and/or intangible assets recognized at the time of an acquisition. These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time.  

Our business depends on strong brands and relationships, and if we are not able to maintain our relationships and enhance our brands, our ability to expand our base of users, advertisers and affiliates will be impaired and our business and operating results could be harmed.

Maintaining and enhancing our brands’ profiles may require us to make substantial investments and these investments may not be successful. If we fail to promote and maintain the brands’ profiles, or if we incur excessive expenses in this effort, our business and operating results could be harmed. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brands’ profiles may become increasingly difficult and expensive. Maintaining and enhancing our brands will depend largely on our ability to be a technology leader and to continue to provide attractive products and services, which we may not do successfully.

We depend on our key management personnel and the loss of their services could adversely affect our business.

We place substantial reliance upon the efforts and abilities of Jeremy Frommer, our Chief Executive Officer, and our other executive officers and directors. Though no individual is indispensable, the loss of the services of these executive officers could have a material adverse effect on our business, operations, revenues or prospects. We do not currently maintain key man life insurance on the lives of these individuals.

We have not adopted various corporate governance measures, and, as a result, stockholders may have limited protections against interested director transactions, conflicts of interest and similar matters.

Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of corporate management and the securities markets. Because our securities are not yet listed on a national securities exchange, we are not required to adopt these corporate governance measures and have not done so voluntarily in order to avoid incurring the additional costs associated with such measures. Among these measures is the establishment of independent committees of the Board of Directors. However, to the extent a public market develops for our securities, such legislation will require us to make changes to our current corporate governance practices. Those changes may be costly and time-consuming. Furthermore, the absence of the governance measures referred to above with respect to our Company may leave our shareholders with more limited protection in connection with interested director transactions, conflicts of interest and similar matters.

If we are unable to protect our intellectual property, the value of our brands and other intangible assets may be diminished, and our business may be adversely affected.

We rely and expect to continue to rely on a combination of confidentiality, assignment, and license agreements with our employees, consultants, and third parties with whom we have relationships, as well as trademark, copyright, patent, trade secret, and domain name protection laws, to protect our proprietary rights. In the United States and internationally, we have filed various applications for protection of certain aspects of our intellectual property, and we currently hold a number of registered trademarks and issued patents in multiple jurisdictions and have acquired patents and patent applications from third parties.  Third parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietary rights held by us, and pending and future trademark and patent applications may not be approved. In addition, effective intellectual property protection may not be available in every country in which we operate or intend to operate our business. In any or all of these cases, we may be required to expend significant time and expense in order to prevent infringement or to enforce our rights. Although we have generally taken measures to protect our proprietary rights, there can be no assurance that others will not offer products or concepts that are substantially similar to ours and compete with our business. In addition, we regularly contribute software source code under open source licenses and have made other technology we developed available under other open licenses, and we include open source software in our products. If the protection of our proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of our brands and other intangible assets may be diminished and competitors may be able to more effectively mimic our products, services, and methods of operations. Any of these events could have an adverse effect on our business and financial results. 

We are subject to payment processing risk.

We accept payments using a variety of different payment methods, including credit and debit cards and direct debit. We rely on third parties to process payments. Acceptance and processing of these payment methods are subject to certain certifications, rules and regulations. To the extent there are disruptions in our or third-party payment processing systems, material changes in the payment ecosystem, failure to recertify and/or changes to rules or regulations concerning payment processing, we could be subject to fines and/or civil liability, or lose our ability to accept credit and debit card payments, which would harm our reputation and adversely impact our results of operations. 

We are subject to risk as it relates to software that we license from third parties.

We license software from third parties, much of which is integral to our systems and our business. The licenses are generally terminable if we breach our obligations under the license agreements. If any of these relationships were terminated or if any of these parties were to cease doing business or cease to support the applications we currently utilize, we may be forced to spend significant time and money to replace the licensed software.

Failures or reduced accessibility of third-party software on which we rely could impair the availability of our platform and applications and adversely affect our business.

We license software from third parties for integration into our Vocal platform, including open source software. These licenses might not continue to be available to us on acceptable terms, or at all. While we are not substantially dependent upon any third-party software, the loss of the right to use all or a significant portion of our third-party software required for the development, maintenance and delivery of our applications could result in delays in the provision of our applications until we develop or identify, obtain and integrate equivalent technology, which could harm our business.

Any errors or defects in the hardware or software we use could result in errors, interruptions, cyber incidents or a failure of our applications. Any significant interruption in the availability of all or a significant portion of such software could have an adverse impact on our business unless and until we can replace the functionality provided by these applications at a similar cost. Furthermore, this software may not be available on commercially reasonable terms, or at all. The loss of the right to use all or a significant portion of this software could limit access to our platform and applications. Additionally, we rely upon third parties’ abilities to enhance their current applications, develop new applications on a timely and cost-effective basis and respond to emerging industry standards and other technological changes. We may be unable to effect changes to such third-party technologies, which may prevent us from rapidly responding to evolving customer requirements. We also may be unable to replace the functionality provided by the third-party software currently offered in conjunction with our applications in the event that such software becomes obsolete or incompatible with future versions of our platform and applications or is otherwise not adequately maintained or updated.

We need to manage growth in operations to maximize our potential growth and achieve our expected revenues and our failure to manage growth will cause a disruption of our operations, resulting in the failure to generate revenue.

In order to maximize potential growth in our current and potential markets, we believe that we must expand our marketing operations. This expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating procedures, and management information systems. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.

In order to achieve the general strategies of our company we need to maintain and search for hard-working employees who have innovative initiatives, while at the same time, keep a close eye on any and all expanding opportunities in our marketplace.

We plan to generate a significant portion of our revenues from advertising and affiliate sales relationships, and a reduction in spending by or loss of advertisers and general decrease in online spending could adversely harm our business.

We plan to generate a substantial portion of our revenues from advertisers. Our advertisers may be able to terminate prospective contracts with us at any time. Advertisers will not continue to do business with us if their investment in advertising with us does not generate sales leads, and ultimately customers, or if we do not deliver their advertisements in an appropriate and effective manner. If we are unable to remain competitive and provide value to our advertisers, they may stop placing ads with us, which would adversely affect our revenues and business. In addition, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. Adverse macroeconomic conditions can also have a material negative impact on the demand for advertising and cause our advertisers to reduce the amounts they spend on advertising, which could adversely affect our revenues and business.

Security breaches could harm our business.

Security breaches have become more prevalent in the technology industry. We believe that we take reasonable steps to protect the security, integrity and confidentiality of the information we collect, use, store and disclose, but there is no guarantee that inadvertent (e.g., software bugs or other technical malfunctions, employee error or malfeasance, or other factors) or unauthorized data access or use will not occur despite our efforts. Although we have not experienced any material security breaches to date, we may in the future experience attempts to disable our systems or to breach the security of our systems. Techniques used to obtain unauthorized access to personal information, confidential information and/or the systems on which such information are stored and/or to sabotage systems change frequently and generally are not recognized until launched against a target. As a result, we may be unable to anticipate these techniques or to implement adequate preventative measures.

If an actual or perceived security breach occurs, the market perception of our security measures could be harmed, and we could lose sales and customers and/or suffer other negative consequences to our business. A security breach could adversely affect the digital content experience and cause the loss or corruption of data, which could harm our business, financial condition and operating results. Any failure to maintain the security of our infrastructure could result in loss of personal information and/or other confidential information, damage to our reputation and customer relationships, early termination of our contracts and other business losses, indemnification of our customers, financial penalties, litigation, regulatory investigations and other significant liabilities. In the event of a major third-party security incident, we may incur losses in excess of their insurance coverage.

Moreover, if a high profilehigh-profile security breach occurs with respect to us or another digital entertainment company, our customers and potential customers may lose trust in the security of our business model generally, which could adversely impact our ability to retain existing customers or attract new ones.

The laws and regulations concerning data privacy and data security are continually evolving; our or our platform providers’ actual or perceived failure to comply with these laws and regulations could harm our business.

Customers view our content online, using third-party platforms and networks and on mobile devices. We collect and store significant amounts of information about our customers—both personally identifying and non-personally identifying information. We are subject to laws from a variety of jurisdictions regarding privacy and the protection of this player information. For example, the European Union (EU) has traditionally taken a broader view than the United States and certain other jurisdictions as to what is considered personal information and has imposed greater obligations under data privacy regulations. The U.S. Children’s Online Privacy Protection Act (COPPA) also regulates the collection, use and disclosure of personal information from children under 13 years of age. While none of our content is directed at children under 13 years of age, if COPPA were to apply to us, failure to comply with COPPA may increase our costs, subject us to expensive and distracting government investigations and could result in substantial fines.

Data privacy protection laws are rapidly changing and likely will continue to do so for the foreseeable future. The U.S. government, including the Federal Trade Commission and the Department of Commerce, is continuing to review the need for greater regulation over the collection of personal information and information about consumer behavior on the Internet and on mobile devices and the EU has proposed reforms to its existing data protection legal framework. Various government and consumer agencies worldwide have also called for new regulation and changes in industry practices. In addition, in some cases, we are dependent upon our platform providers to solicit, collect and provide us with information regarding our players that is necessary for compliance with these various types of regulations.

Customer interaction with our content is subject to our privacy policy and terms of service. If we fail to comply with our posted privacy policy or terms of service or if we fail to comply with existing privacy-related or data protection laws and regulations, it could result in proceedings or litigation against us by governmental authorities or others, which could result in fines or judgments against us, damage our reputation, impact our financial condition and harm our business. If regulators, the media or consumers raise any concerns about our privacy and data protection or consumer protection practices, even if unfounded, this could also result in fines or judgments against us, damage our reputation, and negatively impact our financial condition and damage our business.

In the area of information security and data protection, many jurisdictions have passed laws requiring notification when there is a security breach for personal data or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to implement. Our security measures and standards may not be sufficient to protect personal information and we cannot guarantee that our security measures will prevent security breaches. A security breach that compromises personal information could harm our reputation and result in a loss of confidence in our products and ultimately in a loss of customers, which could adversely affect our business and impact our financial condition. This could also subject us to liability under applicable security breach-related laws and regulations and could result in additional compliance costs, costs related to regulatory inquiries and investigations, and an inability to conduct our business.

Changes to federal, state or international laws or regulations applicable to our company could adversely affect our business.

Our business is subject to a variety of federal, state and international laws and regulations, including those with respect privacy, data, and other laws. These laws and regulations, and the interpretation or application of these laws and regulations, could change. In addition, new laws or regulations affecting our business could be enacted. These laws and regulations are frequently costly to comply with and may divert a significant portion of management’s attention. If we fail to comply with these applicable laws or regulations, we could be subject to significant liabilities which could adversely affect our business. 

If any of our relationships with internet search websites terminate, if such websites’ methodologies are modified or if we are outbid by competitors, traffic to our websites could decline.

We depend in part on various internet search websites, such as Google.com, Bing.com, Yahoo.com and other websites to direct a significant amount of traffic to our websites. Search websites typically provide two types of search results, algorithmic and purchased listings. Algorithmic listings generally are determined and displayed as a result of a set of unpublished formulas designed by search engine companies in their discretion. Purchased listings generally are displayed if particular word searches are performed on a search engine. We rely on both algorithmic and purchased search results, as well as advertising on other internet websites, to direct a substantial share of visitors to our websites and to direct traffic to the advertiser customers we serve. If these internet search websites modify or terminate their relationship with us or we are outbid by our competitors for purchased listings, meaning that our competitors pay a higher price to be listed above us in a list of search results, traffic to our websites could decline. Such a decline in traffic could affect our ability to generate advertising revenue and could reduce the desirability of advertising on our websites.

Our business involves risks of liability claims arising from our media content, which could adversely affect our ability to generate revenue and could increase our operating expenses.

As a distributor of media content, we face potential liability for defamation, invasion of privacy, negligence, copyright or trademark infringement, obscenity, violation of rights of publicity and/or obscenity laws and other claims based on the nature and content of the materials distributed. These types of claims have been brought, sometimes successfully, against broadcasters, publishers, online services and other disseminators of media content. Any imposition of liability that is not covered by insurance or is in excess of our insurance coverage could have a material adverse effect on us. In addition, measures to reduce our exposure to liability in connection with content available through our internet websites could require us to take steps that would substantially limit the attractiveness of our internet websites and/or their availability in certain geographic areas, which could adversely affect our ability to generate revenue and could increase our operating expenses.

Intellectual property litigation could expose us to significant costs and liabilities and thus negatively affect our business, financial condition and results of operations.

We may be subject to claims of infringement of third partythird-party patents and trademarks and other violations of third partythird-party intellectual property rights. Intellectual property disputes are generally time-consuming and expensive to litigate or settle and the outcome of such disputes is uncertain and difficult to predict. The existence of such disputes may require us to set-aside substantial reserves and has the potential to significantly affect our overall financial standing. To the extent that claims against us are successful, they may subject us to substantial liability, and we may have to pay substantial monetary damages, change aspects of our business model, and/or discontinue any of our services or practices that are found to be in violation of another party’s rights. Such outcomes may severely restrict or hinder ongoing business operations and impact the value of our business. Successful claims against us could also result in us having to seek a license to continue our practices. Under such conditions, a license may or may not be offered or otherwise made available to us. If a license is made available to us, the cost of the license may significantly increase our operating burden and expenses, potentially resulting in a negative effect on our business, financial condition and results of operations.

Although we have been and are currently involved in multiple areas of commerce, internet services, and high technology where there is a substantial risk of future patent litigation, we have not obtained insurance for patent infringement losses. If we are unsuccessful at resolving pending and future patent litigation in a reasonable and affordable manner, it could disrupt our business and operations, including by negatively impacting areas of commerce or putting us at a competitive disadvantage.

If we are unable to obtain or maintain key website addresses, our ability to operate and grow our business may be impaired.

Our website addresses, or domain names, are critical to our business. We currently own more than 415 domain names. However, the regulation of domain names is subject to change, and it may be difficult for us to prevent third parties from acquiring domain names that are similar to ours, that infringe our trademarks or that otherwise decrease the value of our brands. If we are unable to obtain or maintain key domain names for the various areas of our business, our ability to operate and grow our business may be impaired.

We may have difficulty scaling and adapting our existing network infrastructure to accommodate increased traffic and technology advances or changing business requirements, which could cause us to incur significant expenses and lead to the loss of users and advertisers.

To be successful, our network infrastructure has to perform well and be reliable. The greater the user traffic and the greater the complexity of our products and services, the more computer power we will need. We could incur substantial costs if we need to modify our websites or our infrastructure to adapt to technological changes. If we do not maintain our network infrastructure successfully, or if we experience inefficiencies and operational failures, the quality of our products and services and our users’ experience could decline. Maintaining an efficient and technologically advanced network infrastructure is particularly critical to our business because of the pictorial nature of the products and services provided on our websites. A decline in quality could damage our reputation and lead us to lose current and potential users and advertisers. Cost increases, loss of traffic or failure to accommodate new technologies or changing business requirements could harm our operating results and financial condition.

Operating a network open to all internet users may result in legal consequences.

Our Terms and Conditions clearly state that our network and services are only to be used by users who are over 13 years old. Although we will terminate accounts that are known to be held by persons age 13 or younger, it is impractical to independently verify that all activity occurring on our network fits into this description. As such, we run the risk of federal and state law enforcement prosecution.

Unfavorable global economic, business, or political conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including conditions that are outside of our control, including the impact of health and safety concerns, such as those relating to the current COVID-19 coronavirus (“COVID-19”) pandemic.

On January 30, 2020 the World Health Organization declared COVID-19 a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates.

Additionally, the global financial crisis in connection with the COVID-19 pandemic has caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our Vocal platform and our ability to raise additional capital when needed on acceptable terms, if at all. Any of the foregoing could harm our business and we cannot anticipate all the ways in which the current economic climate and financial market conditions could adversely impact our business.

Our board of directors recently concluded that we needed to restate previously issued financial statements as a result of a change in accounting for a make-whole provision.

On March 13, 2021, our audit committee concluded, after consultation with management and the Company’s financial consulting firm, that our previously issued unaudited financial statements for the period ended September 30, 2020, included in the Company’s Quarterly Reports of Form 10-Q for the period ended September 30, 2020, should no longer be relied upon as a result of the change in accounting for a make-whole provision. We concluded that a derivative liability of $3,041,688 should have been recorded as of September 30, 2020. The adjustments resulting therefrom, which are non-cash in nature, but has no impact on previously reported cash, total assets, and revenues.

Risks Related To Our Common Stock 

The price of our common stock may be subject to wide fluctuations.

Even though we have our shares quoted onlisted with The Nasdaq Capital Market,, the OTCQB Venture Market, a consistently active trading market for our common stock may not exist. You may not be able to sell your shares quickly or at the current market price if trading in our stock is not active.  You may lose all or a part of your investment.  The market price of our Common Stock may be highly volatile and subject to wide fluctuations in response to a variety of factors and risks, many of which are beyond our control.  In addition to the risks noted elsewhere in this Annual Report on Form 10-K, some of the other factors affecting our stock price may include:

For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on past results as an indication of future performance. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been instituted against the public company.  Regardless of its outcome, this type of litigation could result in substantial costs to us and a likely diversion of our management’s attention.

You may not receivelose all of your investment.

Investing in our common stock involves a positivehigh degree of risk. As an investor, you might never recoup all, or even part of, your investment and you may never realize any return on your investment when you sell your shares and you mayinvestment. You must be prepared to lose the entire amount ofall your investment.

We may, in the future, issue additional shares of common stock, which would reduce investors’ percent of ownership and dilute our share value

Our articlesSecond Amended and Restated Articles of incorporationIncorporation authorize the issuance of 15,000,000100,000,000 shares of common stock, and 20,000,000 shares of preferred stock. Currently the Company has no1,374 shares of preferredPreferred Series E stock outstanding. Additionally, as of March 30, 2020,31, 2021 there are outstanding (i) warrants to purchase 887,9646,272,944 shares of our common; andcommon stock; (ii) options exercisable into 911,5002,010,687 shares of our common stock. stock; and (iii) 333,495 shares underlying the conversion of Preferred Series E shares.

In addition, the Company has convertible notes outstanding that are convertible into 724,751shares of the Company’s common stock. Assuming all of the Company’s currently outstanding warrants and options beare exercised and all convertible notes be converted, the Company would have to issue an additional 2,502,1858,617,126 shares of common stock representing 25.9%79.2% of our current issued and outstanding common stock. As of the date of this filing, none of the Company’s outstanding convertible notes are currently convertible into Common Stock. The future issuance of this common stock would result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any Common Stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and might have an adverse effect on any trading market for our common stock.

Our common shares are subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

SEC Rule 15g-9 establishes the definition of a “penny stock,” in pertinent part, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.

For any transaction involving a penny stock, unless exempt, the rules require:

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person; and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination, and (b) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our Common shares and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Liability of directors for breach of duty is limited under Nevada law.

Nevada law provides that directors must discharge their duties as a director in good faith and with a view to the interests of the corporation. Under Nevada law, directors owe a fiduciary duty to the corporation, which is generally comprised of the duty of care and duty of loyalty to the corporation. Except under limited circumstances set forth in NRS 78.138(7), or unless the articlesour Second Amended and Restated Articles of incorporationIncorporation or an amendment thereto provide for greater individual liability (which ours does not provide), a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that the director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer, and the breach of those duties involved intentional misconduct, fraud or a knowing violation of law. Our stockholders’ ability to recover damages for fiduciary breaches may be reduced by this statute.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future and, as such, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In addition, and any future loan arrangements we enter into may contain, terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Sales of a substantial number of shares of our common stock in the public market by certain of our stockholders could cause our stock price to fall.

Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.

We may issue additional shares of preferred stock in the future that may adversely impact your rights as holders of our common stock.

Pursuant to our articlesSecond Amended and Restated Articles of incorporation,Incorporation, the aggregate number of shares of capital stock which we are authorized to issue is 35,000,000120,000,000 shares, of which 15,000,000100,000,000 shares are common stock, and 20,000,000 shares are “blank check” preferred stock with such designations, rights and preferences as may be determined from time to time by our board of directors. Our board of directors is empowered, without stockholder approval, to issue one or more series of preferred stock with dividend, liquidation, conversion, voting or other rights which could dilute the interest of, or impair the voting power of, our common stockholders. As of the date of this Annual Report on Form 10-K, we do not have any preferred1,374 shares of Preferred Series E stock outstanding.

The issuance of a series of preferred stock could be used as a method of discouraging, delaying or preventing a change in control. For example, it would be possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our Company. In addition, advanced notice is required prior to stockholder proposals, which might further delay a change of control. Additionally, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends are declared to holders of our common stock, and the right to the redemption of such preferred shares, together with a premium, prior to the redemption of the common stock. To the extent that we do issue such additional shares of preferred stock, your rights as holders of common stock could be impaired thereby, including, without limitation, dilution of your ownership interests in us.

Each of our Second Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws provide that the Eighth Judicial District Court of Clark County, Nevada will be the sole and exclusive forum for certain disputes which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers, employees or agents.

Each of our Second Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws provide that unless the Company consents in writing to the selection of an alternative forum, the Eighth Judicial District Court of Clark County, Nevada shall be the sole and exclusive forum for state law claims with respect to: (i) any derivative action or proceeding brought in the name or right of the Company or on its behalf, (ii)  any action asserting a claim for breach of any fiduciary duty owed by any director, officer, employee or agent of the Company to the Company or the Company’s stockholders, (iii) any action arising or asserting a claim arising pursuant to any provision of Nevada Revised Statutes Chapters 78 or 92A or any provision of the Company’s Second Amended and Restated Articles of Incorporation or Amended and Restated Bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine, including, without limitation, any action to interpret, apply, enforce or determine the validity of the Company’s Second Amended and Restated Articles of Incorporation or Amended and Restated Bylaws. This exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.

Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. However, each of our Second Amended Articles of Incorporation and our Amended and Restated Bylaws contain a federal forum provision which provides that unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Company are deemed to have notice of and consented to this provision. As this provision applies to Securities Act claims, there may be uncertainty whether a court would enforce such a provision.

These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or its directors, officers or other employees, which may discourage such lawsuits against the Company and its directors, officers and other employees. Alternatively, if a court were to find our choice of forum provisions contained in either our Second Amended and Restated Articles of Incorporation or Amended and Restated Bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions, which could harm its business, results of operations, and financial condition.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements. These forward-looking statements contain information about our expectations, beliefs or intentions regarding our product development and commercialization efforts, business, financial condition, results of operations, strategies or prospects, and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. These statements may be identified by words such as “expects,” “plans,” “projects,” “will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates,” and other words of similar meaning.

These statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section titled “Risk Factors” and elsewhere in this Annual Report.

Any forward-looking statement in this Annual Report reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our business, results of operations, industry and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Annual Report and the documents that we reference herein and therein and have filed as exhibits hereto and thereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Annual Report also contains or may contain estimates, projections and other information concerning our industry, our business and the markets for our products, including data regarding the estimated size of those markets and their projected growth rates. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

ItemITEM 1B. Unresolved Staff Comments.UNRESOLVED STAFF COMMENTS

Not applicable.None.

ItemITEM 2. Properties.PROPERTIES

The Company currently does not own any properties.  Our corporate headquarters consists of a total of 3,000 square feet and is located at 2050 Center Ave, Suite 640 and Suite 660, Fort Lee, NJ 07024. The current lease term is effective June 5, 2018 through July 5, 2023, with monthly rent of $7,693 for the first year and increases at a rate of 3% for each subsequent year thereafter.

We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate any such expansion of our operations.  

ItemITEM 3. Legal Proceedings.LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. WeExcept as set forth below, we are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

On or about June 25, 2020, Home Revolution, LLC (“Home Revolution”) filed a lawsuit in the United States District Court for the District of New Jersey, Home Revolution, LLC, et al. v. Jerrick Media Holdings, Inc. et al., Case No. 2:20-cv-07775-JMV-MF. The Complaint alleges, among other things, that Creatd, Inc. breached the Membership Interest Purchase Agreement, as modified, and ancillary transaction documents in connection with the acquisition of Seller’s Choice, LLC, from Home Revolution in September 2019. The Complaint additionally alleges violation of the New Jersey Uniform Securities Law, violations of the Exchange Act and Rule 10b-5 thereunder, fraud, equitable accounting, breach of fiduciary duty, conversion and unjust enrichment. After filing the Complaint but prior to our Answer date, Home Revolution moved by order to show cause to have a receiver appointed by the Court to take over Creatd’s operations. 

We submitted an opposition, and after oral arguments on August 13, 2020, the Court denied the receiver request in its entirety. We then filed a Motion to Dismiss on August 14, 2020 on a number of grounds, the most significant of which is that this is a simple (alleged) breach of Promissory Note case. Creatd is current on all payments under the Note, and because both parties are New Jersey entities a mere breach of contract and/or collection-based case is not appropriately venued in federal court.  Upon receipt of our Motion to Dismiss, Home Revolution submitted an Amended Complaint, presumably in an effort to cure the problems with the Complaint which we identified in the Motion to Dismiss.  Home Revolution has subsequently initiated a series of atypical procedures and, as a result, has (without following the Federal Rules of Civil Procedure) moved for both default and to submit yet another newly Amended Complaint (the one precludes the other and vice versa). 

After we submitted a motion to clear up the above, the Court reinstated the matter to the docket and permitted Plaintiff to file the Second Amended Complaint (we had no objection).  We have filed a motion to dismiss the Second Amended Complaint.  That will take some time to be decided.  We expect no major event to occur for the next 12 months. Finally, we believe the lawsuit lacks merit and will vigorously challenge the action.

ItemITEM 4. Mine Safety Disclosures.MINE SAFETY DISCLOSURES

Not applicable.Applicable.

PART II

ItemITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stockCommon Stock is quotedlisted on the OTCQB VentureThe Nasdaq Capital Market under the symbol “JMDA”“CRTD”. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Holders of Common Equity

As of March 30, 2020,31, 2021, there were approximately 278222 registered holders of record of our Common Stock, and approximately 12 holders of record of our Series E Convertible Preferred Stock. Since certain shares of our Common Stock are held by brokers and other institutions on behalf of stockholders, of record. An additionalthe foregoing number of stockholders areholders of our Common Stock is not representative of the number of beneficial holders of our common stock in “street name” through banks, brokers and other financial institutions that are the record holders.  Common Stock.

Dividend InformationDividends

WeTo date, we have not paid any cash dividends toon our holders of common stock. The declaration of any future cash dividends is at the discretion of our board of directorsCommon Stock and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intentiondo not plan to pay any cashsuch dividends in the foreseeable future. Our Board will determine our future but ratherdividend policy on the basis of many factors, including results of operations, capital requirements, and general business conditions. Dividends, under the Nevada Revised Statutes, may only be paid from our net profits or surplus. To date, we have not had a fiscal year with net profits and, subject to reinvest earnings, if any, in our business operations.a valuation by the Board of the present value of the Company’s assets, do not have surplus.

Securities Authorized for Issuance under Equity Compensation Plans

The following table summarizes information about our equity compensation plans as of December 31, 2019.

Unregistered Sales of Equity Securities

The October 2019 Frommer Loan Agreement

On October 7, 2019, the Company entered into a loan agreement (the “October 2019 Frommer Loan Agreement”) with Jeremy Frommer, whereby the Company issued Frommer a promissory note in the principal amount of $10,000 (the “October 2019 Frommer Note”). As additional consideration for entering in the October 2019 Frommer Loan Agreement, the Company issued Frommer a five-year warrant to purchase 150 shares of the Company’s common stock at a purchase price of $6.00 per share.

October 2019 Warrant Issuance

On October 8, 2019, we issued a five-year warrant to an accredited investor to purchase 30,000 shares of the Company’s common stock at a purchase price of $5.00 per share in consideration for converting outstanding promissory notes.

The November 2019 Convertible Note Offering

During the yeartwelve months ended December 31, 2019,2020, we issued securities that were not registered under the Company conductedSecurities Act and were not previously disclosed in a private placement to accredited investors (the “November 2019 Convertible Note Offering”) of unitsCurrent Report on Form 8-K or Quarterly Report on Form 10-Q as listed below. All of the Company’s securities by entering into subscription agreements with accredited investors (the “November 2019 Investors”) for aggregate gross proceeds of $479,500.  

Each unitdiscussed in this Item 2 were issued in reliance on the November 2019 Convertible Note Offering consisted of (a) a 10% Convertible Promissory Note, convertible into sharesexemption under Section 4(a)(2) of the Company’s common stock, at a fixed conversion price equal to $4.50 per share; and a warrant to purchase common stock.Securities Act.

Consultant Shares

During the 3 months ended December 31, 2019,2020 the Company issued 14,89720,762 shares to consultants.

The foregoing offers, sales and issuances were exempt from registration under Section 4(a)(2)Employee Shares

During the 3 months ended December 31, 2020 the Company issued 7,871 shares in lieu of the Securities Act and/or Rule 506 of Regulation D thereunder.compensation to employees.

ItemITEM 6.  Selected Financial Data.SELECTED FINANCIAL DATA

We are not required to provide the information required by this Item we are a “smaller reporting company,” as defined in Rule 229.10(f)(1).Not applicable.

ItemITEM 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our plan of operation and results of operationsanalysis should be read in conjunction with theour consolidated financial statements and related notes to the financial statements includedappearing elsewhere in this Annual Report on Form 10-K. ThisReport. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth in “Part I – Item 1A. Risk Factors.”

This Form 10-K and other reports filed by Creatd, Inc., formerly Jerrick Media Holdings, Inc. (the “Company”), from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events or our future financial performance. These statements involve known and unknownare subject to risks, uncertainties, assumptions, and other factors, that may cause ourincluding the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results levels of activity, performancemay differ significantly from those anticipated, believed, estimated, expected, intended, or achievements to be materially different from anyplanned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements expressed or impliedachievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these forward-looking statements.statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These risksaccounting principles require us to make certain estimates, judgments and other factors include, among others, those listed under “Forward-Looking Statements”assumptions. We believe that the estimates, judgments and “Risk Factors”assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and those includedassumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report. Form 10-K.

We intend for this discussion to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements.

Overview

Jerrick Media Holdings, Inc. (OTCQB: JMDA). providesCreatd is the parent company and creator of Vocal, a robust and proprietary technology solutions for contentplatform that uniquely serves creators, brands, and their respective audiences withby providing long-form storytelling tools, advanced social features, and monetization opportunities. Since launching in December 2016, Vocal has become home to nearly one million content creators, over 20,000 paid subscribers of its flagship digitalVocal+ premium membership program and attracts over 10 million monthly visitors across its network of 36 wholly owned and operated niche communities as well as various social media platform Vocal. channels.

We believe that Jerrick’s agile business frameworkAt December 31, 2020, the Company had cash and Vocal’s designmarketable securities of approximately $8 million, and development process provide a sustainable, capital light operational infrastructure. Our technologyaccounts receivable of $90,000.  The Company’s healthy cash position is builtprincipally due to scale, while the ratenet cash proceeds of growth can be modulated up or down based on available capital and$7.0 million secured at year end 2020 from the relative tightnesssuccessful completion of the capital markets. Company’s Series E Convertible Preferred private placement.

2020 was a positioning year for the Company. Expenses during Fiscal Year 2020 encompassed numerous charges related to financing activities which are described as non-recurring. Though it is the case that the Company may require additional financing in 2021, the financings that occurred this year positioned the Company for ease and relative affordability of future financings.

Vocal is a user-generated long-form digital publishing platform. The platform primarily focuses on providing storytelling tools, monetization features and engaged communities for content creators to get discovered and fund their creativity.Restatement of Previously Issued Interim Financial Statements

There are over 4.5 billion internet users;On March 13, 2021, our audit committee concluded, after consultation with management and the Company’s financial consulting firm, that our previously issued unaudited financial statements for the period ended September 30, 2020, included in the Company’s Quarterly Reports of that, 83% publish some form of content onForm 10-Q for the period ended September 30, 2020, should no longer be relied upon as a monthly basis (photos, writing, reviews), and 3.8 billion of them are active on social media (according to data by GlobalWebIndex and Reddit). In 2020, the internet has become the linchpinresult of the modern information society,change in accounting for a make-whole provision. We concluded that a derivative liability of $3,041,688 should have been recorded as well as the modern social society. We believe digital platforms, such as Vocal, exist to help the world find orderof September 30, 2020. The adjustments resulting therefrom, which are non-cash in this vast ocean of opportunity.

A global crisis, like the 2020 COVID-19 pandemic, only further emphasizes how critical a role digital platforms play in society, as government bodies are encouraging social distancingnature, but has no impact on previously reported cash, total assets, and restricting travel, and employers are widely implementing work-from-home policies. These factors aside, Vocal exists in an environment where the total addressable market (TAM) of the platform was growing exponentially, and in the current environment, may see even more rapid growth.

The Vocal platform is home to content creators and brands of all shapes and sizes, and attracts audiences across a network of the Company’s 100% owned-and-operated communities. The platform’s unique canvas-style editor supports content creation utilizing a wide range of rich-media assets includingstreaming content, photos, videos, podcasts, product links, written word, and more. Vocal makes it easy for creators to produce well-constructed, search engine optimized, and engaging content. Additionally, creators can upgrade to Vocal+, and pay a premium subscription fee to access a suite of additional features such as an increased rate of CPM monetization, brand collaborations, rewards, and early access to new features. 

Given Vocal’s built-in monetization capabilities, topic-specific structure, and adaptability to a wide range of uses and industries, we believe that it is the ideal platform to help users adapt to evolving social, professional, and societal realities of a new digital world. Moderation and compliance are more important in a world where ambiguity can systematically damage value. Vocal’s enforcement of community guidelines and content moderation creates a secure environment for users. Vocal provides its stakeholders a trustworthy environment that people look for, especially in periods of uncertainty.

In 2018, the Company launched its in-house creative studio, Vocal for Brands.Vocal for Brandspartners brands with authentic, like-minded Vocal creators to produce campaign-optimized branded experiences on the Vocal platform that build affinity, trust, and drive results. Additionally, in 2018, Jerrick converted $13,896,233 in debt and preferred holdings into common stock, eliminating a significant majority of debt from the Company’s balance sheet.

In the third quarter of 2019, Jerrick implemented a $9.99 monthly renewal option for Vocal+ subscribers, in addition to the $99 annual renewal option introduced in May 2019. Additionally, following Jerrick’s acquisition of e-commerce agency Seller’s Choice, LLC (“Seller’s Choice”) in September 2019, the Company successfully integrated Seller’s Choice into its sales team and operations. The acquisition enabled Vocal for Brands to further expand its client base in the direct-to-consumer (DTC) space, while providing an opportunity for the Seller’s Choice team to leverage Vocal for Brand’s unique brand storytelling capabilities as a way to further support its e-commerce clientele. The Vocal platform’s unique underlying architecture generates scalable and sustainable revenues, while at the same time providing an infrastructure for future acquisitions, as it did in regard to the Seller’s Choice acquisition. 

Jerrick’s resources and Vocal’s technology were designed to amplify creator subscriptions as well as convert on direct to consumer brand opportunities. Today’s consumer behavior and online environment is ideal for brand marketing and product awareness, and creators are looking for further monetization opportunities. Both brands and creators, as well as their respective audiences, will continue to grow on Jerrick’s safe and secure platform, Vocal.

revenues.

Results of Operations

Liquidity and Capital Resources

The following table summarizes total current assets, liabilities and working capital (deficit) at December 31, 20192020 compared to December 31, 2018:

2019:

At December 31, 2019,2020, we had a working capital deficit of $10,745,004$3,115,299 as compared to a working capital deficit of $2,563,084$(10,850,767) at December 31, 2018,2019, an increase in working capital of $8,181,920.$13,966,066. The increase is primarily attributable to an increase in cash as a result of the completion of the September 2020 $7.7 million Equity Raise, the Sale of $7.8 million of Series E Convertible Preferred Stock in December of 2020, an increase in marketable securities of $62,733, and promissory note increase of $561,539. This was offset by a decrease in demand loans, convertible notes, payableand related party convertible notes payable, and the current portion of operating lease payable.debentures totaling $7,373,638. 

Net Cash

Net cash used in operating activities for the yearsyear ended December 31, 2020 and 2019, was $7,340,487 and 2018, was $5,957,027, and $4,972,814, respectively. The net loss for the yearsyear ended December 31, 2020 and 2019 was $24,162,783 and 2018 was $8,035,372, and $12,013,542, respectively. This change is primarily attributable to the net loss for the current period offset by share-based payments in the amount of $437,106$6,861,163 to employees and consultants for services rendered, the accretion of debt discount and debt issuance costs of $348,665$4,303,072 due to the incentives given with debentures, and a gainloss on extinguishment of debt of $162,860$5,586,012 in addition to a change in accounts payable and accrued expenses of $985,715.$2,880,392. These increases were offset by a change in fair value of derivative liabilities and a change in fair value of derivative liabilities and a change in accounts receivable and unrecognized tax benefit during the year ended December 31, 2019.2020.

Net cash used in investing activities for the yearsyear ended December 31, 2020 and 2019 was $547,212 and 2018 was $363,288, and $27,605, respectively. This change is attributable to the cash paid forused to purchase marketable securities, property and equipment, and the cash considerationdeposits for the acquisition.investments.

Net cash provided by financing activities for the yearsyear ended December 31, 2020 and 2019 was $15,814,083 and 2018 was $6,337,947 and $4,889,368.$6,337,947. During the year ended December 31, 2019 period, the Company was predominantly financed by net proceeds from the issuance of preferred series E, common stock, debt and related party notes of $649,829, $2,722,525$6,670,417, $6,662,015 and $4,186,500,$5,152,496, respectively to fund operations. These increases were offset by repayment of notes and related party notes of $50,000$2,150,666 and $501,500,$983,752, respectively.

Summary of Statements of Operations for the YearsYear Ended December 31, 20192020 and 2018:2019:

Net Revenue

Net Revenue was $453,006$1,212,870 for the year ended December 31, 2019,2020, as compared to $80,898$453,006 for the comparable year ended December 31, 2018,2019, an increase of $372,108.$759,864. The increase in net revenue is primarily attributable to the launch and steady growth of Vocal+ paid subscribers, the rising price points for Vocal for Brands campaigns, and the integration of Seller’s Choice into JerrickCreatd following the Company’s successful acquisition of Seller’s Choice in late third quarter. Over $400,000quarter 2019.  During 2020, management completed its corporate positioning to support its goal of reaching profitable revenue growth by securing funds necessary to eliminate its debt, attracting a marquee board and executive management talent, engaging a strategic senior marketing and sales effort, and uplisting to Nasdaq.

Creatd’s 2020 Creator Subscription revenues are reported net of the $453,006amounts paid to subscribers as cash prizes for winning Vocal Challenges and earnings through reads.  As Vocal+ was generatedcommercially launched early 2020, with Vocal Challenges following soon after, both progressively grew during the year. As Creatd Challenges increased in frequency, in conjunction with an increase in readership, payments to Vocal+ subscribers totaled $213,182 in 2020. Gross revenues (including payments to Vocal+ subscribers) were $1,426,052.

Going forward, with the second halfcontinued release of advancements and new offerings to its Vocal technology platform and the year with approximately $300,000 generated inresulting growth of vocal subscribers, unique monthly visitors and brand relationships, management anticipates reporting accelerated revenue growth for the fourth quarter alone.foreseeable future.

Operating Expenses

Operating expenses for the year ended December 31, 20192020 were $7,669,984$17,496,205 as compared to $5,767,153$7,669,984 for the year ended December 31, 2018.2019. The increase of $1,902,831$9,826,221 in operating expenses is the result of an increase in general and administrative expenses and consulting fees. The increase to these expenses is mainly related to non-recurring expenses totaling approximately $1,320,000 attributed to the acquisitionNasdaq up-listing and financing activities during the year, which included two offerings. In addition, the Company incurred $1,100,000 of Seller’s Choice and the implementationnon-cash charges related to employee option exchange for stock during second quarter, $4,100,000 in stock options granted for previously performed services to 13 members of the management team during the third quarter, and in fourth quarter $107,000 was expensed due to reimbursements from Covid-related pay cuts enacted for several weeks during 2020. The remainder of the increase in expenses is attributed to an increase in marketing totaling roughly $2,000,000, and a significant increase in personnel to 42 full time and 12 part-time, including the addition of a Chief Operating Officer and additions to the sales team with senior-level experience and long-standing brand relationships. Going forward, the Company expects operating expenses to materially decrease, potentially offset by a measured increase in support staff and consultants focused on revenue growth.  During 2020, the Company’s future business plans.average monthly cash burn was approximately $658,000, slightly elevated from last year as the Company accommodated its growth strategy.

Loss from Operations

LossThe Company incurred a loss from operations for the year ended December 31, 2019 was $7,216,9782020 of $16,283,335 as compared to $5,686,255$7,216,978 for the year ended December 31, 2018.2019. The increase in the loss from operations is primarily due to increased expenses duenon-cash stock-based payments to consultants and employees, one-time charges related to the continued developmentNasdaq up-listing, increase in personnel and the launch of the Vocal platform and the acquisition of Seller’s Choice and the implementation of the Company’s future business plans.company’s first significant marketing campaign.

Other Expenses

Other expenses for the year ended December 31, 2019 was $818,3942020 totaled $7,929,448 as compared to $6,327,287$818,394 for the year ended December 31, 2018.2019. Other expenses during the year ended December 31, 2020 was comprised of interest expense of $1,376,902 on notes and related party notes as well as a non-cash change in derivative liability of 3,019,457. Additionally, other expenses included the non-cash, non-recurring accretion of debt discount and issuance cost of $(4,303,072) due to the incentives given with debentures and loss on extinguishment of liabilities of $(5,586,012) for incentives given to convert debt. During the year ended December 31, 2019, wasother expenses were comprised of interest expense of $612,830 on notes and related party notes and accretion of debt discount and issuance cost of $348,665 due to the incentives given with debentures, a loss on extinguishment of debt of $162,860. These expenses were offset by other income from an Australian tax credit for research and development of $292,387. During the year ended December 31, 2018, other expenses were comprised of interest expense of $923,008 on notes and related party notes and accretion of debt discount and issuance cost of $2,090,286 due to the incentives given with debentures, loss on extinguishment of liabilities of $3,453,137$162,860 for the incentives given to amend or convert debt.

Net Loss

Net loss attributable to common shareholdershareholders for the year ended December 31, 2019,2020, was $27,348,485, or loss per share of $5.68, which included a non-cash deemed dividend charge of $3,135,702 related to fair value assigned to the series E preferred and warrants granted in financings during the year.  This compares to a net loss of $8,035,372, or loss per share of $0.98, as compared to a net loss of $14,204,408, or loss per share of $4.16,$2.93, for the year ended December 31, 2018.2019.

Inflation did not have a material impact on the Company’s operations for the applicable period. Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company’s results of operations.

Off-Balance Sheet Arrangements 

As of December 31, 2019,2020, we had no off-balance sheet arrangements. 

Critical Accounting Policies

We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

The preparation of consolidated financial statements in conformity with U.S. GAAPaccounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, valuation of equity issuances and disclosuredisclosures of contingent assets and liabilities at the datesdate of the consolidated financial statements and the reported amounts of revenuesrevenue and expenses during the reporting periods.

Criticalperiod. The Company uses estimates in accounting estimates are estimates for, which (a) the natureamong other items, revenue recognition, allowance for doubtful accounts, stock-based compensation, income tax provisions, excess and obsolete inventory reserve and impairment of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

intellectual property. Actual results could differ from those estimates.

Principles of consolidation

The Company consolidates all majority-owned subsidiaries, if any, in which the parent’s power to control exists.

As of December 31, 2019, the Company’s consolidated subsidiaries and/or entities are as follows:

All inter-company balances and transactions have been eliminated.

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP and expandsmeasurement disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair valueare grouped into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:based on valuation factors:

Financial

The Company’s Level 1 assets/liabilities include cash, accounts receivable, marketable trading securities, accounts payable, prepaid and other current assets, are considered Level 3 whenline of credit and due to related parties. Management believes the estimated fair value of these accounts at December 31, 2020 approximate their fair values are determined using pricing models, discounted cash flow methodologiescarrying value as reflected in the balance sheets due to the short-term nature of these instruments or similar techniques and at least one significant model assumption or input is unobservable.the use of market interest rates for debt instruments.

The Company’s Level 2 assets/liabilities include certain of the Company’s notes payable and capital lease obligations. Their carrying value approximates their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of similar debt currently available to the Company in the marketplace.

The Company’s Level 3 assets/liabilities include goodwill, intangible assets, marketable debt securities, equity investments at cost, and derivative liabilities, when they are recorded at fair value hierarchy givesdue to an impairment charge. Inputs to determine fair value are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the highest priority to quoted prices (unadjusted) in active markets for identical assetsasset or liabilitiesliability. The fair values are therefore determined using model-based techniques, including option pricing models and the lowest priority to unobservable inputs. If thediscounted cash flow models. Unobservable inputs used to measurein the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that ismodels are significant to the fair value measurementvalues of the instrument. 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued liabilities and accrued liquidating damages approximate their fair value because of the short maturity of those instruments. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.liabilities.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.

Property and Equipment

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:

Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations.

Leases

In February 2016, the FASB issued ASU 2016-02 “Leases” (Topic 842) which amended guidance for lease arrangements to increase transparency and comparability by providing additional information to users of financial statements regarding an entity’s leasing activities. Subsequent to the issuance of Topic 842, the FASB clarified the guidance through several ASUs; hereinafter the collection of lease guidance is referred to as ASC 842. The revised guidance seeks to achieve this objective by requiring reporting entities to recognize lease assets and lease liabilities on the balance sheet for substantially all lease arrangements.

On January 1, 2019, the Company adopted ASC 842 using the modified retrospective approach and recognized a right of use (“ROU”) asset and liability in the condensed consolidated balance sheet in the amount of $ 289,167 related to the operating lease for office and warehouse space. Results for the year ended December 31, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with the legacy accounting guidance under ASC Topic 840, Leases.

As part of the adoption the Company elected the practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to:

Long-lived Assets Including Goodwill and Other Acquired Intangibles Assets

We evaluate the recoverability of property and equipment and acquired finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any significant impairment charges during the years presented.

We review goodwill for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value of our single reporting unit below its carrying value. As ofyear ended December 31, 2019, no impairment of goodwill has been identified.2020.

Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. We routinely review the remaining estimated useful lives of property and equipment and finite-lived intangible assets. If we change the estimated useful life assumption for any asset, the remaining unamortized balance is amortized or depreciated over the revised estimated useful life.

During the year ended December 31, 2020 the Company completed its annual impairment test of goodwill. The Company performed the qualitative assessment as permitted by ASC 350-20 and determined that the fair value of the reporting unit was more likely than not equal or greater than the carrying value, including Goodwill. Based on completion of this annual impairment test, no impairment was indicated.

Commitments and ContingenciesInvestments

The Company accounts for its investments in available-for-sale debt securities, in accordance with sub-topic 320-10 of the FASB ASC (“Sub-Topic 320-10”). Accrued interest on these securities is included in fair value and amortized cost.

Pursuant to Paragraph 320-10-35, investments in debt securities that are classified as available for sale shall be measured subsequently at fair value in the statement of financial position. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized.

The Company follows subtopic 450-20FASB ASC 320-10-35 to assess whether an investment in debt securities is impaired in each reporting period. An investment in debt securities is impaired if the fair value of the investment is less than its amortized cost. If the Company intends to sell the debt security (that is, it has decided to sell the security), an other-than-temporary impairment shall be considered to have occurred. If the Company more likely than not will be required to sell the security before recovery of its amortized cost basis or it otherwise does not expect to recover the entire amortized cost basis of the security, an other-than-temporary impairment shall be considered to have occurred. The Company considers the expected cash flows from the investment based on reasonable and supportable forecasts as well as several other factors to estimate whether a credit loss exists. If the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date.

Derivative Liability

The Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair value is reclassified to equity.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

The Company adopted Section 815-40-15 of the FASB Accounting Standards Codification (“Section 815-40-15”) to reportdetermine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.  The Company changed its method of accounting for contingencies. Certain conditions may exist asthe debt and warrants through the early adoption of ASU 2017-11 during the three months ended December 31, 2017 on a retrospective basis.

The Company utilizes an option pricing model to compute the fair value of the datederivative and to mark to market the fair value of the derivative at each balance sheet date. The Company records the change in the fair value of the derivative as other income or expense in the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. operations.

Revenue Recognition

On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605), using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported in accordance with our historic accounting under Topic 605. The impact of adopting the new revenue standard was not material to our consolidated financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.

Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We determine revenue recognition through the following steps:

For more information see Note 2 within the consolidated financial statements.

Revenue disaggregated by revenue source for the years ended December 31, 2019 and 2018 consists of the following

Branded Content

Revenues from branded content in 2019 increased 78% as compared to the previous year. Onboarding of additional brand clients as well as greater pricing strength contributed to a large part of the gain. The increased pricing strength was attributable to improved features and data analytics. Clients are increasing their spend on Vocal for Brands campaigns with the company’s improved marketing strategies. The continued development of Vocal’s technology translates into a higher value proposition for brands. Revenue recognized from these tactical improvements occurred in the fourth quarter and have created a foundation for scale, future platform improvements, and continued pricing strength. 

Branded content revenue is recognized when the Company fulfills its obligation to create and publish branded articles for clients on the Vocal platform, promote said stories, and meet any required promotional milestones as per the contract with the client. The revenue is recognized over time as the services are performed, with any payments received in advance being deferred until they are earned.

Below are the significant components of a typical agreement pertaining to branded content revenue:  

Creator Subscriptions

Vocal+ is a premium subscription offering. The Company initially offered the subscription to a Founding Member beta group starting in May 2019, utilizing our first-party data from the 450,000+ ‘Vocal Free’ creators we had onboarded onto Vocal up until that point. During the beta period, we analyzed the behaviors and data of the Vocal+ Founding Members, refining the product and ultimately releasing it to the public in September 2019 alongside the Vocal 2.0 re-platform.

Vocal+ subscribers receive access to value-added features such as increased rate of CPM cost per mille (thousand) (“CPM”) monetization, a decreased minimum withdrawal threshold, a discount on platform processing fees, member badges for their profiles, participation in exclusive Challenges with monetary rewards, and early access to new Vocal features.

Subscription revenues stem from both monthly and annual subscriptions, which cost $9.99 per month and $99 per year, respectively, the latter of which is amortized over a twelve-month period. Any customer payments received are recognized over the subscription period, with any payments received in advance being deferred until they are earned.

The continued development of Vocal’s technology and targeting efficiencies translates into a decreasing cost of acquisition per creator, a scalable onboarding process, and an increasing rate of subscription signups. 

Managed Services

Managed Services are provided by Seller’s Choice, and encompass a suite of digital marketing solutions for e-commerce brands. Services offered include listing and storefront optimization on e-commerce platforms like Amazon and Shopify, the setup and ongoing management of clients’ websites, search engine optimization, digital advertising, and other various tactics for sales growth and customer retention. Additionally, Seller’s Choice draws upon Vocal for Brand’s storytelling capabilities to provide Seller’s Choice additional value and maximize their success. The average Seller’s Choice client generates revenues of between $3,500-$5,000 per month. 

Affiliate Sales

Affiliate sales represent the commission the Company receives when a purchase is made through affiliate links placed within content hosted on the Vocal platform. Affiliate revenue is earned on a “click through” basis, upon referring visitors, via said links, to an affiliate’s site and having them complete a specific outcome, most commonly a product purchase.

The Company maintains multiple affiliate relationships, with platforms such as Skimlinks, Amazon, and Tune, to form and maintain thousands of vendor relationships. Each vendor establishes their own commission percentage payout, which typically range from 5-15%. The revenue is recognized upon receipt of commission fees.

Deferred Revenue

Deferred revenue consists of billings and payments from clients in advance of revenue recognition. As of December 31, 20192020 and 2018,2019, the Company had deferred revenue of $88,637 and $50,691, and $9,005, respectively.

Accounts Receivable and Allowances

Accounts receivable are recorded and carried when the Company uploads the articles and reaches the required number of views on the platform. We make estimates for the allowance for doubtful accounts and allowance for unbilled receivables based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, and other factors that may affect our ability to collect from customers. During the year ended December 31, 2019 the Company recorded $33,503 as reserve doubtful accounts. As of December 31, 2019 and 2018 the Company has an allowance for doubtful accounts of $33,503 and $0 respectively.     

Stock-Based Compensation

The Company recognizes compensation expense for all equity–based payments granted in accordance with ASCAccounting Standards Codification (“ASC”) 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.

Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a five-year period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of Company stock on the grant date.

The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is benchmarked against similar companies in a similar industry over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future. The expected forfeiture rate is estimated based on management’s best estimate.

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. In addition,The Company issues awards of equity instruments, such as stock options and restricted stock units, to employees and certain non-employee directors. Compensation expense related to these awards is based on the Companyfair value of the underlying stock on the award date and is requiredamortized over the service period, defined as the vesting period, using the straight-line method. The vesting period is generally five years. A Black-Scholes model is utilized to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. Iffair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock units. Compensation expense is reduced for actual forfeiture rate is materially different from its estimate, the equity–based compensation could be significantly different from what the Company has recorded in the current period.forfeitures as they occur.  

Loss Per Share

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the years ended December 31, 2019 and 2018 presented in these consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

The Company had the following common stock equivalents at December 31, 2019 and 2018:

Reclassifications

Certain prior year amounts in the consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current year presentation. These reclassifications did not affect the prior period total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities.

Recently Adopted Accounting Guidance

In February 2016,The Company invests in equity and debt securities. The Company’s investments in debt securities are classified at the FASB issued ASU 2016-02, “Leases (Topic 842).” Under ASU 2016-02, lessees will, among other things, require lessees to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis;date of purchase as available-for-sale securities. Debt securities are reported at fair value with unrealized gains and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model and ASC Topic 606, “Revenue from Contracts with Customers.” ASU 2016-02 became effective for us on January 1, 2019 and initially required transition using a modified retrospective approach for leases existing at, or entered into after, the beginninglosses, net of the earliest comparative period presented inrelated tax effect, reflected as an accumulated other comprehensive income component of stockholder’s equity until such gains or losses are realized. In accordance with Accounting Standards Update (“ASU”) 2016-01, Equity securities are now reported at fair value with unrealized gains and losses, net of the financial statements. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) - Targeted Improvements,” which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognizerelated tax effect, reflected as a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In December 2018, the FASB also issued ASU 2018-20, “Leases (Topic 842) - Narrow-Scope Improvements for Lessors,” which provides for certain policy elections and changes lessor accounting for sales and similar taxes and certain lessor costs. As of January 1, 2019, the Company adopted ASU 2016-02 and has recorded a right-of-use asset and lease liabilitygain or loss on the balance sheet for its operating leases. We elected to apply certain practical expedients provided under ASU 2016-02 whereby we will not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. We also do not expect to apply the recognition requirementsstatement of ASU 2016-02 to any short-term leases (as defined by related accounting guidance). We expect to account for lease and non-lease components separately because such amounts are readily determinable under our lease contracts and because we expect this election will result in a lower impact on our balance sheet.

Recent Accounting Guidance Not Yet Adoptedoperations.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluatingadoption of ASU 2016-16 did not have a material impact on the impactCompany’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the new standard.current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). The updated guidance, which became effective for fiscal years beginning after December 15, 2019, did not have a material impact on the Company’s consolidated financial statements. 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements for fair value measurements. The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements.  

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This guidance requires companies to apply the internal-use software guidance in ASC 350-40 to implementation costs incurred in a hosting arrangement that is a service contract to determine whether to capitalize certain implementation costs or expense them as incurred. The adoption of ASU 2018-15 did not have a material impact on the Company’s consolidated financial statements.

In November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): The mandatory effective dates for Credit Losses in this Update (ASU 2019-10) are as follows: 1. Public business entities that meet the definition of an SEC filer, excluding entities eligible to be SRCs as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those 2. All other entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of ASU 2019-10 had a material impact on the Company’s Consolidated Financial Statements because it deferred the adoption of ASU 2016-13.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements.

ItemITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are not required to provide the information required by this Item we are a “smaller reporting company,” as defined in Rule 229.10(f)(1).Not applicable.

ItemITEM 8. Financial Statements.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Jerrick Media Holdings,Creatd, Inc.

 Financial Statements as of December 31, 20192020 and 20182019

IndexNotes to the Consolidated Financial Statements

	www.rrbb.com
ROSENBERG RICH BAKER BERMAN & COMPANY
265 Davidson Avenue, Suite 210 ● Somerset, NJ 08873-4120 ● PHONE 908-231-1000 ● FAX 908-231-6894
111 Dunnell Road, Suite 100 ● Maplewood, NJ 07040 ● PHONE 973-763-6363 ● FAX 973-763-4430

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Jerrick Media Holdings,Creatd, Inc. and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Jerrick Media Holdings,Creatd, Inc. and Subsidiaries (the Company) as of December 31, 20192020 and 2018,2019, and the related statements of comprehensive income (loss), changes inloss, stockholders' equity (deficit), and cash flows for each of the years in the two-year periodthen ended, December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20192020 and 2018,2019, and the results of its operations and its cash flows for each of the years in the two-year periodthen ended, December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had an accumulated deficit at December 3 1, 2019, and a net loss and net cash used in operating activities for the year then ended. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in this regard are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this unceflainty

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

WeEmphasis of Matter

The accompanying financial statements have servedbeen prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had a significant accumulated deficit, and has incurred significant net losses and negative operating cash flows. These factors raise substantial doubt about the Company's ability to continue as a going concern for a period of one year from the issuance of the financial statements. Management's evaluation of the events and conditions and management's plans regarding those matters also are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.

AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS ● CENTER FOR AUDIT QUALITY ● PRIVATE COMPANIES PRACTICE SECTION ● PRIME GLOBAL ● REGISTERED WITH THE PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

ROSENBERG RICH BAKER BERMAN & COMPANY

To the Board of Directors and

Stockholders of Creatd, Inc. and Subsidiaries

Page 2

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

As described in Note 2 to the consolidated financial statements, the Company recognizes revenue in accordance with FASB Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606"). ASC 606 requires the Company to apply the following steps: (1) identify the contract with the customers; (2) identify performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the Company'sCompany satisfies the performance obligations.

For subscription revenue recognized by the Company, the transaction price is reduced for consideration payable to customers. Because such consideration is paid to both customers and "freemium" subscribers, it requires significant estimates as to the allocation and timing of these reductions in the transaction price. These estimates required auditor since 2018.judgment and consideration of some subjective factors in evaluating the estimates.

Somerset, New Jersey

March 30, 2020How the Critical Matter Was Addressed in the Audit

The primary audit procedures we performed to address this critical audit matter included:

Fair Value of Private Company Investments

As described in Note 2 to the consolidated financial statements, the Company has made certain investments in private companies during 2020. For investments in equity securities that do not to have a readily determinable market value, the Company made the election to measure these securities at amortized cost in accordance with ASC 321-10-35 par.2. The Company performed a qualitative assessment to determine whether these investments could be impaired due to any decline in fair value below cost. For investments in available-for-sale debt securities, the Company measures these instruments at fair value and assesses whether a credit loss exists for any of these securities based on the guidance at ASC 320-10, Investments - Debt and Equity Securities.

ROSENBERG RICH BAKER BERMAN & COMPANY

To the Board of Directors and

Stockholders of Creatd, Inc. and Subsidiaries

Page 3

The determination of fair value for these securities requires significant judgment and subjective evaluation of qualitative factors. In addition, the Company utilized a third-party valuation firm to assist in this determination, and the valuation process involves significant assumptions and estimates.

How the Critical Matter Was Addressed in the Audit

The primary audit procedures we performed to address this critical audit matter included:

Equity securities:

Available-for-sale debt securities:

Rosenberg Rich Baker Berman, P.A.
We have served as the Company's auditor since 2018.
Somerset, New Jersey
March 30, 2021

Jerrick Media Holdings,Creatd, Inc.

Consolidated Balance Sheets

The accompanying notes are an integral part of these consolidated financial statements.

Jerrick Media Holdings,Creatd, Inc.

Consolidated Statements of Comprehensive Income (Loss)Loss

The accompanying notes are an integral part of these consolidated financial statements.

Jerrick Media Holdings,Creatd, Inc.

Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

For the Yearsyear Ended December 31, 20192020 and 20182019