UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 20202021
ORor
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 000-51872001-39500
JERRICK MEDIA HOLDINGS, INC.Creatd, Inc.
(Exact name of registrant as specified in its charter)
| Nevada | 87-0645394 | |
| (State or other jurisdiction of incorporation) | ( Identification No.) |
2050 Center Avenue Suite 640
Fort Lee, New Jersey 07024
(Address of principal executive offices)
(201) 258-3770
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:None.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, par value $0.001 | CRTD | The Nasdaq Stock Market LLC | ||
| Common Stock Purchase Warrants | CRTDW | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by sectionSection 13 or 15(d) of the Securities Exchange Act of 1934 during the pastpreceding 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, or a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of a “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act:Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | ||
| Emerging growth company | ☐ |
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 registrantRegistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of August 13, 2020, there were 9,959,8122021, the registrant had 13,848,057 shares outstanding of the registrant’sits common stock.stock, par value $0.001 per share, outstanding.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021
TABLE OF CONTENTS
- i -
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND
OTHER INFORMATION CONTAINED IN THIS REPORT
This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may” or other similar expressions in this Form 10-Q. In particular, these include statements relating to future actions; prospective products, applications, customers and technologies; future performance or results of anticipated products; anticipated expenses; and projected financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
| ● | our ability to continue as a going concern; |
| ● | our operating expenses exceed our revenues and will likely continue to do so for the foreseeable future; |
| ● | our ability to obtain additional capital, which may be difficult to raise as a result of our limited operating history or any number of other reasons; |
| ● | our ability to provide digital content that is useful to users; |
| ● | our ability to retain existing users or add new users; |
| ● | competition from traditional media companies; |
| ● | general economic conditions and events and the impact they may have on us and our users; and |
| ● | other factors discussed in this Form 10-Q. |
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into.
You should read this Form 10-Q and the documents that we have filed as exhibits to this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Unless otherwise stated or the context otherwise requires, the terms “Creatd,” “we,” “us,” “our” and the “Company” refer collectively to Creatd, Inc. and its subsidiaries.
ii
PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial StatementsStatements.
Jerrick Media Holdings,Creatd, Inc.
June 30, 20202021
Index to the Condensed Consolidated Financial Statements
- 1 -
Jerrick Media Holdings, Inc.
Creatd, Inc. Condensed Consolidated Balance Sheets
| June 30, 2020 | December 31, 2019 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 44,628 | $ | 11,637 | ||||
| Prepaid expenses | - | 4,127 | ||||||
| Accounts receivable, net | 76,462 | 50,849 | ||||||
| Note receivable – related party | 11,450 | 11,450 | ||||||
| Marketable securities | 176,325 | - | ||||||
| Total Current Assets | 308,865 | 78,063 | ||||||
| Property and equipment, net | 34,741 | 42,363 | ||||||
| Intangible assets | 1,024,299 | 1,087,278 | ||||||
| Goodwill | 1,035,795 | 1,035,795 | ||||||
| Deposits and other assets | 48,973 | 16,836 | ||||||
| Operating lease right of use asset | 276,742 | 311,711 | ||||||
| Total Assets | $ | 2,729,415 | $ | 2,572,046 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 2,851,017 | $ | 1,763,222 | ||||
| Demand loan | 325,000 | 225,000 | ||||||
| Convertible Notes - related party, net of debt discount | 20,000 | 20,387 | ||||||
| Convertible Notes, net of debt discount and issuance costs | 5,151,540 | 2,896,425 | ||||||
| Current portion of operating lease payable | 76,833 | 105,763 | ||||||
| Note payable - related party, net of debt discount | 4,990,979 | 5,129,342 | ||||||
| Note payable, net of debt discount and issuance costs | 1,314,634 | 660,000 | ||||||
| Unrecognized tax benefit | 68,000 | 68,000 | ||||||
| Deferred revenue | 55,959 | 50,691 | ||||||
| Warrant liability | - | 10,000 | ||||||
| Total Current Liabilities | 14,853,962 | 10,928,830 | ||||||
| Non-current Liabilities: | �� | |||||||
| Note payable | 401,764 | - | ||||||
| Operating lease payable | 197,810 | 201,944 | ||||||
| Total Non-current Liabilities | 599,574 | 201,944 | ||||||
| Total Liabilities | 15,453,536 | 11,130,774 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Deficit | ||||||||
| Series A Preferred stock, $0.001 par value, 0 and 31,581 shares issued and outstanding, respectively | - | - | ||||||
| Series B Preferred stock, $0.001 par value, 0 and 8,063 shares issued and outstanding, respectively | - | - | ||||||
| Series D Preferred stock, $0.001 par value, 0 and 914 shares issued and outstanding, respectively | - | - | ||||||
| Common stock par value $0.001: 100,000,000 shares authorized; 9,982,195 issued and 9,959,812 outstanding as of June 30, 2020 and 9,178,937 issued and 9,019,087 outstanding as of December 31, 2019 | 9,982 | 9,179 | ||||||
| Additional paid in capital | 39,069,009 | 36,385,699 | ||||||
| Accumulated deficit | (51,708,425 | ) | (44,580,437 | ) | ||||
| Accumulated other comprehensive income (loss) | (34,525 | ) | (5,995 | ) | ||||
| Less: Treasury stock, 22,383 and 159,850 shares, respectively | (60,162 | ) | (367,174 | ) | ||||
| (12,724,121 | ) | (8,558,728 | ) | |||||
| Total Liabilities and Stockholders’ Deficit | $ | 2,729,415 | $ | 2,572,046 | ||||
| June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 2,124,656 | $ | 7,906,782 | ||||
| Accounts receivable, net | 284,419 | 90,355 | ||||||
| Prepaid expenses and other current assets | 888,788 | 23,856 | ||||||
| Total Current Assets | 3,297,863 | 8,020,993 | ||||||
| Property and equipment, net | 60,412 | 56,258 | ||||||
| Intangible assets | 1,493,864 | 960,611 | ||||||
| Goodwill | 1,037,992 | 1,035,795 | ||||||
| Deposits and other assets | 148,450 | 191,836 | ||||||
| Marketable securities | - | 62,733 | ||||||
| Minority investment in business | 367,096 | 217,096 | ||||||
| Operating lease right of use asset | 199,441 | 239,158 | ||||||
| Total Assets | $ | 6,605,118 | $ | 10,784,480 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 2,952,353 | $ | 2,638,688 | ||||
| Derivative liabilities | 436,295 | 42,231 | ||||||
| Convertible Notes, net of debt discount and issuance costs | 67,048 | 897,516 | ||||||
| Current portion of operating lease payable | 95,579 | 79,816 | ||||||
| Note payable - related party, net of debt discount | 7,890 | - | ||||||
| Note payable, net of debt discount and issuance costs | 1,054,600 | 1,221,539 | ||||||
| Deferred revenue | 208,517 | 88,637 | ||||||
| Total Current Liabilities | 4,822,282 | 4,968,427 | ||||||
| Non-current Liabilities: | ||||||||
| Note payable | 34,036 | 213,037 | ||||||
| Convertible Notes | 2,099,400 | - | ||||||
| Operating lease payable | 102,231 | 157,820 | ||||||
| Total Non-current Liabilities | 2,235,667 | 370,857 | ||||||
| Total Liabilities | 7,057,949 | 5,339,284 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Series E Preferred stock, $0.001 par value, 1,048 and 7,738 shares issued and outstanding, respectively | 1 | 8 | ||||||
| Common stock par value $0.001: 100,000,000 shares authorized; 11,857,675 issued and 11,852,018 outstanding as of June 30, 2021 and 8,736,378 issued and 8,727,028 outstanding as of December 31, 2020 | 11,858 | 8,737 | ||||||
| Additional paid in capital | 87,131,333 | 77,505,013 | ||||||
| Subscription receivable | - | (40,000 | ) | |||||
| Less: Treasury stock, 5,657 and 5,657 shares, respectively | (62,406 | ) | (62,406 | ) | ||||
| Accumulated deficit | (87,544,953 | ) | (71,928,922 | ) | ||||
| Accumulated other comprehensive income | (45,097 | ) | (37,234 | ) | ||||
| Total Creatd, Inc. Stockholders’ Equity | (509,264 | ) | 5,445,196 | |||||
| Non-controlling interest in consolidated subsidiary | 56,433 | - | ||||||
| (452,831 | ) | 5,445,196 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 6,605,118 | $ | 10,784,480 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Creatd, Inc.
Condensed Consolidated Statements of Comprehensive Loss (Unaudited)
| For the Three Months Ended | For the Three Months Ended | For the Six Months Ended | For the Six Months Ended | |||||||||||||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||||
| Net revenue | $ | 970,857 | $ | 322,540 | $ | 1,714,770 | $ | 615,682 | ||||||||
| Operating expenses | ||||||||||||||||
| Research and development | 56,598 | 35,705 | 385,450 | 171,275 | ||||||||||||
| Marketing | 4,194,524 | 422,733 | 6,237,179 | 855,564 | ||||||||||||
| Stock based compensation | 1,940,250 | 1,602,649 | 3,510,489 | 1,994,792 | ||||||||||||
| General and administrative | 3,160,280 | 1,796,705 | 5,908,444 | 2,955,252 | ||||||||||||
| Total operating expenses | 9,351,652 | 3,857,792 | 16,041,562 | 5,976,883 | ||||||||||||
| Loss from operations | (8,380,795 | ) | (3,535,252 | ) | (14,326,792 | ) | (5,361,201 | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Other income | - | 14,229 | - | 77,785 | ||||||||||||
| Interest expense | (60,760 | ) | (491,206 | ) | (259,431 | ) | (866,736 | ) | ||||||||
| Accretion of debt discount and issuance cost | (354,199 | ) | (140,274 | ) | (851,364 | ) | (327,221 | ) | ||||||||
| Derivative expense | - | - | (100,502 | ) | - | |||||||||||
| Change In derivative liability | (65,442 | ) | - | (262,831 | ) | - | ||||||||||
| Impairment of investment | (62,733 | ) | - | (62,733 | ) | - | ||||||||||
| Gain (loss) on settlement of vendor liabilities | - | - | 92,909 | (126,087 | ) | |||||||||||
| Gain on marketable securities | - | 10,042 | - | 10,042 | ||||||||||||
| Gain (loss) on extinguishment of debt | 82,431 | 470 | 286,009 | (534,570 | ) | |||||||||||
| Gain on Forgiveness of debt | 279,022 | - | 279,022 | - | ||||||||||||
| Other expenses, net | (181,681 | ) | (606,739 | ) | (878,921 | ) | (1,766,787 | ) | ||||||||
| Loss before income tax provision | (8,562,476 | ) | (4,141,991 | ) | (15,205,713 | ) | (7,127,988 | ) | ||||||||
| Income tax provision | - | - | - | - | ||||||||||||
| Net loss | $ | (8,562,476 | ) | $ | (4,141,991 | ) | $ | (15,205,713 | ) | $ | (7,127,988 | ) | ||||
| Non-controlling interest in net loss | 432 | - | 432 | - | ||||||||||||
| Net Loss attributable to Creatd, Inc. | (8,562,044 | ) | (4,141,991 | ) | (15,205,281 | ) | (7,127,988 | ) | ||||||||
| Deemed dividend | (410,750 | ) | - | (410,750 | ) | - | ||||||||||
| Net loss attributable to common shareholders | (8,972,794 | ) | (4,141,991 | ) | (15,616,031 | ) | (7,127,988 | ) | ||||||||
| Comprehensive loss | ||||||||||||||||
| Net loss | (8,562,476 | ) | (4,141,991 | ) | (15,205,713 | ) | (7,127,988 | ) | ||||||||
| Currency translation gain (loss) | (552 | ) | (19,291 | ) | (7,863 | ) | (28,530 | ) | ||||||||
| Comprehensive loss | $ | (8,563,028 | ) | $ | (4,161,282 | ) | $ | (15,213,576 | ) | $ | (7,156,518 | ) | ||||
| Per-share data | ||||||||||||||||
| Basic and diluted loss per share | $ | (0.81 | ) | $ | (1.30 | ) | $ | (1.49 | ) | $ | (2.28 | ) | ||||
| Weighted average number of common shares outstanding | 11,081,354 | 3,194,321 | 10,465,815 | 3,122,926 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Creatd, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Three Months Ended June 30, 2021 (Unaudited)
| Series E | Additional | Non- | Other | |||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Treasury stock | Paid In | Accumulated | Controlling | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Income | Equity | ||||||||||||||||||||||||||||||||||
| Balance, April 1, 2021 | 1,088 | $ | 1 | 10,925,026 | $ | 10,925 | 5,657 | $ | (62,406 | ) | $ | 80,633,380 | $ | (78,572,159 | ) | $ | - | $ | (44,545 | ) | $ | 1,965,196 | ||||||||||||||||||||||
| Stock based compensation | - | - | 89,050 | 89 | - | - | 2,064,575 | - | - | - | 2,064,664 | |||||||||||||||||||||||||||||||||
| Conversion of warrants to stock | - | - | 18,259 | 18 | - | - | (18 | ) | - | - | - | - | ||||||||||||||||||||||||||||||||
| Stock warrants issued with note payable | - | - | - | - | - | - | 1,601,452 | - | - | - | 1,601,452 | |||||||||||||||||||||||||||||||||
| Cash received for common stock | - | - | 750,000 | 750 | - | - | 2,212,750 | - | - | - | 2,213,500 | |||||||||||||||||||||||||||||||||
| Shares issued for prepaid services | - | - | 10,000 | 10 | - | - | 34,490 | - | - | - | 34,500 | |||||||||||||||||||||||||||||||||
| Common stock issued upon conversion of notes payable | - | - | 55,631 | 56 | - | - | 173,964 | - | - | - | 174,020 | |||||||||||||||||||||||||||||||||
| Conversion of preferred series E to stock | (40 | ) | - | 9,709 | 10 | - | - | (10 | ) | - | - | - | - | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | - | - | - | (552 | ) | (552 | ) | |||||||||||||||||||||||||||||||
| Non-controlling interest in consolidated subsidiary from acquisition | - | - | - | - | - | - | - | - | 56,865 | - | 56,865 | |||||||||||||||||||||||||||||||||
| Dividends | - | - | - | - | - | - | 410,750 | (410,750 | ) | - | - | - | ||||||||||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2021 | - | - | - | - | - | - | - | (8,562,044 | ) | (432 | ) | - | (8,562,476 | ) | ||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | 1,048 | $ | 1 | 11,857,675 | $ | 11,858 | 5,657 | $ | (62,406 | ) | $ | 87,131,333 | $ | (87,544,953 | ) | $ | 56,433 | $ | (45,097 | ) | $ | (452,831 | ) | |||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 2 -
Jerrick Media Holdings,Creatd, Inc.
Condensed Consolidated StatementsStatement of Comprehensive Loss (Unaudited)Changes in Stockholders’ Equity (Deficit)
| For the Three Months Ended | For the Three Months Ended | For the Six Months Ended | For the Six Months Ended | |||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||
| Net revenue | $ | 322,540 | $ | 7,181 | $ | 615,682 | $ | 41,515 | ||||||||
| Gross margin | 322,540 | 7,181 | 615,682 | 41,515 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Compensation | 1,893,178 | 545,037 | 2,266,698 | 1,271,611 | ||||||||||||
| Consulting fees | 902,099 | 191,254 | 1,552,106 | 397,631 | ||||||||||||
| Research and development | 35,705 | 13,559 | 171,275 | 354,898 | ||||||||||||
| General and administrative | 1,026,810 | 659,452 | 1,986,804 | 1,124,490 | ||||||||||||
| Total operating expenses | 3,857,792 | 1,409,302 | 5,976,883 | 3,148,630 | ||||||||||||
| Loss from operations | (3,535,252 | ) | (1,402,121 | ) | (5,361,201 | ) | (3,107,115 | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Other income | 14,229 | - | 77,785 | - | ||||||||||||
| Interest expense | (491,206 | ) | (110,032 | ) | (866,736 | ) | (164,601 | ) | ||||||||
| Accretion of debt discount and issuance cost | (140,274 | ) | (69,626 | ) | (327,221 | ) | (116,990 | ) | ||||||||
| Settlement of vendor liabilities | - | - | (126,087 | ) | - | |||||||||||
| Gain on marketable securities | 10,042 | - | 10,042 | - | ||||||||||||
| Loss on extinguishment of debt | - | (3,635 | ) | (535,040 | ) | (81,149 | ) | |||||||||
| Gain on settlement of debt | 470 | - | 470 | - | ||||||||||||
| Other expenses, net | (606,739 | ) | (183,293 | ) | (1,766,787 | ) | (362,740 | ) | ||||||||
| Loss before income tax provision | (4,141,991 | ) | (1,585,414 | ) | (7,127,988 | ) | (3,469,855 | ) | ||||||||
| Income tax provision | - | - | - | - | ||||||||||||
| Net loss | $ | (4,141,991 | ) | $ | (1,585,414 | ) | $ | (7,127,988 | ) | $ | (3,469,855 | ) | ||||
| Deemed dividend | - | - | - | - | ||||||||||||
| Inducement expense | - | (7,628 | ) | - | (7,628 | ) | ||||||||||
| Net loss attributable to common shareholders | (4,141,991 | ) | (1,577,786 | ) | (7,127,988 | ) | (3,462,227 | ) | ||||||||
| Other comprehensive income (loss) | ||||||||||||||||
| Currency translation (loss) | (19,291 | ) | - | (28,530 | ) | - | ||||||||||
| Comprehensive loss | $ | (4,161,282 | ) | $ | (1,577,786 | ) | $ | (7,156,518 | ) | $ | (3,462,227 | ) | ||||
| Per-share data | ||||||||||||||||
| Basic and diluted loss per share | $ | (0.43 | ) | $ | (0.20 | ) | $ | (0.76 | ) | $ | (0.47 | ) | ||||
| Weighted average number of common shares outstanding | 9,582,964 | 8,072,257 | 9,368,777 | 7,389,564 | ||||||||||||
For the Six Months Ended June 30, 2021 (Unaudited)
| Series E | Additional | Non- | Other | |||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Treasury stock | Paid In | Subscription | Accumulated | Controlling | Comprehensive | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Receivable | Deficit | Interest | Income | Equity | |||||||||||||||||||||||||||||||||||||
| Balance, January 1, 2021 | 7,738 | $ | 8 | 8,736,378 | $ | 8,737 | 5,657 | $ | (62,406 | ) | $ | 77,505,013 | $ | (40,000 | ) | $ | (71,928,922 | ) | $ | - | $ | (37,234 | ) | $ | 5,445,196 | |||||||||||||||||||||||
| Stock based compensation | - | - | 201,311 | 201 | - | - | 3,410,380 | - | - | - | - | 3,410,581 | ||||||||||||||||||||||||||||||||||||
| Shares issued for prepaid services | - | - | 50,000 | 50 | - | - | 226,450 | - | - | - | - | 226,500 | ||||||||||||||||||||||||||||||||||||
| Shares issued to settle vendor liabilities | - | - | 44,895 | 45 | - | - | 181,341 | - | - | - | - | 181,386 | ||||||||||||||||||||||||||||||||||||
| Common stock issued upon conversion of notes payable | - | - | 120,959 | 121 | - | - | 316,699 | - | - | - | - | 316,820 | ||||||||||||||||||||||||||||||||||||
| Exercise of warrants to stock | - | - | 320,693 | 321 | - | - | 1,272,350 | - | - | - | - | 1,272,671 | ||||||||||||||||||||||||||||||||||||
| Cash received for common | - | - | 750,000 | 750 | - | - | 2,212,750 | - | - | - | - | 2,213,500 | ||||||||||||||||||||||||||||||||||||
| Cash received for preferred series E and warrants | 40 | - | - | - | - | - | (4,225 | ) | 40,000 | - | - | - | 35,775 | |||||||||||||||||||||||||||||||||||
| Conversion of preferred series E to stock | (6,730 | ) | (7 | ) | 1,633,439 | 1,633 | - | - | (1,626 | ) | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Stock warrants issued with note payable | - | - | - | - | - | - | 1,601,451 | - | - | - | - | 1,601,451 | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | - | - | - | - | (7,863 | ) | (7,863 | ) | ||||||||||||||||||||||||||||||||||
| Non-controlling interest in consolidated subsidiary from acquisition | - | - | - | - | - | - | - | - | - | 56,865 | - | 56,865 | ||||||||||||||||||||||||||||||||||||
| Dividends | - | - | - | - | - | - | 410,750 | - | (410,750 | ) | - | - | - | |||||||||||||||||||||||||||||||||||
| Net loss for the six months ended June 30, 2021 | - | - | - | - | - | - | - | - | (15,205,281 | ) | (432 | ) | - | (15,205,713 | ) | |||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | 1,048 | $ | 1 | 11,857,675 | $ | 11,858 | 5,657 | $ | (62,406 | ) | $ | 87,131,333 | $ | - | $ | (87,544,953 | ) | $ | 56,433 | $ | (45,097 | ) | $ | (452,831 | ) | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 3 -
Jerrick Media Holdings,Creatd, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Three Months Ended June 30, 2020 (Unaudited)
| Series A Preferred Stock | Series B Preferred Stock | Series D Preferred Stock | Common Stock | Treasury stock | Additional Paid In | Accumulated | Other Comprehensive | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2020 | - | $ | - | - | $ | - | - | $ | - | 9,422,683 | $ | 9,423 | (159,850 | ) | $ | (367,174 | ) | $ | 37,748,356 | $ | (47,566,434 | ) | $ | (15,234 | ) | $ | (10,191,063 | ) | ||||||||||||||||||||||||||||
| Shares issued with note payable | - | - | - | - | - | - | 16,272 | 16 | - | - | 27,281 | - | - | 27,297 | ||||||||||||||||||||||||||||||||||||||||||
| Conversion of warrants to stock | - | - | - | - | - | - | 6,718 | 7 | - | - | (10,007 | ) | - | - | (10,000 | ) | ||||||||||||||||||||||||||||||||||||||||
| Conversion of options to stock | - | - | - | - | - | - | 688,473 | 688 | - | - | 1,404,976 | - | - | 1,405,664 | ||||||||||||||||||||||||||||||||||||||||||
| Stock warrants issued with note payable | - | - | - | - | - | - | - | - | - | - | 247,281 | - | - | 247,281 | ||||||||||||||||||||||||||||||||||||||||||
| Cancellation of Treasury stock | - | - | - | - | - | - | (151,951 | ) | (152 | ) | 151,951 | 349,030 | (348,878 | ) | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | - | - | - | - | - | - | - | - | (14,484 | ) | (42,018 | ) | - | - | - | (42,018 | ) | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | - | - | - | - | - | - | (19,291 | ) | (19,291 | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2020 | - | - | - | - | - | - | - | - | - | - | - | (4,141,991 | ) | - | (4,141,991 | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2020 | - | $ | - | - | $ | - | - | $ | - | 9,982,195 | $ | 9,982 | (22,383 | ) | $ | (60,162 | ) | $ | 39,069,009 | $ | (51,708,425 | ) | $ | (34,525 | ) | $ | (12,724,121 | ) | ||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||
| Common Stock | Treasury stock | Paid In | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||||||||
| Balance, April 1, 2020 | 3,140,894 | $ | 3,141 | 159,850 | $ | (367,174 | ) | $ | 37,754,638 | $ | (47,566,434 | ) | $ | (15,234 | ) | $ | (10,191,063 | ) | ||||||||||||||
| Shares Issued with note payable | 5,424 | 5 | - | - | 27,292 | - | - | 27,297 | ||||||||||||||||||||||||
| Coversion of warrants to stock | 2,239 | 2 | - | - | (10,002 | ) | - | - | (10,000 | ) | ||||||||||||||||||||||
| Conversion of options to stock | 229,491 | 229 | - | - | 1,405,435 | - | - | 1,405,664 | ||||||||||||||||||||||||
| Stock warrants issued with note payable | - | - | - | - | 247,281 | - | - | 247,281 | ||||||||||||||||||||||||
| Cancellation of Treasury stock | (50,650 | ) | (51 | ) | (151,951 | ) | 349,030 | (348,979 | ) | - | - | - | ||||||||||||||||||||
| Purchase of treasury stock | - | - | 14,484 | (42,018 | ) | - | - | - | (42,018 | ) | ||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | (19,291 | ) | (19,291 | ) | ||||||||||||||||||||||
| Net loss for the three months ended June 30, 2020 | - | - | - | - | - | (4,141,991 | ) | - | (4,141,991 | ) | ||||||||||||||||||||||
| Balance, June 30, 2020 | 3,327,398 | $ | 3,326 | 22,383 | $ | (60,162 | ) | $ | 39,075,665 | $ | (51,708,425 | ) | $ | (34,525 | ) | $ | (12,724,121 | ) | ||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 4 -
Jerrick Media Holdings,Creatd, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Six Months Ended June 30, 2020 (Unaudited)
| Series A Preferred Stock | Series B Preferred Stock | Series D Preferred Stock | Common Stock | Treasury stock | Additional Paid In | Accumulated | Other Comprehensive | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2019 | - | $ | - | - | $ | - | - | $ | - | 9,178,937 | $ | 9,179 | (159,850 | ) | $ | (367,174 | ) | $ | 36,385,699 | $ | (44,580,437 | ) | $ | (5,995 | ) | $ | (8,558,728 | ) | ||||||||||||||||||||||||||||
| Shares issued with notes payable | - | - | - | - | - | - | 24,322 | 24 | - | - | 58,912 | - | - | 58,936 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for services | - | - | - | - | - | - | 150,000 | 150 | - | - | 584,848 | - | - | 584,998 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued to settle vendor liabilities | - | - | - | - | - | - | 70,696 | 71 | - | - | 235,564 | - | - | 235,635 | ||||||||||||||||||||||||||||||||||||||||||
| Conversion of warrants to stock | - | - | - | - | - | - | 21,718 | 22 | - | - | (4,250 | ) | - | - | (4,228 | ) | ||||||||||||||||||||||||||||||||||||||||
| Conversion of options to stock | - | - | - | - | - | - | 688,473 | 688 | - | - | 1,404,976 | - | - | 1,405,664 | ||||||||||||||||||||||||||||||||||||||||||
| Stock warrants issued with note payable | - | - | - | - | - | - | - | - | - | - | 752,138 | - | - | 752,138 | ||||||||||||||||||||||||||||||||||||||||||
| Cancellation of Treasury stock | - | - | - | - | - | - | (151,951 | ) | (152 | ) | 151,951 | 349,030 | (348,878 | ) | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | - | - | - | - | - | - | - | - | (14,484 | ) | (42,018 | ) | - | - | - | (42,018 | ) | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | - | - | - | - | - | - | (28,530 | ) | (28,530 | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss for the six months ended June 30, 2020 | - | - | - | - | - | - | - | - | - | - | - | (7,127,988 | ) | - | (7,127,988 | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2020 | - | $ | - | - | $ | - | - | $ | - | 9,982,195 | $ | 9,982 | (22,383 | ) | $ | (60,162 | ) | $ | 39,069,009 | $ | (51,708,425 | ) | $ | (34,525 | ) | $ | (12,724,121 | ) | ||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||
| Common Stock | Treasury stock | Paid In | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||||||||
| Balance, Jan 1, 2019 | 3,059,646 | $ | 3,060 | 159,850 | $ | (367,174 | ) | $ | 36,391,818 | $ | (44,580,437 | ) | $ | (5,995 | ) | $ | (8,558,728 | ) | ||||||||||||||
| Shares issued with notes payable | 8,107 | 8 | - | - | 58,928 | - | - | 58,936 | ||||||||||||||||||||||||
| Shares issued for services | 50,000 | 50 | - | - | 584,948 | - | - | 584,998 | ||||||||||||||||||||||||
| Shares issued to settle vendor liabilities | 23,565 | 24 | - | - | 235,611 | - | - | 235,635 | ||||||||||||||||||||||||
| Conversion of warrants to stock | 7,239 | 7 | - | - | (4,235 | ) | - | - | (4,228 | ) | ||||||||||||||||||||||
| Conversion of options to stock | 229,491 | 229 | - | - | 1,405,435 | - | - | 1,405,664 | ||||||||||||||||||||||||
| Stock warrants issued with note payable | - | - | - | - | 752,138 | - | - | 752,138 | ||||||||||||||||||||||||
| Cancellation of Treasury stock | (50,650 | ) | (51 | ) | (151,951 | ) | 349,030 | (348,979 | ) | - | - | - | ||||||||||||||||||||
| Purchase of treasury stock | - | - | 14,484 | (42,018 | ) | - | - | - | (42,018 | ) | ||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | (28,530 | ) | (28,530 | ) | ||||||||||||||||||||||
| Net loss for the six months ended June 30, 2020 | - | - | - | - | - | (7,127,988 | ) | - | (7,127,988 | ) | ||||||||||||||||||||||
| Balance, June 30, 2020 | 3,327,398 | $ | 3,327 | 22,383 | $ | (60,162 | ) | $ | 39,075,664 | $ | (51,708,425 | ) | $ | (34,525 | ) | $ | (12,724,121 | ) | ||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 5 -
Jerrick Media Holdings, Inc.
Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Three Months Ended June 30, 2019 (Unaudited)
| Series A Preferred Stock | Series B Preferred Stock | Series D Preferred Stock | Common Stock | Treasury stock | Additional Paid In | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2019 | - | $ | - | - | $ | - | - | $ | - | 6,730,306 | $ | 6,730 | (111,667 | ) | $ | (220,781 | ) | $ | 35,091,928 | $ | (38,429,506 | ) | $ | (3,551,629 | ) | |||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | - | - | - | - | - | 122,776 | - | 122,776 | |||||||||||||||||||||||||||||||||||||||
| Cash received for common stock and warrants | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Tender offering | - | - | - | - | - | - | 2,100,173 | 2,101 | - | - | (2,101 | ) | - | - | ||||||||||||||||||||||||||||||||||||||
| Stock issuance cost | - | - | - | - | - | - | - | - | - | - | (35,000 | ) | - | (35,000 | ) | |||||||||||||||||||||||||||||||||||||
| Stock warrants issued with note payable | - | - | - | - | - | - | - | - | 1,153,353 | - | 1,153,353 | |||||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock and warrants | - | - | - | - | - | - | - | - | (38,183 | ) | (141,393 | ) | (89,034 | ) | - | (230,427 | ) | |||||||||||||||||||||||||||||||||||
| Inducement expense | - | - | - | - | - | - | - | - | - | - | - | 7,626 | 7,626 | |||||||||||||||||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2019 | - | - | - | - | - | - | - | - | - | - | - | (1,585,414 | ) | (1,585,414 | ) | |||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2019 | - | $ | - | - | $ | - | - | $ | - | 8,830,479 | $ | 8,831 | (149,850 | ) | $ | (362,174 | ) | $ | 35,241,922 | $ | (40,007,294 | ) | $ | (5,118,715 | ) | |||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements
- 6 -
Jerrick Media Holdings,Creatd, Inc.
Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Six Months Ended June 30, 2019 (Unaudited)
| Series A | Series B | Series D | Additional | |||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Treasury stock | Paid In | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2018 | - | $ | - | - | $ | - | - | $ | - | 6,475,340 | $ | 6,475 | (27,667 | ) | $ | (52,341 | ) | $ | 34,100,327 | $ | (36,545,065 | ) | $ | (2,490,604 | ) | |||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | - | 125,000 | 126 | - | - | 433,959 | - | 434,085 | |||||||||||||||||||||||||||||||||||||||
| Cash received for common stock and warrants | - | - | - | - | - | - | 129,966 | 130 | - | - | 649,699 | - | 649,829 | |||||||||||||||||||||||||||||||||||||||
| Tender offering | - | - | - | - | - | - | 2,100,173 | 2,100 | (2,100 | ) | - | - | ||||||||||||||||||||||||||||||||||||||||
| Stock issuance cost | - | - | - | - | - | - | - | - | - | - | (178,146 | ) | - | (178,146 | ) | |||||||||||||||||||||||||||||||||||||
| Stock warrants issued with note payable | - | - | - | - | - | - | - | - | - | - | 328,777 | - | 328,777 | |||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock and warrants | - | - | - | - | - | - | - | - | (122,183 | ) | (309,833 | ) | (90,594 | ) | - | (400,427 | ) | |||||||||||||||||||||||||||||||||||
| Inducement expense | - | - | - | - | - | - | - | - | - | - | - | 7,626 | 7,626 | |||||||||||||||||||||||||||||||||||||||
| Net loss for the six months ended June 30, 2019 | - | - | - | - | - | - | - | - | - | - | - | (3,469,855 | ) | (3,469,855 | ) | |||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2019 | - | $ | - | - | $ | - | - | $ | - | 8,830,479 | $ | 8,831 | (149,850 | ) | $ | (362,174 | ) | $ | 35,241,922 | $ | (40,007,294 | ) | $ | (5,118,715 | ) | |||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements
- 7 -
Jerrick Media Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
| For the Six Months Ended | For the Six Months Ended | |||||||
| June 30, 2021 | June 30, 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (15,205,713 | ) | $ | (7,127,988 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 91,042 | 76,939 | ||||||
| Impairment of investment | 62,733 | - | ||||||
| Accretion of debt discount and issuance cost | 851,364 | 327,221 | ||||||
| Share-based compensation | 3,510,489 | 1,994,792 | ||||||
| Bad debt expense | - | 34,737 | ||||||
| Gain on marketable securities | - | (10,042 | ) | |||||
| Gain on Forgiveness of debt | (279,022 | ) | - | |||||
| (Gain) loss on settlement of vendor liabilities | (92,909 | ) | 126,087 | |||||
| Change in fair value of derivative liability | 262,831 | - | ||||||
| Derivative Expense | 100,502 | - | ||||||
| (Gain) loss on extinguishment of debt | (286,009 | ) | 534,570 | |||||
| Non cash lease expense | 39,717 | 34,969 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | (742,565 | ) | - | |||||
| Accounts receivable | (186,420 | ) | (60,350 | ) | ||||
| Deposits and other assets | 63,356 | (2,137 | ) | |||||
| Deferred revenue | 119,209 | 5,268 | ||||||
| Accounts payable and accrued expenses | 734,643 | 1,213,615 | ||||||
| Operating lease liability | (39,826 | ) | (33,064 | ) | ||||
| Net Cash Used In Operating Activities | (10,996,578 | ) | (2,885,383 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash paid for property and equipment | (25,650 | ) | (6,339 | ) | ||||
| Deposits | (100,000 | ) | (166,283 | ) | ||||
| Cash paid for minority investment in business | (150,000 | ) | (30,000 | ) | ||||
| Cash consideration for acquisition, net | (469,768 | ) | - | |||||
| Net Cash Used In Investing Activities | (745,418 | ) | (202,622 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from the exercise of warrant | 1,312,672 | - | ||||||
| Net proceeds from issuance of notes | 199,788 | 1,349,094 | ||||||
| Repayment of notes | (276,838 | ) | (58,226 | ) | ||||
| Proceeds from issuance of demand loan | - | 250,000 | ||||||
| Proceeds from issuance of convertible note | 3,460,491 | 1,920,460 | ||||||
| Repayment of convertible notes | (941,880 | ) | (75,000 | ) | ||||
| Proceeds from issuance of note payable - related party | - | 152,989 | ||||||
| Repayment of note payable - related party | - | (327,773 | ) | |||||
| Proceeds from issuance of common stock and warrants | 2,213,500 | - | ||||||
| Purchase of treasury stock and warrants | - | (62,018 | ) | |||||
| Net Cash Provided By Financing Activities | 5,967,733 | 3,149,526 | ||||||
| Effect of exchange rate changes on cash | (7,863 | ) | (28,530 | ) | ||||
| Net Change in Cash | (5,782,126 | ) | 32,991 | |||||
| Cash - Beginning of Period | 7,906,782 | 11,637 | ||||||
| Cash - End of period | $ | 2,124,656 | $ | 44,628 | ||||
| SUPPLEMENTARY CASH FLOW INFORMATION: | ||||||||
| Cash Paid During the Period for: | ||||||||
| Income taxes | $ | - | $ | - | ||||
| Interest | $ | 55,276 | $ | 55,859 | ||||
| SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Settlement of vendor liabilities | $ | 168,667 | $ | 109,548 | ||||
| Warrants issued with debt | $ | 1,601,452 | $ | 752,136 | ||||
| Shares issued with debt | $ | - | $ | 58,935 | ||||
| Issuance of common stock for prepaid services | $ | 226,500 | $ | 585,000 | ||||
| Cancellation of Treasury stock | $ | - | $ | 349,030 | ||||
| Conversion of note payable and interest into convertible notes | $ | - | $ | 385,000 | ||||
| Conversion of Demand loan into notes payable | $ | - | $ | 150,000 | ||||
| Deferred offering costs | $ | 4,225 | $ | - | ||||
| Common stock and warrants issued upon conversion of notes payable | $ | 316,820 | $ | - | ||||
| For the Six Months Ended | For the Six Months Ended | |||||||
| June 30, 2020 | June 30, 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (7,127,988 | ) | $ | (3,469,855 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 76,939 | 5,660 | ||||||
| Accretion of debt discount and issuance cost | 327,221 | 116,991 | ||||||
| Inducement expense | - | 7,626 | ||||||
| Share-based compensation | 1,994,792 | 448,291 | ||||||
| Bad debt expense | 34,737 | - | ||||||
| Gain on settlement of debt | (470 | ) | - | |||||
| Loss on settlement of vendor liabilities | 126,087 | - | ||||||
| Gain on marketable securities | (10,042 | ) | - | |||||
| Loss on extinguishment of debt | 535,040 | 81,149 | ||||||
| Non-cash lease expense | 34,969 | (47,643 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (60,350 | ) | 4,000 | |||||
| Deposits and other assets | (2,137 | ) | - | |||||
| Deferred revenue | 5,268 | 8,828 | ||||||
| Accounts payable and accrued expenses | 1,213,615 | (251,299 | ) | |||||
| Operating lease liability | (33,064 | ) | - | |||||
| Net Cash Used In Operating Activities | (2,885,383 | ) | (3,096,252 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash paid for property and equipment | (6,339 | ) | (26,851 | ) | ||||
| Purchase of marketable securities | (166,283 | ) | - | |||||
| Deposits | (30,000 | ) | - | |||||
| Net Cash Used In Investing Activities | (202,622 | ) | (26,851 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Cash overdraft | - | (33,573 | ) | |||||
| Net proceeds from issuance of notes | 1,349,094 | - | ||||||
| Repayment of notes | (58,226 | ) | (50,000 | ) | ||||
| Proceeds from issuance of demand loan | 250,000 | 100,000 | ||||||
| Proceeds from issuance of convertible note | 1,920,460 | 1,993,025 | ||||||
| Repayment of convertible notes | (75,000 | ) | (12,508 | ) | ||||
| Proceeds from issuance of note payable - related party | 152,989 | 1,590,000 | ||||||
| Repayment of note payable - related party | (327,773 | ) | (275,000 | ) | ||||
| Proceeds from issuance of common stock and warrants | - | 649,829 | ||||||
| Cash paid for stock issuance costs | - | (35,000 | ) | |||||
| Purchase of treasury stock and warrants | (62,018 | ) | (407,307 | ) | ||||
| Net Cash Provided By Financing Activities | 3,149,526 | 3,519,466 | ||||||
| Effect of exchange rate changes on cash | (28,530 | ) | - | |||||
| Net Change in Cash | 32,991 | 396,363 | ||||||
| Cash - Beginning of Year | 11,637 | - | ||||||
| Cash - End of period | $ | 44,628 | $ | 396,363 | ||||
| SUPPLEMENTARY CASH FLOW INFORMATION: | ||||||||
| Cash Paid During the Year for: | ||||||||
| Income taxes | $ | - | $ | - | ||||
| Interest | $ | 55,859 | $ | 18,273 | ||||
| SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Settlement of vendor liabilities | $ | 109,548 | $ | - | ||||
| Deferred offering costs | $ | - | $ | 143,146 | ||||
| Warrants issued with debt | $ | 752,136 | $ | 247,628 | ||||
| Shares issued with debt | $ | 58,935 | $ | - | ||||
| Issuance of common stock for prepaid services | $ | 585,000 | $ | - | ||||
| Cancellation of Treasury stock | $ | 349,030 | $ | - | ||||
| Operating Lease liability | $ | - | $ | 288,790 | ||||
| Option liability | $ | - | $ | 7,328 | ||||
| Conversion of note payable and interest into convertible notes | $ | 385,000 | $ | - | ||||
| Conversion of Demand loan into notes payable | $ | 150,000 | $ | - | ||||
| Conversion of note payable and interest into convertible notes | $ | 385,000 | $ | - | ||||
| Conversion of note payable- related party and interest into convertible notes- related party | $ | - | $ | 20,000 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Jerrick Media Holdings,Creatd, Inc.
June 30, 20202021
Notes to the Condensed Consolidated Financial Statements
Note 1 – Organization and Operations
Creatd, Inc., formerly Jerrick Media Holdings, Inc. (“we,” “us,” the “Company,” or “Jerrick Media” or “Jerrick”“Creatd”), is a technology company focused on the development of digital communities, marketing branded digital content, and e-commerce opportunities. Jerrick’sCreatd’s content distribution platform, Vocal, delivers a robust long-form, digital publishing platform organized into highly engaged niche-communities capable of hosting all forms of rich media content. Through Jerrick’sCreatd’s proprietary algorithm dynamics, Vocal enhances the visibility of content and maximizes viewership, providing advertisers access to target markets that most closely match their interests.
The Company was 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. as part of its plan to diversify its business.
On February 5, 2016 (the “Closing Date”), GTPH, GPH Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of GTPH (“Merger Sub”), and Jerrick Ventures, Inc., a privately-held Nevada corporation headquartered in New Jersey (“Jerrick”), entered into an Agreement and Plan of Merger (the “Merger”) pursuant to which the Merger Sub was merged with and into Jerrick, with Jerrick surviving as a wholly-owned subsidiary of GTPH (the “Merger”). GTPH acquired, pursuant to the Merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “Jerrick Shareholders”), pro-rata, a total of 1,425,000475,000 shares of GTPH’s common stock. In connection therewith, GTPH acquired 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”).
In connection with the Merger, on the Closing Date, GTPH and Kent Campbell entered into a Spin-Off Agreement (the “Spin-Off Agreement”), pursuant to which Mr. Campbell purchased from GTPH (i) all of GTPH’s interest in Ashland Holdings, LLC, a Florida limited liability company, and (ii) all of GTPH’s interest in Lil Marc, Inc., a Utah corporation, in exchange for the cancellation of 39,091 shares of GTPH’s Common Stock held by Mr. Campbell. In addition, Mr. Campbell assumed all debts, obligations and liabilities of GTPH, including any existing prior to the Merger, pursuant to the terms and conditions of the Spin-Off Agreement.
Upon closing of the Merger on February 5, 2016, the Company changed its business plan to that of Jerrick Media.Jerrick.
Effective February 28, 2016, GTPH entered into an Agreement and Plan of Merger (the “Statutory Merger Agreement”) with Jerrick, pursuant to which GTPH became the parent company of Jerrick Ventures, LLC, a wholly-owned operating subsidiary of Jerrick (the “Statutory Merger”) and GTPH changed its name to Jerrick Media Holdings, Inc. to better reflect its new business strategy.
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 a digital e-commerce agency based in New Jersey (see Note 4).
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.
On June 4, 2021, the Company acquired 89% of the membership interests of Plant Camp, LLC, a Delaware limited liability company (“Plant Camp”). Plant Camp is a CPG company that creates healthy upgrades to kid-friendly foods.
Note 2 – Significant and Critical Accounting Policies and Practices
Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by the accounting principles generally accepted in the United States of America.
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Basis of Presentation
The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 20202021 or any other interim period or for any other future year. These unaudited condensed financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2019,2020, included in the Company’s 20192020 Annual Report on Form 10-K filed with the SEC. The balance sheet as of December 31, 20192020 has been derived from audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.
Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
Critical accounting estimates are estimates for which (a) the nature 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.
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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 June 30, 2020,2021, the Company’s consolidated subsidiaries and/or entities are as follows:
| Name of combined affiliate | State or other jurisdiction of incorporation or organization | Company Ownership Interest | ||||
| Jerrick Ventures LLC | Delaware | 100 | % | |||
| Abacus Tech Pty Ltd | Australia | 100 | % | |||
| Seller’s Choice, LLC | New Jersey | 100 | % | |||
| Delaware | 100 | % | ||||
| Delaware | 100 | % | ||||
| Delaware | 100 | % | ||||
| Delaware | % | |||||
| Sci-Fi Shop, LLC | Delaware | 100 | % | |||
| OG Collection LLC | Delaware | 100 | % | |||
| VMENA LLC | Delaware | 100 | % | |||
| Vocal For Brands, LLC | Delaware | 100 | % | |||
| Vocal Ventures LLC | Delaware | 100 | % | |||
| What to Buy, LLC | Delaware | 100 | % | |||
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 expands 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 value into three (3) broad levels. The fair value hierarchy gives the highest priority tomeasurement disclosures are grouped into three levels based on valuation factors:
| ● | Level 1 – quoted prices
The Company’s Level 1 assets/liabilities include cash, accounts receivable, marketable trading securities, accounts payable, prepaid and other current assets, line of credit and due to related parties. Management believes the estimated fair value of these accounts at June 30, 2021 approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments or the use of market interest rates for debt instruments.
The Company’s Level 2 assets/liabilities 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 due 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 asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow
Fair Value Measurements as of June 30,
The following table shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on recurring basis as of June 30, 2021:
The following table provides a summary of the relevant assets that are measured at fair value on non-recurring basis: Fair Value Measurements as of June 30, 2021
The following table shows the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on non-recurring basis as of June 30, 2021:
The Company valued the initial value of debt securities, which are investments in convertible notes receivable, by assessing the separate values of the debt and equity components for similar instruments convertible into private company equity (Level 3). The investment was initially measured at cost, which was determined to approximate fair value due to the lack of marketability of the conversion shares underlying these convertible instruments and the expected recoverability of the note principal. The key assumption affecting the level 3 fair values would be collectability of the notes. The Company monitors for impairment indicators at each balance sheet date.
Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurable limits. The Company
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
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. Investments Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in earnings. Debt securities not classified as held-to-maturity or as trading are classified as available-for-sale, and are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive income and reported in stockholders’ equity. The Company accounts for its investments in available-for-sale debt securities, in accordance with sub-topic 320-10 of the FASB
Pursuant to Paragraph The Company follows
The following table sets forth a summary of the changes in marketable securities - available-for-sale debt securities that are measured at fair value on a recurring basis:
We invest in debt The following table sets forth a summary of the changes in equity investments, at cost that are measured at fair value on a non-recurring basis:
The Company has elected to measure its equity securities without a readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. An election to measure an equity security in accordance with this paragraph shall be made for each investment separately. The Company performed a qualitative assessment considering impairment indicators to evaluate whether these investments were impaired. Impairment indicators that the Company considered included the following: a) a significant deterioration in the earnings performance, credit rating, asset quality or business prospects of the investee; b) a significant adverse change in the regulatory, economic or technology environment of the investee; c) a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates; d) a bona fide offer to purchase or an offer by the investee to sell the investment; e) factors that raise significant concerns about the investee’s ability to continue as a going concern. Commitments and Contingencies The Company follows subtopic 450-20 of the FASB 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 condensed 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. Foreign Currency Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at our Consolidated Balance Sheet dates. Results of operations and cash flows are translated using the average exchange rates throughout the periods. The effect of exchange rate fluctuations on the translation of assets and liabilities is included as a component of 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 determine 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 the 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 a Monte Carlo simulation model for the make whole feature and a binomial option model for convertible notes that have an option to convert at a variable number of shares to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The inputs utilized in the application of the Monte Carlo model included a starting stock price, an expected term of each debenture remaining from the valuation date to maturity, an estimated volatility, drift, and a risk-free rate. The inputs utilized in the application of the Binomial model included a stock price on valuation date, an expected term of each debenture remaining from the valuation date to maturity, an estimated volatility, and a risk-free rate. The Company records the change in the fair value of the derivative as other income or expense in the consolidated statements of operations. Revenue Recognition 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:
Revenue disaggregated by revenue source for the three and six months ended June 30, 2021 and 2020 consists of the following:
Timing of revenue recognition for the three and
Agency Revenue
Managed Services
The Company provides Studio/Agency Service offerings to business-to-business (B2B) and business-to-consumer (B2C) product and service brands which encompasses a full range of digital marketing and e-commerce solutions. The Company’s services include the setup and ongoing management of clients’ websites, Amazon and Shopify storefronts and listings, social media pages, search engine marketing, and other various tools and sales channels utilized by e-commerce sellers for sales and growth optimization. Contracts are broken into three Branded Content Branded content represents the revenue recognized from the Company’s obligation to create and publish branded articles for clients on the Vocal platform and promote said stories, tracking engagement for the client. The performance obligation is satisfied when the Company successfully publishes the articles on its platform and meets any required promotional milestones as per the contract. The revenue is recognized over time as the services are performed and any required milestones are met. Below are the significant components of a typical agreement pertaining to branded content revenue:
Platform Revenue Creator Subscriptions Vocal+ is a premium subscription offering for Vocal creators. In addition to joining for free, Vocal creators now have the option to sign up for a Vocal+ membership for either $9.99 monthly or $99 annually, though these amounts are occasionally subject to promotional discounts. Vocal+ subscribers receive access to value-added features such as increased rate of cost per mille (thousand) (“CPM”) monetization, a decreased minimum withdrawal threshold, a discount on platform processing fees, member badges for their profiles, access to exclusive Vocal+ Challenges, and early access to new Vocal features. Subscription revenues stem from both monthly and annual subscriptions, 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 transaction price for any given subscriber could decrease based on any payments made to that subscriber. A subscriber may be eligible for payment through one or more of the monetization features offered to Vocal creators, including earnings through reads (on a cost per mille basis) and cash prizes offered to Challenge winners. Estimates are utilized for payments made for earnings through reads, by establishing the lifetime a subscriber has had a Vocal account, determining the percentage of that lifetime that the subscriber has been a paying customer, and applying that percentage to payments for earnings through reads in the relevant reporting period. Affiliate Sales Revenue Affiliate sales represents 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 uses multiple affiliate platforms, such as Skimlinks, Amazon, and Tune, to form and maintain thousands of vendor relationships. Each vendor establishes their own commission percentage, which typically range from 2-20%. The revenue is recognized upon receipt as reliable estimates could not be made. E-Commerce Revenue
The Company generates revenue through the sale of consumer products through its e-commerce distribution channels. The Company satisfies its performance obligation upon receipt of product by its customers. Deferred Revenue Deferred revenue consists of billings and payments from clients in advance of revenue recognition. As of June 30, Accounts Receivable and Allowances Accounts receivable are recorded and carried when the Company has performed the work in accordance with managed services, project, partner, consulting and branded content agreements. For example, we bill a managed service client monthly when we have updated their Amazon store, modified SEO or completed the other services listed in the agreement. For projects and branded content, we will bill the client and record the receivable once milestones are reached that are set in the agreement. 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 six months ended June 30, Stock-Based Compensation The Company recognizes compensation expense for all equity–based payments granted in accordance with 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 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.
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 three and six months ended June 30, The Company had the following common stock equivalents at June 30,
Reclassifications
Certain prior year amounts in the Recently Adopted Accounting Guidance
In December 2019, the FASB issued authoritative guidance intended to simplify the accounting for income taxes (ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”). This guidance eliminates certain exceptions to the general approach to the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. This guidance is effective for annual periods after December 15, 2020, including interim periods within those annual periods. The updated guidance, which became effective for fiscal years beginning after December 15, 2020, did not have a material impact on the Company’s condensed consolidated financial statements. Recent Accounting Guidance Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU-2016-13”). ASU 2016-13 affects loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. ASU 2016-13 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company is currently evaluating the In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2021, and interim periods within those annual periods and early adoption is permitted. In May 2021, the FASB issued authoritative guidance intended to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. (ASU 2021-04), “Derivatives and Hedging Contracts in Entity’s Own Equity (Topic 815). This guidance amendments provide measurement, recognition, and disclosure guidance for an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. This guidance is effective for annual periods after December 15, 2021, including interim periods within those annual periods. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements. Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying condensed consolidated financial statements.
Note 3 – Going Concern The Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the condensed consolidated financial statements, as of June 30, 2021, the Company had an accumulated deficit On January 30, 2020, the World Health Organization declared the COVID-19 novel coronavirus outbreak 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. While it is unknown how long these conditions will last and what the complete financial impact will be to the Company, capital raising efforts and our operations may be negatively affected. The Company is attempting to further implement its business plan and generate sufficient revenues; however, its cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds by way of a public or private offering of its debt or equity securities, there can be no assurance that it will be able to do so on reasonable terms, or at all. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenues and its ability to raise additional funds by way of a public or private offering.
The condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Note 4 – The Company has elected to measure its equity securities without a readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of The Company performed a qualitative assessment considering impairment indicators to evaluate whether these investments were impaired. Impairment indicators that the Company considered included the following: a) a significant deterioration in the earnings performance, credit rating, asset quality or business prospects of the investee; b) a significant adverse change in the regulatory, economic or technology environment of the investee; c) a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates; d) a bona fide offer to purchase or an offer by the investee to sell the investment; e) factors that raise significant concerns about the investee’s ability to continue as a going concern. On October 2, 2020, the Company converted $102,096 of its marketable debt security into 119,355 shares of preferred stock or a 1.3% equity investment in a private company. On October 23, 2020, the Company entered into an equity interest purchase agreement whereas the Company purchased 3.8% ownership of a private company for $115,000.
On
Note 5 – Notes Payable Notes payable as of June 30,
Seller’s Choice Note On September 11, 2019, the Company entered into Seller’s Choice Purchase Agreement with Home Revolution LLC (see Note 4). As a part of the consideration provided pursuant to the Seller’s Choice Acquisition, the Company issued the Seller’s Choice Note to the Seller in the principal amount of $660,000. The Seller’s Choice Note bears interest at a rate of 9.5% per annum and is payable on March 11, 2020 (the “Seller’s Choice Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts become due. Upon maturity the Company utilized an automatic extension up to 6 months. This resulted in a 5% increase in the interest rate every month the Seller’s Choice Note is outstanding. As of June 30, 2021, the Company is in default on the Seller’s Choice note.
During the six months ended June 30,
$98,186.
The April 2020 PPP Loan Agreement On April 30, 2020, During the six months ended June 30, During the six months ended June 30, 2021, the Company repaid $30,000 in principal. The Company is in the process of returning the funds received from When the applications for PPP first opened up, there was limited available funding and much confusion surrounding the application process. The Company initially submitted its application for the May 2020 PPP Loan in early April but received no response in the aftermath of submitting the application. After consulting multiple advisors, the Company made the decision to apply elsewhere, due to the rampant media coverage of institutions running out of funding and the Company’s need for the capital and belief that if 2 separate loans were approved, the remaining application could simply be withdrawn.
Therefore, in late April, the company proceeded with applying for the April 2020 PPP Loan. After some conflicting communications regarding acceptance, the Company attempted to contact the lender to clarify but got no response. After continued attempts to follow up with both lenders, the Company received approval for the May 2020 PPP Loan and funding for the April 2020 PPP Loan on the same day, followed the next day by the funding of the May 2020 PPP Loan. The Company immediately separated the funds for the April 2020 PPP Loan into a separate reserved bank account with the intention of returning the funds. However, after several attempts to contact the lender with no response, the Company was faced with difficulty raising funds in the early-Covid economy and made the decision to utilize the funds for operations and pursue an installment repayment plan when they were able to reach the lender. As of the date of this filing, the Company has begun making repayments on the loan, absent a formal installment agreement due to difficulties reaching the lender. The Company intends to complete repayment before the end of 2021. As each company is only permitted one loan under the CARES Act, there is a possibility the loan may be called by the SBA and the Company would have to repay the loan in full at such time. The May 2020 PPP Loan Agreement On May 4, 2020, Jerrick Ventures, LLC (“Jerrick Ventures”), the
During the six months ended June 30, During the six months ended June 30, 2021, the Company repaid $136,597 in principal and was forgiven $275,903 of principal and $3,119 of accrued interest. The On During the six months ended June 30, 2021, the Company accrued A$5,158 in interest. The November 2020 Loan Agreement On November 24, 2020, the Company entered into a loan agreement (the “November 2020 Loan Agreement”) with a lender (the “November 2020 Lender”) whereby the November 2020 Lender issued the Company a promissory note of $34,000 (the “November 2020 Note”). Pursuant to the November 2020 Loan Agreement, the November 2020 Note has an effective interest rate of 14%. The maturity date of the November 2020 Note is May 25, 2021 (the “November 2020 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the November 2020 Note are due. During the six months ended June 30, 2021, the Company repaid $23,716 in principal and $4,736 of The February 2021 Loan Agreement On February 24, 2021, the Company entered into a secured loan agreement (the “February 2021 Loan Agreement”) with a lender (the “February 2021 Lender”), whereby the February 2021 Lender issued the Company a secured promissory note of A$111,683 AUD or $85,372 United States Dollars (the “February 2021 Note”). Pursuant to the February 2021 Loan Agreement, the February 2021 Note has an effective interest rate of 14%. The maturity date of the February 2021 Note is July 31, 2021 (the “February 2021 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the February 2021 Loan Agreement are due. The loan is secured by the Australian research & development credit. During the six months ended June 30, 2021, the Company accrued A$ 5,398 in interest. The April 2021 Loan Agreement On April 9, 2021, the Company entered into a loan agreement (the “April 2021 Loan Agreement”) with a lender (the “April 2021 Lender”) whereby the April 2021 Lender issued the Company a promissory note of $128,110 (the “April 2021 Note”). Pursuant to the April 2021 Loan Agreement, the April 2021 Note has an effective interest rate of 11%. The maturity date of the April 2021 Note is October 8, 2022 (the “April 2021 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the April 2021 Note are due. During the six months ended June 30, 2021, the Company repaid $86,525 in principal. Note 6 – Convertible Note Payable Convertible notes payable as of June 30,
The First July 2020 Convertible Loan Agreement
Upon default or 180 days after issuance the
During the six months ended June 30, 2021, the First July 2020 Note became convertible. Due to the fact that these convertible notes have an option to convert at a
During the six months ended June 30, 2021 the Company converted $68,000 in principal and $3,400 in interest into 35,469 shares of the Company’s common stock. The August 2020 Convertible Loan Agreement On August 17, 2020, the Company entered into a loan agreement (the “August 2020 Loan Agreement”) with an individual (the “August 2020 Lender”), whereby the August 2020 Lender issued the Company a promissory note of $68,000 (the “August 2020 Note”). Pursuant to the August 2020 Loan Agreement, the August 2020 Note has interest of twelve percent (12%). The August 2020 Note matures on August 17, 2021. Upon default or 180 days after issuance the August 2020 Convertible Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) equal to 61% multiplied by the lowest trade of the common stock during the twenty (15) consecutive trading day period immediately preceding the date of the respective conversion. The Company recorded a $3,000 debt discount relating to original issue discount associated with this note. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.t During the six months ended June 30, 2021, the August 2020 Note became convertible. Due to the fact that these convertible notes have an option to convert at a variable amount, they are subject to derivative liability treatment. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The conversion feature has been measured at fair value using a Binomial model at the conversion date and the period end. The conversion feature of August 2020 Note gave rise to a derivative liability of $120,759. The Company recorded $65,000 was recorded as a debt discount and $55,759 was recorded to derivative expense. The debt discount is charged to accretion of debt discount over the remaining term of the convertible note. During the six months ended June 30, 2021 the Company converted $68,000 in principal and $3,400 in interest into 29,859 shares of the Company’s common stock. The September 2020 Convertible Loan Agreement On September 23, 2020, the Company entered into a loan agreement (the “September 2020 Loan Agreement”) with an individual (the “September 2020 Lender”), whereby the September 2020 Lender issued the Company a promissory note of $385,000 (the “September 2020 Note”). Pursuant to the September 2020 Loan Agreement, the September 2020 Note has interest of twelve percent (12%). The September 2020 Note matures on September 23, 2021. Upon default or The Company recorded a
During the six months ended June 30,
The
On
The
Upon default or 180 days after issuance the
The Company recorded a During the six months ended June 30, 2021 the Second July 2020 Note became convertible. Due to the During the six months ended June 30, 2021 the Company converted $169,400 in principal and $4,620 in interest into 55,631 shares of The On
Upon default the The Company recorded a During the six months ended June 30, 2021 the Company repaid $600,000 in principal and $4,340 in interest. The Second December 2020 Convertible Loan Agreement On December 30, 2020, the Company Upon default the Second December 2020 Note is convertible into shares of the Company’s common stock, par value $0.001 per share (“Conversion Shares”) equal to 75% of average the lowest three trading prices of the Company’s common stock on the fifteen-trading day immediately preceding the date of the respective conversion.
The Company recorded a $18,900 debt discount relating to original issue discount associated with this note. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.
The
$3,690,491. The
The Company recorded a The Company recorded a $666,669 debt discount relating to an original issue discount and $539,509 of debt issuance costs related to fees paid to vendors relating to the offering. The debt discount and debt issuance costs are being accreted over the life of the note to accretion of debt discount and issuance cost. Note 7 – Related Party
Notes payable Notes payable – related party as of June 30, 2021 and December 31,
The September 2020 Goldberg Loan Agreement On September 15, 2020, the Company
During the six months ended June 30,
On
Since the September 2020 Rosen Note has a make-whole provision if the shares of the Company’s common stock issued to the lender in accordance with the
During the six months ended June 30, Officer compensation During the six months ended June 30,
Note 8 – The Company has identified derivative instruments arising from a make-whole feature in the Company’s notes payable at June 30, 2021. For the terms of the make-whole features see the September 2020 Rosen Loan Agreement and the September 2020 Goldberg Loan Agreement in Note 7. The Company has also identified derivative instruments arising from convertible notes that have an option to convert at a variable number of shares in the Company’s convertible notes payable at June 30, 2021. For the terms of the conversion features see Note 7. The Company had no derivative assets measured at fair value on a recurring basis as of June 30, 2021. The Company utilizes a Monte Carlo simulation model for the make whole feature and a binomial option model for convertible notes that have an option to convert at a variable number of shares to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The inputs utilized in the application of the Monte Carlo model included a starting stock price, an expected term of each debenture remaining from the valuation date to maturity, an estimated volatility, drift, and a risk-free rate. The inputs utilized in the application of the Binomial model included a stock price on valuation date, an expected term of each debenture remaining from the valuation date to maturity, an estimated volatility, and a risk-free rate. The Company records the change in the fair value of the derivative as other income or expense in the consolidated statements of operations.
Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.
Volatility: The Company calculates the expected volatility based on the company’s historical stock prices with a look back period commensurate with the period Expected term: The Company’s remaining term is based on the remaining contractual maturity of the convertible notes. The following are the changes in the derivative liabilities during the three and six months ended June 30, 2021.
Note 9 – Stockholders’ Equity Shares Authorized Prior to July 13, 2020, the Company was authorized to issue up to thirty-five million (35,000,000) shares of capital stock, of which fifteen million (15,000,000) shares are designated as common stock, par value $0.001 per share, and twenty million (20,000,000) are designated as “blank check” preferred stock, par value $0.001 per share. The designations, rights, and preferences of such preferred stock are to be determined by the Company’s board of directors. On July 13, 2020, the Company filed the Second Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada, which authorize the issuance of 100,000,000 shares of common stock, and 20,000,000 shares of preferred stock.
On Preferred Stock Series E Convertible Preferred Stock On December 29, 2020 the Company entered into securities purchase agreements with thirty-three accredited investors whereby the Investors have agreed to purchase from the Company an aggregate of 7,778 shares of the Company’s Series E Convertible Preferred Stock, par value $0.001 per share and 2,831,715 warrants to purchase shares of the Company’s common stock, par value $0.001 per share. The Series E Preferred Stock is convertible into a total of 1,887,810 shares of Common Stock. 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. The Company has recorded $817,353 to stock issuance costs, which are part of Additional Paid-in Capital. The warrants are exercisable for a term of five-years from the date of issuance, at an exercise price of $4.50 per share. The warrants provide for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock. The placement agent for the transaction and received cash compensation equal to 10% of the aggregate purchase price and warrants to purchase 471,953 shares of the Company’s common stock, at an exercise price of $5.15 per share (the “PA Warrants”). The PA Warrants are exercisable for a term of five-years from the date of issuance. During the six months ended June 30, 2021, the Company received the $40,000 of the subscription receivable for the Series E Convertible Preferred Stock. The Company has recorded $4,225 to stock issuance costs, which are part of Additional Paid-in Capital. During the six months ended June 30, 2021, investors converted 6,730 shares of the Company’s Series E Convertible Preferred Stock into 1,633,439 shares of the Company’s common stock. Common Stock On January 14, 2021, the Company issued On January 20, 2021, the Company issued 40,000 shares of its restricted common stock to consultants in exchange for a year of services at a fair value of On On February 3, 2021, the Company issued 1,929 shares of its restricted common stock to consultants in exchange for services at a fair value of $8,198. On February 8, 2021, the Company entered into a consulting agreement whereas the Company issued a total of 2,092 shares of common stock in exchange for services at a fair value of $7,502. On February 18, 2021, the Company issued 10,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $48,000. On February 18, 2021, the Company issued 10,417 shares of its restricted common stock to consultants in exchange for services at a fair value of $50,002. On February 26, 2021, the Company issued 291 shares of its restricted common stock to consultants in exchange for services at a fair value of $1,499. On March 17, 2021, the Company issued 9,624 shares of its restricted common stock to consultants in exchange for services at a fair value of $49,371. On March 28, 2021, the Company issued 31,782 shares of its restricted common stock to settle outstanding vendor liabilities of On March 31, 2021, the Company issued 13,113 shares of its restricted common stock to settle outstanding vendor liabilities of $43,667. In connection with this transaction the Company also recorded a loss on settlement of vendor liabilities of On On April 21, 2021, the Company On
Stock Options The Company applied fair value accounting for all share-based payments awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The assumptions used for options granted during the six months ended June 30, 2021, are as follows:
The following is a summary of the Company’s stock option activity:
During the
As of June 30, 2021, there was $ 6,122,329 of total unrecognized compensation expense related to Warrants
The Company applied fair value accounting for all share-based payments awards. The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model. The assumptions used for warrants granted during the six months ended June 30, 2020 are as follows:
Warrant Activities The following is a summary of the Company’s warrant activity:
During the six months ended June 30, During the six months ended June 30, During the six months ended June 30, 2021, a total of 1,090,908 warrants were issued with convertible notes (See Note 6 above). The warrants have a grant date fair value of During the six months ended June 30, On June 17, 2021, the Company issued 46,667 warrants Share-based awards, restricted stock award (“RSAs”) On February 4, 2021 the Board resolved that, the Company shall pay each member of the Board, for each calendar quarter during which such member continues to serve on the Board, compensation as a group amounts to $62,500 per quarter. The shares vest one year after issuance. A summary of the activity related
Stock-based compensation for RSA’s has been recorded in the consolidated statements of Note The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”). Corporate taxpayers may carry back net operating losses (NOLs) originating between 2018 and 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act. In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act did not result in any material adjustments to our income tax provision for the On March 26, 2020 and April 30, 2020, the Company received 2 separate loans pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act. When the applications for PPP first opened up, there was limited available funding and much confusion surrounding the application process. The Therefore, in late April, the company proceeded with applying for the April 2020 PPP Loan. After some conflicting communications regarding acceptance, the Company attempted to contact the lender to clarify but got no response. After continued attempts to follow up with both lenders, the Company received approval for the May 2020 PPP Loan and funding for the April 2020 PPP Loan on the same day, followed the next day by the funding of the May 2020 PPP Loan. The Company immediately separated the funds for the April 2020 PPP Loan into a separate reserved bank account with the intention of returning the funds. However, after several attempts to contact the lender with no response, the Company was faced with difficulty raising funds As each company is only permitted one loan under the CARES Act, there is a possibility the loan may be called by the SBA and the Company would have to repay the loan in full at such time. As of June 30, 2021, the May 2020 PPP Loan is no longer outstanding, as during the six months ended June 30, 2021, the Company repaid $136,597 in principal and was forgiven $275,903 of principal and $3,119 of accrued interest. As of June 30, 2021 there was $255,426 in principal outstanding on the April
Litigation 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,
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 After we submitted a Lease Agreements On May 5, 2018, the Company signed a 5-year lease for approximately 2,300 square feet of office space at 2050 Center Avenue Suite 640, Fort Lee, New Jersey 07024. Commencement date of the lease is June 1, 2018. The total amount due under this lease is $411,150. On April 1, 2019, the Company signed a 4-year lease for approximately 796 square feet of office space at 2050 Center Avenue Suite 660, Fort Lee, New Jersey 07024. Commencement date of the lease is April 1, 2019. The total amount due under this lease is The components of lease expense were as follows:
Supplemental cash flow and other information related to leases was as follows:
Total future minimum payments required under the lease as of
Rent expense for the six months ended June 30, 2021 and 2020 was $53,869 and Note 11 – Acquisition On June 1, 2021, the Company, entered into a Membership Interest Purchase Agreement (the “MIPA”) with Angela Hein (“Hein”) and On June 4, 2021, the Company, entered into a MIPA with Sellers, pursuant to which the Purchaser acquired 841,005 common units of Plant Camp from the Sellers, resulting in the Purchaser owning a total of 89% of the issued and outstanding equity of Plant Camp. The additional Membership Interests were purchased for $300,000. The following sets forth the components of the purchase price:
The excess purchase price amounts are provisional and may be adjusted during the one-year measurement period as required by U.S. GAAP. The following table provides a summary of the preliminary allocation of the excess purchase price.
Note
On July 20, 2021, the Company entered into a Stock Purchase Agreement to purchase 44% ownership and 55% of voting power of the issued and outstanding shares of WHE Agency, Inc., (“WHE”). The aggregate closing consideration was $935,000, which consists of a combination of $144,750 in cash and $790,250 in the form of 224,503 shares of the Company’s restricted common stock at a price of $3.52 per share. Based on the purchase price of $935,000 for 44% ownership, the fair value of the non-controlling interest would be approximately $1,190,000. WHE is a talent management and public relations agency dedicated to the representation and management of family- and lifestyle-focused influencers and digital creators. The transaction leverages the existing synergies between Creatd and WHE, specifically enabling WHE to utilize the Vocal platform and technology to further expand its creator network, introduce new verticals, and deepen existing brand ties. At the same time, the addition of WHE enables Creatd to expand its existing agency offerings, specifically within the scope of influencer marketing. With WHE in its portfolio, Creatd has expanded the pool of talent available to partner with its brand clients. Additionally, the transaction created immense opportunity for Creatd in terms of both human capital and market expansion. First, the transaction enables Creatd to enhance its own talent pool; gaining access to WHE’s highly skilled talent managers and brand liaisons fuels new capacity for innovation and growth. Second, WHE’s influencers work with a large set of brand partners, all of whom stand to benefit by working with Creatd Partners on Vocal for Brands marketing campaigns. Integrating WHE and its influencer network into Creatd provides Creatd the benefit of a significantly expanded customer base. The required separate audited financials and pro forma condensed interim statements will be completed and filed as soon as practicable, and in any event not later than October 3, 2021. Subsequent to June 30,
Subsequent to June 30, 2021, a total of $3,525,000 in principal of convertible notes converted into shares of
Subsequent to June 30, 2021, 438 shares of Series E Preferred Stock converted into common stock, resulting in the issuance of 106,311 shares of common stock. On July 8, 2021, the Company made a deposit of $100,000 towards future ownership in a private company related to the Memorandum of Understanding announced on August 2, 2021, below. At this time, the Company has no voting control nor equity in the private company related to this deposit. On July 28, 2021, the Company entered into a non-binding Memorandum of Understanding to purchase a majority stake in direct-to-consumer company, Wobble Wedge®. Wobble Wedges®, sold through both direct-to-consumer (DTC) and wholesale avenues, are an interlocking modular system of tapered shims that are adaptable to hundreds of uses. Pursuant to the MOU, Creatd intends to acquire a 55% equity stake in Wobble Wedge, in exchange for a combination of cash and stock consideration totaling $500,000. The Company expects to execute definitive agreements in early fourth quarter 2021 and to close shortly thereafter, subject to the completion of due diligence and other closing conditions. On August 2, 2021, the Company entered into a Memorandum of Understanding to acquire a majority equity stake in Dune, Inc., a direct-to-consumer brand focused on promoting wellness through its range of health-oriented beverages. Pursuant to the MOU, Creatd intends to acquire a 50.4% equity stake in Dune in exchange for a combination of cash and stock. The Company expects to execute definitive agreements early in the fourth quarter 2021 and to close shortly thereafter, subject to the completion of due diligence and other closing conditions.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This 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. 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 statements to actual results. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions 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 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. This discussion should be read in conjunction with our financial statements and accompanying notes for the year ended December 31, Overview
Creatd Labs, our first pillar, is dedicated to building a home base for creators of all kinds. Creatd Labs houses our proprietary technology platforms, including Creatd’s flagship product, Vocal and its 39 niche communities. Vocal is an all-in-one platform where creators can share their stories, build an audience, and earn money. To date, over 1 million creators now call Vocal their home, from bloggers to podcasters, makers, musicians, photographers, and more. Creatd Partners, Creatd’s second pillar, fosters relationships between creators and brands. This pillar houses Creatd’s three primary agency businesses: Vocal for Brands (content marketing), Seller’s Choice (performance marketing), and WHE Agency (influencer marketing). Creatd Partners leverages its network of brands and influencers, along with resources from across Creatd, to help direct-to-consumer brands achieve conversions and reach their target audiences, while driving success for all of Creatd’s stakeholders. Creatd Ventures, our third pillar, invests in creators and helps them evolve into entrepreneurs, by providing needed capital, operational resources, and marketing expertise. This pillar houses Creatd's portfolio of e-commerce businesses, both majority and minority-owned, including Plant Camp, Untamed Photographer, with additional transactions still in progress. The ideal candidate for a Creatd Ventures partnership is an individual that shares in our mission of serving the creator economy and are accretive to our pillars. Creatd Studios is our fourth pillar, focused on identifying opportunities to leverage Creatd’s stories–including those from Vocal creators and from our owned IP library–for transmedia production and adaptation to print, podcasts, TV, film, digital video, games, comics, and more. Housed under Creatd Studios is Creatd’s intellectual property and legacy media assets, including acquired artwork, photographs and media memorabilia. Creatd Studios represents an initiative by Creatd to revitalize and transform this content, by partnering with the Creatd Labs Creatd Labs is building the home base for creators. 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. Creators of 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. 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. Since its initial launch in Vocal provides a broad stage for creators to connect with fans and find new audiences. In addition to enabling access to millions of
Why Over 1 Million Creators Choose Vocal:
Creatd Partners
All brands have a story to
Vocal’s first-party data
Vocal for Brands typically collects fixed fees ranging from $30,000 to $50,000, depending on campaign duration and specific client objectives. Additionally, brands can collaborate 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 WHE Agency The WHE Agency, acquired by Creatd in 2021, was founded by Tracy Willis with the goal of supporting top creators and influencers, by connecting them with leading family and lifestyle brands
Creatd Ventures houses Creatd's portfolio of e-commerce businesses, both majority and minority-owned as well as associated e-commerce technology and infrastructure. The Company supports founders by providing capital, as well as a host of services including design and development, marketing and distribution, and go-to-market strategy. Currently, the
Opportunistic Acquisition Strategy
Creatd’s extensive brand and founder network creates a positively-selected pool of potential targets for opportunistic e-commerce ventures. The ideal candidate is one that shares in our mission of serving the creator economy and that is aligned with our pillars. Investment framework:
Creatd Studios The goal of Creatd Studios is to elevate creators’ stories to TV, film, books, podcasts, video, and more.
With millions of compelling stories in its midst, Creatd’s technology surfaces the best candidates for transmedia adaptations, through community and creator data insights. Then, Creatd Studios helps creators tell their existing stories in new ways, by partnering them with entertainment and publishing studios to create unique content experiences that accelerate earnings, discoverability, and open doors.
Acquired by Creatd's founders, the OG Collection is an extensive library of original artwork and imagery from the archives of some of the most iconic magazines of the 20th century. OG Gallery is an exploratory initiative aimed at identifying opportunities to propel the OG Collection into a new technological sphere: the NFT marketplace. Results of Operations Liquidity and Capital Resources The following table summarizes total current assets, liabilities and working capital at June 30,
At June 30, Net Cash Net cash used in operating activities for the six months ended June 30, 2021, and 2020, was $10,996,578 and
Net cash used in investing activities for the six months ended June 30,
Net cash provided by financing activities for the six months ended June 30, 2021, and 2020 was $5,967,733 and Summary of Statements of Operations for the Three Months Ended June 30,
Revenue Revenue was Operating Expenses Operating expenses for the three months ended June 30, Additionally, the increased operating expenses during the quarter are partially attributable to a $1.3 million increase in compensation, including a $338,000 increase in stock-based current cash level and its near completion of its current acquisition pipeline, the Company should see a significant reduction in its financing-related expenditures and other transaction-related fees in upcoming quarters.
Loss from Operations Loss from operations for the three months ended June 30, Other Income and Expenses Other expenses for the three months ended June 30, Net Loss Net loss attributable to common shareholders for the three months ended June 30,
Summary of Statements of Operations for the Six Months Ended June 30,
Revenue Revenue was Operating Expenses Operating expenses for the six months ended June 30, Additionally, the increased operating expenses during this six-month period are partially attributable to and a $3.9 million increase in compensation, including a $2 million increase in stock-based current cash level and its near completion of its current acquisition pipeline, the Company should see a significant reduction in its financing-related expenditures and other transaction-related fees in upcoming quarters.
Loss from Operations Loss from operations for the six months ended June 30, Other Income and Expenses Other expenses for the six months ended June 30, Net Loss Net loss attributable to common
Off-Balance Sheet Arrangements As of June 30,
Our significant accounting policies are described in Note 2 of the Item 3. Quantitative and Qualitative Disclosures
our 2020 Annual Report.
Item 4. Controls and
The
Changes in Internal Control Over Financial Reporting
reporting in the future.
PART II - OTHER INFORMATION From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, 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. On June 25, 2020, Home Revolution, LLC (“Home Revolution”) filed a lawsuit in the United States District Court for the District of New Jersey (the “Court”), entitled Home Revolution, LLC, et al v. Jerrick Media Holdings, Inc. et al, Case No. 2:20-cv-07775-JMV-MF (the “Action”). The complaint for the lawsuit alleges, among other things, that the Company 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.
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 After we submitted a Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our most recent Annual Report on Form 10-K for the year ended December 31, There have been no material changes to the Risk Factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31,
2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. During the three months ended June 30,
During the six months ended June 30,
During the Debt Conversion During the three months ended June 30, Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures. Not applicable. There is no other information required to be disclosed under this item which was not previously disclosed.
Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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