As filed with the Securities and Exchange Commission on August 20, 2020.November 22, 2022
Registration Statement No. 333-238514333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
AMENDMENT NO. 3 TO:
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
JERRICK MEDIA HOLDINGS,CREATD, INC.
(to be renamed “Creatd Inc.”)
(Exact name of Registrantregistrant as specified in its charter)
Nevada | 7819 | 87-0645394 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification |
2050 Center Avenue Suite 640419 Lafayette Street
Fort Lee, NJ 070246th Floor
Telephone: New York, NY 10003
(201) 258-3770
(Address, including zip code and telephone number, including area code, of registrant’s principal executive offices)
Jeremy Frommer
Chief Executive Officer
2050 Center Avenue Suite 640419 Lafayette Street, 6th Floor
Fort Lee, NJ 07024New York, NY 10003
Telephone: (201) 258-3770
(Name, address, including zip code and telephone number, including area code, of agent for service)
Copies of all communications, including communications sent to agent for service, should be sent to:
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Joseph M. Lucosky, Esq.
Scott E. Linsky, Esq.
Lucosky Brookman LLP
101 Wood Avenue South, 5th Floor
Iselin, NJ 08830
(732) 395-4400
Approximate Datedate of Commencementcommencement of Proposed Saleproposed sale to the Public:public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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 7(a)(2)(B) of the Securities ActAct. ☐
Each Class of Securities to be Registered | Proposed Maximum Aggregate Offering Price (1)(2) | Amount of Registration Fee | ||||||
Units, consisting of one share of common stock, par value $0.001 per share, and one warrant to purchase one share of common stock, par value $0.001 per share | ||||||||
Common stock included as part of the Units | $ | 8,625,000 | $ | 1,119.53 | ||||
Warrants included as part of the Units (3) | ||||||||
Shares of common stock issuable upon exercise of the Warrants | $ | 8,625,000 | $ | 1,119.53 | ||||
Total | $ | 17,250,000 | $ | 2,239.06 | * |
The Registrantregistrant hereby amends this Registration Statementregistration statement on such date or dates as may be necessary to delay its effective date until the Registrantregistrant shall file a further amendment which specifically states that this Registration Statementregistration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statementthis registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determinedetermine. .
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it iswe are not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 20, 2020NOVEMBER 22, 2022
PRELIMINARY PROSPECTUS
JERRICK MEDIA HOLDINGS, INC.
(to be renamed “Creatd Inc.”)
833,333 Units
9,250,834 Shares of Common Stock and Warrants
This prospectus relates to the sale by Jerrick Media Holdings, Inc.resale, from time to time, of up to 9,250,834 shares (the “Company” or “Jerrick”“Shares”) of approximately $7,500,000 of units of securities (the “Units”). The offering price is $ per Unit.
Each Unit consists of (a) one share of our common stock, and (b) one warrant to purchase onepar value $0.001 per share of our common stock at an exercise price equal to $ (100% of(“Common Stock”), by the offering price per Unit) until the fifth anniversary of the issuance date. Theselling stockholders identified in this prospectus under “Selling Stockholders” (the “Offering”), comprised of:
(i) | up to 1,250,834 Shares, pursuant to securities purchase agreements the Company entered into and closed on with six (6) Selling Stockholders on July 25, 2022 (as amended, collectively, the “July Purchase Agreements”), which includes (a) up to 1,720,000 shares of Common Stock issuable upon conversion of debentures in the principal amount of $2,150,000 (the “Debentures”), (b) 1,075,000 shares of Common Stock issuable upon exercise of Series E Common Stock Purchase Warrants (the “Series E Warrants”), and (c) 1,075,000 Series F Common Stock Purchase Warrants (the “Series F Warrants,” and together with the Series E Warrants, the “July Warrants”), |
(ii) | up to 4,000,000 Shares, which underly the September Warrants (defined below), pursuant to a securities purchase agreement (the “September Purchase Agreement”) with five accredited investors resulting in the raise of $800,000 in gross proceeds to the Company, pursuant to which the Company agreed to sell in a registered direct offering (the “Offering”) an aggregate of 4,000,000 shares of Common Stock, in connection with which, in a concurrent private placement, the Company issued to such investors warrants to purchase up to 4,000,000 shares of Common Stock, representing 100% of the shares of common stock purchased in the Offering (the “September Warrants”); and |
(iii) | up to 4,000,000 Shares, pursuant to the securities purchase agreement the Company entered into and closed on October 24, 2022 with one accredited investor (the “October Investor”), whereby the October Investor purchased from the Company for an aggregate of $1,500,000 in subscription amount, an unsecured debenture in the principal amount of $1,666,650 (the “October Debenture”). |
We are not selling any shares of our common stock and warrants are immediately separableCommon Stock under this prospectus and will be issued separately but will be purchased together in this offering.
We have applied to list our common stock andnot receive any proceeds from the warrants on the Nasdaq Capital Market upon our satisfactionsale of the exchange’s initial listing criteria. If our common stockShares. We will, however, receive proceeds from any warrants that are exercised through the payment of the exercise price in cash. The Selling Stockholders will bear all commissions and warrants are not approved for listing ondiscounts, if any, attributable to the Nasdaq Capital Market, wesale of the Shares. We will not consummate this offering. No assurance can be given that our application will be approved. Upon approval to list our common stockbear all costs, expenses and fees in connection with the warrants onregistration of the Nasdaq Capital Market, we will change our name to “Creatd, Inc.” Additionally, upon the securities comprising the Units becoming separately traded, we expect that our common stock and warrants will be listed on the Nasdaq Capital Market under the symbols “CRTD” and “CRTDW,” respectively.Shares.
Our common stock is currently tradingquoted on the OTCQB Venture Market (the “OTCQB”Marketplace operated by OTC Markets Group Inc. (“OTCQB”) under the temporary symbol of “JMDAD,“CRTD.” previously “JMDA.” We have assumed a public offering price of $9.00 per Unit,On November 21, 2022, the last reported sale price for our common stock as reported on the OTCQB on August 18, 2020. The actual public offering price per Unit will be determined between us and the underwriters at the time of pricing and may be at a discount to the current market price. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the final offering price.
Quotes of our common stock trading prices on the OTCQB may not be indicative of the market price of our common stock or warrants if listed on the Nasdaq Capital Market. was $1.62 per share.
Investing in our common stock is highly speculative andsecurities involves a high degree of risk. You should carefully consider the risks and uncertainties described under the headingrisks. See “Risk Factors” beginning on page 812 of this prospectus. We and our board of directors are not making any recommendation regarding the exercise of your rights.
No securities may be sold without delivery of this prospectus before making a decision to purchase ourand the applicable prospectus supplement describing the method and terms of the offering of such securities.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The CompanyNeither the Securities and Exchange Commission nor any state securities commission has granted a 45 day optionapproved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the representative of the underwriters to purchase up to an additional 125,000 shares of common stock to cover over-allotments, if any.contrary is a criminal offense.
The underwriters expect to deliver the shares to purchasers in the offering on or about , 2020.
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The date of this prospectus is , 2020.November 22, 2022.
ABOUT THIS PROSPECTUS
In this prospectus, unless the context suggests otherwise, references to “the Company,” “Jerrick,” “JMDA,” “JMDAD,” “we,” “us,” and “our” refer to Jerrick Media Holdings, Inc. and its consolidated subsidiaries.
This prospectus describes the specific details regarding this offering, the terms and conditions of the common stock being offered hereby and the risks of investing in the Company’s common stock. You should read this prospectus and the additional information about the Company described in the section entitled “Where You Can Find More Information” before making your investment decision.
Neither the Company, nor any of its officers, directors, agents, representatives or underwriters, make any representation to you about the legality of an investment in the Company’s common stock. You should not interpret the contents of this prospectus or any free writing prospectus to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in the Company’s common stock.
ADDITIONAL INFORMATION
You should rely only on the information contained in this prospectus and in any accompanying prospectus supplement. No one has been authorized to provide you with different or additional information. The shares of common stock are not being offered in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front of such documents.
TRADEMARKS AND TRADE NAMES
This prospectus includes trademarks that are protected under applicable intellectual property laws and are the Company’s property or the property of one of the Company’s subsidiaries. This prospectus also contains trademarks, service marks, trade names and/or copyrights of other companies, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the Company will not assert, to the fullest extent under applicable law, its rights or the right of the applicable licensor to these trademarks and trade names.
INDUSTRY AND MARKET DATA
Unless otherwise indicated, information contained in this prospectus concerning the Company’s industry and the markets in which it operates, including market position and market opportunity, is based on information from management’s estimates, as well as from industry publications and research, surveys and studies conducted by third parties. The third-party sources from which the Company has obtained information generally state that the information contained therein has been obtained from sources believed to be reliable, but the Company cannot assure you that this information is accurate or complete. The Company has not independently verified any of the data from third-party sources nor has it verified the underlying economic assumptions relied upon by those third parties. Similarly, internal company surveys, industry forecasts and market research, which the Company believes to be reliable, based upon management’s knowledge of the industry, have not been verified by any independent sources. The Company’s internal surveys are based on data it has collected over the past several years, which it believes to be reliable. Management estimates are derived from publicly available information, its knowledge of the industry, and assumptions based on such information and knowledge, which management believes to be reasonable and appropriate. However, assumptions and estimates of the Company’s future performance, and the future performance of its industry, are subject to numerous known and unknown risks and uncertainties, including those described under the heading “Risk Factors” in this prospectus and those described elsewhere in this prospectus, and the other documents the Company files with the Securities and Exchange Commission, or SEC, from time to time. These and other important factors could result in its estimates and assumptions being materially different from future results. You should read the information contained in this prospectus completely and with the understanding that future results may be materially different and worse from what the Company expects. See the information included under the heading “Forward-Looking Statements.”
TABLE OF CONTENTS
i
Unless the context requires otherwise, references in this prospectus to “Creatd,” “our company,” “we,” “our” “us” and similar terms refer to Creatd, Inc., a Nevada corporation, and its subsidiaries, unless the context otherwise requires.
ii
The following summary highlights selected information contained elsewhere in this prospectus. ThisBecause the following is only a summary, mayit does not contain all of the information that may be important to you. Youyou should consider before investing in our securities. Before making an investment decision, you should carefully read all of the information contained in this entire prospectus, carefully, including the sections entitledrisks described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s historicalour consolidated financial statements and the related notes included elsewhere in this prospectus. In this prospectus, unless otherwise noted,from our 2021 Annual Report and most recent Form 10-Q, before making an investment decision.
Overview
Creatd, Inc. provides economic opportunities to creators and brands by multiplying the terms “theimpact of platforms, technology, and people.
The Company” “Jerrick,” “we,” “us,” has four main revenue lines, all directly related to its flagship technology platform, Vocal. The business lines complement one another, creating a flywheel effect. Working together, they provide shared data and “our” referresources to Jerrick Media Holdings, Inc.holistically leverage and its consolidated subsidiaries.organically grow the Company. Revenues are generated from creator subscriptions, consumer product sales, branded content, and IP development.
Creator-Centric Strategy
Creatd’s north star metric is to empower creators by providing best-in-class tools, supportive communities, and opportunities for monetization and audience expansion. This creator-first approach is the foundation of our culture and mission.
Overview
Creator Subscriptions
Jerrick Media Holdings, Inc. (“JMDA” or “the Company”)
Creatd’s most scalable stream of revenues are derived from its flagship technology platform, Vocal.
Vocal was built to serve as a home base for creators. This robust, proprietary technology platform provides digital tools and resources, safe and curated communities, and monetization opportunities that enable creators to find a receptive audience and be rewarded for their content. Creators of all types call Vocal their home, from bloggers to social media influencers, to podcasters, founders, musicians, photographers, and more.
Since its initial launch in 2016, Vocal has grown to over 1.5 million registered creators and is the parent company and creatorone of the premier technology platforms for content creators of all shapes and sizes. Creators can opt to use Vocal platform. The Company develops technology-based solutionsfor free, or upgrade to solve problemsthe premium membership tier, Vocal+. Upon joining Vocal, either as a freemium or premium member, creators can immediately begin to utilize Vocal’s storytelling tools to create and publish their stories, as well as benefit from Vocal’s monetization features. Creatd facilitates creators’ monetization on Vocal in many ways, including i) rewarding creators for the creator community,each ‘read’ their story receives; ii) via Vocal Challenges, or writing contests through which creators can win cash and other rewards; iii) by awarding Bonuses; iv) by connecting creators with brands for opportunities to collaborate on Vocal for Brands branded content campaigns; v) through ‘Subscribe,’ which enables creators to receive payment directly from their ideal audiencesaudience via monthly subscriptions and one-off microtransactions; vi) via Vocal’s Ambassador Program, which enables creators to receive additional rewards whenever they refer a new Vocal+ member. The Vocal app is available for both iOS and Android on the Apple App store and the Google Play store.
Vocal’s proprietary technology is built on Keystone, the same underlying open-source framework used by industry leaders in the software as a service (SaaS) space. Some of the differentiating elements of Vocal’s technology are speed, sustainability, and scalability. The Company continues to invest heavily in research and development to continuously improve and innovate its platform, with the goal of optimizing the user experience for creators, brands that want to access thoseand their audiences. Through a combination of data analysis, design, and development,Additionally, the Company conceptualizes, creates, and maintains a suite of technology products and provides services that influence a global audience.
Jerrick is committed to identifying and leveraging opportunities within the digitalVocal platform and content monetization space. Our proprietary flagshipits underlying technology platform is Vocal, which provides creators with storytelling tools, engaged communities,maintain an advantageous capital-light infrastructure. By using cloud service providers and opportunities to monetize their content. Vocal’s architecture was engineered to support a scalable and easy-to-update platform that could adapt its capacity to meet the current and growing demand for digital resources and technologies that foster virtual connection and community.
We maintain a capital-light infrastructure by, among other things, using third party cloud-based service providers. As a result,data segment specialists, we are able to focus on building the platform, community, and revenue growth rather than building and maintaining athe costly internal infrastructure. Similarly, whileinfrastructures that have materially affected so many legacy media platforms.
Vocal’s technology has been specifically designed to significantly scale without a material corresponding increase in operational costs. While our users can embed rich media, such as video, audio, and product links, into their Vocal stories, the rich media content is hosted elsewhere (such as YouTube, Instagram, Vimeo, Shopify, Spotify, etc.)and Spotify). As a result, ourThe Vocal platform can accommodate rich media content of all kinds without bearing the financial or operational costs associated with hosting the rich media itself. Creatd maintains a number of partnerships and initiatives with the primary content distribution and hosting platforms. In addition to the benefits this framework affords to the Company, it provides the additional benefit to our content creators, in that a creator can increase their monetization; for example, a creator can embed their YouTube video into a Vocal story and thus derive earnings from both platforms when their video is viewed.
Consumer Products Group
Creatd’s portfolio of internally owned and operated e-commerce businesses and associated technology and infrastructure make up the majority of the company’s second most scalable revenue line. The Company supports founders by providing a host of services including design and development, marketing and distribution, and go-to-market strategies. The Company expects to broaden its portfolio through the acquisition of up and coming brands that are aligned and easily consolidated into its shared supply chain, resources, and infrastructure.
This portfolio includes:
● | Camp, a direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. Each of Camp’s products are created with servings of vegetables and contain Vitamins A, C, D, E, B1 + B6. Since its launch in 2020, Camp continues to add new products to its line of healthy, veggie-based, family-friendly foods, with flavors including Classic Cheddar Mac ‘N’ Cheese, White Cheddar Mac ‘N’ Cheese, Vegan Cheezy Mac, and Twist Veggie Pasta. |
● | Dune Glow Remedy (“Dune”), which the Company purchased and brought to market in 2021, is a beverage brand focused on promoting wellness and beauty from within. Each beverage in Dune’s product line is meticulously crafted with functional ingredients that nourish skin from the inside out and enhance one’s natural glow. During 2022, Dune has continued to advance its retail and wholesale distribution strategy, securing numerous partnerships including with lifestyle retailer Urban Outfitters, Equinox, and the Los Angeles-based Erewhon Market. |
● | Basis, a hydrating electrolyte drink mix formulated using rehydration therapies developed by the World Health Organization. Acquired by the Company in first quarter 2022, Basis has a history of strong sales volume both on the brand’s website as well as through third-party distribution channels such as Amazon. |
● | Brave, a plant-based food company that provides convenient and healthy breakfast food products. On September 13, 2022, the Company acquired 100% of the membership interests of Brave Foods, LLC, a Maine limited liability company (“Brave”). What started as a search for a better morning routine evolved into a business serving thousands of go-getters of every type. |
Branded Content
The branded content revenue line is driven primarily by its Vocal for Brands offering, the Company’s internal content studio. The business line works with premier brands developing best-in-class organic marketing campaigns. In addition to content creation, the Company generates revenues from its influencer and performance marketing agency opportunities.
Brands have a story to tell. They leverage Vocal’s technology was builtcreator communities to organically sustain and scale multiple lines of revenue,help them tell it. Vocal for Brands’ content marketing studio specializes in pairing leading brands with Vocal creators, as well as discovering new talent and introducing them to assimilate externalthe Vocal platform. The branded content business produces marketing campaigns on the platform that are non-interruptive, engaging, and direct-response driven. Additionally, brands can opt to collaborate with Vocal on sponsored Challenges, prompting the creation of thousands of high-quality stories that are centered around the brand’s mission and further disseminated through creators’ respective social channels and promotional outlets. Vocal for Brands campaigns leverage Vocal’s first-party audience insights, which enables the creation of highly targeted, segmented audiences and optimized campaign results.
IP Development and Production
Creatd’s fourth revenue stream is driven by partnering with its top creators to produce stories for TV, film, podcasts, and print. The Vocal platform is perpetually generating intellectual property sourced and curated by a combination of human let moderation and machine learning models. With millions of compelling stories in its midst, Creatd’s Vocal technology surfaces the best candidates for transmedia adaptations, through a deep analysis of community, creator, and audience insights.
In 2022, Creatd announced a series of newly released and upcoming production projects, including:
● | “Write Here, Write Now,” the Company’s first-ever podcast showcasing select Vocal creators and stories; a partnership with UK-based publisher, Unbound, for the publication of books featuring stories sourced from Vocal; the formation of a new graphic novel development arm which in Fall 2022 will release its first title, Steam Wars, created by artist and independent filmmaker Larry Blamire. |
● | OG Gallery: 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. |
Application of First-Party Data
Creatd’s shared business intelligence and marketing teams identify and target individual creators, communities, and brands, utilizing empirical data harnessed from the Vocal technology platform. The team’s ability to apply its proprietary first-party data works to reduce acquisition costs for new creators and to help provide brands with conversions and an ideal targeted audience. In this way, our ability to apply first-party data is one of the value-drivers for the Company across its four business pillars. The internal teams work across the Company’s portfolio of technology product and service revenue lines.
Creatd uses its first party data to improve the Vocal platform. Specifically, data helps understand the behaviors and attributes that are common among the creators, brands, and audiences within the platform’s ecosystem. Pairing first-party Vocal data with third-party data from distribution platforms such as Instagram, Tiktok, Twitter, and Snapchat provide a more granular profile of creators, brands, and audiences. It is through generating this valuable first-party data that the Company can continually enrich and refine its targeting capabilities for branded content marketing and creator acquisition, and specifically, to reduce creator acquisition costs (CAC) and subscriber acquisition costs (SAC).
Competitive Advantage
The idea for Vocal came as a response to what Creatd’s founders recognized as systemic flaws inherent to the digital media industry and its operational infrastructures. The depreciating value of digital media business models built on legacy technology platforms that did not efficiently access and mediaapply data, created a unique opportunity for the development of a new type of creator-centric platform. Key to building a platform that could appeal to a global community was utilizing that data to create a win-win proposition for all constituents including creators, audiences and the brands that want to access them. The proprietary nature of Creatd’s technology and its process give the company a competitive advantage in acquiring undervalued technology assets that can be rapidly assimilated into the greater collective, thus exponentially driving future EBITDA.
Creatd’s founders built the Vocal platform upon the general thesis that a closed and safe ecosystem utilizing first-party data to increase efficiencies could create a sustainable and defensible business model. Vocal was strategically developed to provide value for content creators, readers, and brands, and to serve as a home for the ever-increasing amount of digital content being produced and the libraries of digital assets lying dormant.
Acquisition Strategy
Creatd’s hybrid finance and design culture is key to its acquisition strategy. Acquisition targets are companies that meet a set of opportunistic or financial standards or that are part of specific digital environments. Transactions are mainly accretive and targets can seamlessly integrate into Creatd’s existing infrastructure.revenue lines. Creatd will continue to make strategic acquisitions when presented with opportunities that are in the interest of long term shareholder value.
Recent Developments
Appointment of Erica Wagner to Board; Resignation of Joanna Bloor
On November 16, 2022, Erica Wagner was appointed to the Company’s Board of Directors. Ms. Wagner, age 55, joins the Board with over 25 years of experience as a journalist, broadcaster, editor and author. From 2016 through 2021, Ms. Wagner was a Lecturer, and later Senior Lecturer, at Goldsmith’s College, University of London, where she taught creative writing. Ms. Wagner was previously Lead Editorial Innovator for Creatd, Inc., has previously and currently held roles as a freelance editor, journalist, and contributing writer for numerous outlets both in the U.K. and the U.S., including The New Statesman, Harper’s Bazaar, the Economist, the Observer, the New York Times. Ms. Wagner is also a freelance literary and creative consultant for Chanel, as well as the host of their branded podcast. She has twice been a judge of the Booker Prize and has been judge and Chair of the Goldsmiths Prize. In 2015, Ms. Wagner was awarded an Honorary PhD by the University of East Anglia, and currently Goldsmith’s College Distinguished Writers’ Centre Fellow. She has an undergraduate degree from University of Cambridge, a Master’s degree from University of East Anglia, and an Honorary PhD from the University of East Anglia. As a member of Creatd’s board of directors, Ms. Wagner will add significant expertise with respect to informing the Company’s literary and creative direction, having worked closely with news organizations, commercial companies and publishers, to advise their creative direction and its application towards commercial success.
On November 17, 2022, the Board received notice from Joanna Bloor of her resignation as a director and from all committees of the Board on which she served, effective as of such date. Such resignation is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Appointment of Peter Majar to the Board; Resignation of Lorraine Hendrickson
On November 2, 2022, the Board appointed Peter Majar to the Board. Mr. Majar, age 55, Founder and Managing Member of Majar Advisors, combines over 25 years of experience in investment banking, financial services and technology, and management consulting, having held numerous senior management and executive positions including Chief Financial Officer, Head of Financial Technology, Head of Strategy, as well as several Managing Director positions. From 2015 to 2017, Mr. Majar served as Managing Director in Investment Banking and co-Head of Diversified Financial Services at Piper Jaffray & Co. (now Piper Sandler Companies). From 2017 to 2018, Mr. Majar provided management consulting services through his self-established firm, Majar Advisors LLC, which remains in operation through the present. From 2018 to 2021, Mr. Majar served as Managing Director, Head of Financial Technology at New York-based investment banking and financial advisory firm, TAP Advisors, LLC. Between 2021 and 2022, Mr. Majar served as Chief Financial Officer at information technology company Hoyos Integrity Corp., having previously served as a longtime advisor to the firm. Mr. Majar holds an undergraduate degree from University of Washington and an MBA from Columbia University. As a board director, Mr. Majar will add considerable value, including through his comprehensive and diverse investment management experience, deep knowledge of financial technology services and transactions, and broad experience with corporate development, strategy consulting, and executive leadership.
On November 1, 2022, the Board received notice from Lorraine Hendrickson of her resignation as a director and from all committees of the Board on which she served, effective as of such date. Ms. Hendrickson’s resignation as a member of the Board is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Nasdaq Delisting
On September 2, 2022, the Company received a letter from the staff of The Nasdaq Capital Market notifying the Company that the Nasdaq Hearings Panel has determined to delist the Company’s common stock from the Exchange, based on the Company’s failure to comply with the listing requirements of Nasdaq Rule 5550(b)(1) as a result of the Company’s shareholder equity deficit for the period ended June 30, 2022, as demonstrated in Company’s Quarterly Report on Form 10-Q filed on August 15, 2022, following the Company having not complied with the market value of listed securities requirement in Nasdaq Rule 5550(b)(2) on March 1, 2022, while the Company was under a Panel Monitor, as had been previously disclosed. Suspension of trading in the Company’s shares on the Exchange became effective at the opening of business on September 7, 2022, at which time the Company’s common stock, under the symbol “CRTD,” and publicly-traded warrants, under the symbol “CRTDW,” was quoted on the OTCPink marketplace operated by OTC Markets Group Inc.
Following passage of the proscribed 15-day time period for appeal as stated in the Letter, on October 26, 2022, Nasdaq completed the delisting by filing a Form 25 Notification of Delisting with the Securities and Exchange Commission.
The Company’s common stock, under the symbol “CRTD,” is quoted on the OTCQB marketplace operated by OTC Markets Group Inc. effective as of September 26, 2022. The Company’s publicly-traded warrants, under the symbol “CRTDW,” are quoted on the OTCPink marketplace operated by OTC Markets Group Inc.
Securities Purchase Agreement; Side Letter
On October 24, 2022, the Company entered into and closed a securities purchase agreement (the “Purchase Agreement”) with one accredited investor (the “Investor”), whereby the Investor purchased from the Company for an aggregate of $1,500,000 in subscription amount, an unsecured debenture in the principal amount of $1,666,650 (the “Debenture”). The Company anticipates continuingand the Investor also entered into a registration rights agreement (each, a “Registration Rights Agreement”) pursuant to the Purchase Agreement.
The Debenture has an original issue discount of 10%, has a term of six months with a maturity date of April 24, 2023, may be extended by six months at the Company’s option subject to certain conditions, and are convertible into shares of Common Stock at a conversion price of $0.20 per share, subject to adjustment upon certain events.
In connection with its entry into the Purchase Agreement and issuance of the Debenture, the Company also entered into a side letter agreement (the “Letter Agreement”) with the holders of debentures of the Company, the Series C Warrants and Series D Warrants issued as of May 31, 2022 (the “May Investors”) and the holders of debentures of the Company, the Series E Warrants and Series F Warrants issued as of July 25, 2022 (the “July Investors”). Pursuant to the Letter Agreement each of the May Investors and the July Investors have entered into a lock-up agreement whereby they may not sell any such debentures, warrants, the shares into which such debentures may be converted, or certain shares underlying such warrants until the date that is 30 days after the date on which the registration statement registering for resale the shares of the Company’s common stock underlying the Debenture is declared effective by the Securities and Exchange Commission. Additionally, the Letter Agreement, provides that the May Investors and July Investors have agreed to a further lock up of such shares for a further 30 days upon the receipt of a certain amount of the proceeds from future potential issuances of debentures, common stock or similar securities by the Company. Further additionally, pursuant to the Letter Agreement, the May Investors and the July Investors have agreed to exchange and return for cancellation the Series C Warrants, Series D Warrants, Series E Warrants and Series F Warrants, receiving replacement warrants from the Company (the “Replacement Warrants”), in consideration for (i) the Company’s payment of $750,000 of the proceeds from the sale of the Debenture to the May Investors and July Investors on a pro rata basis and (ii) the Company’s agreement to pay, on a pro rata basis to the May Investors and July Investors, the greater of (x) $750,000 and (y) 50% of the gross proceeds raised in a subsequent financing. The Replacement Warrants reflect a reduction in the number of Series C and Series D Warrants from 1,550,000 in each class to 1,536,607 in each class and a reduction in the number of Series E and Series F Warrants from 1,075,000 in each class to 807,143 in each class, and the initial exercise date for the Replacement Warrants are unchanged from the date as set forth in the respective exchanged Series C, Series D, Series E or Series F Warrant.
Common Stock Purchase Agreement, Securities Purchase Agreement and Promissory Note
On October 20, 2022, the Company entered into a Common Stock Purchase Agreement (the “Investment Agreement”) with an otherwise unaffiliated third party (the “Investor”). Pursuant to the terms of the Investment Agreement, for a period of thirty-six (36) months commencing on the trading day immediately following date of effectiveness of the Registration Statement (as defined below), the Investor purchase up to $15,000,000 of the Company’s common stock, par value $0.001 per share (the “Shares”), pursuant to Drawdown Notices (as defined below), covering the Registrable Securities (as defined below). The purchase price of the Shares under the Investment Agreement is equal to 82% of the lowest volume weighted average price (VWAP) during the last ten trading days after the Company delivers to the Investor a Put notice (a “Drawdown Notice”) in writing requiring Investor to purchase shares of the Company, subject to the terms of the Investment Agreement.
On October 20, 2022, the Company also entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Investor, pursuant to which the Company issued to the Investor on that date a Promissory Note (the “Note”) in the principal amount of $300,000 in exchange for a purchase price of $255,000, which the Investor funded on October 20,2022. The proceeds of the Note will be used by the Company for general working capital purposes.
The Note bears interest at the rate of 10% per annum. Starting on the fifth month anniversary of the funding of the Note, and for the next six months thereafter, the Company will make targeted acquisitionsseven equal monthly payments of technologies$47,142.85 to the Investor.
On October 20, 2022, in connection with the entry by the Company and publicthe Investor into the economic agreements, (i.e., the Investment Agreement, the Purchase Agreement, and the Note and the funding thereof), the Company issued 800,000 shares of its common stock to the Investor.
Securities Purchase Agreement
On September 15, 2022, Creatd, Inc., entered into a securities purchase agreement (the “Purchase Agreement”) with five accredited investors resulting in the raise of $800,000 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell in a registered direct offering (the “Offering”) an aggregate of 4,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). In a concurrent private companies.placement, the Company issued to such investors warrants to purchase up to 4,000,000 shares of Common Stock, representing 100% of the shares of common stock purchased in the Offering (the “Warrants”). The Vocal technology platform, trademark,Warrants and related intellectual propertythe shares of common stock issuable upon the exercise of the Warrants (the “Warrant Shares”) are wholly owned and operated by Jerrick. not being registered under the Securities Act of 1933, as amended.
The Offering is expected to close on or about September 19, 2022, subject to the satisfaction of customary closing conditions as set forth in the Purchase Agreement. The Company expects the gross proceeds from the Offering to be $800,000, before deducting Offering expenses, which will be used for general corporate purposes, including working capital.
Risks AssociatedThe shares of Common Stock were offered and sold by the Company pursuant to a prospectus supplement, which will be filed with Our Businessthe Securities and Exchange Commission in connection with a takedown from the Company’s effective shelf registration statement on Form S-3, which was filed with the Commission on November 25, 2020 and subsequently declared effective on April 23, 2021 (File No. 333-250982) (the “Shelf Registration Statement”).
Our business isThe Warrants are immediately exercisable for a term of five years until September 15, 2027. The Warrants are exercisable at an exercise price of $0.20, subject to a numberadjustment upon certain events. The Warrants provide for cashless exercise to the extent that there is no registration statement available for the underlying shares of risksCommon Stock. The shares underlying the Warrants are to be registered within 10 trading days of which you should be aware before making a decision to invest in our common shares. the date of the Purchase Agreement.
The followingrepresentations and other risks are discussed more fullywarranties contained in the “Risk Factors” sectionPurchase Agreement were made by the parties to, and solely for the benefit of, this prospectus.the other in the context of all of the terms and conditions of the Purchase Agreement and in the context of the specific relationship between the parties. The provisions of the Purchase Agreement, including the representations and warranties contained therein, are not for the benefit of any party other than the parties to the Purchase Agreement. The Purchase Agreement is not intended for investors and the public to obtain factual information about the current state of affairs of the parties.
Restructuring Agreement
On September 15, 2022, in connection with the Offering, the Company entered into an agreement with the holders of certain of the Company’s previously issued securities (the “Restructuring Agreement”).
The Restructuring Agreement, among other things, modified certain provisions of the following securities of the Company:
(v) | Series C Common Stock Purchase Warrants issued on May 31, 2022 (the “Series C Warrants”); |
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Pursuant to the Restructuring Agreement, the Company and the Holders agreed to, among other things, to (i) reduce the conversion price of the Debentures down to $0.20, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock; (ii) reduce the exercise price of the Restructured Warrants down to $0.20, subject to adjustment for subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock; (iii) extend the maturity dates for the Debentures to March 31, 2023; (iv) permit the Company’s contemplated rights offering to proceed, provided that the per share offering price in the rights offering is not less than $0.20; and (v) require that the Company’s cash burn rate not exceed $600,000 per month; provided, however, that with the prior written consent of a majority in interest of the Holders, such permitted monthly burn rate can be increased by $150,000, provided such additional amount is used for marketing purposes.
Additionally, in connection with the Restructuring Agreement, (i) the Company entered into a Registration Rights Agreement (“Registration Rights Agreement”), providing for the filing of a registration statement covering the Restructured Warrants and shares underlying the Warrants by not later than 10 trading days after the date of the Registration Rights Agreement or the earliest practical date on which the Company is permitted by Commission guidance to file such registration statement; (ii) the Company and its subsidiaries entered into a Security Agreement (the “Security Agreement”), whereby the Company granted a first priority security interest in all of their respective assets to the Holders and (iii) the subsidiaries of the Company delivered a guarantee (the “Guarantee”) in favor of the Holders whereby each such subsidiary guaranteed the full payment and performance of all obligations of the Company pursuant to the Debentures.
Each of our directors and officers have entered into lock-up agreements (the “Lock-up Agreements”) in favor of the Holders, whereby they have agreed not to offer, sell, agree to sell, directly or indirectly, or otherwise dispose of any shares of Common Stock or any securities convertible into or exchangeable for shares of Common Stock without the prior written consent of the Holders for a period of 180 days after the date of the Restructuring Agreement. The Lock-up Agreements provide limited exceptions and their restrictions may be waived at any time by the Holders.
Resignation of Brad Justus
On September 21, 2022, the Board of Directors of Creatd, Inc. received notice from Brad Justus of his resignation as a member of the Board, chair of the Nominating & Corporate Governance Committee, a member of the Audit Committee and a member of the Compensation Committee, with such resignation to become effective on September 30, 2022. Such resignation is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Resignation of Chief Executive Officer and Director
On August 9, 2022, Laurie Weisberg, the Company’s Chief Executive Officer and a member of the Board, notified the Company of her intention to resign from the positions of Chief Executive Officer, director, and any other positions held with the Company or any of its subsidiaries, regardless of whether Ms. Weisberg had been appointed. Such resignations are to become effective on a date to be determined following further discussion with the Board, but in no event later than August 31, 2022. On September 2, 2022, the Company entered into an Executive Separation Agreement with Laurie Weisberg the Company’s Chief Executive Officer and member of the Board of Directors setting forth the terms and conditions related to the Executive’s resignation for good reason as Chief Executive Officer, Director and any other positions held with the Company or any subsidiary.
Appointment of Director
Effective upon Ms. Weisberg’s resignation as a director, Justin Maury, currently the Company’s President and Chief Operating Officer, will be appointed to the Board, pursuant to the Board’s approval.
Justin Maury
Mr. Maury has served as our President since January 2019 and was appointed Chief Operating Officer in August 2021. A full-stack designer and product developer by training, Mr. Maury partnered with Jeremy Frommer and founded the Company in 2013, having brought with him 10 years of experience in the creative industry. Since joining Creatd in 2013, Mr. Maury has been an instrumental force in the Company’s business and revenue expansion, and has overseen the Company’s product development since inception, including overseeing the design, development, launch, and ongoing growth of the Company’s flagship product, Vocal, the innovative creator that, under Mr. Maury’s leadership, has grown to a community of over 1.5 million users with a total audience reach of over 175 million.
As a director, we believe Mr. Maury will add considerable value, including through by providing a unique perspective into Creatd’s product performance and evolution and by providing invaluable direct input to help guide the Company’s ongoing refinement of its technology roadmap and maturation of its business model.
Trigger of Price Reset
On July 29, 2022, the Company announced that it was not moving forward with its previously announced Rights Offering. In doing so, it triggered a price reset in the July 2022 Financing and the May 2022 Securities Purchase Agreement. As a result of this price reset, the May 2022 Securities Purchase Agreement debentures now have a conversion price of $1.00, and both the Series C and Series D warrants have exercise prices of $0.96. As a result of the price reset, the July 2022 Financing debentures now have a conversion price of $1.25, and both the Series E and Series F warrants have exercise prices of $1.01.
July 2022 Financing
On July 25, 2022 (the “Effective Date”), the Company entered into and closed securities purchase agreements (each, a “Purchase Agreement”) with five accredited investors (the “Investors”), whereby the Investors purchased from the Company for an aggregate of $1,935,019 in subscription amount (i) debentures in the principal amount of $2,150,000 (the “Debentures”); (ii) 1,075,000 Series E Common Stock Purchase Warrants to purchase shares of the Common Stock (the “Series E Warrants”); and (iii) 1,075,000 Series F Common Stock Purchase Warrants to purchase shares of Common Stock (the “Series F Warrants”, and collectively with the Series E Warrants, the “Warrants”). The Company and the Investors also entered into registration rights agreements (each, a “Registration Rights Agreement”) pursuant to the Purchase Agreement.
The Debentures have an original issue discount of 10%, have a maturity date of November 30, 2022, may be extended by six months at the Company’s option subject to certain conditions, and are convertible into shares of Common Stock at a conversion price of $2.00 per share, subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering (as defined therein), with such adjusted conversion price not to be lower than $1.25.
The Warrants are immediately exercisable for a term of five years until July 25, 2027. The Series E Warrants are exercisable at an exercise price of $3.00, subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $1.01. The Series F Warrants are exercisable at an exercise price of $6.00 subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $1.01. The Warrants provide for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock. The shares underlying the Debentures, the Series E Warrants and the Series F Warrants are to be registered within 90 days of the Effective Date.
The representations and warranties contained in the Purchase Agreement were made by the parties to, and solely for the benefit of, the other in the context of all of the terms and conditions of the Purchase Agreement and in the context of the specific relationship between the parties. The provisions of the Purchase Agreement, including the representations and warranties contained therein, are not for the benefit of any party other than the parties to the Purchase Agreement. The Purchase Agreement is not intended for investors and the public to obtain factual information about the current state of affairs of the parties.
Additionally, in connection with the Purchase Agreements, the subsidiaries of the Company delivered a guarantee (the “Guarantee”) in favor of the Investors whereby each such subsidiary guaranteed the full payment and performance of all obligations of the Company pursuant to the Purchase Agreement.
May 2022 Securities Purchase Agreement
On May 31, 2022, the Company entered into and closed securities purchase agreements (each, a “Purchase Agreement”) with eight accredited investors (the “Investors”), whereby the Investors purchased from the Company for an aggregate of $3,600,036 in subscription amount (i) debentures in the principal amount of $4,000,000 (the “Debentures”); (ii) 2,000,000 Series C Common Stock Purchase Warrants to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) (the “Series C Warrants”); and (iii) 2,000,000 Series D Common Stock Purchase Warrants to purchase shares of Common Stock (the “Series D Warrants”, and collectively with the Series C Warrants, the “Warrants”). The Company and the Investors also entered into registration rights agreements (each, a “Registration Rights Agreement”) pursuant to the Purchase Agreement.
The Debentures have an original issue discount of 10%, have a term of six months with a maturity date of November 30, 2022, may be extended by six months at the Company’s option subject to certain conditions, and are convertible into shares of Common Stock at a conversion price of $2.00 per share, subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering (as defined therein), with such adjusted conversion price not to be lower than $1.00.
The Warrants are exercisable for a term of five years from the initial exercise date of November 30, 2022, until November 30, 2027. The Series C Warrants are exercisable at an exercise price of $3.00, subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $0.96. The Series D Warrants are exercisable at an exercise price of $6.00 subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $0.96. The Warrants provide for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock. The shares underlying the Debentures, the Series C Warrants and the Series D Warrants are to be registered within 90 days of the Effective Date.
Additionally, in connection with the Purchase Agreements, the subsidiaries of the Company delivered a guarantee (the “Guarantee���) in favor of the Investors whereby each such subsidiary guaranteed the full payment and performance of all obligations of the Company pursuant to the Purchase Agreement.
The Debentures, Warrants, Common Stock underlying the Debentures and the Common Stock underlying the Warrants were not registered under the Securities Act, but qualified for exemption under Section 4(a)(2) and Rule 506 promulgated thereunder. The Company is relying on this exemption from registration for private placements based in part on the representations made by Investors, including representations with respect to each Investor’s status as an accredited investor, as such term is defined in Rule 501(a) of the Securities Act, and each Investor’s investment intent.
Our Corporate History
Creatd, Inc., formerly Jerrick Media Holdings, Inc. (“we,” “us,” the “Company,” or “Creatd”), is a technology company focused on the development of digital communities, marketing branded digital content, and Informatione-commerce opportunities. Creatd’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 Creatd’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.
We wereThe 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. (“GTPH”) as part of its plan to diversify its business.
On February 5, 2016 (the “Merger Closing“Closing Date”), we entered into an Agreement and Plan of Merger (the “Merger Agreement”) withGTPH, GPH Merger Sub, Inc., a Nevada corporation and our 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 oura wholly-owned subsidiary of GTPH (the “Merger”). PursuantGTPH acquired, pursuant to the terms of the Merger, Agreement, we acquired, through a reverse triangular merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “Jerrick Shareholders”), pro-rata, a total of 475,000 shares of ourGTPH’s common stock. Additionally, we assumedIn 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”).
Upon closing of the Merger on February 5, 2016, the Company changed its business plan to our current plan.
In connection with the Merger, on the Merger Closing Date, weGTPH and Kent Campbell entered into a Spin-Off Agreement with Kent Campbell (the “Spin-Off Agreement”), pursuant to which Mr. Campbell purchased from GTPH (i) all of ourGTPH’s interest in Ashland Holdings, LLC, a Florida limited liability company, and (ii) all of ourGTPH’s interest in Lil Marc, Inc., a Utah corporation, in exchange for the cancellation of 13,030 shares of our common stockGTPH’s Common Stock held by Mr. Campbell. In addition, Mr. Campbell assumed all of our 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.
Effective February 28, 2016, weGTPH entered into an Agreement and Plan of Merger (the “Statutory Merger Agreement”), with Jerrick, pursuant to which weGTPH became the parent company of Jerrick Ventures, LLC, oura wholly-owned operating subsidiary of Jerrick (the “Statutory Merger”).
On February 28, 2016, we and GTPH changed ourits name to Jerrick Media Holdings, Inc. to better reflect ourits new business strategy.
On July 25,September 11, 2019, wethe Company acquired 100% of the membership interests of Seller’s Choice, LLC, a New Jersey limited liability company (“Seller’s Choice”), a digital e-commerce agency.
On September 9, 2020, the Company filed a certificate of amendment to our articles of incorporation, as amended (the “Amendment”), with the Secretary of State of the State of Nevada to effectuate a one-for-twenty (1:20) reverse stock split (the “Reverse Stock Split”) of our common stock without any change to its par value. The Amendment became effective on July 30, 2019. The number of shares of authorized common stock was proportionately reduced as a result of the Reverse Stock Split. The number of shares of authorized preferred stock was not affected by the Reverse Stock Split. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to the next whole share.
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All share and per share amounts for the common stock indicated in this prospectus have been retroactively restated to give effect to the Reverse Stock Split.
On July 13, 2020, upon approval from our board of directors and stockholders, we filed Second Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada.
Upon approval to list our common stock and the warrants on the Nasdaq Capital Market, we will 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”), which the Company subsequently rebranded as Camp. Plant Camp is a direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. The Company’s addressresults of Plant Camp’s operations have bene included since the date of acquisition in the Statements of Operations.
On July 20, 2021, the Company acquired 44% of the membership interests of WHE Agency, Inc. WHE Agency, Inc, is 2050 Center Avenue Suite 640 Fort Lee, NJ 07024. The Company’s telephone number is (201) 258-3770. Our website is: https://jerrick.media/. The information on, or that can be accessed through, this website is not part of this prospectus,a talent management and you should not rely on any such informationpublic relations agency based in making the decision whetherNew York. WHE Agency, Inc, has been consolidated due to purchase the Company’s common stock.ownership of 55% voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations.
Reverse Stock SplitBetween October 21, 2020, and August 16, 2021, the Company acquired 21% of the membership interests of Dune, Inc. Dune, Inc. is a direct-to-consumer brand focused on promoting wellness through its range of health-oriented beverages.
On October 3, 2021, the Company acquired 29% of the membership interests of Dune, Inc. bring our total membership interests to 50%. Dune, Inc. is a direct-to-consumer brand focused on promoting wellness through its range of health-oriented beverages. Dune, Inc, has been consolidated due to the Company’s ownership of 50% voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations.
On March 7, 2022, the Company acquired 100% of the membership interests of Denver Bodega, LLC, d/b/a Basis, a Colorado limited liability company (“Basis”). Basis is a direct-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Denver Bodega, LLC has been consolidated due to the Company’s ownership of 100% voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations.
On August 13, 2020, we filed1, 2022 the Company entered into a certificateMembership Interest Purchase (the “Agreement”) with Zachary Shenkman, Wuseok Jung, Wesley Petry, Nicholas Scibilia, Gary Rettig, Brandon Fallin (collectively the “Sellers”), whereby the Company purchased a majority stake in Orbit Media LLC, a New York limited liability company whose product is an app-based stock trading platform designed to empower a new generation of amendmentinvestors, providing users with a like-minded community as well as access to our second amendedtools, content, and restated articles of incorporation (the “Amendment”), withother resources to learn, train, and excel in the Secretary of Statefinancial markets. Pursuant to the Agreement, Creatd acquired fifty one percent (51%) of the Stateissued and outstanding membership interests of NevadaOrbit Media LLC for consideration of forty-four thousand dollars ($44,000) in cash and 57,576 shares of the Company’s Common Stock.
On September 13, 2022, the Company acquired 100% of the membership interests of Brave Foods, LLC, a Maine limited liability company. Brave is a plant-based food company that provides convenient and healthy breakfast food products. Brave Foods, LLC has been consolidated due to effectuate a one-for-three (1:3) reverse stock splitthe Company’s ownership of 100% voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations.
SUMMARY OF THE OFFERING
This prospectus relates to the resale, from time to time, of up to 9,250,834 shares (the “August 2020 Reverse Stock Split”“Shares”) of our common stock, withoutpar value $0.001 per share (“Common Stock”), by the selling stockholders identified in this prospectus under “Selling Stockholders” (the “Offering”), comprised of (i) up to 1,250,834 Shares, pursuant to securities purchase agreements the Company entered into and closed on with six (6) Selling Stockholders on July 25, 2022 (as amended, collectively, the “July Purchase Agreements”), which includes (a) up to 1,720,000 shares of Common Stock issuable upon conversion of debentures in the principal amount of $2,150,000 (the “Debentures”), (b) 1,075,000 shares of Common Stock issuable upon exercise of Series E Common Stock Purchase Warrants (the “Series E Warrants”), and (c) 1,075,000 Series F Common Stock Purchase Warrants (the “Series F Warrants,” and together with the Series E Warrants, the “July Warrants”), (ii) up to 4,000,000 Shares, which underly the September Warrants (defined below), pursuant to a securities purchase agreement (the “September Purchase Agreement”) with five (5) accredited investors resulting in the raise of $800,000 in gross proceeds to the Company, pursuant to which the Company agreed to sell in a registered direct offering (the “Offering”) an aggregate of 4,000,000 shares of Common Stock, in connection with which, in a concurrent private placement, the Company issued to such investors warrants to purchase up to 4,000,000 shares of Common Stock, representing 100% of the shares of common stock purchased in the Offering (the “September Warrants”); and (iii) up to 4,000,000 Shares, pursuant to the securities purchase agreement the Company entered into and closed on October 24, 2022 with one accredited investor (the “October Investor”), whereby the October Investor purchased from the Company for an aggregate of $1,500,000 in subscription amount, an unsecured debenture in the principal amount of $1,666,650 (the “October Debenture”).
We are not selling any changeshares of our Common Stock under this prospectus and will not receive any proceeds from the sale of the Shares. We will, however, receive proceeds from any warrants that are exercised through the payment of the exercise price in cash. The Selling Stockholders will bear all commissions and discounts, if any, attributable to its par value. The Amendment became effective on August 17, 2020. No fractional shares were issuedthe sale of the Shares. We will bear all costs, expenses and fees in connection with the August 2020 Reverse Stock Split as all fractional shares were rounded down toregistration of the next whole share. All share and per share amounts of our common stock listed in this prospectus have been adjusted to give effect to the August 2020 Reverse Stock Split.Shares.
Employees
As of August 18, 2020, we had 23 full-time employees. None of our employees are subject to a collective bargaining agreement, and we believe that relationship with our employees to be good.
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THE OFFERING
Creatd, Inc. | ||
Shares of Common Stock offered by us | ||
Shares of Common Stock offered by the Selling Stockholders | 9,250,834 shares (1) | |
Shares of Common Stock outstanding before the Offering | 29,768,242 shares (2) | |
Shares of Common Stock outstanding after completion of this offering, assuming the sale of all shares offered hereby | 39,019,076 shares (2) | |
Use of proceeds | We will not receive any proceeds from the resale of the common stock by the Selling Stockholders. | |
Market for Common Stock | Our common stock is quoted on OTCQB under the symbol “CRTD.” | |
Risk Factors | Investing in our securities involves a high degree of risk. See the “Risk Factors” section of this prospectus on page 12 and in the documents we incorporate by reference in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our securities. |
(1) | This amount consists of | |
(2) | The number of shares of Common Stock outstanding before and after the Offering is based on | |
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(1) The number of shares of common stock outstanding is based on 3,319,937 shares of common stock issued and outstanding as of August 18, 2020 and excludes the following:
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Except as otherwise indicated herein, all information in this prospectus reflects or assumes:
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The following summary financial and operating data set forth below should be read in conjunction with the Company’s financial statements, the notes thereto and the other information contained in this prospectus. The summary statement of operations data for the years ended December 31, 2019 and 2018 have been derived from the Company’s audited financial statements appearing elsewhere in this prospectus. The historical results presented below are not necessarily indicative of financial results to be achieved in future periods. The financial data as of June 30, 2020 and 2019 has been derived from our unaudited financial statements and the related notes thereto, which are included elsewhere in this prospectus. The data below reflects a one-for-twenty (1:20) reverse stock split of our common stock on July 30, 2019 and a one-for-three (1:3) reverse stock split of our common stock that was effectuated on August 17, 2020.
Statement of Operations Data:
The following information should be read in conjunction with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and our consolidated financial statements and related notes included elsewhere in this prospectus.
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||
Statement of operations data: | 2019 | 2018 | 2020 | 2019 | ||||||||||||
Revenue | $ | 453,006 | $ | 80,898 | $ | 615,682 | $ | 41,515 | ||||||||
Operating expenses | $ | (7,669,984 | ) | $ | (5,767,153 | ) | $ | 5,976,883 | $ | 3,148,630 | ||||||
(Loss) income from operations | $ | (7,216,978 | ) | $ | (5,686,255 | ) | $ | (5,361,201 | ) | $ | (3,107,115 | ) | ||||
Other expenses | $ | (818,394 | ) | $ | (6,327,287 | ) | $ | (1,766,787 | ) | $ | (362,740 | ) | ||||
Net income (loss) | $ | (8,035,372 | ) | $ | (12,013,542 | ) | $ | (7,127,988 | ) | $ | (3,469,855 | ) | ||||
Income (loss) per common share – basic and diluted(1) | $ | (2.93 | ) | $ | (12.47 | ) | $ | (2.28 | ) | $ | (1.41 | ) |
December 31, | June 30, | |||||||||||||||
Balance sheet data: | 2019 | 2018 | 2020 | 2019 | ||||||||||||
Cash | $ | 11,637 | $ | - | $ | 44,628 | $ | 396,363 | ||||||||
Total assets | $ | 2,572,046 | $ | 208,925 | $ | 2,729,415 | $ | 801,817 | ||||||||
Current liabilities | $ | 10,928,830 | $ | 2,569,584 | $ | 14,853,962 | $ | 5,661,621 | ||||||||
Total liabilities | $ | 11,130,774 | $ | 2,699,529 | $ | 15,453,536 | $ | 5,920,532 |
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||
Cash flows from operating activities data: | 2019 | 2018 | 2020 | 2019 | ||||||||||||
Net cash used in operating activities | $ | (5,957,027 | ) | $ | (4,972,814 | ) | $ | (2,885,383 | ) | $ | (3,096,252 | ) | ||||
Net cash used in investing activities | $ | (363,288 | ) | $ | (27,605 | ) | $ | (202,622 | ) | $ | (26,851 | ) | ||||
Net cash provided by financing activities | $ | 6,337,947 | $ | 4,889,368 | $ | 3,149,526 | $ | 3,519,466 | ||||||||
Net change in cash and cash equivalents | $ | 11,637 | $ | (111,051 | ) | $ | 32,991 | $ | 396,363 |
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||
Other financial data (unaudited): | 2019 | 2018 | 2020 | 2019 | ||||||||||||
Adjusted EBITDA(2) | $ | (6,927,944 | ) | $ | (10,701,362 | ) | $ | (4,267,306 | ) | $ | (2,851,303 | ) |
119,114 shares of |
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Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||
Reconciliation of Adjusted EBITDA: | 2019 | 2018 | 2020 | 2019 | ||||||||||||
Net loss: | $ | (8,035,372 | ) | $ | (12,013,542 | ) | $ | (7,127,988 | ) | $ | (3,469,855 | ) | ||||
Add (deduct): | ||||||||||||||||
Interest expense | $ | 612,830 | $ | 923,008 | $ | 866,736 | $ | 164,601 | ||||||||
Depreciation | $ | 57,492 | $ | 42,218 | $ | 76,939 | $ | 5,660 | ||||||||
Stock-based compensation | $ | 437,106 | $ | 346,954 | $ | 1,994,792 | $ | 448,291 | ||||||||
Adjusted EBITDA | $ | (6,927,944 | ) | $ | (10,701,362 | ) | $ | (4,189,521 | ) | $ | (2,851,303 | ) |
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RISK FACTORS
Investing in our common stocksecurities involves a high degree of risk. Prospective investorsYou should carefully consider the risks described below, together withand read carefully all of the risks and uncertainties described below, as well as other information included or referred tocontained in this prospectus, before purchasing sharesmaking an investment decision with respect to our securities. The occurrence of our common stock. There are numerous and varied risks that may prevent the Company from achieving its goals. If any of thesethe following risks actually occurs, the Company’sor those incorporated by reference, or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition, or results of operations may be materially adversely affected.or cash flows. In any such case, the trading price of our common stock and the trading price of Series A warrants, if any, could decline, and investors couldyou may lose all or part of theiryour investment. This prospectus also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below and those incorporated by reference.
Risks Related to our Business
The Company is a development stage business and subject to the many risks associated with new businesses.
Our current line of business has a limited operating history and our business is subject to all of the risks inherent in the establishment of a new business enterprise. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with development and expansion of a new business enterprise. We have incurred losses and may continue to operate at a net loss for at least the next several years as we execute our business plan. We had a net loss of approximately $8.0$37.0 million for the year ended December 31, 2019,2021, and a working capital deficit and accumulated deficit of approximately $10.7$0.9 million and approximately $44.6$109.6 million, respectively. Our net loss for the six months ended June 30, 2020 and 2019 was $7.2 million and $3.5 million, respectively, and our accumulated deficit as of June 30, 2020 was $51.7 million.
Our financial situation creates doubt whether we will continue as a going concern.
There can be no assurances that we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or obtain funding from this offering or additional financing through private placements, public offerings and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital and no assurance can be given that additional financing will be available, or if available, will be on acceptable terms. These conditions raise substantial doubt about our ability to continue as a going concern. If adequate working capital is not available, we may be forced to discontinue operations, which would cause investors to lose their entire investment.
Based on the report from our independent auditors dated March 30, 2020,April 6, 2022, management stated that our financial statements for the year ended December 31, 2019,2021, were prepared assuming substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The Company’s consolidated financial statements have been prepared assuming that we wouldit will continue as a going concern, which contemplates thecontinuity of operations, realization of assets, and the satisfactionliquidation of liabilities in the normal course of business. The accompanying financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
We are not profitable and may never be profitable.
Since inception through the present, we have been dependent on raising capital to support our working capital needs. During this same period, we have recorded net accumulated losses and are yet to achieve profitability. Our ability to achieve profitability depends upon many factors, including our ability to develop and commercialize our websites. There can be no assurance that we will ever achieve any significant revenues or profitable operations.
Our operating expenses exceed our revenues and will likely continue to do so for the foreseeable future.
We are in an early stage of our development and we have not generated sufficient revenues to offset our operating expenses. Our operating expenses will likely continue to exceed our operating income for the foreseeable future, until such time as we are able to monetize our brands and generate substantial revenues, particularly as we undertake payment of the increased costs of operating as a public company.
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We have assumed a significant amount of debt and our operations may not be able to generate sufficient cash flows to meet our debt obligations, which could reduce our financial flexibility and adversely impact our operations.
Currently the Company has considerable obligations under notes, related party notes and lines of credit outstanding with various debtors.lenders. Our ability to make payments on such indebtedness will depend on our ability to generate cash flow. The Company may not generate sufficient cash flow from operations to enable us to repay this indebtedness and to fund other liquidity needs, including capital expenditure requirements. Such indebtedness could affect our operations in several ways, including the following:
● | a significant portion of our cash flows could be required to be used to service such indebtedness; |
● | a high level of debt could increase our vulnerability to general adverse economic and industry conditions; |
● | any covenants contained in the agreements governing such outstanding indebtedness could limit our ability to borrow additional funds, dispose of assets, pay dividends and make certain investments; |
● | a high level of debt may place us at a competitive disadvantage compared to our competitors that are less leveraged and, therefore, our competitors may be able to take advantage of opportunities that our indebtedness may prevent us from pursuing; and |
● | debt covenants to which we may agree may affect our flexibility in planning for, and reacting to, changes in the economy and in our industry. |
A high level of indebtedness increases the risk that we may default on our debt obligations. We may not be able to generate sufficient cash flows to pay the principal or interest on our debt. If we cannot service or refinance our indebtedness, we may have to take actions such as selling significant assets, seeking additional equity financing (which will result in additional dilution to stockholders) or reducing or delaying capital expenditures, any of which could have a material adverse effect on our operations and financial condition. If we do not have sufficient funds and are otherwise unable to arrange financing, our assets may be foreclosed upon which could have a material adverse effect on our business, financial condition and results of operations.
We will need additional capital, which may be difficult to raise as a result of our limited operating history or any number of other reasons.
Upon completion of this offering, weWe expect that we will have adequate financing forneed to raise additional capital within the next 12 months. However, in the event that we exceed our expected growth, we would need to raise additional capital. There is no assurance that additional equity or debt financing will be available to us when needed, on acceptable terms, or even at all. Our limited operating history makes investor evaluation and an estimation of our future performance substantially more difficult. As a result, investors may be unwilling to invest in us or such investment may be offered on terms or conditions that are not acceptable. In the event that we are not able to secure financing, we may have to scale back our growth plans or cease operations.
We face intense competition. If we do not provide digital content that is useful to users, we may not remain competitive, and our potential revenues and operating results could be adversely affected.
Our business is rapidly evolving and intensely competitive, and is subject to changing technologies, shifting user needs, and frequent introductions of new products and services. Our ability to compete successfully depends heavily on providing digital content that is useful and enjoyable for our users and delivering our content through innovative technologies in the marketplace.
We face competition from others in the digital content creation industry and media companies. Our current and potential competitors range from large and established companies to emerging start-ups. Established companies have longer operating histories and more established relationships with customers and users, and they can use their experience and resources in ways that could affect our competitive position, including by making acquisitions, investing aggressively in research and development, aggressively initiating intellectual property claims (whether or not meritorious) and competing aggressively for advertisers and websites. Emerging start-ups may be able to innovate and provide products and services faster than we can.
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Additionally, our operating results would suffer if our digital content is not appropriately timed with market opportunities, or if our digital content is not effectively brought to market. As technology continues to develop, our competitors may be able to offer user experiences that are, or that are seen to be, substantially similar to or better than, ours. This may force us to compete in different ways and expend significant resources in order to remain competitive. If our competitors are more successful than we are in developing compelling content or in attracting and retaining users and advertisers, our revenues and operating results could be adversely affected.
If we fail to retain existing users or add new users, or if our users decrease their level of engagement with our products, our revenue, financial results, and business may be significantly harmed.
The size of our user base and our user’s level of engagement are critical to our success. Our financial performance will be significantly determined by our success in adding, retaining, and engaging active users of our products, particularly Vocal. We anticipate that our active user growth rate will generally decline over time as the size of our active user base increases, and it is possible that the size of our active user base may fluctuate or decline in one or more markets, particularly in markets where we have achieved higher penetration rates. If people do not perceive Vocal to be useful, reliable, and trustworthy, we may not be able to attract or retain users or otherwise maintain or increase the frequency and duration of their engagement. A number of other content management systems and publishing platforms that achieved early popularity have since seen their active user bases or levels of engagement decline, in some cases precipitously. There is no guarantee that we will not experience a similar erosion of our active user base or engagement levels. Our user engagement patterns have changed over time, and user engagement can be difficult to measure, particularly as we introduce new and different products and services. Any number of factors could potentially negatively affect user retention, growth, and engagement, including if:
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If we are unable to maintain or increase our user base and user engagement, our revenue and financial results may be adversely affected. Any decrease in user retention, growth, or engagement could render our products less attractive to users, marketers, and developers, which is likely to have a material and adverse impact on our revenue, business, financial condition, and results of operations. If our active user growth rate continues to slow, we will become increasingly dependent on our ability to maintain or increase levels of user engagement and monetization in order to drive revenue growth.
We face competition from traditional media companies, and we may not be included in the advertising budgets of large advertisers, which could harm our operating results.
In addition to internet companies, we face competition from companies that offer traditional media advertising opportunities. Most large advertisers have set advertising budgets, a very small portion of which is allocated to Internet advertising. We expect that large advertisers will continue to focus most of their advertising efforts on traditional media. If we fail to convince these companies to spend a portion of their advertising budgets with us, or if our existing advertisers reduce the amount they spend on our programs, our operating results would be harmed.
Acquisitions may disrupt growth.
We may pursue strategic acquisitions in the future. Risks in acquisition transactions include difficulties in the integration of acquired businesses into our operations and control environment, difficulties in assimilating and retaining employees and intermediaries, difficulties in retaining the existing clients of the acquired entities, assumed or unforeseen liabilities that arise in connection with the acquired businesses, the failure of counterparties to satisfy any obligations to indemnify us against liabilities arising from the acquired businesses, and unfavorable market conditions that could negatively impact our growth expectations for the acquired businesses. Fully integrating an acquired company or business into our operations may take a significant amount of time. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered with acquisitions and other strategic transactions. These risks may prevent us from realizing the expected benefits from acquisitions and could result in the failure to realize the full economic value of a strategic transaction or the impairment of goodwill and/or intangible assets recognized at the time of an acquisition. These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time.
Our business depends on strong brands and relationships, and if we are not able to maintain our relationships and enhance our brands, our ability to expand our base of users, advertisers and affiliates will be impaired and our business and operating results could be harmed.
Maintaining and enhancing our brands’ profiles may require us to make substantial investments and these investments may not be successful. If we fail to promote and maintain the brands’ profiles, or if we incur excessive expenses in this effort, our business and operating results could be harmed. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brands’ profiles may become increasingly difficult and expensive. Maintaining and enhancing our brands will depend largely on our ability to be a technology leader and to continue to provide attractive products and services, which we may not do successfully.
We depend on our key management personnel and the loss of their services could adversely affect our business.
We place substantial reliance upon the efforts and abilities of Jeremy Frommer, our Chief Executive Officer,Chairman of the Board of Directors, and our other executive officers and directors. Though no individual is indispensable, the loss of the services of these executive officers could have a material adverse effect on our business, operations, revenues or prospects. We do not currently maintain key man life insurance on the lives of these individuals.
We have not adopted various corporate governance measures, and, as a result, stockholders may have limited protections against interested director transactions, conflicts of interest and similar matters.
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of corporate management and the securities markets. Because our securities are not yet listed on a national securities exchange, we are not required to adopt these corporate governance measures and have not done so voluntarily in order to avoid incurring the additional costs associated with such measures. Among these measures is the establishment of independent committees of the Board of Directors. However, to the extent a public market develops for our securities, such legislation will require us to make changes to our current corporate governance practices. Those changes may be costly and time-consuming. Furthermore, the absence of the governance measures referred to above with respect to our Company may leave our shareholders with more limited protection in connection with interested director transactions, conflicts of interest and similar matters.
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If we are unable to protect our intellectual property, the value of our brands and other intangible assets may be diminished, and our business may be adversely affected.
We rely and expect to continue to rely on a combination of confidentiality, assignment, and license agreements with our employees, consultants, and third parties with whom we have relationships, as well as trademark, copyright, patent, trade secret, and domain name protection laws, to protect our proprietary rights. In the United States and internationally, we have filed various applications for protection of certain aspects of our intellectual property, and we currently hold a number of registered trademarks and issued patents in multiple jurisdictions and have acquired patents and patent applications from third parties. Third parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietary rights held by us, and pending and future trademark and patent applications may not be approved. In addition, effective intellectual property protection may not be available in every country in which we operate or intend to operate our business. In any or all of these cases, we may be required to expend significant time and expense in order to prevent infringement or to enforce our rights. Although we have generally taken measures to protect our proprietary rights, there can be no assurance that others will not offer products or concepts that are substantially similar to ours and compete with our business. In addition, we regularly contribute software source code under open source licenses and have made other technology we developed available under other open licenses, and we include open source software in our products. If the protection of our proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of our brands and other intangible assets may be diminished and competitors may be able to more effectively mimic our products, services, and methods of operations. Any of these events could have an adverse effect on our business and financial results. results
We are subject to payment processing risk.
We accept payments using a variety of different payment methods, including credit and debit cards and direct debit. We rely on third parties to process payments. Acceptance and processing of these payment methods are subject to certain certifications, rules and regulations. To the extent there are disruptions in our or third-party payment processing systems, material changes in the payment ecosystem, failure to recertify and/or changes to rules or regulations concerning payment processing, we could be subject to fines and/or civil liability, or lose our ability to accept credit and debit card payments, which would harm our reputation and adversely impact our results of operations.
We are subject to risk as it relates to software that we license from third parties.
We license software from third parties, much of which is integral to our systems and our business. The licenses are generally terminable if we breach our obligations under the license agreements. If any of these relationships were terminated or if any of these parties were to cease doing business or cease to support the applications we currently utilize, we may be forced to spend significant time and money to replace the licensed software.
Failures or reduced accessibility of third-party software on which we rely could impair the availability of our platform and applications and adversely affect our business.
We license software from third parties for integration into our Vocal platform, including open source software. These licenses might not continue to be available to us on acceptable terms, or at all. While we are not substantially dependent upon any third-party software, the loss of the right to use all or a significant portion of our third-party software required for the development, maintenance and delivery of our applications could result in delays in the provision of our applications until we develop or identify, obtain and integrate equivalent technology, which could harm our business.
Any errors or defects in the hardware or software we use could result in errors, interruptions, cyber incidents or a failure of our applications. Any significant interruption in the availability of all or a significant portion of such software could have an adverse impact on our business unless and until we can replace the functionality provided by these applications at a similar cost. Furthermore, this software may not be available on commercially reasonable terms, or at all. The loss of the right to use all or a significant portion of this software could limit access to our platform and applications. Additionally, we rely upon third parties’ abilities to enhance their current applications, develop new applications on a timely and cost-effective basis and respond to emerging industry standards and other technological changes. We may be unable to effect changes to such third-party technologies, which may prevent us from rapidly responding to evolving customer requirements. We also may be unable to replace the functionality provided by the third-party software currently offered in conjunction with our applications in the event that such software becomes obsolete or incompatible with future versions of our platform and applications or is otherwise not adequately maintained or updated.
We need to manage growth in operations to maximize our potential growth and achieve our expected revenues and our failure to manage growth will cause a disruption of our operations, resulting in the failure to generate revenue.
In order to maximize potential growth in our current and potential markets, we believe that we must expand our marketing operations. This expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating procedures, and management information systems. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.
In order to achieve the general strategies of our company we need to maintain and search for hard-working employees who have innovative initiatives, while at the same time, keep a close eye on any and all expanding opportunities in our marketplace.
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We plan to generate a significant portion of our revenues from advertising and affiliate sales relationships, and a reduction in spending by or loss of advertisers and general decrease in online spending could adversely harm our business.
We plan to generate a substantial portion of our revenues from advertisers. Our advertisers may be able to terminate prospective contracts with us at any time. Advertisers will not continue to do business with us if their investment in advertising with us does not generate sales leads, and ultimately customers, or if we do not deliver their advertisements in an appropriate and effective manner. If we are unable to remain competitive and provide value to our advertisers, they may stop placing ads with us, which would adversely affect our revenues and business. In addition, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. Adverse macroeconomic conditions can also have a material negative impact on the demand for advertising and cause our advertisers to reduce the amounts they spend on advertising, which could adversely affect our revenues and business.
Security breaches could harm our business.
Security breaches have become more prevalent in the technology industry. We believe that we take reasonable steps to protect the security, integrity and confidentiality of the information we collect, use, store and disclose, but there is no guarantee that inadvertent (e.g., software bugs or other technical malfunctions, employee error or malfeasance, or other factors) or unauthorized data access or use will not occur despite our efforts. Although we have not experienced any material security breaches to date, we may in the future experience attempts to disable our systems or to breach the security of our systems. Techniques used to obtain unauthorized access to personal information, confidential information and/or the systems on which such information are stored and/or to sabotage systems change frequently and generally are not recognized until launched against a target. As a result, we may be unable to anticipate these techniques or to implement adequate preventative measures.
If an actual or perceived security breach occurs, the market perception of our security measures could be harmed, and we could lose sales and customers and/or suffer other negative consequences to our business. A security breach could adversely affect the digital content experience and cause the loss or corruption of data, which could harm our business, financial condition and operating results. Any failure to maintain the security of our infrastructure could result in loss of personal information and/or other confidential information, damage to our reputation and customer relationships, early termination of our contracts and other business losses, indemnification of our customers, financial penalties, litigation, regulatory investigations and other significant liabilities. In the event of a major third-party security incident, we may incur losses in excess of their insurance coverage.
Moreover, if a high profilehigh-profile security breach occurs with respect to us or another digital entertainment company, our customers and potential customers may lose trust in the security of our business model generally, which could adversely impact our ability to retain existing customers or attract new ones.
The laws and regulations concerning data privacy and data security are continually evolving; our or our platform providers’ actual or perceived failure to comply with these laws and regulations could harm our business.
Customers view our content online, using third-party platforms and networks and on mobile devices. We collect and store significant amounts of information about our customers—both personally identifying and non-personally identifying information. We are subject to laws from a variety of jurisdictions regarding privacy and the protection of this player information. For example, the European Union (EU) has traditionally taken a broader view than the United States and certain other jurisdictions as to what is considered personal information and has imposed greater obligations under data privacy regulations. The U.S. Children’s Online Privacy Protection Act (COPPA) also regulates the collection, use and disclosure of personal information from children under 13 years of age. While none of our content is directed at children under 13 years of age, if COPPA were to apply to us, failure to comply with COPPA may increase our costs, subject us to expensive and distracting government investigations and could result in substantial fines.
Data privacy protection laws are rapidly changing and likely will continue to do so for the foreseeable future. The U.S. government, including the Federal Trade Commission and the Department of Commerce, is continuing to review the need for greater regulation over the collection of personal information and information about consumer behavior on the Internet and on mobile devices and the EU has proposed reforms to its existing data protection legal framework. Various government and consumer agencies worldwide have also called for new regulation and changes in industry practices. In addition, in some cases, we are dependent upon our platform providers to solicit, collect and provide us with information regarding our players that is necessary for compliance with these various types of regulations.
Customer interaction with our content is subject to our privacy policy and terms of service. If we fail to comply with our posted privacy policy or terms of service or if we fail to comply with existing privacy-related or data protection laws and regulations, it could result in proceedings or litigation against us by governmental authorities or others, which could result in fines or judgments against us, damage our reputation, impact our financial condition and harm our business. If regulators, the media or consumers raise any concerns about our privacy and data protection or consumer protection practices, even if unfounded, this could also result in fines or judgments against us, damage our reputation, and negatively impact our financial condition and damage our business.
In the area of information security and data protection, many jurisdictions have passed laws requiring notification when there is a security breach for personal data or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to implement. Our security measures and standards may not be sufficient to protect personal information and we cannot guarantee that our security measures will prevent security breaches. A security breach that compromises personal information could harm our reputation and result in a loss of confidence in our products and ultimately in a loss of customers, which could adversely affect our business and impact our financial condition. This could also subject us to liability under applicable security breach-related laws and regulations and could result in additional compliance costs, costs related to regulatory inquiries and investigations, and an inability to conduct our business.
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Changes to federal, state or international laws or regulations applicable to our company could adversely affect our business.
Our business is subject to a variety of federal, state and international laws and regulations, including those with respect privacy, data, and other laws. These laws and regulations, and the interpretation or application of these laws and regulations, could change. In addition, new laws or regulations affecting our business could be enacted. These laws and regulations are frequently costly to comply with and may divert a significant portion of management’s attention. If we fail to comply with these applicable laws or regulations, we could be subject to significant liabilities which could adversely affect our business.
If any of our relationships with internet search websites terminate, if such websites’ methodologies are modified or if we are outbid by competitors, traffic to our websites could decline.
We depend in part on various internet search websites, such as Google.com, Bing.com, Yahoo.com and other websites to direct a significant amount of traffic to our websites. Search websites typically provide two types of search results, algorithmic and purchased listings. Algorithmic listings generally are determined and displayed as a result of a set of unpublished formulas designed by search engine companies in their discretion. Purchased listings generally are displayed if particular word searches are performed on a search engine. We rely on both algorithmic and purchased search results, as well as advertising on other internet websites, to direct a substantial share of visitors to our websites and to direct traffic to the advertiser customers we serve. If these internet search websites modify or terminate their relationship with us or we are outbid by our competitors for purchased listings, meaning that our competitors pay a higher price to be listed above us in a list of search results, traffic to our websites could decline. Such a decline in traffic could affect our ability to generate advertising revenue and could reduce the desirability of advertising on our websites.
Our business involves risks of liability claims arising from our media content, which could adversely affect our ability to generate revenue and could increase our operating expenses.
As a distributor of media content, we face potential liability for defamation, invasion of privacy, negligence, copyright or trademark infringement, obscenity, violation of rights of publicity and/or obscenity laws and other claims based on the nature and content of the materials distributed. These types of claims have been brought, sometimes successfully, against broadcasters, publishers, online services and other disseminators of media content. Any imposition of liability that is not covered by insurance or is in excess of our insurance coverage could have a material adverse effect on us. In addition, measures to reduce our exposure to liability in connection with content available through our internet websites could require us to take steps that would substantially limit the attractiveness of our internet websites and/or their availability in certain geographic areas, which could adversely affect our ability to generate revenue and could increase our operating expenses.
Intellectual property litigation could expose us to significant costs and liabilities and thus negatively affect our business, financial condition and results of operations.
We may be subject to claims of infringement of third partythird-party patents and trademarks and other violations of third partythird-party intellectual property rights. Intellectual property disputes are generally time-consuming and expensive to litigate or settle and the outcome of such disputes is uncertain and difficult to predict. The existence of such disputes may require us to set-aside substantial reserves and has the potential to significantly affect our overall financial standing. To the extent that claims against us are successful, they may subject us to substantial liability, and we may have to pay substantial monetary damages, change aspects of our business model, and/or discontinue any of our services or practices that are found to be in violation of another party’s rights. Such outcomes may severely restrict or hinder ongoing business operations and impact the value of our business. Successful claims against us could also result in us having to seek a license to continue our practices. Under such conditions, a license may or may not be offered or otherwise made available to us. If a license is made available to us, the cost of the license may significantly increase our operating burden and expenses, potentially resulting in a negative effect on our business, financial condition and results of operations.
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Although we have been and are currently involved in multiple areas of commerce, internet services, and high technology where there is a substantial risk of future patent litigation, we have not obtained insurance for patent infringement losses. If we are unsuccessful at resolving pending and future patent litigation in a reasonable and affordable manner, it could disrupt our business and operations, including by negatively impacting areas of commerce or putting us at a competitive disadvantage.
If we are unable to obtain or maintain key website addresses, our ability to operate and grow our business may be impaired.
Our website addresses, or domain names, are critical to our business. We currently own more than 415 domain names. However, the regulation of domain names is subject to change, and it may be difficult for us to prevent third parties from acquiring domain names that are similar to ours, that infringe our trademarks or that otherwise decrease the value of our brands. If we are unable to obtain or maintain key domain names for the various areas of our business, our ability to operate and grow our business may be impaired.
We may have difficulty scaling and adapting our existing network infrastructure to accommodate increased traffic and technology advances or changing business requirements, which could cause us to incur significant expenses and lead to the loss of users and advertisers.
To be successful, our network infrastructure has to perform well and be reliable. The greater the user traffic and the greater the complexity of our products and services, the more computer power we will need. We could incur substantial costs if we need to modify our websites or our infrastructure to adapt to technological changes. If we do not maintain our network infrastructure successfully, or if we experience inefficiencies and operational failures, the quality of our products and services and our users’ experience could decline. Maintaining an efficient and technologically advanced network infrastructure is particularly critical to our business because of the pictorial nature of the products and services provided on our websites. A decline in quality could damage our reputation and lead us to lose current and potential users and advertisers. Cost increases, loss of traffic or failure to accommodate new technologies or changing business requirements could harm our operating results and financial condition.
Operating a network open to all internet users may result in legal consequences.
Our Terms and Conditions clearly state that our network and services are only to be used by users who are over 13 years old. Although we will terminate accounts that are known to be held by persons age 13 or younger, it is impractical to independently verify that all activity occurring on our network fits into this description. As such, we run the risk of federal and state law enforcement prosecution.
Unfavorable global economic, business, or political conditions could adversely affect our business, financial condition or results of operations.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including conditions that are outside of our control, including the impact of health and safety concerns, such as those relating to the current COVID-19 coronavirus (“COVID-19”) pandemic.
On January 30, 2020
The continuing global COVID-19 pandemic has created significant volatility, uncertainty and economic disruption. The extent to which the World Health Organization declared COVID-19 a “Public Health Emergencypandemic continues to impact our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of International Concern”the pandemic; governmental, business and on March 10, 2020, declared itindividuals’ actions, including vaccination requirements, that have been and continue to be a pandemic. Actions taken aroundin response to the world to help mitigatepandemic; the spreadimpact of the coronavirus include restrictionspandemic on travel,economic activity and quarantinesactions taken in certain areas,response; and forced closures for certain types of public placesany future variants that may arise and businesses.its effects on the overall response to the pandemic. 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.
Our direct-to-consumer brands experienced supply-chain issues as a direct result of the COVID-19 pandemic, resulting in delayed growth within these business lines. Additionally, the global financial crisis in connection with the COVID-19 pandemic has caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our Vocal platform and our ability to raise additional capital when needed on acceptable terms, if at all. Any of the foregoing could harm our business and we cannot anticipate all the ways in which the current economic climate and financial market conditions could adversely impact our business.business.
Risks Related To Our Common Stock
Risks Relating to our Common Stock and the Offering
Future sales or potential sales of our common stock in the public market could cause our share price to decline.
If the existing holders of our common stock, particularly our directors and officers, sell a large number of shares, they could adversely affect the market price for our common stock. Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline.
Because we will not pay dividends on our common stock in the foreseeable future, stockholders will only benefit from owning common stock if it appreciates.
We have never paid cash dividends on our common stock, and we do not intend to do so in the foreseeable future. We intend to retain any future earnings to finance our growth. Accordingly, any potential investor who anticipates the need for current dividends from his investment should not purchase our common stock.
Our share price has been, and will likely continue to be, volatile, and you may be unable to resell your shares at or above the price at which you acquired them.
The trading price of our common stock has been, and is likely to continue to be, highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.
The market price for our securities may be influenced by many factors that are beyond our control, including, but not limited to:
● | variations in our revenue and operating expenses; |
● | market conditions in our industry and the economy as a whole; |
● | actual or expected changes in our growth rates or our competitors’ growth rates; |
● | developments or disputes concerning patent applications, issued patents or other proprietary rights; |
● | developments in the financial markets and worldwide or regional economies; |
● | variations in our financial results or those of companies that are perceived to be similar to us; |
● | announcements by the government relating to regulations that govern our industry; |
● | sales of our common stock or other securities by us or in the open market; |
● | changes in the market valuations of other comparable companies; |
● | general economic, industry and market conditions; and |
● | the other factors described in this “Risk Factors” section. |
The trading price of our shares might also decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. Each of these factors, among others, could harm the value of your investment in our securities. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, operating results and financial condition.
Because our shares of common stock are subject to the penny stock rules, it is more difficult to trade our shares.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.
The price of our common stock may be subject to wide fluctuations.
Even though we have our shares quoted onwith The OTCQB, the OTCQB Venture Market, a consistently active trading market for our common stock may not exist. You may not be able to sell your shares quickly or at the current market price if trading in our stock is not active. You may lose all or a part of your investment. The market price of our Common Stock may be highly volatile and subject to wide fluctuations in response to a variety of factors and risks, many of which are beyond our control. In addition to the risks noted elsewhere in this prospectus,Form 10-K, some of the other factors affecting our stock price may include:
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For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on past results as an indication of future performance. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been instituted against the public company. Regardless of its outcome, this type of litigation could result in substantial costs to us and a likely diversion of our management’s attention.
You may not receivelose all of your investment.
Investing in our common stock involves a positivehigh degree of risk. As an investor, you might never recoup all, or even part of, your investment and you may never realize any return on your investment when you sell your shares and you mayinvestment. You must be prepared to lose the entire amount ofall your investment.
We may, in the future, issue additional shares of common stock, which would reduce investors’ percent of ownership and dilute our share value
Our Second Amended and Restated Articles of Incorporation authorize the issuance of 100,000,000 shares of common stock, and 20,000,000 shares of preferred stock. Currently the Company has no500 shares of preferredPreferred Series E stock outstanding. Additionally, as of August 18, 2020,November 21, 2022 there are outstanding (i) warrants to purchase 341,68516,046,464 shares of our common stock; and (ii) options exercisable into 542,6954,408,267 shares of our common stock.stock; (iii) 121 shares underlying the conversion of Preferred Series E shares; and (iv) 32,191,546 shares underlying the conversion of convertible notes.
In addition, the Company has convertible notes outstanding that are convertible into 455,470 shares of the Company’s common stock. Assuming all of the Company’s currently outstanding warrants and options beare exercised and all convertible notes be converted, the Company would have to issue an additional 1,339,85052,646,398 shares of common stock representing 40.4%177% of our current issued and outstanding common stock. As of the date of this filing, none of the Company’s outstanding convertible notes are currently convertible into Common Stock. The future issuance of this common stock would result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any Common Stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and might have an adverse effect on any trading market for our common stock.
Our common shares are subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
SEC Rule 15g-9 establishes the definition of a “penny stock,” in pertinent part, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.
For any transaction involving a penny stock, unless exempt, the rules require:
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person; and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination, and (b) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our Common shares and cause a decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Liability of directors for breach of duty is limited under Nevada law.
Nevada law provides that directors must discharge their duties as a director in good faith and with a view to the interests of the corporation. Under Nevada law, directors owe a fiduciary duty to the corporation, which is generally comprised of the duty of care and duty of loyalty to the corporation. Except under limited circumstances set forth in NRS 78.138(7), or unless our Second Amended and Restated Articles of Incorporation or an amendment thereto provide for greater individual liability (which ours does not provide), a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that the director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer, and the breach of those duties involved intentional misconduct, fraud or a knowing violation of law. Our stockholders’ ability to recover damages for fiduciary breaches may be reduced by this statute.
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We do not anticipate paying any cash dividends on our common stock in the foreseeable future and, as such, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In addition, and any future loan arrangements we enter into may contain, terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
Sales of a substantial number of shares of our common stock in the public market by certain of our stockholders could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.
We may issue additional shares of preferred stock in the future that may adversely impact your rights as holders of our common stock.
Pursuant to our Second Amended and Restated Articles of Incorporation, the aggregate number of shares of capital stock which we are authorized to issue is 120,000,000 shares, of which 100,000,000 shares are common stock, and 20,000,000 shares are “blank check” preferred stock with such designations, rights and preferences as may be determined from time to time by our board of directors. Our board of directors is empowered, without stockholder approval, to issue one or more series of preferred stock with dividend, liquidation, conversion, voting or other rights which could dilute the interest of, or impair the voting power of, our common stockholders. As of the date of this prospectus,filing, we do not have any preferred500 shares of Preferred Series E stock outstanding.
The issuance of a series of preferred stock could be used as a method of discouraging, delaying or preventing a change in control. For example, it would be possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our Company. In addition, advanced notice is required prior to stockholder proposals, which might further delay a change of control. Additionally, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends are declared to holders of our common stock, and the right to the redemption of such preferred shares, together with a premium, prior to the redemption of the common stock. To the extent that we do issue such additional shares of preferred stock, your rights as holders of common stock could be impaired thereby, including, without limitation, dilution of your ownership interests in us.
Each of our Second Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws provide that the Eighth Judicial District Court of Clark County, Nevada will be the sole and exclusive forum for certain disputes which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers, employees or agents.
Each of our Second Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws provide that unless the Company consents in writing to the selection of an alternative forum, the Eighth Judicial District Court of Clark County, Nevada shall be the sole and exclusive forum for state law claims with respect to: (i) any derivative action or proceeding brought in the name or right of the Company or on its behalf, (ii) any action asserting a claim for breach of any fiduciary duty owed by any director, officer, employee or agent of the Company to the Company or the Company’s stockholders, (iii) any action arising or asserting a claim arising pursuant to any provision of Nevada Revised Statutes Chapters 78 or 92A or any provision of the Company’s Second Amended and Restated Articles of Incorporation or Amended and Restated Bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine, including, without limitation, any action to interpret, apply, enforce or determine the validity of the Company’s Second Amended and Restated Articles of Incorporation or Amended and Restated Bylaws. This exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. However, each of our Second Amended Articles of Incorporation and our Amended and Restated Bylaws contain a federal forum provision which provides that unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Company are deemed to have notice of and consented to this provision. As this provision applies to Securities Act claims, there may be uncertainty whether a court would enforce such a provision.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or its directors, officers or other employees, which may discourage such lawsuits against the Company and its directors, officers and other employees. Alternatively, if a court were to find our choice of forum provisions contained in either our Second Amended and Restated Articles of Incorporation or Amended and Restated Bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions, which could harm its business, results of operations, and financial condition.
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Risks Related to this Offering
The Company will have broad discretion in the use of the net proceeds from this offering and may fail to apply these proceeds effectively.
The Company’s management will have broad discretion in the application of the net proceeds of this offering, including using the proceeds to conduct operations, expand the Company’s business lines and for general working capital. The Company may also use the net proceeds of this offering to acquire or invest in complementary businesses, products, or technologies, or to obtain the right to use such complementary technologies. We have no commitments with respect to any acquisition or investment; however, we seek opportunities and transactions that management believes will be advantageous to the Company and its operations or prospects. We cannot specify with certainty the actual uses of the net proceeds of this offering. You may not agree with the manner in which our management chooses to allocate and spend the net proceeds. We may invest the net proceeds from this offering in a manner that does not produce income or that loses value. The failure by our management to apply these funds effectively could harm our business, financial condition and results of operations.
There is no assurance that an active and liquid trading market in our common stock will develop.
This offering will close only if our common stock (and the warrants underlying the Units) are accepted to be listed on the Nasdaq Capital Market. There can be no assurance any broker will be interested in trading our common stock. Therefore, it may be difficult to sell any securities you purchase in this offering if you desire or need to sell them. Neither we nor the underwriters can provide any assurance that an active and liquid trading market in our common stock or the warrants will develop or, if developed, that the market will continue.
There is no guarantee that we will successfully have our common stock listed on the Nasdaq Capital Market. Even if our common stock is accepted for listing on the Nasdaq Capital Market, upon our satisfaction of the exchange’s initial listing criteria, the exchange may subsequently delist our common stock if we fail to comply with ongoing listing standards.
In the event we are able to list our common stock and the warrants on the Nasdaq Capital Market upon our satisfaction of the exchange’s initial listing criteria, the exchange will require us to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our common stock. If we fail to meet these continued listing requirements, our common stock may be subject to delisting. If our common stock or warrants are delisted and we are not able to list such common stock or warrants on another national securities exchange, we expect our securities would be quoted on an over-the-counter market; However, if this were to occur, our stockholders could face significant material adverse consequences, including limited availability of market quotations for our common stock and reduced liquidity for the trading of our securities. In addition, in the event of such delisting, we could experience a decreased ability to issue additional securities and obtain additional financing in the future. Even if our common stock or warrants are listed on the Nasdaq Capital Market, there can be no assurance that an active trading market for our common stock or warrants will develop or be sustained after our initial listing.
You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
If you purchase shares of common stock in this offering, the value of your shares based on our actual book value will immediately be less than the price you paid. This reduction in the value of your equity is known as dilution. This dilution occurs in large part because our existing stockholders paid less than the assumed public offering price when they acquired their shares of common stock. Based upon the issuance and sale of 833,333 shares of common stock by us in this offering at an assumed public offering price of $9.00 per share, you will incur immediate dilution of $0.68 in the net tangible book value per share of common stock. If the underwriters exercise their over-allotment option, or if outstanding options to purchase our common shares are exercised, investors will experience additional dilution. For more information, see “Dilution.”
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CAUTIONARY STATEMENTNOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 or the Securities Act, Section 21E of the Securities Exchange Act of 1934 or the Exchange Act, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that reflect our current views with respect to future events and financial performance, and all statements other than statements of historical fact are statements that are, or could be, deemed forward-looking statements. TheseIn some cases, you can identify forward-looking statements contain information about our expectations, beliefsby terms such as “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “believe,” “expect,” “seek,” “anticipate,” “intend,” “estimate,” “plan,” “target,” “project,” “forecast,” “envision” or intentionsthe negative of these terms, and other similar phrases. All statements contained in this prospectus and any prospectus supplement regarding our product development and commercialization efforts, business,future financial condition,position, sales, costs, earnings, losses, cash flows, other measures of results of operations, strategiescapital expenditures or prospects,debt levels and other similar matters. Theseplans, objectives, outlook, targets, guidance or goals are forward-looking statements.
You should not place undue reliance on our forward-looking statements because they are not guarantees of future performance or expectations, and involve risks and uncertainties. Our forward-looking statements are based on management’s currentthe information currently available to us and speak only as of the date on the cover of this prospectus, the date of any prospectus supplement, or, in the case of forward-looking statements incorporated by reference, the date of the filing that includes the statement. Although we believe that the expectations and assumptions about future events, whichreflected in these forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. These statements may be identified by words such as “expects,” “plans,” “projects,” “will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates,” and other words of similar meaning.
Thesereasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Except as required by applicable law, we assume no obligation, and disclaim any obligation, to update forward-looking statements whether as a result of new information, events or otherwise.
The forward-looking statements contained in this prospectus are set forth principally in “Risk Factors” above, and in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and other sections in our 2021 Annual Report and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and other sections in our Latest Form 10-Q. In addition, there may be events in the future that we are not able to predict accurately or control which may cause actual results to differ materially from current expectations include, among other things, those listed under the section titled “Risk Factors” and elsewhere in this prospectus, in any related prospectus supplement and in any related free writing prospectus.
Any forward-looking statement in this prospectus, in any related prospectus supplement and in any related free writing prospectus reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our business, results of operations, industry and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this prospectus, any related prospectus supplement and any related free writing prospectus and the documents that we reference herein and therein and have filed as exhibits hereto and thereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements. Except as required by law, we assume no obligation to update or revise thesePlease consider our forward-looking statements for any reason, even if new information becomes available in the future.light of these risks as you read this prospectus.
This prospectus, any related prospectus supplement and any related free writing prospectus also contain or may contain estimates, projections and other information concerning our industry, our business and the markets for our products, including data regarding the estimated size of those markets and their projected growth rates. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.
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AssumingAll proceeds from the sale of allresale of the 833,333 Units inshares of our Common Stock offered by this offering at an assumed offering priceprospectus will belong to the Selling Shareholders. We will not receive any proceeds from the resale of $9.00 per Unit,the shares of our Common Stock by the Selling Shareholders.
We will receive proceeds from any cash exercise of the Warrants. If all 4,000,000 of the September Warrants are exercised on a cash basis, the Company estimates thatwould receive gross cash proceeds of $800,000, subject to adjustment upon certain events. We expect to use the proceeds from the exercise of such warrants, if any, for general corporate purposes. General corporate purposes may include providing working capital, funding capital expenditures, or paying for acquisitions. We currently do not have any arrangements or agreements for any acquisitions. We cannot precisely estimate the allocation of the net proceeds from any exercise of the sale of Units it is offering will be approximately $6,830,000. If the underwriters fully exercise the over-allotment option, the net proceeds will be approximately $7,870,625. “Net proceeds” is what the Company expects to receive after deducting the underwriting discount and commission and estimated offering expenses payable by the Company.
The Company intends to use the net proceeds from this offering to conduct operations, increase marketing efforts, and investmentswarrants for cash. Accordingly, in the Company’s existing business initiatives and products, as well as general working capital. The Company anticipates budgeting approximately $6.0 million ofevent the proceeds from the offeringWarrants are exercised for conducting operations and for working capital. The Company also intends to repay certain outstanding promissory notes and other payables totalling $1.5 million and the related interest thereon that are due or are coming due in the near term.
The Company may also use a portion of the net proceeds of this offering to acquire or invest in complementary businesses, products, or technologies, or to obtain the right to use such complementary technologies. The Company has no commitments with respect to any acquisition or investment and is not currently involved in any negotiations with respect to any such transactions.
As of the date of this prospectus, the Company cannot specify with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering. The amounts and timing of its actual expenditures will depend on numerous factors, including the status of its product development efforts, sales and marketing activities, technological advances, amount of cash, generated or used by its operations and competition. Accordingly, the Company’sour management will have broad discretion in the application of the net proceeds of such exercises. There is no assurance that the Warrants will ever be exercised for cash.
CAPITALIZATION
The table below sets forth our cash and investors will be relyingcash equivalents and capitalization as of September 30, 2022 on an actual basis and on a pro forma basis to reflect our issuance of the judgmentshares of its management regarding theour Common Stock offered by this prospectus and our receipt and application of the proceeds of this offering.
The Company has not declared nor paid any cash dividend on its common stock, and it currently intends to retain future earnings, if any, to finance the expansion of its business, and the Company does not expect to pay any cash dividends in the foreseeable future. The decision whether to pay cash dividends on its common stock willamount of approximately $674,000 from the exercise of warrants, after deducting our estimated offering expenses. This table should be made by its board of directors, in their discretion, and will depend on the Company’s financial condition, results of operations, capital requirements and other factors that its board of directors considers significant.
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The following table sets forth the Company’s cash and capitalization as of June 30, 2020 on:
The information in this table is unaudited and is illustrative only and the Company’s capitalization following the completion of this offering will be adjusted based on the actual public offering price and other terms of this offering determined at pricing. You should read this table in conjunction with the information contained in “Use“Use of Proceeds” “Summary Financial Information”above and “Management’s Discussionour consolidated audited and Analysis of Financial Condition and Results of Operation,” as well as theunaudited financial statements and the notes included elsewherethereto set forth in this prospectus.
June 30, 2020 | Conversion of debt | Proceeds | Adjusted | |||||||||||||
(Unaudited) | ||||||||||||||||
Assets | ||||||||||||||||
Current Assets | ||||||||||||||||
Cash | $ | 44,628 | $ | - | $ | 6,830,000 | $ | 6,874,628 | ||||||||
Total Liabilities | 15,435,536 | (12,095,283 | ) | - | 3,358,253 | |||||||||||
Stockholders' Deficit | ||||||||||||||||
Common stock par value $0.001: 100,000,000 shares authorized; 3,327,398 issued and 3,319,937 outstanding as of June 30, 2020 and 3,059,646 issued and 3,006,362 outstanding as of December 31, 2019 | 3,327 | 1,666 | 833 | 5,680 | ||||||||||||
Additional paid in capital | 39,075,664 | 11,333,617 | 6,829,167 | 57,238,594 | ||||||||||||
Accumulated deficit | (51,708,425 | ) | 760,000 | - | (50,948,425 | ) | ||||||||||
(12,724,121 | ) | 12,095,283 | 6,8330,000 | 6,201,162 |
September 30, 2022 | ||||||||||||
Actual | Adjustments | Pro Forma as Adjusted | ||||||||||
Cash | $ | 439,539 | 673,980 | $ | 1,113,519 | |||||||
Marketable Securities | 96 | - | 96 | |||||||||
Notes Payable | 1,787,099 | - | 1,787,099 | |||||||||
Convertible Notes Payable | 6,062,926 | - | 6,062,926 | |||||||||
Common stock - par value $0.001; 100,000,000 shares authorized; 20,254,839 issued and 20,249,182 outstanding as of June 30, 2022 | 24,470 | 4,000 | 28,470 | |||||||||
Additional paid-in capital | 124,667,772 | 669,980 | 125,337,752 | |||||||||
Accumulated deficit | (133,762,800 | ) | - | (133,762,800 | ) | |||||||
Accumulated other comprehensive income (loss) | (143,991 | ) | - | (143,991 | ) | |||||||
Treasury Stock | (76,106 | ) | - | (76,106 | ) | |||||||
Stockholders’ equity | (8,613,461 | ) | 673,980 | (7,939,481 | ) | |||||||
Total capitalization | (763,436 | ) | 673,980 | (89,456 | ) |
Each $1.00 increase (decrease) in the assumed public offering price of $9.00 per share would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets and total stockholders’ equity (deficit) by approximately $0.14, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 100,000 shares in the number of shares offered by us at the assumed public offering price of $9.00 per share would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets and total stockholders’ equity (deficit) by approximately $0.82.The table above excludes:
The number of shares of common stock outstanding is based on 3,319,937 shares of common stock issued and outstanding as of June 30, 2020, and excludes the following:
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Except as otherwise indicated herein, all information in this prospectus assumes:
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If you invest in the Company’s common stock in this offering, your ownership interest will be diluted to the extent of the difference between the assumed offering price per share of its common stock and the as adjusted net tangible book value per share of its common stock immediately after the offering. Historical net tangible book value per share represents the amount of the Company’s total tangible assets less total liabilities, divided by the number of shares of its common stock outstanding.
The historical net tangible book value (deficit) of the Company’s common stock as of June 30, 2020 was approximately $(15,060,957) or $(4.53) per share based upon shares of common stock outstanding on such date. Historical net tangible book value (deficit) per share represents the amount of its total tangible assets reduced by the amount of its total liabilities, divided by the total number of shares of common stock outstanding. After giving effect to the Company’s sale of all of the 833,333 Units (and the shares of common stock thereunder) offered in this offering at an assumed public offering price of $9.00 per Unit after deducting estimated underwriting discounts and commissions and the Company’s estimated offering expenses, the Company’s pro forma as adjusted net tangible book value as of June 30, 2020 would have been $3,864,326 or $0.66 per share. This represents an immediate increase in net tangible book value of $5.19 per share to the Company’s existing stockholders, and an immediate dilution in net tangible book value of $7.57 per share to new investors. The following table illustrates this per share dilution:
Assumed public offering price per share | $ | 9.00 | ||||||
Pro forma net tangible book value per share as of June 30, 2020 | $ | (15,060,957 | ) | |||||
Increase in net tangible book value per share attributable to new investors in this offering | 18,925,283 | |||||||
Pro forma, as adjusted net tangible book value, after this offering | 3,864,326 | |||||||
Dilution per share to new investors in this offering | $ | 0.68 |
The information discussed above is illustrative only, and the dilution information following this offering will be adjusted based on the actual public offering price and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed public offering price of $9.00 per share would increase (decrease) the pro forma as adjusted net tangible book value by $0.14 per share and increase (decrease) the dilution to new investors by $8.04 per share, assuming the number of shares offered by the Company, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by the Company. The Company may also increase or decrease the number of shares it is offering. An increase of 100,000 shares offered by it would increase the pro forma as adjusted net tangible book value by $0.82 per share and decrease the dilution to new investors by $0.14 per share, assuming the assumed public offering price of $9.00 per share remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by the Company. Similarly, a decrease of 100,000 shares offered by the Company would decrease the pro forma as adjusted net tangible book value by $0.53 per share and increase the dilution to new investors by $(0.15) per share, assuming the assumed public offering price of $9.00 per share remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by the Company.
If the underwriters’ over-allotment option to purchase additional shares from the Company is exercised in full, and based on the assumed public offering price of $9.00 per share, the pro forma as adjusted net tangible book value per share after this offering would be $0.84 per share, the increase in as adjusted net tangible book value per share to existing stockholders would be $5.37 per share and the dilution to new investors purchasing shares in this offering would be $8.06 per share.
The number of shares of common stock outstanding is based on 3,319,937 shares of common stock issued and outstanding as of June 30, 2020, and excludes the following:
● | 30,833,250 shares of common stock issuable upon the |
● | ||
● | ||
● | 169,182 shares of common stock |
Except as otherwise indicated herein, all information in this prospectus assumes:
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MARKET FOR COMMON STOCK AND DIVIDEND POLICY
Our common stock is quoted on the OTCQB under the symbol “CRTD.” As of November 21, 2022, the last reported sale price of the common stock as reported on OTCQB was $1.62 per share. As of November 21, 2022, there were approximately 378 holders of record of common stock. The actual number of shareholders is greater than this number of record holders and includes shareholders who are beneficial owners but whose shares are held in street name by brokers and other nominees (including any mobile investment platform).
To date, we have not paid cash dividends on our common stock and do not plan to pay such dividends in the foreseeable future. Our board of directors will determine our future dividend policy on the basis of many factors, including results of operations, capital requirements, and general business conditions. Dividends, under the Nevada Revised Statutes, may only be paid from our net profits or surplus.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with theour consolidated financial statements and related notes to the financial statements includedappearing elsewhere in this prospectus. ThisIn addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth in “Risk Factors.”
This prospectus and other reports filed by Creatd, Inc. (the “Company”), from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events or our future financial performance. These statements involve known and unknownare subject to risks, uncertainties, assumptions, and other factors, that may cause ourincluding the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results levels of activity, performancemay differ significantly from those anticipated, believed, estimated, expected, intended, or achievements to be materially different from anyplanned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements expressed or impliedachievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these forward-looking statements.statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These risksaccounting principles require us to make certain estimates, judgments and other factors include, among others, those listed under “forward-looking statements”assumptions. We believe that the estimates, judgments and “risk factors”assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and those includedassumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this prospectus.
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, 2021, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on April 6, 2022 and the Company’s Quarterly Report on Form 10-Q that was filed with the SEC on November 16, 2022.
Overview
Jerrick Media Holdings,Creatd, Inc. (OTCQB: JMDA). provides economic opportunities to creators and brands by multiplying the impact of platforms, technology, solutions for content creators, brands and their respective audiences throughpeople.
The Company has four main revenue lines, all directly related to its flagship technology platform, Vocal. The business lines complement one another, creating a flywheel effect. Working together, they provide shared data and resources to holistically leverage and organically grow the Company. Revenues are generated from creator subscriptions, consumer product sales, branded content, and IP development.
VocalCreator-Centric Strategy
Creatd’s north star metric is a user-generated long-form digital publishing platform primarily focused onto empower creators by providing needed resourcesbest-in-class tools, supportive communities, and opportunities for monetization and audience expansion. This creator-first approach is the virtually infinite numberfoundation of our culture and mission.
Creator Subscriptions
Creatd’s most scalable stream of revenues are derived from its flagship technology platform, Vocal.
Vocal was built to serve as a home base for creators. This robust, proprietary technology platform provides digital tools and resources, safe and curated communities, and monetization opportunities that enable creators brands,to find a receptive audience and audiences that occupy the digital sphere. be rewarded for their content. Creators of all types call Vocal their home, from bloggers to social media influencers, to podcasters, founders, musicians, photographers, and more.
Since its initial launch in December of 2016, Vocal has grown to becomeover 1.5 million registered creators and is one of the fastest growing digital communitiespremier technology platforms for content creators of all kinds–shapes and sizes. Creators can opt to use Vocal for free, or upgrade to the premium membership tier, Vocal+. Upon joining Vocal, either as a freemium or premium member, creators can immediately begin to utilize Vocal’s storytelling tools to create and publish their stories, as well as benefit from bloggers,Vocal’s monetization features. Creatd facilitates creators’ monetization on Vocal in many ways, including i) rewarding creators for each ‘read’ their story receives; ii) via Vocal Challenges, or writing contests through which creators can win cash and other rewards; iii) by awarding Bonuses; iv) by connecting creators with brands for opportunities to filmmakers, to musicians, artists, podcasters, entrepreneurs, and more–all of whom relycollaborate on Vocal for Brands branded content campaigns; v) through ‘Subscribe,’ which enables creators to receive payment directly from their audience via monthly subscriptions and one-off microtransactions; vi) via Vocal’s Ambassador Program, which enables creators to receive additional rewards whenever they refer a new Vocal+ member. The Vocal app is available for both iOS and Android on the Apple App store and the Google Play store.
Vocal’s proprietary technology is built on Keystone, the same underlying open-source framework used by industry leaders in the software as a service (SaaS) space. Some of the differentiating elements of Vocal’s technology are speed, sustainability, and scalability. The Company continues to invest heavily in research and development to continuously improve and innovate its storytelling tools, engagedplatform, with the goal of optimizing the user experience for creators, brands and their audiences. Additionally, the Vocal platform and its underlying technology maintain an advantageous capital-light infrastructure. By using cloud service providers and data segment specialists, we are able to focus on building the platform, community, and revenue rather than building and maintaining the costly internal infrastructures that have materially affected so many legacy media platforms.
Vocal’s technology has been specifically designed to significantly scale without a material corresponding increase in operational costs. While our users can embed rich media, such as video, audio, and product links, into their Vocal stories, the rich media content is hosted elsewhere (such as YouTube, Instagram, Vimeo, Shopify, and Spotify). The Vocal platform can accommodate content of all kinds without bearing the financial or operational costs associated with hosting the media itself. Creatd maintains a number of partnerships and initiatives with the primary content distribution and hosting platforms. In addition to the benefits this framework affords to the Company, it provides the additional benefit to our content creators, in that a creator can increase their monetization; for example, a creator can embed their YouTube video into a Vocal story and thus derive earnings from both platforms when their video is viewed.
Consumer Products Group
Creatd’s portfolio of internally owned and operated e-commerce businesses and associated technology and infrastructure make up the majority of the company’s second most scalable revenue line. The Company supports founders by providing a host of services including design and development, marketing and distribution, and go-to-market strategies. The Company expects to broaden its portfolio through the acquisition of up and coming brands that are aligned and easily consolidated into its shared supply chain, resources, and infrastructure.
This portfolio includes:
● | Camp, a direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. Each of Camp’s products are created with servings of vegetables and contain Vitamins A, C, D, E, B1 + B6. Since its launch in 2020, Camp continues to add new products to its line of healthy, veggie-based, family-friendly foods, with flavors including Classic Cheddar Mac ‘N’ Cheese, White Cheddar Mac ‘N’ Cheese, Vegan Cheezy Mac, and Twist Veggie Pasta. |
● | Dune Glow Remedy (“Dune”), which the Company purchased and brought to market in 2021, is a beverage brand focused on promoting wellness and beauty from within. Each beverage in Dune’s product line is meticulously crafted with functional ingredients that nourish skin from the inside out and enhance one’s natural glow. During 2022, Dune has continued to advance its retail and wholesale distribution strategy, securing numerous partnerships including with lifestyle retailer Urban Outfitters, Equinox, and the Los Angeles-based Erewhon Market. |
● | Basis, a hydrating electrolyte drink mix formulated using rehydration therapies developed by the World Health Organization. Acquired by the Company in first quarter 2022, Basis has a history of strong sales volume both on the brand’s website as well as through third-party distribution channels such as Amazon. |
● | Brave, a plant-based food company that provides convenient and healthy breakfast food products. On September 13, 2022, the Company acquired 100% of the membership interests of Brave Foods, LLC, a Maine limited liability company (“Brave”). What started as a search for a better morning routine evolved into a business serving thousands of go-getters of every type. |
Branded Content
The branded content revenue line is driven primarily by its Vocal for Brands offering, the Company’s internal content studio. The business line works with premier brands developing best-in-class organic marketing campaigns. In addition to content creation, the Company generates revenues from its influencer and performance marketing agency opportunities.
Brands have a story to tell. They leverage Vocal’s creator communities to help them tell it. Vocal for Brands’ content marketing studio specializes in pairing leading brands with Vocal creators, as well as discovering new talent and introducing them to the Vocal platform. The branded content business produces marketing campaigns on the platform that are non-interruptive, engaging, and direct-response driven. Additionally, brands can opt to collaborate with Vocal on sponsored Challenges, prompting the creation of thousands of high-quality stories that are centered around the brand’s mission and further disseminated through creators’ respective social channels and promotional outlets. Vocal for Brands campaigns leverage Vocal’s first-party audience insights, which enables the creation of highly targeted, segmented audiences and optimized campaign results.
IP Development and Production
Creatd’s fourth revenue stream is driven by partnering with its top creators to produce stories for TV, film, podcasts, and print. The Vocal platform is perpetually generating intellectual property sourced and curated by a combination of human let moderation and machine learning models. With millions of compelling stories in its midst, Creatd’s Vocal technology surfaces the best candidates for transmedia adaptations, through a deep analysis of community, creator, and audience insights.
In 2022, Creatd announced a series of newly released and upcoming production projects, including:
● | “Write Here, Write Now,” the Company’s first-ever podcast showcasing select Vocal creators and stories; a partnership with UK-based publisher, Unbound, for the publication of books featuring stories sourced from Vocal; the formation of a new graphic novel development arm which in Fall 2022 will release its first title, Steam Wars, created by artist and independent filmmaker Larry Blamire. |
● | OG Gallery: 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. |
Application of First-Party Data
Creatd’s shared business intelligence and marketing teams identify and target individual creators, communities, and monetization opportunitiesbrands, utilizing empirical data harnessed from the Vocal technology platform. The team’s ability to apply its proprietary first-party data works to reduce acquisition costs for new creators and to help provide brands with conversions and an ideal targeted audience. In this way, our ability to apply first-party data is one of the value-drivers for the Company across its four business pillars. The internal teams work across the Company’s portfolio of technology product and service revenue lines.
Creatd uses its first party data to improve the Vocal platform. Specifically, data helps understand the behaviors and attributes that help them get discoveredare common among the creators, brands, and fund their creativity. Currently,audiences within the platform’s ecosystem. Pairing first-party Vocal data with third-party data from distribution platforms such as Instagram, Tiktok, Twitter, and Snapchat provide a more granular profile of creators, brands, and audiences. It is homethrough generating this valuable first-party data that the Company can continually enrich and refine its targeting capabilities for branded content marketing and creator acquisition, and specifically, to over 650,000reduce creator acquisition costs (CAC) and subscriber acquisition costs (SAC).
Competitive Advantage
The idea for Vocal came as a response to what Creatd’s founders recognized as systemic flaws inherent to the digital media industry and its operational infrastructures. The depreciating value of digital media business models built on legacy technology platforms that did not efficiently access and apply data, created a unique opportunity for the development of a new type of creator-centric platform. Key to building a platform that could appeal to a global community was utilizing that data to create a win-win proposition for all constituents including creators, audiences and the brands that want to access them. The proprietary nature of Creatd’s technology and its process give the company a competitive advantage in acquiring undervalued technology assets that can be rapidly assimilated into the greater collective, thus exponentially driving future EBITDA.
Creatd’s founders built the Vocal platform upon the general thesis that a closed and safe ecosystem utilizing first-party data to increase efficiencies could create a sustainable and defensible business model. Vocal was strategically developed to provide value for content creators, readers, and brands, and attracts millionsto serve as a home for the ever-increasing amount of audience members each month acrossdigital content being produced and the libraries of digital assets lying dormant.
Acquisition Strategy
Creatd’s hybrid finance and design culture is key to its acquisition strategy. Acquisition targets are companies that meet a set of opportunistic or financial standards or that are part of specific digital environments. Transactions are mainly accretive and targets can seamlessly integrate into Creatd’s existing revenue lines. Creatd will continue to make strategic acquisitions when presented with opportunities that are in the interest of long term shareholder value.
Recent Developments
Appointment of Erica Wagner to Board; Resignation of Joanna Bloor
On November 16, 2022, Erica Wagner was appointed to the Company’s networkBoard of 100% owned-and-operated communities.
There areDirectors. Ms. Wagner, age 55, joins the Board with over 4.5 billion internet users;25 years of that, 83% publish some formexperience as a journalist, broadcaster, editor and author. From 2016 through 2021, Ms. Wagner was a Lecturer, and later Senior Lecturer, at Goldsmith’s College, University of content onLondon, where she taught creative writing. Ms. Wagner was previously Lead Editorial Innovator for Creatd, Inc., has previously and currently held roles as a monthly basis (photos, writing, reviews)freelance editor, journalist, and contributing writer for numerous outlets both in the U.K. and the U.S., including The New Statesman, Harper’s Bazaar, the Economist, the Observer, the New York Times. Ms. Wagner is also a freelance literary and 3.8 billion of them are active on social media (according to data by GlobalWebIndex and Reddit). In 2020, the internet has become the linchpin of the modern information society,creative consultant for Chanel, as well as the modern social society.host of their branded podcast. She has twice been a judge of the Booker Prize and has been judge and Chair of the Goldsmiths Prize. In 2015, Ms. Wagner was awarded an Honorary PhD by the University of East Anglia, and currently Goldsmith’s College Distinguished Writers’ Centre Fellow. She has an undergraduate degree from University of Cambridge, a Master’s degree from University of East Anglia, and an Honorary PhD from the University of East Anglia. As a member of Creatd’s board of directors, Ms. Wagner will add significant expertise with respect to informing the Company’s literary and creative direction, having worked closely with news organizations, commercial companies and publishers, to advise their creative direction and its application towards commercial success.
On November 17, 2022, the Board received notice from Joanna Bloor of her resignation as a director and from all committees of the Board on which she served, effective as of such date. Such resignation is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Appointment of Peter Majar to the Board; Resignation of Lorraine Hendrickson
On November 2, 2022, the Board appointed Peter Majar to the Board. Mr. Majar, age 55, Founder and Managing Member of Majar Advisors, combines over 25 years of experience in investment banking, financial services and technology, and management consulting, having held numerous senior management and executive positions including Chief Financial Officer, Head of Financial Technology, platformsHead of Strategy, as well as several Managing Director positions. From 2015 to 2017, Mr. Majar served as Managing Director in Investment Banking and co-Head of Diversified Financial Services at Piper Jaffray & Co. (now Piper Sandler Companies). From 2017 to 2018, Mr. Majar provided management consulting services through his self-established firm, Majar Advisors LLC, which remains in operation through the present. From 2018 to 2021, Mr. Majar served as Managing Director, Head of Financial Technology at New York-based investment banking and financial advisory firm, TAP Advisors, LLC. Between 2021 and 2022, Mr. Majar served as Chief Financial Officer at information technology company Hoyos Integrity Corp., having previously served as a longtime advisor to the firm. Mr. Majar holds an undergraduate degree from University of Washington and an MBA from Columbia University. As a board director, Mr. Majar will add considerable value, including through his comprehensive and diverse investment management experience, deep knowledge of financial technology services and transactions, and broad experience with corporate development, strategy consulting, and executive leadership.
On November 1, 2022, the Board received notice from Lorraine Hendrickson of her resignation as a director and from all committees of the Board on which she served, effective as of such date. Ms. Hendrickson’s resignation as Vocal exista member of the Board is not the result of any disagreement with the Company on any matter relating to help creators capture opportunities within the vastCompany’s operations, policies or practices.
Nasdaq Delisting
On September 2, 2022, the Company received a letter from the staff of The Nasdaq Capital Market notifying the Company that the Nasdaq Hearings Panel has determined to delist the Company’s common stock from the Exchange, based on the Company’s failure to comply with the listing requirements of Nasdaq Rule 5550(b)(1) as a result of the Company’s shareholder equity deficit for the period ended June 30, 2022, as demonstrated in Company’s Quarterly Report on Form 10-Q filed on August 15, 2022, following the Company having not complied with the market value of listed securities requirement in Nasdaq Rule 5550(b)(2) on March 1, 2022, while the Company was under a Panel Monitor, as had been previously disclosed. Suspension of trading in the Company’s shares on the Exchange became effective at the opening of business on September 7, 2022, at which time the Company’s common stock, under the symbol “CRTD,” and competitive digital landscape. Given Vocal’s inherent monetization capabilities, topic-specific structure,publicly-traded warrants, under the symbol “CRTDW,” was quoted on the OTCPink marketplace operated by OTC Markets Group Inc.
Following passage of the proscribed 15-day time period for appeal as stated in the Letter, on October 26, 2022, Nasdaq completed the delisting by filing a Form 25 Notification of Delisting with the Securities and adaptabilityExchange Commission.
The Company’s common stock, under the symbol “CRTD,” is quoted on the OTCQB marketplace operated by OTC Markets Group Inc. effective as of September 26, 2022. The Company’s publicly-traded warrants, under the symbol “CRTDW,” are quoted on the OTCPink marketplace operated by OTC Markets Group Inc.
Securities Purchase Agreement; Side Letter
On October 24, 2022, the Company entered into and closed a securities purchase agreement (the “Purchase Agreement”) with one accredited investor (the “Investor”), whereby the Investor purchased from the Company for an aggregate of $1,500,000 in subscription amount, an unsecured debenture in the principal amount of $1,666,650 (the “Debenture”). The Company and the Investor also entered into a registration rights agreement (each, a “Registration Rights Agreement”) pursuant to the Purchase Agreement.
The Debenture has an original issue discount of 10%, has a term of six months with a maturity date of April 24, 2023, may be extended by six months at the Company’s option subject to certain conditions, and are convertible into shares of Common Stock at a conversion price of $0.20 per share, subject to adjustment upon certain events.
In connection with its entry into the Purchase Agreement and issuance of the Debenture, the Company also entered into a side letter agreement (the “Letter Agreement”) with the holders of debentures of the Company, the Series C Warrants and Series D Warrants issued as of May 31, 2022 (the “May Investors”) and the holders of debentures of the Company, the Series E Warrants and Series F Warrants issued as of July 25, 2022 (the “July Investors”). Pursuant to the Letter Agreement each of the May Investors and the July Investors have entered into a lock-up agreement whereby they may not sell any such debentures, warrants, the shares into which such debentures may be converted, or certain shares underlying such warrants until the date that is 30 days after the date on which the registration statement registering for resale the shares of the Company’s common stock underlying the Debenture is declared effective by the Securities and Exchange Commission. Additionally, the Letter Agreement, provides that the May Investors and July Investors have agreed to a wide rangefurther lock up of usessuch shares for a further 30 days upon the receipt of a certain amount of the proceeds from future potential issuances of debentures, common stock or similar securities by the Company. Further additionally, pursuant to the Letter Agreement, the May Investors and industries, we believethe July Investors have agreed to exchange and return for cancellation the Series C Warrants, Series D Warrants, Series E Warrants and Series F Warrants, receiving replacement warrants from the Company (the “Replacement Warrants”), in consideration for (i) the Company’s payment of $750,000 of the proceeds from the sale of the Debenture to the May Investors and July Investors on a pro rata basis and (ii) the Company’s agreement to pay, on a pro rata basis to the May Investors and July Investors, the greater of (x) $750,000 and (y) 50% of the gross proceeds raised in a subsequent financing. The Replacement Warrants reflect a reduction in the number of Series C and Series D Warrants from 1,550,000 in each class to 1,536,607 in each class and a reduction in the number of Series E and Series F Warrants from 1,075,000 in each class to 807,143 in each class, and the initial exercise date for the Replacement Warrants are unchanged from the date as set forth in the respective exchanged Series C, Series D, Series E or Series F Warrant.
Common Stock Purchase Agreement, Securities Purchase Agreement and Promissory Note
On October 20, 2022, the Company entered into a Common Stock Purchase Agreement (the “Investment Agreement”) with an otherwise unaffiliated third party (the “Investor”). Pursuant to the terms of the Investment Agreement, for a period of thirty-six (36) months commencing on the trading day immediately following date of effectiveness of the Registration Statement (as defined below), the Investor purchase up to $15,000,000 of the Company’s common stock, par value $0.001 per share (the “Shares”), pursuant to Drawdown Notices (as defined below), covering the Registrable Securities (as defined below). The purchase price of the Shares under the Investment Agreement is equal to 82% of the lowest volume weighted average price (VWAP) during the last ten trading days after the Company delivers to the Investor a Put notice (a “Drawdown Notice”) in writing requiring Investor to purchase shares of the Company, subject to the terms of the Investment Agreement.
On October 20, 2022, the Company also entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Investor, pursuant to which the Company issued to the Investor on that itdate a Promissory Note (the “Note”) in the principal amount of $300,000 in exchange for a purchase price of $255,000, which the Investor funded on October 20,2022. The proceeds of the Note will be used by the Company for general working capital purposes.
The Note bears interest at the rate of 10% per annum. Starting on the fifth month anniversary of the funding of the Note, and for the next six months thereafter, the Company will make seven equal monthly payments of $47,142.85 to the Investor.
On October 20, 2022, in connection with the entry by the Company and the Investor into the economic agreements, (i.e., the Investment Agreement, the Purchase Agreement, and the Note and the funding thereof), the Company issued 800,000 shares of its common stock to the Investor.
Securities Purchase Agreement
On September 15, 2022, Creatd, Inc., entered into a securities purchase agreement (the “Purchase Agreement”) with five accredited investors resulting in the raise of $800,000 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell in a registered direct offering (the “Offering”) an aggregate of 4,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). In a concurrent private placement, the Company issued to such investors warrants to purchase up to 4,000,000 shares of Common Stock, representing 100% of the shares of common stock purchased in the Offering (the “Warrants”). The Warrants and the shares of common stock issuable upon the exercise of the Warrants (the “Warrant Shares”) are not being registered under the Securities Act of 1933, as amended.
The Offering is expected to close on or about September 19, 2022, subject to the ideal platformsatisfaction of customary closing conditions as set forth in the Purchase Agreement. The Company expects the gross proceeds from the Offering to help users adjustbe $800,000, before deducting Offering expenses, which will be used for general corporate purposes, including working capital.
The shares of Common Stock were offered and sold by the Company pursuant to a world increasingly reliant on digital connectivity. The impact of a global crisis like the 2020 COVID-19 pandemic only further emphasizes how critical a role digital platforms play in society,prospectus supplement, which will be filed with the continuationSecurities and Exchange Commission in connection with a takedown from the Company’s effective shelf registration statement on Form S-3, which was filed with the Commission on November 25, 2020 and subsequently declared effective on April 23, 2021 (File No. 333-250982) (the “Shelf Registration Statement”).
The Warrants are immediately exercisable for a term of social distancing measures, businesses undergoing massive digital transformations, increased virtual socialization, and remote workplaces. These factors aside, Vocal exists infive years until September 15, 2027. The Warrants are exercisable at an environment whereexercise price of $0.20, subject to adjustment upon certain events. The Warrants provide for cashless exercise to the total addressable market (TAM) of the platform is growing exponentially; given the current conditions, it may see growth even more rapidly.
Vocal makes it easy for creators to produce well-constructed, search engine optimized, and engaging content. The platform’s unique canvas-style editor supports content creation utilizing a wide range of rich-media assets including streaming content, photos, videos, podcasts, product links, written text, and more. Further, Vocal’s proprietary moderation system is vital in a digital environment increasingly characterized by misinformation, toxicity, and hate speech. Vocal’s enforcement of community guidelines and content moderation creates a secure environment for all platform stakeholders, including Vocal creators, brands, and audiences.
Additionally, Freemium (Vocal Free) creators can opt to upgrade to a premium tier, Vocal+, and pay a subscription fee to access a suite of additional features such as an increased rate of cost per mille (CPM) monetization, brand collaborations, the ability to enter exclusive members-only Challenges, early access to new features, and other rewards. In less than one year since first introducing the Vocal+ premium subscription offering, we have successfully onboarded nearly 4,000 paid subscribers. The Vocal+ premium subscription tier is accretive to Jerrick’s overall business model not only in the fact that it represents a highly scalable revenue stream, but in the factextent that there is a direct correlationno registration statement available for the underlying shares of Common Stock. The shares underlying the Warrants are to be registered within 10 trading days of the date of the Purchase Agreement.
The representations and warranties contained in the Purchase Agreement were made by the parties to, and solely for the benefit of, the other in the context of all of the terms and conditions of the Purchase Agreement and in the context of the specific relationship between the numberparties. The provisions of Vocal+ membersthe Purchase Agreement, including the representations and warranties contained therein, are not for the benefit of any party other than the parties to the Purchase Agreement. The Purchase Agreement is not intended for investors and the costspublic to acquire and retain creators on Vocal. Specifically, historical data shows that asobtain factual information about the numbercurrent state of paid Vocal+ subscribers grows, creator acquisition costs decline for bothaffairs of the Freemium and Vocal+ paid tier.parties.
In conjunction
Restructuring Agreement
On September 15, 2022, in connection with its creator services,the Offering, the Company entered into an agreement with the holders of certain of the Company’s in-house content studio Vocalpreviously issued securities (the “Restructuring Agreement”).
The Restructuring Agreement, among other things, modified certain provisions of the following securities of the Company:
(i) | Original Issue Discount Senior Convertible Debentures issued on May 31, 2022 (the “May 2022 Debentures”); |
(ii) | Original Issue Discount Senior Convertible Debentures issued on July 25, 2022 (the “July 2022 Debentures” and, together with the May 2022 Debentures, the “Debentures”); |
(iii) | Common Stock Purchase Warrants issued on February 28, 2022 (the “February 2022 Warrants”); |
(iv) | Common Stock Purchase Warrants issued on March 9, 2022 (the “March 2022 Warrants”); |
(v) | Series C Common Stock Purchase Warrants issued on May 31, 2022 (the “Series C Warrants”); |
(vi) | Series D Common Stock Purchase Warrants issued on May 31, 2022 (the “Series D Warrants”); |
(vii) | Series E Common Stock Purchase Warrants issued on July 25, 2022 (the “Series E Warrants”); |
(viii) | Series F Common Stock Purchase Warrants issued on July 25, 2022 (the “Series F Warrants” and, together with the February 2022 Warrants, the March 2022 Warrants, Series C Warrants, Series D Warrants and Series E Warrants, the “Restructured Warrants”); |
Pursuant to the Restructuring Agreement, the Company and the Holders agreed to, among other things, to (i) reduce the conversion price of the Debentures down to $0.20, subject to adjustment for Brands leveragesreverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock; (ii) reduce the exercise price of the Restructured Warrants down to $0.20, subject to adjustment for subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock; (iii) extend the maturity dates for the Debentures to March 31, 2023; (iv) permit the Company’s technologycontemplated rights offering to proceed, provided that the per share offering price in the rights offering is not less than $0.20; and Vocal creator platform to help DTC (direct-to-consumer) brands reach their ideal audience in an educational, trustworthy and direct-results focused way, rather than through traditional programmatic advertising methods like display ads and pop ups,(v) require that are inherently interruptive.
Vocal for Brands partners brands with authentic Vocal creators to produce beautiful, campaign-optimized stories on Vocalthe Company’s cash burn rate not exceed $600,000 per month; provided, however, that build brand affinity and trust, and drive results. Additionally, with the introductionprior written consent of Challengesa majority in earlyinterest of the Holders, such permitted monthly burn rate can be increased by $150,000, provided such additional amount is used for marketing purposes.
Additionally, in connection with the Restructuring Agreement, (i) the Company entered into a Registration Rights Agreement (“Registration Rights Agreement”), providing for the filing of a registration statement covering the Restructured Warrants and shares underlying the Warrants by not later than 10 trading days after the date of the Registration Rights Agreement or the earliest practical date on which the Company is permitted by Commission guidance to file such registration statement; (ii) the Company and its subsidiaries entered into a Security Agreement (the “Security Agreement”), whereby the Company granted a first quarter 2020, brands can now tap into Vocal’s network of approximately 650,000 content creators and encourage them to interact with, learn about and promote their brand while benefiting from Vocal’s brand-safe, moderated, and curated environment. Brand-sponsored Challenges effectively yield a collection of crowdsourced branded content for brands and help them reach a wider audience. In both cases, Vocal for Brands clients uniquely benefit from Vocal’s first-party data, which is what enables our team to create highly targeted and segmented audiences for Vocal for Brands campaigns, and help brands reach their ideal audience.
Jerrick’s resources and Vocal’s proprietary technology were built to simultaneously amplify creators’ discoverability and earnings, help direct-to-consumer brands achieve conversions and reach their target audiences, and yield value forpriority security interest in all of Jerrick’s stakeholders. Further,their respective assets to the Vocal platform’s unique underlying architecture generates scalableHolders and sustainable revenues,(iii) the subsidiaries of the Company delivered a guarantee (the “Guarantee”) in favor of the Holders whereby each such subsidiary guaranteed the full payment and lends itself wellperformance of all obligations of the Company pursuant to future acquisitionsthe Debentures.
Each of our directors and white-label opportunitiesofficers have entered into lock-up agreements (the “Lock-up Agreements”) in favor of the Holders, whereby they have agreed not to offer, sell, agree to sell, directly or indirectly, or otherwise dispose of any shares of Common Stock or any securities convertible into or exchangeable for Jerrick.shares of Common Stock without the prior written consent of the Holders for a period of 180 days after the date of the Restructuring Agreement. The Lock-up Agreements provide limited exceptions and their restrictions may be waived at any time by the Holders.
At
Resignation of Brad Justus
On September 21, 2022, the Board of Directors of Creatd, Inc. received notice from Brad Justus of his resignation as a member of the Board, chair of the Nominating & Corporate Governance Committee, a member of the Audit Committee and a member of the Compensation Committee, with such resignation to become effective on September 30, 2022. Such resignation is not the result of any disagreement with the Company on any matter relating to the Company’s 2020 Annual Meetingoperations, policies or practices.
Resignation of ShareholdersChief Executive Officer and Director
On August 9, 2022, Laurie Weisberg, the Company’s Chief Executive Officer and a member of the Board, notified the Company of her intention to resign from the positions of Chief Executive Officer, director, and any other positions held with the Company or any of its subsidiaries, regardless of whether Ms. Weisberg had been appointed. Such resignations are to become effective on July 8th, 2020,a date to be determined following further discussion with the Board, but in no event later than August 31, 2022. On September 2, 2022, the Company entered into an Executive Separation Agreement with Laurie Weisberg the Company’s Chief Executive Officer and member of the Board of Directors setting forth the terms and conditions related to the Executive’s resignation for good reason as Chief Executive Officer, Director and any other positions held with the Company or any subsidiary.
Appointment of Chief Executive Officer
Effective upon Ms. Weisberg’s resignation as Chief Executive Officer, Jeremy Frommer, currently the Company’s Executive Chairman, will be appointed as Chief Executive Officer, pursuant to the Board’s approval.
Jeremy Frommer
Mr. Frommer was appointed Executive Chairman in February 2022 and has been a member of our board of directors since February 2016. Previously, he served as our Chief Executive Officer from February 2016 to August 2021, and Co-Chief Executive Officer from August 2021 to February 2022. Mr. Frommer has over 20 years of experience in the financial technology industry. Previously, Mr. Frommer held key leadership roles in the investment banking and trading divisions of large financial institutions. From 2009 to 2012, Mr. Frommer was briefly retired until beginning concept formation for Jerrick Media Holdings, Inc. received approvalVentures which he officially founded in 2013. From 2007 to change its name to Creatd, Inc., expected to take effect upon its planned uplisting in mid-third quarter. Once Creatd, Inc. begins trading on the Nasdaq2009, Mr. Frommer was Managing Director of Global Prime Services at RBC Capital Markets, the investment banking arm of the Royal Bank of Canada, the largest financial institution in Canada, after the sale of Carlin Financial Group, a professional trading firm. From 2004 to 2007, Mr. Frommer was the Chief Executive Officer of Carlin Financial Group after the sale of NextGen Trading, a software development company focused on building equity trading platforms. From 2002 to 2004, Mr. Frommer was Founder and Chief Executive Officer of NextGen Trading. From 2000 to 2002, he was Managing Director of Merger Arbitrage Trading at Bank of America, a financial services firm. Mr. Frommer was also a director of LionEye Capital, a hedge fund from June 2012 to June 2014. He holds a B.A. from the University of Albany. We believe Mr. Frommer is qualified to serve on our board of directors due to his financial and leadership experience.
Appointment of Director
Effective upon Ms. Weisberg’s resignation as a director, Justin Maury, currently the Company’s President and Chief Operating Officer, will be appointed to the Board, pursuant to the Board’s approval.
Justin Maury
Mr. Maury has served as our President since January 2019 and was appointed Chief Operating Officer in August 2021. A full-stack designer and product developer by training, Mr. Maury partnered with Jeremy Frommer and founded the Company plansin 2013, having brought with him 10 years of experience in the creative industry. Since joining Creatd in 2013, Mr. Maury has been an instrumental force in the Company’s business and revenue expansion, and has overseen the Company’s product development since inception, including overseeing the design, development, launch, and ongoing growth of the Company’s flagship product, Vocal, the innovative creator that, under Mr. Maury’s leadership, has grown to tradea community of over 1.5 million users with a total audience reach of over 175 million.
As a director, we believe Mr. Maury will add considerable value, including through by providing a unique perspective into Creatd’s product performance and evolution and by providing invaluable direct input to help guide the Company’s ongoing refinement of its technology roadmap and maturation of its business model.
Trigger of Price Reset
On July 29, 2022, the Company announced that it was not moving forward with its previously announced Rights Offering. In doing so, it triggered a price reset in the July 2022 Financing and the May 2022 Securities Purchase Agreement. As a result of this price reset, the May 2022 Securities Purchase Agreement debentures now have a conversion price of $1.00, and both the Series C and Series D warrants have exercise prices of $0.96. As a result of the price reset, the July 2022 Financing debentures now have a conversion price of $1.25, and both the Series E and Series F warrants have exercise prices of $1.01.
July 2022 Financing
On July 25, 2022 (the “Effective Date”), the Company entered into and closed securities purchase agreements (each, a “Purchase Agreement”) with five accredited investors (the “Investors”), whereby the Investors purchased from the Company for an aggregate of $1,935,019 in subscription amount (i) debentures in the principal amount of $2,150,000 (the “Debentures”); (ii) 1,075,000 Series E Common Stock Purchase Warrants to purchase shares of the Common Stock (the “Series E Warrants”); and (iii) 1,075,000 Series F Common Stock Purchase Warrants to purchase shares of Common Stock (the “Series F Warrants”, and collectively with the Series E Warrants, the “Warrants”). The Company and the Investors also entered into registration rights agreements (each, a “Registration Rights Agreement”) pursuant to the Purchase Agreement.
The Debentures have an original issue discount of 10%, have a maturity date of November 30, 2022, may be extended by six months at the Company’s option subject to certain conditions, and are convertible into shares of Common Stock at a conversion price of $2.00 per share, subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering (as defined therein), with such adjusted conversion price not to be lower than $1.25.
The Warrants are immediately exercisable for a term of five years until July 25, 2027. The Series E Warrants are exercisable at an exercise price of $3.00, subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $1.01. The Series F Warrants are exercisable at an exercise price of $6.00 subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $1.01. The Warrants provide for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock. The shares underlying the Debentures, the Series E Warrants and the Series F Warrants are to be registered within 90 days of the Effective Date.
The representations and warranties contained in the Purchase Agreement were made by the parties to, and solely for the benefit of, the other in the context of all of the terms and conditions of the Purchase Agreement and in the context of the specific relationship between the parties. The provisions of the Purchase Agreement, including the representations and warranties contained therein, are not for the benefit of any party other than the parties to the Purchase Agreement. The Purchase Agreement is not intended for investors and the public to obtain factual information about the current state of affairs of the parties.
Additionally, in connection with the Purchase Agreements, the subsidiaries of the Company delivered a guarantee (the “Guarantee”) in favor of the Investors whereby each such subsidiary guaranteed the full payment and performance of all obligations of the Company pursuant to the Purchase Agreement.
Securities Purchase Agreement
On May 31, 2022, the Company entered into and closed securities purchase agreements (each, a “Purchase Agreement”) with eight accredited investors (the “Investors”), whereby the Investors purchased from the Company for an aggregate of $3,600,036 in subscription amount (i) debentures in the principal amount of $4,000,000 (the “Debentures”); (ii) 2,000,000 Series C Common Stock Purchase Warrants to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) (the “Series C Warrants”); and (iii) 2,000,000 Series D Common Stock Purchase Warrants to purchase shares of Common Stock (the “Series D Warrants”, and collectively with the Series C Warrants, the “Warrants”). The Company and the Investors also entered into registration rights agreements (each, a “Registration Rights Agreement”) pursuant to the Purchase Agreement.
The Debentures have an original issue discount of 10%, have a term of six months with a maturity date of November 30, 2022, may be extended by six months at the Company’s option subject to certain conditions, and are convertible into shares of Common Stock at a conversion price of $2.00 per share, subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering (as defined therein), with such adjusted conversion price not to be lower than $1.00.
The Warrants are exercisable for a term of five years from the initial exercise date of November 30, 2022, until November 30, 2027. The Series C Warrants are exercisable at an exercise price of $3.00, subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $0.96. The Series D Warrants are exercisable at an exercise price of $6.00 subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $0.96. The Warrants provide for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock. The shares underlying the Debentures, the Series C Warrants and the Series D Warrants are to be registered within 90 days of the Effective Date.
Additionally, in connection with the Purchase Agreements, the subsidiaries of the Company delivered a guarantee (the “Guarantee”) in favor of the Investors whereby each such subsidiary guaranteed the full payment and performance of all obligations of the Company pursuant to the Purchase Agreement.
The Debentures, Warrants, Common Stock underlying the Debentures and the Common Stock underlying the Warrants were not registered under the ticker symbol ‘CRTD.’
Securities Act, but qualified for exemption under Section 4(a)(2) and Rule 506 promulgated thereunder. The Company is relying on this exemption from registration for private placements based in part on the representations made by Investors, including representations with respect to each Investor’s status as an accredited investor, as such term is defined in Rule 501(a) of the Securities Act, and each Investor’s investment intent.
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Results of Operations
Summary of Statements of Operations for the Years Ended December 31, 2019 and 2018:
Year Ended December 31, | ||||||||
2019 | 2018 | |||||||
Revenue | $ | 453,006 | $ | 80,898 | ||||
Gross Margin | $ | 453,006 | $ | 80,898 | ||||
Operating Expenses | $ | (7,669,984 | ) | $ | (5,767,153 | ) | ||
Loss from operations | $ | (7,216,978 | ) | $ | (5,686,255 | ) | ||
Other Expenses | $ | (818,394 | ) | $ | (6,327,287 | ) | ||
Net loss | $ | (8,035,372 | ) | $ | (12,013,542 | ) | ||
Loss per common share – basic and diluted | $ | (2.93 | ) | $ | (12.47 | ) |
Revenue
Revenue was $453,006 for the year ended December 31, 2019, as compared to $80,898 for the comparable year ended December 31, 2018, an increase of $372,108. The increase in revenue is primarily attributable to the launch and steady growth of Vocal+ paid subscribers, the rising price points for Vocal for Brands campaigns, and the integration of Seller’s Choice into Jerrick following the Company’s successful acquisition of Seller’s Choice in late third quarter. Over $400,000 of the $453,006 was generated in the second half of the year with approximately $300,000 generated in the fourth quarter alone.
Operating Expenses
Operating expenses for the year ended December 31, 2019 were $7,669,984 as compared to $5,767,153 for the year ended December 31, 2018. The increase of $1,902,831 in operating expenses is the result of an increase in general and administrative expenses and consulting fees. The increase to these expenses is mainly related to the acquisition of Seller’s Choice and the implementation of the Company’s future business plans.
Loss from Operations
Loss from operations for the year ended December 31, 2019 was $7,216,978 as compared to $5,686,255 for the year ended December 31, 2018. The increase in the loss from operations is primarily due to increased expenses due to the continued development of the Vocal platform and the acquisition of Seller’s Choice and the implementation of the Company’s future business plans.
Other Expenses
Other expenses for the year ended December 31, 2019 was $818,394 as compared to $6,327,287 for the year ended December 31, 2018. Other expenses during the year ended December 31, 2019 was comprised of interest expense of $612,830 on notes and related party notes, accretion of debt discount and issuance cost of $348,665 due to the incentives given with debentures, a loss on extinguishment of debt of $162,860. These expenses were offset by other income from an Australian tax credits for research and development of $292,387. During the year ended December 31, 2018, other expenses were comprised of interest expense of $923,008 on notes and related party notes and accretion of debt discount and issuance cost of $2,090,286 due to the incentives given with debentures, loss on extinguishment of liabilities of $3,453,137 for the incentives given to amend or convert debt.
Net Loss
Net loss attributable to common shareholder for the year ended December 31, 2019, was $8,035,372, or loss per share of $2.93, as compared to a net loss attributable to common shareholders of $14,204,408, or loss per share of $12.47, for the year ended December 31, 2018.
Inflation did not have a material impact on the Company’s operations for the applicable period. Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company’s results of operations.
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Summary of Statements of Operations for the Three Months Ended June 30, 2020 and 2019:
Three Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Revenue | $ | 322,540 | $ | 7,181 | ||||
Operating Expenses | $ | (3,857,792 | ) | $ | (1,409,302 | ) | ||
Loss from operations | $ | (3,535,252 | ) | $ | (1,402,121 | ) | ||
Other Expenses | $ | (606,739 | ) | $ | (183,293 | ) | ||
Net loss | $ | (4,141,991 | ) | $ | (1,585,414 | ) | ||
Loss per common share – basic and diluted | $ | (1.30 | ) | $ | (0.59 | ) |
Revenue
Revenue was $322,540 for the three months ended June 30, 2020, as compared to $7,181 for the comparable three months ended June 30, 2019, an increase of $315,359. The increase in revenue is primarily attributable to the launch and steady growth of Vocal+ paid subscribers, the rising price points for Vocal for Brands campaigns, and the integration of Seller’s Choice into Jerrick following the Company’s successful acquisition in late third quarter 2019.
Operating Expenses
Operating expenses for the three months ended June 30, 2020 were $3,857,792 as compared to $1,409,302 for the three months ended June 30, 2019. The increase of $2,448,490 in operating expenses is the result of an increase in general and administrative expenses and consulting fees. The increase to these expenses is mainly related to one-time stock-based payments to consultants and employees. In addition, the acquisition of Seller’s Choice and subsequent integration into Jerrick’s infrastructure, as well as the implementation of the Company’s future business plans contributed to this increase.
Loss from Operations
Loss from operations for the three months ended June 30, 2020 was $3,535,252 as compared to $1,402,121 for the three months ended June 30, 2019. The increase in the loss from operations is primarily due to one-time stock-based payments to consultants and employees, as well as increased expenses due to the continued development of the Vocal platform, the acquisition of Seller’s Choice and the implementation of the Company’s future business plans.
Other Expenses
Other expenses for the three months ended June 30, 2020 was $606,739 as compared to $183,293 for the three months ended June 30, 2019. Other expenses during the three months ended June 30, 2020 was comprised of interest expense of $491,206 on notes and related party notes and accretion of debt discount and issuance cost of $140,274 due to the incentives given with debentures. During the three months ended June 30, 2019, other expenses were comprised of interest expense of $110,032 on notes and related party notes and accretion of debt discount and issuance cost of $69,626 due to the incentives given with debentures, loss on extinguishment of liabilities of $3,635 for the incentives given to amend or convert debt.
Net Loss
Net loss attributable to common shareholders for the three months ended June 30, 2020, was $4,141,991, or loss per share of $1.30, as compared to a net loss of $1,585,414, or loss per share of $0.59, for the three months ended June 30, 2019.
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Summary of Statements of Operations for the Six Months Ended June 30, 2020 and 2019:
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Revenue | $ | 615,682 | $ | 41,515 | ||||
Operating Expenses | $ | (5,976,883 | ) | $ | (3,148,630 | ) | ||
Loss from operations | $ | (5,361,201 | ) | $ | (3,107,115 | ) | ||
Other Expenses | $ | (1,766,787 | ) | $ | (362,740 | ) | ||
Net loss | $ | (7,127,988 | ) | $ | (3,469,855 | ) | ||
Loss per common share – basic and diluted | $ | (2.28 | ) | $ | (1.41 | ) |
Revenue
Revenue was $615,682 for the six months ended June 30, 2020, as compared to $41,515 for the comparable six months ended June 30, 2019, an increase of $574,167. The increase in revenue is primarily attributable to the launch and steady growth of Vocal+ paid subscribers, the rising price points for Vocal for Brands campaigns, and the integration of Seller’s Choice into Jerrick following the Company’s successful acquisition in late third quarter 2019.
Operating Expenses
Operating expenses for the six months ended June 30, 2020 were $5,976,883 as compared to $3,148,630 for the six months ended June 30, 2019. The increase of $2,828,253 in operating expenses is mainly related to one-time stock-based payments to consultants and employees. In addition, the acquisition of Seller’s Choice and subsequent integration into Jerrick’s infrastructure, as well as the implementation of the Company’s future business plans contributed to this increase.
Loss from Operations
Loss from operations for the six months ended June 30, 2020 was $5,361,201 as compared to $3,107,115 for the six months ended June 30, 2019. The increase in the loss from operations is primarily due to one-time stock-based payments to consultants and employees, as well as increased expenses due to the continued development of the Vocal platform, the acquisition of Seller’s Choice and the implementation of the Company’s future business plans.
Other Expenses
Other expenses for the six months ended June 30, 2020 was $1,766,787 as compared to $362,740 for the six months ended June 30, 2019. Other expenses during the six months ended June 30, 2020 was comprised of interest expense of $866,736 on notes and related party notes, accretion of debt discount and issuance cost of $327,221 due to the incentives given with debentures, and loss on extinguishment of liabilities of $535,040 for the incentives given to amend or convert debt. During the six months ended June 30, 2019, other expenses were comprised of interest expense of $164,601 on notes and related party notes and accretion of debt discount and issuance cost of $116,990 due to the incentives given with debentures, loss on extinguishment of liabilities of $81,149 for the incentives given to amend or convert debt.
Net Loss
Net loss attributable to common shareholder for the six months ended June 30, 2020, was $7,127,988, or loss per share of $2.28, as compared to a net loss of $3,469,855, or loss per share of $1.41, for the six months ended June 30, 2019.
Inflation did not have a material impact on the Company’s operations for the applicable period. Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company’s results of operations.
Liquidity and Capital Resources
The following table summarizes total current assets, liabilities and working capital at JuneSeptember 30, 20202022 compared to December 31, 2019:2021:
June 30, | December 31, | Increase / | ||||||||||
Current Assets | $ | 308,865 | $ | 78,063 | $ | 230,802 | ||||||
Current Liabilities | $ | 14,853,962 | $ | 10,928,830 | $ | 3,925,132 | ||||||
Working Capital Deficit | $ | (14,545,097 | ) | $ | (10,850,767 | ) | $ | (3,694,330 | ) |
September 30, 2022 | December 31, 2021 | Increase / (Decrease) | ||||||||||
Current Assets | $ | 1,680,594 | $ | 4,475,242 | $ | (2,794,648 | ) | |||||
Current Liabilities | $ | 15,172,939 | $ | 5,421,015 | $ | 9,751,924 | ||||||
Working Capital (Deficit) | $ | (13,492,345 | ) | $ | (945,773 | ) | $ | (12,546,572 | ) |
At JuneSeptember 30, 2020, we2022, the Company had a working capital deficit of $14,545,097$13,492,345 as compared to a working capital deficit of $10,850,767$945,773 at December 31, 2019,2021, an increase in working capital deficit of $3,694,330.$12,546,572. The increase is primarily attributable to the decrease in cash, accounts receivable, and prepaids and other current assets, as well as an increase in accounts payable, and accrued expenses, notes payable, convertible notes payable and accounts payable. This was offset by an increase of account receivable and marketable securities.
deferred revenue.
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Net Cash
Net cash used in operating activities for the sixnine months ended JuneSeptember 30, 20202022, and 2019,2021, was $2,885,383$13,857,189 and $3,096,252,$15,617,065, respectively. The net loss for the sixnine months ended JuneSeptember 30, 20202022, and 20192021 was $7,127,988$25,112,331 and $3,469,855,$24,942,247, respectively. The decrease in net cash used in operating activities reflects the decrease in net cash used in operating activities reflects a decrease in cash paid for marketing expenditures, research and development, legal fees, and accounting & audit fees. This change is primarily attributable to the net loss for the current periodwas offset by share-based paymentsan increase in the amount of $1,994,792 to employeesrent and consultants for services rendered, the accretion of debt discountlease expenses and debt issuance costs of $327,221 due to the incentives given with debentures, and a loss on extinguishment of debt of $535,040 in addition to a change in accounts payable and accrued expenses of $1,213,615. These increases were offset by a change in accounts receivable during the six months ended June 30, 2020.payroll expense.
Net cash used in investing activities for the sixnine months ended JuneSeptember 30, 20202022, and 20192021, was $202,622$494,192 and $26,851,$1,325,155, respectively. This change is primarily attributable to cash paid for property and equipment along with the cash used to purchase marketable securities.paid for minority and majority investment in business.
Net cash provided by financing activities for the sixnine months ended JuneSeptember 30, 20202022, and 20192021 was $3,149,526$11,061,905 and $3,519,466.$10,560,265, respectively. During the sixnine months ended JuneSeptember 30, 2020,2022, the Company wasCompany’s operations were predominantly financed by net proceeds from the issuance of debtcommon stock with warrants and related partyfrom the issuance of notes. Similarly, the Company’s financing activity for the nine months ended September 30, 2021, generated $5,472,068 from the exercise of warrants, the proceeds from loans and notes of $3,269,554$3,931,720, and $402,989, respectively to fund operations. These increasesproceeds from the issuance of stock and warrants, which were partially offset by the repayment of notes and related party notesloans of $133,226 and $327,773, respectively.$1,345,723.
Summary of Statements of Operations for the Three Months Ended September 30, 2022, and 2021:
Three Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Revenue | $ | 1,022,851 | $ | 1,179,620 | ||||
Cost of revenue | $ | 1,404,562 | $ | 1,418,213 | ||||
Operating expenses | $ | (5,595,108 | ) | $ | (6,672,381 | ) | ||
Loss from operations | $ | (5,976,819 | ) | $ | (6,910,974 | ) | ||
Other expenses | $ | (3,549,526 | ) | $ | (2,809,147 | ) | ||
Net loss | $ | (9,526,345 | ) | $ | (9,736,534 | ) | ||
Loss per common share - basic and diluted | $ | (0.45 | ) | $ | (0.71 | ) |
Revenue
Revenue totaled $1,022,851 for the three months ended September 30, 2022, a decrease of $156,769 as compared to $1,179,620 for the comparable three months ended September 30, 2021. Management attributes this decrease to the significant headwinds that have interrupted year-over-year growth due to supply-line disruptions and an overall decline in consumer spending.
Cost of Revenue
Cost of revenue for the three months ended September 30, 2022, were $1,404,562, relatively flat as compared to $1,418,213 for the three months ended September 30, 2021. Going forward, the Company expects the gross margin to continue to improve over time as it continues to consolidate operations across its portfolio of e-commerce brands.
Operating Expenses
Operating expenses for the three months ended September 30, 2022, were $5,595,108 as compared to $6,672,381 for the three months ended September 30, 2021. The 16% decrease of $1,077,273 in operating expenses is primarily attributable to a cost cutting program implemented by the Company to dramatically reduce expenses, including significant decreases to marketing and research and development expenditures. This program began in September of 2022, and its primary impact will be recognized in Q4 of 2022, including the impact of a significant reduction in headcount. Additionally, the company’s non-cash charges totaled $626,568, a $1,135,880 decrease from third quarter 2021. This decrease primarily represents stock-based compensation to employees and consultants during the quarter.
These decreases were offset by an increase in general and administrative expenses, as well as approximately $257,117 in one-time non-cash expenses related to the impairment of intangible assets and goodwill, as well as a one-time cash expense of $475,000 expense related to a member of management’s severance package.
Loss from Operations
Loss from operations for the three months ended September 30, 2022, was $5,976,819 as compared to $6,910,974 for the three months ended September 30, 2021. The $934,155 decrease in the loss from operations this quarter primarily reflects the Company’s decreased operating expenses, offset by the decrease in revenues.
Other Expenses
Other expenses for the three months ended September 30, 2022, were $3,549,526 as compared to $2,809,147 for the three months ended September 30, 2021. The decrease in third quarter 2022 other income was predominantly due to the increase from loss on extinguishment of debt and interest expense. This was offset by a decrease in change in derivative liability and accretion of debt discount and issuance cost.
Net Loss
Net loss for the three months ended September 30, 2022, was $9,526,345, as compared to a net loss of $9,797,011 for the three months ended September 30, 2021.
Net loss attributable to common shareholders for the three months ended September 30, 2022, was $9,448,271, or loss per share of $0.45, as compared to a net loss attributable to common shareholders of $9,797,011, or loss per share of $0.71, for the three months ended September 30, 2021.
Summary of Statements of Operations for the Nine Months Ended September 30, 2022, and 2021:
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
Revenue | $ | 3,997,490 | $ | 2,894,390 | ||||
Cost of revenue | $ | 4,771,151 | $ | 4,160,743 | ||||
Operating expenses | $ | (20,205,866 | ) | $ | (19,971,413 | ) | ||
Loss from operations | $ | (20,979,527 | ) | $ | (21,237,766 | ) | ||
Other expenses | $ | (4,132,804 | ) | $ | (3,688,068 | ) | ||
Net loss | $ | (25,112,331 | ) | $ | (24,942,247 | ) | ||
Loss per common share - basic and diluted | $ | (1.23 | ) | $ | (2.20 | ) |
Revenue
Revenue totaled $3,997,490 for the nine months ended September 30, 2022, as compared to $2,894,390 for the comparable nine months ended September 30, 2021, an increase of $1,103,100. The 38% year-over-year increase in revenue is primarily attributable to growth within the Company’s consumer product portfolio.
Cost of Revenue
Cost of revenue for the nine months ended September 30, 2022, were $4,771,151 as compared to $4,160,743 for the nine months ended September 30, 2021. The increase of $610,408 in cost of revenue is primarily related to an increase in product-related cost of goods sold as the consumer products group expanded its operations. The Company expects the gross margin to continue to improve over time as it continues to grow a self-sustaining, organically driven revenue model across its business segments.
Operating Expenses
Operating expenses for the nine months ended September 30, 2022, were $20,205,866 as compared to $19,971,413 for the nine months ended September 30, 2021. The decrease of $234,453 in operating expenses is mainly related to a 50% decrease in marketing spend and a 32% decrease in stock-based compensation. This increase was partially offset by an increase in general and administrative expenses. The Company expects expenditures to decrease further due to the austerity measures put into place in late Q3 2022.
Loss from Operations
Loss from operations for the nine months ended September 30, 2022, was $20,979,527 as compared to $21,237,766 for the nine months ended September 30, 2021. The $ 258,239 increase in the loss from operations primarily reflects the Company’s increased revenues within its consumer products group coupled with lowered operating expenses.
Other Expenses
Other expenses for the nine months ended September 30, 2022, were $4,132,804 as compared to $3,688,068 for the nine months ended September 30, 2021. The increase in other income was predominantly due to the increase from loss on extinguishment of debt and interest expense. This was offset by a decrease in change in derivative liability and accretion of debt discount and issuance cost.
Net Loss
Net loss for the nine months ended September 30, 2022, was $25,112,331, as compared to a net loss of $24,942,247 for the nine months ended September 30, 2021.
Net loss attributable to common shareholders for the nine months ended September 30, 2022, was $24,130,227, or loss per share of $1.23, as compared to a net loss attributable to common shareholders of $25,413,042, or loss per share of $2.20, for the nine months ended September 30, 2021.
Off-Balance Sheet Arrangements
As of JuneSeptember 30, 2020,2022, we had no off-balance sheet arrangements.
CriticalSignificant Accounting Policies
We believe that the followingOur significant accounting policies are described in Note 2 of the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”
Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
The preparation of financial statements in conformity with U.S. GAAP requires managementStatements. If we complete an acquisition, we will be required to make estimates and assumptions typical of other companies. For example, we will be required to make critical accounting estimates related to valuation and accounting for business combinations. The estimates will require us to rely upon assumptions that were highly uncertain at the time the accounting estimates are made, and changes in them are reasonably likely to occur from period to period. Changes in estimates used in these and other items could have a material impact on our financial statements in the future. Our estimates will be based on our experience and our interpretation of economic, political, regulatory, and other factors that affect the reported amounts of assetsour business prospects. Actual results may differ significantly from our estimates. For detailed information regarding our critical accounting policies and liabilities and disclosure of contingent assets and liabilities at the dates of theestimates, see our financial statements and the reported amounts of revenuesnotes thereto included in this Report 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 estimatein our Annual Report 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.
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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.
Actual results could differ from those estimates.
Principles of consolidation
The Company consolidates all majority-owned subsidiaries, if any, in which the parent’s power to control exists.
As of December 31, 2019, the Company’s consolidated subsidiaries and/or entities are as follows:
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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 to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
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Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued liabilities and accrued liquidating damages approximate their fair value because of the short maturity of those instruments. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:
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Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations.
Leases
In February 2016, the FASB issued ASU 2016-02 “Leases” (Topic 842) which amended guidance for lease arrangements to increase transparency and comparability by providing additional information to users of financial statements regarding an entity’s leasing activities. Subsequent to the issuance of Topic 842, the FASB clarified the guidance through several ASUs; hereinafter the collection of lease guidance is referred to as ASC 842. The revised guidance seeks to achieve this objective by requiring reporting entities to recognize lease assets and lease liabilities on the balance sheet for substantially all lease arrangements.
On January 1, 2019, the Company adopted ASC 842 using the modified retrospective approach and recognized a right of use (“ROU”) asset and liability in the condensed consolidated balance sheet in the amount of $289,167 related to the operating lease for office and warehouse space. ResultsForm 10-K for the year ended December 31, 2019 are presented under ASC 842, while prior period amounts were not adjusted2021. There have been no material changes to our critical accounting policies and continue to be reportedestimates from those disclosed in accordance with the legacy accounting guidance under ASC Topic 840, Leases.our most recent Annual Report on Form 10-K.
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BUSINESS
As partOverview
Creatd, Inc. provides economic opportunities to creators and brands by multiplying the impact of the adoption the Company elected the practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to:platforms, technology, and people.
Long-lived Assets Including Goodwill and Other Acquired Intangibles Assets
We evaluate the recoverability of property and equipment and acquired finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any significant impairment charges during the years presented.
We review goodwill for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value of our single reporting unit below its carrying value. As of December 31, 2019, no impairment of goodwill has been identified.
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.
Commitments and Contingencies
The Company follows subtopic 450-20has four main revenue lines, all directly related to its flagship technology platform, Vocal. The business lines complement one another, creating a flywheel effect. Working together, they provide shared data and resources to holistically leverage and organically grow the Company. Revenues are generated from creator subscriptions, consumer product sales, branded content, and IP development.
Creator-Centric Strategy
Creatd’s north star metric is to empower creators by providing best-in-class tools, supportive communities, and opportunities for monetization and audience expansion. This creator-first approach is the foundation of our culture and mission.
Creator Subscriptions
Creatd’s most scalable stream of revenues are derived from its flagship technology platform, Vocal.
Vocal was built to serve as a home base for creators. This robust, proprietary technology platform provides digital tools and resources, safe and curated communities, and monetization opportunities that enable creators to find a receptive audience and be rewarded for their content. Creators of all types call Vocal their home, from bloggers to social media influencers, to podcasters, founders, musicians, photographers, and more.
Since its initial launch in 2016, Vocal has grown to over 1.5 million registered creators and is one of the FASB Accounting Standards Codificationpremier technology platforms for content creators of all shapes and sizes. Creators can opt to report accountinguse Vocal for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a lossfree, or upgrade to the Company, but which will only be resolved when onepremium membership tier, Vocal+. Upon joining Vocal, either as a freemium or more future events occur or failpremium member, creators can immediately begin to occur. The Company assesses such contingent liabilities,utilize Vocal’s storytelling tools to create and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claimspublish their stories, as well as the perceived merits of the amount of relief soughtbenefit from Vocal’s monetization features. Creatd facilitates creators’ monetization on Vocal in many ways, including i) rewarding creators for each ‘read’ their story receives; ii) via Vocal Challenges, or expectedwriting contests through which creators can win cash and other rewards; iii) by awarding Bonuses; iv) by connecting creators with brands for opportunities to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
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 shareholders’ equity in accumulated other comprehensive income. Gains and losses from foreign currency transactions, which are included in SG&A, have not been significant in any period presented.
Revenue Recognition
On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605), using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported in accordance with our historic accounting under Topic 605. The impact of adopting the new revenue standard was not material to our consolidated financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.
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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 years ended December 31, 2019 and 2018 consists of the following
Year Ended December 31, | ||||||||
2019 | 2018 | |||||||
Branded Content | $ | 107,335 | $ | 60,485 | ||||
Creator Subscriptions | 31,997 | - | ||||||
Managed Services | 283,332 | |||||||
Affiliate Sales | 15,300 | 11,553 | ||||||
Other Revenue | 15,042 | 8,860 | ||||||
$ | 453,006 | $ | 80,898 |
Branded Content
Revenues from branded content in 2019 increased 78% as compared to the previous year. Onboarding of additional brand clients as well as greater pricing strength contributed to a large part of the gain. The increased pricing strength was attributable to improved features, data analytics, and guidance on how to apply it. Clients are increasing their spendcollaborate on Vocal for Brands campaigns with the company’s improved marketing strategies.branded content campaigns; v) through ’Subscribe,’ which enables creators to receive payment directly from their audience via monthly subscriptions and one-off microtransactions; vi) via Vocal’s Ambassador Program, which enables creators to receive additional rewards whenever they refer a new Vocal+ member. The continued development of Vocal’s technology translates into a higher value propositionVocal app is available for brands. Revenue recognized from these tactical improvements occurred in the fourth quarterboth iOS and have created a foundation for scale, future platform improvements, and continued pricing strength.
Branded content revenue is recognized when the Company fulfills its obligation to create and publish branded articles for clientsAndroid on the Vocal platform, promote said stories,Apple App store and meet any required promotional milestones as per the contract with the client. The revenue is recognized over time as the services are performed, with any payments received in advance being deferred until they are earned.
Below are the significant components of a typical agreement pertaining to branded content revenue:
Google Play store.
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Creator Subscriptions
Vocal+ is a premium subscription offering. The Company initially offered the subscription to a Founding Member beta group starting in May 2019, utilizing our first-party data from the 425,000 ‘Vocal Free’ creators we had onboarded onto Vocal up until that point. We have seen a greater than 50% growth rate in the last 12 months.
Currently, Vocal+ subscribers receive access to value-added features such as increased rate of monetization per reads and views, a decreased minimum withdrawal threshold, a discount on platform processing fees, member badges for their profiles, participation in exclusive Challenges with monetary rewards, and early access to new Vocal features.
Subscription revenues stem from both monthly and annual subscriptions, which cost $9.99 per month and $99 per year, respectively, the latter of which is amortized over a twelve-month period. Any customer payments received are recognized over the subscription period, with any payments received in advance being deferred until they are earned. The subscription revenue model is the most scalable and predictable revenue stream on the platform. New features and opportunities for creators, audiences, and brands can introduce new subscription offerings, thereby scaling the company vertically and horizontally. In the future, premium services generate premium revenues.
The continued development of Vocal’s technology and targeting efficiencies translates into a decreasing cost of acquisition per creator, a scalable onboarding process, and an increasing rate of subscription signups.
Managed Services
Managed Services are provided by Seller’s Choice and encompass a suite of digital marketing solutions for e-commerce brands. Services offered include listing and storefront optimization on e-commerce platforms like Amazon and Shopify, the setup and ongoing management of clients’ websites, search engine optimization, digital advertising, and other various tactics for sales growth and customer retention. Additionally, Seller’s Choice draws upon Vocal for Brand’s storytelling capabilities to provide Seller’s Choice additional value and maximize their success. Seller’s Choice clients generate revenues of between $3,500-$10,000 per month.
Affiliate Sales
Affiliate sales represent the commission the Company receives when a purchase is made through referral links. Affiliate revenue is earned on a “click through” basis, upon referring visitors, via said links, to an affiliate’s site and having them complete a specific outcome, most commonly a product purchase.
The Company maintains multiple affiliate relationships, with platforms such as Skimlinks, Amazon, and Tune, to form and maintain thousands of vendor relationships. Each vendor establishes their own commission percentage payout, which typically range from 5-15%. The revenue is recognized upon receipt of commission fees. This opportunity continues to grow in the current environment as consumer behavior continues to shift online.
Deferred Revenue
Deferred revenue consists of billings and payments from clients in advance of revenue recognition. As of December 31, 2019, and 2018, the Company had deferred revenue of $50,691 and $9,005, respectively.
Accounts Receivable and Allowances
Accounts receivable are recorded and carried when the Company uploads creator content and reaches predetermined metrics and views on the platform. We make estimates for the allowance for doubtful accounts and allowance for unbilled receivables based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, and other factors that may affect our ability to collect from customers. During the year ended December 31, 2019 the Company recorded $33,503 as a reserve for doubtful accounts. As of December 31, 2019, and 2018 the Company has an allowance for doubtful accounts of $33,503 and $0, respectively.
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Stock-Based Compensation
The Company recognizes compensation expense for all equity–based payments granted in accordance with ASC 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.
Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a five-year period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of Company stock on the grant date.
The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is benchmarked against similar companies in a similar industry over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future. The expected forfeiture rate is estimated based on management’s best estimate.
Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If the Company’s actual forfeiture rate is materially different from its estimate, the equity–based compensation could be significantly different from what the Company has recorded in the current period.
Loss Per Share
Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the years ended December 31, 2019 and 2018 presented in these consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.
The Company had the following common stock equivalents at December 31, 2019 and 2018:
December 31, | ||||||||
2019 | 2018 | |||||||
Options | 303,833 | 294,166 | ||||||
Warrants | 247,407 | 1,847,651 | ||||||
Convertible notes - related party | 1,812 | 963 | ||||||
Convertible notes | 241,583 | 13,996 | ||||||
Totals | 794,635 | 2,156,776 |
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Reclassifications
Certain prior year amounts in the consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current year presentation. These reclassifications did not affect the prior period total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities.
Recently Adopted Accounting Guidance
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” Under ASU 2016-02, lessees will, among other things, require lessees to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model and ASC Topic 606, “Revenue from Contracts with Customers.” ASU 2016-02 became effective for us on January 1, 2019 and initially required transition using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) - Targeted Improvements,” which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In December 2018, the FASB also issued ASU 2018-20, “Leases (Topic 842) - Narrow-Scope Improvements for Lessors,” which provides for certain policy elections and changes lessor accounting for sales and similar taxes and certain lessor costs. As of January 1, 2019, the Company adopted ASU 2016-02 and has recorded a right-of-use asset and lease liability on the balance sheet for its operating leases. We elected to apply certain practical expedients provided under ASU 2016-02 whereby we will not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. We also do not expect to apply the recognition requirements of ASU 2016-02 to any short-term leases (as defined by related accounting guidance). We expect to account for lease and non-lease components separately because such amounts are readily determinable under our lease contracts and because we expect this election will result in a lower impact on our balance sheet.
Recent Accounting Guidance Not Yet Adopted
In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.
Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements.
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Overview
Jerrick Media Holdings, Inc. (“JMDA,” “the Company,” or “Creatd”) is the parent company and creator of the Vocal platform.
Our mission is to empower creators, entrepreneurs, and brands through technology platforms, partnership, and data-driven innovation.
Through Vocal, creators can create and share their stories in a way that helps them get discovered by their ideal audiences, and fund their creativity. Similarly, brands can access their ideal consumers and drive conversions for their products and services.
In addition to focusing on expanding Vocal, its flagship platform, Jerrick identifies and leverages value-accretive opportunities within the digital space to enhance its portfolio.
Whereas comparable companies traditionally seek a venture capital or private equity-backed IPO, Jerrick instead began trading on the OTCQB in February of 2016, in an effort to maintain a level of transparency while raising the capital necessary to build and scale its technology, with the ultimate goal of achieving an uplisting to a national exchange. Jerrick’s agile business framework and technology capabilities distinguish it from most of the approximately 10,000 companies that trade on the OTC, only a small fraction of which have achieved an uplisting to a national exchange in the last decade. The Company’s Vocal technology is built for scale and relies on a relatively capital light operational infrastructure, while its business model, which can generate a consistent and scalable return on capital by utilizing data, is, in a sense, invaluable, much like the mythic “unicorn” that Silicon Valley seeks.
Per the Company’s 2020 Annual Meeting of Shareholders, held on July 8th, 2020, Jerrick received approval to change its name to Creatd, Inc., and to begin trading under the new ticker symbol CRTD upon the Company’s planned uplisting to the Nasdaq Capital Markets. At its core, Jerrick (which we will at times refer to as Creatd) and its numerous subsidiaries, centers around the philosophy that creators are the driving force of all success that can be achieved in the digital realm, including monetization, audience growth, and community engagement. This philosophy is represented by a framework we call the Creatd Cycle, which operates on the premise that it is content creators who produce content that attracts audiences, who in turn attract brands who are interested in reaching those audiences. The Vocal platform is the company’s first iteration of the Creatd Cycle in practice.
Vocal
The Vocal platform, Jerrick’s flagship technology product, provides creators with storytelling tools, engaged communities, and opportunities that enable audience discovery and monetization.
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Quality content submissions from creators attract audiences and brands to Vocal, representing the three primary stakeholders who exist in Vocal’s ecosystem as well as the three spokes of the Creatd Cycle.
Through this essential Creatd Cycle framework, we are able to segment and understand the motivations and behaviors of the key players transacting on the Vocal platform. To that end, our processes have been tested and proven successful by the onboarding of what is currently 679,907 Freemium creators and nearly 4,000 total Vocal+ paid subscribers onto the Vocal platform; along with that, success is measured by the continually declining costs of acquisition and retention for both user segments, the increasing caliber and budgets of our brand clients, and expansion of Vocal’s overall audience.
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Creators
There are three primary categories of stakeholders/customers that interact within Vocal’s ecosystem: creators, brands, and audiences (readers).
Vocal provides a large stage for creators to connect with fans and find new audiences. In addition to enabling access to millions of monthly visitors, the platform provides creators with a full suite of tools and services for content creation, discovery, distribution, and monetization, including:
Vocal creators provide a steady stream of user-generated content, which can be monetized through reads, as well as through microtransactions, such as Tips, received from audiences. Creators can monetize even further through participation in Challenges, and collaborations with the brands with whom they co-exist in Vocal’s ecosystem.
The Vocal content creation process can be broken down into three key steps:
1. Create: Vocal’s storytelling tools make it easy for creators of all kinds to produce beautiful, engaging, rich-media content.
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2. Share: Creators share stories on one of Vocal’s 34 genre-specific communities to get discovered and connect with like-minded creators and readers.
3. Earn: Creators can earn money every time their story is read, through participation in Challenges, and through Tips received from fans.
In January 2020, Vocal’s product team launched the latest feature for creators and brands, called “Challenges.” Challenges (which are either internally run or sponsored by brands) are themed story contests that incentivize content submissions and engage Vocal’s user base by providing creators with the chance to win cash prizes and other rewards. The introduction of creator Challenges, which represents Vocal’s most important product update to date, showcases Jerrick’s unique ability to leverage its powerful network to host unique content experiences that drive success and value for brands, creators, and audiences simultaneously. Moreover, creator Challenges are accretive to Jerrick’s own marketing efforts; Challenges offer further incentive for new creators to join Vocal and, in particular, to upgrade to Vocal+ (which offers exclusive members-only Challenges). As a result, since the launch of creator Challenges, we’ve seen our creator acquisition costs decrease.
Brands
We believe that digital audiences have become increasingly wary of traditional display and programmatic advertising tactics. Intrusive ads like pop-ups have proven to disrupt the consumer experience, leading to trends such as the fact that over 25% of internet users have ad blockers installed. Brands are actively seeking trustworthy and safe platforms like Vocal to drive engagement through non-interruptive brand storytelling and deliver invaluable performance metrics that help optimize their marketing efforts.
Our in-house content studio, Vocal for Brands, leverages Vocal to produce authentic and educational branded stories and brand-sponsored Challenges that build affinity and trust, while generating sales and awareness. The key value propositions for brands include:
Vocal’s first-party data enables our team to create highly targeted and segmented audiences for Vocal for Brands campaigns, and help the brand reach their ideal audience. Brands can access story performance data, engagement data, behavioral data, and sentiment data, all of which is used to further optimize the campaign’s success. The combination of Vocal’s hyper-engaged audiences, user-generated communities, and brand-safe environment help brands achieve maximum ROAS (return on ad spend).
The Company typically collects fixed fees ranging from $5,000 to $45,000, depending on duration and scope of third-party marketing spend. To date, Vocal for Brands’ client roster includes direct to consumer (DTC) brands such as Daily Harvest, Vimeo, hims, Lull, cleancult, Lelo, Intimina, and more.
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With the introduction of Challenges in early first quarter 2020, brands can now tap into Vocal’s network of 679,907 content creators and encourage them to interact with, learn about and promote their brand while benefiting from Vocal’s brand-safe, moderated, and curated environment. Brand-sponsored Challenges effectively yield a collection of crowdsourced branded content for brands and help them reach a wider audience. Typical long-form branded content campaigns within the legacy world of publishing cost as much as $50,000 for a single article, let alone the exponential hundreds of submissions our Challenges can generate. Authentic storytelling from real creators is the common denominator for success.
Audiences (Readers)
The Creatd Cycle represents the fact that creators attract audiences, which in turn attracts the brands who want access to those audiences. We are focused on enabling the discovery and curation of stories for our audiences, or Vocal readers, through a range of service and features built into the platform:
Moderation and Compliance
One of the key differentiating factors between Vocal and most other user-generated content platforms is the fact that each story submitted to Vocal is run through the Company’s proprietary moderation process before it goes live on the platform. The decision to implement moderation into the submission process was in direct response to the rise of misinformation and bad actors on many social platforms. In response to these inherent pitfalls within the content landscape, Vocal’s proprietary moderation system combines the algorithmic detection of copyrighted material, hate speech, graphic violence, and nudity, and human-led curation to ensure the quality and safety of each story published on Vocal, thus fostering a safe and trustworthy environment for creators, audiences, and brands. Moderation and compliance are more important than ever in a world where ambiguity can systematically damage value. Vocal’s enforcement of community guidelines and emphasis on content moderation protects the platform, its creators, and Jerrick shareholders.
Trust and safety are paramount to the Vocal ecosystem. We follow best practices when handling personally identifiable information, with guidance from the European Union’s General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), and the Digital Millennium Copyright Act (DMCA).
Platform Compliance Policies include:
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Vocal Technology
Vocal’s proprietary technology is built on Keystone, the same underlying open-source framework used by industry-leaders suchindustry leaders in the software as Atlassian, a $43-billion Australian technology company.service (SaaS) space. Some of the key differentiating elements of Vocal’s technology are speed, sustainability, and scalability. The Company continues to invest heavily in research and development to continuously improve and innovate its platform, with the goal of optimizing the user experience for creators. Vocal’s architecture allows it to do more with less costcreators, brands and provides a model capable of turning a profit.
We believe there is a huge opportunity to capture market share for user-generated content. Jerrick does not see Vocal as a substitute or competitor to segment-specific content platforms, such as Vimeo, YouTube, Instagram, or SoundCloud. We don’t want to replace anyone; we built Vocal to be accretive to the entire digital ecosystem. In fact, one of the most powerful components of our technology is the fact that Vocal makes it easy for creators to embed their existing published content, including videos, songs, podcasts, photographs, and more, directly into Vocal. We see this as a growth opportunity by building partnerships with the world’s greatest technology companies and to further spread our roots deeper into the digital landscape. To that end, we have an existing partnership with Unsplash, the world’s largest photography platform with over 1 million royalty free images, whose integration into Vocal makes it easier for creators to be able to search for beautiful, royalty-free photographs in order to elevate their stories. This is the first of many institutional platform integrations to come.
audiences. Additionally, we believe that the Vocal platform and its underlying technology allows us to maintain an advantageous capital-light infrastructure. By using cloud service providers and data segment specialists, we are able to focus on building the platform, community, and revenue growth rather than building and maintaining the costly internal infrastructures that have materially affected so many legacy media platforms.
Vocal’s technology has been specifically designed and built to significantly scale without a material corresponding increase in operational costs. While our users can embed rich media, such as video, audio, and product links, into their Vocal stories, the rich media content is hosted elsewhere (such as YouTube, Instagram, Vimeo, Shopify, Spotify, etc.)and Spotify). Thus, ourThe Vocal platform can accommodate rich media content of all kinds without bearing the financial or operational costs associated with hosting the rich media itself. Creatd maintains a number of partnerships and initiatives with the primary content distribution and hosting platforms. In addition to the benefits this framework affords to the Company, it isprovides the additional benefit to our content creators, in that a creator can increase their monetization; for example, a creator can embed their YouTube video into a Vocal story and thus derive earnings from both platforms when their video is viewed.
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Consumer Products Group
Creatd’s portfolio of internally owned and operated e-commerce businesses and associated technology and infrastructure make up the majority of the company’s second most scalable revenue line. The Company supports founders by providing a host of services including design and development, marketing and distribution, and go-to-market strategies. The Company expects to broaden its portfolio through the acquisition of up and coming brands that are aligned and easily consolidated into its shared supply chain, resources, and infrastructure.
This portfolio includes:
● | Camp, a direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. Each of Camp’s products are created with servings of vegetables and contain Vitamins A, C, D, E, B1 + B6. Since its launch in 2020, Camp continues to add new products to its line of healthy, veggie-based, family-friendly foods, with flavors including Classic Cheddar Mac ‘N’ Cheese, White Cheddar Mac ‘N’ Cheese, Vegan Cheezy Mac, and Twist Veggie Pasta. |
● | Dune Glow Remedy (“Dune”), which the Company purchased and brought to market in 2021, is a beverage brand focused on promoting wellness and beauty from within. Each beverage in Dune’s product line is meticulously crafted with functional ingredients that nourish skin from the inside out and enhance one’s natural glow. During 2022, Dune has continued to advance its retail and wholesale distribution strategy, securing numerous partnerships including with lifestyle retailer Urban Outfitters, Equinox, and the Los Angeles-based Erewhon Market. |
● | Basis, a hydrating electrolyte drink mix formulated using rehydration therapies developed by the World Health Organization. Acquired by the Company in first quarter 2022, Basis has a history of strong sales volume both on the brand’s website as well as through third-party distribution channels such as Amazon. |
● | Brave, a plant-based food company that provides convenient and healthy breakfast food products. On September 13, 2022, the Company acquired 100% of the membership interests of Brave Foods, LLC, a Maine limited liability company (“Brave”). What started as a search for a better morning routine evolved into a business serving thousands of go-getters of every type. |
Branded Content
The branded content revenue line is driven primarily by its Vocal for Brands offering, the Company’s internal content studio. The business line works with premier brands developing best-in-class organic marketing campaigns. In addition to content creation, the Company generates revenues from its influencer and performance marketing agency opportunities.
Brands have a story to tell. They leverage Vocal’s creator communities to help them tell it. Vocal for Brands’ content marketing studio specializes in pairing leading brands with Vocal creators, as well as discovering new talent and introducing them to the Vocal platform. The branded content business produces marketing campaigns on the platform that are non-interruptive, engaging, and direct-response driven. Additionally, brands can opt to collaborate with Vocal on sponsored Challenges, prompting the creation of thousands of high-quality stories that are centered around the brand’s mission and further disseminated through creators’ respective social channels and promotional outlets. Vocal for Brands campaigns leverage Vocal’s first-party audience insights, which enables the creation of highly targeted, segmented audiences and optimized campaign results.
IP Development and Production
Creatd’s fourth revenue stream is driven by partnering with its top creators to produce stories for TV, film, podcasts, and print. The Vocal platform is perpetually generating intellectual property sourced and curated by a combination of human let moderation and machine learning models. With millions of compelling stories in its midst, Creatd’s Vocal technology surfaces the best candidates for transmedia adaptations, through a deep analysis of community, creator, and audience insights.
In 2022, Creatd announced a series of newly released and upcoming production projects, including:
● | “Write Here, Write Now,” the Company’s first-ever podcast showcasing select Vocal creators and stories; a partnership with UK-based publisher, Unbound, for the publication of books featuring stories sourced from Vocal; the formation of a new graphic novel development arm which in Fall 2022 will release its first title, Steam Wars, created by artist and independent filmmaker Larry Blamire. |
● | OG Gallery: 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. |
Application of First-Party Data
Jerrick’sCreatd’s shared business intelligence and marketing teams identify and target individual creators, communities, and brands, utilizing empirical data harnessed from the Vocal technology platform. The team’s ability to apply its proprietary first-party data works to reduce acquisition costs for new creators and to help provide brands with conversions and an ideal targeted audience. In this way, our ability to apply first-party data is one of the value-drivers for the Company across its four business pillars. The internal teams work across the Company’s portfolio of technology product and the key advantages of its closed ecosystem strategy, which we refer to as the Creatd Cycle.service revenue lines.
InCreatd uses its simplest definition, first-partyfirst party data is data that you collect directly from your customers. Even the most simplistic blog website is collecting some degree of first-party data, though Jerrick’s edge is in its application of that data. Our organization is constantly collecting a tremendous amount of first-party behavioral data extracted fromto improve the Vocal platform. To date, we have collected hundreds of millions ofSpecifically, data points around our customers and our audiences.
Importantly, we do not sell that data, that being a common monetization opportunity for many other businesses. Instead, we use our collected first-party data for the purposes of bettering the platform. Specifically, our data helps us understand the behaviors and attributes that are common among the creators, brands, and audiences within ourthe platform’s ecosystem. We then pair ourPairing first-party Vocal data with third-party data from distribution platforms such as FacebookInstagram, Tiktok, Twitter, and Snapchat to provide a more granular profile of our creators, brands, and audiences.
These insights ultimately increase our conversion rates and drive down acquisition costs, as they guide our decisions as to which new features we can implement within our platform that will make it an even more valuable proposition for users, such that they continue creating and sharing content on Vocal, and ultimately drive the growth of the Freemium and Vocal+ paid creator base.
The Freemium Vocal offering (Vocal Free) functions as a funnel into the Vocal+ paid subscription tier and acts as a magnet for audiences. It is those audiences that generate thethrough generating this valuable first-party data that we use tothe Company can continually enrich and refine ourits targeting capabilities for branded content promotionmarketing and creator acquisition, and specifically, to reduce our creator acquisition costs (CAC) and subscriber acquisition costs (SAC). Lower acquisition costs combined with increasing lifetime value (LTV) per subscriber, means that our enterprise value is accelerating each time we acquire a new user. Currently, we estimate the LTV of a Vocal+ creator to be roughly $300, spread over two years and accounting for churn. By contrast, our subscriber acquisition cost (SAC) is roughly $200; we anticipate our SAC to continue to decrease as we add more and more creators. At the same time, we anticipate the lifetime value of our subscribers to increase as we introduce more features that cater to the needs of our creators. It is Vocal’s unique capability to collect and apply first-party behavioral data that allows us to simultaneously increase the LTV of our subscribers over time, while lowering the cost to acquire them. In fact, the link between incentivizing creators and lowering creator acquisition costs is a primary focus of the data science team, and an important consideration for every feature we develop for the Vocal platform.
41Competitive Advantage
Competition
The idea for Vocal came as a response to what Jerrick’sCreatd’s founders recognized as systemic flaws inherent to the digital media industry and its operational infrastructures. DepreciatingThe depreciating value of digital media business models built on legacy technology platforms that did not efficiently access and apply data, created a unique opportunity for the development of a new type of creator-centric platform. Key to building a platform that could appeal to a global community was utilizing that data to create a win-win proposition for all constituents including creators, audiences and at the same time, be capablebrands that want to access them. The proprietary nature of Creatd’s technology and its process give the company a competitive advantage in acquiring undervalued complimentary technology assets.assets that can be rapidly assimilated into the greater collective, thus exponentially driving future EBITDA.
JerrickCreatd’s founders built the Vocal platform upon the general thesis that a closed and safe ecosystem utilizing first-party data to increase efficiencies could create a sustainable and defensible business model. Vocal was strategically developed to provide value for content creators, readers, and brands, and to serve as a home for the ever-increasing amount of digital content being produced and the libraries of digital assets lying dormant.
Since 2016, the ‘creator era,’ the industry has been marked by the proliferationAcquisition Strategy
Creatd’s hybrid finance and design culture is key to its acquisition strategy. Acquisition targets are companies that meet a set of democratizedopportunistic or financial standards or that are part of specific digital environments. Transactions are mainly accretive and transparent platforms. The digital space now encompasses an online global audience of over 4.5 billion internet users and over 1.7 billion websites. The “read, write and execute” web, or Web 3.0, is a data-driven and more intelligent web thattargets can adjust its output according to the particular needs and habits of the individual user, fostering more intelligent creation, greater personalization and, ultimately, a more satisfied end user.
In this context, legacy sites and platforms are becoming increasingly threatened by factors like fragmented content creation tools, excessive traffic and marketing dollars required to monetize content, and compressing margins for traditional digital advertising. This has led to a qualitative deterioration of online content. In addition, it means that companies operating on these modelsseamlessly integrate into Creatd’s existing revenue lines. Creatd will continue to strugglemake strategic acquisitions when presented with limited paths to scalable profitability.opportunities that are in the interest of long term shareholder value.
There isCorporate History and Information
We were originally incorporated under the laws of the State of Nevada on December 30, 1999 under the name LILM, Inc. The Company changed its name on December 3, 2013 to Great Plains Holdings, Inc.
On February 5, 2016 (the “Merger Closing Date”), we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GPH Merger Sub, Inc., a Nevada corporation and our wholly-owned subsidiary (“Merger Sub”), and Jerrick Ventures, Inc., a privately-held Nevada corporation headquartered in New Jersey (“Jerrick”), pursuant to which the Merger Sub was merged with and into Jerrick, with Jerrick surviving as our wholly-owned subsidiary (the “Merger”). Pursuant to the terms of the Merger Agreement, we acquired, through a reverse triangular merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “Jerrick Shareholders”), pro-rata, a total of 475,000 shares of our common stock, par value $0.001 per share (“Common Stock”). Additionally, we assumed 33,415 shares of Jerrick’s Series A Convertible Preferred Stock (the “Jerrick Series A Preferred”) and 8,064 shares of Series B Convertible Preferred Stock (the “Jerrick Series B Preferred”).
Upon closing of the Merger on February 5, 2016, the Company changed its business plan to our current plan.
In connection with the Merger, on the Merger Closing Date, we entered into a Spin-Off Agreement with Kent Campbell (the “Spin-Off Agreement”), pursuant to which Mr. Campbell purchased (i) all of our interest in Ashland Holdings, LLC, a Florida limited competition that providesliability company, and (ii) all of our interest in Lil Marc, Inc., a Utah corporation, in exchange for the specific typecancellation of resources and platform that Vocal provides the creative community.13,030 shares of our common stock held by Mr. Campbell. In addition, there areMr. Campbell assumed all of our debts, obligations and liabilities, including any existing prior to the Merger, pursuant to the terms and conditions of the Spin-Off Agreement.
Effective February 28, 2016, we entered into an Agreement and Plan of Merger (the “Statutory Merger Agreement”), pursuant to which we became the parent company of Jerrick Ventures, LLC, our wholly-owned operating subsidiary (the “Statutory Merger”).
On February 28, 2016, we changed our name to Jerrick Media Holdings, Inc. to better reflect our new business strategy.
On July 25, 2019, we filed a limitedcertificate of amendment to our articles of incorporation, as amended (the “Amendment”), with the Secretary of State of the State of Nevada to effectuate a one-for-twenty (1:20) reverse stock split (the “Reverse Stock Split”) of our common stock without any change to its par value. The Amendment became effective on July 30, 2019. The number of digital media companies like Vocal that charge only creatorsshares of authorized common stock was proportionately reduced as a result of the Reverse Stock Split. The number of shares of authorized preferred stock was not affected by the Reverse Stock Split. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to the next whole share.
All share and brands for publishing content, as opposed to charging the audience for accessing content. Jerrick’s management team believes that the primary competition for Vocal are other platforms that can draw attention or time from the creative community in general. These platforms can vary in scope, size, and genre. Simply put, platforms competeper share amounts for the attentioncommon stock indicated in this prospectus have been retroactively restated to give effect to the Reverse Stock Split.
On September 11, 2019, the Company acquired 100% of the digital consumer.
Product Revenues
Revenues are primarily generated through:
Creator Subscriptions:
Vocal+ is a premium subscription membership for Vocal users. Vocal+ members pay a membership fee for premium features, including receiving increased earnings for their content, reduced platform processing fees for Tips received, a Vocal+ badge on their creator page, eligibility to participate in exclusive Vocal+ Weekly 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. The current costinterests of a Vocal+ membership is either $9.99 per month or $99 annually.
In its first year since launching its Vocal+ premium subscription tier, the Company onboarded nearly 4,000 paid subscribers.
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Brand Agency:
Our in-house content studio, Vocal for Brands, specializes in producing authentic and educational branded stories. We leverage our first-party platform data and creator community to help us do it.
Vocal for Brands pairs brands with active creators in the Vocal network to produce bespoke branded content campaigns, brand-sponsored creator Challenges, and other types of branded experiences on the Vocal platform that build brand engagement and trust, and drive results.
Vocal’s first-party data enables our team to create highly targeted and segmented audiences for Vocal for Brands campaigns, and help the brand reach their ideal audience. Brands can access story performance data, engagement data, behavioral data, and sentiment data, all of which is used to further optimize the campaign’s success.
The Company typically collects fixed fees ranging from $5,000 to $45,000, depending on duration and scope of third-party marketing spend.
Marketing + Consulting Services:
Seller’s Choice, LLC, a New Jersey limited liability company (“Seller’s Choice”), a digital e-commerce agency.
On July 13, 2020, upon approval from our board of directors and stockholders, we filed Second Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada for the purpose of increasing our authorized shares of Common Stock to 100,000,000.
On August 13, 2020, we filed a certificate of amendment to our second amended and restated articles of incorporation (the “Amendment”), with the Secretary of State of the State of Nevada to effectuate a one-for-three (1:3) reverse stock split (the “August 2020 Reverse Stock Split”) of our common stock without any change to its par value. The Amendment became effective on August 17, 2020. No fractional shares were issued in connection with the August 2020 Reverse Stock Split as all fractional shares were rounded down to the next whole share. All share and per share amounts of our common stock listed in this prospectus have been adjusted to give effect to the August 2020 Reverse Stock Split.
On September 9, 2020, the Company filed a certificate of amendment with the Secretary of State of the State of Nevada to change our name to “Creatd, Inc.”, which webecame effective on September 10, 2020.
On June 4, 2021, the Company acquired in September 2019,89% of the membership interests of Plant Camp, LLC, a Delaware limited liability company (“Plant Camp”), which the Company subsequently rebranded as Camp. Camp is a digital marketing solution provider dedicateddirect-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. The results of Plant Camp’s operations have been included since the date of acquisition in the Statements of Operations.
On July 20, 2021, the Company acquired 44% of the membership interests of WHE Agency, Inc. WHE Agency, Inc, is a talent management and public relations agency based in New York (“WHE”). WHE has been consolidated due to the Company’s ownership of 55% voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations.
Between October 21, 2020, and August 16, 2021, the Company acquired 21% of the membership interests growth,of Dune, Inc. Dune, Inc. is a direct-to-consumer brand focused on promoting wellness through its range of health-oriented beverages.
On October 3, 2021, the Company acquired an additional 29% of the membership interests of Dune, Inc., bringing our total membership interests to 50%. Dune, Inc., has been consolidated due to the Company’s ownership of 50% voting control, and profitabilitythe results of e-commerce brands. Seller’s Choice cohesively focusesoperations have been included since the date of acquisition in the Statements of Operations.
On March 7, 2022, the Company acquired 100% of the membership interests of Denver Bodega, LLC, d/b/a Basis, a Colorado limited liability company (“Basis”). Basis is a direct-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Denver Bodega, LLC has been consolidated due to the Company’s ownership of 100% voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations.
On August 1, 2022, the Company acquired 51% of the membership interests of Orbit Media LLC, a New York limited liability company. Orbit is a app-based stock trading platform designed to empower a new generation of investors. Orbit has been consolidated due to the Company’s ownership of 51% voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations.
On September 13, 2022, the Company acquired 100% of the membership interests of Brave Foods, LLC, a Maine limited liability company. Brave is a plant-based food company that provides convenient and healthy breakfast food products. Brave Foods, LLC has been consolidated due to the Company’s ownership of 100% voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations.
Recent Developments
Appointment of Erica Wagner to Board; Resignation of Joanna Bloor
On November 16, 2022, Erica Wagner was appointed to the Company’s Board of Directors. Ms. Wagner, age 55, joins the Board with over 25 years of experience as a journalist, broadcaster, editor and author. From 2016 through 2021, Ms. Wagner was a Lecturer, and later Senior Lecturer, at Goldsmith’s College, University of London, where she taught creative writing. Ms. Wagner was previously Lead Editorial Innovator for Creatd, Inc., has previously and currently held roles as a freelance editor, journalist, and contributing writer for numerous outlets both in the U.K. and the U.S., including The New Statesman, Harper’s Bazaar, the Economist, the Observer, the New York Times. Ms. Wagner is also a freelance literary and creative consultant for Chanel, as well as the host of their branded podcast. She has twice been a judge of the Booker Prize and has been judge and Chair of the Goldsmiths Prize. In 2015, Ms. Wagner was awarded an Honorary PhD by the University of East Anglia, and currently Goldsmith’s College Distinguished Writers’ Centre Fellow. She has an undergraduate degree from University of Cambridge, a Master’s degree from University of East Anglia, and an Honorary PhD from the University of East Anglia. As a member of Creatd’s board of directors, Ms. Wagner will add significant expertise with respect to informing the Company’s literary and creative direction, having worked closely with news organizations, commercial companies and publishers, to advise their creative direction and its application towards commercial success.
On November 17, 2022, the Board received notice from Joanna Bloor of her resignation as a director and from all committees of the Board on which she served, effective as of such date. Such resignation is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Appointment of Peter Majar to the Board; Resignation of Lorraine Hendrickson
On November 2, 2022, the Board appointed Peter Majar to the Board. Mr. Majar, age 55, Founder and Managing Member of Majar Advisors, combines over 25 years of experience in investment banking, financial services and technology, and management consulting, having held numerous senior management and executive positions including Chief Financial Officer, Head of Financial Technology, Head of Strategy, as well as several Managing Director positions. From 2015 to 2017, Mr. Majar served as Managing Director in Investment Banking and co-Head of Diversified Financial Services at Piper Jaffray & Co. (now Piper Sandler Companies). From 2017 to 2018, Mr. Majar provided management consulting services through his self-established firm, Majar Advisors LLC, which remains in operation through the present. From 2018 to 2021, Mr. Majar served as Managing Director, Head of Financial Technology at New York-based investment banking and financial advisory firm, TAP Advisors, LLC. Between 2021 and 2022, Mr. Majar served as Chief Financial Officer at information technology company Hoyos Integrity Corp., having previously served as a longtime advisor to the firm. Mr. Majar holds an undergraduate degree from University of Washington and an MBA from Columbia University. As a board director, Mr. Majar will add considerable value, including through his comprehensive and diverse investment management experience, deep knowledge of financial technology services and transactions, and broad experience with corporate development, strategy consulting, and executive leadership.
On November 1, 2022, the Board received notice from Lorraine Hendrickson of her resignation as a director and from all committees of the Board on which she served, effective as of such date. Ms. Hendrickson’s resignation as a member of the Board is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Nasdaq Delisting
On September 2, 2022, the Company received a letter from the staff of The Nasdaq Capital Market notifying the Company that the Nasdaq Hearings Panel has determined to delist the Company’s common stock from the Exchange, based on the fourCompany’s failure to comply with the listing requirements of Nasdaq Rule 5550(b)(1) as a result of the Company’s shareholder equity deficit for the period ended June 30, 2022, as demonstrated in Company’s Quarterly Report on Form 10-Q filed on August 15, 2022, following the Company having not complied with the market value of listed securities requirement in Nasdaq Rule 5550(b)(2) on March 1, 2022, while the Company was under a Panel Monitor, as had been previously disclosed. Suspension of trading in the Company’s shares on the Exchange became effective at the opening of business on September 7, 2022, at which time the Company’s common stock, under the symbol “CRTD,” and publicly-traded warrants, under the symbol “CRTDW,” was quoted on the OTCPink marketplace operated by OTC Markets Group Inc.
Following passage of the proscribed 15-day time period for appeal as stated in the Letter, on October 26, 2022, Nasdaq completed the delisting by filing a Form 25 Notification of Delisting with the Securities and Exchange Commission.
The Company’s common stock, under the symbol “CRTD,” is quoted on the OTCQB marketplace operated by OTC Markets Group Inc. effective as of September 26, 2022. The Company’s publicly-traded warrants, under the symbol “CRTDW,” are quoted on the OTCPink marketplace operated by OTC Markets Group Inc.
Securities Purchase Agreement; Side Letter
On October 24, 2022, the Company entered into and closed a securities purchase agreement (the “Purchase Agreement”) with one accredited investor (the “Investor”), whereby the Investor purchased from the Company for an aggregate of $1,500,000 in subscription amount, an unsecured debenture in the principal amount of $1,666,650 (the “Debenture”). The Company and the Investor also entered into a registration rights agreement (each, a “Registration Rights Agreement”) pursuant to the Purchase Agreement.
The Debenture has an original issue discount of 10%, has a term of six months with a maturity date of April 24, 2023, may be extended by six months at the Company’s option subject to certain conditions, and are convertible into shares of Common Stock at a conversion price of $0.20 per share, subject to adjustment upon certain events.
In connection with its entry into the Purchase Agreement and issuance of the Debenture, the Company also entered into a side letter agreement (the “Letter Agreement”) with the holders of debentures of the Company, the Series C Warrants and Series D Warrants issued as of May 31, 2022 (the “May Investors”) and the holders of debentures of the Company, the Series E Warrants and Series F Warrants issued as of July 25, 2022 (the “July Investors”). Pursuant to the Letter Agreement each of the May Investors and the July Investors have entered into a lock-up agreement whereby they may not sell any such debentures, warrants, the shares into which such debentures may be converted, or certain shares underlying such warrants until the date that is 30 days after the date on which the registration statement registering for resale the shares of the Company’s common stock underlying the Debenture is declared effective by the Securities and Exchange Commission. Additionally, the Letter Agreement, provides that the May Investors and July Investors have agreed to a further lock up of such shares for a further 30 days upon the receipt of a certain amount of the proceeds from future potential issuances of debentures, common stock or similar securities by the Company. Further additionally, pursuant to the Letter Agreement, the May Investors and the July Investors have agreed to exchange and return for cancellation the Series C Warrants, Series D Warrants, Series E Warrants and Series F Warrants, receiving replacement warrants from the Company (the “Replacement Warrants”), in consideration for (i) the Company’s payment of $750,000 of the proceeds from the sale of the Debenture to the May Investors and July Investors on a pro rata basis and (ii) the Company’s agreement to pay, on a pro rata basis to the May Investors and July Investors, the greater of (x) $750,000 and (y) 50% of the gross proceeds raised in a subsequent financing. The Replacement Warrants reflect a reduction in the number of Series C and Series D Warrants from 1,550,000 in each class to 1,536,607 in each class and a reduction in the number of Series E and Series F Warrants from 1,075,000 in each class to 807,143 in each class, and the initial exercise date for the Replacement Warrants are unchanged from the date as set forth in the respective exchanged Series C, Series D, Series E or Series F Warrant.
Common Stock Purchase Agreement, Securities Purchase Agreement and Promissory Note
On October 20, 2022, the Company entered into a Common Stock Purchase Agreement (the “Investment Agreement”) with an otherwise unaffiliated third party (the “Investor”). Pursuant to the terms of the Investment Agreement, for a period of thirty-six (36) months commencing on the trading day immediately following date of effectiveness of the Registration Statement (as defined below), the Investor purchase up to $15,000,000 of the Company’s common stock, par value $0.001 per share (the “Shares”), pursuant to Drawdown Notices (as defined below), covering the Registrable Securities (as defined below). The purchase price of the Shares under the Investment Agreement is equal to 82% of the lowest volume weighted average price (VWAP) during the last ten trading days after the Company delivers to the Investor a Put notice (a “Drawdown Notice”) in writing requiring Investor to purchase shares of the Company, subject to the terms of the Investment Agreement.
On October 20, 2022, the Company also entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Investor, pursuant to which the Company issued to the Investor on that date a Promissory Note (the “Note”) in the principal amount of $300,000 in exchange for a purchase price of $255,000, which the Investor funded on October 20,2022. The proceeds of the Note will be used by the Company for general working capital purposes.
The Note bears interest at the rate of 10% per annum. Starting on the fifth month anniversary of the funding of the Note, and for the next six months thereafter, the Company will make seven equal monthly payments of $47,142.85 to the Investor.
On October 20, 2022, in connection with the entry by the Company and the Investor into the economic agreements, (i.e., the Investment Agreement, the Purchase Agreement, and the Note and the funding thereof), the Company issued 800,000 shares of its common stock to the Investor.
Securities Purchase Agreement
On September 15, 2022, Creatd, Inc., entered into a securities purchase agreement (the “Purchase Agreement”) with five accredited investors resulting in the raise of $800,000 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell in a registered direct offering (the “Offering”) an aggregate of 4,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). In a concurrent private placement, the Company issued to such investors warrants to purchase up to 4,000,000 shares of Common Stock, representing 100% of the shares of common stock purchased in the Offering (the “Warrants”). The Warrants and the shares of common stock issuable upon the exercise of the Warrants (the “Warrant Shares”) are not being registered under the Securities Act of 1933, as amended.
The Offering is expected to close on or about September 19, 2022, subject to the satisfaction of customary closing conditions as set forth in the Purchase Agreement. The Company expects the gross proceeds from the Offering to be $800,000, before deducting Offering expenses, which will be used for general corporate purposes, including working capital.
The shares of Common Stock were offered and sold by the Company pursuant to a prospectus supplement, which will be filed with the Securities and Exchange Commission in connection with a takedown from the Company’s effective shelf registration statement on Form S-3, which was filed with the Commission on November 25, 2020 and subsequently declared effective on April 23, 2021 (File No. 333-250982) (the “Shelf Registration Statement”).
The Warrants are immediately exercisable for a term of five years until September 15, 2027. The Warrants are exercisable at an exercise price of $0.20, subject to adjustment upon certain events. The Warrants provide for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock. The shares underlying the Warrants are to be registered within 10 trading days of the date of the Purchase Agreement.
The representations and warranties contained in the Purchase Agreement were made by the parties to, and solely for the benefit of, the other in the context of all of the terms and conditions of the Purchase Agreement and in the context of the specific relationship between the parties. The provisions of the Purchase Agreement, including the representations and warranties contained therein, are not for the benefit of any party other than the parties to the Purchase Agreement. The Purchase Agreement is not intended for investors and the public to obtain factual information about the current state of affairs of the parties.
Restructuring Agreement
On September 15, 2022, in connection with the Offering, the Company entered into an agreement with the holders of certain of the Company’s previously issued securities (the “Restructuring Agreement”).
The Restructuring Agreement, among other things, modified certain provisions of the following securities of the Company:
(i) | Original Issue Discount Senior Convertible Debentures issued on May 31, 2022 (the “May 2022 Debentures”); | |
(ii) | Original Issue Discount Senior Convertible Debentures issued on July 25, 2022 (the “July 2022 Debentures” and, together with the May 2022 Debentures, the “Debentures”); | |
(iii) | Common Stock Purchase Warrants issued on February 28, 2022 (the “February 2022 Warrants”); | |
(iv) | Common Stock Purchase Warrants issued on March 9, 2022 (the “March 2022 Warrants”); | |
(v) | Series C Common Stock Purchase Warrants issued on May 31, 2022 (the “Series C Warrants”); | |
(vi) | Series D Common Stock Purchase Warrants issued on May 31, 2022 (the “Series D Warrants”); | |
(vii) | Series E Common Stock Purchase Warrants issued on July 25, 2022 (the “Series E Warrants”); | |
(viii) | Series F Common Stock Purchase Warrants issued on July 25, 2022 (the “Series F Warrants” and, together with the February 2022 Warrants, the March 2022 Warrants, Series C Warrants, Series D Warrants and Series E Warrants, the “Restructured Warrants”); |
Pursuant to the Restructuring Agreement, the Company and the Holders agreed to, among other things, to (i) reduce the conversion price of the Debentures down to $0.20, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock; (ii) reduce the exercise price of the Restructured Warrants down to $0.20, subject to adjustment for subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock; (iii) extend the maturity dates for the Debentures to March 31, 2023; (iv) permit the Company’s contemplated rights offering to proceed, provided that the per share offering price in the rights offering is not less than $0.20; and (v) require that the Company’s cash burn rate not exceed $600,000 per month; provided, however, that with the prior written consent of a majority in interest of the Holders, such permitted monthly burn rate can be increased by $150,000, provided such additional amount is used for marketing purposes.
Additionally, in connection with the Restructuring Agreement, (i) the Company entered into a Registration Rights Agreement (“Registration Rights Agreement”), providing for the filing of a registration statement covering the Restructured Warrants and shares underlying the Warrants by not later than 10 trading days after the date of the Registration Rights Agreement or the earliest practical date on which the Company is permitted by Commission guidance to file such registration statement; (ii) the Company and its subsidiaries entered into a Security Agreement (the “Security Agreement”), whereby the Company granted a first priority security interest in all of their respective assets to the Holders and (iii) the subsidiaries of the Company delivered a guarantee (the “Guarantee”) in favor of the Holders whereby each such subsidiary guaranteed the full payment and performance of all obligations of the Company pursuant to the Debentures.
Each of our directors and officers have entered into lock-up agreements (the “Lock-up Agreements”) in favor of the Holders, whereby they have agreed not to offer, sell, agree to sell, directly or indirectly, or otherwise dispose of any shares of Common Stock or any securities convertible into or exchangeable for shares of Common Stock without the prior written consent of the Holders for a period of 180 days after the date of the Restructuring Agreement. The Lock-up Agreements provide limited exceptions and their restrictions may be waived at any time by the Holders.
Resignation of Brad Justus
On September 21, 2022, the Board of Directors of Creatd, Inc. received notice from Brad Justus of his resignation as a member of the Board, chair of the Nominating & Corporate Governance Committee, a member of the Audit Committee and a member of the Compensation Committee, with such resignation to become effective on September 30, 2022. Such resignation is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Resignation of Chief Executive Officer and Director
On August 9, 2022, Laurie Weisberg, the Company’s Chief Executive Officer and a member of the Board, notified the Company of her intention to resign from the positions of Chief Executive Officer, director, and any other positions held with the Company or any of its subsidiaries, regardless of whether Ms. Weisberg had been appointed. Such resignations are to become effective on a date to be determined following further discussion with the Board, but in no event later than August 31, 2022. On September 2, 2022, the Company entered into an Executive Separation Agreement with Laurie Weisberg the Company’s Chief Executive Officer and member of the Board of Directors setting forth the terms and conditions related to the Executive’s resignation for good reason as Chief Executive Officer, Director and any other positions held with the Company or any subsidiary.
Appointment of Chief Executive Officer
Effective upon Ms. Weisberg’s resignation as Chief Executive Officer, Jeremy Frommer, currently the Company’s Executive Chairman, will be appointed as Chief Executive Officer, pursuant to the Board’s approval.
Jeremy Frommer
Mr. Frommer was appointed Executive Chairman in February 2022 and has been a member of our board of directors since February 2016. Previously, he served as our Chief Executive Officer from February 2016 to August 2021, and Co-Chief Executive Officer from August 2021 to February 2022. Mr. Frommer has over 20 years of experience in the financial technology industry. Previously, Mr. Frommer held key factorsleadership roles in the investment banking and trading divisions of online sellers – sell-through, differentiation,large financial institutions. From 2009 to 2012, Mr. Frommer was briefly retired until beginning concept formation for Jerrick Ventures which he officially founded in 2013. From 2007 to 2009, Mr. Frommer was Managing Director of Global Prime Services at RBC Capital Markets, the investment banking arm of the Royal Bank of Canada, the largest financial institution in Canada, after the sale of Carlin Financial Group, a professional trading firm. From 2004 to 2007, Mr. Frommer was the Chief Executive Officer of Carlin Financial Group after the sale of NextGen Trading, a software development company focused on building equity trading platforms. From 2002 to 2004, Mr. Frommer was Founder and Chief Executive Officer of NextGen Trading. From 2000 to 2002, he was Managing Director of Merger Arbitrage Trading at Bank of America, a financial services firm. Mr. Frommer was also a director of LionEye Capital, a hedge fund from June 2012 to June 2014. He holds a B.A. from the University of Albany. We believe Mr. Frommer is qualified to serve on our board of directors due to his financial and leadership experience.
Appointment of Director
Effective upon Ms. Weisberg’s resignation as a director, Justin Maury, currently the Company’s President and Chief Operating Officer, will be appointed to the Board, pursuant to the Board’s approval.
Justin Maury
Mr. Maury has served as our President since January 2019 and was appointed Chief Operating Officer in August 2021. A full-stack designer and product developer by training, Mr. Maury partnered with Jeremy Frommer and founded the Company in 2013, having brought with him 10 years of experience in the creative industry. Since joining Creatd in 2013, Mr. Maury has been an instrumental force in the Company’s business and revenue expansion, and has overseen the Company’s product development since inception, including overseeing the design, development, launch, and ongoing growth of the Company’s flagship product, Vocal, the innovative creator that, under Mr. Maury’s leadership, has grown to a community of over 1.5 million users with a total audience reach of over 175 million.
As a director, we believe Mr. Maury will add considerable value, including through by providing a unique perspective into Creatd’s product performance and compliance –evolution and by providing invaluable direct input to help e-commerce businesses establish their brand identityguide the Company’s ongoing refinement of its technology roadmap and realize profitablematuration of its business model.
Trigger of Price Reset
On July 29, 2022, the Company announced that it was not moving forward with its previously announced Rights Offering. In doing so, it triggered a price reset in the July 2022 Financing and sustainable growth while maximizing customer engagementthe May 2022 Securities Purchase Agreement. As a result of this price reset, the May 2022 Securities Purchase Agreement debentures now have a conversion price of $1.00, and retention.both the Series C and Series D warrants have exercise prices of $0.96. As a result of the price reset, the July 2022 Financing debentures now have a conversion price of $1.25, and both the Series E and Series F warrants have exercise prices of $1.01.
Through Jerrick’s acquisitionJuly 2022 Financing
On July 25, 2022 (the “Effective Date”), the Company entered into and closed securities purchase agreements (each, a “Purchase Agreement”) with five accredited investors (the “Investors”), whereby the Investors purchased from the Company for an aggregate of Seller’s Choice, restructuring$1,935,019 in subscription amount (i) debentures in the principal amount of $2,150,000 (the “Debentures”); (ii) 1,075,000 Series E Common Stock Purchase Warrants to purchase shares of the Common Stock (the “Series E Warrants”); and (iii) 1,075,000 Series F Common Stock Purchase Warrants to purchase shares of Common Stock (the “Series F Warrants”, and collectively with the Series E Warrants, the “Warrants”). The Company and the Investors also entered into registration rights agreements (each, a “Registration Rights Agreement”) pursuant to the Purchase Agreement.
The Debentures have an original issue discount of 10%, have a maturity date of November 30, 2022, may be extended by six months at the Company’s option subject to certain conditions, and are convertible into shares of Common Stock at a conversion price of $2.00 per share, subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering (as defined therein), with such adjusted conversion price not to be lower than $1.25.
The Warrants are immediately exercisable for a term of five years until July 25, 2027. The Series E Warrants are exercisable at an exercise price of $3.00, subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $1.01. The Series F Warrants are exercisable at an exercise price of $6.00 subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $1.01. The Warrants provide for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock. The shares underlying the Debentures, the Series E Warrants and the Series F Warrants are to be registered within 90 days of the Effective Date.
The representations and warranties contained in the Purchase Agreement were made by the parties to, and solely for the benefit of, the other in the context of all of the terms and conditions of the Purchase Agreement and in the context of the specific relationship between the parties. The provisions of the Purchase Agreement, including the representations and warranties contained therein, are not for the benefit of any party other than the parties to the Purchase Agreement. The Purchase Agreement is not intended for investors and the public to obtain factual information about the current state of affairs of the parties.
Additionally, in connection with the Purchase Agreements, the subsidiaries of the Company delivered a guarantee (the “Guarantee”) in favor of the Investors whereby each such subsidiary guaranteed the full payment and performance of all obligations of the Company pursuant to the Purchase Agreement.
Securities Purchase Agreement
On May 31, 2022, the Company entered into and closed securities purchase agreements (each, a “Purchase Agreement”) with eight accredited investors (the “Investors”), whereby the Investors purchased from the Company for an aggregate of $3,600,036 in subscription amount (i) debentures in the principal amount of $4,000,000 (the “Debentures”); (ii) 2,000,000 Series C Common Stock Purchase Warrants to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) (the “Series C Warrants”); and (iii) 2,000,000 Series D Common Stock Purchase Warrants to purchase shares of Common Stock (the “Series D Warrants”, and collectively with the Series C Warrants, the “Warrants”). The Company and the Investors also entered into registration rights agreements (each, a “Registration Rights Agreement”) pursuant to the Purchase Agreement.
The Debentures have an original issue discount of 10%, have a term of six months with a maturity date of November 30, 2022, may be extended by six months at the Company’s option subject to certain conditions, and are convertible into shares of Common Stock at a conversion price of $2.00 per share, subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering (as defined therein), with such adjusted conversion price not to be lower than $1.00.
The Warrants are exercisable for a term of five years from the initial exercise date of November 30, 2022, until November 30, 2027. The Series C Warrants are exercisable at an exercise price of $3.00, subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $0.96. The Series D Warrants are exercisable at an exercise price of $6.00 subject to adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $0.96. The Warrants provide for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock. The shares underlying the Debentures, the Series C Warrants and the Series D Warrants are to be registered within 90 days of the Effective Date.
Additionally, in connection with the Purchase Agreements, the subsidiaries of the Company delivered a guarantee (the “Guarantee”) in favor of the Investors whereby each such subsidiary guaranteed the full payment and performance of all obligations of the Company pursuant to the Purchase Agreement.
The Debentures, Warrants, Common Stock underlying the Debentures and the Common Stock underlying the Warrants were not registered under the Securities Act, but qualified for exemption under Section 4(a)(2) and Rule 506 promulgated thereunder. The Company is relying on this exemption from registration for private placements based in part on the representations made by Investors, including representations with respect to each Investor’s status as an accredited investor, as such term is defined in Rule 501(a) of the Securities Act, and each Investor’s investment intent.
Employees
As of September 30, 2022, we had 24 full-time employees and 12 part-time employees. None of our employees are subject to a collective bargaining agreement, and we believe our relationship with our employees to be good.
We believe that our future success will depend in part on our continued ability to attract, hire and retain qualified personnel. Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their product line,abilities and consolidationachieve our objectives.
Facilities
Our corporate headquarters consists of staff, Jerricka total of approximately 8,000 square feet and is located at 419 Lafayette Street, 6th Floor, New York, NY 10003. The current lease term is effective May 1, 2022 through April 30, 2029, with monthly rent of $39,000 for the first year of the leasing period, and an increase in rent of 3% for every year thereafter. Previously in 2022, the Company also had additional office space located at 648 Broadway, Suite 200, New York, NY 10012. The lease term was effective September 9, 2021 through September 9, 2022, with monthly rent of $12,955 for the leasing period. During 2021, the Company also had additional office space located at 2050 Center Ave, Suite 640 and Suite 660, Fort Lee, NJ 07024. The lease term was effective June 5, 2018 through July 5, 2023, with monthly rent of $7,693 for the first year and increases at a rate of 3% for each subsequent year thereafter. Subsequent to December 31, 2021, the Company reached an agreement with the landlord at the New Jersey location to terminate the lease effective February 28, 2022.
Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, we are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
On or about August 30, 2021, Robert W. Monster and Anonymize, Inc. (“Monster”) filed a lawsuit in the United States District Court for the Western District of Washington at Seattle, Robert W. Monster, et al. v. Creatd, Inc., et al. (Western District of Washington at Seattle 2:21-CV-1177). The Complaint alleges, among other things, that action for Declaratory Judgment under 28 U.S.C. § 2201 that Monster’s registration and use of the internet domain name VOCL.COM (the “Domain Name”) does not violate Creatd’s rights under the Anticybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. § 1125(d), or otherwise under the Lanham Act, 15 U.S.C. § 1051 et seq. Creatd claims trademark rights and certain other rights with respect to the term and the domain name VOCL.COM. Monster seeks a determination by the Court that Monster’s registration and/or use of VOCL.COM is not, and has not been in violation of the ACPA, and that Plaintiffs’ use of VOCL.COM constitutes neither a violation of the ACPA nor trademark infringement or dilution under the Lanham Act. Creatd believes the lawsuit lacks merit and will vigorously challenge the action. At this time, we are unable to estimate potential damage exposure, if any, related to the litigation.
A complaint against the Company, dated September 21, 2022, has been ablefiled in the Supreme Court of the State of New York, New York County, by Lind Global Macro Fund LP and Lind Global Fund II LP, making certain claims alleging breach of contract related to expandtwo Securities Purchase Agreements executed on May 31, 2022, seeking damages in excess of $920,000. On November 18, 2022, Creatd filed a motion to dismiss the Complaint in its reach intoentirety. No response to the direct-to-consumer marketplace, while enabling somemotion to dismiss has been filed to date. Given the premature nature of Seller’s Choice’s clientele to leverage Vocal for Brand’s unique brand storytelling capabilities. With the power of Vocal, Jerrick has the ability to rapidly identify the winning aspects of an acquisition and eliminate unnecessary operational infrastructures.
Platform Processing Fees and Microtransactions:
With Tipping and other types of microtransactions, audiences can engage and support their favorite Vocal creators by actively investing in their creativity. Vocal takes a platform processing fee on all transactions. Each Tip sent on Vocal generates revenuethis case, it is still too early for the Company in the form of platform processing fees. For Vocal Free creators, we retain a 7% platform processing fee for every Tip exchanged. For Vocal+ creators, we retain a 2.9% platform processing fee.
Vocal utilizes Stripe for payment processing, which currently supports Apple Pay and Google Wallet.
Additional applications for microtransactions on Vocal are in development, including the enablement of gated premium content, recurring Tips, affiliate marketing features for brands, and incentivization fees for new creator referrals.
Affiliate sales:
Vocal generates revenue through affiliate marketing relationships, which pays the Company a percentage of purchases made on our platform. Affiliate relationships include Amazon, Skimlinks, Tune, and more. This represents a unique opportunity in the post-pandemic environment where brands need expansive distribution pipelines suchto make an assessment as Vocal to reach broader audiences.liability.
E-commerce:
Our e-commerce strategy involves revitalizing archival imagery and media content in dormant legacy portfolios. Our curation and data capabilities have helped us create scalable and definable value for our internal collection of media assets through financing, trademarking, licensing, and production opportunities. Jerrick, or ‘Creatd,’ has an exclusive license to leverage the stories housed on Vocal, reimagining them for films, episodic shows, games, graphic novels, collectibles, books, and more.
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Growth Strategy:
Continued growth is likely to be achieved by focusing on the following key areas:
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Currently, the Company has begun exploring long-term partnerships with the following Creatd Partners:
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Corporate Information
We were originally incorporated under the lawsThe Company’s address is 419 Lafayette Street, 6th Floor, New York, NY 10003. The Company’s telephone number is (201) 258-3770. Our website is https://creatd.com. The information on, or that can be accessed through, this website is not part of the State of Nevadathis prospectus, and you should not rely on December 30, 1999 under the name LILM, Inc. The Company changed its name on December 3, 2013 to Great Plains Holdings, Inc.
On February 5, 2016 (the “Merger Closing Date”), we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GPH Merger Sub, Inc., a Nevada corporation and our wholly-owned subsidiary (“Merger Sub”), and Jerrick Ventures, Inc., a privately-held Nevada corporation headquartered in New Jersey (“Jerrick”), pursuant to which the Merger Sub was merged with and into Jerrick, with Jerrick surviving as our wholly-owned subsidiary (the “Merger”). Pursuant to the terms of the Merger Agreement, we acquired, through a reverse triangular merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “Jerrick Shareholders”), pro-rata, a total of 28,500,000 shares of our common stock. Additionally, we assumed 33,415 shares of Jerrick’s Series A Convertible Preferred Stock (the “Jerrick Series A Preferred”) and 8,064 shares of Series B Convertible Preferred Stock (the “Jerrick Series B Preferred”).
Upon closing of the Merger on February 5, 2016, the Company changed its business plan to our current plan.
In connection with the Merger, on the Merger Closing Date, we entered into a Spin-Off Agreement with Kent Campbell (the “Spin-Off Agreement”), pursuant to which Mr. Campbell purchased (i) all of our interest in Ashland Holdings, LLC, a Florida limited liability company, and (ii) all of our interest in Lil Marc, Inc., a Utah corporation, in exchange for the cancellation of 781,818 shares of our common stock held by Mr. Campbell. In addition, Mr. Campbell assumed all of our debts, obligations and liabilities, including any existing prior to the Merger, pursuant to the terms and conditions of the Spin-Off Agreement.
Effective February 28, 2016, we entered into an Agreement and Plan of Merger (the “Statutory Merger Agreement”), pursuant to which we became the parent company of Jerrick Ventures, LLC, our wholly-owned operating subsidiary (the “Statutory Merger”).
On February 28, 2016, we changed our name to Jerrick Media Holdings, Inc. to better reflect our new business strategy.
Employees
As of August 18, 2020, we had 23 full-time employees. None of our employees are subject to a collective bargaining agreement, and we believe that relationship with our employees to be good.
Description of Property
Our corporate headquarters consists of a total of 3,000 square feet and is located at 2050 Center Ave, Suite 640 and Suite 660, Fort Lee, NJ 07024. The current lease term is effective June 5, 2018 through July 5, 2023, with monthly rent of $7,693 for the first year and increases at a rate of 3% for each subsequent year thereafter.
Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, we are currently not aware of any such legal proceedings or claims that will have, individually orinformation in making the aggregate, a material adverse effect on our business, financial condition or operating results.
On June 25, 2020, Home Revolution, LLC (“Home Revolution”) filed a lawsuit indecision whether to purchase 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.securities.
The Company continues to believe that the Action lacks merit and has moved to dismiss the Action. In the event this Action is not summarily dismissed, Jerrick intends to vigorously challenge it. At this time, the Company is unable to estimate potential damage exposure, if any, related to the litigation.
In addition to the existing claim for damages contained in the Complaint, on July 29, 2020, Home Revolution moved, by order to show cause, for preliminary injunctive relief. On August 13, 2020, the Court denied Home Revolution’s request for a preliminary injunction.
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MANAGEMENT
The following table and biographical summaries set forth information, including principal occupation and business experience, about our directors and executive officers as of the date of this prospectus:
Name | Age | Positions | ||||
Jeremy Frommer | 53 | Chief Executive Officer, | ||||
Executive Chairman of the Board of Directors | ||||||
58 | Director | |||||
55 | ||||||
Director | ||||||
Justin Maury | 33 | Chief Operating Officer, President and Director | ||||
Chelsea Pullano | 31 | Chief Financial Officer |
Jeremy Frommer – Chief Executive OfficerChairman and DirectorCo-Founder
Mr. Frommer was appointed Executive Chairman in February 2022 and has served as our Chief Executive Officer and asbeen a member of our board of directors since February 2016. Previously, he served as our Chief Executive Officer from February 2016 to August 2021, and Co-Chief Executive Officer from August 2021 to February 2022. Mr. Frommer has over 20 years of experience in the financial technology industry. Previously, Mr. Frommer held key leadershipsleadership roles in the investment banking and trading divisions of large financial institutions. From 2009 to 2012, Mr. Frommer was briefly retired until beginning concept formation for Jerrick Ventures which he officially founded in 2013. From 2007 to 2009, Mr. Frommer was Managing Director of Global Prime Services at RBC Capital Markets, the investment banking arm of the Royal Bank of Canada, the largest financial institution in Canada, after the sale of Carlin Financial Group, a professional trading firm. From 2004 to 2007, Mr. Frommer was the Chief Executive Officer of Carlin Financial Group after the sale of NextGen Trading, a software development company focused on building equity trading platforms. From 2002 to 2004, Mr. Frommer was Founder and Chief Executive Officer of NextGen Trading. From 2000 to 2002, he was Managing Director of Merger Arbitrage Trading at Bank of America, a financial services firm. Mr. Frommer was also a director of LionEye Capital, a hedge fund from June 2012 to June 2014. He holds a B.A. from the University of Albany. We believe Mr. Frommer is qualified to serve on our board of directors due to his financial and leadership experience.
Mark StandishPeter Majar– Director
Mr. Majar joined the Board in November 2022. Mr. Majar, Founder and Managing Member of Majar Advisors, previously held numerous senior management and executive positions including Chief Financial Officer, Head of Financial Technology, Head of Strategy, as well as several Managing Director positions. From 2015 to 2017, Mr. Majar served as Managing Director in Investment Banking and co-Head of Diversified Financial Services at Piper Jaffray & Co. (now Piper Sandler Companies). From 2017 to 2018, Mr. Majar provided management consulting services through his self-established firm, Majar Advisors LLC, which remains in operation through the present. From 2018 to 2021, Mr. Majar served as Managing Director, Head of Financial Technology at New York-based investment banking and financial advisory firm, TAP Advisors, LLC. Between 2021 and 2022, Mr. Majar served as Chief Financial Officer at information technology company Hoyos Integrity Corp., having previously served as a longtime advisor to the firm. Mr. Majar holds an undergraduate degree from University of Washington and an MBA from Columbia University. As a board director, Mr. Majar will add considerable value, including through his comprehensive and diverse investment management experience, deep knowledge of financial technology services and transactions, and broad experience with corporate development, strategy consulting, and executive leadership.
Erica Wagner – ChairmanDirector
Ms. Wagner joined the Board in November 2022. From 2016 through 2021, Ms. Wagner was a Lecturer, and later Senior Lecturer, at Goldsmith’s College, University of London, where she taught creative writing. Ms. Wagner was previously Lead Editorial Innovator for Creatd, Inc., has previously and currently held roles as a freelance editor, journalist, and contributing writer for numerous outlets both in the U.K. and the U.S., including The New Statesman, Harper’s Bazaar, the Economist, the Observer, the New York Times. Ms. Wagner is also a freelance literary and creative consultant for Chanel, as well as the host of their branded podcast. She has twice been a judge of the BoardBooker Prize and has been judge and Chair of Directors
Mr. Standishthe Goldsmiths Prize. In 2015, Ms. Wagner was elected to ourawarded an Honorary PhD by the University of East Anglia, and currently Goldsmith’s College Distinguished Writers’ Centre Fellow. She has an undergraduate degree from University of Cambridge, a Master’s degree from University of East Anglia, and an Honorary PhD from the University of East Anglia. As a member of Creatd’s board of directors, in July 2020Ms. Wagner will add significant expertise with respect to informing the Company’s literary and serves ascreative direction, having worked closely with news organizations, commercial companies and publishers, to advise their creative direction and its Chairman. He has served as a Senior Partner for HHM Capital since January 2017. Additionally, he has served as a member of the Board of Directors for LightPoint Financial Technology LLC since January 2017. From February 2015 to December 2016, he served as Managing Partner and Chief Information Officers for Deimos Asset Management LLC. In 1995 he joined the Royal Bank of Canada and served as Co-Chief Executive Officer of RBC Capital Markets from 2008 to 2014. He studied banking and finance at Croydon College in England in 1983. We believe Mr. Standish is qualified to serve as a member of our board because of his extensive financial industry and leadership experience.
Leonard Schiller – Director
Mr. Schiller is the Chairman of our board of directors. He is President and Managing Partner of the Chicago law firm of Schiller, Strauss and Lavin PC and has been associated with the firm since 1977. Mr. Schiller also has served as the President of The Dearborn Group, a residential property management and real estate company with properties located in the Midwest. Mr. Schiller has also been involved in the ownership of residential properties andapplication towards commercial properties throughout the country. Mr. Schiller has acted as a principal in numerous private loan transactions and has been responsible for the structure, and management of these transactions. Mr. Schiller has also served as a member of the Board of Directors of IMALL, an internet search engine company, which was acquired by Excite@Home. He also served as a member of the Board of AccuMed International, Inc., a company which manufactured and marketed medical diagnostic screening products, which was acquired by Molecular Diagnostics, Inc. He presently serves as a director of Milestone Scientific, Inc., a Delaware company. We believe Mr. Schiller is qualified to serve on our board of directors due to his legal and business experience.success.
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Laurie Weisberg – Director
Ms. Weisberg was elected to our board of directors in July 2020. Weisberg, who has served as the Chief Sales Officer at Intent since February 2019, has spent over 25 years at the forefront of sales and marketing innovation in the technology space, having held leadership positions at various technology companies including Thrive Global, Curalate, and Oracle Data Cloud. From October 2010 to April 2015, Ms. Weisberg was a member of the executive leadership team at Datalogix, leading up to its acquisition by Oracle in 2015, at which point she assumed the role of VP of Oracle Data Cloud. Additionally, Ms. Weisberg has served on the Advisory Board at Crowdsmart, an intelligent data-driven investment prediction platform since April 2019. Ms. Weisberg was born and educated in England. We believe Ms. Weisberg is qualified to serve on our board of directors due to her extensive global sales and brand marketing expertise as well as her leadership experience working within the technology space.
Mark Patterson – Director
Mr. Patterson was elected to our board of directors in July 2020. Mr. Patterson, a private equity and hedge fund businessman, co-founded MatlinPatterson Global Advisors, a leading private equity firm in the distressed investing space in 2002. Early in his career, Patterson worked in leveraged finance at Credit Suisse, Scully Brothers & Foss, Salomon Brothers, and Bankers Trust. During his tenure as chairman and chief executive of MatlinPatterson’s asset management division, Mr. Patterson expanded the firm’s portfolio beyond distressed debt, implementing other investment strategies such as credit trading, securitized credit, and senior credit. Mark Patterson currently holds the position of Non-Executive Chairman of MatlinPatterson Asset Management. Mr. Patterson received degrees in Law and Economics from Stellenbosch University in South Africa and an M.B.A. from New York University’s Stern School of Business. We believe Mr. Patterson is qualified to serve on our board of directors due to his extensive experience in financial markets, investment management, and his corporate governance experience on various boards.
Justin Maury – PresidentChief Operating Officer, Co-Founder and Director
Mr. Maury has served as our President since January 2019.2019, and was appointed Chief Operating Officer in August 2021. He is a full stack design director with an expertise in product development. With over ten years of design and product management experience in the creative industry, Mr. Maury’s passion for the creative arts and technology ultimately resulted in the vision for Vocal. Since joining JerrickCreatd in 2013, Maury has overseen the development and launch of the company’s flagship product, Vocal, an innovative platform that provides storytelling tools and engaged communities for creators and brands to get discovered while funding their creativity. Under Maury’s supervision, Vocal has achieved growth to over 380,000 creators across 34 genre-specific communities in its first two years since launch.
Chelsea Pullano – Chief Financial Officer
Ms. Pullano has been our Chief Financial Officer since June 2020. She has a long history of leadership at Jerrick,Creatd, serving as a member of the Company’s Management Committee for four years. Prior to her current role, Ms. Pullano was an integral member of our finance department since 2017, most recently serving as our Head of Corporate Finance, a role in which she coordinated our periodic reports under the Exchange Act and other financial matters. Prior to joining the Finance Department, Ms. Pullano was a member of our operations team from 2015 to 2017. She holds a B.A. from the State University of New York College at Geneseo.
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Director Terms; Qualifications
Members of our board of directors serve until the next annual meeting of stockholders, or until their successors have been duly elected.
When considering whether directors and nominees have the experience, qualifications, attributes and skills to enable the board of directors to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the board of directors focuses primarily on the industry and transactional experience, and other background, in addition to any unique skills or attributes associated with a director.
Director or Officer Involvement in Certain Legal Proceedings
There are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that is averseadverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past ten years. No director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past ten years. No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past ten years. No director or officer has been found by a court to have violated a federal or state securities or commodities law during the past ten years.
Directors and Officers Liability Insurance
The Company has directors’ and officers’ liability insurance insuring its directors and officers against liability for acts or omissions in their capacities as directors or officers, subject to certain exclusions. Such insurance also insures the Company against losses, which it may incur in indemnifying its officers and directors. In addition, officers and directors also have indemnification rights under applicable laws, and the Company’s Second Amended and Restated Articles of Incorporation and Amended and Restated Bylaws.
Director Independence
The listing rules of The Nasdaq Stock Market LLC (“Nasdaq”) require that independent directors must comprise a majority of a listed company’s board of directors. In addition, the rules of Nasdaq require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and governance committees be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. Under the rules of Nasdaq, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Our board of directors has undertaken a review of the independence of our directors and considered whether any director has a material relationship with it that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, the board of directors has determined that Leonard Shiller, Mark Standish, Laurie Weisberg, and Mark Patterson arePeter Majar is “independent” as that term is defined under the applicable rules and regulations of the SEC and the listing standards of Nasdaq. In making these determinations, our board of directors considered the current and prior relationships that each non-employee director has with the Company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of the Company’s capital stock by each non-employee director, and any transactions involving them described in the section captioned “—Certain relationships and related transactions and director independence.”
Board Committees
Upon the consummation of this Offering, theThe Company’s Board will establishhas established three standing committees: Audit, Compensation, and Nominating and Corporate Governance. Each of the committees will operateoperates pursuant to its charter. The committee charters will be reviewed annually by the Nominating and Corporate Governance Committee. If appropriate, and in consultation with the chairs of the other committees, the Nominating and Corporate Governance Committee may propose revisions to the charters. The responsibilities of each committee are described in more detail below.
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Nasdaq permits a phase-in period of up to one year for an issuer registering securities in an initial public offering to meet the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee independence requirements. Under the initial public offering phase-in period, only one member of each committee is required to satisfy the heightened independence requirements at the time our registration statement becomes effective, a majority of the members of each committee must satisfy the heightened independence requirements within 90 days following the effectiveness of our registration statement, and all members of each committee must satisfy the heightened independence requirements within one year from the effectiveness of our registration statement.
Audit Committee
The Audit Committee, among other things, will be responsible for:
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The board of directors has affirmatively determined that each member of the Audit Committee meets the additional independence criteria applicable to audit committee members under SEC rules and Nasdaq listing rules. Effective upon the completion of this offering theThe board of directors will adopthas adopted a written charter setting forth the authority and responsibilities of the Audit Committee. The Board has affirmatively determined that each member of the Audit Committee is financially literate, and that Mr. StandishMajar meets the qualifications of an Audit Committee financial expert.
The Audit Committee will consistconsists of Mr. Standish, Mr. Schiller, Ms. Weisberg, and Mr. Patterson. Mr. Standish will chair the Audit Committee. We believe that, after consummation of this offering, the functioning of the Audit Committee will comply with the applicable requirements of the rules and regulations of the Nasdaq listing rules and the SEC.Majar, Chair.
Compensation Committee
The Compensation Committee will be responsible for:
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Effective upon the completion of this offering, theThe board of directors will adopthas adopted a written charter setting forth the authority and responsibilities of the Compensation Committee.
The Compensation Committee will consistconsists of Mr. Standish, Mr. Schiller,Majar, who serves as chair, and Ms. Weisberg, and Mr. Patterson. Mr. Patterson will serve as chairman of the Compensation Committee.Wagner. The board of directors has affirmatively determined that each member of the Compensation Committee meets the independence criteria applicable to compensation committee members under SEC rules and Nasdaq listing rules. The Company believes that after the consummation of the offering, the composition of the Compensation Committee will meetmeets the requirements for independence under, and the functioning of such Compensation Committee will comply with, any applicable requirements of the rules and regulations of Nasdaq listing rules and the SEC.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee, among other things, will beis responsible for:
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● | Evaluating and reporting to the Board on the performance and effectiveness of the directors, committees and the Board as a whole; |
● | Working with the Board to determine the appropriate and desirable mix of characteristics, skills, expertise and experience, including diversity considerations, for the full Board and each committee; |
● | Annually presenting to the Board a list of individuals recommended to be nominated for election to the Board; |
● | Reviewing, evaluating, and recommending changes to the Company’s Corporate Governance Principles and Committee Charters; |
● | Recommending to the Board individuals to be elected to fill vacancies and newly created directorships; |
● | Overseeing the Company’s compliance program, including the Code of Conduct; and |
● | Overseeing and evaluating how the Company’s corporate governance and legal and regulatory compliance policies and practices, including leadership, structure, and succession planning, may affect the Company’s major risk exposures. |
Effective upon completion of this offering., theThe board of directors will adopthas adopted a written charter setting forth the authority and responsibilities of the Corporate Governance/Nominating Committee.
The Nominating and Corporate Governance Committee will consistconsists of Mr. Standish, Mr. Schiller, Ms. Weisberg,Wagner, who serves as chair, and Mr. Patterson. Ms. Weisberg will serve as chairman.Majar. The Company’s board of directors has determined that each member of the Nominating and Corporate Governance Committee is independent within the meaning of the independent director guidelines of Nasdaq listing rules.
Compensation Committee Interlocks and Insider Participation
None of the Company’s executive officers serves, or in the past has served, as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of the Company’s board of directors or its compensation committee. None of the members of the Company’s compensation committee is, or has ever been, an officer or employee of the company.
Code of Business Conduct and Ethics
Prior to the completion of this offering, theThe Company’s Board of Directors will adopthas adopted a code of business conduct and ethics applicable to its employees, directors and officers, in accordance with applicable U.S. federal securities laws and the corporate governance rules of Nasdaq. The code of business conduct and ethics will be publicly available on the Company’s website. Any substantive amendments or waivers of the code of business conduct and ethics or code of ethics for senior financial officers may be made only by the Company’s board of directors and will be promptly disclosed as required by applicable U.S. federal securities laws and the corporate governance rules of Nasdaq.
Corporate Governance Guidelines
Prior to the completion of this offering, theThe Company’s board of directors will adopthas adopted corporate governance guidelines in accordance with the corporate governance rules of Nasdaq.
Delinquent Section 16(A) Reports
Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC and are required to furnish copies to the Company. Based solely on the review of the Changes of Beneficial Ownership disclosures on Forms 3, 4 and 5 filed with the Securities and Exchange Commission, the following persons filed the following number of transactions on Section 16 beneficial ownership disclosure filings late for transactions:
● | Mr. Mark Standish filed one Form 4 late with respect to one transaction; |
● | Mr. Arthur Rosen filed one Form 5 for late filings with respect to five transactions; and |
● | Mr. Eric Ellis Goldberg filed one Form 4 for late filings with respect to two transactions, and one Form 3 late with respect to two transactions. |
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following summary compensation table sets forth all compensation awarded to, earned by, or paidinformation is related to the named executive officerscompensation paid, distributed or accrued by us duringfor the years ended December 31, 2019,2021 and 2018.December 31, 2020 for our Chief Executive Officer (principal executive officer) serving during the year ended December 31, 2021 and the three other executive officers serving at December 31, 2021 whose total compensation exceeded $100,000 (the “Named Executive Officers”).
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||
Jeremy Frommer | 2019 | $ | 168,269 | $ | 300,080 | - | - | - | - | $ | 104,667 | (1) | $ | 573,016 | ||||||||||||||||||||
Chief Executive Officer | 2018 | $ | 152,879 | $ | 135,700 | - | - | - | - | $ | 96,463 | (3) | $ | 385,042 | ||||||||||||||||||||
Rick Schwartz | 2019 | $ | 33,642 | - | - | - | - | - | $ | 9,708 | $ | 43,350 | ||||||||||||||||||||||
Former President | 2018 | $ | 124,476 | - | - | - | - | - | - | $ | 124,476 | |||||||||||||||||||||||
Justin Maury | 2019 | $ | 117,751 | - | - | - | - | - | $ | 8,094 | (4) | $ | 125,845 | |||||||||||||||||||||
President | 2018 | $ | 90,846 | - | - | - | - | - | - | $ | 90,846 |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||
Laurie Weisberg | 2021 | $ | 313,750 | $ | 25,000 | $ | 20,226 | $ | 763,894 | - | - | $ | 24,925 | (1) | $ | 1,147,795 | ||||||||||||||||||||
Chief Executive Officer | 2020 | $ | 60,577 | $ | - | - | - | - | - | $ | 7,875 | (2) | $ | 68,452 | ||||||||||||||||||||||
Justin Maury | 2021 | $ | 306,923 | $ | 5,000 | - | $ | 1,479,328 | - | - | $ | 7,919 | (3) | $ | 1,799,170 | |||||||||||||||||||||
President & Chief Operating Officer | 2020 | $ | 147,009 | - | $ | 412,204 | (9) | $ | 713,563 | - | - | $ | 7,920 | (4) | $ | 1,280,696 | ||||||||||||||||||||
Chelsea Pullano | 2021 | $ | 207,616 | $ | - | - | $ | 610,052 | - | - | $ | 7,632 | (5) | $ | 825,300 | |||||||||||||||||||||
Chief Financial Officer | 2020 | $ | 123,500 | - | $ | 38,050 | (10) | $ | 522,121 | - | - | $ | 1,908 | (6) | $ | 685,579 | ||||||||||||||||||||
Jeremy Frommer | 2021 | $ | 665,433 | $ | 200,000 | - | $ | 1,709,628 | - | - | $ | 98,237 | (7) | $ | 2,673,298 | |||||||||||||||||||||
Executive Chairman | 2020 | $ | 234,231 | $ | 182,000 | $ | 469,255 | (11) | $ | 931,339 | - | - | $ | 86,686 | (8) | $ | 1,903,511 |
(1) |
(2) | The |
(3) | The $7,919 includes payment to Mr. Maury for health insurance. |
(4) | The $7,920 includes payment to Mr. Maury for health insurance. |
(5) | The $7,632 includes payment to Ms. Pullano for health insurance. |
(6) | The $1,908 includes payment to Ms. Pullano for health insurance. |
(7) | The $98,237 includes payment to Mr. Frommer for living expenses, health insurance and a vehicle allowance. |
(8) | The |
(9) | On May 13, 2020, the Company exchanged 167,955 stock options for 251,933 shares of Common Stock. $403,604 is attributable to this exchange. $8,660 of this amount is attributable to the issuance of shares in lieu of wages. | |
(10) | On May 13, 2020, the Company exchanged 14,205 stock options for 21,308 shares of Common Stock. | |
(11) | On May 13, 2020, the Company exchanged 200,000 stock options for 300,000 shares of Common Stock. $456,134 is attributable to this exchange. $12,121 of this amount is attributable to the issuance of shares in lieu of wages. |
Employment Agreements
As of August 18, 2020,December 31, 2021, the Company hashad not entered into any employment agreements, but intends on enteringhas entered into such agreements with its Chief Executive Officer, Executive Chairman, President& Chief Operating Officer, and PresidentChief Financial Officer subsequent to December 31, 2021.
2020 Equity Incentive Plan
Our 2020 Equity Incentive Plan (the “2020 Plan”) provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), and other stock-based awards and there are 2,500,000 shares originally reserved under the 2020 Plan.
No further awards may be issued under the Jerrick Ventures 2015 Incentive and Award Plan (the “2015 Plan”), but all awards under the 2015 Plan that are outstanding as of the Effective Date will continue to be governed by the end of fiscal year 2020.
terms, conditions and procedures set forth in the 2015 Plan and any applicable award agreement.
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Outstanding Equity Awards at Fiscal Year-End 20192021
At December 31, 2019,2021, we had outstanding equity awards as follows:
Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Weighted Average Exercise Price | Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested | |||||||||||||||||||||||||
Jeremy Frommer (1) | 66,666 | - | 66,666 | $ | 22.5 | May 22, 2022 | - | $ | - | - | - | |||||||||||||||||||||||
Rick Schwartz (1) | 66,666 | - | 66,666 | $ | 22.5 | May 22, 2022 | - | $ | - | - | - | |||||||||||||||||||||||
Justin Maury (2) | 55,985 | - | 55,985 | $ | 29.7 | May 22, 2022 | - | - | - | - |
Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Weighted Average Exercise Price | Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested | |||||||||||||||||||||||||
Jeremy Frommer (1) | 210,188 | 400,000 | - | $ | 5.94 | February 19, 2028 (5) | - | $ | - | - | - | |||||||||||||||||||||||
Laurie Weisberg (2) | 137,667 | 87,083 | - | $ | 7.13 | February 19, 2028 (6) | - | $ | - | - | - | |||||||||||||||||||||||
Justin Maury (3) | 149,333 | 374,000 | - | $ | 5.93 | February 19, 2028 (7) | - | $ | - | - | - | |||||||||||||||||||||||
Chelsea Pullano (4) | 87,000 | 150,000 | - | $ | 4.37 | February 19, 2028 (8) | - | $ | - | - | - |
(1) | Effective February 5, 2016, to August 13, 2021, Jeremy Frommer was appointed as our Chief Executive Officer. Starting August 13, 2021, Jeremy Frommer was appointed Co-Chief Executive Officer | |
(2) | Effective September 28, 2020, to August 13, 2021, Laurie Weisberg was appointed as our |
(3) | ||
(4) | Effective June 29, 2020, Chelsea Pullano was appointed Chief Financial Officer. | |
(5) | 121,000 options expire on | |
(6) | 53,750 options expire on February 4, 2026, 121,000 options expire on October 28, 2026, 25,000 options expire on February 19, 2027, 25,000 options expire on February 19, 2028. | |
(7) | 81,000 options expire on October 28, 2026, 187,000 options expire on February 19, 2027, 187,000 options expire on February 19, 2028. | |
(8) | 37,000 options expire on October 28, 2026, 75,000 options expire on February 19, 2027, 75,000 options expire on February 19, 2028. |
Director Compensation
The following table presents the total compensation for each person who served as a non-employee member of our board of directors and received compensation for such service during the fiscal year ended December 31, 2019.2021. Other than as set forth in the table and described more fully below, we did not pay any compensation, make any equity awards or non-equity awards to, or pay any other compensation to any of the non-employee members of our board of directors in 2019.2021.
Director | Option Awards (1) | Fees Earned or Paid in Cash | Total | |||||||||
Andrew Taffin(2) | $ | 3,021 | $ | - | $ | 3,021 | ||||||
Leonard Schiller | $ | - | $ | - | $ | - |
Director | Option Awards (1) | Fees Earned or Paid in Cash | Total | |||||||||
Mark Standish (4) | $ | 340,414 | $ | - | $ | 340,414 | ||||||
Mark Patterson (2) | $ | 131,845 | $ | - | $ | 131,845 | ||||||
Leonard Schiller (4) | $ | 171,453 | $ | - | $ | 171,453 | ||||||
LaBrena Martin (4) | $ | 169,078 | $ | - | $ | 169,078 | ||||||
Laurie Weisberg (3) | $ | 763,894 | $ | - | $ | 763,894 |
(1) | Amounts shown in this column do not reflect dollar amounts actually received by our non-employee directors. Instead, these amounts represent the aggregate grant date fair value of stock option awards determined in accordance with FASB ASC Topic 718. |
(2) |
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been limited public market for the Company’s common stock, and a liquid trading market for its common stock may not develop or be sustained after this offering. Future sales of substantial amounts of the Company’s common stock in the public market, or the anticipation of these sales, could materially and adversely affect market prices prevailing from time to time, and could impair the Company’s ability to raise capital through sales of equity or equity-related securities.
Only a limited number of shares of the Company’s common stock will be available for sale in the public market for a period of several months after completion of this offering due to contractual and legal restrictions on resale described below. Nevertheless, sales of a substantial number of shares of the Company’s common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could materially and adversely affect the prevailing market price of its common stock. Although the Company intends to list its common stock on The Nasdaq Capital Market, the Company cannot assure you that there will be an active market for its common stock.
Of the shares to be outstanding immediately after the completion of this offering, we expect that the shares to be sold in this offering will be freely tradable without restriction under the Securities Act unless purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act; these restricted securities may be sold in the public market only if registered or pursuant to an exemption from registration, such as Rule 144 or Rule 701 under the Securities Act.
Rule 144
In general, under Rule 144 as currently in effect, once the Company has been subject to the public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, a person who is not deemed to have been one of the Company’s affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares of its common stock proposed to be sold for at least six months is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than Company affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect, the Company’s affiliates or persons selling shares of its common stock on behalf of its affiliates are entitled to sell upon expiration of the market standoff agreements and lock-up agreements described above, within any three-month period, a number of shares that does not exceed the greater of:
(3) | |
(4) | Mark Standish, Leonard Schiller, and LaBrena Martin resigned from the board of directors subsequent to December 31, 2021. |
Sales under Rule 144 by the Company’s affiliates or persons selling shares of its common stock on behalf of its affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about the Company.
Rule 701
Rule 701 generally allows a stockholder who purchased shares of the Company’s common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of the Company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation, or notice provisions of Rule 144. Rule 701 also permits affiliates of the Company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling such shares pursuant to Rule 701 and until expiration of the lock-up period described below.
Lock-Up Agreements
In connection with this offering, the Company, and its officers, directors and stockholders have agreed to a nine-month “lock-up” period from the closing of this offering, with respect to the shares that they beneficially own, including shares issuable upon the exercise of convertible securities and options that are currently outstanding or which may be issued. This means that, for a period of nine months following the closing of this offering, such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of the underwriters. The nine-month restricted period is subject to extension upon certain events and the terms of the lock-up agreements may be waived at the underwriters’ discretion. The lock-up restrictions, specified exceptions and the circumstances under which the nine-month lock-up period may be extended are described in more detail under “Underwriting.”
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CERTAIN RELATIONSHIPS AND RELATED The following includes a summary of transactions during our fiscal years ended December 31, Revenue During the year ended December 31, 2021 the Company received revenue of $80,000 from Dune for branded content services prior to consolidation but after recognition as an equity method investee. The July 2020 Convertible Note Offering From July 2020 to September 2020, the Company conducted multiple closings of a private placement offering to accredited investors (the “July 2020 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “July 2020 Investors”) for aggregate gross proceeds of $50,000. The July 2020 Convertible Note Offering accrues interest at a rate of twelve percent per annum (12%). The July 2020 Convertible Note Offering mature on the six (6th) month anniversary of their issuance dates. The July 2020 Note Offering is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $12.75 per share after the maturity date or (ii) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”). Upon default the July 2020 Convertible Note Offering 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 conversion feature of the July 2020 Convertible Note Offering provides for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a beneficial conversion feature. When the Company records a BCF the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF and related debt discount of $9,812, the discount is being accreted over the life of the Debenture to accretion of debt discount and issuance cost. The Company recorded a $21,577 debt discount relating to 3,922 July 2020 Convertible Note Offering issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the Company converted $50,000 of principal and $630 of unpaid interest into the September 2020 Equity Raise. The January On January During the year ended December 31, The On During the interest. The On During the year ended December 31, The On Since the September 2020 Goldberg Note has a make-whole provision if the share price of the Company’s common stock is below 2.92 on September 14, 2020, 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 make-whole feature of gave rise to a derivative liability of $2,557,275 which was recorded as a loss on extinguishment of debt. During the year ended December 31, 2020 the Company accrued interest of $347. The September 2020 Rosen Loan Agreement On September 15, 2020, the Company entered into a loan agreement (the “September 2020 Rosen Loan Agreement”) with Rosen whereby the Company issued a promissory note of $3,295 (the “September 2020 Rosen Note”). Pursuant to Since the September 2020 Rosen During the year ended December 31, PRINCIPAL STOCKHOLDERS The Securities Authorized for Issuance Under Equity Compensation Plans As of December 31, 2021, we had awards outstanding under our 2020 Equity Incentive Plan: SELLING STOCKHOLDERS FOR WHOSE ACCOUNTS WE ARE REGISTERING SHARES The shares of our Common Stock being offered by the Selling Stockholders are issuable upon conversion of the July Debentures, exercise of the September The table below lists the Selling Stockholders and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (and the rules and regulations thereunder) of the shares of The third column lists the The fourth and The amounts and information set forth below are based upon information provided to Percentages are calculated based on an aggregate of 29,768,242 shares of Common Stock outstanding as of November 21, 2022. As applicable, such percentages have been further adjusted to account for outstanding convertible securities of such Selling Stockholder. The following description of the Company’s capital stock and provisions of its Second Amended and Restated Articles of Incorporation and Amended and Restated Bylaws are summaries and are qualified by reference to the Company’s Second Amended and Restated Articles of Incorporation and Amended and Restated Description of The Company is authorized to issue 120,000,000 shares of capital stock, par value $0.001 per share, of which 100,000,000 are shares of common stock and 20,000,000 are shares of “blank check” preferred stock. As of November 21, 2022, there were 29,768,242 shares of common stock issued and outstanding. There were 500 shares of Preferred Series E Stock issued or outstanding as of November 21, 2022. On August 13, 2020, we filed a certificate of amendment to our Second Amended and Restated Articles of Incorporation (the “Amendment”), with the Secretary of State of the State of Nevada to effectuate a one-for-three (1:3) reverse stock split (the “August 2020 Reverse Stock Split”) of our common stock without any change to its par value. The Amendment became effective on August 17, 2020. No fractional shares were issued in connection with the August 2020 Reverse Stock Split as all fractional shares were rounded down to the next whole share. The holders of the The Common Stock is quoted on the OTCQB under the trading symbol “CRTD.” The Company’s transfer agent is Pacific Stock Transfer. Set forth below is a summary of provisions in our Articles of Incorporation and the Bylaws that could have the effect of delaying or preventing a change in control of the Company. The No Cumulative Voting Our Articles of Incorporation and the Bylaws do not provide holders of our common stock the removal of incumbent management. Each Selling Stockholder and any The Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the In connection with the sale of the securities or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The Selling Stockholders and any The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the The validity of the EXPERTS The financial statements as of WHERE YOU CAN FIND We file reports, proxy statements and other information with the SEC. Our website address is https://creatd.com. The information on our This prospectus and any prospectus supplement are part of a registration statement that we filed PART I - FINANCIAL INFORMATION September 30, 2022 Creatd, Inc. Condensed Consolidated Balance Sheets The accompanying Creatd, Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) 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 September 30, 2022 (Unaudited) The accompanying notes are an integral part of these consolidated financial statements. Condensed Consolidated For the Nine Months Ended September 30, 2022 (Unaudited) For the Year Ended December 31, The accompanying notes are an integral part of these consolidated financial statements. (Deficit) (Unaudited) Additional Paid In 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 Nine Months Ended September 30, 2021 (Unaudited) The accompanying notes are an integral part of these condensed consolidated financial statements. Creatd, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) The accompanying notes are an integral part of these condensed consolidated financial statements. Creatd, Inc. Notes to the Condensed Consolidated Financial Statements Note 1 – Organization and Operations Creatd, Inc., formerly Jerrick Media Holdings, Inc. (“we,” “us,” the “Company,” or 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 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 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”) 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”), which the Company subsequently rebranded as Camp. Camp is On July 20, 2021, the Company acquired 44% of the membership interests of WHE Agency, Inc. WHE Agency, Inc, is a talent management and public relations agency based in New Between October 21, 2020, and August 16, 2021, the Company acquired 21% of the membership interests of Dune, Inc. Dune, Inc. is a direct-to-consumer brand focused on promoting wellness through its range of health-oriented beverages. On October 3, 2021, the Company acquired an additional 29% of the membership interests of Dune, Inc., bringing our total membership interests to 50%. Dune, Inc., has been consolidated due to the Company’s ownership of 50% voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations. On March 7, 2022, the Company acquired 100% of the membership interests of Denver Bodega, LLC, d/b/a Basis, a Colorado limited liability company (“Basis”). Basis is a direct-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Denver Bodega, LLC has been consolidated due to the Company’s ownership of 100% voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations. On August 1, 2022, the Company acquired 51% of the membership interests of Orbit Media LLC, a New York limited liability company. Orbit is a app-based stock trading platform designed to empower a new generation of investors. Orbit has been consolidated due to the Company’s ownership of 51% voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations. On September 13, 2022, the Company acquired 100% of the membership interests of Brave Foods, LLC, a Maine limited liability company. Brave is a plant-based food company that provides convenient and healthy breakfast food products. Brave Foods, LLC has been consolidated due to the Company’s ownership of 100% voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations. Note 2 – Significant 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. 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, 2022 or any other interim period or for any other future year. These unaudited condensed consolidated 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, 2021, included in the Company’s 2021 Annual Report on Form 10-K filed with the SEC. The balance sheet as of December 31, 2021 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 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. 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. The Company uses estimates in accounting for, among other items, revenue recognition, allowance for doubtful accounts, stock-based compensation, income tax provisions, excess and obsolete inventory reserve, and impairment of intellectual property. Actual results could differ from those estimates. Presentation During 2021, we adopted a change in presentation on our Condensed Consolidated Statements of Comprehensive Loss in order to present a gross profit line and allocate certain overhead expenses, the presentation of which is consistent with our peers. Under the new presentation, we began allocating overhead expenses related to cost of goods sold. Prior periods have been revised to reflect this change in presentation. Principles of consolidation The Company consolidates all majority-owned subsidiaries, if any, in which the parent’s power to control exists. As of All inter-company balances and transactions have been eliminated. The condensed consolidated financial statements include Denver Bodega, LLC activity since March 7, 2022, Orbit Media LLC activity since August 1, 2022, and Brave Foods, LLC activity since September 13, 2022. Variable Interest Entities Management performs an ongoing assessment of its noncontrolling interests from investments in unrelated entities to determine if those entities are variable interest entities (VIEs), and if so, whether the Company is the primary beneficiary. If an entity in such a transaction, by design, meets the definition of a VIE and the Company determines that it, or a condensed consolidated subsidiary is the primary beneficiary, the Company will include the VIE in its condensed consolidated financial statements. If such an entity is deemed to not be condensed consolidated, the Company records only its investment in equity securities as a marketable security or investment under the equity method, as applicable Fair Value of Financial Instruments The Company’s Level The Company’s Level 3 assets/liabilities include goodwill, intangible assets, equity investments at cost, and derivative liabilities. 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 The September 30, 2022 Our marketable equity securities are publicly traded stocks measured at fair value using quoted prices for identical assets in active markets and classified as Level 1 within the fair value hierarchy. Marketable equity securities as of September 30, 2022 are $96. The change in net realized depreciation on equity trading securities that has been included in other expenses for the nine months ended September 30, 2022 and 2021 was $11,646 and $0, respectively. 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”) or Financial Claims Scheme (“FCS”) insurable limits. The Company has never experienced any losses related to these balances. The uninsured cash balance as of September 30, 2022, was $0. The Company does not believe it is exposed to significant credit risk on cash and cash equivalents. Concentration of Credit Risk and Other Risks and Uncertainties The Company The Company operates in Australia and holds total assets of $622,445. It is reasonably possible that operations located outside an entity’s home country will be disrupted in the near term. Property and Equipment Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows: Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the condensed consolidated statements of operations. Long-lived Assets Including Goodwill and Other Acquired We evaluate the recoverability of property and equipment, 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. The remaining weighted average life of the intangible assets are 7.1 years. Amortization expense was $94,130 and $75,069 for the three months ended September 30, 2022 and 2021, respectively. Amortization expense was $355,509 and $143,776 for the nine months ended September 30, 2022 and 2021, respectively. Goodwill is not amortized but is subject to periodic testing for impairment in accordance with ASC Topic 350 “Intangibles – Goodwill and Other – Testing Indefinite-Lived Intangible Assets for Impairment” (“ASC Topic 350”). The Company tests goodwill for impairment on an annual basis as of the last day of the Company’s fiscal December each year or more frequently if events occur or circumstances change indicating that the fair value of the goodwill may be below its carrying amount. The Company has four reporting units. The Company uses an income-based approach to determine the fair value of the reporting units. This approach uses a discounted cash flow methodology and the ability of our reporting units to generate cash flows as measures of fair value of our reporting units. During the year ended December 31, 2021, the Company completed its annual impairment test of goodwill. The Company performed the qualitative assessment as permitted by ASC 350-20 and determined for three of its reporting units that the fair value of those reporting units was more likely than not greater than their carrying value, including Goodwill. However, based on this qualitative assessment, the Company determined that the carrying value of the Seller’s Choice reporting unit was more likely than not greater than its carrying value, including Goodwill. Based on completion of the annual impairment test, the Company recorded an impairment charge of $1,035,795 for goodwill. During the three months ended September 30, 2022, management observed impairment indicators that led them to believe the carrying amount of goodwill was below its carrying value. The Company determined that the carrying value of the Plant Camp and Dune reporting units were more likely than not greater than their carrying value, including Goodwill. Based on estimated impairment computed, the Company recorded an impairment charge of $25,139 for goodwill. The following table sets forth a summary of the changes in goodwill for the three months ended September 30, 2022. The following table sets forth a summary of the changes in goodwill for the nine months ended September 30, 2022. 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 Condensed 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 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 The Company utilizes 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 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 condensed consolidated statements of operations. Shipping and Handling Costs The Company classifies freight billed to customers as sales revenue and the related freight costs as cost of revenue. 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 The Company utilizes the output method to measures the results achieved and value transferred to a customer over time. Timing of revenue recognition for the three and nine months ended September 30, 2022 and 2021 consists of the following: 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 categories: Partners, Monthly Services, and Projects. Contract amounts for Partner and Monthly Services clients range from approximately $500-$7,500 per month while Project amounts vary depending on the scope of work. Partner and Monthly clients are billed monthly for the work completed within that month. Partner Clients may or may not have an additional billing component referred to as Sales Performance Fee, which is a fee based upon a previously agreed upon percentage point of the client’s total sales for the month. Some Partners may also have projects within their contracts that get billed and recognized as agreed upon project milestones are achieved. Revenue is recognized over time as service obligations and milestones in the contract are met. Branded Content Branded content represents the revenue recognized from the Company’s obligation to create and publish branded articles and/or branded challenges for clients on the Vocal platform and promote said stories, tracking engagement for the client. Below are the significant components of a typical agreement pertaining to branded content revenue: Talent Management represents the revenue recognized by WHE Agency, Inc. (“WHE”) from the Company’s obligation to manage and oversee influencer-led campaigns from the contract negotiation stage through content creation and publication. WHE acts in an agent capacity for influencers and collects a management fee of 20% of the value of an influencer’s contract with a brand. Revenue is recognized net of the 80% of the contract that is collected by the influencer and is recognized when performance obligations of the contract are met. Performance obligations are complete when milestones and deliverables of contracts are delivered to the client. Below are the significant components of a typical agreement pertaining to talent management 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 subject to promotional discounts and free trials. 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. Potential revenue offset is calculated by reviewing a subscriber’s earnings in conjunction with payments made by the subscriber on a monthly and/or annual basis. 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. Deferred revenue consists of billings and payments from clients in advance of revenue recognition. The Company has two types of deferred revenue, subscription revenue whereas the revenue is recognized over the subscription period and contract liabilities where the performance obligation was not satisfied. The Company will recognize the deferred revenue within the next twelve months. As of Accounts Receivable and Allowances Accounts receivable are recorded and carried when the Company Inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value. Inventories are periodically evaluated to identify obsolete or otherwise impaired products and are written off when management determines usage is not probable. The Company estimates the balance of excess and obsolete inventory by analyzing inventory by age using last used and original purchase date and existing sales pipeline for which the inventory could be used. As of September 30, 2022, and December 31, 2021, the Company had no valuation allowance. 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 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 The Company had the following common stock equivalents at Reclassifications Certain prior year amounts in the condensed consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current Recently Adopted Accounting Guidance In Recent Accounting Guidance Not Yet Adopted In June 2016, the FASB issued ASU 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. ASU 2020-06 is effective for the fiscal year beginning after December 15, 2022, including interim periods within In In 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 September 30, 2022, 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 – Inventory was comprised of the following at September 30, 2022 and December 31, 2021: Note 5 – Property and Equipment Property and equipment stated at cost, less accumulated depreciation, Depreciation expense was Note 6 – Notes Payable Notes payable as of September 30, 2022 and December 31, On September 11, 2019, the Company entered into Seller’s Choice Purchase Agreement with Home Revolution On March 3, 2022, after substantial motion practice, Creatd successfully settled the dispute with Home Revolution, LLC for a total of $799,000, which includes $660,000 of note principal and $139,000 of accrued interest. The matter has been dismissed. As part of the settlement the Company recorded a Gain on extinguishment of debt of $147,256. The April 2020 PPP Loan Agreement On April 30, 2020, the Company was granted a loan with a principal amount of $282,432 (the “Loan”), pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The Loan, which was in the form of a Note dated April 30, 2020, matures on April 30, 2022, and bears interest at a fixed rate of 1.00% per annum, payable monthly commencing on October 30, 2020. The Note may be prepaid by the Company at any time prior to maturity without payment of any premium. Funds from the Loan may only be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments. During the The Company is in the process of returning the funds received from the Loan. As of September 30, 2022, the Loan is in default, and the lender may require immediate payment of all amounts owed under the Loan or file suit and obtain judgment. The First December On December 3, 2021, the Company entered into a loan agreement (the “First December 2021 Loan Agreement”) with a lender (the “First December 2021 Lender”) whereby the First December 2021 Lender issued the Company a promissory note of $191,975 (the “First December 2021 Note”). Pursuant to the First December 2021 Loan Agreement, the First December 2021 Note has an effective interest rate of 9%. The maturity date of the First December 2021 Note is June 3, 2023 (the “First December 2021 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First December 2021 Note are due. During the nine months ended September 30, 2022, the Company repaid $137,665 in principal. The Second December 2021 Loan Agreement On December 14, 2021, the Company entered into a secured loan agreement (the “Second December 2021 Loan Agreement”) with a lender (the “Second December 2021 Lender”), whereby the Second December 2021 Lender issued the Company a secured promissory note of $438,096 AUD or $329,127 United States Dollars (the “Second December 2021 Note”). Pursuant to the Second December 2021 Loan Agreement, the Second December 2021 Note has an effective interest rate of 14%. The maturity date of the Second December 2021 Note is June 30, 2022 (the “Second December 2021 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Second December 2021 Loan Agreement are due. The Company has the option to extend the Maturity date by 60 days. The loan is secured by the Australian research & development credit. During the nine months ended September 30, 2022, the Company accrued $22,287 in interest. As of the date of this filing the Company has exercised its option to extend the maturity date to August 29, 2022. During the nine months ended September 30, 2022, the Company repaid $293,499 of principal and $26,115 of interest. The First February 2022 Loan Agreement On February 22, 2022, the Company entered into a secured loan agreement (the “First February 2022 Loan Agreement”) with a lender (the “First February 2022 Lender”), whereby the First February 2022 Lender issued the Company a secured promissory note of $222,540 AUD or $159,223 United States Dollars (the “First February 2022 Note”). Pursuant to the First February 2022 Loan Agreement, the First February 2022 Note has an effective interest rate of 14%. The maturity date of the First February 2022 Note is June 30, 2022 (the “First February 2022 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First February 2022 Loan Agreement are due. The Company has the option to extend the Maturity date by 60 days. The loan is secured by the Australian research & development credit. During the nine months ended September 30, 2022, the Company accrued $8,120 in interest. As of the date of this filing the Company has exercised its option to extend the maturity date to August 29, 2022. During the nine months ended September 30, 2022, the Company repaid $149,089 of principal and $8,120 of interest. Denver Bodega LLC Notes payable On March 7, 2022, The Company acquired five note payable agreements from the acquisition of Denver Bodega LLC. See note 12. The total liabilities of these notes amounted to $293,888. During the nine months ended September 30, 2022, the Company repaid $249,880. As of September 30, 2022, the Company has one note outstanding. This note has a principal balance of $44,088, bears interest at 5%, and requires 36 monthly payments of $1,496. The First May 2022 Loan Agreement On May 9, 2022, the Company entered into a loan agreement (the “First May 2022 Loan Agreement”) with a lender (the “First May 2022 Lender”), whereby the First May 2022 Lender issued the Company a promissory note of $693,500 (the “First May 2022 Note”). The Company received cash proceeds of $455,924. Pursuant to the First May 2022 Loan Agreement, the First May 2022 Note has an effective interest rate of 143%. The maturity date of the First May 2022 Note is December 18, 2022 (the “First May 2022 Maturity Date”). The Company is required to make weekly payment of $21,673. The First May 2022 Note is secured by officers of the Company. The Company recorded a $237,576 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the Company repaid $390,114 in principal. On September 22, 2022, the Company and the First May 2022 Lender entered into an exchange agreement whereas both parties agreed to roll the remaining $303,386 in the Second September 2022 Loan Agreement. Since the PV cashflows of the new and old debt were more than 10% differences the company used extinguishment accounting. As part of the agreement the Company recognized $33,115 as loss on extinguishment of debt due to the remaining debt discount on the First May 2022 Loan Agreement. The Second May 2022 Loan Agreement On May 9, 2022, the Company entered into a loan agreement (the “Second May 2022 Loan Agreement”) with a lender (the “Second May 2022 Lender”), whereby the Second May 2022 Lender issued the Company a promissory note of $401,500 (the “Second May 2022 Note”). The Company received cash proceeds of $263,815. Pursuant to the Second May 2022 Loan Agreement, the Second May 2022 Note has an effective interest rate of 162 %. The maturity date of the Second May 2022 Note is November 20, 2022 (the “Second May 2022 Maturity Date”). The Company is required to make weekly payment of $14,339. The Second May 2022 Note is secured by officers of the Company. The Company recorded a $137,685 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the Company repaid $272,447 in principal. On September 23, 2022, the Company and the Second May 2022 Lender entered into an exchange agreement whereas both parties agreed to roll the remaining $129,053 in the Third September 2022 Loan Agreement. Since the PV cashflows of the new and old debt were more than 10% differences the company used extinguishment accounting. As part of the agreement the Company recognized $3,905 as loss on extinguishment of debt due to the remaining debt discount on the Second May 2022 Loan Agreement. The Third May 2022 Loan Agreement On May 25, 2022, the Company entered into a loan agreement (the “Third May 2022 Loan Agreement”) with a lender (the “Third May 2022 Lender”), whereby the Third May 2022 Lender issued the Company a promissory note of $27,604 (the “Third May 2022 Note”). Pursuant to the Third May 2022 Loan Agreement, the Third May 2022 Note has an effective interest rate of 20%. The maturity date of the Third May 2022 Note is November 23, 2022 (the “Third May 2022 Maturity Date”). The Company is required to make monthly payments of $3,067. During the nine months ended September 30, 2022, the Company repaid $11,435 in principal. The Fourth May 2022 Loan Agreement On May 26, 2022, the Company entered into a loan agreement (the “Fourth May 2022 Loan Agreement”) with a lender (the “Fourth May 2022 Lender”), whereby the Fourth May 2022 Lender issued the Company a promissory note of $40,000 (the “Fourth May 2022 Note”). Pursuant to the Fourth May 2022 Loan Agreement, the Fourth May 2022 Note has an effective interest rate of 17%. The maturity date of the Fourth May 2022 Note is November 23, 2022 (the “Fourth May 2022 Maturity Date”). During the nine months ended September 30, 2022, the Company repaid $9,442 in principal. The June 2022 Loan Agreement On June 17, 2022, the Company entered into a loan agreement (the “June 2022 Loan Agreement”) with a lender (the “June 2022 Lender”), whereby the June 2022 Lender issued the Company a promissory note of $568,000 (the “June 2022 Note”). The Company received cash proceeds of $378,000. Pursuant to the June 2022 Loan Agreement, the June 2022 Note has an effective interest rate of 217%. The maturity date of the June 2022 Note is November 4, 2022 (the “June 2022 Maturity Date”). The Company is required to make weekly payment of $28,400. The June 2022 Note is secured by officers of the Company. The Company recorded a $190,000 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the Company repaid $255,600 in principal. On August 19, 2022, the Company and the June 2022 Lender entered into an exchange agreement whereas both parties agreed to roll the remaining $312,400 in the Third September 2022 Loan Agreement. Since the PV cashflows of the new and old debt were more than 10% differences the company used extinguishment accounting. As part of the agreement the Company recognized $66,749 as loss on extinguishment of debt due to the remaining debt discount on the Second May 2022 Loan Agreement. The First August 2022 Loan Agreement On August 18, 2022, the Company entered into a secured loan agreement (the “First August 2022 Loan Agreement”) with a lender (the “First August 2022 Lender”), whereby the First August 2022 Lender issued the Company a secured promissory note of $193,500 AUD or $129,634 United States Dollars (the “First August 2022 Note”). Pursuant to the First August 2022 Loan Agreement, the First August 2022 Note has an effective interest rate of 14%. The maturity date of the First August 2022 Note is June 30, 2023 (the “First August 2022 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First August 2022 Loan Agreement are due. The Company has the option to extend the Maturity date by 60 days. The loan is secured by the Australian research & development credit. During the nine months ended September 30, 2022, the Company accrued $2,037 AUD in interest. The Second August 2022 Loan Agreement On August 19, 2022, the Company entered into a loan agreement (the “Second August 2022 Loan Agreement”) with a lender (the “Second August 2022 Lender”), whereby the Second August 2022 Lender issued the Company a promissory note of $923,000 (the “Second August 2022 Note”). The Company received cash proceeds of $300,100 and rolled the remaining $312,400 of principal from the June 2022 Loan Agreement. Pursuant to the Second August 2022 Loan Agreement, the Second August 2022 Note has an effective interest rate of 704%. The maturity date of the Second August 2022 Note is January 9, 2022 (the “Second August 2022 Maturity Date”). The Company is required to make weekly payment of $46,150. The Second August 2022 Note is secured by officers of the Company. The Company recorded a $310,500 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the Company repaid $276,900 in principal. The First September 2022 Loan Agreement On September 1, 2022, the Company entered into a loan agreement (the “First September 2022 Loan Agreement”) with a lender (the “First September 2022 Lender”), whereby the First September 2022 Lender issued the Company a promissory note of $87,884 (the “First September 2022 Note”). Pursuant to the First September 2022 Loan Agreement, the First September 2022 Note has an effective interest rate of 13%. The maturity date of the First September 2022 Note is September 1, 2023 (the “First September 2022 Maturity Date”). During the nine months ended September 30, 2022, the Company repaid $0 in The Second September 2022 Loan Agreement On September 22, 2022, the Company entered into a loan agreement (the “Second September 2022 Loan Agreement”) with a lender (the “Second September 2022 Lender”), whereby the Second September 2022 Lender issued the Company a promissory note of $876,000 (the “Second September 2022 Note”). The Company received cash proceeds of $272,614 and rolled the remaining $303,386 of principal from the First May 2022 Loan Agreement. Pursuant to the Second September 2022 Loan Agreement, the Second September 2022 Note has an effective interest rate of 475%. The maturity date of the Second September 2022 Note is May 5, 2023 (the “Second September 2022 Maturity Date”). The Company is required to make weekly payment of $27,375. The Second September 2022 Note is secured by officers of the Company. The Company recorded a $300,000 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the Company repaid $27,375 in principal. The Third September 2022 Loan Agreement On September 22, 2022, the Company entered into a loan agreement (the “Third September 2022 Loan Agreement”) with a lender (the “Third September 2022 Lender”), whereby the Third September 2022 Lender issued the Company a promissory note of $365,000 (the “Third September 2022 Note”). The Company received cash proceeds of $110,762 and rolled the remaining $129,053 of principal from the Second May 2022 Loan Agreement. Pursuant to the Third September 2022 Loan Agreement, the Third September 2022 Note has an effective interest rate of 556%. The maturity date of the Third September 2022 Note is May 5, 2023 (the “Second September 2022 Maturity Date”). The Company is required to make weekly payment of $13,036. The Third September 2022 Note is secured by officers of the Company. The Company recorded a $300,000 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the Company repaid $13,036 in principal. Note 7 – Convertible Convertible notes payable as of September 30, 2022 Interest Rate Conversion Price Maturity Date Exercise Price The The Company recorded a $15,850 debt discount relating to an original issue discount and $3,000 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. During the nine months ended September 30, 2022, the July 2021 Note became convertible. Due to the fact that these convertible notes have an option to convert at a During the nine months ended September 30, 2022, the note holder converted $168,850 of principal and $4,605 of interest into 109,435 shares of the Company’s common stock. The unamortized debt discount of $96,803 was recorded to extinguishment of debt due to conversion. The Second February 2022 Loan Agreement On February 22, 2022, the Company entered into a loan agreement (the “Second February 2022 Loan Agreement”) with a lender (the “Second February 2022 Lender”), whereby the Second February 2022 Lender issued the Company a promissory note of $337,163 (the “Second February 2022 Note”). Pursuant to the Second February 2022 Loan Agreement, the Second February 2022 Note has an interest rate of 11%. The maturity date of the Second February 2022 Note is February 22, 2023 (the “Second February 2022 Maturity Date”). The Company is required to make 10 monthly payments of $37,425. Upon default the May 2022 Note is convertible into shares of the Company’s common stock, par value $0.001 per share The Company recorded a During the nine months ended September 30, 2022, the Company The May 2022 Convertible Loan Agreement On Upon default the May 2022 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 ten-trading day immediately preceding the date of the respective conversion. The During the nine months ended September 30, 2022, the Company repaid $38,349 in principal. The May 2022 Convertible Note Offering $4,000,000. The The Company recorded a On September 2, 2022, the Company went into default on these notes. As part of the default terms the Company owes 110% of the principal outstanding and the notes accrue interest at a rate of 18%. On September 15, 2022, the Company and six out of eight lenders May 2022 Investors agreed to forgive default interest and extend the maturity date to March 31, 2023, for a reduced conversion price of $0.20 for the convertible notes and warrants. Since the PV cashflows of the new and old debt were more than 10% differences the company used extinguishment accounting. As part of the agreement the Company recognized $737,756 as loss on extinguishment of debt due to the remaining debt discount and recognized $331,861 as a gain on extinguishment of debt due to the forgiveness of interest. The company also recognized an additional $75,610 of debt discount from the change in relative fair value on the warrants. During the Subsequent to September 30, 2022, the Company made a repayment of $35,714 towards these notes. The The Company recorded a The Company recorded a $214,981 debt discount relating to an original issue discount. The debt discount are being accreted over the life of the note On September 2, 2022, the Company went into default on these notes. As part of the default terms the Company owes 110% of the principal outstanding and the notes accrue interest On September 15, 2022, the Company and the July Investors agreed to forgive default interest and extend the maturity date to March 31, 2023 for a reduced conversion price of Subsequent to September 30, 2022, the Company made a repayment of $714,285 towards these notes. Note 8 – Related Party Equity raises During the nine months ended September 30, 2022, the Company conducted two equity raises in which officers, directors, employees, and an affiliate of an officer cumulatively invested $421,001 for 240,571 shares of common stock and 240,571 warrants to purchase common stock. Officer compensation During the nine months ended September 30, 2022 and 2021, the Company paid $87,275 and $72,328, respectively for living expenses for officers of the Company. Note 9 – Derivative Liabilities The Company has 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 during the nine months ended September 30, 2022. 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 September 30, 2022. The Company utilizes 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 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 condensed consolidated statements of operations. Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note adjusted to be on a continuous return basis to align with the Monte Carlo simulation model and binomial model. 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 to maturity. 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 nine months ended September 30, 2022. Note 10 – Stockholders’ Equity Shares Authorized The Company is authorized to issue up to one hundred and twenty million (120,000,000) shares of capital stock, of which one hundred million (100,000,000) shares are designated as common stock, par value $0.001 per share, and twenty million (20,000,000) are designated as preferred stock, par value $0.001 per share. Preferred Stock Series E Convertible Preferred Stock The Company has designated 8,000 shares of Series E Convertible Preferred stock and has 500 shares issued and outstanding as of September 30, 2022. The shares of Series E Preferred Stock have a stated value of $1,000 per share and are convertible into Common Stock at the election of the holder of the Series E Preferred Stock, at any time following the Original Issue Date at a price of $4.12 per share, subject to adjustment. The holders of Series E Preferred Stock shall be paid pari passu with the holders of Common Stock with respect to payment of dividends and rights upon liquidation and shall have no voting rights. In addition, as further described in the Series E Designation, as long as any of the shares of Series E Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of Series E Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series E Preferred Stock or alter or amend this Series E Designation, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of the Series E Preferred Stock, (c) increase the number of authorized shares of Series E Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing. Each share of Series E Preferred Stock shall be convertible, at any time and from time to time at the option of the holder of such shares, into that number of shares of Common Stock determined by dividing the Series E Stated Value by the Conversion Price, subject to certain beneficial ownership limitations. Common Stock During the nine months ended September 30, 2022, the Company issued 82,342 shares of its restricted common stock to settle outstanding vendor liabilities of $130,625. In connection with this transaction the Company also recorded a loss on settlement of vendor liabilities of $17,024. On January 6, 2022, the Company issued 8,850 shares of its restricted common stock to consultants in exchange for services at a fair value of $19,736. On February 24, 2022, the Company issued 50,000 shares of its restricted common stock to consultants in exchange for four months of services at a fair value of $69,000. These shares were recorded as common stock issued for prepaid services and will be expensed over the life of the consulting contract to share based payments. During the nine months ended September 30, 2022 the Company recorded $69,000 to share based payments. On March 1, 2022, the Company entered into securities purchase agreements with twenty-eight accredited investors whereby, at the closing, such investors purchased from the Company an aggregate of 1,401,457 shares of the Company’s common stock and (ii) 1,401,457 warrants to purchase shares of common stock, for an aggregate purchase price of $2,452,550. Such warrants are exercisable for a term of five-years from the date of issuance, at an exercise price of $1.75 per share. The Company has recorded $40,000 to stock issuance costs, which are part of Additional Paid-in Capital. On March 7, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with thirteen accredited investors resulting in the raise of $2,659,750 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell in a registered direct offering an aggregate of 1,519,857 shares of the Company’s common stock together with warrants to purchase an aggregate of 1,519,857 shares of Common Stock at an exercise price of $1.75 per share. The warrants are immediately exercisable and will expire on March 9, 2027. The Company has recorded $75,000 to stock issuance costs, which are part of Additional Paid-in Capital. During the three months ended March 31, 2022, the Company issued 7,488 shares of its restricted common stock to consultants in exchange for services at a fair value of $8,364. On April 5, 2022 the Company issued 185,000 shares of its restricted common stock to officers of the company in exchange for services at a fair value of $192,400. On June 24, 2022, the Company issued 50,000 shares of its restricted common stock to consultants in exchange for four months of services at a fair value of $37,200. These shares were recorded as common stock issued for prepaid services and will be expensed over the life of the consulting contract to share based payments. During the nine months ended September 30, 2022 the Company recorded $2,405 to share based payments. During the three months ended June 30, 2022, the Company issued 29,387 shares of its restricted common stock to consultants in exchange for services at a fair value of $24,001. On September 15, 2022, the Company entered into a securities purchase agreement with five accredited investors resulting in the raise of $796,000 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell in a registered direct offering an aggregate of 4,000,000 shares of the Company’s common stock together with warrants to purchase an aggregate of 4,000,000 shares of Common Stock at an exercise price of $0.20 per share. The warrants are immediately exercisable and will expire on September 15, 2027. The Company has recorded $75,000 to stock issuance costs, which are part of Additional Paid-in Capital. During the three months ended September 30, 2022, the Company issued 50,000 shares of its restricted common stock to consultants in exchange for prepaid services at a fair value of $34,900. During the three months ended September 30, 2022, the Company issued 107,206 shares of its restricted common stock to consultants in exchange for services at a fair value of $22,892. During the three months ended September 30, 2022 the company repurchased 83,800 shares of common stock for $13,700 Stock Options The assumptions used for options granted during the nine months ended September 30, 2022 and 2021, are as follows: The following is a summary of the Company’s stock option activity: During the year ended December 31, 2018 the Company granted options of 11,667 to consultants that have a fair value of $57,123. As of the date of this filing the company has not issued these options and they are recorded as an accrued liability on the Condensed Consolidated Balance Sheet. Stock-based compensation for stock options has been recorded in the consolidated statements of operations and totaled $4,100,729, for the nine months ended September 30, 2021. Stock-based compensation for stock options has been recorded in the condensed consolidated statements of operations and totaled $523,749, for the three months ended September 30, 2022. Stock-based compensation for stock options has been recorded in the condensed consolidated statements of operations and totaled $3,355,445, for the nine months ended September 30, 2022. As of September 30, 2022, there was $1,283,111 of total unrecognized compensation expense related to unvested employee options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately 1.21 years. 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 nine months ended September 30, 2022 and 2021 are as follows: Warrant Activities The following is a summary of the Company’s warrant activity: During the nine months ended September 30, 2021, the Company issued 1,275,261 shares of common stock to a certain warrant holder upon the cashless exercise of a warrant to purchase 1,438,788 shares of common stock. The Company received $5,472,068 in connection with the exercise of the warrant. During the nine months ended September 30, 2021, a total of 486,516 warrants were issued in connection with the Series E Convertible Preferred Stock raise. During the nine months ended September 30, 2021, a total of 1,090,908 warrants were issued with convertible notes. The warrants have a grant date fair value of $3,067,617 using a Black-Scholes option-pricing model and the above assumptions. During the nine months ended September 30, 2021, some of the Company’s warrants had a reset provision triggered that also resulted in an additional 127,801 warrants to be issued. A deemed dividend of $410,750 was recorded to the Statements of Comprehensive Loss. On June 17, 2021, the Company issued 46,667 warrants in connection with the underwriting agreement. Stock-based compensation for stock warrants has been recorded in the consolidated statements of operations and totaled $480,863, for the nine months ended September 30, 2021 During the nine months ended September 30, 2022, some of the Company’s warrants had a down-round provision triggered that also resulted in an additional 1,740,948 warrants to be issued. A deemed dividend of $303,557 was recorded to the Statements of Operations and Comprehensive Loss. During the nine months ended September 30, 2022, a total of 6,150,000 warrants were issued with convertible notes (See Note 7 above). The warrants have a grant date fair value of $5,185,826 using a Black-Scholes option-pricing model and the above assumptions and a relative fair value of $2,929,303. Note 11 – Commitments and Contingencies 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, Home Revolution, LLC, et al. v. Jerrick Media Holdings, Inc. et al., Case No. 2:20-cv-07775-JMV-MF. The Complaint alleges, among other things, that Creatd, Inc. breached the Membership Interest Purchase Agreement, as modified, and ancillary transaction documents in connection with the acquisition of Seller’s Choice, LLC, from Home Revolution in September 2019. The Complaint additionally alleges violation of the New Jersey Uniform Securities Law, violations of the Exchange Act and Rule 10b-5 thereunder, fraud, equitable accounting, breach of fiduciary duty, conversion and unjust enrichment. Plaintiff also sought to have a receiver appointed by the Court to take over Creatd’s operations. After substantial motion practice, Creatd successfully settled this dispute from June 2020 for a total of $799,000, which includes $660,000 of note principal and $139,000 of accrued interest. The matter has been dismissed as of March 3, 2022. On or about August 30, 2021, Robert W. Monster and Anonymize, Inc. (“Monster”) filed a lawsuit in the United States District Court for the Western District of Washington at Seattle, Robert W. Monster, et al. v. Creatd, Inc., et al. (Western District of Washington at Seattle 2:21-CV-1177). The Complaint alleges, among other things, that action for Declaratory Judgment under 28 U.S.C. § 2201 that Monster’s registration and use of the internet domain name VOCL.COM (the “Domain Name”) does not violate Creatd’s rights under the Anticybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. § 1125(d), or otherwise under the Lanham Act, 15 U.S.C. § 1051 et seq. Creatd claims trademark rights and certain other rights with respect to the term and the domain name VOCL.COM. Monster seeks a determination by the Court that Monster’s registration and/or use of VOCL.COM is not, and has not been in violation of the ACPA, and that Plaintiffs’ use of VOCL.COM constitutes neither a violation of the ACPA nor trademark infringement or dilution under the Lanham Act. Creatd believes the lawsuit lacks merit and will vigorously challenge the action. At this time, we are unable to estimate potential damage exposure, if any, related to the litigation. A complaint against the Company, dated September 21, 2022, has been filed in the Supreme Court of the State of New York, New York County, by Lind Global Macro Fund LP and Lind Global Fund II LP, making certain claims alleging breach of contract related to two Securities Purchase Agreements executed on May 31, 2022, seeking damages in excess of $920,000. No response to the Complaint has been filed at this time. The Company has not yet submitted a response to the Complaint or had the opportunity to conduct discovery as to the allegations. The Company will file an initial response on or before November 18, 2022. Given the premature nature of this case, it is still too early for the Company to make an assessment as to liability. Inflation Reduction Act of 2022 On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA includes a 15% Corporate Alternative Minimum Tax (“Corporate AMT”) for tax years beginning after December 31, 2022. We do not expect the Corporate AMT to have a material impact on our consolidated financial statements. Additionally, the IRA imposes a 1% excise tax on net repurchases of stock by certain publicly traded corporations. The excise tax is imposed on the value of the net stock repurchased or treated as repurchased. The new law will apply to stock repurchases occurring after December 31, 2022. Lease Agreements On April 26, 2022, the Company signed a 7-year lease for approximately 8,000 square feet of office space at 419 Lafayette Street, 6th Floor, New York, NY, 10003. Commencement date of the lease is May 1, 2022. The total amount due under this lease is $3,502,033. On July 28, 2022, the Company signed a 3-year lease for approximately 1,364 square feet of office space at 1674 Meridian Ave., Miami Beach, FL, 33131. Commencement date of the lease is July 28, 2022. The total amount due under this lease is $181,299. During the three months ended September 30, 2022, it was decided the company would not be using the office space and recorded an impairment of $101,623 on the right-of-use asset. 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 September 30, are as follows: Rent expense for the three months ended September 30, 2022 and 2021 was $154,015 and $67,397, respectively. Rent expense for the nine months ended September 30, 2022 and 2021 was $395,709 and $121,266, respectively. Market price risk of crypto (“digital”) assets The Company holds crypto and digital assets in third-party wallets. Crypto asset price risk could adversely affect its operating results and will depend upon the market price of Bitcoin, ETH, as well as other crypto assets. Crypto asset prices have fluctuated significantly from quarter to quarter. There is no assurance that crypto asset prices will reflect historical trends. A decline in the market price of Bitcoin, ETH, and Other crypto assets could have an adverse effect on our earnings, the carrying value of the crypto assets, and future cash flows. This may also affect the liquidity and the ability to meet our ongoing obligations. Appointment of New Directors On February 17, 2022, the Board of Directors (the “Board”) of the Company appointed Joanna Bloor, Brad Justus, and Lorraine Hendrickson to serve as members of the Board. Ms. Bloor has been nominated to, and will serve as, chair of the Compensation Committee, and to be a member of the Audit Committee and Nominating & Corporate Governance Committee. Mr. Justus has been nominated, and will serve as, chair of the Nominating & Corporate Governance Committee, and to be a member of the Compensation Committee and Audit Committee. Ms. Hendrickson has been nominated to, and will serve as, chair of the Audit Committee and to be a member of the Compensation and Nominating & Corporate Governance Committee. Departure of Directors On February 17, 2022, the Board received notice that effective immediately, Mark Standish resigned as Chair of the Board, Chair of the Audit Committee and as a member of the Compensation Committee and Nominating & Corporate Governance Committee; Leonard Schiller resigned as member of the Board, Chair of the Compensation Committee and as a member of the Audit Committee and Nominating & Corporate Governance Committee; and LaBrena Martin resigned as a member of the Board, Chair of the Nominating & Corporate Governance Committee and as a member of the Audit Committee and Compensation Committee. Such resignations are not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Management Restructuring On February 17, 2022, the Board of the Company approved the restructuring of the Company’s senior management team to eliminate the Co-Chief Executive Officer role, appointing Jeremy Frommer as Executive Chairman and Founder, and appointing Laurie Weisberg as Chief Executive Officer (the “Second Restructuring”). Prior to the Second Restructuring, Mr. Frommer and Ms. Weisberg served as the Company’s co-Chief Executive Officers and Ms. Weisberg served as the Company’s Chief Operating Officer. The Second Restructuring does not impact the role or functions of the Company’s Chief Financial Officer, Chelsea Pullano, or the role or functions of the Company’s President and Chief Operating Officer, Justin Maury. Nasdaq Notice of Delisting On September 2, 2022, the Company received a letter from the staff of The Nasdaq Capital Market notifying the Company that the Nasdaq Hearings Panel has determined to delist the Company’s common stock from the Exchange, based on the Company’s failure to comply with the listing requirements of Nasdaq Rule 5550(b)(1) as a result of the Company’s shareholder equity deficit for the period ended June 30, 2022, as demonstrated in Company’s Quarterly Report on Form 10-Q filed on August 15, 2022, following the Company having not complied with the market value of listed securities requirement in Nasdaq Rule 5550(b)(2) on March 1, 2022, while the Company was under a Panel Monitor, as had been previously disclosed. Suspension of trading in the Company’s shares on the Exchange became effective at the opening of business on September 7, 2022, at which time the Company’s common stock, under the symbol “CRTD,” and publicly-traded warrants, under the symbol “CRTDW,” was quoted on the OTCPink marketplace operated by OTC Markets Group Inc. Following passage of the proscribed 15-day time period for appeal as stated in the Letter, on October 26, 2022, Nasdaq completed the delisting by filing a Form 25 Notification of Delisting with the Securities and Exchange Commission. The Company’s common stock, under the symbol “CRTD,” is quoted on the OTCQB marketplace operated by OTC Markets Group Inc. effective as of September 26, 2022. The Company’s publicly-traded warrants, under the symbol “CRTDW,” are quoted on the OTCPink marketplace operated by OTC Markets Group Inc. Employment Agreements On April 5, 2022, upon the recommendation of the Compensation Committee of the Board, the Board approved employment agreements with, and equity issuances for, (i) Jeremy Frommer, Executive Chairman, who will receive (a) an signing award of $80,000, (b) an annual salary of $420,000; (c) 121,000 options, to vest immediately with a strike price of $1.75, and (d) 50,000 shares of the Company’s restricted common stock; (ii) Laurie Weisberg, Chief Executive Officer, who will receive (a) an annual salary of $475,000; (b) 121,000 options, to vest immediately with a strike price of $1.75, and (c) 50,000 shares of the Company’s restricted common stock; (iii) Justin Maury, Chief Operating Officer & President, who will receive (a) an annual salary of $475,000 (b) 81,000 options, to vest immediately with a strike price of $1.75, and (c) 50,000 shares of the Company’s restricted common stock; and (iv) Chelsea Pullano, Chief Financial Officer, who will receive (a) an annual salary of $250,000; (b) 37,000 options, to vest immediately with a strike price of $1.75, and (c) 35,000 shares of the Company’s restricted common stock (collectively, the “Executive Employment Arrangements”). Pursuant to the Executive Employment Arrangements, the Company entered into executive employment agreements with each of the respective executives as of April 5, 2022 (the “Executive Employment Agreements”). The Executive Employment Agreements contain customary terms, conditions and rights. Executive Separation Agreement On September 2, 2022, the Company entered into an Executive Separation Agreement with Laurie Weisberg the Company’s Chief Executive Officer and member of the Board of Directors setting forth the terms and conditions related to the Executive’s resignation for good reason as Chief Executive Officer, Director and any other positions held with the Company or any subsidiary. The Company will pay severance in the aggregate amount of $475,000, payable as follows: (i) 1/24 will be paid on each of September 15, 2022, October 1, 2022 and November 1, 2022, respectively; (ii) 1/8 will be paid on each of December 1, 2022, January 1, 2023 and February 1, 2023, respectively; (iii) 1/4 will be paid on April 1, 2023; and (iv) the balance will be paid on May 1, 2023. The Company has executed and delivered a Confession of Judgment concerning the severance amount, which is being held in escrow pending satisfaction of payment. Additionally, all unvested and/or outstanding stock options held by Ms. Weisberg as of the date of the separation agreement that are not subject to metric based vesting shall automatically and fully vest. All unvested and/or outstanding stock options held by Ms. Weisberg as of the date of the separation agreement that are subject to metric based vesting shall vest in accordance with their respective original terms. Note 12 – Acquisitions Denver Bodega, LLC d/b/a Basis On March 7, 2022, the Company entered into a Membership Interest Purchase (the “Agreement”) with Henry Springer and Kyle Nowak (collectively the “Sellers”), whereby the Company purchased a majority stake in Denver Bodega, LLC, a Colorado limited liability company whose product is Basis, a direct-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Pursuant to the Agreement, Creatd acquired all of the issued and outstanding membership interests of Denver Bodega, LLC for consideration of one dollar ($1.00), as well as the Company’s payoff, assumption, or satisfaction of certain debts and liabilities. 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. The goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisition. Acquisition of Orbit On August 1, 2022 the Company entered into a Membership Interest Purchase (the “Agreement”) with Zachary Shenkman, Wuseok Jung, Wesley Petry, Nicholas Scibilia, Gary Rettig, Brandon Fallin (collectively the “Sellers”), whereby the Company purchased a majority stake in Orbit Media LLC, a New York limited liability company whose product is an app-based stock trading platform designed to empower a new generation of investors, providing users with a like-minded community as well as access to tools, content, and other resources to learn, train, and excel in the financial markets. Pursuant to the Agreement, Creatd acquired fifty one percent (51%) of the issued and outstanding membership interests of Orbit Media LLC for consideration of forty-four thousand dollars ($44,000) in cash and 57,576 shares of the Company’s Common Stock. 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. On September 13, 2022, the Company acquired 100% of the membership interests of Brave Foods, LLC, a Maine limited liability company for $150,000. Brave is a plant-based food company that provides convenient and healthy breakfast food products. 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. The goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisition. The following presents the unaudited pro-forma combined results of operations of the Company with Plant Camp, WHE, Dune, Denver Bodega, Orbit, and Brave as if the entities were combined on January 1, 2021. Nine Months Note 13 – Segment Information We operate in three reportable segments: Creatd Labs, Creatd Ventures, and Creatd Partners. Our segments were determined based on the economic characteristics of our products and services, our internal organizational structure, the manner in which our operations are managed and the criteria used by our Chief Operating Decision Maker (CODM) to evaluate performance, which is generally the segment’s operating losses. Creatd Labs is the segment focused on development initiatives. Creatd Labs houses the Company’s proprietary technology, including its flagship platform, Vocal, as well as oversees the Company’s content creation framework, and management of its digital communities. Creatd Labs derives revenues from Vocal creator subscriptions, platform processing fees and technology licensing fees. Creatd Ventures builds, develops, and scales e-commerce brands. This segment generates revenues through product sales of its two majority-owned direct-to-consumer brands, Camp and Dune Glow Remedy. The following tables present certain financial information related to our reportable segments and Corporate: Note 14 – Subsequent Events Warrant Exercises Subsequent to September 30, 2022, a total of 4,227,114 warrants were exercised, resulting in the cancellation of 4,227,114 warrants, the issuance of 3,802,626 shares of Common Stock, and gross proceeds of $354,994 to the Company. Promissory Notes Subsequent to September 30, 2022, the Company entered into one promissory note agreement with net proceeds of $100,000. Common Stock Purchase Agreement, Securities Purchase Agreement and Promissory Note On October 20, 2022, Creatd, Inc. a Nevada corporation (the “Company”), entered into a Common Stock Purchase Agreement (the “Investment Agreement”) with an otherwise unaffiliated third party (the “Investor”). Pursuant to the terms of the Investment Agreement, for a period of thirty-six (36) months commencing on the trading day immediately following date of effectiveness of the Registration Statement (as defined below), the Investor purchase up to $15,000,000 of the Company’s common stock, par value $0.001 per share (the “Shares”), pursuant to Drawdown Notices (as defined below), covering the Registrable Securities (as defined below). The purchase price of the Shares under the Investment Agreement is equal to 82% of the lowest volume weighted average price (VWAP) during the last ten trading days after the Company delivers to the Investor a Put notice (a “Drawdown Notice”) in writing requiring Investor to purchase shares of the Company, subject to the terms of the Investment Agreement. On October 20, 2022, the Company also entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Investor, pursuant to which the Company issued to the Investor on that date a Promissory Note (the “Note”) in the principal amount of $300,000 in exchange for a purchase price of $255,000, which the Investor funded on October 20,2022. The proceeds of the Note will be used by the Company for general working capital purposes. The Note bears interest at the rate of 10% per annum. Starting on the fifth month anniversary of the funding of the Note, and for the next six months thereafter, the Company will make seven equal monthly payments of $47,142.85 to the Investor. On October 20, 2022, in connection with the entry by the Company and the Investor into the economic agreements, (i.e., the Investment Agreement, the Purchase Agreement, and the Note and the funding thereof), the Company issued 800,000 shares of its common stock to the Investor. Securities Purchase Agreement On October 24, 2022 (the “Effective Date”), the Company, entered into and closed securities purchase agreement (the “Purchase Agreement”) with one accredited investor (the “Investor”), whereby the Investor purchased from the Company for an aggregate of $1,500,000 in subscription amount, an unsecured debenture in the principal amount of $1,666,650 (the “Debenture”). The Debenture has an original issue discount of 10%, has a term of six months with a maturity date of April 24, 2023, may be extended by six months at the Company’s option subject to certain conditions, and are convertible into shares of Common Stock at a conversion price of $0.20 per share, subject to adjustment upon certain events. In connection with its entry into the Purchase Agreement and issuance of the Debenture, the Company also entered into a side letter agreement (the “Letter Agreement”) with the holders of debentures of the Company, the Series C Warrants and Series D Warrants issued as of May 31, 2022 (the “May Investors”) and the holders of debentures of the Company, the Series E Warrants and Series F Warrants issued as of July 25, 2022 (the “July Investors”). Pursuant to the Letter Agreement each of the May Investors and the July Investors have entered into a lock-up agreement whereby they may not sell any such debentures, warrants, the shares into which such debentures may be converted, Creatd, Inc. December 31, 2021 and 2020 Index to the Consolidated Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Creatd, Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying balance sheets of Creatd, Inc. and Subsidiaries (the Company) as of December 31, 2021 and 2020, and the related statements of income, comprehensive income, stockholders’ equity, and cash flows for years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS ● CENTER FOR AUDIT QUALITY ● PRIVATE COMPANIES PRACTICE SECTION ● PRIME GLOBAL ● REGISTERED WITH THE PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD To the Board of Directors and Stockholders of Creatd, Inc. and Subsidiaries Revenue Recognition As described in Note 2 to the consolidated financial statements, the Company recognizes revenue in accordance with FASB Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 requires the Company to apply the following steps: (1) identify the contract with the customers; (2) identify performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the Company satisfies the performance obligations. For subscription revenue recognized by the Company, the transaction price is reduced for consideration payable to customers. Because such consideration is paid to both customers and “freemium” subscribers, it requires significant estimates as to the allocation and timing of these reductions in the transaction price. These estimates required auditor judgment and consideration of some subjective factors in evaluating the estimates. How the Critical Matter Was Addressed in the Audit The primary audit procedures we performed to address this critical audit matter included: Evaluation of Variable Interest Entities for Consolidation As described in Note 2 to the consolidated financial statements, the Company’s management performs an ongoing assessment of its noncontrolling interests from investments in unrelated entities to determine if those entities are variable interest entities (VIEs), and if so, whether the Company is the primary beneficiary. If an entity in such a transaction, by design, meets the definition of a VIE and the Company determines that it, or a consolidated subsidiary is the primary beneficiary, the Company will include the VIE in its consolidated financial statements. If such an entity is deemed to not be consolidated, the Company records only its investment in equity securities as a marketable security or investment under the equity method, as applicable. We identified management’s accounting for variable interest entities as a critical audit matter because there is significant judgment required by management to evaluate the contractual arrangements under the variable interest entity consolidation model. Auditing such considerations involved especially challenging auditor judgment in evaluating the appropriateness of the Company’s assessment and an increased audit effort. To the Board of Directors and Stockholders of Creatd, Inc. and Subsidiaries How the Critical Matter Was Addressed in the Audit The primary audit procedures we performed to address this critical audit matter included: Rosenberg Rich Baker Berman, P.A. We have served as the Company’s auditor since 2018. Somerset, New Jersey April 6, 2022 Creatd, Inc. Consolidated Balance Sheets The accompanying notes are an integral part of these consolidated financial statements. Creatd, Inc. Consolidated Statements of Comprehensive Loss The accompanying notes are an integral part of these consolidated financial statements. Creatd, Inc. Consolidated Statement of Changes in Stockholders’ Equity (Deficit) For the Years Ended December 31, 2021 and 2020 - - The accompanying notes are an integral part of these consolidated financial statements. Creatd, Inc. Consolidated Statements of Cash Flows The accompanying notes are an integral part of these consolidated financial statements. Creatd, Inc. December 31, 2021 Notes to the Consolidated Financial Statements Note 1 – Organization and Operations Creatd, Inc., formerly Jerrick Media Holdings, Inc. (“we,” “us,” the “Company,” or “Creatd”), is a technology company focused on providing economic opportunities for creators, which it accomplishes through its four main business pillars: Creatd Labs, Creatd Partners, Creatd Ventures, and Creatd Studios. Creatd’s flagship product, 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 Creatd’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 475,000 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. 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. 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”), which the Company subsequently rebranded as Camp. Plant Camp is a direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. The results of Plant Camp’s operations have bene included since the date of acquisition in the Statements of Operations. On July 20, 2021, the Company acquired 44% of the membership interests of WHE Agency, Inc,. WHE Agency, Inc, is a talent management and public relations agency based in New York. WHE Agency, Inc, has been consolidated due to the Company’s ownership of 55% voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations. On August 16, 2021, the Company acquired 16% of the membership interests of Dune, Inc. bring our total membership interests to 21%. On October 3, 2021, the Company acquired 29% of the membership interests of Dune, Inc. bring our total membership interests to 50%. Dune, Inc. is a direct-to-consumer brand focused on promoting wellness through its range of health-oriented beverages. Dune, Inc, has been consolidated due to the Company’s ownership of 50% voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations. Note 2 – Significant 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. Use of Estimates 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. 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. The Company uses estimates in accounting for, among other items, revenue recognition, allowance for doubtful accounts, stock-based compensation, income tax provisions, excess and obsolete inventory reserve, and impairment of intellectual property. During the fourth quarter of 2021, management changed its estimates for cost of revenues. This change in estimates did not result in a change to loss from operations or net loss. Actual results could differ from those estimates. Presentation During 2021, we adopted a change in presentation on our Consolidated Statements of Comprehensive Loss in order to present a gross profit line and allocate certain overhead expenses, the presentation of which is consistent with our peers. Under the new presentation, we began allocating overhead expenses related to cost of goods sold. Prior periods have been revised to reflect this change in presentation. Principles of consolidation The Company consolidates all majority-owned subsidiaries, if any, in which the parent’s power to control exists. As of December 31, 2021, the Company’s consolidated subsidiaries and/or entities are as follows: All inter-company balances and transactions have been eliminated. Variable Interest Entities Management performs an ongoing assessment of its noncontrolling interests from investments in unrelated entities to determine if those entities are variable interest entities (VIEs), and if so, whether the Company is the primary beneficiary. If an entity in such a transaction, by design, meets the definition of a VIE and the Company determines that it, or a consolidated subsidiary is the primary beneficiary, the Company will include the VIE in its consolidated financial statements. If such an entity is deemed to not be consolidated, the Company records only its investment in equity securities as a marketable security or investment under the equity method, as applicable Fair Value of Financial Instruments The fair value measurement disclosures are grouped into three levels based on valuation factors: 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 December 31, 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 include certain of the Company’s notes payable and capital lease obligations. Their carrying value approximates their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of similar debt currently available to the Company in the marketplace. The Company’s Level 3 assets/liabilities include goodwill, intangible assets, marketable debt securities, equity investments at cost, and derivative liabilities. 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 models. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities. The following tables provides a summary of the relevant assets and liabilities that are measured at fair value on recurring basis: Fair Value Measurements as of December 31, 2020 Fair Value Measurements as of December 31, 2021 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 December 31, 2021 and 2020: The following tables provides a summary of the relevant assets that are measured at fair value on non-recurring basis: Fair Value Measurements as of December 31, 2021 Fair Value Measurements as of December 31, 2020 The following table shows the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on non-recurring basis as of December 31, 2021: The Company recognizes impairment on loans or notes receivable (that do not meet the definition of a debt security) when it is probable that it will be unable to collect all amounts due according to the contractual terms, and the amount of loss can be estimated. The loss is estimated based on the present value of expected cash flows. The change in net realized depreciation on equity trading securities that has been included in other expenses for the year ended December 31, 2021 and 2020 was $0 and $(7,453), respectively. 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 observable price changes to the equity investments. 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”) or Financial Claims Scheme (“FCS”) insurable limits . The Company has never experienced any losses related to these balances. As of December 31, 2021 and 2020, cash amounts in excess of $250,000 were not fully insured. The uninsured cash balance as of December 31, 2021 and 2020, was approximately $2.7 million and $7.7 million, respectively. The Company does not believe it is exposed to significant credit risk on cash and cash equivalents. Concentration of Credit Risk and Other Risks and Uncertainties The Company provides credit in the normal course of business. The Company maintains allowances for credit losses on factors surrounding the credit risk of specific customers, historical trends, and other information. The Company operates in Australia and holds total assets of $675,024 that are considered to be reasonably possible that operations located outside an entity’s home country will be disrupted in the near term. Property and Equipment Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows: Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations. Long-lived Assets Including Goodwill and Other Acquired Intangible 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. During the year ended December 31, 2021 and 2020, the Company recorded an impairment charge of $688,127.00 and $0, respectively for intangible assets. 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. The remaining weighted average life of the intangible assets are 7.26 years. Goodwill is not amortized but is subject to periodic testing for impairment in accordance with ASC Topic 350 “Intangibles - Goodwill and Other - Testing Indefinite-Lived Intangible Assets for Impairment” (“ASC Topic 350”). The Company tests goodwill for impairment on an annual basis as of the last day of the Company’s fiscal December each year or more frequently if events occur or circumstances change indicating that the fair value of the goodwill may be below its carrying amount. The Company has four reporting units. The Company uses an income-based approach to determine the fair value of the reporting units. This approach uses a discounted cash flow methodology and the ability of our reporting units to generate cash flows as measures of fair value of our reporting units. During the year ended December 31, 2021, the Company completed its annual impairment test of goodwill. The Company performed the qualitative assessment as permitted by ASC 350-20 and determined for three of its reporting units that the fair value of those reporting units was more likely than not greater than their carrying value, including Goodwill. However, based on this qualitative assessment, the Company determined that the carrying value of the Seller’s Choice reporting unit was more likely than not greater than its carrying value, including Goodwill. Based on completion of the annual impairment test, the Company recorded an impairment charge of $1,035,795 for goodwill. The following table sets forth a summary of the changes in goodwill for the years ended December 31, 2020 and 2021. 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 ASC (“Sub-Topic 320-10”). Accrued interest on these securities is included in fair value and amortized cost. Pursuant to Paragraph 320-10-35, investments in debt securities that are classified as available for sale shall be measured subsequently at fair value in the statement of financial position. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized. The Company follows FASB ASC 320-10-35 to assess whether an investment in debt securities is impaired in each reporting period. An investment in debt securities is impaired if the fair value of the investment is less than its amortized cost. If the Company intends to sell the debt security (that is, it has decided to sell the security), an other-than-temporary impairment shall be considered to have occurred. If the Company more likely than not will be required to sell the security before recovery of its amortized cost basis or it otherwise does not expect to recover the entire amortized cost basis of the security, an other-than-temporary impairment shall be considered to have occurred. The Company considers the expected cash flows from the investment based on reasonable and supportable forecasts as well as several other factors to estimate whether a credit loss exists. If the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. 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 securities. Our investments in debt securities are subject to interest rate risk. To minimize the exposure due to an adverse shift in interest rates, we invest in securities with maturities of two years or less and maintain a weighted average maturity of one year or less. As of December 31, 2021, all of our investments had maturities between one and three years. The marketable debt security investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable. During the years ended December 31, 2021 and 2020, the Company recognized a $62,733 and $50,000 respectively from the impairment of the debt security. 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. During the year ended December 31, 2021 the Company recognized a $102,096 impairment of the equity security. Equity Method Investments Investments in unconsolidated entities over which we have significant influence are accounted for under the equity method of accounting. Under the equity method of accounting, the Company does not consolidate the investment’s financial statements within its consolidated financial statements. Equity method investments are initially recorded at cost, then our proportional share of the underlying net income or loss is recorded as equity in net loss from equity method investments in our statement of operations, with a corresponding increase or decrease to the carrying value of the investment. Distributions received from the investee reduce our carrying value of the investment and are recorded in the consolidated statements of cash flows using the cumulative earnings approach. These investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable. There were indicators of impairment related to our equity method investments for the year ended December 31, 2021. During the year ended December 31, 2021, the Company recorded an impairment charge of $487,365 for investments. Commitments and Contingencies The Company follows subtopic 450-20 of the FASB ASC to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. 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 stockholders’ equity in accumulated other comprehensive income. Gains and losses from foreign currency transactions, which are included in operating expenses, have not been significant in any period presented. 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. Shipping and Handling Costs The Company classifies freight billed to customers as sales revenue and the related freight costs as cost or revenue. 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 years ended December 31, 2021 and 2020 consists of the following: The Company utilizes the output method to measures the results achieved and value transferred to a customer over time. Timing of revenue recognition for the years ended December 31, 2021 and 2020 consists of the following: 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 categories: Partners, Monthly Services, and Projects. Contract amounts for Partner and Monthly Services clients range from approximately $500-$7,500 per month while Project amounts vary depending on the scope of work. Partner and Monthly clients are billed monthly for the work completed within that month. Partner Clients may or may not have an additional billing component referred to as Sales Performance Fee, which is a fee based upon a previously agreed upon percentage point of the client’s total sales for the month. Some Partners may also have projects within their contracts that get billed and recognized as agreed upon project milestones are achieved. Revenue is recognized over time as service obligations and milestones in the contract are met. Branded Content Branded content represents the revenue recognized from the Company’s obligation to create and publish branded articles and/or branded challenges for clients on the Vocal platform and promote said stories, tracking engagement for the client. In the case of branded articles, 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. In the case of branded challenges, the performance obligation is satisfied when the Company successfully closes the challenge and winners have been announced. The Company utilizes the completed contract method when revenue is recognized over time as the services are performed and any required milestones are met. Certain contracts contain separate milestones whereas the Company separates its performance obligations and utilizes the stand-alone selling price method and residual method to determine the estimate of the allocation of the transaction price. Below are the significant components of a typical agreement pertaining to branded content revenue: Talent Management Services Talent Management represents the revenue recognized by WHE Agency, Inc. (“WHE”) from the Company’s obligation to manage and oversee influencer-led campaigns from the contract negotiation stage through content creation and publication. WHE acts in an agent capacity for influencers and collects a management fee of 20% of the value of an influencer’s contract with a brand. Revenue is recognized net of the 80% of the contract that is collected by the influencer and is recognized when performance obligations of the contract are met. Performance obligations are complete when milestones and deliverables of contracts are delivered to the client. Below are the significant components of a typical agreement pertaining to talent management 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 subject to promotional discounts and free trials. 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’s e-commerce businesses are housed under Creatd Ventures, and currently consists of two majority-owned e-commerce companies, Camp (previously Plant Camp) and Dune Glow Remedy (“Dune”). The Company generates revenue through the sale of Camp and Dune’s consumer products through its e-commerce distribution channels. The Company satisfies its performance obligation upon shipment of product to its customers and recognizes shipping and handling costs as a fulfillment cost. Customers have 30 days from receipt of an item to return unopened, unused items. The Company runs discounts from time to time to promote sales, improve market penetration, and increase customer retention. Deferred Revenue Deferred revenue consists of billings and payments from clients in advance of revenue recognition. The Company has two types of deferred revenue, subscription revenue whereas the revenue is recognized over the subscription period and contract liabilities where the performance obligation was not satisfied. The Company will recognize the deferred revenue over the next year. As of December 31, 2021, and 2020, the Company had deferred revenue of $234,159 and $88,637, respectively. 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 years ended December 31, 2021 and 2020, the Company recorded $110,805 and $53,692, respectively as a bad debt expense. As of December 31, 2021 and 2020, the Company has an allowance for doubtful accounts of $186,147 and $80,509, respectively. Inventory Inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value. Inventories are periodically evaluated to identify obsolete or otherwise impaired products and are written off when management determines usage is not probable. The Company estimates the balance of excess and obsolete inventory by analyzing inventory by age using last used and original purchase date and existing sales pipeline for which the inventory could be used. As of December 31, 2021 and 2020, the Company has no valuation allowance. Stock-Based Compensation The Company recognizes compensation expense for all equity–based payments granted in accordance with Accounting Standards Codification (“ASC”) 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation over the requisite service period of the award. The company has a relatively low forfeiture rate of stock based compensation and forfeitures are recognized as they occur. Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods. 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 volatility is derived from the Company’s historical data 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. Forfeitures are recognized as they occur. 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. The Company issues awards of equity instruments, such as stock options and restricted stock units, to employees and certain non-employee directors. Compensation expense related to these awards is based on the fair value of the underlying stock on the award date and is amortized over the service period, defined as the vesting period. The vesting period is generally one to three years. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock units. Compensation expense is reduced for actual forfeitures as they occur. Income Taxes Income taxes are provided in accordance with ASC No. 740, “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expense (benefit) results from the net change during the period of deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. During the year ended December 31, 2021 and 2020, we recognized a $275,213 and $507,242 respectively, benefit for research and development tax credits in other income on the Statements of Comprehensive Income (Loss). The tax credits were claimed on our previous Australian tax returns and were based upon a research and development costs paid to an Australian company. Loss Per Share Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the years ended December 31, 2021 and 2020 presented in these consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. The Company had the following common stock equivalents at December 31, 2021 and 2020: Reclassifications Certain prior year amounts in the consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current year’s presentation. These reclassifications did not affect the prior period’s total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities. During the year ended December 31, 2021, we adopted a change in presentation on our consolidated statements of operations and comprehensive loss in order to present a gross profit line, the presentation of which is consistent with our peers. Under the new presentation, we began allocating payroll and related expenses, professional services and creator payouts. Prior periods have been revised to reflect this change in presentation. 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 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 impact of the new guidance on its consolidated financial statements. 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. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements. 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 consolidated financial statements. In July 2021, the FASB issued ASU No. 2021-05, Lessors—Certain Leases with Variable Lease Payments (Topic 842), Which requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate (hereafter referred to as “variable payments”) as an operating lease on the commencement date of the lease if specified criteria are met. ASU 2021-05 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s consolidated financial statements upon the adoption of this ASU. In October 2021, the FASB issued ASU No. 2021-08, Business Combinations — Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805), Which aims to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in recognition and payment terms that effect subsequent revenue recognition. ASU 2021-08 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s consolidated financial statements upon the adoption of this ASU. Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements. Note 3 – Going Concern The Company’s 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 consolidated financial statements, as of December 31, 2021, the Company had an accumulated deficit of $109.6 million, a net loss of $37.3 million and net cash used in operating activities of $21.1 million for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. 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 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 – Inventory Inventory was comprised of the following at December 31, 2021: December 31, 2021 Note 5 – Property and Equipment Property and equipment stated at cost, less accumulated depreciation and amortization, consisted of the following: Depreciation expense was $49,254 and $31,094 for the year ended December 31, 2021 and 2020, respectively. Note 6 – Equity investments, at cost 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. 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. During the year ended December 31, 2021, the Company recorded a full impairment on this investment. 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. During the year ended December 31, 2021, the Company acquired additional equity interests that resulted in the Company achieving significant influence over this investee, therefore the investments were reclassified as an equity method investment (see Note 7). On February 17, 2021, the Company entered into a membership interest purchase agreement whereas the Company purchased another 3.3% ownership of a private company for $100,000. During the year ended December 31, 2021, the Company acquired additional equity interests that resulted in the Company achieving significant influence over this investee, therefore the investments were reclassified as an equity method investment (see Note 7). On May 21, 2021, the Company entered into a common stock purchase agreement whereas the Company purchased 10.0% ownership of a private company for $50,000. Note 7 – Equity Method Investments During the year ended December 31, 2021, we invested $410,000 in cash into Dune, Inc., and received equity interest for services valued at $123,710 that were recorded to other income on the Statement of Operations. Our investment in Dune, Inc., was accounted for under the equity method until the 29% purchased on October 3, 2021 that increased our ownership to 50.41%. During the year ended December 31, 2021, we recorded $16,413 of losses from this investment as equity in net loss from equity method investment and an impairment in investment of $424,632 related to the remeasurement of previously held interest as of October 3, 2021. These amounts are recorded within our consolidated statements of operations. As of December 31, 2021, our Equity method investment total $0. Note 8 – Notes Payable Notes payable as of December 31, 2021 and 2020 is as follows: Seller’s Choice Note On September 11, 2019, the Company entered into Seller’s Choice Purchase Agreement with Home Revolution LLC. 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 December 31, 2021, the Company is in default on the Seller’s Choice note. During the year ended December 31, 2021, the Company accrued interest of $198,000. On March 3, 2022, the Company settled the Seller’s Choice Note for a cash payment of $799,000. The First March 2020 Loan Agreement On March 23, 2020, the Company entered into a loan agreement (the “First March 2020 Loan Agreement”) with an individual (the “First March 2020 Lender”) whereby the First March 2020 Lender issued the Company a promissory note of $11,000 (the “First March 2020 Note”). Pursuant to the First March 2020 Loan Agreement, the First March 2020 Note has an effective interest rate of 25%. The maturity date of the First March 2020 Note was September 23, 2020 (the “First March 2020 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First March 2020 Note were due. During the year ended December 31, 2020, the Company repaid $11,000 in principal and $2,695 in interest. The Second March 2020 Loan Agreement On March 26, 2020, the Company entered into a loan agreement (the “Second March 2020 Loan Agreement”) with an individual (the “Second March 2020 Lender”), whereby the Second March 2020 Lender issued the Company a promissory note of $17,000 (the “Second March 2020 Note”). Pursuant to the Second March 2020 Loan Agreement, the Second March 2020 Note has an effective interest rate of 19%. The maturity date of the Second March 2020 Note was September 17, 2020 (the “Second March 2020 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Second March 2020 Note were due. During the year ended December 31, 2020, the Company repaid $17,000 in principal and $1,398 in interest. The April 2020 PPP Loan Agreement On April 30, 2020, the Company was granted a loan with a principal amount of $282,432 (the “Loan”), pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The Loan, which was in the form of a Note dated April 30, 2020, matures on April 30, 2022, and bears interest at a fixed rate of 1.00% per annum, payable monthly commencing on October 30, 2020. The Note may be prepaid by the Company at any time prior to maturity without payment of any premium. Funds from the Loan may only be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments. During the year ended December 31, 2021, the Company accrued interest of $1,637. During the year ended December 31, 2021, the Company repaid $83,855 in principal. The Company is in the process of returning the funds received from the Loan. 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. 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 Company’s wholly-owned subsidiary, was granted a loan from PNC Bank, N.A. with a principal amount of $412,500, pursuant to the Paycheck Protection Program (the “PPP”). The Loan, which was in the form of a Note dated May 4, 2020, matures on May 4, 2022, and bears interest at a fixed rate of 1.00% per annum, payable monthly commencing on November 4, 2020. The Note may be prepaid by Jerrick Ventures at any time prior to maturity without payment of any premium. Funds from the Loan may only be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments. Jerrick Ventures intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. During the year ended December 31, 2021, the Company accrued interest of $396. During the year ended December 31, 2021, the Company repaid $136,597 in principal and was forgiven $275,903 of principal and The June 2020 Loan Agreement On June 30, 2020, the Company entered into a loan agreement (the “June 2020 Loan Agreement”) with a banking institution (the “June 2020 Lender”), whereby the June 2020 Lender issued the Company a promissory note of A$510,649 Australian dollar (“AUD”) or $351,692 United States Dollar (the “June 2020 Note”). Pursuant to the June 2020 Loan Agreement, the June 2020 Note has an effective interest rate of 15%. The maturity date of the June 2020 Note was July 31, 2020 (the “June 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the June 2020 Note were due in AUD currency. This loan was secured by the Australian research & development credit. During the year ended December 31, 2020 the Company repaid A$510,649 in principal and A$14,814 in interest. The October 2020 Loan Agreement On October 6, 2020, the Company entered into a secured loan agreement (the “October 2020 Loan Agreement”) with a lender (the “October 2020 Lender”), whereby the October 2020 Lender issued the Company a secured promissory note of $74,300 AUD or $54,412 United States Dollars (the “October 2020 Note”). Pursuant to the October 2020 Loan Agreement, the October 2020 Note has an effective interest rate of 14%. The maturity date of the October 2020 Note is September 30, 2021 (the “October 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the October 2020 Loan Agreement are due. The loan is secured by the Australian research & development credit. During the year ended December 31, 2021, the Company accrued $4,850 AUD in interest. During the year ended December 31, 2021, the Company’s repaid $111,683 in principal and $6,408 in interest from our R&D tax credit receivable. 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 year ended December 31, 2020, the Company repaid $10,284 in principal. During the year ended December 31, 2021, the Company repaid $23,716 in principal and $4,736 of accrued interest. 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 $111,683 AUD or $81,789 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 year ended December 31, 2021, the Company accrued $9,339 AUD 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 year ended December 31, 2021, the Company repaid $92,140 in principal and converted $35,970 into the The July 2021 Loan Agreement On July 2, 2021, the Company entered into a loan agreement (the “July 2021 Loan Agreement”) with a lender (the “July 2021 Lender”) whereby the July 2021 Lender issued the Company a promissory note of $137,625 (the “July 2021 Note”). Pursuant to the July 2021 Loan Agreement, the July 2021 Note has an effective interest rate of 10%. The maturity date of the July 2021 Note is December 31, 2022 (the “July 2021 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the July 2021 Note are due. During the year ended December 31, 2021, the Company repaid $113,606 in principal and converted $24,019 into the Second December 2021 Loan. As part of the conversion the Company recorded $7,109 as extinguishment expense. The First December 2021 Loan Agreement On December 3, 2021, the Company entered into a loan agreement (the “First December 2021 Loan Agreement”) with a lender (the “First December 2021 Lender”) whereby the First December 2021 Lender issued the Company a promissory note of $191,975 (the “First December 2021 Note”). Pursuant to the First December 2021 Loan Agreement, the First December 2021 Note has an effective interest rate of 9%. The maturity date of the First December 2021 Note is June 3, 2023 (the “First December 2021 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First December 2021 Note are due. During the year ended December 31, 2021, the Company repaid $6,320 in principal. The Second December 2021 Loan Agreement On December 14, 2021, the Company entered into a secured loan agreement (the “Second December 2021 Loan Agreement”) with a lender (the “Second December 2021 Lender”), whereby the Second December 2021 Lender issued the Company a secured promissory note of $438,096 AUD or $329,127 United States Dollars (the “Second December 2021 Note”). Pursuant to the Second December 2021 Loan Agreement, the Second December 2021 Note has an effective interest rate of 14%. The maturity date of the Second December 2021 Note is June 30, 2022 (the “Second December 2021 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Second December 2021 Loan Agreement are due. The loan is secured by the Australian research & development credit. During the year ended December 31, 2021, the Company accrued $2,857 AUD in interest. Note 9 – Convertible Notes Payable Convertible notes payable as of December 31, 2021, and 2020, is as follows: December 31, 2021 December 31, 2020 Interest Rate Conversion Price Maturity Date Exercise Price The February 2018 Convertible Note Offering During the three months ended March 31, 2018, the Company conducted multiple closings of a private placement offering to accredited investors (the “February 2018 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “February 2018 Investors”) for aggregate gross proceeds of $725,000. In addition, $250,000 of the Company’s short-term debt along with accrued but unpaid interest of $40,675 was exchanged for convertible debt in the February 2018 Offering. These conversions resulted in the issuance of The February 2018 Convertible Note Offering consisted of a maximum of $750,000 of units of the Company’s securities (each, a “February 2018 Unit” and collectively, the “February 2018 Units”), with each February 2018 Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a “February 2018 Convertible Note” and together the “February 2018 Convertible Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“February 2018 Conversion Shares”) at a conversion price of $12.00 per share (the “February 2018 Note Conversion Price”), and (b) a five-year warrant (each a “February 2018 Offering Warrant and together the “February 2018 Offering Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the February 2018 Convertible Notes can be converted into (“February 2018 Warrant Shares”) at an exercise price of $12.00 per share (“February 2018 Warrant Exercise Price”). The February 2018 Offering Notes mature on the second (2nd) anniversary of their issuance dates. The February 2018 Offering Notes are secured by a second priority security interest in the Company’s assets up to $1,000,000. The February 2018 Note Conversion Price and the February 2018 Offering Warrant Exercise Price are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein. The conversion feature of the February 2018 Convertible Note Offering provides for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a beneficial conversion feature (“BCF”). When the Company records a BCF the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF and related debt discount of $37,350, the discount is being accreted over the life of the first Debenture to accretion of debt discount and issuance cost. The Company recorded a $316,875 debt discount relating to 60,416 February 2018 Offering Warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost. In connection with the February 2018 Convertible Note Offering, the Company retained a placement agent (the “Placement Agent”), to carry out the Offering on a “best-efforts” basis. For services in its capacity as Placement Agent, the Company has paid the Placement Agent a cash fee of $94,250 and issued to the Placement Agent shares of the Company’s common stock equal to ten percent (10%) of the Conversion Shares underlying the February 2018 Convertible Notes or 6,041 shares that had a fair value of $74,881, which was recorded as issuance cost and is being accreted over the life of these notes to accretion of debt discount and issuance cost. During the year ended December 31, 2018, the Company converted $940,675 of principal and $86,544 of unpaid interest into the August 2018 Equity During the year ended December 31, 2019 the During the year ended December 31, 2020 the Company repaid $75,000 in principal and $781 in interest, and the February 2018 Convertible Notes are no longer outstanding. The March 2018 Convertible Note Offering During the three months ended March 31, 2018, the Company conducted multiple closings of a private placement offering to accredited investors (the “March 2018 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “March 2018 Investors”) for aggregate gross proceeds of $770,000. In addition, $50,000 of the Company’s short-term debt, $767 accrued but unpaid interest and $140,600 of the Company’s vendor liabilities was exchanged for convertible debt within the March 2018 Convertible Note Offering. These conversions resulted in the issuance of 15,947 warrants with a fair value of $84,087. These were recorded as a loss on extinguishment of debt. The March 2018 Convertible Note Offering consisted of a maximum of $900,000, with an over-allotment option of an additional $300,000 of units of the Company’s securities (each, a “March 2018 Unit” and collectively, the “March 2018 Units”), with each March 2018 Unit consisting of (a) a 14% Convertible Secured Promissory Note (each a “March 2018 Note” and together the “March 2018 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at a conversion price of $12.00 per share (the “Conversion Price”), and (b) a four-year warrant (each a “Warrant and together the “Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into (“Warrant Shares”) at an exercise price of $12.00 per share (“Exercise Price”). The March 2018 Notes mature on the second (2nd) anniversary of their issuance dates. The Conversion Price of the March 2018 Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein. The Company recorded a $254,788 debt discount relating to 80,114 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 2018, the Company converted $886,367 of principal and $51,293 of unpaid interest pursuant to the August 2018 Equity During the year ended December 31, 2020, the Company converted $50,000 of principal and $17,949 of unpaid interest into the September 2020 Equity Raise. During the year ended December 31, 2020, the Company repaid $25,000 in principal and $9,364 in interest. The February 2019 Convertible Note Offering During the The February 2019 Convertible Note Offering consisted of (a) a 10% Convertible Promissory Note (each a “February 2019 Note” and together, the “February 2019 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $15.00 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company between February 21, 2019 and the date on which the Company’s consummates a listing onto a national securities exchange, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”), and (b) a four-year stock purchase warrant (each a “Warrant and together the “Warrants”) to purchase a quantity of shares of the Company’s common stock up to thirty-three percent (33%) of the number of shares of common stock into which the underlying Notes may be converted, at an exercise price of $18.00 per share (“Exercise Price”). During the The February 2019 Notes mature on the first (1st) anniversary of their issuance dates. In the event that the Offering’s Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Dates, the principal and interest evidenced by the Note shall be mandatorily converted upon the earlier of (i) the listing of the Common Stock onto a national securities exchange, or (ii) upon a Qualified Offering. The Conversion Price of the February 2019 Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein. The Company recorded a $222,632 debt discount relating to 44,396 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, During the year ended December 31, The November 2019 Convertible Note Offering During the year ended December 31, 2019, the Company conducted an offering to accredited investors (the “November 2019 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “November 2019 Investors”) for aggregate gross proceeds of $479,500. In addition, the Company converted $318,678 in Accounts Payable into this offering. The November 2019 Convertible Note Offering consisted of (a) a 10% Convertible Promissory Note (each a “November 2019 Note” and together, the “November 2019 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at a fixed conversion price equal to $13.50 per share. The November 2019 Notes mature six months after the anniversary of their issuance dates. At any time on or after the The Company recorded a $84,377 debt discount relating to an original issue discount equal to $79,933 and a beneficial conversion feature of $4,444. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the Company converted $559,433 of principal and $77,785 of unpaid interest into the September 2020 Equity Raise. The January 2020 Convertible Note Offering During the three months ended March 31, 2020, the Company conducted an offering to accredited investors (the “January 2020 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “January 2020 Investors”) for aggregate gross proceeds of $87,473. The January 2020 Convertible Note Offering consisted of (a) a 12% Convertible Promissory Note (each a “January 2020 Note” and together, the “January 2020 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $13.50 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”). The January 2020 Notes mature on the first (6th) month anniversary of their issuance dates. If an event of default occurs and is not cured within 30 days of the Company receiving notice, the notes will be convertible at 80% multiplied by the lowest VWAP of the common stock during the five (5) consecutive trading day period immediately preceding the date of the respective conversion, and a default interest rate of 24% will become effective. The Conversion Price of the January 2020 Note are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price being reduced to such lower purchase price, subject to carve-outs as described therein. The Company recorded a $12,473 debt discount relating to original issue discount associated with these notes. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the Company converted $87,473 of principal and $8,275 of unpaid interest into the September 2020 Equity Raise. The First February 2020 Convertible Loan Agreement On February 4, 2020, the Company entered into a loan agreement (the “First February 2020 Loan Agreement”) with an individual (the “First February 2020 Lender”), whereby the First February 2020 Lender issued the Company a promissory note of $85,000 (the “First February 2020 Note”). Pursuant to the First February 2020 Loan Agreement, the First February 2020 Note has interest of ten percent (10%). The First February 2020 Note are convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $12.00 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”). The First February 2020 Notes mature on the first (6th) month anniversary of their issuance dates. In the event that the Offering’s Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Dates and the Notes have not been repaid or an event of default occurs as defined in the Notes, the notes will be convertible at the lesser of the fixed conversion price or 65% multiplied by the lowest trade of the common stock during the twenty (20) consecutive trading day period immediately preceding the date of the respective conversion and a default interest rate of 15% will be applied. The Conversion Price of the First February 2020 Note are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price being reduced to such lower purchase price, subject to carve-outs as described therein. The Company recorded a $8,000 debt discount relating to original issue discount associated with these notes. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the Company repaid $158,065 in principal and $0 in interest. The Second February 2020 Convertible Loan Agreement On February 11, 2020, the Company entered into a loan agreement (the “Second February 2020 Loan Agreement”) with an individual (the “Second February 2020 Lender”), whereby the Second February 2020 Lender issued the Company a promissory note of $200,000 (the “Second February 2020 Note”). Pursuant to the Second February 2020 Loan Agreement, the Second February 2020 Note has interest of twelve percent (12%). As additional consideration for entering in the Second February 2020 convertible Loan Agreement, the Company issued a five-year warrant to purchase 6,666 shares of the Company’s common stock at a purchase price of $15.00 per share. The Second February 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $13.50 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”). The Second February 2020 Note matures on the first (12th) month anniversary of its issuance date. In the event that the Offering’s Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Date and the Note is unpaid, the note will be convertible at the lesser of the fixed conversion price or 75% multiplied by the lowest trade of the common stock during the twenty (20) consecutive trading day period immediately preceding the date of the respective conversion. The Conversion Price of the First February 2020 Note is subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price being reduced to such lower purchase price, subject to carve-outs as described therein. The Company recorded a $33,340 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. During the year ended December 31, 2020, the Company converted $125,000 of principal and $0 of unpaid interest into the September 2020 Equity Raise. The Company recorded a Loss on extinguishment of debt of $136,115. During the year ended December 31, 2020, the Company repaid $175,000 in principal and $0 in interest. The Third February 2020 Convertible Loan Agreement On February 25, 2020, the Company entered into a loan agreement (the “Third February 2020 Loan Agreement”) with an individual (the “Third February 2020 Lender”), whereby the Third February 2020 Lender issued the Company a promissory note of $1,500,000 (the “Third February 2020 Note”). The Company received proceeds of $864,950 and converted notes payable of $385,000 in exchange for the note (see Note 5). Pursuant to the Third February 2020 Loan Agreement, the Second February 2020 Note has interest of twelve percent (12%). The Third February 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $4.50 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”). The Third February 2020 Note matures on the first (12th) month anniversary of their issuance dates. In the event that the Offering’s Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Dates and the note is unpaid, the notes will be convertible at the lower of the fixed conversion price or 75% multiplied by the lowest trade of the common stock during the twenty (20) consecutive trading day period immediately preceding the date of the respective conversion. The Conversion Price of the Third February 2020 Note are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price being reduced to such lower purchase price, subject to carve-outs as described therein. In accordance with ASC 470-50, since the present value of the cash flows under the new debt instrument was at least ten percent different from the present value of the remaining cash flows under the terms of the original debt instrument, the Company accounted for the note exchange as described above as a debt extinguishment. The Company recorded a loss on debt extinguishment of $535,041. This represents the fair value of the warrants issued $445,705 and a debt premium of $89,336. The note has an effective interest rate of 24%. The Company recorded a debt discount of $160,714. This is made up of an original issue discount of $250,050 less a debt premium of $89,336. During the year ended December 31, 2020, the Company converted $1,500,000 of principal and $100,603 of unpaid interest into the September 2020 Equity Raise. The April 2020 Convertible Note Offering During April of 2020, the Company conducted multiple closings of a private placement offering to accredited investors (the “April 2020 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “April 2020 Investors”) for aggregate gross proceeds of $350,010. The April 2020 Convertible Note Offering accrues interest at a rate of twelve percent per annum (12%). The April 2020 Convertible Note Offering mature on the six (6th) month anniversary of their issuance dates. The April 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $13.50 per share after the maturity date or (ii) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”). The Company recorded a $50,010 debt discount relating to original issue discount associated with these notes. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the Company converted $350,010 of principal and $16,916 of unpaid interest into the September 2020 Equity Raise. The June 2020 Convertible Loan Agreement On June 19, 2020, the Company entered into a loan agreement (the “June 2020Loan Agreement”) with an individual (the “June 2020 Lender”), whereby the June 2020 Lender issued the Company a promissory note of $550,000 (the “June 2020 Note”). Pursuant to the June 2020 Loan Agreement, the June 2020 Note has interest of twelve percent (12%). As additional consideration for entering in the June 2020 convertible Loan Agreement, the Company issued a five-year warrant to purchase 49,603 shares of the Company’s common stock at a purchase price of $11.55 per share. The June 2020 Note matures on the first (12th) month anniversary of its issuance date. Upon default the June 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion. The Company recorded a $67,500 debt discount relating to original issue discount associated with this note. The Company recorded a $274,578 debt discount relating to 49,603 warrants and 5,424 shares issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the lender converted $59,200 of principal into the Second July 2020 Convertible Loan Agreement During the year ended December 31, 2020, the Company repaid $490,800 in principal and $16,944 in interest. The First July 2020 Convertible Loan Agreement On July 01, 2020, the Company entered into a loan agreement (the “First July 2020 Loan Agreement”) with an individual (the “First July 2020 Lender”), whereby the First July 2020 Lender issued the Company a promissory note of $68,000 (the “First July 2020 Note”). Pursuant to the First July 2020 Loan Agreement, the First July 2020 Note has interest of ten percent (10%). The First July 2020 Note matures on June 29, 2021. Upon default or 180 days after issuance the First July 2020 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. During the year ended December 31, 2021, the First July 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 First July 2020 Note gave rise to a derivative liability of $112,743. The Company recorded $68,000 as a debt discount and $44,743 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 year ended December 31, 2021, the Company converted $68,000 in principal and $3,400 in interest into 35,469 shares of the Company’s common stock. The Second July 2020 Convertible Loan Agreement On July 17, 2020, the Company entered into a loan agreement (the “Second July 2020 Loan Agreement”) with an individual (the “Second July 2020 Lender”), whereby the Second July 2020 Lender issued the Company a promissory note of $250,000 (the “Second July 2020 Note”). Pursuant to the Second July 2020 Loan Agreement, the Second July 2020 Note has interest of twelve percent (12%). The Second July 2020 Note matures on July 17, 2021. Upon default the Second July 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion. The Company recorded a $46,750 debt discount relating to original issue discount associated with this note. The Company recorded a $71,329 debt discount relating to 6,667 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the Company repaid $250,000 in principal and $0 in interest. The July 2020 Convertible Note Offering From July 2020 to September 2020, the Company conducted multiple closings of a private placement offering to accredited investors (the “July 2020 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “July 2020 Investors”) for aggregate gross proceeds of $390,000. The July 2020 Convertible Note Offering accrues interest at a rate of twelve percent per annum (12%). The July 2020 Convertible Note Offering mature on the six (6th) month anniversary of their issuance dates. The July 2020 Note Offering is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $12.75 per share after the maturity date or (ii) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”). Upon default the July 2020 Convertible Note Offering 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 conversion feature of the July 2020 Convertible Note Offering provides for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a beneficial conversion feature. When the Company records a BCF the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF and related debt discount of $38,215, the discount is being accreted over the life of the Debenture to accretion of debt discount and issuance cost. The Company recorded a $158,078 debt discount relating to 30,589 July 2020 Convertible Note Offering issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the Company converted $390,000 of principal and $3,436 of unpaid interest into the September 2020 Equity Raise. 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 year ended December 31, 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 year ended December 31, 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 180 days after issuance the Second July 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion. The Company recorded a $68,255 debt discount relating to original issue discount associated with this note. The Company recorded a $146,393 debt discount relating to 85,555 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 2021, the Company repaid $341,880 in principal and $46,200 in interest. The October 2020 Convertible Loan Agreement On October 2, 2020, the Company entered into a loan agreement (the “October 2020 Loan Agreement”) with an individual (the “October 2020 Lender”), whereby the October 2020 Lender issued the Company a promissory note of $169,400 (the “October 2020 Note”). Pursuant to the October 2020 Loan Agreement, the October 2020 Note has interest of six percent (6%). The October 2020 Note matures on the first (12th) month anniversary of its issuance date. Upon default or 180 days after issuance the October 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 $19,400 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. During the year ended December 31, 2021, the Second July 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 Second July 2020 Note gave rise to a derivative liability of $74,860. The Company recorded this as a debt discount. The debt discount is charged to accretion of debt discount over the remaining term of the convertible note. During the year ended December 31, 2021, the Company converted $169,400 in principal and $4,620 in interest into 55,631 shares of the Company’s common stock. The First December 2020 convertible Loan Agreement On December 9, 2020, the Company entered into a loan agreement (the “First December 2020 Loan Agreement”) with an individual (the “First December 2020 Lender”), whereby the First December 2020 Lender issued the Company a promissory note of $600,000 (the “First December 2020 Note”). Pursuant to the First December 2020 Loan Agreement, the First December 2020 Note has interest of twelve percent (12%). As additional consideration for entering in the First December 2020 convertible Loan Agreement, the Company issued 45,000 shares of the Company’s common stock. The First December 2020 Note matures on the first (12th) month anniversary of its issuance date. Upon default the First December 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion. The Company recorded a $110,300 debt discount relating to original issue discount associated with this note. The Company recorded a $113,481 debt discount relating to 45,000 shares issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 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 entered into a loan agreement (the “Second December 2020 Loan Agreement”) with an individual (the “Second December 2020 Lender”), whereby the Second December 2020 Lender issued the Company a promissory note of $169,400 (the “Second December 2020 Note”). Pursuant to the Second December 2020 Loan Agreement, the Second December 2020 Note has interest of six percent (6%). The Second December 2020 Note matures on the first (12th) month anniversary of its issuance date. 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. During the year ended December 31, 2021, the Second December 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 Second December 2020 Note gave rise to a derivative liability of $108,880. The Company recorded this as a debt discount. The debt discount is charged to accretion of debt discount over the remaining term of the convertible note. During the year ended December 31, 2021, the Company converted $168,900 in principal and $4,605 in interest into 74,706 shares of the Company’s common stock. The May 2021 Convertible Note Offering On May 14, 2021, the Company conducted multiple closings of a private placement offering to accredited investors (the “May 2021 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “May 2021 Investors”) for aggregate gross proceeds of $3,690,491. The May 2021 convertible notes are convertible into shares of the Company’s common stock, par value $.001 per share at a conversion price of $5.00 per share. As additional consideration for entering in the May 2021 Convertible Note Offering, the Company issued 1,090,908 warrants of the Company’s common stock. The May 2021 Convertible Note matures on November 14, 2022. The Company recorded a $1,601,452 debt discount relating to 1,090,908 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost. 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. During the year ended December 31, 2021, the Company converted $4,666,669 in principal into 933,334 shares of the Company’s common stock. The July 2021 Convertible Loan Agreement On July 6, 2021, the Company entered into a loan agreement (the “July 2021 Loan Agreement”) with an individual (the “July 2021 Lender”), whereby the July 2021 Lender issued the Company a promissory note of $168,850 (the “July 2021 Note”). Pursuant to the July 2021 Loan Agreement, the July 2021 Note has interest of six percent (6%). The July 2021 Note matures on the first (12th) month anniversary of its issuance date. Upon default or 180 days after issuance the July 2021 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 $15,850 debt discount relating to an original issue discount and $3,000 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. During the year ended December 31, 2021, the Company accrued $4,941 in interest. Note Note receivable October 2019 Cacher Loan Agreement On October 28, 2019, the Company entered into a loan agreement with Cacher Studios LLC (the “October 2019 Cacher Loan Agreement”) whereby Cacher Studios issued the Company a promissory note in the principal amount of $11,450 (the “October 2019 Cacher Note”). The October 2019 Cacher Note has a maturity date of October 28, 2020. Repayment is due from Cacher Studios LLC’s revenues, with 100% of net revenues due to the Company until $2,500 in principal has been repaid, and 50% of net revenues due to the Company thereafter. Cacher Studios LLC is owned and operated by Alexandra Frommer, daughter of Jeremy Frommer, the Company’s CEO. such assets may not be recoverable. During the year ended December 31, The March 2018 Convertible Note Offering During the year ended December 31, 2018, the Company conducted multiple closings of a private placement offering to accredited investors (the “March 2018 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “Investors”) for aggregate gross proceeds of $239,400. The March 2018 Convertible Note Offering consisted of a maximum of $900,000, with an over-allotment option of an additional $300,000, of units of the Company’s securities (each, a “March 2018 Unit” and collectively, the “March 2018 Units”), with each March 2018 Unit consisting of (a) a 14% Convertible Secured Promissory Note (each a “March 2018 Note” and together the “March 2018 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at a conversion price of $12.00 per share (the “Conversion Price”), and (b) a four-year warrant (each a “Warrant and together the “Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into (“Warrant Shares”) at an exercise price of $12.00 per share (“Exercise Price”). The Notes mature on the second (2nd) anniversary of their issuance dates. The Conversion Price of the Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein. The Company recorded a $84,854 debt discount relating to 19,950 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost. During the year ended December 31, 2018, the Company converted $239,000 of principal and $15,401 of unpaid interest into the August 2018 Equity During the year ended December 31, 2020 the lender forgave $400 of principal and $70 of unpaid interest. This was recorded as a gain on settlement of debt on the Consolidated Statements of Comprehensive Income (Loss). The February 2019 Convertible Note Offering During the The February 2019 Convertible Note Offering consisted of (a) a 10% Convertible Promissory Note (each a “February 2019 Note” and together, the “February 2019 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $15.00 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company between February 21, 2019 and the date on which the Company’s consummates a listing onto a national securities exchange, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”), and (b) a four-year stock purchase warrant (each a “Warrant and together the “Warrants”) to purchase a quantity of shares of the Company’s common stock up to thirty-three percent (33%) of the number of shares of common stock into which the underlying Notes may be converted, at an exercise price of $18.00 per share (“Exercise Price”). During the The February 2019 Notes mature on the first (1st) anniversary of their issuance dates. In the event that the Offering’s Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Dates, the principal and interest evidenced by the Note shall be mandatorily converted upon the earlier of (i) the listing of the Common Stock onto a national securities exchange, or (ii) upon a Qualified Offering. The Company recorded a $2,465 debt discount relating to 440 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 2019, $20,000 During the year ended December 31, 2020, the Company converted $20,000 of principal and $3,065 of unpaid interest into the September 2020 Equity Raise. From July 2020 to September 2020, the Company conducted multiple closings of a private placement offering to accredited investors (the “July 2020 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “July 2020 Investors”) for aggregate gross proceeds of $50,000. The July 2020 Convertible Note Offering accrues interest at a rate of twelve percent per annum (12%). The July 2020 Convertible Note Offering mature on the six (6th) month anniversary of their issuance dates. The July 2020 Note Offering is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $12.75 per share after the maturity date or (ii) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”). Upon default the July 2020 Convertible Note Offering 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 conversion feature of the July 2020 Convertible Note Offering provides for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a beneficial conversion feature. When the Company records a BCF the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF and related debt discount of $9,812, the discount is being accreted over the life of the Debenture to accretion of debt discount and issuance cost. The Company recorded a $21,577 debt discount relating to 3,922 July 2020 Convertible Note Offering issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the Company converted $50,000 of principal and $630 of unpaid interest into the September 2020 Equity Raise. Notes payable Notes payable – related party as of December 31, The June 2018 Frommer Loan Agreement On June 29, 2018, the Company entered into a loan agreement (the “June 2018 Frommer Loan Agreement”) with Jeremy Frommer, an officer and director of the Company, whereby the Company issued Frommer a promissory note in the principal amount of $10,000 (the “June 2018 Frommer Note”). As additional consideration for entering in the June 2018 Frommer Note Loan Agreement, the Company issued Frommer a four-year warrant to purchase 500 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the June 2018 Frommer Loan Agreement, the June 2018 Frommer Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018 (the “June 2018 Frommer Maturity Date”). On November 8, 2018, the Company executed upon an agreement that extended the maturity date of the June 2018 Frommer Agreement to March 7, 2019. As part of the extension agreement, the Company issued Frommer an additional 681 warrants to purchase common stock of the Company at an exercise price of $18.00. These warrants had a fair value of $4,645 which was recorded to loss on extinguishment of debt. On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the June 2018 Frommer Agreement to March During the year ended December 31, The On July 17, 2018, the Company entered into a loan agreement (the “Second July 2018 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Schiller a promissory note in the principal aggregate amount of $25,000 (the “Second July 2018 Schiller Note”). As additional consideration for entering in the Second July 2018 Schiller Loan Agreement, the Company issued Schiller a four-year warrant to purchase 1,250 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the Second July 2018 Schiller Loan Agreement, the Second July 2018 Schiller Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. Subsequent to the balance sheet date, on November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Schiller warrants to purchase 1,698 shares of common stock of the Company at an exercise price of $18.00. On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the Second July 2018 Schiller Loan Agreement to March 7, 2019. As part of the extension agreement, the Company issued Schiller an additional 1,726 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company entered into an agreement with Mr. Schiller that further extended the maturity date of this loan to May 15, 2019. On December 15, 2019 the Company entered into an agreement that further extended the maturity date of this loan to May 15, 2020. During the year ended December 31, 2019 $4,137 in principal was converted into the February 2019 Convertible Note Offering. During the year ended December 31, $3,216 in interest. The June 2019 Loan Agreement Cost Realized On June 3, 2019, the Company entered into a loan agreement (the “June 2019 Loan Agreement”), pursuant to which the Company was to be indebted in the amount of $2,400,000, of which $1,200,000 was funded by September 30, 2019 and $1,200,000 was exchanged from the May 2016 Rosen Loan Agreement dated May 26, 2016 in favor of Rosen for a joint and several interest in the Term Loan pursuant to the Debt Exchange Agreement. The June 2019 Loan Agreement, the June 2019 Loan bears interest at a rate of 12.5% per annum, compounded annually and payable on the maturity date of December 3, 2019 (the “June 2019 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the June 2019. In connection with the conversion of the May 2016 Rosen Loan Agreement the Company recorded a debt discount of $92,752. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. On July 29, 2019, the Company entered into the First Amendment Agreement to the June 2019 Loan Agreement pursuant to which the parties agreed to amend the June 2019 Loan Agreement and the June 2019 Security Agreement so as to (i) increase the principal aggregate amount of the June 2019 Loan to $2,500,000, and (ii) amend the provisions regarding the ranking of interest of such loan. On August 12, 2019, the Company entered into the Second Amendment Agreement to the June 2019 Loan Agreement pursuant to which the parties agreed to further amend the June 2019 Loan Agreement and the June 2019 Security Agreement so as to (i) increase the principal aggregate amount of the June 2019 Loan to $3,000,000, and (ii) amend the provisions regarding the ranking of interest of such loan. On September 16, 2019, the Company entered into the Third Amendment Agreement to the June 2019 Loan Agreement pursuant to which the parties agreed to further amend the June 2019 Loan Agreement and the June 2019 Security Agreement so as to (i) increase the principal amount of the June 2019 Loan to $4,000,000; and (ii) amend the provisions therein with regard to the ranking of security interests. On October 10, 2019 the Company and investors entered into the Fourth Amendment Agreement to the June 2019 Loan Agreement, whereby the parties thereto agreed to (i) increase the principal amount of the June 2019 Loan to $4,825,000; and (ii) amend the interest, conversion terms, and other covenants of the note. On February 27, 2020, the Company entered into a fifth amendment agreement to the June 2019 Loan Agreement, whereby the parties agreed to amend Section 2.6 of the June 2019 Loan Agreement and provide for: (i) an additional 10% of shares to be issued at the time of conversion in the event that the price per share (or unit, as applicable) of securities issued in a Qualified Public Offering (as such term is defined in the Fifth Amendment) is below $15.00; and (ii) provide for the acceleration of all outstanding interest due on the Loan upon the consummation of a Qualified Public Offering. During year ended December 31, 2020, the Company converted $4,325,000 of principal and $752,346 of unpaid interest into the September 2020 Equity Raise. During the year ended December 31, 2020 the Company repaid $500,000 in principal and $0 in interest. The December 2019 Gravitas Loan Agreement On December 23, 2019, the Company entered into a loan agreement (the “December 2019 Gravitas Loan Agreement”), whereby the Company issued Gravitas a promissory note in the principal amount of $300,000 (the “December 2019 Gravitas Note”). Pursuant to the December 2019 Gravitas Loan Agreement, the December 2019 Gravitas Note has a flat interest payment of $20,000. During the The First January 2020 Loan Agreement On January 3, 2020, the Company entered into a loan agreement (the “First January 2020 Loan Agreement”) with an individual (the “First January 2020 Lender”) whereby the First January 2020 Lender issued the Company a promissory note of $250,000 (the “First January 2020 Note”). Pursuant to the First January 2020 Loan Agreement, the First January 2020 Note has an effective interest rate of 6%. As additional consideration for entering in the First January 2020 Loan Agreement, the Company issued the First January 2020 Lender 1,333 shares of the Company’s common stock. The maturity date of the First January 2020 Note was January 15, 2020 (the “First January 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First January 2020 Note were due. The Company recorded a $16,000 debt discount relating to the 1,333 shares issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the Company converted $250,000 in principal to the Third February 2020 Note (as defined in Note 8). The Second January 2020 Loan Agreement On January 14, 2020, the Company entered into a loan agreement (the “Second January 2020 Loan Agreement”) with an individual (the “Second January 2020 Lender”), whereby the Second January 2020 Lender issued the Company a promissory note of $10,000 (the “Second January 2020 Note”). Pursuant to the Second January 2020 Loan Agreement, the Second January 2020 Note has an effective interest rate of 5%. The maturity date of the Second January 2020 Note was January 24, 2020 (the “Second January 2020 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Second January 2020 Note were due. As additional consideration for entering in the Second January Loan Agreement, the Company issued a five-year warrant to purchase 50 shares of the Company’s common stock at a purchase price of $18.00 per share. The Company recorded a $580 debt discount relating to 50 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the Company repaid $10,000 in principal and $500 in interest. The Third January 2020 Loan Agreement On January 22, 2020, the Company entered into a loan agreement (the “Third January 2020 Loan Agreement”) with an individual (the “Third January 2020 Lender”), whereby the Third January 2020 Lender issued the Company a promissory note of $15,000 (the “Third January 2020 Note”). Pursuant to the Third January 2020 Loan Agreement, the Third January 2020 Note has an effective interest rate of 10%. The maturity date of the Third January 2020 Note was January 29, 2020 (the “Third January 2020 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Third January 2020 Note were due. As additional consideration for entering in the Third January Loan Agreement, the Company issued a five-year warrant to purchase 75 shares of the Company’s common stock at a purchase price of $18.00 per share. The Company recorded a $892 debt discount relating to 75 warrants issued to the Third January 2020 Lender based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the Company repaid $15,000 in principal and $1,500 in interest. The Fourth January 2020 Loan Agreement On January 23, 2020, the Company entered into a loan agreement (the “Fourth January 2020 Loan Agreement”) with an individual (the “Fourth January 2020 Lender”) whereby the Fourth January 2020 Lender issued the Company a promissory note of $135,000 (the “Fourth January 2020 Note”). Pursuant to the Fourth January 2020 Loan Agreement, the Fourth January 2020 Note has an effective interest rate of 7%. As additional consideration for entering in the First January 2020 Loan Agreement, the Company issued the Fourth January 2020 Lender 750 shares of the Company’s common stock. The maturity date of the Fourth January 2020 Note was February 23, 2020 (the “Fourth January 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Fourth January 2020 Note were due. During the year ended December 31, 2020, the Company converted $135,000 in principal to the Second February 2020 Note (as defined below). The January 2020 Rosen Loan Agreement On January 14, 2020, the Company entered into a loan agreement (the “January 2020 Rosen Loan Agreement”), whereby the Company issued a promissory note in the principal amount of $150,000 (the “January 2020 Rosen Note”). Pursuant to the January 2020 Rosen Loan Agreement, the January 2020 Rosen Note accrues interest at a fixed amount of $2,500 for the duration of the note. During the The February Banner 2020 Loan Agreement On February 15, 2020, the Company entered into a loan agreement (the “February 2020 Banner Loan Agreement”), whereby the Company issued a promissory note in the principal amount of $9,900 (the “February 2020 Note”) for expenses paid on behalf of the Company by an employee. Pursuant to the February 2020 Loan Agreement, the February 2020 Note bears interest at a rate of $495. As additional consideration for entering in the February 2020 Loan Agreement, the Company issued a five-year warrant to purchase 49 shares of the Company’s common stock at a purchase price of $18.00 per share. During the The February 2020 Frommer Loan Agreement On February 18, 2020, the Company entered into a loan agreement (the “February 2020 Frommer Loan Agreement”) with Jeremy Frommer, an officer of the Company, whereby the Company issued Frommer a promissory note in the principal amount of $2,989 (the “February 2020 Frommer Note”). As additional consideration for entering in the June 2018 Frommer Note Loan Agreement, the Company issued Frommer a five-year warrant to purchase 15 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the February 2020 Frommer Loan Agreement, the note is payable on the maturity date of February 28, 2020 (the “February 2020 Frommer Maturity Date”). During the On During the year ended December 31, The July 2020 Loan Agreement On July 30, 2020, the Company entered into a loan agreement (the “July 2020 Loan Agreement”) with an individual (the “July 2020 Lender”), whereby the July 2020 Lender issued the Company a promissory note of $5,000 (the “July 2020 Note”). Pursuant to the July 2020 Loan Agreement, the July 2020 Note has an effective interest rate of 5%. The maturity date of the July 2020 Note was August 06, 2020 (the “July 2020 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the July 2020 Note were due. As additional consideration for entering in the July 2020 Loan Agreement, the Company issued a five-year warrant to purchase 25 shares of the Company’s common stock at a purchase price of $18.00 per share. The Company recorded a $316 debt discount relating to 25 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the year ended December 31, 2020, the Company repaid $5,000 in principal and $250 in interest. The September 2020 Goldberg Loan Agreement On September 15, 2020, the Company entered into a loan agreement (the “September 2020 Goldberg Loan Agreement”) with Goldberg whereby the Company issued a promissory note of $16,705 (the “September 2020 Goldberg Note”). Pursuant to the September 2020 Goldberg Loan Agreement, the September 2020 Goldberg Note has an interest rate of 7%. The maturity date of the September 2020 Goldberg Note is September 15, 2022 (the “September 2020 Goldberg Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under note are due. The September 2020 Goldberg Loan is secured by the tangible and intangible property of the Company. Since the September 2020 Goldberg Note has a make-whole provision if the shares of the Company’s common stock issued to the lender in accordance with the Lender’s Exchange Agreement (see note 10) have a value equal to or less than $6,463,363 determined by using the lowest VWAP of the last 30 days prior to September 14, 2021. The principal amount of the September 2020 Goldberg Note shall increase by 200% of the difference between the initial consideration and the September 14, 2021, value. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The make-whole feature gave rise to a derivative liability that has been marked to market during the year ended December 31, 2021, and the change in derivative liability is recorded on Consolidated Statements of Comprehensive Loss. See note 10. On September 15, 2021, the make-whole provision was triggered, causing an increase in principal of the September 2020 Goldberg Note by $939,022. During the year ended December 31, 2021, the Company accrued interest of $3,576. During the year ended December 31, 2021, the Company entered into a settlement agreement whereas the Company agreed to pay $200,000 in cash and $150,000 in shares of Common Stock. The September 2020 Rosen Loan Agreement On September 15, 2020, the Company entered into a loan agreement (the “September 2020 Rosen Loan Agreement”) with Rosen whereby the Company issued a promissory note of $3,295 (the “September 2020 Rosen Note”). Pursuant to the September 2020 Rosen Loan Agreement, the September 2020 Rosen Note has an interest rate of 7%. The maturity date of the September 2020 Rosen Note is September 15, 2022 (the “September 2020 Rosen Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the note are due. The September 2020 Rosen Loan is secured by the tangible and intangible property of the Company. 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 Lender’s Exchange Agreement (see note 10) have a value equal to or less than $1,274,553 determined by using the lowest VWAP of the last 30 days prior to September 14, 2021. The principal amount of the September 2020 Rosen Note shall increase by 200% of the difference the initial consideration and the September 14, 2021 value. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The make-whole feature of gave rise to a derivative that has been marked to market during the year ended December 31, 2021, and the change in derivative liability is recorded on Consolidated Statements of Comprehensive Loss. See note 10. On September 15, 2021 the make-whole provision was triggered, causing an increase in principal of the September 2020 Rosen Note by $185,279. During the year ended December 31, 2021, the Company accrued interest of $1,610. During the year ended December 31, 2021, the Company repaid $188,574 in principal and $1,677 in interest. Demand loan During the year ended December 31, 2020 the Company repaid $75,000 of principal. On December 17, 2019, Standish made non-interest bearing loans of $150,000 to the Company in the form of cash. The loan is due on demand and unsecured. During the On March 27, 2020, a lender made non-interest bearing loans of $100,000 to the Company in the form of cash. The loan is due on demand and unsecured. During the year ended December 31, 2020, the Company converted $100,000 of principal and $6,707 of unpaid interest into the September 2020 Equity Raise. On April 9, 2020, a lender made non-interest bearing loans of $50,000 to the Company in the form of cash. The loan is due on demand and unsecured. During the year ended December 31, 2020, the Company converted $50,000 of principal into the September 2020 Equity Raise. On April 21, 2020, a lender made non-interest bearing loans of $100,000 to the Company in the form of cash. The loan is due on demand and unsecured. During the On July 6, 2020, a lender made non-interest bearing loans of $100,000 to the Company in the form of cash. The loan is due on demand and unsecured. During the year ended December 31, the Company converted $100,000 of principal and $6,707 of unpaid interest into the September 2020 Equity Raise. On August 10, 2020, a lender made non-interest bearing loans of $40,000 to the Company in the form of cash. The loan is due on demand and unsecured. During the year ended December 31, 2020 the Company repaid $40,000 of principal. On September 9, 2020, a lender made non-interest bearing loans of $50,000 to the Company in the form of cash. The loan is due on demand and unsecured. During the year ended December 31, 2020 the Company repaid $50,000 of principal. Officer compensation During the year ended December 31, 2021 and 2020, the Company paid Revenue During the year ended December 31, 2021 the Company received revenue of $80,000 from Dune for branded content services prior to consolidation but after recognition as an equity method investee. Note The Company has identified derivative instruments arising from a make-whole feature in the Company’s notes payable during the year ended December 31, 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 10. 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 during the year ended December 31, 2021. For the terms of the conversion features see Note 10. The Company had no derivative assets or liabilities measured at fair value on a recurring basis as of December 31, 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. Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note adjusted to be on a continuous return basis to align with the Monte Carlo simulation model and binomial model. 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 to maturity. 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 year ended December 31, 2021 and 2020. Note 12 – Stockholders’ Shares Authorized 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. 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 year ended December 31, 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 year ended December 31, 2021, investors converted 7,278 shares of the Company’s Series E Convertible Preferred Stock into 1,766,449 shares of the Company’s common stock. Common Stock On January 30, 2020, the Company issued 50,000 shares of its restricted common stock to consultants in exchange for three months of services at a fair value of $585,000. These shares were recorded as common stock issued for prepaid services and will be expensed over the life of the consulting contract to share based payments. During the On January 6, 2020, the Company issued 1,412 shares of its restricted common stock to settle outstanding vendor liabilities of $12,500. In connection with this transaction the Company also recorded a loss on settlement of vendor liabilities of $4,233. On March 5, 2020, the Company issued 2,153 shares of its restricted common stock to settle outstanding vendor liabilities of $25,000. In connection with this transaction, the Company also recorded a gain on settlement of vendor liabilities of $1,098. On March 13, 2020 the Company entered into an exchange agreement with a warrant holder. The company agreed to exchange 5,833 warrants for 5,000 shares of the company common stock. In connection with this agreement the company recorded a loss on conversion of warrants to stock of On March 19, 2020, the Company issued 20,000 shares of its restricted common stock to settle outstanding vendor liabilities of $72,048. In connection with this transaction the Company also recorded a gain on settlement of vendor liabilities of $122,953. On June 18, 2020, the Company issued 50,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $525,000. On June 29, 2020 the Company entered into an exchange agreement with a warrant holder. The company agreed to exchange 5,833 warrants for 2,239 shares of the company common stock and $10,000. On July 3, 2020, the Company issued 15,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $204,300. On July 17, 2020 the Company issued 6,667 shares of its restricted common stock to the Second February 2020 Lender in connection with the Second July 2020 convertible Loan Agreement. On August 15, 2020, the Company issued 6,167 shares of its restricted common stock to consultants in exchange for services at a fair value of $50,693. On August 21, 2020, the Company issued 20,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $180,000. On August 31, 2020, the Company issued 1,866 shares of its restricted common stock to consultants in exchange for services at a fair value of $15,842. On September 11, 2020 the Second February 2020 Lender converted $125,000 of the outstanding principal into 34,722 shares of the Company’s common stock. On September 11, 2020 the February 2019 Convertible Note Lender converted $70,542 of the outstanding principal and $112,888 of the outstanding interest into 64,124 shares of the Company’s common stock. Lender’s Exchange Agreement On September 15, 2020, the Company exchanged $7,325,000 of principal and $967,518 of accrued but unpaid interest of the Company’s debt obligations for $500,000 cash, 2,744,288 shares of Common Stock, and 331,456 warrants (the “Lender’s Exchange Agreement”). The Company also issued the lenders notes totaling $20,000. See note 9 for the September 2020 Goldberg Loan and the September 2020 Rosen Loan. The warrants have an exercise price equal to $4.50 per share, expiring five years from the date of issuance. Since the terms of the original debt were exchanged this was accounted for under extinguishment accounting. The Company determined this debt exchange was a debt extinguishment and the Company recognized a loss on debt extinguishment of $4,915,327, including the derivative liability value. September 2020 Equity Raise Effective September 15, 2020, the Company consummated an underwritten public offering (the “September 2020 Equity Raise”) of 1,725,000 units of securities (the “Units”), with each Unit consisting of (i) one share of common stock, and (ii) one warrant to purchase one share of common stock (the “Warrants”). The September 2020 Equity Raise was conducted pursuant to an Underwriting Agreement, dated September 10, 2020, by and between the Company and The Benchmark Company, LLC, acting as the representative (the “Representative”) of the several underwriters named therein (the “Underwriting Agreement”). In connection with the September 2020 Equity Raise, the Company granted the underwriters a 45-day option to purchase up to 258,750 shares of common stock and/or 258,750 Warrants to purchase common stock to cover over-allotments, if any. The public offering price per Unit was $4.50. The shares of common stock and Warrants were issued separately and were immediately separable upon issuance. Each Warrant represents the right to purchase one share of common stock at an exercise price of $4.50 per share, expiring 5 years from the date of issuance. The gross proceeds to the Company from the September 2020 Equity Raise, before deducting underwriting discounts and commissions and other estimated offering expenses, and excluding the exercise of any Warrants, was approximately $7,762,500. In connection with the September 2020 Equity Raise, the Company converted $3,183,667 of principal and accrued but unpaid interest of the Company’s debt obligations into 768,204 shares of Common Stock and $570,416 warrants. See Notes 7, 8, and 9. The warrants have an exercise price equal to $4.50 per share, expiring five years from the date of issuance. A down-round event was triggered in connection with the September 2020 Equity Raise, resulting in a contingent BCF that had a value of $3,051,810. As these notes were fully converted in the September 2020 Equity Raise, the discount was expensed to accretion of debt discount and issuance cost on the Consolidated Statements of Comprehensive Loss. On September 30, 2020, the Company issued 7,979 shares of its restricted common stock to consultants in exchange for services at a fair value of $21,304. On December 14, 2020, the Company issued 10,417 shares of its restricted common stock to consultants in exchange for services at a fair value of $38,647. On December 21, 2020, the Company issued 8,371 shares of its restricted common stock to employees in exchange for services at a fair value of $31,323. During the On January 14, 2021, the Company issued 30,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $133,200. 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 $192,000. On May 24, 2021, the Company amended the contract and issued and additional 10,000 shares of its restricted common stock. these shares had a fair value of $34,500. The shares issued to the consultant were recorded as common stock issued for prepaid services and will be expensed over the life of the consulting contract to share based payments. During the year ended December 31, 2021, the Company recorded $99,908 to stock-based compensation expense related to these shares. On February 1, 2021, the Company issued 50,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $196,000. 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 $125,000. 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 $12,719. On April 10, 2021, the Company issued 16,275 shares of its restricted common stock to consultants in exchange for services at a fair value of $69,332. On April 21, 2021, the Company entered into a consulting agreement whereas the Company issued a total of 1,048 shares of common stock in exchange for services at a fair value of $3,587. On June 17, 2021, the Company entered into an underwriting agreement with The Benchmark Company LLC, pursuant to which we agreed to sell to the Underwriter in a firm commitment underwritten public offering an aggregate of 750,000 shares of the Company’s common stock, at a public offering price of $3.40 per share. The Company also granted the Underwriter a 30-day option to purchase up to an additional 112,500 shares of Common Stock to cover over-allotments, if any. The Offering closed on June 21, 2021. The net proceeds to the Company from the equity raise was $2,213,500. As part of the underwriting agreement the Company issued 46,667 warrants of the Company’s common stock to Benchmark. The warrants have an exercise price $5.40 and a term of five years. On July 9, 2021, the Representative exercised the over-allotment option to purchase an additional 954,568 shares of Common Stock. On July 20, 2021, the Company issued 2,154 shares of its restricted common stock to consultants in exchange for services at a fair value of $8,570. On July 15, 2021, the Company issued 715 shares of its restricted common stock to consultants in exchange for services at a fair value of $2,500. On August 15, 2021, the Company issued 820 shares of its restricted common stock to consultants in exchange for services at a fair value of $2,500. On August 26, 2021, the Company issued 348 shares of its restricted common stock to consultants in exchange for services at a fair value of $999. On September 15, 2021, the Company issued 793 shares of its restricted common stock to consultants in exchange for services at a fair value of $2,500. On October 25, 2021, the Company entered into a securities purchase agreement with institutional investors resulting in the raise of $3,407,250 in gross proceeds to the Company. Pursuant to the terms of the purchase agreement, the Company agreed to sell, in a registered direct offering, an aggregate of 850,000 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $4.50 per Share. On November 5, 2021, the Company issued 25,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $85,750. On November 15, 2021, the Company issued 13,392 shares of its restricted common stock to consultants in exchange for services at a fair value of $41,917. On November 29, 2021, the Company issued 250,000 shares of its restricted common stock to settle outstanding vendor liabilities of $576,783. In connection with this transaction the Company also recorded a loss on settlement of vendor liabilities of $33,217. On November 29, 2021, the Company issued 101,097 shares of its restricted common stock to consultants in exchange for services at a fair value of $246,676. On December 3, 2021, the Company issued 194 shares of its restricted common stock to consultants in exchange for services at a fair value of $429. On December 14, 2021, the Company issued 211 shares of its restricted common stock to consultants in exchange for services at a fair value of $452. 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 years December 31, 2021 and 2020, are as follows: The following is a summary of the Company’s stock option activity: Weighted Average Remaining (in years) During the year ended December 31, 2018 the Company granted options of On May 7, 2020, the board of directors approved the Jerrick Media Holdings, Inc. 2020 Omnibus Equity Incentive Plan (the “Plan”). Only employees, non-employee directors and consultants are eligible for awards under the Plan. The Plan provides for awards in the form of options (incentive stock options or nonstatutory stock options) restricted stock grants, and restricted stock unit grants. Up to 2,500,000 shares of common stock may be issued under the Plan and the option exercise price of stock options granted under the Plan shall not be less than 100% of the Fair Market Value (as defined in the Plan) (110% for 10% shareholders in the case of ISOs) of a share of common stock on the date of the grant. The option exercise price may be payable in cash, surrender of stock, cashless exercise or net exercise. Each grant awarded under the Plan shall be evidenced by a grant agreement and may or may not be subject to vesting. The Plan is subject to the approval of the Company’s stockholders within one year of the date of adoption by the Board of Directors. On July 8, 2020, the Company’s stockholders approved the Plan, which terminates on May 7, 2030. The Board of Directors may amend or terminate the Plan at any time and for any reason. An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or rules. On May Stock-based compensation for stock options has been recorded in the consolidated statements of operations and totaled $7,616,195 and $4,092,013, for the year ended December 31, 2021 and 2020, respectively. As of December 31, 2021, there was $3,197,018 of total unrecognized compensation expense related to unvested employee options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately 1.23 year. 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 Warrant Activities The following is a summary of the Company’s warrant activity: On October 6, 2020, the underwriters for the September 2020 Equity Raise partially exercised the over-allotment option and on October 8, 2020, purchased an additional 258,750 warrants, generating gross proceeds, before deducting underwriting discounts and commissions, of $2,588. During the During the During the During the year ended December 31, 2020, some of the Company’s warrants had a down-round provision triggered that resulted in a lower exercise price. A deemed dividend of $18,421 was recorded to the Statements of Comprehensive Loss. During the Year ended December 31, 2021, the Company issued 2,250,691 shares of common stock to a certain warrant holder upon the exercise of 2,414,218 warrants. The Company received $9,487,223 in connection with the exercise of the warrant. During the year ended December 31, 2021, a total of 486,516 warrants were issued in connection with the Series E Convertible Preferred Stock raise. During the year ended December 31, 2021, a total of 1,137,575 warrants were issued with convertible notes (See Note 9 above). The warrants have a grant date fair value of $3,258,955 using a Black-Scholes option-pricing model and the above assumptions. During the year ended December 31, 2021, some of the Company’s warrants had a down-round provision triggered that also resulted in an additional 127,801 warrants to be issued. A deemed dividend of $410,750 was recorded to the Statements of Comprehensive Loss. During the year ended December 31, 2021, the Company issued 80,000 warrants in connection with the underwriting agreement. Stock-based compensation for stock warrants of 129,375 has been recorded in the Consolidated Statements of Comprehensive Loss and totaled $480,863, for the year ended December 31, 2021. 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 to RSUs for the year ended December 31, 2021 is presented below: Stock-based compensation for RSA’s has been recorded in the consolidated statements of operations and totaled $391,035 for the year ended December 31, 2021. Note 13 – Commitments and Contingencies 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 December 31, 2021, the May 2020 PPP Loan is no longer outstanding, as during the year ended December 31, 2021, the Company repaid $136,597 in principal and was forgiven $275,903 of principal and $3,119 of accrued interest. As of December 31, 2021 there was $198,655 in principal outstanding on the April 2020 PPP Loan. 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, On or about August 30, 2021, Robert W. Monster and Anonymize, Inc. (“Monster”) filed a lawsuit in the United States District Court for the Western District of Washington at Seattle, Robert W. Monster, et al. v. Creatd, Inc., et al. (Western District of Washington at Seattle 2:21-CV-1177). The 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 On July 28, 2021, the Company signed a 3-year lease for approximately 1,364 square feet of office space at 1674 Meridian Avenue, Miami Beach, Florida 33139. The On February 16, 2022, the company entered into a termination agreement whereas CRTD agrees to pay $115,000 and forfeit the security deposit of $16,836. The lease was terminated as of February 28, 2022 and was determined that the lease agreement was abandoned under ASC 842- 20 -35 -10. The Company updated useful life of the ROU asset and marked the ROU asset and lease liability its single lease cost of $18,451. Supplemental cash flow and other information related to leases was as follows: Total Rent expense for the year ended December 31, 2021 and 2020 was $216,845 and $107,737, respectively. Note 14 – Acquisition Plant Camp LLC On June 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 acquisition was accounted for as a step acquisition however there was no change in value of the Company’s existing equity interest. The Company utilized the fair value of the consideration to determine the fair value of the existing equity interest based on the total merger consideration offered. 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. The goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisition. The following presents the unaudited pro-forma combined results of operations of the Company with Plant Camp as if the entities were combined on January 1, 2020. WHE Agency, Inc. 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 $1,038,271, which consists of a combination of $144,750 in cash and $893,521 in the form of 224,503 shares of the Company’s restricted common stock at a price of $3.98 per share. Based on the purchase price of $1,038,271 for 44% ownership, the fair value of the non-controlling interest was estimated to be $1,190,000 based on the consideration from the Company. 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 following sets forth the components of the purchase price: The excess purchase price amounts were recorded to goodwill and is 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. The goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisition. The following presents the unaudited pro-forma combined results of operations of the Company with WHE as if the entities were combined on January 1, 2020. Dune Inc. Prior to October 3, 2021, the Company invested $732,297 into Dune See note 6 & 7. Using step acquisition accounting, the Company decreased the value of its existing equity interest to its fair value based on its purchase price on October 3, 2021, resulting in the recognition of an impairment in investment of $424,632, which was included in within our consolidated statements of operations. The Company utilized the fair value of the consideration to determine the fair value of the existing equity interest based on the total merger consideration offered and the Company’s stock price at acquisition. On October 3, 2021, we, through Creatd Partners, LLC (“Buyer”), entered into a Stock Purchase Agreement (the “Dune Agreement”) with Standard Holdings, Inc. (“SHI”) and Mark De Luca (“De Luca”) (SHI and De Luca, collectively the “Dune Sellers”), and Stephanie Roy Dufault, whereby Buyer purchased a majority stake in Dune, Inc., a Delaware corporation (“Dune”). Pursuant to the Dune Agreement, which closed on October 4, 2021, Buyer acquired a total of 3,905,634 shares of the common stock of Dune (the “Purchased Shares”). The Company issued 163,344 restricted shares of the Company’s common stock to the Dune Sellers. In addition, pursuant to the Dune Agreement, $50,000 worth of the Company’s common stock issuable to the Dune Sellers on a pro rata basis, priced in accordance with the terms and conditions set forth in the Dune Agreement (the “Indemnification Escrow Amount”), shall be held in escrow and reserved in each Dune Seller’s name by the Company’s transfer agent until such time as release is authorized under the Agreement. The following sets forth the components of the purchase price: Due to the limited amount of time since the acquisition date, the assets and liabilities of Dune Inc. were recorded based primarily on their acquisition date carrying values. Management believes the estimated fair value of these accounts on the acquisition date approximates their carrying value as reflected in the table above due to the short-term nature of these instruments. The remaining assets and liabilities primarily consisted of goodwill, customer relationships, know how, and tradenames. We will adjust the remaining assets and liabilities to fair value as valuations are completed and we obtain information necessary to complete the analyses, but no later than one year from the acquisition data. 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. The goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisition. The following presents the unaudited pro-forma combined results of operations of the Company with Dune as if the entities were combined on January 1, 2020. Note 15 – Segment Information We operate in three reportable segments: Creatd Labs, Creatd Ventures, and Creatd Partners. Our segments were determined based on the economic characteristics of our products and services, our internal organizational structure, the manner in which our operations are managed and the criteria used by our Chief Operating Decision Maker (CODM) to evaluate performance, which is generally the segment’s operating losses. Creatd Labs is the segment focused on development initiatives. Creatd Labs houses the Company’s proprietary technology, including its flagship platform, Vocal, as well as oversees the Company’s content creation framework, and management of its digital communities. Creatd Labs derives revenues from Vocal creator subscriptions, platform processing fees and technology licensing fees. Creatd Ventures builds, develops, and scales e-commerce brands. This segment generates revenues through product sales of its two majority-owned direct-to-consumer brands, Camp and Dune Glow Remedy. The following tables present certain financial information related to our reportable segments and Corporate: During the year ended December 31, 2021, Creatd Partners acquired assets from the Purchase of WHE. See note 14 for a list of assets acquired. During the year ended December 31, 2021, Creatd Ventures acquired assets from the Purchase of Dune and Plant Camp. See note 14 for a list of assets acquired. Note 16 –Income Taxes Components of deferred tax assets are as follows: A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows: The following is a reconciliation of the beginning and ending amount of the unrecognized tax benefit for the Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets of the Company will not be fully realizable for the years ended December 31, 2021 and 2020. Accordingly, management had applied a full valuation allowance against net deferred tax assets as of December 31, 2021 and 2020. As of December 31, 2021, the Company had approximately $54 million of federal net operating loss carryforwards available to reduce future taxable income which will begin to expire in 2034 for both federal and state purposes. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code of 1986, as amended (the “Code”). The Act reduces the federal corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017. ASC 470 requires the Company to remeasure the existing net deferred tax asset in the period of enactment. The Act also provides for immediate expensing of 100% or the costs of qualified property that is incurred and placed in service during the period from September 27, 2017 to December 31, 2022. Beginning January 1, 2023, the immediate expensing provision is phased down by 20% per year until it is completely phased out as of January 1, 2027. Additionally, effective January 1, 2018, the Act imposes possible limitations on the deductibility of interest expense. As a result of the provisions of the Act, the Company’s deduction for interest expense could be limited in future years. The effects of other provisions of the Act are not expected to have a material impact on the Company’s financial statements. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to provide guidance on accounting for the tax effects of the Act. SAB 118 provides a measurement period that begins in the reporting period that includes the Act’s enactment date and ends when an entity has obtained, prepared and analyzed the information that was needed in order to complete the accounting requirements under ASC 720. However, in no circumstance should the measurement period extend beyond one year from the enactment date. In accordance with SAB 118, a company must reflect in its financial statements the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. SAB 118 provides that to the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. The Company does not reflect a deferred tax asset in its financial statements but includes that calculation and valuation in its footnotes. We are still analyzing the impact of certain provisions of the Act and refining our calculations. The Company will disclose any change in the estimates as it refines the accounting for the impact of the Act. Federal and state tax laws impose limitations on the utilization of net operating losses and credit carryforwards in the event of an ownership change for tax purposes, as defined in Section 382 of the Internal Revenue Code. Accordingly, the Company’s ability to utilize these carryforwards may be limited as a result of an ownership change which may have already happened or may happen in the future. Such an ownership change could result in a limitation in the use of the net operating losses in future years and possibly a reduction of the net operating losses available. Note Appointment of New Directors On February 17, 2022, the Board of Directors (the “Board”) of the Company appointed Joanna Bloor, Brad Justus, and Lorraine Hendrickson to Departure of Directors On February 17, 2022, the Board received notice that effective immediately, Mark Standish resigned as Chair of the Board, Chair of the Audit Committee and as a member of the Compensation Committee and Nominating & Corporate Governance Committee; Leonard Schiller resigned as member of the Board, Chair of the Compensation Committee and as a member of the Audit Committee and Nominating & Corporate Governance Committee; and LaBrena Martin resigned as a member of the Board, Chair of the Nominating & Corporate Governance Committee and as a member of the Audit Committee and Compensation Committee. Such resignations are not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Management Restructuring On February 17, 2022, the Board of the Company approved the restructuring of the Company’s senior management team to eliminate the Co-Chief Executive Officer role, appointing Jeremy Frommer as Executive Chairman and Founder, and appointing Laurie Weisberg as Chief Executive Officer (the “Second Restructuring”). Prior to the Second Restructuring, Mr. Frommer and Ms. Weisberg served as the Company’s co-Chief Executive Officers and Ms. Weisberg served as the Company’s Chief Operating Officer. The Second Restructuring does not impact the role or functions of the Company’s Chief Financial Officer, Chelsea Pullano, or the role or functions of the Company’s President and Chief Operating Officer, Justin Maury. Securities Purchase Agreement On March 1, 2022, the Company entered into Nasdaq Notice of Delisting On March 1, 2022, the Company received a letter (the “Letter”) from the staff of The Nasdaq Capital Market (the “Exchange”) notifying the Company that the Exchange has determined to delist the Company’s common stock from the Exchange based on the Company’s Market Value of Listed Securities for the 30-consecutive day period between January 15, 2022 and February 25, 2022 falling short of the requirements under Listing Rule 5550(b)(2) (the “Rule”). Although a 180-day period is typically allowed for an issuer to regain compliance, the Company is not eligible to use such compliance period, as the Exchange had instituted a Panel Monitor through March 9, 2022. The Company is pursuing an appeal to the Panel of such determination, in accordance with the Exchange’s rules and, pursuant to such request by the Company to appeal, the delisting of the Company’s securities and the Form 25 Notification of Delisting filing will be stayed pending the Panel’s decision. The Company intends to present to the Panel evidence that the Company has regained compliance with the Rule; however, there can be no assurance that the Panel will grant the Company’s request for continued listing. The Letter has no immediate impact on the listing of the Company’s common stock or warrants, which will continue to be listed and traded on the Exchange, subject to the Company’s compliance with other continued listing requirements. The Company’s receipt of the Letter does not affect the Company’s business, operations or reporting requirements with the Securities and Exchange Commission. Registered Direct Offering On March 7, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with thirteen accredited investors resulting in the raise of $2,659,750 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell in a registered direct offering an aggregate of 1,519,857 shares of the Company’s common stock together with warrants to purchase an aggregate of 1,519,857 shares of Common Stock at an exercise price of $1.75 per share. The warrants are immediately exercisable and will expire on March 9, 2027. Acquisition of Denver Bodega, LLC d/b/a Basis On March 7, 2022, the Company entered into a Membership Interest Purchase (the “Agreement”) with Henry Springer and Kyle Nowak (collectively the “Sellers”), whereby the Company purchased a majority stake in Denver Bodega, LLC, a Colorado limited liability company whose product is Basis, a direct-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Pursuant to the Agreement, Creatd acquired all of the issued and outstanding membership interests of Denver Bodega, LLC for consideration of one dollar ($1.00), as well as the Company’s payoff, assumption, or satisfaction of certain debts and liabilities totaling $278,163. Settlement of Home Revolution Litigation On March 3, 2022, after substantial motion practice, Creatd successfully settled the dispute with Home Revolution, LLC for a total of $799,000, which includes $660,000 of note principal and $139,000 of accrued interest. The matter has been dismissed. Note Conversions Subsequent to December 31, 2021, a total of $168,850 in principal of convertible notes converted into 109,435 shares of common stock. Promissory Note Subsequent to December 31, 2021, the Company entered into one promissory note Consultant Shares Subsequent to Employment Agreements On April 5, 2022, upon the recommendation of the Compensation Committee of the Board, the Board approved employment agreements with, and equity issuances for, (i) Jeremy Frommer, Executive Chairman, who will receive (a) an signing award of $80,000, (b) an annual salary of $420,000; (c) 121,000 options, to The foregoing descriptions of the Executive Employment Agreements do not purport to be complete and are qualified in their entirety by reference to the forms of Amended Executive Employment Agreements, copies of which are filed as Exhibits 10.40, 10.41, 10.42 and 10.43 to this Annual Report on Form 10-K and is incorporated herein by reference. 9,250,834 Shares of Common Stock PROSPECTUS November 22, 2022 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS The following table sets forth the expenses payable by us in connection with the offering of securities described in this registration statement. All Item 14. Indemnification of Directors and Each of our Second Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws provide for indemnification of our directors and officers. Our Amended and Restated Bylaws provide that we will indemnify any person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent will not, without more, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. The Company may by action of its Board of Directors, grant rights to indemnification and advancement of expenses to employees and agents of the Company with the same scope and effects as the indemnification provisions for officers and directors. Insofar as indemnification for liabilities under the Securities Act may be permitted to officers, directors or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that is it is the opinion of the Securities and Exchange Commission that such indemnification is against public policy as expressed in such Securities Act and is, therefore, unenforceable. During the three months ended September 30, 2022, the Company issued 157,260 shares of Common Stock to consultants and employees. On sellers. II-1 Consolidated Financial Statement Schedules. II-2 II-3 Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. To include any material information with respect to the plan of distribution not previously disclosed in provided, however, that paragraphs (1)(i), (1)(ii) and (1)(iii) above do not apply if the registration SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this POWER OF ATTORNEY: KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints Jeremy Frommer, his true and lawful attorneys-in-fact and agents with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to sign any registration statement for the same offering covered by the Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his, her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF THE COMPANY’S COMMON STOCKThe following is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the ownership and disposition of the Company’s common stock but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth below. No ruling on the U.S. federal, state, or local tax considerations relevant to the Company’s operations or to the purchase, ownership or disposition of its shares, has been requested from the IRS or other tax authority. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.This summary also does not address the tax considerations arising under the laws of any non-U.S., state or local jurisdiction, or under U.S. federal gift and estate tax laws, except to the limited extent set forth below. In addition, this discussion does not address tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation:●banks, insurance companies or other financial institutions, regulated investment companies or real estate investment trusts;●persons subject to the alternative minimum tax or Medicare contribution tax on net investment income;●tax-exempt organizations or governmental organizations;●controlled foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid U.S. federal income tax;●brokers or dealers in securities or currencies;●traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;●persons that own, or are deemed to own, more than five percent of the Company’s capital stock (except to the extent specifically set forth below);●U.S. expatriates and certain former citizens or long-term residents of the United States;●partnerships or entities classified as partnerships for U.S. federal income tax purposes or other pass-through entities (and investors therein);●persons who hold the Company’s common stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction or integrated investment;●persons who hold or receive the Company’s common stock pursuant to the exercise of any employee stock option or otherwise as compensation;●persons who do not hold the Company’s common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code; or●persons deemed to sell the Company’s common stock under the constructive sale provisions of the Internal Revenue Code.In addition, if a partnership or entity classified as a partnership for U.S. federal income tax purposes holds the Company’s common stock, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold the Company’s common stock, and partners in such partnerships, should consult their tax advisors.55You are urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership and disposition of the Company’s common stock arising under the U.S. federal estate or gift tax rules or under the laws of any state, local, non-U.S., or other taxing jurisdiction or under any applicable tax treaty.Non-U.S. Holder DefinedFor purposes of this discussion, you are a non-U.S. holder (other than a partnership) if you are any holder other than:●an individual citizen or resident of the United States (for U.S. federal income tax purposes);●a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States, any state thereof, or the District of Columbia, or other entity treated as such for U.S. federal income tax purposes;●an estate whose income is subject to U.S. federal income tax regardless of its source; or●a trust (x) whose administration is subject to the primary supervision of a U.S. court and which has one or more “U.S. persons” (within the meaning of Section 7701(a)(30) of the Internal Revenue Code) who have the authority to control all substantial decisions of the trust or (y) which has made a valid election to be treated as a U.S. person.DistributionsAs described in “Dividend Policy,” the Company has never declared or paid cash dividends on its common stock and do not anticipate paying any dividends on its common stock in the foreseeable future. However, if the Company does make distributions on its common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from the Company’s current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both the Company’s current and its accumulated earnings and profits, they will constitute a return of capital and will first reduce your basis in the Company’s common stock, but not below zero, and then will be treated as gain from the sale of stock as described below under “— Gain on Disposition of common stock.”Subject to the discussion below on effectively connected income, backup withholding and foreign accounts, any dividend paid to you generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty. In order to receive a reduced treaty rate, you must provide us with an IRS Form W-8BEN, IRS Form W-8BEN-E, or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate. A non-U.S. holder of shares of the Company’s common stock eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. If the non-U.S. holder holds the stock through a financial institution or other agent acting on the non-U.S. holder’s behalf, the non-U.S. holder will be required to provide appropriate documentation to the agent, which then will be required to provide certification to the Company or its paying agent, either directly or through other intermediaries.Dividends received by you that are effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, attributable to a permanent establishment maintained by you in the United States) are generally exempt from the withholding tax described above. In order to obtain this exemption, you must provide us with an IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of certain deductions and credits. In addition, if you are a corporate non-U.S. holder, dividends you receive that are effectively connected with your conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. You should consult your tax advisor regarding any applicable tax treaties that may provide for different rules.56Gain on Disposition of Common StockSubject to the discussion below regarding backup withholding and foreign accounts, you generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other disposition of the Company’s common stock unless:●the gain is effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment maintained by you in the United States);●you are a non-resident alien individual who is present in the United States for a period or periods aggregating 183 days or more during the taxable year in which the sale or disposition occurs and certain other conditions are met; or●the Company’s common stock constitutes a United States real property interest by reason of its status as a “United States real property holding corporation,” or USRPHC, for U.S. federal income tax purposes at any time within the shorter of (i) the five-year period preceding your disposition of the Company’s common stock, or (ii) your holding period for its common stock.The Company believes that it is not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion so assumes. However, because the determination of whether it is a USRPHC depends on the fair market value of its U.S. real property relative to the fair market value of its other business assets, there can be no assurance that the Company will not become a USRPHC in the future. Even if it becomes a USRPHC, however, as long as the Company’s common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if you actually or constructively hold more than five percent of such regularly traded common stock at any time during the shorter of (i) the five-year period preceding your disposition of the Company’s common stock, or (ii) your holding period for the Company’s common stock.If you are a non-U.S. holder described in the first bullet above, you will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates, and a corporate non-U.S. holder described in the first bullet above also may be subject to the branch profits tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty. If you are an individual non-U.S. holder described in the second bullet above, you will be required to pay a flat 30% tax (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, which gain may be offset by U.S. source capital losses for the year (provided you have timely filed U.S. federal income tax returns with respect to such losses). You should consult any applicable income tax or other treaties that may provide for different rules.Backup Withholding and Information ReportingGenerally, the Company must report annually to the IRS, regardless of whether any tax was withheld, the amount of dividends paid to you, your name and address and the amount of tax withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of residence.Payments of dividends or of proceeds on the disposition of stock made to you may be subject to information reporting and backup withholding at a current rate of 24% unless you establish an exemption, for example, by properly certifying your non-U.S. status on an IRS Form W-8BEN, IRS Form W-8BEN-E, or another appropriate version of IRS Form W-8.Backup withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.Foreign Account Tax ComplianceThe Foreign Account Tax Compliance Act, or FATCA, imposes withholding tax at a rate of 30% on dividends on and gross proceeds from the sale or other disposition of the Company’s common stock paid to “foreign financial institutions” (as specially defined under these rules), unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding the U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or otherwise establishes an exemption. FATCA also generally imposes a U.S. federal withholding tax of 30% on dividends on and gross proceeds from the sale or other disposition of the Company’s common stock paid to a “non-financial foreign entity” (as specially defined for purposes of these rules) unless such entity provides the withholding agent with a certification identifying certain substantial direct and indirect U.S. owners of the entity, certifies that there are none or otherwise establishes an exemption. The withholding provisions under FATCA generally apply to dividends on our common stock, and under current transition rules, are expected to apply with respect to the gross proceeds from the sale or other disposition of the Company’s common stock on or after January 1, 2019. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph. Non-U.S. holders should consult their own tax advisors regarding the possible implications of this legislation on their investment in the Company’s common stock.Each prospective investor should consult its own tax advisor regarding the particular U.S. federal, state and local and non-U.S. tax consequences of purchasing, holding and disposing of the Company’s common stock, including the consequences of any proposed change in applicable laws.57SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTThe following table sets forth certain information regarding the Company’s common stock, beneficially owned as of August 18, 2020 (i) each person known to the Company to beneficially own more than 5% of its common stock, (ii) each executive officer, director and director nominee and (iii) all officers, directors and director nominees as a group. The following table is based on the Company having 3,319,937 shares of common stock issued and outstanding as of August 18, 2020. The Company calculated beneficial ownership according to Rule 13d-3 of the Securities Exchange Act of 1934, as amended as of that date. Shares of the Company’s common stock issuable upon exercise of options or warrants or conversion of notes that are exercisable or convertible within 60 days after August 18, 2020 are included as beneficially owned by the holder, but not deemed outstanding for computing the percentage of any other stockholder for Percentage of common stock Beneficially Owned. For each individual and group included in the table below, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the 3,319,937 shares of common stock outstanding at August 18, 2020, plus the number of shares of common stock that such person or group had the right to acquire on or within 60 days after August 18, 2020. Beneficial ownership generally includes voting and dispositive power with respect to securities. Unless otherwise indicated below, the persons and entities named in the table have sole voting and sole dispositive power with respect to all shares beneficially owned. Shares
Beneficially
Owned (1) Percentage
Beneficially Owned Executive Officers and Directors Jeremy Frommer 392,868 (2) 11.52 % Justin Maury 163,707 (3) 4.83 % Chelsea Pullano 57,818 (6) 1.71 % Leonard Schiller 79,506 (4) 2.39 % Mark Standish 156,000 (7) 4.62 % Mark Patterson 21,830 (8) * % Laurie Weisberg -- -- % All current directors and officers as a group 871,729 25.07 % 5% or Greater Stockholders Chris Gordon 257,572 7.76 % Arthur Rosen 445,816 (5) 13.39 % *less than one percent(1)The securities “beneficially owned” by a person are determined in accordance with the definition of “beneficial ownership” set forth in the regulations of the SEC and accordingly, may include securities owned by or for, among others, the spouse, children or certain other relatives of such person, as well as other securities over which the person has or shares voting or investment power or securities which the person has the right to acquire within 60 days.(2)Includes 303,631 shares of common stock, 89,187 shares of common stock underlying stock options, and 50 shares of common stock underlying warrants.(3)Includes 95,374 shares of common stock and 68,333 shares of common stock underlying stock options.(4)Includes 76,098 shares of common stock and 3,408 shares of common stock underlying warrants.(5)Solely based on the Company’s review of filings made on a Schedule 13G on February 14, 2020 with the SEC. Includes (i) 391,570 shares of Common Stock held directly by Mr. Rosen, (ii) 44,247 shares of Common Stock held by Pearl Digital Opportunities Fund LLC (“Pearl”), of which Mr. Rosen is the Managing Member, (iii) warrants to acquire 3,333 shares of the Company’s common stock, and (iv) warrants to acquire 6,666 shares of the Company’s common stock held Mr. Rosen’s minor children.(6)Includes 7,818 shares of common stock and 50,000 shares of common stock underlying stock options.(7)Includes 102,800 shares of common stock, 13,200 shares of common stock underlying warrants, and 40,000 shares of common stock underlying convertible notes.(8)Includes 19,630 shares of common stock underlying convertible notes and 2,200 shares of common stock underlying warrants.58PARTY TRANSACTIONS20192021 and December 31, 20182020 to which we have been a party, including transactions in which the amount involved in the transaction exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described elsewhere in this proxy statement.Annual Report. We are not otherwise a party to a current related party transaction, and no transaction is currently proposed, in which the amount of the transaction exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years and in which a related person had or will have a direct or indirect material interest.20182020 Rosen Loan Agreement16, 2018,14, 2020, the Company entered into a loan agreement (the “January 20182020 Rosen Loan Agreement”) with Arthur Rosen, a shareholder of the Company,, whereby the Company issued Mr. Rosen a promissory note in the principal amount of $60,000$150,000 (the “January 20182020 Rosen Note”). The January 2018 Rosen Note is secured by Jeremy Frommer, our Chief Executive Officer, whereby upon default Mr. Frommer’s personal shares of the Company’s common stock would be available to Mr. Rosen in an amount equal to the principal outstanding divided by 12. Pursuant to the January 20182020 Rosen Loan Agreement, the January 20182020 Rosen Note bearsaccrues interest at a ratefixed amount of 6% per annum and is payable on$2,500 for the maturity dateduration of January 31, 2018 (the “January 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the May 2016 Rosen Loan are due. note.2018,2020 the Company repaid $60,000$150,000 in principal and $200$15,273 in interest and the loan is no longer outstanding. interest.January 2018 GordonFebruary Banner 2020 Loan AgreementJanuary 16, 2018,February 15, 2020, the Company entered into a loan agreement (the “January 2018 Gordon“February 2020 Banner Loan Agreement”) with Christopher Gordon (“Gordon”), whereby the Company issued Mr. Gordon a promissory note in the principal amount of $40,000$9,900 (the “January 2018 Gordon“February 2020 Note”). The January 2018 Gordon Note is secured by Jeremy Frommer, our Chief Executive Officer, whereby upon default Mr. Frommer’s personal shares for expenses paid on behalf of the Company’s common stock would be available to Mr. Gordon in amount equal to the principal outstanding dividedCompany by 12.an employee. Pursuant to the January 2018 GordonFebruary 2020 Loan Agreement, the January 2018 GordonFebruary 2020 Note bears interest at a rate of 6% per annum and payable on the maturity date of January 31, 2018 (the “January 2018 Gordon Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the January 2018 Gordon Note are due. During the year ended December 31, 2018, the Company repaid $40,000 in principal and $105 in interest and the loan is no longer outstanding.The First March 2018 Rosen Loan AgreementOn March 4, 2018, the Company entered into a loan agreement (the “First March 2018 Rosen Loan Agreement”) with Mr. Rosen, whereby the Company issued Mr. Rosen a promissory note in the principal amount of $10,000 (the “First March 2018 Rosen Note”).$495. As additional consideration for entering in the First March 2018 Rosen NoteFebruary 2020 Loan Agreement, the Company issued Mr. Rosen a five-year warrant to purchase 16649 shares of the Company’s common stock at a purchase price of $12.00$18.00 per share. Pursuant to the First March 2018 Rosen Loan Agreement, the First March 2018 Rosen Note bears interest at a rate of 12% per annum and is payable on the maturity date of March 19, 2018 (the “First March 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First March 2018 Rosen Note was due. nine monthsyear ended December 31, 2018,2020 the Company repaid $10,000$9,900 in principal and $260$495 in interest and the loan is no longer outstanding.59Second March 2018 RosenFebruary 2020 Frommer Loan AgreementMarch 9, 2018,February 18, 2020, the Company entered into a loan agreement (the “Second March 2018 Rosen Loan Agreement”) with Mr. Rosen, whereby the Company issued Mr. Rosen a promissory note in the principal amount of $15,000 (the “Second March 2018 Rosen Note”). As additional consideration for entering in the Second March 2018 Rosen Loan Agreement, the Company issued Mr. Rosen a five-year warrant to purchase 250 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the Second March 2018 Rosen Loan Agreement, the Second March 2018 Rosen Note bears interest at a rate of 12% per annum and is payable on the maturity date of March 24, 2018 (the “Second March 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Second March 2018 Rosen Note was due. During the nine months ended December 31, 2018, the Company repaid $15,000 in principal and $365 in interest and the loan is no longer outstanding.The Third March 2018 Rosen Loan AgreementOn March 13, 2018, the Company entered into a loan agreement (the “Third March 2018 Rosen Loan Agreement”) with Mr. Rosen, whereby the Company issued Mr. Rosen a promissory note in the principal amount of $10,000 (the “Third March 2018 Rosen Note”). As additional consideration for entering in the Third March 2018 Rosen Loan Agreement, the Company issued Mr. Rosen a five-year warrant to purchase 166 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the Third March 2018 Rosen Loan Agreement, the Third March 2018 Rosen Note bears interest at a rate of 12% per annum and is payable on the maturity date of March 28, 2018 (the “Third March 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Third March 2018 Rosen Note was due. During the nine months ended December 31, 2018, the Company repaid $10,000 in principal and $230 in interest and the loan is no longer outstanding.The May 2018 Schiller Loan AgreementOn May 2, 2018, the Company entered into a loan agreement (the “May 2018 Schiller Loan Agreement”) with Leonard Schiller, Chairman of our board of directors, whereby the Company issued Mr. Schiller a promissory note in the principal amount of $100,000 (the “May 2018 Schiller Note”). As additional consideration for entering in the May 2018 Schiller Loan Agreement, the Company issued Mr. Schiller a four-year warrant to purchase 5,000 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the May 2018 Schiller Loan Agreement, the May 2018 Schiller Note bears interest at a rate of 13% per annum and is payable on the maturity date of February 02, 2019 (the “May 2018 Schiller Maturity Date”) at which time all outstanding principal, accrued and unpaid interest are due under the May 2018 Schiller Loan.During the year ended December 31, 2018, the Company converted $100,000 of principal and $4,369 of unpaid interest into the August 2018 Equity Raise (as defined below) and the loan is no longer outstanding. The June 2018 Frommer Loan AgreementOn June 29, 2018, the Company entered into a loan agreement (the “June 2018“February 2020 Frommer Loan Agreement”) with Jeremy Frommer, our Chief Executive Officer,an officer of the Company, whereby the Company issued Frommer a promissory note in the principal amount of $10,000$2,989 (the “June 2018“February 2020 Frommer Note”). As additional consideration for entering in the June 2018 Frommer Note Loan Agreement, the Company issued Frommer a four-yearfive-year warrant to purchase 500 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the June 2018 Frommer Loan Agreement, the June 2018 Frommer Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018 (the “June 2018 Frommer Maturity Date”) at which time all outstanding principal, accrued and unpaid interest are due under the June 2018 Frommer Loan. Subsequent to the balance sheet date, on November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued 680 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company executed upon an agreement that extended the maturity date of this loan to May 15 2019. On December 15, 2019 the Company executed upon an agreement that further extended the maturity date of this loan to May 15, 2020.60The First July 2018 Schiller Loan AgreementOn July 3, 2018, the Company entered into a loan agreement (the “First July 2018 Schiller Loan Agreement”) with Leonard Schiller, a member of the Board, whereby the Company issued Mr. Schiller a promissory note of $35,000 (the “First July 2018 Schiller Note”). As additional consideration for entering in the First July 2018 Schiller Loan Agreement, the Company issued Schiller a four-year warrant to purchase 1,250 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the agreement, the note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018 at which time all outstanding principal, accrued and unpaid interest were due under the First July 2018 Schiller Loan. Subsequent to the balance sheet date, on November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued 2,383 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company executed upon an agreement that extended the maturity date of this loan to May 15, 2019.During the year ended December 31, 2018 the Company repaid $20,000 in principal. During the year ended December 31, 2019, the Company converted $15,000 in principal and $863.33 into the February 2019 Offering and the note is no longer outstanding.The Second July 2018 Schiller Loan AgreementOn July 17, 2018, the Company entered into a loan agreement (the “Second July 2018 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Mr. Schiller a promissory note of $25,000 (the “Second July 2018 Schiller Note”). As additional consideration for entering in the Second July 2018 Schiller Loan Agreement, the Company issued Mr. Schiller a four-year warrant to purchase 1,250 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the Second July 2018 Schiller Loan Agreement, the Second July 2018 Schiller Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018 at which time all outstanding principal, accrued and unpaid interest were due under the Second July 2018 Schiller Loan. Subsequent to the balance sheet date, on November 8, 2018 the Company entered into an agreement with Mr. Schiller that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued 1,698 warrants to Mr. Schiller to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company entered into an agreement that extended the maturity date of this loan to May 15, 2019. On December 15, 2019 the Company executed upon an agreement that further extended the maturity date of this loan to May 15, 2020.During the year ended December 31, 2019 the Company converted $4,136.67 in principal into the February 2019 Offering.The First July 2018 Rosen Loan AgreementsOn July 12, 2018, the Company entered into a loan agreement (the “First July 2018 Rosen Loan Agreement”) with Mr. Rosen, a shareholder of the Company, whereby the Company issued Mr. Rosen a promissory note of $10,000 (the “First July 2018 Rosen Note”). Pursuant to the First July 2018 Rosen Loan Agreement, the note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018 at which time all outstanding principal, accrued and unpaid interest are due under the First July 2018 Rosen Note. Subsequent to the balance sheet date, on November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued to Mr. Rosen 458 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company entered into an agreement that extended the maturity date of this loan to May 15, 2019.During the year ended December 31, 2019, the Company repaid $10,000 of principal and all unpaid interest and the loan is no longer outstanding.The Second July 2018 Rosen Loan AgreementsOn July 18, 2018, the Company entered into a loan agreement (the “Second July 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Mr. Rosen a promissory note of $50,000 (the “Second July 2018 Rosen Note”) resulting from the conversion of a demand note (as described below). As additional consideration for entering into the Second July 2018 Rosen Loan Agreement, the Company issued Mr. Rosen a four-year warrant to purchase 2,500 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the Second July 2018 Rosen Loan Agreement, the Second July 2018 Rosen Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018 at which time all outstanding principal, accrued and unpaid interest are due under the Second July 2018 Rosen Note. Subsequent to the balance sheet date, on November 8, 2018 the Company entered into an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued to Mr. Rosen 3,399 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company entered into an agreement that extended the maturity date of this loan to May 15, 2019.During the year ended December 31, 2019, the Company repaid $50,000 of principal and all unpaid interest and the loan is no longer outstanding.61The November 2018 Rosen Loan AgreementOn November 29, 2018, the Company entered into a loan agreement (the “November 2018 Rosen Loan Agreement”) with Mr. Rosen, whereby the Company issued Mr. Rosen a promissory note in the principal amount of $25,000 (the “November 2018 Rosen Note”). As additional consideration for entering in the November 2018 Rosen Note Loan Agreement, the Company issued Mr. Rosen a four-year warrant to purchase 416 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the November 2018 Rosen Loan Agreement, the November 2018 Rosen Note bears interest at a rate of 6% per annum and payable on the maturity date of December 23, 2018 (the “November 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest are due under the November 2018 Rosen Loan.During the year ended December 31, 2018, the Company repaid $25,000 of principal and $33 of unpaid interest and the loan is no longer outstanding.The December 2018 Rosen Loan AgreementOn December 27, 2018, the Company entered into a loan agreement (the “December 2018 Rosen Loan Agreement”) with Mr. Rosen, whereby the Company issued Mr. Rosen a promissory note in the principal amount of $75,000 (the “December 2018 Rosen Note”). As additional consideration for entering in the December 2018 Rosen Note Loan Agreement, the Company issued Mr. Rosen a four-year warrant to purchase 1,250 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the December 2018 Rosen Loan Agreement, the December 2018 Rosen Note bears interest at a rate of 6% per annum and payable on the maturity date of January 26, 2018 (the “December 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest are due under the November 2018 Rosen Loan. On March 29, 2019 the Company entered into an agreement that extended the maturity date of this loan to May 15, 2019.During the year ended December 31, 2019, the Company converted this loan and all unpaid interest into the June 2019 Loan Agreement and the loan is no longer outstanding.The December 2018 Gravitas Capital Loan AgreementOn December 27, 2018, the Company entered into a loan agreement (the “December 2018 Gravitas Capital Loan Agreement”) with Gravitas Capital, whereby the Company issued Gravitas Capital a promissory note in the principal amount of $50,000 (the “December 2018 Gravitas Capital Note”). As additional consideration for entering in the December 2018 Gravitas Capital Note Loan Agreement, the Company issued Gravitas Capital a four-year warrant to purchase 833 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the December 2018 Gravitas Capital Loan Agreement, the December 2018 Gravitas Capital Note bears interest at a rate of 6% per annum and payable on the maturity date of January 27, 2018 (the “December 2018 Gravitas Capital Maturity Date”) at which time all outstanding principal, accrued and unpaid interest are due under the November 2018 Gravitas Capital Loan. In January 2019, the Company repaid $50,000 in principal and $250 in interest, and the loan is no longer outstanding.The January 2019 Rosen Loan AgreementOn January 30, 2019, the Company entered into a loan agreement (the “January 2019 Rosen Loan Agreement”) with Mr. Rosen, whereby the Company issued Mr. Rosen a promissory note in the principal amount of $175,000 (the “January 2019 Rosen Note”). As additional consideration for entering in the January 2019 Rosen Note Loan Agreement, the Company issued Mr. Rosen a four-year warrant to purchase 5,000 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the January 2019 Rosen Loan Agreement, the January 2019 Rosen Note bears interest at a rate of 10% per annum and payable on the maturity date of February 15, 2019 (the “January 2019 Rosen Maturity Date”). On February 19, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Mr. Rosen warrants to purchase 11,731 shares of common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company entered into an agreement with Mr. Rosen that extended the maturity date of this loan to May 15, 2019.62On August 8, 2019 the Company entered into an agreement further extending the maturity date to September 20, 2019.During the year ended December 31, 2019 the Company repaid $175,000 in principal and $15,073 in interest and the loan is no longer outstanding.The February 2019 Rosen Loan AgreementOn February 14, 2019, the Company entered into a loan agreement (the “February 2019 Rosen Loan Agreement”) with Mr. Rosen, whereby the Company issued Mr. Rosen a promissory note in the principal amount of $50,000 (the “February 2019 Rosen Note”). As additional consideration for entering in the February 2019 Rosen Note Loan Agreement, the Company issued Mr. Rosen a four-year warrant to purchase 1,666 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the February 2019 Rosen2020 Frommer Loan Agreement, the February 2019 Rosen Note bears interest at a rate of 10% per annum andnote is payable on the maturity date of February 28, 20192020 (the “February 2019 Rosen2020 Frommer Maturity Date”). On March 29, 2019 the Company entered into an agreement with Mr. Rosen that extended the maturity date of this loan to May 15, 2019. On August 8, 2019 the Company entered into an agreement further extending the maturity date to September 20, 2019.20192020 the Company repaid $50,000$2,989 in principal and $3,208$160 in interest and the loan is no longer outstanding.interest.June 2019September 2020 Goldberg Loan AgreementJune 3, 2019,September 15, 2020, the Company entered into a loan agreement (the “June 2019“September 2020 Goldberg Loan Agreement”) with Mr. Rosen, pursuant to whichGoldberg whereby the Company issued a promissory note of $16,705 (the “September 2020 Goldberg Note”). Pursuant to the September 2020 Goldberg Loan Agreement, the September 2020 Goldberg Note has an interest rate of 7%. The maturity date of the September 2020 Goldberg Note is September 15, 2022 (the “September 2020 Goldberg Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under note are due. The September 2020 Goldberg Loan is secured by the tangible and intangible property of the Company.be indebted in the amount of $2,400,000, of which $1,200,000 was funded by September 30, 2019 and $1,200,000 was exchanged from the May 20162020 Rosen Loan Agreement, dated May 26, 2016 in favor ofthe September 2020 Rosen for a joint and severalNote has an interest in the Term Loan pursuant to the Debt Exchange Agreement. The June 2019 Loan Agreement, the June 2019 Loan bears interest at a rate of 12.5% per annum, compounded annually and payable on the7%. The maturity date of December 3, 2019the September 2020 Rosen Note is September 15, 2022 (the “June 2019“September 2020 Rosen Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the June 2019. In connection withnote are due. The September 2020 Rosen Loan is secured by the conversiontangible and intangible property of the May 2016Company.Loan AgreementNote has a make-whole provision if the Company recorded a debt discount of $92,752. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.The August 2019 Schiller Loan AgreementOn August 6, 2019, the Company entered into a loan agreement (the “August 2019 Schiller Loan Agreement”) with Mr. Schiller, whereby the Company issued a promissory note to Mr. Schiller in the principal amount of $15,000 (the “August 2019 Schiller Note”). Pursuant to the August 2019 Schiller Loan Agreement, the August 2019 Schiller Note bears interest at a rate of $750 per month. As additional consideration for entering in the August 2019 Schiller Loan Agreement, the Company issued a five-year warrant to purchase 75 sharesshare price of the Company’s common stock atis below 2.92 on September 14, 2020, they are subject to derivative liability treatment. The Company has applied ASC 815, due to the potential for settlement in a purchase pricevariable quantity of $18.00 per share.shares. The make-whole feature of gave rise to a derivative liability of $504,413 which was recorded as a loss on extinguishment of debt.20192020 the Company repaid $15,000 in principal and $750 inaccrued interest and the loan is no longer outstanding. of $67.September 2019 Schiller Loan AgreementOn September 26, 2019, the Company entered into a loan agreement (the “September 2019 Schiller Loan Agreement”)following table sets forth certain information, as of November 21, 2022, with Mr. Schiller, whereby the Company issued Mr. Schiller a promissory note in the principal amount of $50,000 (the “September 2019 Schiller Note”). Pursuantrespect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of the Company’s executive officers and directors; and (iii) the Company’s directors and executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned. The address for each person is 419 Lafayette Street, 6th Floor, New York, NY 10003. Shares Beneficially Owned(1) Percentage Ownership Executive Officers and Directors Jeremy Frommer 2,015,401 (2) 6.48 % Justin Maury 1,160,536 (3) 3.77 % Chelsea Pullano 420,818 (4) 1.40 % Erica Wagner 32,767 (5) * % Peter Majar — 0 % All current directors and officers as a group 3,629,522 11.76 % * less than one percent (1) The securities “beneficially owned” by a person are determined in accordance with the definition of “beneficial ownership” set forth in the regulations of the SEC and accordingly, may include securities owned by or for, among others, the spouse, children or certain other relatives of such person, as well as other securities over which the person has or shares voting or investment power or securities which the person has the right to acquire within 60 days. (2) Includes 699,862 shares of common stock, 1,121,188 shares of common stock underlying stock options, and 194,351 shares of common stock underlying warrants. (3) Includes 159,060 shares of common stock, 994,333 shares of common stock underlying stock options, and 7,143 shares of common stock underlying warrants. (4) Includes 44,818 shares of common stock, 374,000 shares of common stock underlying stock options and 2,000 shares of common stock underlying warrants. (5) Includes 5,714 shares of common stock, 20,000 shares of common stock underlying stock options and 25,714 shares of common stock underlying warrants. Number of
securities
to be
issued upon
exercise of
outstanding
options and
warrants Weighted-
average
exercise
price of
outstanding
options,
warrants and
rights Number of
securities
remaining
available for
future
issuance
under
equity
compensation
plans
(excluding
securities
reflected
in
column (a) Plan Category (a) (b) (c) Equity compensation plans approved by security holders 2,950,402 (1) $ 7.07 351,515 Equity compensation plans not approved by stockholders N/A N/A N/A Total 2,950,402 $ 7.07 351,515 (1) During the year ended December 31, 2021, we had awards outstanding under the 2020 Plan. As of the end of fiscal year 2021, we had 3,039,308 shares of our common stock issuable upon the exercise of outstanding options granted pursuant to the 2020 Plan. The securities available under the Plan for issuance and issuable pursuant to exercises of outstanding options may be adjusted in the event of a change in outstanding stock by reason of stock dividend, stock splits, reverse stock splits, etc. Pursuant to the terms of the 2020 Plan we can grant stock options, restricted stock unit awards, and other awards at levels determined appropriate by our Board and/or compensation committee. The 2020 Plan also allows us to utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of our employees, 2019 Schiller LoanWarrants and conversion of the October Debenture. For additional information regarding the issuance of such debentures and warrants see above descriptions of the July Purchase Agreement, the September 2019 Schiller Note bears interest at a ratePurchase Agreement and the October Debenture. We are registering the shares of $2,250 per month. As additional considerationour Common Stock in order to permit the Selling Stockholders to offer the shares for enteringresale from time to time. Except as otherwise described in the First September 2019 Schiller Loanfootnotes to the table below and for the ownership of the registered shares issued pursuant to the July Purchase Agreement, the Company issued Schiller a five-year warrant to purchase 333September Purchase Agreement and/or the October Purchase Agreement, neither the Selling Stockholders nor any of the persons that control them has had any material relationships with us or our affiliates within the past three (3) years.the Company’s common stock at a purchase price of $18.00 per share.During the year ended December 31, 2019 the Company repaid $50,000 in principal and $2,250 in interest and the loan is no longer outstanding. The October 2019 Frommer Loan AgreementOn October 7, 2019, the Company entered into a loan agreement (the “October 2019 Frommer Loan Agreement”) with Mr. Frommer, whereby the Company issued Mr. Frommer a promissory note in the principal amount of $10,000 (the “October 2019 Frommer Note”). Pursuant to the October 2019 Frommer Loan Agreement, the October 2019 Frommer Note bears interest at a flat rate of $500. As additional consideration for entering in the October 2019 Frommer Loan Agreement, the Company issued Mr. Frommer a five-year warrant to purchase 50 sharesour Common Stock by each of the Company’s common stock at a purchase price of $18.00 per share.Selling Stockholders.DuringThe second column lists the year ended December 31, 2019 the Company repaid $10,000 in principal and $225 in interest and the loan is no longer outstanding. 63In connection with this offering, we will enter into an underwriting agreement with The Benchmark Company as representative for the underwriters in this offering. Each underwriter named below has severally agreed to purchase from us, on a firm commitment basis, the number of Units, consisting of shares of our common stock and warrants, set forth opposite its name below, atCommon Stock beneficially owned by each Selling Stockholder before this Offering (including shares which the public offering price, less the underwriting discount set forth on the cover page of this prospectus.UnderwriterNumber ofUnitsThe Benchmark Company, LLCBrookline Capital Markets, a division of Arcadia Securities, LLCTotal833,333The underwriters are committed to purchase all of the Units offered by us other than those covered by the option to purchase additional securities described below, if they purchase any such securities. The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriters’ obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.The CompanySelling Stockholder has agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act of 1933, as amended, and to contribute to payments the underwriters may be required to make in respect thereof.The underwriters are offering the Units, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers toacquire within 60 days, including upon conversion of any convertible securities)publicshares of our Common Stock being offered by this prospectus by each Selling Stockholder.to reject orders in whole or in part.Over-allotment OptionThe Company has grantedfifth columns list the underwriters an over-allotment option. This option, which is exercisable for up to 45 daysnumber of shares of Common Stock beneficially owned by each Selling Stockholder and their percentage ownership after the dateOffering (including shares which the Selling Stockholder has the right to acquire within 60 days, including upon conversion of this prospectus, permitsany convertible securities), assuming the underwriters to purchase a maximumsale of 125,000 additional shares (15% of the shares sold in this offering) from us to cover over-allotments, if any. If the underwriters exercise all or part of this option, it will purchase shares covered by the option at the public offering price per share that appears on the cover page of this prospectus, less the underwriting discount. If this option is exercised in full, the total offering price to the public will be $8,625,000 and the total net proceeds, before expenses, to us will be $7,870,625.DiscountThe following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.PerShareTotalWithoutOver-AllotmentOptionTotalWithOverAllotmentOptionPublic offering price$$$Underwriting discount (7.5%)$$$Proceeds, before expenses, to us$$$The underwriters propose to offer the shares offered by us to the public at the public offering price per share set forth on the cover of this prospectus. In addition, the underwriters may offer some of the shares to other securities dealers at such price less a concession of $ per share. If all of the shares offered by us are not sold at the public offering price per share, the underwriters may change the offering price per share and other selling terms by means of a supplementeach Selling Stockholder pursuant to this prospectus.64The Company will payUnder the out-of-pocket accountable expensesterms of the underwriters in connection with this offering. The underwriting agreement, however, provides that inJuly Debenture, the eventSeptember Warrants and the offering is terminated,October Debenture, a Selling Stockholder may not convert any advance expense deposits paid to the underwriters will be returnedsuch securities to the extent that offering expenses are not actually incurred in accordancesuch conversion or exercise would cause such Selling Stockholder, together with FINRA Rule 5110(f)(2)(C).The Company has agreedany other person with which the Selling Stockholder is considered to pay the underwriters’ non-accountable expenses allowance equal to 1%be part of a group under Section 13 of the aggregate gross proceeds of this offering. The Company has also agreed to pay for a certain amountExchange Act or with which the Selling Stockholder otherwise files reports under Section 13 and/or 16 of the underwriter’s accountable expenses including actual accountable road show expenses for the offering; prospectus tracking and compliance software for the offering; the reasonable and documented fees and disbursementsExchange Act, to beneficially own a number of shares of Common Stock which exceeds 4.99% or 9.99%, as applicable, of the underwriter’s counsel up to an amount of $75,000; background checks of the Company’s officers and directors; preparation of bound volumes and cube mementos in such quantities as the underwriter may reasonably request; provided that these actual accountable expenses of the underwriter shall not exceed $100,000 in the aggregate, including the fees and disbursements of the underwriter’s counsel.The Company estimates that the total expenses of the offering payable by us, excluding underwriting discounts and commissions, will be approximately $ ..Discretionary AccountsThe underwriters do not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.Lock-Up AgreementsPursuant to certain “lock-up” agreements, the Company, its executive officers, directors and holders of the Company’s common stock and securities exercisable for or convertible into its common stock outstanding immediately upon the closing of this offering, have agreed, subject to certain exceptions, not to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, the economic risk of ownership of, directly or indirectly, engage in any short selling of any common stock or securities convertible into or exchangeable or exercisable for any common stock, whether currently owned or subsequently acquired, without the prior written consent of the underwriters, for a period of nine (9) months from the date of effectiveness of the offering.The lock-up period described in the preceding paragraph will be automatically extended if: (1) during the last 17 days of the restricted period, the Company issues an earnings release or announce material news or a material event; or (2) prior to the expiration of the lock-up period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the lock-up period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the date of the earnings release, unless the underwriters waive this extension in writing; provided, however, that this lock-up period extension shall not apply to the extent that FINRA has amended or repealed NASD Rule 2711(f)(4), or has otherwise provided written interpretive guidance regarding such rule, in each case, so as to eliminate the prohibition of any broker, dealer, or memberEquity Interests of a national securities association from publishing or distributing any research report, with respectclass that is registered under the Exchange Act that is outstanding at such time.the securities of an emerging growth company (as defined in the JOBS Act) prior to or after the expiration of any agreement between the broker, dealer, or member of a national securities association and the emerging growth company or its stockholders that restricts or prohibits the sale of securities heldus by the emerging growth companySelling Stockholders as of November 21, 2022, except as otherwise noted below. The Selling Stockholders may sell all or its stockholders after the initial public offering date.65Underwriter WarrantsThe Company has agreed to issue to the underwriters warrants to purchase up to a total of 7.5%some of the shares of Common Stock it is offering, and may sell, unless indicated otherwise in the footnotes below, shares of our common stock sold inotherwise than pursuant to this offering (excludingprospectus. The tables below assume the Selling Stockholders sell all of the shares sold through the exercise of the over-allotment option). The warrants are exercisable at $9.90 per share (110% of the public offering price) commencing on a date which is six (6) months from the effective date of the offering underoffered by them in offerings pursuant to this prospectus, supplement and expiring on a date which is no more than five (5) years fromdo not acquire any additional shares. We are unable to determine the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G). The warrants have been deemed compensation by FINRA and are therefore subject to a 6-month lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriters (or their permitted assignees under the Rule) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will it engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 12 months from effectiveness. The warrants may be exercised as to all, or a lesserexact number of shares of common stock, and will provide for cashless exercise and will contain provisions for one demand registration of the sale of the underlying shares of common stock and unlimited “piggyback” registration rights, both for a period of no greater than five (5) years from the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G)(iv). The Company will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or the Company’s recapitalization, reorganization, merger or consolidation. However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.Electronic Offer, Sale and Distribution of SharesA prospectus in electronic format may be made available on the websites maintained by the underwriters, if any, participating in this offering and the underwriters participating in this offering may distribute prospectuses electronically. The underwriters may agree to allocate a number of shares for sale to its online brokerage account holders. Internet distributions will be allocated by the underwriters that will make internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information onactually be sold or when or if these websites is not part of, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us or the underwriters in their capacity as underwriters, and should not be relied upon by investors.sales will occur.Selling Stockholder Number of Shares Owned Before Offering (1) Shares Offered Hereby Number of Shares Owned After Offering Percentage of Shares Beneficially Owned After Offering (1) Anson Investment Master Fund LP (2) 0 2,048,060 0 0.00 % Anson East Master Fund (3) 0 512,015 0 0.00 % L1 Capital Global Opportunities Master Fund (4) 0 56,007 0 0.00 % Joseph Reda (5) 200,000 1,610,722 200,000 0.51 % Gregory Castaldo (6) 228,935 612,015 228,935 0.59 % Andrew Arno (7) 80,000 412,015 80,000 0.21 % Dorado Goose, LLC (8) 400,000 4,000,000 400,000 1.03 % 2.33 % StabilizationIn connection with this offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate-covering transactions, penalty bids and purchases to cover positions created by short sales.(1) ●(2) Stabilizing transactions permit bidsRepresents 1,600,000 shares of issuable upon the exercise of warrants and 448,060 shares issuable upon the exercise of warrants. Anson Advisors Inc. and Anson Funds Management LP, the Co-Investment Advisers of Anson Investments Master Fund LP (“AIMF”) hold voting and dispositive power over the Common Shares held by Anson. Bruce Winson is the managing member of Anson 4 Management GP LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Amin Nathoo are directors of Anson Advisors Inc. Mr. Winson, Mr. Kassam and Mr. Nathoo each disclaim beneficial ownership of these Common Shares except to purchasethe extent of their pecuniary interest therein. The principal business address of Anson is Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands.(3) Represents 400,000 shares so long asissuable upon the stabilizing bids do not exceedexercise of warrants and 112,015 shares issuable upon the conversion of convertible notes. Anson Advisors Inc. and Anson Funds Management LP, the Co-Investment Advisers of Anson Investments Master Fund LP (“AIMF”) hold voting and dispositive power over the Common Shares held by Anson. Bruce Winson is the managing member of Anson 4 Management GP LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Amin Nathoo are directors of Anson Advisors Inc. Mr. Winson, Mr. Kassam and Mr. Nathoo each disclaim beneficial ownership of these Common Shares except to the extent of their pecuniary interest therein. The principal business address of Anson is Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands.(4) Represents 56,007 issuable upon the conversion of convertible notes. David Feldman is a specified maximumdirector of L1 Capital Global Opportunities Master Fund and are engaged in formay be deemed to having voting and investment power over the purpose of preventing or retarding a declinesecurities listed in the market pricetable above. Such Selling Stockholder’s address is 161A Shedden Road, 1 Artillery Court, PO Box 10085, Grand Cayman KY1-1001, Cayman Islands.(5) Represents 1,200,000 shares issuable upon the exercise of warrants and 410,722 shares issuable upon the conversion of convertible notes. (6) Represents 500,000 shares whileissuable upon the offeringexercise of warrants and 112,015 shares issuable upon the conversion of convertible notes.(7) Represents 300,000 shares issuable upon the exercise of warrants and 112,015 shares issuable upon the conversion of convertible notes. (8) Represents 4,000,000 shares issuable upon the conversion of convertible notes. Thomas Wang is in progress.●Over-allotment transactions involve sales by the underwritersa director of shares in excess of the number of shares the underwriters are obligated to purchase. This creates a syndicate short position whichDorado Goose, LLC and may be either a covered short position or a naked short position. In a covered short position,deemed to having voting and investment power over the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchasesecurities listed in the over-allotment option. In a naked short position, the number of shares involvedtable above. Such Selling Stockholder’s address is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by exercising their over-allotment option and/or purchasing shares in the open market.170 Dorado Bch E, Dorado, Puerto Rico 00646.●Syndicate covering transactions involve purchases of shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the over- allotment option. If the underwriters sell more shares than could be covered by exercise of the over-allotment option and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering.●Penalty bids permits the underwriters to reclaim a selling concession from a syndicate member when the shares originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.66These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of the Company’s shares of common stock or preventing or retarding a decline in the market price of its shares of common stock. As a result, the price of the Company’s common stock or warrants in the open market may be higher than it would otherwise be in the absence of these transactions. Neither the Company nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of the Company’s common stock. These transactions may be effected on the Nasdaq Capital Market, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.Passive Market MakingIn connection with this offering, the underwriters may engage in passive market making transactions in the Company’s common stock on The Nasdaq Capital Market in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the shares and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.Other RelationshipsThe underwriters and their respective affiliates may, in the future provide various investment banking, commercial banking and other financial services for the Company and its affiliates for which they have received, and may in the future receive, customary fees. However, except as disclosed in this prospectus, the Company has no present arrangements with the underwriters for any further services.Offer Restrictions Outside the United StatesOther than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.67Authorized and Outstanding Capital StockBylaws which are filed as exhibits to the registration statementBylaws.which this prospectus forms a part.StockAs of August 18, 2020, the Company had outstanding 3,319,937 shares of common stock held by 274 shareholders of record.Units Offered HerebyWe are offering 833,333 Units at an assumed price of $9.00 per Unit, the last reported sale price for our common stock as reported on the OTCQB on August 18, 2020. Each Unit shall consist of (a) one share of our common stock, and (b) one warrant to purchase one share of our common stock, with an exercise price of $9.00 per share. The actual public offering price per Unit will be determined between us and the underwriters at the time of pricing and may be at a discount to the current market price. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the final offering price.Common StockCompany’s common stockCommon Stock are entitled to one vote per share. In addition, the holders of the Company’s common stock will be entitled to receive dividends ratably, if any, declared by the Company’s board of directors out of legally available funds; however, the current policy of the board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of the Company’s common stock are entitled to share ratably in all assets that are legally available for distribution. The holders of the Company’s common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of the Company’s common stock are subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock, which may be designated solely by action of the board of directors and issued in the future.Warrants Offered HerebyApplicable Anti-Takeover Lawwarrants entitlefollowing description is only a summary and it is qualified by refence our Articles of Incorporation, Bylaws and relevant provisions of the registered holder to purchase one shareNevada Revised Statutes.atcumulative voting rights in the election of directors. The absence of cumulative voting could have the effect of preventing stockholders holding a price equal to $9.00 per share, subject to adjustment as discussed below, at any time commencing on dateminority of issuance (the “Issuance Date”) and terminating at 5:00 p.m., New York City time, on the fifth (5th) anniversary of the Issuance Date.The warrants will be issued in registered form under a warrant agent agreement (the “Warrant Agent Agreement”) between us and our warrant agent, Pacific Stock Transfer (the “Warrant Agent”). The material provisions of the warrants are set forth herein and a copy of the Warrant Agent Agreement has been filed as an exhibit to the Registration Statement on Form S-1, of which this prospectus forms a part. The Company and the Warrant Agent may amend or supplement the Warrant Agent Agreement without the consent of any holder for the purpose of curing any ambiguity, or curing, correcting or supplementing any defective provision contained therein or adding or changing any other provisions with respect to matters or questions arising under the Warrant Agent Agreement as the parties thereto may deem necessary or desirable and that the parties determine, in good faith, shall not adversely affect the interest of the holders. All other amendments and supplements shall require the vote or written consent of holders of at least 50.1%. The exercise price and number of shares of common stock issuable upon exercisefrom obtaining representation on our board of the warrants may be adjusted indirectors. The absence of cumulative voting might also, under certain circumstances, including inrender more difficult or discourage a merger, tender offer or proxy contest favored by a majority of our stockholders, the eventassumption of control by a holder of a large block of our stock dividend, extraordinary dividend on or recapitalization, reorganization, merger or consolidation.68The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the Warrant Agent, with the exercise form attached to the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of common stockPLAN OF DISTRIBUTIONvoting rights until they exerciseof their warrantspledgees, assignees and receive shares of common stock. After the issuance of shares of common stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.No warrants will be exercisable unless at the time of the exercise a prospectus or prospectus relating to common stock issuable upon exercise of the warrants is current and the common stock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. Under the terms of the Warrant Agent Agreement, we have agreed to use our best efforts to maintain a current prospectus or prospectus relating to common stock issuable upon exercise of the warrants until the expiration of the warrants. If we are unable to maintain the qualification or effectiveness of such registration statement until the expiration of the warrants, and therefore are unable to deliver registered shares of common stock, the warrantssuccessors-in-interest may, become worthless. Such expiration would result in each holder paying the full Unit purchase price solely for the shares of common stock underlying the Units. Additionally, the market for the warrants may be limited if the prospectus or prospectus relating to the common stock issuable upon exercise of the warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of such warrants reside. In no event will the registered holders of a Warrant be entitled to receive a net-cash settlement, stock or other consideration in lieu of physical settlement in shares of our common stock. No fractional shares of common stock will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round up to the nearest whole number the number of shares of common stock to be issued to the Warrant holder. If multiple warrants are exercised by the holder at the same time, we will aggregate the number of whole shares issuable upon exercise of all the warrants.The price of the warrants has been arbitrarily established by us and the Underwriter after giving consideration to numerous factors, including but not limited to, the pricing of the Units in this offering. No particular weighting was given to any one aspect of those factors considered. We have not performed any method of valuation of the warrants.Preferred StockThe Company’s board of directors are authorized, subject to any limitations prescribed by law, without further vote or action by its stockholders, to issue from time to time, sharessell any or all of preferredtheir securities covered hereby on any stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. The Company will not receive any of the proceeds from the sale by the Selling Stockholders. A Selling Stockholders may use any one or more series. Each series of preferred stock will have the number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by the Company’s board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.It is not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of holders of the Company’s common stock until the board of directors determines the specific rights of the holders of its preferred stock. However, the effects might include, among other things:following methods when selling securities:● Impairing dividend rightsordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;● block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the Company’s common stock;block as principal to facilitate the transaction;● Dilutingpurchases by a broker-dealer as principal and resale by the voting powerbroker-dealer for its account;● an exchange distribution in accordance with the rules of the Company’s common stock;applicable exchange;● Impairing the liquidation rights of the Company’s common stock; andprivately negotiated transactions;● Delaying or preventing a changesettlement of control without further action by the Company’s stockholders.short sales;● in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security; Blank Check Preferred Stock● through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; ● a combination of any such methods of sale; or ● any other method permitted pursuant to applicable law. ability to authorize “blank check” preferred stock makes it possible for the Company’s board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire the Company. These and other provisionsSelling Stockholders may have the effect of deferring hostile takeovers or delaying changes in control or management of the Company.69Common Stock Purchase WarrantsAs of August 18, 2020 the Company had outstanding warrants to purchase 341,685 shares of its common stock outstanding with various exercise prices and expiration dates, held by 66 warrant holders.Common Stock Purchase OptionsAs of August 18, 2020 the Company had stock options to purchase 542,695 shares of its common stock outstanding, all of which were exercisable, with various exercise prices and expiration dates, held by 22 option holders.ListingOur shares of common stock are currently quoted on The OTCQB Venture Market, operated by OTC Markets Group,also sell securities under the temporary symbol of “JMDAD,” previously “JMDA.” We have applied to list our common stock on the Nasdaq Capital Market upon our satisfaction of the exchange’s initial listing criteria. Upon approval to list our common stock and the warrants on the Nasdaq Capital Market, we will change our name to “Creatd, Inc.” and we anticipate that the shares of common stock and warrants underlying the Units (once the warrants have begun to trade separately), will be listed on the Nasdaq Capital Market under the symbols “CRTD” and “CRTDW”, respectively. No assurance can be given that our application will be approved. If our common stock and the warrants are not approved for listing on the Nasdaq Capital Market, we will not consummate this offering.Exclusive ForumEach of our Second Amended Articles of Incorporation and our Amended and Restated Bylaws provide that unless the Company consents in writing to the selection of an alternative forum, the Eighth Judicial District Court of Clark County, Nevada shall be the sole and exclusive forum for state law claims with respect to: (i) any derivative action or proceeding brought in the name or right of the Company or on its behalf, (ii) any action asserting a claim for breach of any fiduciary duty owed by any director, officer, employee or agent of the Company to the Company or the Company’s stockholders, (iii) any action arising or asserting a claim arising pursuant to any provision of Nevada Revised Statutes Chapters 78 or 92ARule 144 or any provision of the Company’s Second Amended and Restated Articles of Incorporation or Amended and Restated Bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine, including, without limitation, any action to interpret, apply, enforce or determine the validity of the Company’s Second Amended and Restated Articles of Incorporation or Amended and Restated Bylaws. This exclusive forum provision would not apply to suits brought to enforce any liability or duty created byother exemption from registration under the Securities Act, if available, rather than under this prospectus.Exchange ActSelling Shareholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.other claim for whichbroker-dealers or agents that are involved in selling the federal courts have exclusive jurisdiction. To the extent that any such claimssecurities may be based upon federal law claims, Section 27 ofdeemed to be “underwriters” within the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22meaning of the Securities Act creates concurrent jurisdiction for federalin connection with such sales. In such event, any commissions received by such broker-dealers or agents and state courts over all suits brought to enforce any duty or liability created byprofit on the Securities Act or the rules and regulations thereunder. The enforceability of similar exclusive forum provisions in other corporations’ bylaws has been challenged in legal proceedings, and it is possible that a court could rule that this provision in our Amended and Restated Bylaws is inapplicable or unenforceable.Additionally, each of our Second Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws provide that unless the Company consents in writing to the selection of an alternative forum, the federal district courtsresale of the United States of America willsecurities purchased by them may be the exclusive forum for the resolution of any complaint asserting a cause of action arisingdeemed to be underwriting commissions or discounts under the Securities Act. AnyEach Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person or entity purchasing or otherwise acquiring any interest in shares of capital stockto distribute the securities.Company are deemed to have notice of and consented to this provision. As this provision applies to Securities Act claims, there may be uncertainty whether a court would enforce such a provision.70Transfer Agent and Warrant AgentThe Company’s transfer agent and Warrant Agent is Pacific Stock Transfer with an address 6725 Via Austi Parkway, Suite 300 Las Vegas, NV 89119.Indemnification of Directors and OfficersEach of our Second Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws provide for indemnification of our directors and officers. Our Amended and Restated Bylaws provide that we will indemnify any person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent will not, without more, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.securities. The Company may by action of its Board of Directors, grant rightshas agreed to indemnificationindemnify the Selling Stockholders against certain losses, claims, damages and advancement of expenses to employees and agents of the Company with the same scope and effects as the indemnification provisions for officers and directors.Disclosure of Commission Position on Indemnification for Securities Act LiabilitiesInsofar as indemnification forliabilities, including liabilities under the Securities Act may be permitted to officers, directors or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that is it is the opinion of the Securities and Exchange Commission that such indemnification is against public policy as expressed in such Securities Act and is, therefore, unenforceable.Act.2015 Incentive Stock and Award PlanOn February 5, 2016, the Company assumed the Jerrick Ventures, Inc. 2015 Incentive Stock and Award Plan (the “2015 Plan”), and all awards thereunder, which provides for the issuance of up to 900,000 shares of the Company’s common stock. As described below, no further awards shall be issued pursuant to the 2015 Plan as a result of the approval by our stockholders of the Company’s 2020 Equity Incentive Plan. As a result of the reverse stock split effectuated on August 17, 2020, the number authorized shares of common stock issuable under the 2015 Plan was adjusted to 300,000.The purpose of the 2015 Plan is to provide additional incentive to those officers, employees, consultants and non-employee directors of the Company and its parents, subsidiaries and affiliates whose contributions are essential to the growth and success of the Company’s business.Eligible recipients of option awards are employees, officers, consultants, attorneys, advisors or directors (including non-employee directors) of the Company or of any parent, subsidiary or affiliate of the Company. Upon recommendation from the Compensation Committee, the board has the authority to grant to any eligible recipient any options, restricted stock or other awards valued in whole or in part by reference to, or otherwise based on, the Company’s Common Stock; provided, however, that Incentive Options may only be granted to employees of the Company or its subsidiaries.The provisions of each option granted need not be the same with respect to each option recipient. Option recipients have entered into award agreements with the Company, in such form as the Compensation Committee of the board of directors (or the full board of directors) has determined.The 2015 Plan is administered by the Compensation Committee consisting of two or more independent, non-employee and outside directors. In the absence of such a committee, the board of directors administers the 2015 Plan.Each stock option under the 2015 Plan contains the following material terms:(i) the purchase price of each share of common stock with respect to Incentive Options shall be determined by the Compensation Committee at the time of grant, shall not be less than 100% of the Fair Market Value (defined as the closing price on the final trading day immediately prior to the grant on the principal exchange or quotation system on which the common stock is listed or quoted, as applicable) of the common stock of the Company, provided that if the recipient of the stock option owns more than ten percent (10%) of the total combined voting power of the Company, the exercise price shall be at least 110% of the Fair Market Value;(ii) The purchase price of each share of common stock purchasable under a Nonqualified Option shall be at least 100% of the Fair Market Value of such share of common stock on the date the Nonqualified Option is granted, unless the Compensation Committee, in its sole and absolute discretion, determines to set the purchase price of such Nonqualified Option below Fair Market Value.(iii) the term of each stock option shall be fixed by the Compensation Committee, provided that such stock option shall not be exercisable more than five (5) years after the date such stock option is granted, and provided further that with respect to an Incentive Option, if the recipient owns more than ten percent (10%) of the total combined voting power of the Company, the Incentive Option shall not be exercisable more than five (5) years after the date such Incentive Option is granted;71(iv) subjectWe agreed to acceleration inkeep this prospectus effective until the eventearlier of a Change of Control of the Company (as further described in the 2015 Plan), the period during which the stock options vest shall be designated by the Compensation Committee or, in the absence of any stock option vesting periods designated by the Compensation Committee at the time of grant, shall vest and become exercisable in equal amounts on each fiscal quarter of the Company through the four (4) year anniversary of(i) the date on which the stock option was granted;(v) no stock option is transferable and each is exercisable onlysecurities may be freely resold by the recipientSelling Stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect, or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect, under circumstances in which any legend borne by such option exceptsecurities relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the eventapplicable state or an exemption from the registration or qualification requirement is available and is complied with.death of the recipient; and(vi)resale securities may not simultaneously engage in market making activities with respect to Incentive Options, the aggregate Fair Market Value of Common Stock exercisablesecurities for the first time during any calendar year shall not exceed $100,000.Each awardapplicable restricted period, as defined in Regulation M, prior to the commencement of Restricted Stock isthe distribution. In addition, the Selling Stockholders will be subject to the following material terms:(i) no rights to an award of Restricted Stock are granted to the intended recipient of Restricted Stock unless and until the grant of Restricted Stock is accepted within the period prescribed by the Compensation Committee;(ii) No certificates evidencing shares of Restricted Stock shall be delivered until such shares are free of any restrictions specified by the Compensation Committee at the time of grant;(iii) recipients of Restricted Stock have the rights of a stockholder of the Company as of the date of the grant of the Restricted Stock, subject to vesting with respect to dividends and certain other non-transferability and forfeiture restrictions described below;(iv) shares of Restricted Stock are forfeitable until the terms of the Restricted Stock grant have been satisfied or the recipient’s employment with the Company is terminated; and(v) the Restricted Stock is not transferable until the date on which the Compensation Committee has specified such restrictions have lapsed.2020 Equity Incentive PlanThe following is a summary of the material features of our 2020 Equity Incentive Plan (the “2020 Plan”). This summary is qualified in its entirety by the full text of the 2020 Plan, a copy of which is filed as an exhibit to the registration statement of which this prospectus forms a part.Authorized Shares. A total of 7,500,000 shares of our common stock were originally reserved for issuance pursuant to the 2020 Plan. Our board of directors adopted the 2020 Plan on May 7, 2020 and our stockholders approved the 2020 Plan on July 8, 2020 (the “Effective Date”). Following the Effective Date, no further awards may be issued under our 2015 Plan, but all awards under the 2015 Plan that are outstanding as of the Effective Date will continue to be governed by the terms, conditions and procedures set forth in the 2015 Plan and any applicable award agreement. As a result of the reverse stock split effectuated on August 17, 2020, the number authorized shares of common stock issuable under the 2020 Plan was adjusted to 2,500,000.Types of Awards. The 2020 Plan provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), and other stock-based awards. Items described above in the Section called “Shares Available” are incorporated herein by reference.Administration. The 2020 Plan will be administered by our board of directors, or if our board of directors does not administer the 2020 Plan, a committee or subcommittee of our board of directors that complies with the applicable requirements of Section 16provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the securities by the Selling Stockholders or any other applicable legal or stock exchange listing requirements (eachperson. We will make copies of our board of directors or such committee or subcommittee,this prospectus available to the “plan administrator”). The plan administrator may interpret the 2020 PlanSelling Stockholders and may prescribe, amend and rescind rules and make all other determinations necessary or desirable for the administrationhave informed them of the 2020 Plan, provided that, subjectneed to the equitable adjustment provisions described below, the plan administrator will not have the authoritydeliver a copy of this prospectus to reprice or cancel and re-grant any award at a lower exercise, base or purchase price or cancel any award with an exercise, base or purchase price in exchange for cash, property or other awards without first obtaining the approval of our stockholders.72The 2020 Plan permits the plan administrator to select the eligible recipients who will receive awards, to determine the terms and conditions of those awards, including but not limited to the exercise price or other purchase price of an award, the number of shares of common stock or cash or other property subject to an award, the term of an award and the vesting schedule applicable to an award, and to amend the terms and conditions of outstanding awards.Restricted Stock and Restricted Stock Units. Restricted stock and RSUs may be granted under the 2020 Plan. The plan administrator will determine the purchase price, vesting schedule and performance goals, if any, and any other conditions that apply to a grant of restricted stock and RSUs. If the restrictions, performance goals or other conditions determined by the plan administrator are not satisfied, the restricted stock and RSUs will be forfeited. Subject to the provisionseach purchaser of the 2020 Plan and the applicable award agreement, the plan administrator has the sole discretion to provide for the lapse of restrictions in instalments.Unless the applicable award agreement provides otherwise, participants with restricted stock will generally have all of the rights of a stockholder; provided that dividends will only be paid if and when the underlying restricted stock vests. RSUs will not be entitled to dividendssecurities at or prior to vesting, but may be entitled to receive dividend equivalents if the award agreement provides for them. The rights of participants granted restricted stock or RSUs upon the termination of employment or service to us will be set forth in the award agreement.Options. Incentive stock options and non-statutory stock options may be granted under the 2020 Plan. An “incentive stock option” means an option intended to qualify for tax treatment applicable to incentive stock options under Section 422 of the Internal Revenue Code. A “non-statutory stock option” is an option that is not subject to statutory requirements and limitations required for certain tax advantages that are allowed under specific provisions of the Internal Revenue Code. A non-statutory stock option under the 2020 Plan is referred to for federal income tax purposes as a “non-qualified” stock option. Each option granted under the Plan will be designated as a non-qualified stock option or an incentive stock option. At the discretion of the administrator, incentive stock options may be granted only to our employees, employees of our “parent corporation” (as such term is defined in Section 424(e) of the Code) or employees of our subsidiaries.The exercise period of an option may not exceed ten years from the date of grant and the exercise price may not be less than 100% of the fair market value of a share of common stock on the date the option is granted (110% of fair market value in the case of incentive stock options granted to ten percent stockholders). The exercise price for shares of common stock subject to an option may be paid in cash, or as determined by the administrator in its sole discretion, (i) through any cashless exercise procedure approved by the administrator (including the withholding of shares of common stock otherwise issuable upon exercise), (ii) by tendering unrestricted shares of common stock owned by the participant, (iii) with any other form of consideration approved by the administrator and permitted by applicable law or (iv) by any combination of these methods. The option holder will have no rights to dividends or distributions or other rights of a stockholder with respect to the shares of Common Stock subject to an option until the option holder has given written notice of exercise and paid the exercise price and applicable withholding taxes.In the event of an participant’s termination of employment or service, the participant may exercise his or her option (to the extent vested as of such date of termination) for such period of time as specified in his or her option agreement.Stock Appreciation Rights. SARs may be granted either alone (a “free-standing SAR”) or in conjunction with all or part of any option granted under the 2020 Plan (a “tandem SAR”). A free-standing SAR will entitle its holder to receive, at the time of exercise, an amount per share up to the excess of the fair market value (at the date of exercise) of a share of common stock over the base price of the free-standing SAR (which shall be no less than 100% of the fair market value of the related shares of common stock on the date of grant) multipliedsale (including by the number of shares in respect of which the SAR is being exercised. A tandem SAR will entitle its holder to receive, at the time of exercise of the SAR and surrender of the applicable portion of the related option, an amount per share up to the excess of the fair market value (at the date of exercise) of a share of common stock over the exercise price of the related option multiplied by the number of shares in respect of which the SAR is being exercised. The exercise period of a free-standing SAR may not exceed ten years from the date of grant. The exercise period of a tandem SAR will also expire upon the expiration of its related option.The holder of a SAR will have no rights to dividends or any other rights of a stockholdercompliance with respect to the shares of Common Stock subject to the SAR until the holder has given written notice of exercise and paid the exercise price and applicable withholding taxes.73In the event of an participant’s termination of employment or service, the holder of a SAR may exercise his or her SAR (to the extent vested as of such date of termination) for such period of time as specified in his or her SAR agreement.Other Stock-Based Awards. The administrator may grant other stock-based awardsRule 172 under the 2020 Plan, valued in whole or in part by reference to, or otherwise based on, shares of common stock. The administrator will determine the terms and conditions of these awards, including the number of shares of common stock to be granted pursuant to each award, the manner in which the award will be settled, and the conditions to the vesting and payment of the award (including the achievement of performance goals)Securities Act). The rights of participants granted other stock-based awards upon the termination of employment or service to us will be set forth in the applicable award agreement. In the event that a bonus is granted in the form of shares of common stock, the shares of common stock constituting such bonus shall, as determined by the administrator, be evidenced in uncertificated form or by a book entry record or a certificate issued in the name of the participant to whom such grant was made and delivered to such participant as soon as practicable after the date on which such bonus is payable. Any dividend or dividend equivalent award issued hereunder shall be subject to the same restrictions, conditions and risks of forfeiture as apply to the underlying award.Equitable Adjustment and Treatment of Outstanding Awards Upon a Change in ControlEquitable Adjustments. In the event of a merger, consolidation, reclassification, recapitalization, spin-off, spin-out, repurchase, reorganization, special or extraordinary dividend or other extraordinary distribution (whether in the form of common shares, cash or other property), combination, exchange of shares, or other change in corporate structure affecting our common stock, an equitable substitution or proportionate adjustment shall be made in (i) the aggregate number and kind of securities reserved for issuance under the 2020 Plan, (ii) the kind and number of securities subject to, and the exercise price of, any outstanding options and SARs granted under the 2020 Plan, (iii) the kind, number and purchase price of shares of common stock, or the amount of cash or amount or type of property, subject to outstanding restricted stock, RSUs and other stock-based awards granted under the 2020 Plan and (iv) the terms and conditions of any outstanding awards (including any applicable performance targets). Equitable substitutions or adjustments other than those listed above may also be made as determined by the plan administrator. In addition, the plan administrator may terminate all outstanding awards for the payment of cash or in-kind consideration having an aggregate fair market value equal to the excess of the fair market value of the shares of common stock, cash or other property covered by such awards over the aggregate exercise price, if any, of such awards, but if the exercise price of any outstanding award is equal to or greater than the fair market value of the shares of common stock, cash or other property covered by such award, the plan administrator may cancel the award without the payment of any consideration to the participant. With respect to awards subject to foreign laws, adjustments will be made in compliance with applicable requirements. Except to the extent determined by the plan administrator, adjustments to incentive stock options will be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code.Change in Control. The 2020 Plan provides that, unless otherwise determined by the plan administrator and evidenced in an award agreement, if a “change in control” (as defined below) occurs and a participant is employed by us or any of our affiliates immediately prior to the consummation of the change in control, then the plan administrator, in its sole and absolute discretion, may (i) provide that any unvested or unexercisable portion of an award carrying a right to exercise will become fully vested and exercisable; and (ii) cause the restrictions, deferral limitations, payment conditions and forfeiture conditions applicable to any award granted under the 2020 Plan to lapse, and the awards will be deemed fully vested and any performance conditions imposed with respect to such awards will be deemed to be fully achieved at target performance levels. The administrator shall have discretion in connection with such change in control to provide that all outstanding and unexercised options and SARs shall expire upon the consummation of such change in control.For purposes of the 2020 Plan, a “change in control” means, in summary, the first to occur of the following events: (i) a person or entity becomes the beneficial owner of more than 50% of our voting power; (ii) an unapproved change in the majority membership of our board of directors; (iii) a merger or consolidation of us or any of our subsidiaries, other than (A) a merger or consolidation that results in our voting securities continuing to represent 50% or more of the combined voting power of the surviving entity or its parent and our board of directors immediately prior to the merger or consolidation continuing to represent at least a majority of the board of directors of the surviving entity or its parent or (B) a merger or consolidation effected to implement a recapitalization in which no person is or becomes the beneficial owner of our voting securities representing more than 50% of our combined voting power; or (iv) stockholder approval of a plan of our complete liquidation or dissolution or the consummation of an agreement for the sale or disposition of substantially all of our assets, other than (A) a sale or disposition to an entity, more than 50% of the combined voting power of which is owned by our stockholders in substantially the same proportions as their ownership of us immediately prior to such sale or (B) a sale or disposition to an entity controlled by our board of directors. However, a change in control will not be deemed to have occurred as a result of any transaction or series of integrated transactions following which our stockholders, immediately prior thereto, hold immediately afterward the same proportionate equity interests in the entity that owns all or substantially all of our assets.74Tax WithholdingEach participant will be required to make arrangements satisfactory to the plan administrator regarding payment of up to the maximum statutory tax rates in the participant’s applicable jurisdiction with respect to any award granted under the 2020 Plan, as determined by us. We have the right, to the extent permitted by applicable law, to deduct any such taxes from any payment of any kind otherwise due to the participant. With the approval of the plan administrator, the participant may satisfy the foregoing requirement by either electing to have us withhold from delivery of shares of common stock, cash or other property, as applicable, or by delivering already owned unrestricted shares of common stock, in each case, having a value not exceeding the applicable taxes to be withheld and applied to the tax obligations. We may also use any other method of obtaining the necessary payment or proceeds, as permitted by applicable law, to satisfy our withholding obligation with respect to any award.Amendment and Termination of the 2020 PlanThe 2020 Plan provides our board of directors with authority to amend, alter or terminate the 2020 Plan, but no such action impair the rights of any participant with respect to outstanding awards without the participant’s consent. The plan administrator may amend an award, prospectively or retroactively, but no such amendment may materially impair the rights of any participant without the participant’s consent. Stockholder approval of any such action will be obtained if required to comply with applicable law. The 2020 Plan will terminate on the tenth anniversary of the Effective Date (although awards granted before that time will remain outstanding in accordance with their terms).Clawback. If we are required to prepare a financial restatement due to the material non-compliance with any financial reporting requirement, then the plan administrator may require any Section 16 officer to repay or forfeit to us that part of the cash or equity incentive compensation received by that Section 16 officer during the preceding three years that the plan administrator determines was in excess of the amount that such Section 16 officer would have received had such cash or equity incentive compensation been calculated based on the financial results reported in the restated financial statement. The plan administrator may take into account any factors it deems reasonable in determining whether to seek recoupment of previously paid cash or equity incentive compensation and how much of such compensation to recoup from each Section 16 officer (which need not be the same amount or proportion for each Section 16 officer). The amount and form of the incentive compensation to be recouped shall be determined by the administrator in its sole and absolute discretion.75issuance of the Units, and the common stock and warrants underlying the Units,securities offered by us in this offeringhereby will be passed upon for us by Sheppard, Mullin, Richter & Hampton LLP, New York, New York. Certain legal matters will be passed upon for the underwriter by Lucosky Brookman LLP, Woodbridge, New Jersey.LLP.and for the yearsfiscal year ended December 31, 20192021 and 20182020 have been audited by Rosenberg Rich Baker Berman, P.A., 265 Davidson Avenue, Suite 210, Somerset, NJ 08873, an independent registered public accounting firm, as set forthstated in their report and arereports. Such financial statements have been so included in reliance upon such report given as authoritythe reports of such firm given upon their authority as experts in accounting and auditing.MOREADDITIONAL INFORMATIONThe Company files annual, quarterly and currentAvailable InformationThe Company hasInformation filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the common stock being offered under this prospectus. This prospectus does not contain all of the information set forth in the registration statementby us can be inspected and the exhibits to the registration statement. For further information with respect to the Company and the securities being offered under this prospectus, please refer to the complete registration statement and the exhibits and schedules filed as a part of the registration statement.You may read and copy the registration statement, as well as the Company’s reports, proxy statements and other information,copied at the SEC’s Public Reference Room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please callYou may also obtain copies of this information by mail from the Public Reference Room of the SEC at 1-800-SEC-0330 for moreprescribed rates. Further information abouton the operation of the SEC’s Public Reference Room.Room in Washington, D.C. can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Interneta web site that contains reports, proxy and information statements and other information regardingabout issuers, thatsuch as us, who file electronically with the SEC. The SEC’s Internet site can be found ataddress of that website is http://www.sec.gov. You may accessannual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-Kwebsite, however, is not, and other reportsshould not be deemed to be, a part of this prospectus. or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC freeand do not contain all of charge onthe information in the registration statement. The full registration statement may be obtained from the SEC or us, as provided below. Forms of the documents establishing the terms of the offered securities are or may be filed as exhibits to the registration statement. Statements in this prospectus or any prospectus supplement about these documents are summaries and each statement is qualified in all respects by reference to the document to which it refers. You should refer to the actual documents for a more complete description of the relevant matters. You may inspect a copy of the registration statement at the SEC’s website.Public Reference Room in Washington, D.C. or through the SEC’s website, as provided above.76INDEX TO FINANCIAL STATEMENTSIndex to the Condensed Consolidated Financial StatementsJerrick Media Holdings, Inc.ContentsPage(s)Financial Statements as of and for the Three And Six Months Ended June 30, 2020 and 2019 (Unaudited)Condensed Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019F-46Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)F-47Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the Three and SixNine Months Ended JuneSeptember 30, 20202022 and 20192021 (unaudited) F-48F-4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited) F-8 Notes to the Condensed Consolidated Financial Statements (unaudited) F-52F-9F-1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM September 30,
2022 December 31,
2021 (Unaudited) Assets Current Assets Cash $ 439,539 $ 3,794,734 Accounts receivable, net 222,183 337,440 Inventory 879,050 106,403 Marketable securities 96 - Prepaid expenses and other current assets 139,726 236,665 Total Current Assets 1,680,594 4,475,242 Property and equipment, net 248,963 102,939 Intangible assets 2,536,599 2,432,841 Goodwill 1,365,328 1,374,835 Deposits and other assets 769,136 718,951 Minority investment in businesses - 50,000 Operating lease right of use asset 2,123,171 18,451 Total Assets $ 8,723,791 $ 9,173,259 Liabilities and Stockholders’ Deficit Current Liabilities Accounts payable and accrued liabilities $ 6,714,606 $ 3,730,540 Share liability 52,080 - Convertible Notes, net of debt discount and issuance costs 6,062,926 159,193 Current portion of operating lease payable 279,593 18,451 Note payable, net of debt discount and issuance costs 1,758,179 1,278,672 Deferred revenue 305,555 234,159 Total Current Liabilities 15,172,939 5,421,015 Non-current Liabilities: Note payable 28,920 63,992 Operating lease payable 2,135,393 - Total Non-current Liabilities 2,164,313 63,992 Total Liabilities 17,337,252 5,485,007 Commitments and contingencies Stockholders’ Equity (Deficit) Preferred stock, $0.001 par value, 20,000,000 shares authorized Series E Preferred stock, $0.001 par value, 8,000 shares authorized 500 and 500 shares issued and outstanding, respectively - - Common stock par value $0.001: 100,000,000 shares authorized; 24,469,675 issued and 24,380,218 outstanding as of September 30, 2022 and 16,691,170 Outstanding 16,685,513 outstanding as of December 31, 2021 24,470 16,691 Additional paid in capital 124,667,772 111,563,618 Less: Treasury stock at cost, 89,457 and 5,657 shares, respectively (76,106 ) (62,406 ) Accumulated deficit (133,762,800 ) (109,632,574 ) Accumulated other comprehensive income (143,991 ) (78,272 ) Total Creatd, Inc. Stockholders’ Equity (9,290,655 ) 1,807,057 Non-controlling interest in consolidated subsidiaries 677,194 1,881,195 (8,613,461 ) 3,688,252 Total Liabilities and Stockholders’ Equity (Deficit) $ 8,723,791 $ 9,173,259 To the Board of Directors andStockholders of Jerrick Media Holdings, Inc.Opinion on the Financial StatementsWe have audited the accompanying balance sheets of Jerrick Media Holdings, Inc. (the Company) as of December 31, 2019 and 2018, and the related statements of comprehensive income (loss), changes in stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.Going Concernfinancial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company hadnotes are an accumulated deficit at December 3 1, 2019, and a net loss and net cash used in operating activities for the year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Asintegral part of our audits, we are required to obtain an understanding of internal control overthese condensed consolidated financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.statements.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.We have served as the Company’s auditor since 2018.Somerset, New JerseyMarch 30, 2020F-2 For the Three
Months Ended For the Three
Months Ended For the Nine
Months Ended For the Nine
Months Ended September 30,
2022 September 30,
2021 September 30,
2022 September 30,
2021 Net revenue $ 1,022,851 $ 1,179,620 $ 3,997,490 $ 2,894,390 Cost of revenue 1,404,562 1,418,213 4,771,151 4,160,743 Gross margin (loss) (381,711 ) (238,593 ) (773,661 ) (1,266,353 ) Operating expenses Research and development 234,965 322,946 686,131 708,396 Marketing 646,520 1,812,400 4,016,051 8,049,579 Stock based compensation 626,568 2,151,900 3,848,578 5,662,389 Impairment of intangible assets 249,586 - 257,117 93,791 General and administrative 3,837,469 2,385,135 11,397,989 5,457,258 Total operating expenses 5,595,108 6,672,381 20,205,866 19,971,413 Loss from operations (5,976,819 ) (6,910,974 ) (20,979,527 ) (21,237,766 ) Other income (expenses) Other income - 123,710 99 123,710 Interest expense (673,694 ) (59,859 ) (707,950 ) (319,290 ) Accretion of debt discount and issuance cost (1,884,679 ) (2,176,651 ) (2,531,687 ) (3,028,015 ) Derivative expense - - - (100,502 ) Change in derivative liability - (833,456 ) 3,729 (1,096,287 ) Impairment of investment - - (50,000 ) (62,733 ) Settlement of vendor liabilities - - (2,867 ) 92,909 Loss on marketable securities (11,415 ) - (11,646 ) - Gain (loss) on extinguishment of debt (979,738 ) 137,109 (832,482 ) 423,118 Gain on forgiveness of debt - - - 279,022 Other expenses, net (3,549,526 ) (2,809,147 ) (4,132,804 ) (3,688,068 ) Loss before income tax provision (9,526,345 ) (9,720,121 ) (25,112,331 ) (24,925,834 ) Equity in net loss from equity method investment - (16,413 ) - (16,413 ) Income tax provision - - - - Net loss (9,526,345 ) (9,736,534 ) (25,112,331 ) (24,942,247 ) Non-controlling interest in net loss 299,903 (60,477 ) 1,285,661 (60,045 ) Net Loss attributable to Creatd, Inc. (9,226,442 ) (9,797,011 ) (23,826,670 ) (25,002,292 ) Deemed dividend (221,829 ) - (303,557 ) (410,750 ) Net loss attributable to common shareholders $ (9,448,271 ) $ (9,797,011 ) $ (24,130,227 ) $ (25,413,042 ) Comprehensive loss Net loss (9,526,345 ) (9,736,534 ) (25,112,331 ) (24,942,247 ) Currency translation gain (loss) (36,110 ) (8,436 ) (65,719 ) (16,299 ) Comprehensive loss $ (9,562,455 ) $ (9,744,970 ) $ (25,178,050 ) $ (24,958,546 ) Per-share data Basic and diluted loss per share $ (0.45 ) $ (0.71 ) $ (1.23 ) $ (2.20 ) Weighted average number of common shares outstanding 21,030,188 13,710,111 19,669,411 11,563,150 December 31,
2019 December 31,
2018 Assets Current Assets Cash $ 11,637 $ - Prepaid expenses 4,127 - Accounts receivable 50,849 6,500 Note receivable – related party 11,450 - Current portion of operating lease right of use asset 105,763 - Total Current Assets 183,826 6,500 Property and equipment, net 42,363 42,443 Intangible assets 1,087,278 - Goodwill 1,035,795 - Deferred offering costs - 143,146 Security deposit 16,836 16,836 Operating lease right of use asset 205,948 - Total Assets $ 2,572,046 $ 208,925 Liabilities and Stockholders’ Deficit Current Liabilities Cash overdraft $ - $ 33,573 Accounts payable and accrued liabilities 1,763,222 1,246,207 Demand loan 225,000 - Convertible Notes - related party, net of debt discount 20,387 - Convertible Notes, net of debt discount and issuance costs 2,896,425 - Current portion of operating lease payable 105,763 - Note payable - related party, net of debt discount 5,129,342 1,223,073 Note payable, net of debt discount and issuance costs 660,000 49,926 Unrecognized tax benefit 68,000 - Deferred revenue 50,691 9,005 Warrant liability 10,000 - Deferred rent - 7,800 Total Current Liabilities 10,928,830 2,569,584 Non-current Liabilities: Operating lease payable 201,944 - Deferred rent - 6,150 Convertible Notes - related party, net of debt discount - 314 Convertible Notes, net of debt discount and issuance costs - 123,481 Total Non-current Liabilities 201,944 129,945 Total Liabilities 11,130,774 2,699,529 Commitments and contingencies Stockholders’ Deficit Common stock par value $0.001: 100,000,000 shares authorized; 3,059,645 issued and 3,006,362 outstanding as of December 31, 2019 and 2,158,446 issued and 2,149,224 outstanding as of December 31, 2018 (1) 3,059 2,158 Additional paid in capital 36,391,819 34,14,644 Accumulated deficit (44,580,437 ) (36,545,065 ) Accumulated other comprehensive income (5,995 ) - Less: Treasury stock, 53,283 and 9,222 shares, respectively (367,174 ) (52,341 ) (8,564,848 ) (2,494,921 ) Total Liabilities and Stockholders’ Deficit $ 2,572,046 $ 208,925 Series E
Preferred Stock Common Stock Treasury stock Additional
Paid In Accumulated Non-Controlling Other
Comprehensive Stockholders’
Equity Shares Amount Shares Amount Shares Amount Capital Deficit Interest Income (Deficit) Balance, July 1, 2022 500 $ - 20,254,839 $ 20,255 (5,657 ) $ (62,406 ) $ 122,068,892 $ (124,314,529 ) $ 895,437 $ (107,881 ) $ (1,500,232 ) Stock based compensation - - 107,260 107 - - 568,107 - - - 568,214 Shares issued for prepaid services - - 50,000 50 - - 34,900 - - - 34,950 Shares issued for acquisition - - 57,576 58 - - 40,937 - 81,660 - 122,655 Purchase of treasury stock - - - - (83,800 ) (13,700 ) - - - - (13,700 ) Cash received for common stock and warrants, net of $75,000 of issuance costs - - 4,000,000 4,000 - - 721,000 - - - 725,000 Stock warrants issued with note payable - - - - - - 1,012,107 - - - 1,012,107 Foreign currency translation adjustments - - - - - - - - - (36,110 ) (36,110 ) Dividends - - - - - - 221,829 (221,829 ) - - - Net loss for the three months ended September 30, 2022 - - - - - - - (9,226,442 ) (299,903 ) - (9,526,345 ) Balance, September 30, 2022 500 $ - 24,469,675 $ 24,470 (89,457 ) $ (76,106 ) $ 124,667,772 $ (133,762,800 ) $ 677,194 $ (143,991 ) $ (8,613,461 ) (1) The shares have been retroactively restated to reflect the 1-for-3 reverse stock split effectuated on August 17, 2020, of the Company’s issued and outstanding shares of common stock (see Note 12).F-3Jerrick Media Holdings,Creatd, Inc.StatementsStatement of Comprehensive Income (Loss)Changes in Stockholders’ Equity (Deficit) 2019 2018 Net revenue $ 453,006 $ 80,898 Gross margin 453,006 80,898 Operating expenses Compensation 2,204,265 2,378,664 Consulting fees 1,624,786 1,086,557 Research and development 1,131,180 636,180 General and administrative 2,709,753 1,665,752 Total operating expenses 7,669,984 5,767,153 Loss from operations (7,216,978 ) (5,686,255 ) Other expenses Other income 292,387 - Interest expense (612,830 ) (923,008 ) Accretion of debt discount and issuance cost (348,665 ) (2,090,286 ) Settlement of vendor liabilities 13,574 122,886 Loss on extinguishment of debt (162,860 ) (3,453,137 ) Gain (loss) on settlement of debt - 16,258 Other expenses, net (818,394 ) (6,327,287 ) Loss before income tax provision (8,035,372 ) (12,013,542 ) Income tax provision - - Net loss (8,035,372 ) (12,013,542 ) Deemed dividend - 174,232 Inducement expense - 2,016,634 Net loss attributable to common shareholders (8,035,372 ) (14,204,408 ) Other comprehensive income Currency translation loss (5,995 ) - Comprehensive loss $ (8,041,367 ) $ (14,204,408 ) Per-share data Basic and diluted loss per share $ (2.93 ) $ (12.47 ) Weighted average number of common shares outstanding (1) 2,741,136 1,139,497 Series E
Preferred Stock Common Stock Treasury stock Additional
Paid In Accumulated Non-Controlling Other
Comprehensive Stockholders’
Equity Shares Amount Shares Amount Shares Amount Capital Deficit Interest Income (Deficit) Balance, January 1, 2022 500 $ - 16,691,170 $ 16,691 (5,657 ) $ (62,406 ) $ 111,563,618 $ (109,632,574 ) $ 1,881,195 $ (78,272 ) $ 3,688,252 Stock based compensation - - 415,180 415 - - 3,822,564 - - - 3,822,979 Shares issued for prepaid services - - 150,000 150 - - 141,000 - - - 141,150 Shares issued for acquisition - - 57,576 58 - - 40,937 - 81,660 - 122,655 Purchase of treasury stock - - - - (83,800 ) (13,700 ) - - - - (13,700 ) Stock warrants issued with note payable - - - - - - 2,907,497 - - - 2,907,497 Cash received for common stock and warrants, net of $190,000 of issuance costs - - 7,046,314 7,046 - - 5,715,254 - - - 5,722,300 Common stock issued upon conversion of notes payable - - 109,435 110 - - 173,346 - - - 173,456 Foreign currency translation adjustments - - - - - - - - - (65,719 ) (65,719 ) Dividends - - - - - - 303,556 (303,556 ) - - - Net loss for the nine months ended September 30, 2022 - - - - - - - (23,826,670 ) (1,285,661 ) - (25,112,331 ) Balance, September 30, 2022 500 $ - 24,469,675 $ 24,470 (89,457 ) $ (76,106 ) $ 124,667,772 $ (133,762,800 ) $ 677,194 $ (143,991 ) $ (8,613,461 ) (1) The shares have been retroactively restated to reflect the 1-for-3 reverse stock split effectuated on August 17, 2020, of the Company’s issued and outstanding shares of common stock (see Note 12).F-4Jerrick Media Holdings,Creatd, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity
For the YearsThree Months Ended December 31, 2019 and 2018September 30, 2021 Series A Preferred Stock Series B Preferred Stock Common Stock (1) Treasury stock Additional Paid In Accumulated Other Comprehensive Stockholders’ Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Loss Equity Balance, December 31, 2017 31,581 31 8,063 $ 8 658,678 $ 659 (9,222 ) $ (19,007 ) $ 14,426,148 $ (21,775,107 ) $ - $ (7,367,307 ) Common stock issued to settle vendor liabilities - - - - 313 - - - 3,375 - - 3,375 Stock based compensation - - - - 27,283 27 - - 547,278 - - 547,305 Issuance of common stock and warrants in exchange for Series A and accrued dividend (31,581 ) (31 ) - - 370,829 371 - - 2,199,752 - - 2,200,092 Issuance of common stock and warrants in exchange for series B and accrued dividend - - (8,063 ) (8 ) 76,947 77 - - 469,107 - - 469,176 Cash received for common stock and warrants - - - - 185,831 186 - - 2,787,276 - - 2,787,462 Common stock and warrants issued upon conversion of notes payable - - - - 752,149 752 - - 11,940,011 - - 11,940,763 Stock issuance cost - - - - 70,000 70 - - (161,473 ) - - (161,403 ) Stock warrants issued with note payable - - - - - - - - 1,660,986 - - 1,660,986 Issuance of common stock for prepaid services - - - - 10,167 10 - - 116,290 - - 116,300 Common stock issued with note payable - - - - 6,250 6 - - 77,481 - - 77,487 BCF issued with note payable - - - - - - - - 38,413 - - 38,413 Purchase of treasury stock - - - - - - - (33,334 ) - - - (33,334 ) Inducement expense - - - - - - - - - (2,016,635 ) - (2,016,635 ) Dividends - - - - - - - - - (739,782 ) - (739,782 ) Net loss for the year ended December 31, 2018 - - - - - - - - - (12,013,542 ) - (12,013,542 ) Balance, December 31, 2018 - - - - 2,158,447 2,158 (9,222 ) (52,341 ) 34,104,644 (36,545,065 ) - (2,490,604 ) Stock based compensation - - - - 41,742 43 - - 437,063 - - 437,106 Cash received for common stock and warrants - - - - 43,322 43 - - 649,786 - - 649,829 Tender offering - - - - 700,058 700 - - (700 ) - - - Stock issuance cost - - - - - - - - (178,146 ) - - (178,146 ) Stock warrants issued with note payable - - - - - - - - 427,692 - - 427,692 Purchase of treasury stock and warrants - - - - - - (44,061 ) (314,833 ) (271,658 ) - - (586,491 ) Shares issued for acquisition - - - - 111,111 111 - - 1,166,558 - - 1,166,669 BCF issued with note payable - - - - - - - - 4,444 - - 4,444 Shares issued to settle vendor payable - - - - 4,966 5 - - 52,135 - - 52,140 Foreign currency translation adjustments - - - - - - - - - - (5,995 ) (5,995 ) Net loss for the year ended December 31, 2019 - - - - - - - - - (8,035,372 ) - (8,035,372 ) Balance, December 31, 2019 - $ - - $ - 3,059,646 $ 3,060 (53,283 ) $ (367,174 ) $ 36,391,818 $ (44,580,437 ) $ (5,995 ) $ (8,558,728 ) Series E Preferred Stock Common Stock Treasury stock Accumulated Non-Controlling Other Comprehensive Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Interest Income Equity Balance, July 1, 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 ) Stock based compensation - - 22,934 23 - - 2,094,787 - - - 2,094,810 Conversion of warrants to stock - - 954,568 955 - - 4,198,442 - - - 4,199,397 Shares issued for acquisition - - 224,503 224 - - 893,297 - - - 893,521 Cash received for common stock - - 87,500 87 - - 248,613 - - - 248,700 Common stock issued upon conversion of notes payable - - 779,706 779 - - 3,697,725 - - - 3,698,504 Conversion of preferred series E to stock (438 ) - 106,311 106 - - (106 ) - - - - Foreign currency translation adjustments - - - - - - - - - (8,436 ) (8,436 ) Non-controlling interest in consolidated subsidiary from acquisition - - - - - - - - 1,190,000 - 1,190,000 Net loss for the three months ended September 30, 2021 - - - - - - - (9,797,011 ) 60,477 - (9,736,534 ) Balance, September 30, 2021 610 $ 1 14,033,197 $ 14,032 (5,657 ) $ (62,406 ) $ 98,264,091 $ (97,341,964 ) $ 1,306,910 $ (53,533 ) $ 2,127,131 (1) The shares have been retroactively restated to reflect the 1-for-3 reverse stock split effectuated on August 17, 2020, of the Company’s issued and outstanding shares of common stock (see Note 12).F-5 Series E
Preferred Stock Common Stock Treasury stock Additional
Paid In Subscription Accumulated Non-
Controlling Other
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 - - 224,245 224 - - 5,505,165 - - - - 5,505,389 Shares issued for prepaid services - - 50,000 50 - - 226,450 - - - - 226,500 Shares issued to settle vendor liabilities - - 44,895 44 - - 181,341 - - - - 181,385 Common stock issued upon conversion of notes payable - - 900,665 901 - - 4,014,424 - - - - 4,015,325 Exercise of warrants to stock - - 1,275,261 1,275 - - 5,470,793 - - - - 5,472,068 Cash received for common - - 837,500 837 - - 2,461,363 - - - - 2,462,200 Cash received for preferred series E and warrants 40 - - - - - (4,225 ) 40,000 - - - 35,775 Conversion of preferred series E to stock (7,168 ) (7 ) 1,739,750 1,739 - - (1,732 ) - - - - - Stock warrants issued with note payable - - - - - - 1,601,452 - - - - 1,601,452 Shares issued for acquisition - - 224,503 225 - - 893,297 - - - - 893,522 Foreign currency translation adjustments - - - - - - - - - - (16,299 ) (16,299 ) Non-controlling interest in consolidated subsidiary from acquisition - - - - - - - - - 1,246,865 - 1,246,865 Dividends - - - - - - 410,750 - (410,750 ) - - - Net loss for the nine months ended September 30, 2021 - - - - - - - - (25,002,292 ) 60,045 - (24,942,247 ) Balance, September 30, 2021 610 $ 1 14,033,197 $ 14,032 (5,657 ) $ (62,406 ) $ 98,264,091 $ - $ (97,341,964 ) $ 1,306,910 $ (53,533 ) $ 2,127,131 For the Year Ended
December 31, 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (8,035,372 ) $ (12,013,542 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 57,492 42,218 Accretion of debt discount and issuance cost 348,665 2,090,286 Share-based compensation 437,106 346,954 Bad debt expense 33,503 - Gain (loss) on settlement of vendor liabilities (13,574 ) (122,886 ) Gain (loss) on settlement of debt - (16,257 ) Gain on extinguishment of debt 162,860 3,610,049 Amortization of ROU Asset 60,764 - Changes in operating assets and liabilities: Operating Lease liability (56,240 ) Prepaid expenses (3,458 ) 40,680 Accounts receivable (54,174 ) (5,175 ) Security deposit - 164 Deferred revenue 41,686 9,005 Accounts payable and accrued expenses 985,716 1,039,690 Unrecognized tax benefit 68,000 - Warrant liability 10,000 Deferred rent - 6,000 Net Cash Used In Operating Activities (5,957,027 ) (4,972,814 ) CASH FLOWS FROM INVESTING ACTIVITIES: Issuance of note receivable (11,450 ) - Cash paid for property and equipment (27,887 ) (27,605 ) Cash consideration for acquisition (340,000 ) - Net cash received in business combination 16,049 - Net Cash Used In Investing Activities (363,288 ) (27,605 ) CASH FLOWS FROM FINANCING ACTIVITIES: Cash overdraft (33,573 ) 33,573 Net proceeds from issuance of notes - 791,833 Repayment of notes (50,000 ) (264,939 ) Proceeds from issuance of demand loan 250,000 50,000 Repayment of demand Loan (25,000 ) - Proceeds from issuance of convertible note 2,472,525 1,525,154 Repayment of convertible notes - (226,250 ) Proceeds from issuance of convertible notes - related party - 299,852 Proceeds from issuance of note payable - related party 4,186,500 465,000 Repayment of note payable - related party (501,500 ) (205,000 ) Proceeds from issuance of common stock and warrants 684,829 2,787,462 Repayment of line of credit - (44,996 ) Cash paid to preferred holder - (87,111 ) Cash paid for debt issuance costs - (166,761 ) Cash paid for stock issuance costs (35,000 ) (35,115 ) Purchase of treasury stock and warrants (575,834 ) (33,334 ) Net Cash Provided By Financing Activities 6,337,947 4,889,368 Effect of exchange rate changes on cash (5,995 ) - Net Change in Cash 11,637 (111,051 ) Cash - Beginning of Year - 111,051 Cash - End of Year $ 11,637 $ - SUPPLEMENTARY CASH FLOW INFORMATION: Cash Paid During the Year for: Income taxes $ - $ - Interest $ 55,987 $ 64,892 SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Settlement of vendor liabilities $ 32,500 $ 123,750 Deferred offering costs $ 143,146 $ 143,146 Beneficial conversion feature on convertible notes $ 4,444 $ 38,413 Accrued dividends $ - $ 174,232 Warrants issued with debt $ 427,692 $ 1,133,820 Issuance of common stock for prepaid services $ - $ 116,300 Operating Lease liability $ 349,997 $ - Conversion of note payable and interest into convertible notes $ - $ 341,442 Warrants with amendment to notes payable $ - $ 135,596 Issuance of common stock and warrants in exchange for Series A and accrued dividend $ - $ 2,200,123 Issuance of common stock and warrants in exchange for series B and accrued dividend $ - $ 469,184 Common stock and warrants issued upon conversion of notes payable $ - $ 11,940,763 Promissory Note issued for acquisition $ 660,000 $ - Shares issued for acquisition $ 1,166,669 $ - Conversion of note payable - related party and interest into convertible notes - related party $ 4,119 $ - Conversion of accounts payable and interest into convertible notes $ 318,678 $ - Conversion of interest into note payable - related party $ 128,992 $ - Leasehold improvements reclassified to right-of-use asset $ 22,478 $ - For the Nine Months Ended For the Nine Months Ended September 30, 2022 September 30, 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (25,112,331 ) $ (24,942,247 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 441,943 194,929 Impairment of investment 50,000 62,733 Impairment of intangible assets 257,117 93,791 Accretion of debt discount and issuance cost 2,531,687 3,028,015 Share-based compensation 3,848,578 5,662,389 Bad debt expense 124,186 - Loss (Gain) on Forgiveness of debt 832,482 (702,140 ) Settlement of vendor liabilities 2,867 (92,909 ) Change in fair value of derivative liability (3,729 ) 1,096,287 Derivative Expense - 100,502 Loss on marketable securities 11,646 - Non cash lease expense 44,305 60,756 Equity interest granted for other income - (123,710 ) Equity in net loss from unconsolidated investment - 16,413 Changes in operating assets and liabilities: Prepaid expenses 114,925 (471,899 ) Inventory (492,128 ) (68,091 ) Accounts receivable (481,080 ) 150,980 Deposits and other assets (50,185 ) 107,115 Deferred revenue 71,396 111,192 Accounts payable and accrued expenses 3,805,245 160,434 Operating lease liability 145,887 (61,605 ) Net Cash Used In Operating Activities (13,857,189 ) (15,617,065 ) CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for property and equipment (213,975 ) (65,971 ) Deposits - (325,000 ) Cash paid for minority investment in business - (510,000 ) Cash paid for investments in marketable securities (48,878 ) - Sale of marketable securities 37,135 - Cash consideration for acquisition (75,679 ) (412,943 ) Purchases of digital assets (192,795 ) (11,241 ) Net Cash Used In Investing Activities (494,192 ) (1,325,155 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the exercise of warrant - 5,472,068 Net proceeds from issuance of notes 2,174,402 321,229 Repayment of notes (2,292,953 ) (403,843 ) Proceeds from issuance of convertible note 5,809,755 3,610,491 Repayment of convertible notes (337,899 ) (941,880 ) Purchase of treasury stock (13,700 ) - Proceeds from issuance of common stock and warrants 5,722,300 2,502,200 Net Cash Provided By Financing Activities 11,061,905 10,560,265 Effect of exchange rate changes on cash (65,719 ) (16,299 ) Net Change in Cash (3,355,195 ) (6,398,254 ) Cash - Beginning of period 3,794,734 7,906,782 Cash - End of period $ 439,539 $ 1,508,528 SUPPLEMENTARY CASH FLOW INFORMATION: Cash Paid During the Year for: Income taxes $ - $ - Interest $ 139,000 $ 58,395 SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Settlement of vendor liabilities $ 147,649 $ 168,667 Warrants issued with debt $ 2,907,497 $ 1,601,452 Issuance of common stock for prepaid services $ 141,150 $ 226,500 Operating Lease liability $ 2,250,648 $ - Deferred offering costs $ - $ 4,225 Common stock and warrants issued upon conversion of notes payable $ 173,455 $ 4,015,325 Shares issued for acquisition $ 40,994 $ 893,520 F-6December 31, 2019 and 2018September 30, 2022“Jerrick Media” or “Jerrick”“Creatd”), is a technology company focused on the development of digital communities, marketing branded digital content,providing economic opportunities for creators, which it accomplishes through its four main business pillars: Creatd Labs, Creatd Partners, Creatd Ventures, and e-commerce opportunities. Jerrick’s content distribution platform,Creatd Studios. Creatd’s flagship product, 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.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”).Jerrick Media.Jerrick.. Seller’s Choice, a digital e-commerce agency.digital e-commercea direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. The results of Plant Camp’s operations have been included since the date of acquisition in the Statements of Operations.Jersey (see Note 4)York (“WHE”). WHE has been consolidated due to the Company’s ownership of 55% voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations.and Critical Accounting Policies and PracticesF-7 and Assumptions and Critical Accounting Estimates and AssumptionsCritical 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:(i)Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.(ii)Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.(iii) Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.(iv)Estimates and assumptions used in valuation of equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk-free rate(s) to value share options and similar instruments.(v)Operating lease Estimates and assumptions: These assets and liabilities are recognized based on the present value of future payments over the lease term at the commencement date. We estimate the incremental borrowing rate for each lease based on an evaluation of our credit ratings and the prevailing market rates for collateralized debt in a similar economic environment with similar payment terms and maturity dates commensurate with the terms of the lease.F-8December 31, 2019,September 30, 2022, 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%100% Abacus Tech Pty Ltd Australia 100%100% Seller’s Choice, LLC New Jersey 100%100% Brave Foods, LLC Brave Foods, LLC 100 % Jerrick Global,Creatd Studios, LLC Delaware 100%100% Jerrick Investment AdvisorsGive, LLC Delaware 100%100% JerrickCreatd Partners LLC Delaware 100%100% Denver Bodega, LLC Colorado 100 % Maven TechDune Inc.Delaware 50 % Plant Camp LLC Delaware 100%89% OG CollectionSci-Fi.com, LLC Delaware 100%100% OG Collection, Inc. Delaware 100 % OG Gallery, LLC Delaware 100 % Orbit Media LLC New York 51 % VMENA LLC Delaware 100%100% Vocal For Brands, LLC Delaware 100%100% Vocal Ventures LLC Delaware 100%100% What to Buy, LLC Delaware 100%100% WHE Agency, Inc. Delaware 44 % 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 (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:Level 1Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.Level 2Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.Level 3Pricing inputs that are generally observable inputs and not corroborated by market data.investments● Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs) F-9● Level 3 – significant unobservable inputs (including our own assumptions in determining the fair value of investments) FinancialThe Company’s Level 1 assets/liabilities include cash, accounts receivable, marketable trading securities, accounts payable, marketable trading securities, prepaid and other current assets, are consideredline of credit and due to related parties. Management believes the estimated fair value of these accounts at September 30, 2022 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.3 when2 assets/liabilities include certain of the Company’s notes payable. Their carrying value approximates their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of similar debt currently available to the Company in the marketplace.methodologies or similar techniques and at least one significant model assumption or input is unobservable.The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If themodels. Unobservable inputs used to measurein the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that ismodels are significant to the fair value measurementvalues of the instrument.assets and liabilities. carrying amountfollowing tables provides a summary of the Company’s financialrelevant assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued liabilities. Transactions involving related parties cannot be presumed to be carried outthat are measured at fair value on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.a recurring basis:Cash EquivalentsFair Value Measurements as of Total Quoted
Prices in
Active
Markets for
Identical
Assets or
Liabilities
(Level 1) Quoted
Prices for
Similar
Assets or
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in Active Markets
(Level 2) Significant
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(Level 3) Assets: Marketable securities - equity securities $ 96 $ 96 $ - $ - Total assets $ 96 $ 96 $ - $ - minimizes itsprovides credit in the normal course of business. The Company maintains allowances for credit losses on factors surrounding the credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.specific customers, historical trends, and other information. Estimated
Useful
Life
(Years) Computer equipment and software 3 Furniture and fixturefixtures 5 IntangiblesIntangible Assetsand acquired finite-lived intangible assets and, purchased infinite life digital 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. Digital assets accounted for as intangible assets are subject to impairment losses if the fair value of digital assets decreases other than temporary below the carrying value. The fair value is measured using the quoted price of the crypto asset at the time its fair value is being measured. 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 notDuring the three months ended September 30, 2022, the Company recorded any significantan impairment charges duringcharge of $249,586 for intangible assets. During the years presented.nine months ended September 30, 2022, the Company recorded an impairment charge of $257,117 for intangible assets.F-10We review goodwill for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value of our single reporting unit below its carrying value. As of December 31, 2019, no impairment of goodwill has been identified.Scheduled amortization over the next five years are as follows: Twelve months ending September 30, 2023 $ 415,215 2024 443,236 2025 280,223 2026 260,935 2027 239,934 Thereafter 739,762 Total 2,379,305 Intangible assets not subject to amortization 157,294 Total Intangible Assets $ 2,536,599 For the
Three Months ended
September 30,
2022 Total As of July 1, 2022 $ 1,383,785 Goodwill acquired in a business combination 6,682 Impairment of goodwill (25,139 ) As of September 30, 2022 $ 1,365,328 For the
Nine Months ended
September 30,
2022 Total As of January 1, 2022 $ 1,374,835 Goodwill acquired in a business combination 15,632 Impairment of goodwill (25,139 ) As of September 30, 2022 $ 1,365,328 Accounting Standards CodificationASC to report accounting for contingencies. Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.shareholders’stockholders’ equity in accumulated other comprehensive income. Gains and losses from foreign currency transactions, which are included in SG&A,operating expenses, have not been significant in any period presented.Revenue RecognitionDerivative LiabilityOn January 1, 2018, we adoptedThe 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 Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedesCodification. The result of this accounting treatment is that the revenue recognition requirementsfair 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 condensed 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. (ASC) Topic 605, Revenue Recognition (Topic 605), using(“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the modified retrospective transition method appliedCompany’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjustedevaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and continue to be reported in accordance with our historic accounting under Topic 605. The impact of adopting the new revenue standard was not material to our consolidated financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.settlement provisions. ● identification of the contract, or contracts, with a customer; ● identification of the performance obligations in the contract; ● determination of the transaction price;price. 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 mile basis) and cash prizes offered to Challenge winners; ● allocation of the transaction price to the performance obligations in the contract; and ● recognition of revenue when, or as, we satisfy a performance obligation. F-11yearsthree and nine months ended December 31, 2019September 30, 2022 and 20182021 consists of the following: Year Ended
December 31, 2019 2018 Branded content $ 107,115 $ 60,485 Managed Services 283,332 - Creator Subscriptions 31,997 - Affiliate sales 15,300 11,553 Other revenue 15,042 8,860 $ 453,006 $ 80,898 Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Agency (Managed Services, Branded Content, & Talent Management Services) $ 442,867 $ 555,766 $ 1,613,924 $ 1,472,902 Platform (Creator Subscriptions) 230,212 611,714 1,138,812 1,370,581 Ecommerce 347,944 4,153 1,237,634 9,679 Affiliate Sales 1,828 7,619 7,120 23,425 Other Revenue - 368 - 17,803 $ 1,022,851 $ 1,179,620 $ 3,997,490 $ 2,894,390 Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Products and services transferred over time $ 673,079 $ 1,167,480 $ 2,752,736 $ 2,843,483 Products transferred at a point in time 349,772 12,140 1,244,754 50,907 $ 1,022,851 $ 1,179,620 $ 3,997,490 $ 2,894,390 TheIn the case of branded articles, 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. In the case of branded challenges, the performance obligation is satisfied when the Company successfully closes the challenge and winners have been announced. The Company utilizes the completed contract method when revenue is recognized over time as the services are performed.performed and any required milestones are met. Certain contracts contain separate milestones whereas the Company separates its performance obligations and utilizes the stand-alone selling price method and residual method to determine the estimate of the allocation of the transaction price. ● The Company collects fixed fees ranging from $5,000$10,000 to $45,000$110,000, with branded challenges ranging from $10,000 to $25,000 and branded articles ranging from $2,500 to $7,500 per article. ●The● Branded articles are created and published, and challenges are completed, within three months of the signed agreement, or as previously negotiated with the clientclient. ● TheBranded articles and challenges are promoted per the contract and engagement reports are provided to the clientclient. ●The client pays 50% at signing and 50% upon completion ● Most contracts include provisions for clients to acquire content rights at the end of the campaign for a flat feefee. Affiliate SalesTalent Management Services● Total gross contracts range from $500-$50,000. ● The Company collects fixed fees in the amount of 20% of the gross contract amount, ranging from $100 to $20,000 in net revenue per contract. ● The campaign is created and made live by the influencer within the timeframe specified in the contract. ● Campaigns are promoted per the contract and the customer is provided a link to the live deliverables on the influencer’s social media channels. ● Most billing for contracts occur 100% at execution of the performance obligation. Net payment terms vary by client. SubscriptionVocal+ 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. Vocal+ subscribers receive access to value-added features such as increased rate of CPM cost per mille (thousand) (“CPM”) monetization, a decreased minimum withdrawal threshold, a discount on platform processing fees, member badges for their profiles, 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.E-Commerce RevenueF-12Managed ServicesThe Company’s e-commerce businesses are housed under Creatd Ventures, and currently consists of four majority-owned e-commerce companies, Camp (previously Plant Camp), Dune Glow Remedy (“Dune”), Basis, and Brave. The Company generates revenue through the sale of Camp, Dune, and Basis, and Brave’s consumer products through its e-commerce distribution channels. The Company satisfies its performance obligation upon shipment of product to its customers and recognizes shipping and handling costs as a fulfillment cost. Customers have 30 days from receipt of an item to return unopened, unused, or damaged items for a full refund. All returns are processed within the relevant recording period and accounted for as a reduction in revenue. The Company runs discounts from time to time to promote sales, improve market penetration, and increase customer retention. Any discounts are run as coupon codes applied at the time of transaction and accounted for as a reduction in gross revenue. The Company assesses variable consideration using the most likely amount method.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 categories Partners, Monthly Services, and Projects. Contract amounts Partner and Monthly Services clients range from approximately $500-$7,500 per month while project amounts vary depending on the scope of work. Partner and Monthly clients are billed monthly for the work completed within that month. Partner Clients may or may not have an additional billing component referred to as Sales Performance Fee, which is a fee based upon a previously agreed upon percentage point of the client’s total sales for the month.Deferred RevenueDeferred RevenueDecember 31, 2019 and 2018,September 30, 2022, the Company had deferred revenue of $50,691$305,555. As of December 31, 2021, the Company had deferred revenue of $234,159, of which $159,727 was recognized as revenue in the nine months ended September 30, 2022, and $9,005, respectively.$13,512 was recognized as revenue in the three months ended September 30, 2022.uploadshas performed the articleswork in accordance with managed services, project, partner, consulting and reachesbranded content agreements. For example, we bill a managed service client monthly when we have updated their Amazon store, modified SEO or completed the required number of views onother services listed in the platform.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 yearnine months ended December 31, 2019September 30, 2022, the Company recorded $33,503$124,186, as reserve doubtful accounts.a bad debt expense. As of December 31, 2019 and 2018September 30, 2022, the Company has an allowance for doubtful accounts of $33,503 and $0 respectively.$311,133. As of December 31, 2021, the Company has an allowance for doubtful accounts of $186,147.Stock-Based CompensationInventoryASCAccounting Standards Codification (“ASC”) 718 “Compensation“Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award. The company has a relatively low forfeiture rate of stock based compensation and forfeitures are recognized as they occur.periods, typically over a five-year period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of Company stock on the grant date. periods.benchmarked against similar companies in a similar industryvolatility is derived from the Company’s historical data 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. Forfeitures are recognized as they occur.In addition,The Company issues awards of equity instruments, such as stock options and restricted stock units, to employees and certain non-employee directors. Compensation expense related to these awards is based on the Companyfair value of the underlying stock on the award date and is requiredamortized over the service period, defined as the vesting period. The vesting period is generally one to three years. A Black-Scholes model is utilized to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. Iffair value of stock options, while the market price of the Company’s actual forfeiture rate is materially different from its estimate, the equity–based compensation could be significantly different from what the Company has recorded in the current period.Income TaxesIncome taxes are provided in accordance with ASC No. 740, “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expense (benefit) results from the net change during the period of deferred tax assets and liabilities.Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates oncommon stock at the date of enactment. grant is used for restricted stock units. Compensation expense is reduced for actual forfeitures as they occur.F-13Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. During the year ended December 31, 2019, we recognized a $292,383 benefit for research and development tax credits in other income on the Statements of Comprehensive Income (Loss). The tax credits were claimed on our previous Australian tax returns and were based upon a research and development costs paid to an Australian company. Unrecognized tax benefits associated with these tax credits total $68,000.yearsthree and nine months ended December 31, 2019September 30, 2022 and 20182021 presented in these condensed consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.December 31, 2019September 30, 2022 and 2018:2021: December 31, 2019 2018 Options 303,833 294,166 Warrants 247,407 1,847,651 Convertible notes - related party 1,812 963 Convertible notes 241,583 13,996 Totals 794,635 2,156,776 September 30, 2022 2021 Series E preferred 121 148 Options 4,408,267 2,327,445 Warrants 20,429,630 6,558,705 Convertible notes 32,215,486 228,334 Totals 57,053,504 9,114,632 Reclassificationsyearyear’s presentation. These reclassifications did not affect the prior periodperiod’s total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities. During the year ended December 31, 2021, we adopted a change in presentation on our condensed consolidated statements of operations and comprehensive loss in order to present a gross profit line, the presentation of which is consistent with our peers. Under the new presentation, we began allocating payroll and related expenses, professional services and creator payouts. Prior periods have been revised to reflect this change in presentation.FebruaryMay 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’s 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. The updated guidance, which became effective for fiscal years beginning after December 15, 2021, During the nine months ended September 30, 2022 the Company recognized a deemed dividend of $63,064 from the modification of warrants.2016-02, “LeasesNo. 2016-13, Financial Instruments – Credit Losses (Topic 842)326), Measurement of Credit Losses on Financial Instruments (“ASU-2016-13”).” Under ASU 2016-02, lessees will, among2016-13 affects loans, debt securities, trade receivables, and any other things, require lesseesfinancial 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. On October 16, 2019, FASB approved a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that representsfinal ASU delaying the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model and ASC Topic 606, “Revenue from Contracts with Customers.” ASU 2016-02 became effective for us on January 1, 2019 and initially required transition using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) - Targeted Improvements,” which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In December 2018, the FASB also issued ASU 2018-20, “Leases (Topic 842) - Narrow-Scope Improvements for Lessors,” which provides for certain policy elections and changes lessor accounting for sales and similar taxes and certain lessor costs. As of January 1, 2019, the Company adopted ASU 2016-02 and has recorded a right-of-use asset and lease liability on the balance sheet for its operating leases. We elected to apply certain practical expedients provided under ASU 2016-02 whereby we will not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. We also do not expect to apply the recognition requirementsdate of ASU 2016-022016-13 for small reporting companies to any short-term leases (as defined by related accounting guidance). We expect to account for leaseinterim and non-lease components separately because such amounts are readily determinable under our lease contracts and because we expect this election will result in a lower impact on our balance sheet.Recent Accounting Guidance Not Yet AdoptedIn October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019,2022. The Company is currently evaluating the impact of these amendments to the Company’s financial position and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. The Company does not believe the adoption will have a material impact on the Company’s condensed consolidated financial statements. The adoption of the guidance will affect disclosures and estimates around accounts receivable. thosethat fiscal years. Early adoption of the update is permitted.year. The Company is currently evaluating the impact of the new standard.guidance on its condensed consolidated financial statements.F-14January 2017,July 2021, the Financial Accounting Standards Board (“FASB”FASB issued ASU No. 2021-05, Lessors—Certain Leases with Variable Lease Payments (Topic 842), Which requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate (hereafter referred to as “variable payments”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifyingas an operating lease on the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2commencement date of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). We do not believe the new guidance, whichlease if specified criteria are met. ASU 2021-05 is effective for the fiscal yearsyear beginning after December 15, 2019, will have a2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on ourthe Company’s condensed consolidated financial statemenstatements upon the adoption of this ASU.January 2017,October 2021, the FinancialFASB issued ASU No. 2021-08, Business Combinations — Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles-Goodwillfor Contract Assets and OtherContract Liabilities from Contracts with Customers (Topic 350): Simplifying805), Which aims to improve the Testaccounting for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measureacquired revenue contracts with customers in a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). We do not believe the new guidance, whichbusiness combination by addressing diversity in recognition and payment terms that effect subsequent revenue recognition. ASU 2021-08 is effective for the fiscal yearsyear beginning after December 15, 2019, will have a2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on ourthe Company’s condensed consolidated financial statements.statements upon the adoption of this ASU.In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements for fair value measurements. We do not believe the updated guidance, which is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This guidance requires companies to apply the internal-use software guidance in Accounting Standards Codification (“ASC”) 350-40 to implementation costs incurred in a hosting arrangement that is a service contract to determine whether to capitalize certain implementation costs or expense them as incurred. We do not believe the new guidance, which is effective for fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.at December 31, 2019,of $133.8 million, a net loss of $8.0$25.1 million and net cash used in operating activities of $5.9$13.9 million for the reporting period then ended. The Company is also in default on debentures as of the date of this filing. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.Acquisition of Seller’s ChoiceOn September 11, 2019, the Company entered into a Membership Interest Purchase Agreement (the “Seller’s Choice Purchase Agreement”) by and between the Company and Home Revolution, LLC, a Delaware limited liability company (the “Seller”). Pursuant to the Seller’s Choice Purchase Agreement, subject to the terms and conditions set forth therein, at the closing of the transactions contemplated by the Seller’s Choice Purchase Agreement (the “Seller’s Choice Closing”), the Company acquired 100% of the membership interests of Seller’s Choice. As a result of the transactions contemplated by the Seller’s Choice Purchase Agreement, Seller’s Choice became a wholly owned subsidiary of the Company (collectively, the “Seller’s Choice Acquisition”).At the Seller’s Choice Closing, the aggregate consideration (the “Consideration”) paid to the Seller was as follows: (i) $340,000, in cash; (ii) 111,111 shares of the Company’s common stock; and (iii) a secured promissory note in the principal amount of $660,000 (the “Seller’s Choice Note”). In connection with the Seller’s Choice Note, the Company, Seller, and Seller’s Choice entered into a Security Agreement whereby the Seller’s Choice Note is secured by the assets of Seller’s Choice.Following the closing of the transaction, Seller’s Choice’s financial statements as of the Closing were consolidated with the Consolidated Financial Statements of the Company. These amounts are provisional and may be adjusted during the measurement period.InventoryF-15 September 30,
2022 December 31,
2021 Raw Materials $ 82,834 $ - Packaging 78,799 2,907 Finished goods 717,417 103,496 $ 879,050 $ 106,403 Following the closing of the merger transaction the Company’s investment in Seller’s Choice consisted of the following: Shares Amount Consideration paid prior to Closing: Cash paid $ 40,000 Total consideration paid - $ 40,000 Consideration paid at Closing: Cash paid $ 300,000 Common stock issued at closing (1) 111,111 $ 1,166,669 Note payable due March 11, 2020 660,000 Total consideration to be paid $ 2,126,669 Total consideration $ 2,166,669 (1)The common stock issued at the closing of the Seller’s Choice Acquisition had a closing price of $10.50 per share on the date of the transaction.The following presents the unaudited pro-forma combined results of operations of the Company with Seller’s Choice as if the entities were combined on January 1, 2018. Year Ended December 31,
2018 Revenues, net $ 705,537 Net loss attributable to common shareholders $ (14,250,859 ) Net loss per share $ (3.80 ) Weighted average number of shares outstanding 3,751,825 Year Ended December 31,
2019 Revenues, net $ 1,121,521 Net loss attributable to common shareholders $ (8,176,763 ) Net loss per share $ (0.97 ) Weighted average number of shares outstanding 8,455,095 The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2018 or to project potential operating results as of any future date or for any future periods. The Company consolidated Seller’s Choice as of the closing date of the Seller’s Choice Acquisition, and the results of operations of the Company include that of Seller’s Choice.and amortization, consisted of the following: December 31,
2019 December 31,
2018 Computer Equipment $ 239,940 $ 223,574 Furniture and Fixtures 86,888 61,803 Leasehold Improvements - 25,446 326,828 310,823 Less: Accumulated Depreciation (284,465 ) (268,380 ) $ 42,363 $ 42,443 September 30,
2022 December 31,
2021 Computer Equipment $ 447,342 $ 353,880 Furniture and Fixtures 184,524 102,416 Leasehold Improvements 47,616 11,457 679,482 467,753 Less: Accumulated Depreciation (430,519 ) (364,814 ) $ 248,963 $ 102,939 During the year ended December 31, 2019 the Company reclassified leasehold improvements to right of use asset in accordance with the adoption of ASU 2016-02. See Note 10.$19,053$43,546 and $42,218$10,047 for the yearthree months ended December 31, 2019September 30, 2022 and 2018,2021, respectively. Depreciation expense was $67,951 and $30,141 for the nine months ended September 30, 2022 and 2021, respectively.F-162019 and 20182021 is as follows: Outstanding Principal as of Warrants granted December 31,
2019 December 31,
2018 Interest Rate Maturity Date Quantity Exercise
Price July 2018 Loan Agreement - 50,000 6 % August 2018 5,000 $ 12.00 Seller’s Choice Note 660,000 - 9.5 % September 2020 - - 660,000 50,000 Less: Debt Discount - - Less: Debt Issuance Costs - (74 ) $ 660,000 $ 49,926 The February 2017 Offering Outstanding
Principal as of September 30,
2022 December 31,
2021 Interest
Rate Maturity
DateSeller’s Choice Note $ - $ 660,000 30 % September 2020 The April 2020 PPP Loan Agreement 198,577 198,577 1 % May 2022 The First December 2021 Loan Agreement 47,990 185,655 10 % June 2023 The Second December 2021 Loan Agreement - 313,979 14 % June 2022 First Denver Bodega LLC Loan 44,008 - 5 % March 2025 The Third May 2022 Loan Agreement 16,169 - - % November 2022 The Fourth May 2022 Loan Agreement 30,558 - - % November 2022 The First August 2022 Loan Agreement 129,634 - 14 % November 2022 The Second August 2022 Loan Agreement 646,100 - - % January 2023 The First September 2022 Loan Agreement 87,884 - - % September 2023 The Second September 2022 Loan Agreement 848,625 - - % May 2023 The Third September 2022 Loan Agreement 351,964 - - % April 2023 2,401,509 1,358,211 Less: Debt Discount (614,410 ) (15,547 ) Less: Debt Issuance Costs - - 1,787,099 1,342,664 Less: Current Debt (1,758,179 ) (1,278,672 ) Total Long-Term Debt $ 28,920 $ 63,992 From February 24, 2017 through March 17, 2017, the Company conducted multiple closings of a private placement offering (the “February 2017 Offering”) of the Company’s securities by entering into subscription agreements (the “Subscription Agreements”) with accredited investors (the “Accredited Investors”) for aggregate gross proceeds of $916,585 for which the Accredited Investors received $975,511 in principal value of secured promissory notes with an original issue discount of six percent (6%) (the “February 2017 Offering Notes”) and warrants to purchase the Company’s common stock (the “February 2017 Offering Warrants”). The February 2017 Offering Notes are convertible into shares of the Company’s common stock at the time of Company’s next round of financing (the “Subsequent Offering”) at a price equal to eighty-five percent (85%) of the price per share offered in the Subsequent Offering (the “Conversion Price”). The February 2017 Offering Warrants have a five-year term. Investors received the February 2017 Offering Warrants in the following amounts: (i) Investors purchasing $150,000 or more of the Offering received a February 2017 Offering Warrant equal to one hundred thirty percent (130%) of the dollar amount invested in the Offering; (ii) investors purchasing at least $100,000 but less than $150,000 of the February 2017 Offering received a February 2017 Offering Warrant equal to one hundred percent (100%) of the dollar amount invested in the Offering; and (iii) investors purchasing less than $100,000 of the Offering received to a February 2017 Offering Warrant equal to seventy percent (70%) of the dollar amount invested in the Offering. The February 2017 Offering Warrants entitle the holder to purchase shares of the Company’s common stock at $12.00 per share (the “Exercise Price”).Seller’s Choice NoteThe Conversion Price and the Exercise Price are subject to adjustments for issuances of (i) the Company’s common stock, (ii) any equity linked instruments or (iii) securities convertible into the Company’s common stock, at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustments shall result in the Conversion Price or Exercise Price being reduced to such lower purchase price, as described in the February 2017 Offering Notes and the February 2017 Offering Warrants.Pursuant to the Subscription Agreements, the February 2017 Offering Notes matured on September 1, 2017 (the “February 2017 Offering Maturity Date”). Prior to the February 2017 Offering Maturity Date, investors representing $575,511 in principal value converted their February 2017 Offering Notes into two year, 15% secured convertible promissory notes offered by the Company (the “August 2017 Convertible Note Offering”). The remaining investors representing an aggregate $400,000 in principal of the February 2017 Offering Notes agreed to forbear their right to declare an event of default until December 15, 2017 during which time they retain the right to convert their principal and any accrued but unpaid interest into the August 2017 Convertible Note Offering. In consideration of the forbearance for which the investors will receive a warrant to purchase up to fifteen percent (15%) of the shares of common stock underlying the warrant acquired with the purchase of the February 2017 Offering Notes at a purchase price of $12.00 per share, and the interest on their note would be increased to eighteen percent (18%) from September 1, 2017 through December 15, 2017 or the conversion date, whichever is sooner.F-17During the year ended December 31, 2018, the Company entered into three forbearance agreement whereby the Company issued the remaining investors of The February 2017 Offering five-year warrants to purchase 8,333 shares of the Company’s common stock at a purchase price of $12.00 per share. These warrants had a fair value of $70,219 which was recorded to loss on extinguishment of debt. The new maturity date of the February 2017 Loan Agreements were from July to September of 2018.During the year ended December 31, 2018 the Company has repaid $131,606 of principal and $45,931 of unpaid interest. In addition, during the year ended December 31, 2018, the Company converted $268,394 of principal and $21,620 of unpaid interest into 24,081 shares of common stock. Upon conversion of the notes, the Company also issued 12,040 warrants with a grant date fair value of $104,124 which is recorded in Other income (expense) on the accompanying consolidated Statements of Comprehensive Loss.The June 2017 Loan AgreementOn June 12, 2017, the Company entered into a loan agreement (the “June 2017 Loan Agreement”) with an individual (the “June 2017 Lender”) whereby the June 2017 Lender issued the Company a promissory note of $50,000 (the “June 2017 Note”). Pursuant to the June 2017 Loan Agreement, the June 2017 Note bears interest at a rate of 10% per annum. As additional consideration for entering in the June 2017 Loan Agreement, the Company issued the June 2017 Lender a five-year warrant to purchase 583 shares of the Company’s common stock with an exercise price of $12.00 per share. The maturity date of the June 2017 Note was September 1, 2017 (the “June 2017 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the June 2017 Note were due.During the year ended December 31, 2018 the Company repaid $50,000 principal and the debtor forgave the interest of $4,424, which was recorded as a gain on forgiveness of debt on the accompanying consolidated Statements of Comprehensive Loss.The First November 2017 Loan AgreementOn November 28, 2017, the Company entered into a loan agreement (the “First November 2017 Loan Agreement”) with an individual (the “First November 2017 Lender”), the First November 2017 Lender issued the Company a promissory note of $100,000 (the “First November 2017 Note”). Pursuant to the First November 2017 Loan Agreement, the First November 2017 Note has interest of fifteen percent (15%), (i) five percent (5%) (i.e. $5,000) shall be payable in cash or convertible into shares of the Company’s restricted common stock at a rate of $12.00 per share, at the option of the Lender, at the Maturity Date; (ii) ten percent (10%) (i.e. $10,000) shall be paid in the form of the Company’s restricted common stock at a rate of $12.00 per share (equivalent to 833 shares of the Company’s common stock ). The maturity date of the First November 2017 Note was January 12, 2018 (the “First November 2017 Maturity Date”). On January 12, 2018, the First November 2017 Note and accrued but unpaid interest was converted into the Company’s August 2017 Convertible Note Offering. The Second November 2017 Loan AgreementOn November 29, 2017, the Company entered into a loan agreement (the “Second November 2017 Loan Agreement”) with an individual (the “Second November 2017 Lender”), the Second November 2017 Lender issued the Company a promissory note of $50,000 (the “Second November 2017 Note”). Pursuant to the Second November 2017 Loan Agreement, the Second November 2017 Note has interest of fifteen percent (15%), (i) five percent (5%) (i.e. $2,500) shall be payable in cash or convertible into shares of the Company’s restricted common stock at a rate of $12.00 per share, at the option of the Lender, at the Maturity Date; (ii) ten percent (10%) (i.e. $5,000) shall be paid in the form of the Company’s restricted common stock at a rate of $12.00 per share (equivalent to 416 shares of the Company’s common stock ). The maturity date of the Second November 2017 Note was January 13, 2018 (the “Second November 2017 Maturity Date”). On January 12, 2018, the Second November 2017 Note and accrued but unpaid interest was converted into the Company’s August 2017 Convertible Note Offering. F-18The Third November 2017 Loan AgreementOn November 29, 2017, the Company entered into a loan agreement (the “Third November 2017 Loan Agreement”) with an individual (the “Third November 2017 Lender”), the Third November 2017 Lender issued the Company a promissory note of $100,000 (the “Third November 2017 Note”). Pursuant to the Third November 2017 Loan Agreement, the Third November 2017 Note has interest of fifteen percent (15%), (i) five percent (5%) (i.e. $5,000) shall be payable in cash or convertible into shares of the Company’s restricted common stock at a rate of $12.00 per share, at the option of the Lender, at the Maturity Date; (ii) ten percent (10%) (i.e. $10,000) shall be paid in the form of the Company’s restricted common stock at a rate of $12.00 per share (equivalent to 833 shares of the Company’s common stock). The maturity date of the Third November 2017 Note was January 13, 2018 (the “Third November 2017 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Third November 2017 Note are due. On January 12, 2018, the Third November 2017 Note and accrued but unpaid interest was converted into the Company’s August 2017 Convertible Note Offering.On March 14, 2018, the Company entered into a loan agreement (the “March 2018 Loan Agreement”) with an individual (the “March 2018 Lender”), the March 2018 Lender issued the Company a promissory note of $50,000 (the “March 2018 Note”). Pursuant to the March 2018 Loan Agreement, the March 2018 Note bears interest at a rate of 12% per annum. As additional consideration for entering in the March 2018 Loan Agreement, the Company issued the March 2018 Lender a five-year warrant to purchase 1,666 shares of the Company’s common stock with an exercise price of $12.00 per share. The maturity date of the March 2018 Note was March 29, 2018 (the “March 2018 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the March 2018 Note were due. On March 29, 2018, the March 2018 Note and accrued but unpaid interest was exchanged for a convertible note under the Company’s March 2018 Convertible Note Offering.The May 2018 OfferingDuring the months of May and June 2018, the Company conducted multiple closings with accredited investors (the “May 2018 Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “May 2018 Investors”) for aggregate gross proceeds of $608,500.The May 2018 Offering consisted of a maximum of $1,200,000 of units of the Company’s securities (each, a “May 2018 Unit” and collectively, the “May 2018 Units”), with each May 2018 Unit consisting of (i) a 13% promissory note (each, a “May 2018 Offering Note” and, together, the “May 2018 Offering Notes”), and (ii) a four-year warrant (“May 2018 Offering Warrant”) to purchase the number of shares of the Company’s common stock equal to three times the principal amount in dollars invested by such investor in each May 2018 Offering Note (the “May 2018 Warrant Shares”) at an exercise price of $12.00 per share (the “May Offering Warrant Exercise Price”), subject to adjustment upon the terms thereof. The May 2018 Offering Notes mature on the nine-month anniversary of their issuance dates.The Company recorded a $215,032 debt discount relating to 30,425 May 2018 Offering Warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During August 2018, the Company converted all outstanding principal unpaid interest into the August 2018 equity raise.The May Offering Warrant Exercise Price of the May 2018 Offering Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing May 2018 Offering Warrant Exercise Price. Such adjustment shall result in the May 2018 Offering Warrant Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.During the nine months ended December 31, 2018, the Company converted $608,500 of principal and $723,780 of unpaid interest into the August 2018 equity raise (as defined below).F-19July 2018 Loan AgreementsIn July 2018, the Company received gross proceeds of $100,000 from the issuance of notes payable. As additional consideration for entering into the debentures, the Company issued the investor a 4-year warrant to purchase 5,000 shares of the Company’s common stock at a purchase price of $12.00 per share. The Company recorded a $34,569 debt discount relating to these warrants issued to these investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of this note to accretion of debt discount and issuance cost.On November 8, 2018 the Company executed upon agreements that extended the maturity dates of these loans to March 7, 2019. As part of the extension agreements, the Company issued 3,401 warrants to purchase common stock of the Company at an exercise price of $18.00.During the year ended December 31, 2019 the Company has repaid $50,000 of principal and $1,700 of unpaid interest.August 2018 Loan AgreementsOn August 30, 2018, the Company received gross proceeds of $33,333 from the issuance of a note payable. As additional consideration for entering into the debenture, the Company issued the investor a 4-year warrant to purchase 555 shares of the Company’s common stock at a purchase price of $12.00 per share. The Company recorded a $4,178 debt discount relating to these warrants issued to this investor based on the relative fair value of each equity instrument on the dates of issuance. The debt discount was fully accreted during the nine months ended December 31, 2018. On September 7, 2018 the Company has repaid $33,333 in principal. Seller’s Choice NoteLLC, (see Note 4).LLC. 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 December 31, 2021, the Company was in default on the Seller’s Choice note.yearnine months ended September 30, 2022, the Company accrued interest of $4,815.31, 20192021 Loan Agreementprincipal and $16,198 in interest on the Seller’s Choice Note.principal.NoteNotes PayableDecember 31, 2019 and 2018September 30, 2022, is as follows: Outstanding Principal as of Warrants granted December 31,
2019 December 31,
2018 Interest
Rate Conversion
Price Maturity Date Quantity Exercise
Price The February 2018 Convertible Note Offering 75,000 75,000 15 % 12.00 (*) January – February 2020 84,639 12.00 The March 2018 Convertible Note Offering 75,000 75,000 14 % 12.00 (*) March – April 2020 80,114 12.00 The February 2019 Convertible Note Offering 2,311,703 - 10 % 15.00 (*) February – March 2020 44,396 18.00 The November 2019 Convertible Note Offering 559,433 - 12 % 13.50 May – June 2020 - - 3,021,136 150,000 Less: Debt Discount (124,096 ) (17,280 ) Less: Debt Issuance Costs (614 ) (9,239 ) 2,896,425 123,481 Less: Current Debt (2,896,425 ) - Total Long-Term Debt $ - $ 123,481 Outstanding
Principal as of Warrants granted Quantity The Second February 2022 Loan Agreement $ 112,613 11 % - (*) February-23 - - The May 2022 Convertible Loan Agreement 76,814 11 % - (*) May-23 - - The May 2022 Convertible Note Offering 4,090,000 18 % 2.00 (*) November-22 4,000,000 $3.00 – $6.00 The July 2022 Convertible Note Offering 2,150,000 18 % 2.00 (*) November-22 2,150,000 $3.00 – $6.00 6,429,427 Less: Debt Discount (360,854 ) Less: Debt Issuance Costs (5,648 ) 6,062,926 (*) As subject to adjustment as further outlined in the notes F-20November 2016July 2021 Convertible Note OfferingLoan AgreementDuring the months of November and December 2016,On July 6, 2021, the Company issued convertible notes to third party lenders totaling $400,000entered into a loan agreement (the “November 2016 Convertible Note Offering”“July 2021 Loan Agreement”). These notes accrued interest at a rate of 10% per annum and matured with interest and principal both due between November 1, 2017 through December 29, 2017. The notes and accrued interest are convertible at a conversion price as defined therein. In addition, in connection with these notesan individual (the “July 2021 Lender”), whereby the July 2021 Lender issued the Company issued five-year warrantsa promissory note of $168,850 (the “July 2021 Note”). Pursuant to purchase an aggregatethe July 2021 Loan Agreement, the July 2021 Note has interest of 6,666 sharessix percent (6%). The July 2021 Note matures on the first (12th) month anniversary of Company common stock at a purchase price of $18.00 per share. These investors converted $375,000 of principal and $30,719 of interest into the August 2017 Convertible Note Offering. its issuance date. DuringUpon default or 180 days after issuance the year December 2018, the Company converted $25,000 of principal and $4,417 of unpaid interestJuly 2021 Note is convertible into the August 2018 Equity Raise (as defined below).The June 2017 Convertible Note OfferingDuring the month of June 2017, the Company issued convertible notes to third party lenders totaling $71,500. These notes accrued interest at 12% per annum and matured with interest and principal both due on September 1, 2017. These notes and accrued interest may be converted into a subsequent offering at a 15% discount to the offering price are convertible at a conversion price as defined therein. In addition, the Company issued warrants to purchase 1,126 shares of Company common stock. These warrants entitle the holders to purchase 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.purchase pricevariable 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 $12.00shares. The conversion feature has been measured at fair value using a Binomial model at the conversion date. The conversion feature of July 2021 Note gave rise to a derivative liability of $100,532. The Company recorded this as a debt discount. The debt discount is charged to accretion of debt discount over the remaining term of the convertible note.for(“Conversion Shares”) equal to 75% of average the lowest three trading prices of the Company’s common stock on the ten-trading day immediately preceding the date of the respective conversion.period$37,163 debt discount relating to an original issue discount. The debt discount is being accreted over the life of five years from the issue date. Asnote to accretion of December 31, 2017,debt discount and issuance cost.was currentlyrepaid $224,550 in default on $71,500 in principal due on these notes. principal.February 8, 2018,May 20, 2022, the Company paid these notes and is no longer in default. entered into a loan agreement (the “May 2022 Loan Agreement”) with an individual (the “May 2022 Lender”), whereby the May 2022 Lender issued the Company a promissory note of $115,163 (the “July 2021 Note”). Pursuant to the Third May 2022 Loan Agreement, the Third May 2022 Note has an interest rate of 11%. The May 2022 Note matures on the first (12th) month anniversary of its issuance date. August 2017Company recorded a $15,163 debt discount relating to an original issue discount The debt discount and debt issuance costs are being accreted over the life of the note to accretion of debt discount and issuance cost.From August through NovemberDuring May of 2017,2022, the Company conducted multiple closings of a private placement offering to accredited investors (the “August 2017“May 2022 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “August 2017“May 2022 Investors”) for aggregate gross proceeds of $1,585,000. In addition, $1,217,177 of the Company’s short-term debt along with accrued but unpaid interest of $40,146 was converted into the August 2017 Convertible Note Offering. These conversions resulted in the issuance of 113,190 warrants with a fair value of $583,681 and an original issue discount of $101,561. These were recorded as a loss on extinguishment of debt. August 2017 Convertible Note Offering consisted of a maximum of $6,000,000 of units of the Company’s securities (each, a “August 2017 Unit” and collectively, the “August 2017 Units”), with each August 2017 Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a “August 2017 Offering Note”, and together the “August 2017 Offering Notes”),May 2022 convertible notes are convertible into shares of the Company’s common stock, (“August 2017 Offering Conversion Shares”)par value $.001 per share at a conversion price of $12.00$2.00 per share (the “August 2017share. As additional consideration for entering in the May 2022 Convertible Note Conversion Price”), and (b) a five-year warrant (each a “August 2017 Offering, Warrant and together the “August 2017 Offering Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the August 2017 Offering Notes can be converted into (“August 2017 Offering Warrant Shares”) at an exercise price of $12.00 per share (“August 2017 Offering Warrant Exercise Price”). The August 2017 Offering Notes mature on the second (2nd) anniversary of their issuance dates.F-21The August 2017 Note Conversion Price and the August 2017 Offering Warrant Exercise Price are subject to adjustment for issuancesCompany issued 4,000,000 warrants of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing August 2017stock. The May 2022 Convertible Note Conversion Price or August 2017 Offering Warrant Exercise Price. Such adjustment shall result in the August 2017 Note Conversion Price and August 2017 Offering Warrant Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.matures on November 30, 2022. $472,675$1,895,391 debt discount relating to 132,083 August 2017 Offering Warrants4,000,000 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the notethese notes to accretion of debt discount and issuance cost.In connection withThe Company recorded a $399,964 debt discount relating to an original issue discount and $125,300 of debt issuance costs related to fees paid to vendors relating to the August 2017 Convertible Note Offering, the Company paid a placement agent a cash fee of $90,508 to for services rendered in connection therewith on a “best-efforts” basis, which was recorded asoffering. The debt discount and debt issuance cost and iscosts are being accreted over the life of the note to accretion of debt discount and issuance cost.yearnine months ended December 31, 2018,September 30, 2022, the Company converted $2,830,764accrued $103,670 in interest that was not forgiven. As of September 30, 2022, the Company is in default on $900,000 of principal and $409,287$103,670 of unpaid interest into the August 2018 Equity Raise (as defined below). During the year ended December 31, 2018 the Company has repaid $114,000 of principal and $18,410 of unpaid interest.First December 2017July 2022 Convertible Note OfferingOn December 27, 2017,During July of 2022, the Company issuedconducted multiple closings of a private placement offering to accredited investors (the “July 2022 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “July 2022 Investors”) for aggregate gross proceeds of $2,150,000. The July 2022 convertible note to a third-party lender totaling $100,000 (the “First December 2017 Note”). The First December 2017 Note accrues interest at 15% per annum and matures with interest and principal both due on December 27, 2019. In addition, the Company issued a warrant to purchase 8,333notes are convertible into shares of Company common stock. The warrant entitles the holder to purchase the Company’s common stock, par value $.001 per share at a purchaseconversion price of $12.00$2.00 per shareshare. As additional consideration for a periodentering in the July 2022 Convertible Note Offering, the Company issued 2,150,000 warrants of five years from the issue date. Company’s common stock. The July 2022 Convertible Note matures on November 30, 2022. $35,525$863,792 debt discount relating to the2,150,000 warrants issued to the investorinvestors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost.The First December 2017 Noteto accretion of debt discount and accruedissuance cost.is convertible at a rate of 18%.$12.00$0.20 for the convertible notes and warrants. Since the present value of the cash flows of the new and old debt were more than 10% different, the company used extinguishment accounting. As part of the agreement the Company recognized $640,521 as loss on extinguishment related to the change in fair value from the restructuring agreement.Nine Months Ended
September 30, 2022Level 1 Level 2 Level 3 Derivative liabilities as January 1, 2022 $ - $ - $ - Addition - - 100,532 Changes in fair value - - (3,729 ) Extinguishment - - (96,803 ) Derivative liabilities as September 30, 2022 $ - $ - $ - The First December 2017 Note is securedEach holder of Series E Preferred Stock shall be entitled to receive, with respect to each share of Series E Preferred Stock then outstanding and held by a second priority liensuch holder, dividends on an as-converted basis in the assetssame form as dividends actually paid on shares of the Company.Common Stock when, as and if such dividends are paid on shares of the Common Stock.September 30,
2022Exercise price $ 1.10 – 1.90 Expected dividends 0 % Expected volatility 165.38% – 166.48 % Risk free interest rate 2.69% – 2.95 % Expected life of option 5 years September 30,
2021Exercise price $ 2.55 – 14.10 Expected dividends 0 % Expected volatility 194.39% – 242.98 % Risk free interest rate 0.46% – 0.98 % Expected life of option 5 - 7 years Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Life (in years) Balance – December 31, 2020 – outstanding 541,021 12.75 3.27 Granted 1,850,588 6.32 6.20 Exercised - - - Forfeited/Cancelled (64,164 ) 13.06 - Balance – September 30, 2021 – outstanding 2,327,445 7.63 4.29 Balance – September 30, 2021 – exercisable 608,524 12.75 3.75 Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Life (in years) Balance – January 1, 2022 – outstanding 2,902,619 7.07 4.71 Granted 1,940,000 1.38 - Exercised - - - Forfeited/Cancelled (434,352 ) 13.56 - Balance – September 30, 2022 – outstanding 4,408,267 3.93 4.43 Balance – September 30, 2022 – exercisable 3,010,101 4.12 4.32 Option Outstanding Option Exercisable Exercise price Number
Outstanding Weighted
Average
Remaining
Contractual
Life
(in years) Weighted
Average
Exercise
Price Number
Exercisable Weighted
Average
Remaining
Contractual
Life
(in years) $ 3.93 4,408,267 4.43 4.12 3,010,101 4.32 September 30,
2021Exercise price $4.50 – 4.95 Expected dividends 0% Expected volatility 237.14% - 237.68 % Risk free interest rate 0.82% - 0.86 % Expected life of warrant 5 years September 30,
2022Exercise price $0.20 – 6.00 Expected dividends 0% Expected volatility 164.34% - 169.75% Risk free interest rate 2.81% – 4.00% Expected life of warrant 5.00 – 5.50 years Warrant Weighted
Average
Exercise
Price Balance – December 31, 2020 – outstanding 6,130,948 4.96 Granted 1,881,267 5.63 Exercised (1,438,788 ) 4.59 Forfeited/Cancelled (14,722 ) 24.00 Balance – September 30, 2021 – outstanding 6,558,705 4.92 Balance – September 30, 2021 – exercisable 6,558,705 $ 4.92 Warrant Weighted
Average
Exercise
Price Balance – January 1, 2022 – outstanding 5,658,830 4.98 Granted 14,812,262 2.29 Exercised - - Forfeited/Cancelled (41,462 ) 12.00 Balance – September 30, 2022 – outstanding 20,429,630 1.88 Balance – September 30, 2022 – exercisable 16,429,630 $ 2.62 Warrants Outstanding Warrants Exercisable Exercise price Number
Outstanding Weighted
Average
Remaining
Contractual
Life
(in years) Weighted
Average
Exercise
Price Number
Exercisable Weighted
Average
Exercise
Price $ 1.88 20,429,630 4.07 2.62 16,429,630 3.81 Three Months
Ended
September 30,
2022 Operating lease cost $ 148,446 Short term lease cost 5,568 Total net lease cost $ 154,015 Nine Months
Ended
September 30,
2022 Operating lease cost $ 241,601 Short term lease cost 154,108 Total net lease cost $ 395,709 Nine Months
Ended
September 30,
2022Cash paid for amounts included in the measurement of lease liabilities: Operating lease payments 54,564 Weighted average remaining lease term (in years): 3.40 Weighted average discount rate: 12.50 % For the Twelve Months Ended September 30, Operating
Leases 2023 $ 534,880 2024 541,905 2025 513,507 2026 528,589 2027 544,122 Thereafter 892,399 Total lease payments 3,555,402 Less: Amounts representing interest (1,140,416 ) Total lease obligations 2,414,986 Less: Current (279,593 ) $ 2,135,393 Purchase price: Cash paid to seller $ 1 Total purchase price 1 Assets acquired: Cash 44,977 Accounts Receivable 2,676 Inventory 194,365 Total assets acquired 242,018 Liabilities assumed: Accounts payable and accrued expenses 127,116 Notes payable 293,888 Total liabilities assumed 421,004 Net liabilities acquired (178,986 ) Excess purchase price $ 178,987 Goodwill $ 8,950 Trade Names & Trademarks 8,949 Know-How and Intellectual Property 107,392 Website 8,949 Customer Relationships 44,747 Excess purchase price $ 178,987 Purchase price: Cash paid to seller $ 44,000 Shares granted to seller 40,994 Total purchase price 84,994 Net Assets acquired - Non-controlling interest in consolidated subsidiary 81,661 Excess purchase price $ 166,655 Know-How and Intellectual Property $ 166,655 Excess purchase price $ 166,655 Purchase price: Cash paid to seller $ 150,000 Total purchase price 150,000 Assets acquired: Cash 73,344 Inventory 86,154 Total assets acquired 159,498 Liabilities assumed: Accounts payable and accrued expenses 1,316 Notes payable 75,000 Total liabilities assumed 76,316 Net assets acquired 83,182 Excess purchase price $ 66,818 Goodwill $ 6,683 Trade Names & Trademarks 16,704 Know-How and Intellectual Property 16,704 Website 16,704 Customer Relationships 10,023 Excess purchase price $ 66,818 Three Months
Ended September 30, 2021 Revenues $ 3,429,748 Net loss attributable to common shareholders $ (25,735,007 ) Net loss per share $ (2.17 ) Weighted average number of shares outstanding 11,845,229 Three Months Ended September 30, 2022 Revenues $ 4,057,080 Net loss attributable to common shareholders $ (9,425,313 ) Net loss per share $ (0.45 ) Weighted average number of shares outstanding 21,087,764 Nine Months
Ended 2021 Revenues $ 5,069,181 Net loss attributable to common shareholders $ (26,428,192 ) Net loss per share $ (2.23 ) Weighted average number of shares outstanding 11,845,229
Ended 2022 Revenues $ 4,683,843 Net loss attributable to common shareholders $ (24,217,030 ) Net loss per share $ (1.23 ) Weighted average number of shares outstanding 19,726,987 Operations of: Products and services provided: Creatd Labs Creatd Ventures Creatd Partners Creatd Partners fosters relationships between brands and creators through its suite of agency services, including content marketing (Vocal for Brands), performance marketing (Seller’s Choice), and influencer marketing (WHE Agency). Creatd Partners derives revenues in the form of brand fees and talent management commissions. As of September 30, 2022 Creatd
Labs Creatd
Ventures Creatd
Partners Corporate Total Accounts receivable, net $ - $ 4,973 $ 217,210 $ - $ 222,183 Prepaid expenses and other current assets 43,336 - - 96,390 139,726 Deposits and other assets 576,551 - - 192,585 769,136 Intangible assets 162,489 1,568,347 648,469 157,294 2,536,599 Goodwill - 15,632 1,349,696 - 1,365,328 Inventory - 879,050 - - 879,050 All other assets - - - 2,811,769 2,811,769 Total Assets $ 782,376 $ 2,468,002 $ 2,215,375 $ 3,258,038 $ 8,723,791 Accounts payable and accrued liabilities $ 1,365 $ 1,518,544 $ 68,063 $ 5,126,634 $ 6,714,606 Note payable, net of debt discount and issuance costs 129,634 170,365 - 1,487,100 1,787,099 Deferred revenue 161,112 - 144,443 - 305,555 All other Liabilities - - - 8,529,992 8,529,992 Total Liabilities $ 292,111 $ 1,688,909 $ 212,506 $ 15,143,726 $ 17,337,252 As of December 31, 2021 Creatd
Labs Creatd
Ventures Creatd
Partners Corporate Total Accounts receivable, net $ - $ 2,884 $ 334,556 $ - $ 337,440 Prepaid expenses and other current assets 48,495 - - 188,170 236,665 Deposits and other assets 626,529 - - 92,422 718,951 Intangible assets - 1,637,924 783,676 11,241 2,432,841 Goodwill - 25,139 1,349,696 - 1,374,835 Inventory - 106,403 - - 106,403 All other assets - - - 3,966,124 3,966,124 Total Assets $ 675,024 $ 1,772,350 $ 2,467,928 $ 4,257,957 $ 9,173,259 Accounts payable and accrued liabilities $ 9,693 $ 766,253 $ 6,232 $ 2,948,362 $ 3,730,540 Note payable, net of debt discount and issuance costs 313,979 - - 1,028,685 1,342,664 Deferred revenue 161,112 13,477 59,570 - 234,159 All other Liabilities - - - 177,644 177,644 Total Liabilities $ 484,784 $ 779,730 $ 65,802 $ 4,154,691 $ 5,485,007 For the three months ended September 30, 2022 Creatd
Labs Creatd Ventures Creatd Partners Corporate Total Net revenue $ 291,414 $ 316,654 $ 414,783 $ - $ 1,022,851 Cost of revenue 564,349 502,396 337,817 - 1,404,562 Gross margin (loss) (272,935 ) (185,742 ) 76,966 - (381,711 ) Research and development 139,997 - 94,968 - 234,965 Marketing 370,584 234,760 41,176 - 646,520 Stock based compensation 122,964 111,472 126,654 265,478 626,568 General and administrative not including depreciation, amortization, or Impairment 90,212 476,386 384,365 3,136,092 4,087,055 Depreciation and amortization 1,489 43,001 40,917 72,589 157,996 Impairment of intangibles - 85,406 - 164,180 249,586 Total operating expenses $ 723,757 $ 822,618 $ 647,163 $ 3,401,570 $ 5,595,108 Interest expense (17,048 ) - - (656,647 ) (673,694 ) All other expenses - - - (2,875,832 ) (2,875,832 ) Other expenses, net (17,048 ) - - (3,532,479 ) (3,549,526 ) Loss before income tax provision $ (1,001,024 ) $ (1,008,360 ) $ (570,197 ) $ (6,946,764 ) $ (9,526,345 ) For the three months ended September 30, 2021 Creatd
Labs Creatd
Ventures Creatd
Partners Corporate Total Net revenue $ 565,852 $ 3,919 $ 609,849 $ - $ 1,179,620 Cost of revenue 849,079 174,438 394,696 - 1,418,213 Gross margin (283,227 ) (170,519 ) 215,153 - (238,593 ) Research and development 250,474 60 72,412 - 322,946 Marketing 1,540,540 - 181,240 90,620 1,812,400 Stock based compensation 337,026 - 332,531 1,179,579 2,151,900 General and administrative 386,844 302,764 293,296 1,672,176 2,385,135 Total operating expenses 2,514,884 32,819 879,479 2,942,375 6,672,381 Loss before income tax provision and equity in net loss from unconsolidated investments $ (2,802,443 ) $ (506,162 ) $ (664,326 ) $ (5,747,190 ) $ (9,720,121 ) For the Nine months ended September 30, 2022 Creatd
Labs Creatd
Ventures Creatd
Partners Corporate Total Net revenue $ 1,138,904 $ 1,237,542 $ 1,621,044 $ - $ 3,997,490 Cost of revenue 1,917,039 1,706,586 1,147,526 - 4,771,151 Gross margin (loss) (778,135 ) (469,044 ) 473,518 - (773,661 ) Research and development 408,810 - 277,321 - 686,131 Marketing 2,301,994 1,458,280 255,777 - 4,016,051 Stock based compensation 755,284 684,697 777,948 1,630,649 3,848,578 General and administrative not including depreciation, amortization, or Impairment 242,330 1,279,676 1,032,487 8,401,553 10,956,046 Depreciation and amortization 4,166 120,282 114,453 203,042 441,943 Impairment of intangibles - 87,983 - 169,134 257,117 Total operating expenses $ 3,712,584 $ 3,630,918 $ 2,457,986 $ 10,404,378 $ 20,205,866 Interest expense (34,095 ) - - (673,855 ) (707,950 ) All other expenses - - (3,424,854 ) (3,424,854 ) Other expenses, net (34,095 ) - - (4,098,709 ) (4,132,804 ) Loss before income tax provision $ (4,524,814 ) $ (4,099,962 ) $ (1,984,468 ) $ (14,503,087 ) $ (25,112,331 ) For the nine months ended September 30, 2021 Creatd
Labs Creatd Ventures Creatd Partners Corporate Total Net revenue $ 1,388,411 $ 9,616 $ 1,496,363 $ - $ 2,894,390 Cost of revenue 2,482,848 497,194 1,180,701 - 4,160,743 Gross margin (1,094,437 ) (487,578 ) 315,662 - (1,266,353 ) Research and development 549,426 131 158,839 - 708,396 Marketing 6,842,142 - 804,958 402,479 8,049,579 Stock based compensation 886,832 796,676 875,004 3,103,877 5,662,389 General and administrative 900,323 76,381 682,602 3,891,743 5,551,049 Total operating expenses $ 9,178,723 $ 873,188 $ 2,521,403 $ 7,398,099 $ 19,971,413 Loss before income tax provision and equity in net loss from unconsolidated investments $ (10,286,156 ) $ (1,360,766 ) $ (2,205,741 ) $ (11,073,171 ) $ (24,925,834 ) $100,000or certain shares underlying such warrants until the date that is 30 days after the date on which the registration statement registering for resale the shares of the Company’s common stock underlying the Debenture is declared effective by the Securities and Exchange Commission. Additionally, the Letter Agreement, provides that the May Investors and July Investors have agreed to a further lock up of such shares for a further 30 days upon the receipt of a certain amount of the proceeds from future potential issuances of debentures, common stock or similar securities by the Company. Further additionally, pursuant to the Letter Agreement, the May Investors and the July Investors have agreed to exchange and return for cancellation the Series C Warrants, Series D Warrants, Series E Warrants and Series F Warrants, receiving replacement warrants from the Company (the “Replacement Warrants”), in consideration for (i) the Company’s payment of $750,000 of the proceeds from the sale of the Debenture to the May Investors and July Investors on a pro rata basis and (ii) the Company’s agreement to pay, on a pro rata basis to the May Investors and July Investors, the greater of (x) $750,000 and (y) 50% of the gross proceeds raised in a subsequent financing. The Replacement Warrants reflect a reduction in the number of Series C and Series D Warrants from 1,550,000 in each class to 1,536,607 in each class and a reduction in the number of Series E and Series F Warrants from 1,075,000 in each class to 807,143 in each class, and the initial exercise date for the Replacement Warrants are unchanged from the date as set forth in the respective exchanged Series C, Series D, Series E or Series F Warrant.www.rrbb.com ROSENBERG RICH BAKER BERMAN & COMPANY 265 Davidson Avenue, Suite 210 ● Somerset, NJ 08873-4120 ● PHONE 908-231-1000 ● FAX 908-231-6894 111 Dunnell Road, Suite 100 ● Maplewood, NJ 07040 ● PHONE 973-763-6363 ● FAX 973-763-4430 ROSENBERG RICH BAKER BERMAN & COMPANY ● Gained detailed understanding of processes related to subscription revenue, including evaluation of controls within the Company and the results of an audit of internal controls at the external payment processing organization. ● Verified the validity of customer payment data by testing the completeness and accuracy of the population of customer payments and by subscriber type. ● Critically evaluated management’s estimated allocations based on supportable information, including refined methodologies and estimates based on historical data for consideration paid to customers. ROSENBERG RICH BAKER BERMAN & COMPANY ● Evaluating the reasonableness and appropriateness of management’s evaluation of each VIE and determination of primary beneficiary of the VIE through a decision-making workflow. ● Reading pertinent supporting organizational documents and agreements associated with each VIE and relevant business plans and documentation to agree key terms with those used in management’s evaluation of each VIE. ● Performed corroborative interviews with personnel involved in each entity analyzed to determine the business purpose of the transactions in the time frame the initial equity interests were acquired. December 31,
2021 December 31,
2020 Assets Current Assets Cash $ 3,794,734 $ 7,906,782 Accounts receivable, net 337,440 90,355 Inventory 106,403 - Prepaid expenses and other current assets 236,665 23,856 Total Current Assets 4,475,242 8,020,993 Property and equipment, net 102,939 56,258 Intangible assets 2,432,841 960,611 Goodwill 1,374,835 1,035,795 Marketable securities - 62,733 Deposits and other assets 718,951 191,836 Minority investment in businesses 50,000 217,096 Operating lease right of use asset 18,451 239,158 Total Assets $ 9,173,259 $ 10,784,480 Liabilities and Stockholders’ Deficit Current Liabilities Accounts payable and accrued liabilities $ 3,730,540 $ 2,638,688 Derivative liabilities - 42,231 Convertible Notes, net of debt discount and issuance costs 159,193 897,516 Current portion of operating lease payable 18,451 79,816 Note payable, net of debt discount and issuance costs 1,278,672 1,221,539 Deferred revenue 234,159 88,637 Total Current Liabilities 5,421,015 4,968,427 Non-current Liabilities: Note payable 63,992 213,037 Operating lease payable - 157,820 Total Non-current Liabilities 63,992 370,857 Total Liabilities 5,485,007 5,339,284 Commitments and contingencies Stockholders’ Equity Series E Preferred stock, $0.001 par value, 500 and 7,738 shares issued and outstanding, respectively - 8 Common stock par value $0.001: 100,000,000 shares authorized; 16,691,170 issued and 16,685,513 outstanding as of December 31, 2021 and 8,736,378 issued and 8,727,028 outstanding as of December 31, 2020 16,691 8,737 Additional paid in capital 111,563,618 77,505,013 Subscription receivable - (40,000 ) Less: Treasury stock, 5,657 and 5,657 shares, respectively (62,406 ) (62,406 ) Accumulated deficit (109,632,574 ) (71,928,922 ) Accumulated other comprehensive income (78,272 ) (37,234 ) Total Creatd, Inc. Stockholders’ Equity 1,807,057 5,445,196 Non-controlling interest in consolidated subsidiaries 1,881,195 - 3,688,252 5,445,196 Total Liabilities and Stockholders’ Equity $ 9,173,259 $ 10,784,480 For the Year Ended For the Year Ended December 31,
2021 December 31,
2020 Net revenue (related party of $80,000 and $0) $ 4,299,717 $ 1,212,870 Cost of revenue 5,300,037 1,495,042 Gross loss (1,000,320 ) (282,172 ) Operating expenses Research and development 983,528 257,431 Marketing 9,626,982 2,854,904 Stock based compensation 9,661,168 6,861,163 Impairment of goodwill 1,035,795 - General and administrative 11,060,927 6,027,665 Total operating expenses 32,368,400 16,001,163 Loss from operations (33,368,720 ) (16,283,335 ) Other income (expenses) Other income 396,223 512,071 Interest expense (372,106 ) (1,376,902 ) Accretion of debt discount and issuance cost (3,612,669 ) (4,303,072 ) Derivative expense (100,502 ) - Change in derivative liability (1,096,287 ) 3,019,457 Impairment of investment (589,461 ) (11,450 ) Impairment of debt security - (50,000 ) Settlement of vendor liabilities 59,792 (126,087 ) Loss on marketable securities - (7,453 ) Gain (loss) on extinguishment of debt 1,025,555 (5,586,482 ) Gain on forgiveness of debt 279,022 470 Other expenses, net (4,010,433 ) (7,929,448 ) Loss before income tax provision and equity in net loss from unconsolidated investments (37,379,153 ) (24,212,783 ) - - Equity in net loss from equity method investment Income tax provision - - Net loss (37,379,153 ) (24,212,783 ) Non-controlling interest in net loss 86,251 - Net Loss attributable to Creatd, Inc. (37,292,902 ) (24,212,783 ) Deemed dividend (410,750 ) (3,135,702 ) Inducement expense - - Net loss attributable to common shareholders $ (37,703,652 ) $ (27,348,485 ) Comprehensive loss Net loss (37,379,153 ) (24,212,783 ) Currency translation gain (loss) (41,038 ) (31,239 ) Comprehensive loss $ (37,420,191 ) $ (24,244,022 ) Per-share data Basic and diluted loss per share $ (2.98 ) $ (5.68 ) Weighted average number of common shares outstanding 12,652,470 4,812,153 Series E Preferred Stock Common Stock Treasury stock Additional
Paid In Subscription Accumulated Non-Controlling Other
Comprehensive Stockholders’ Shares Amount Shares Amount Shares Amount Capital Receivable Deficit Interest Income Equity Balance, December 31, 2019 - $ - 3,059,646 $ 3,059 (53,283 ) $ (367,174 ) $ 36,391,819 $ - $ (44,580,437 ) $ - $ (5,995 ) $ (8,558,728 ) Shares issued with notes payable - - 59,774 60 - - 243,685 - - - - 243,745 Stock based compensation - - 169,800 170 - - 5,743,970 - - - - 5,744,140 Shares issued to settle vendor liabilities - - 23,565 24 - - 235,607 - - - - 235,631 Conversion of warrants to stock - - 7,239 7 - - (4,236 ) - - - - (4,229 ) Conversion of options to stock - - 229,491 229 - - 1,116,802 - - - - 1,117,031 Stock warrants issued with note payable - - - - - - 1,078,501 - - - - 1,078,501 Cancellation of Treasury stock - - (50,650 ) (50 ) 54,343 374,184 (374,134 ) - - - - - Purchase of treasury stock - - - - (6,717 ) (69,416 ) - - - - - (69,416 ) Recognition of intrinsic value of beneficial conversion features – convertible notes - - - - - - 3,099,837 - - - - 3,099,837 Cash received for common stock and warrants - - 1,725,000 1,725 - - 7,028,355 - - - - 7,030,080 Cash received for preferred series E and warrants 7,738 8 - - 6,710,417 (40,000 ) - - - 6,670,425 Common stock and warrants issued upon conversion of notes payable - - 768,225 769 - - 3,182,898 - - - - 3,183,667 Common stock and warrants issued upon extinguishment of notes payable 2,744,288 2,744 - - 9,915,790 - - - - 9,918,534 Foreign currency translation adjustments - - - - - - - - - - (31,239 ) (31,239 ) Dividends - - - - - - 3,135,702 - (3,135,702 ) - - - Net loss for the year ended December 31, 2020 - - - - - - - - (24,212,783 ) - - (24,212,783 ) Balance, December 31, 2020 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 - - 388,411 388 - - 9,446,687 - - - - 9,447,075 Shares issued for prepaid services - - 50,000 50 - - 226,450 - - - - 226,500 Shares issued to settle vendor liabilities - - 294,895 295 - - 791,091 - - - - 791,386 Common stock issued upon conversion of notes payable - - 1,128,999 1,129 - - 5,155,865 - - - - 5,156,994 Exercise of warrants to stock - - 2,250,691 2,251 - - 9,484,972 - - - - 9,487,223 Cash received for common stock and warrants - - 1,687,500 1,687 - - 5,665,263 - - - - 5,666,950 Cash received for preferred series E and warrants 40 - - - - - (4,225 ) 40,000 - - - 35,775 Conversion of preferred series E to stock (7,278 ) (8 ) 1,766,449 1,766 - - (1,758 ) - - - - - Stock warrants issued with note payable - - - - - - 1,665,682 - - - - 1,665,682 Shares issued for acquisition - - 387,847 388 - - 1,217,828 - - 1,967,446 - 3,185,662 Foreign currency translation adjustments - - - - - - - - - - (41,038 ) (41,038 ) Dividends - - - - - - 410,750 - (410,750 ) - - - Net loss for the year months ended December 31, 2021 - - - - - - - - (37,292,902 ) (86,251 ) - (37,379,153 ) Balance, December 31, 2021 500 $ - 16,691,170 $ 16,691 (5,657 ) $ (62,406 ) $ 111,563,618 $ - $ (109,632,574 ) $ 1,881,195 $ (78,272 ) $ 3,688,252 For the
Year Ended For the
Year Ended December 31,
2021 December 31,
2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (37,379,153 ) $ (24,162,783 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 397,440 157,760 Impairment of investments 589,461 11,450 Impairment of intangible assets 1,727,032 - Accretion of debt discount and issuance cost 3,612,669 4,303,072 Share-based compensation 9,661,174 6,861,163 Bad debt expense 110,805 53,692 Change in fair value of derivative liabilities - (3,019,457 ) Gain on marketable securities - 7,453 Gain on Forgiveness of debt (279,022 ) - Settlement of vendor liabilities (59,692 ) 126,087 Change in fair value of derivative liability 1,096,287 - Derivative Expense 100,502 - (Gain) loss on extinguishment of debt (1,025,655 ) 5,586,012 Non cash lease expense 82,511 72,553 Equity interest granted for other income (123,710 ) - Equity in net loss from unconsolidated investment 16,413 - Changes in operating assets and liabilities: Prepaid expenses (174,819 ) (19,729 ) Inventory (39,182 ) - Accounts receivable (80,407 ) (93,198 ) Deposits and other assets (527,115 ) (4,829 ) Deferred revenue 144,851 37,946 Accounts payable and accrued expenses 1,714,902 2,880,392 Unrecognized tax benefit - (68,000 ) Operating lease liability (84,099 ) (70,071 ) Net Cash Used In Operating Activities (20,518,807 ) (7,340,487 ) CASH FLOWS FROM INVESTING ACTIVITIES: Issuance of note receivable - - Cash paid for property and equipment (95,935 ) (44,988 ) Deposits - (175,000 ) Cash paid for minority investment in business (325,000 ) - Cash paid for equity method investment (510,000 ) (115,000 ) Cash paid for investments in marketable securities - (248,272 ) Sale of marketable securities - 36,048 Cash consideration for acquisition (225,947 ) - Purchases of digital assets (11,241 ) - Net Cash Used In Investing Activities (1,168,123 ) (547,212 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the exercise of warrant 9,487,223 - Net proceeds from issuance of notes 747,937 1,501,661 Repayment of notes (456,233 ) (492,665 ) Proceeds from issuance of demand loan - 440,000 Repayment of demand Loan - (90,000 ) Proceeds from issuance of convertible note 3,610,491 3,650,835 Repayment of convertible notes (941,880 ) (1,658,001 ) Proceeds from issuance of convertible notes - related party - 50,000 Proceeds from issuance of note payable - related party - 152,989 Repayment of note payable - related party (538,574 ) (983,752 ) Proceeds from issuance of common stock and warrants 5,666,951 6,662,015 Cash received for preferred series E and warrants - 6,670,417 Purchase of treasury stock and warrants - (89,416 ) Net Cash Provided By Financing Activities 17,615,915 15,814,083 Effect of exchange rate changes on cash (41,038 ) (31,239 ) Net Change in Cash (4,112,048 ) 7,895,145 Cash - Beginning of Year 7,906,782 11,637 Cash - End of year $ 3,794,734 $ 7,906,782 SUPPLEMENTARY CASH FLOW INFORMATION: Cash Paid During the Year for: Income taxes $ - $ - Interest $ 60,073 $ 178,461 SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Settlement of vendor liabilities $ 168,667 $ 475,220 Conversion of marketable debt securities into equity securities $ - $ 102,096 Beneficial conversion feature on convertible notes $ - $ 3,099,837 Warrants issued with debt $ 1,665,682 $ 1,078,500 Shares issued with debt $ - $ 243,741 Issuance of common stock for prepaid services $ 226,500 $ 585,000 Cancellation of Treasury stock $ - $ 374,184 Conversion of note payable and interest into convertible notes $ - $ 385,000 Conversion of Demand loan into notes payable $ - $ 200,000 Deferred offering costs $ 4,225 $ - Common stock and warrants issued upon conversion of notes payable $ 5,156,994 $ 11,217,362 Shares issued for acquisition $ 1,318,218 $ - Conversion of note payable and interest into convertible notes $ - $ 385,000 Reduction of ROU asset related to re-measurement of lease liability $ 135,086 $ - Repayment of promissory notes from Australian R&D credits $ 146,630 $ - Name of combined affiliate State or other
jurisdiction of
incorporation
or organizationCompany
Ownership
InterestJerrick Ventures LLC Delaware 100 % Abacus Tech Pty Ltd Australia 100 % Seller’s Choice, LLC New Jersey 100 % Recreatd, LLC Delaware 100 % Give, LLC Delaware 100 % Creatd Partners LLC Delaware 100 % Dune Inc. Delaware 50 % Plant Camp LLC Delaware 89 % 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 % WHE Agency, Inc. Delaware 44 % ● Level 1 – quoted prices in active markets for identical investments ● Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs) ● Level 3 – significant unobservable inputs (including our own assumptions in determining the fair value of investments) Total Quoted
Prices
in Active
Markets for
Identical
Assets or
Liabilities
(Level 1) Quoted
Prices
for Similar
Assets or
Liabilities in
Active
Markets
(Level 2) Significant
Unobservable
Inputs
(Level 3) Assets: Marketable securities - debt securities $ 62,733 $ - $ - $ 62,733 Total assets $ 62,733 $ - $ - $ 62,733 Liabilities: Derivative liabilities $ 42,231 $ - $ - $ 42,231 Total Liabilities 42,231 $ - $ - $ 42,231 Total Quoted
Prices
in Active
Markets for
Identical
Assets or
Liabilities
(Level 1)Quoted
Prices
for Similar
Assets or
Liabilities in
Active
Markets
(Level 2)Significant
Unobservable
Inputs
(Level 3)Assets: Marketable securities - debt securities $ - $ - $ - $ - Total assets $ - $ - $ - $ - Liabilities: Derivative liabilities $ - $ - $ - $ - Total Liabilities - $ - $ - $ - Fair Value
As of
December 31,
2021 Fair Value
As of
December 31,
2020 Valuation
Methodology Unobservable
InputsMarketable securities - debt securities $ - $ 62,733 Discounted cash flow analysis Expected cash flows from the investment Derivative liabilities $ - $ 42,231 Monte Carlo simulations and Binomial model Risk free rate Expected volatility; Drift rate Total Quoted
Prices in
Active
Markets for
Identical
Assets or
Liabilities
(Level 1) Quoted
Prices for
Similar
Assets or
Liabilities
in Active Markets
(Level 2) Significant
Unobservable
Inputs
(Level 3) Assets: Equity investments, at cost $ 50,000 $ - $ - $ 50,000 Total assets $ 50,000 $ - $ - $ 50,000 Total Quoted
Prices
in Active
Markets for
Identical
Assets or
Liabilities
(Level 1) Quoted
Prices
for Similar
Assets or
Liabilities in
Active
Markets
(Level 2) Significant
Unobservable
Inputs
(Level 3) Assets: Equity investments, at cost $ 217,096 $ - $ - $ 217,096 Total assets $ 217,096 $ - $ - $ 217,096 Fair Value
As of
December 31,
2021 Fair Value
As of
December 31,
2020 Valuation Methodology Unobservable Inputs Equity investments, at cost $ - $ 217,096 Qualitative assessment per ASC 321-10-35 Qualitative factors Estimated
Useful Life
(Years)Computer equipment and software 3 Furniture and fixtures 5 Scheduled amortization over the next five years are as follows: Twelve months ending December 31, 2022 $ 493,660 2023 407,848 2024 347,936 2025 231,624 2026 219,749 Thereafter 732,024 Total $ 2,432,841 For the
years ended
December 31,
2021 and
2020 Total As of January 1, 2020 and 2021 $ 1,035,795 Goodwill acquired in a business combination 1,374,835 Impairment of goodwill (1,035,795 ) As of December 31, 2021 1,374,835 For the
years ended
December 31,
2021 and
2020 Total As of January 1, 2020 - Purchase of marketable securities $ 210,000 Interest due at maturity 4,829 Other than temporary impairment (50,000 ) Conversion of marketable securities (102,096 ) As of December 31, 2020 62,733 Purchase of marketable securities - Interest due at maturity - Other than temporary impairment (62,733 ) Conversion of marketable securities - December 31, 2021 $ - For the
years ended
December 31,
2021 and
2020 Total As of January 1, 2020 $ - Purchase of equity investments 115,000 Conversion of marketable securities 102,096 As of December 31, 2020 217,096 Purchase of equity investments 150,000 Other than temporary impairment (102,096 ) Conversion to equity method investments (215,000 ) As of December 31, 2021 $ 50,000 ● identification of the contract, or contracts, with a customer; ● identification of the performance obligations in the contract; ● determination of the transaction price. 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 mile basis) and cash prizes offered to Challenge winners; ● allocation of the transaction price to the performance obligations in the contract; and ● recognition of revenue when, or as, we satisfy a performance obligation. Years Ended December 31, 2021 2020 Agency (Managed Services, Branded Content, & Talent Management Services) $ 2,256,546 $ 1,100,199 Platform (Creator Subscriptions) 1,926,135 70,623 Ecommerce (Tangible products) 90,433 - Affiliate Sales 26,453 33,748 Other Revenue 150 8,300 $ 4,299,717 $ 1,212,870 Years Ended December 31, 2021 2020 Products and services transferred over time $ 4,182,681 $ 1,100,199 Products and services transferred at a point in time 117,036 112,671 $ 4,299,717 $ 1,212,870 ● The Company collects fixed fees ranging from $10,000 to $110,000, with branded challenges ranging from $10,000 to $25,000 and branded articles ranging from $2,500 to $7,500 per article. ● Branded articles are created and published, and challenges are completed, within three months of the signed agreement, or as previously negotiated with the client. ● Branded articles and challenges are promoted per the contract and engagement reports are provided to the client. ● Most contracts include provisions for clients to acquire content rights at the end of the campaign for a flat fee. ● Total gross contracts range from $500-$50,000. ● The Company collects fixed fees in the amount of 20% of the gross contract amount, ranging from $100 to $20,000 in net revenue per contract. ● The campaign is created and made live by the influencer within one month of the signed agreement, or as previously negotiated with the client. ● Campaigns are promoted per the contract and the customer is provided a link to the live deliverables on the influencer’s social media channels. ● Most billing for contracts occur 100% at execution of the performance obligation. Net payment terms vary by client. December 31, 2021 2020 Options 2,902,619 541,021 Warrants 5,658,830 3,228,235 Totals 8,561,449 3,769,256 Packaging $ 2,907 Finished goods 103,496 $ 106,403 December 31,
2021 December 31,
2020 Computer Equipment $ 353,880 $ 284,928 Furniture and Fixtures 102,416 86,888 Leasehold Improvements 11,457 - 467,753 371,816 Less: Accumulated Depreciation (364,814 ) (315,558 ) $ 102,939 $ 56,258 Outstanding Principal as of December 31,
2021 December 31,
2020 Interest
Rate Maturity
DateSeller’s Choice Note $ 660,000 $ 660,000 30 % September 2020 The May 2020 PPP Loan Agreement - 412,500 1 % April 2022 The April 2020 PPP Loan Agreement 198,577 282,432 1 % May 2022 The October 2020 Loan Agreement - 55,928 14 % July 2021 The November 2020 Loan Agreement - 23,716 14 % May 2021 The February 2021 Loan Agreement - - 14 % July 2021 The July 2021 Loan Agreement - - 10 % October 2022 The First December 2021 Loan Agreement 185,655 - 10 % June 2023 The Second December 2021 Loan Agreement 313,979 - 14 % June 2022 1,358,211 1,434,576 Less: Debt Discount (15,547 ) - Less: Debt Issuance Costs - - 1,342,664 1,434,576 Less: Current Debt (1,278,672 ) (1,221,539 ) Total Long-Term Debt $ 63,992 $ 213,037 $10,292$3,119 of accrued interest.August 2018 Equity Raise (as defined below).July 2021 Loan Agreement. As part of the conversion the Company recorded $8,341 as extinguishment expense. Outstanding Principal as of Warrants granted Quantity The September 2020 convertible Loan Agreement $ - $ 341,880 12 % - (*) September-21 85,555 5 The First December 2020 convertible Loan Agreement - 600,000 12 % - (*) December-21 - - The October 2020 convertible Loan Agreement - 169,400 6 % - (*) October-21 - - The Second December 2020 convertible Loan Agreement - 169,400 6 % - (*) December-21 - - The May 2021 Loan - - - % 5.00 (*) November-22 1,090,908 4.50 The July 2021 Loan 168,850 - 6 % - (*) July - 22 168,850 1,280,680 Less: Debt Discount (8,120 ) (309,637 ) Less: Debt Issuance Costs (1,537 ) (73,527 ) 897,516 Less: Current Debt (159,193 ) (897,516 ) Total Long-Term Debt $ - $ - (*) As subject to adjustment as further outlined in the notes 72,66924,223 warrants with a fair value of $181,139. These were recorded as a loss on extinguishment of debt.F-22Raise (as defined in Note 7 below).Raise.companyCompany repaid $19,758 in interest.Raise (as defined below).Raise.nine monthsyear ended September 30,December 31, 2019, the Company conducted an offering to accredited investors (the “February 2019 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “February 2019 Investors”) for aggregate gross proceeds of $1,993,025.F-23nine monthsyear ended September 30,December 31, 2019 a total of 44,396 Warrants were issued in conjunction with The February 2019 Convertible Note Offering.As of the date of this filing, certain notes in this offering with maturity dates prior to March 20, 2020 have not been repaid, but the Company is in negotiations with the holders about an extension agreement. The July 2019 Tal Loan AgreementOn July 26, 2019, the Company entered into a loan agreement (the “July 2019 Tal Loan Agreement”) with Robert Tal, whereby the Company issued Tal a promissory note in the principal amount of $12,000 (the “July 2019 Tal Note”). Pursuant to the July 2019 Tal Loan Agreement, the July 2019 Tal Note bears interest at a rate of $600 per month. As additional consideration for entering in the July 2019 Tal Loan Agreement, the Company issued Tal a five-year warrant to purchase 60 shares of the Company’s common stock at a purchase price of $18.00 per share.20192020, the Company repaid $12,000 inconverted $1,963,567 of principal and $600 in$416,786 of unpaid interest andinto the loan is no longer outstanding. September 2020 Equity Raise.The August 2019 Tal Loan AgreementOn August 6, 2019, the Company entered into a loan agreement (the “August 2019 Tal Loan Agreement”), whereby the Company issued Tal a promissory note in the principal amount of $12,000 (the “August 2019 Tal Note”). Pursuant to the August 2019 Tal Loan Agreement, the August 2019 Tal Note bears interest at a rate of $600 per month. As additional consideration for entering in the August 2019 Tal Loan Agreement, the Company issued Tal a five-year warrant to purchase 60 shares of the Company’s common stock at a purchase price of $18.00 per share.20192020, the Company repaid $12,000$348,136 in principal and $600$0 in interest and the loan is no longer outstanding. The First September 2019 Tal Loan AgreementOn September 4, 2019, the Company entered into a loan agreement (the “First September 2019 Tal Loan Agreement”), whereby the Company issued Tal a promissory note in the principal amount of $15,000 (the “First September 2019 Tal Note”). Pursuant to the First September 2019 Tal Loan Agreement, the First September 2019 Tal Note bears interest at a rate of $750 per month. As additional consideration for entering in the First September 2019 Tal Loan Agreement, the Company issued Tal a five-year warrant to purchase 75 shares of the Company’s common stock at a purchase price of $18.00 per share.During the year ended December 31, 2019 the Company repaid $15,000 in principal and $750 in interest and the loan is no longer outstanding. The Second September 2019 Tal Loan AgreementOn September 26, 2019, the Company entered into a loan agreement (the “Second September 2019 Tal Loan Agreement”), whereby the Company issued Tal a promissory note in the principal amount of $12,500 (the “Second September 2019 Tal Note”). Pursuant to the Second September 2019 Tal Loan Agreement, the Second September 2019 Tal Note bears interest at a rate of $625 per month. As additional consideration for entering in the First September 2019 Tal Loan Agreement, the Company issued Tal a five-year warrant to purchase 62 shares of the Company’s common stock at a purchase price of $18.00 per share.During the year ended December 31, 2019 the Company repaid $12,500 in principal and $1,250 in interest and the loan is no longer outstanding. interest.F-24Maturity Date,maturity date, at the election of the Offering’s Purchaser, this Note may convert into Common Stock equal to the quotient obtained by dividing the outstanding principal and unpaid accrued interest of this Note on the date of such conversion by $13.50.810 – Related PartyConvertible notesConvertible notes payable – related party as This investment is evaluated for impairment if events or circumstances arise that indicate that the carrying amount of December 31, 2019 and 2018 is as follows: Outstanding Principal as of Warrants granted December 31,
2019 December 31,
2018 Interest
Rate Maturity Date Quantity Exercise
Price The March 2018 Convertible Note Offering 400 400 14 % April 2020 19,950 12.00 The February 2019 Convertible Note Offering 20,000 - 10 % May 2020 440 18.00 20,400 400 Less: Debt Discount (13 ) (72 ) Less: Debt Issuance Costs - - 20,387 328 Less: Current Debt (20,387 ) - Total Long-Term Debt $ - $ 328 The August 2017 Convertible Note Offering2017,2020 the Company conducted multiple closingsrecorded an impairment of a private placement offering to accredited investors (the “The August 2017 Convertible Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “August 2017 Investors”) for aggregate gross proceeds of $505,000. In addition, $645,000 of the Company’s short-term debt along with accrued but unpaid interest of $206,026 was converted into the August 2017 Convertible Offering. These conversions resulted in the issuance of 75,918 warrants with a fair value of $440,157 and the increase of principal of $60,000. These resulted in a loss on extinguishment of debt of $500,157.The Company offered, through a placement agent, $6,000,000 of units of its securities (each, an “August 2017 Unit” and collectively, the “August 2017 Units”), with each August 2017 Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a “August 2017 Note” and together the “August 2017 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at a conversion price of $12.00 per share (the “Conversion Price”), and (b) a five-year warrant (each a “Warrant and together the “Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into (“Warrant Shares”) at an exercise price of $12.00 per share (“Exercise Price”). The August 2017 Notes mature on the second (2nd) anniversary of their issuance dates.The Conversion Price of the August 2017 Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.The Company recorded a $160,700 debt discount relating to 42,083 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost.$11,450.F-25During the year ended December 31, 2018, the Company converted $1,416,026 of principal and $202,362 of unpaid interest pursuant to the August 2018 Equity Raise (as defined below).The Second December 2017 NoteConvertible notesOn December 21, 2017, the Company issued a convertible note to a third-party lender totaling $100,000 (the “Second December 2017 Note”). The Second December 2017 Note accrues interest at 15% per annum and matures with interest and principal both due on December 27, 2019. In addition, the Company issued a warrant to purchase 8,333 shares of Company common stock. The warrant entitles the holder to purchase the Company’s common stock at a purchase price of $12.00 per share for a period of five years from the issue date. The Company recorded a $36,722 debt discount relating to the warrants issued to the investor based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note The Second December 2017 Note and accrued interest is convertible at a conversion price of $12.00 per share, subject to adjustment. The Second December 2017 Note is secured as a second priority lien on the assets of the Company.During the year ended December 31, 2018, the Company converted $100,000 of principal and $10,542 of unpaid interest pursuant to the August 2018 Equity Raise (as defined below) and the note is no longer outstanding. The February 2018 Convertible Note OfferingDuring the year ended December 31, 2018, the Company conducted multiple closings of a private placement offering to accredited investors (the “February 2018 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “Investors”) for aggregate gross proceeds of $25,000.The February 2018 Convertible Note Offering consisted of a maximum of $750,000 of units of the Company’s securities (each, a “February 2018 Unit” and collectively, the “February 2018 Units”), with each February 2018 Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a “February 2018 Note” and together the “February 2018 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at a conversion price of $12.00 per share (the “Conversion Price”), and (b) a five-year warrant (each a “Warrant and together the “Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the February 2018 Notes can be converted into (“Warrant Shares”) at an exercise price of $12.00 per share (“Exercise Price”). The February 2018 Notes mature on the second (2nd) anniversary of their issuance dates. The February 2018 Notes are secured by a second priority security interest in the Company’s assets up to $1,000,000.The Conversion Price of the Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.The conversion feature of the February 2018 Convertible Note Offering provides for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a beneficial conversion feature (“BCF”). When the Company records a BCF the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF and related debt discount of $1,063, the discount is being accreted over the life of the first Debenture to accretion of debt discount and issuance cost.The Company recorded a $11,054 debt discount relating to 2,083 warrants issued to Investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.F-26In connection with the Offering, the Company retained Network 1 Financial Securities, Inc. (the “Placement Agent”), to carry out the Offering on a “best-efforts” basis. For services in its capacity as Placement Agent, the Company has paid the Placement Agent a cash fee of $3,250 and issued to the Placement Agent shares of the Company’s common stock equal to ten percent (10%) of the Conversion Shares underlying the Notes or 208 shares that had a fair value of $2,606, which was recorded as issuance cost and is being accreted over the life of these notes to accretion of debt discount and issuance cost.During the year ended December 31, 2018, the Company converted $25,000 of principal and $2,219 of unpaid interest pursuant to the August 2018 Equity Raise (as defined below).The Second February 2018 NoteOn February 8, 2018, the Company issued a convertible note to a third-party lender totaling $40,750 (the “Second February 2018 Note”). The Second February 2018 Note accrues interest at 18% per annum and matures with interest and principal both due on December 31, 2018. In addition, the Company issued a warrant to purchase 1,358 shares of Company common stock. The warrant entitles the holder to purchase the Company’s common stock at a purchase price of $12.00 per share for a period of five years from the issue date. The Company recorded a $7,963 debt discount relating to the warrants issued to the investor based on the relative fair value of each equity instrument on the dates of issuance and an original issue discount of $5,298. The debt discount is being accreted over the life of the note The Second February 2018 Note and accrued interest is convertible at a conversion price of $12.00 per share, subject to adjustment. The Second February 2018 Note is secured as a second priority lien on the assets of the Company.During the year ended December 31, 2018, the Company has repaid $5,298 in principal. In addition, the Company converted $35,452 of principal and $4,116 of unpaid interest into the August 2018 Equity Raise (as defined below). Raise (as defined below)Raise.Nine monthsyear ended September 30,December 31, 2019, the Company conducted an offering to accredited investors (the “February 2019 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “February 2019 Investors”) for aggregate gross proceeds of $1,993,025.$20,000.F-27nine monthsyear ended September 30,December 31, 2019 a total of 440 Warrants were issued in conjunction with The February 2019 Convertible Note Offering.inof principal was converted from a promissory note into this Offering.offering.Notes payableThe July 2020 Convertible Note Offering20192021 and 20182020 is as follows: Outstanding Principal as of Warrants granted December 31,
2019 December 31,
2018 Interest
Rate Maturity Date Quantity Exercise
Price The May 2016 Rosen Loan Agreement $ - $ 1,000,000 13 % November 26, 2017 16,666 $ 24.00 The June 2018 Frommer Loan Agreement 10,000 10,000 6 % August 17, 2018 500 12.00 The July 2018 Rosen Loan Agreement - 56,695 6 % August 17, 2018 500 12.00 The July 2018 Schiller Loan Agreements 20,863 40,000 6 % August 17, 2018 2,500 12.00 The December 2018 Gravitas Loan Agreement - 50,000 6 % January 22, 2019 833 18.00 The December 2018 Rosen Loan Agreement - 75,000 6 % January 26, 2019 1,250 18.00 The January 2019 Rosen Loan Agreement - - 10 % February 15, 2019 5,000 18.00 The February 2019 Gravitas Loan Agreement - - 5 % February 28, 2019 125 18.00 The February 2019 Rosen Loan Agreement - - 10 % February 28, 2019 1,666 18.00 The June 2019 Loan Agreement 4,825,000 - 12.5 % December 3, 2019 - - The July 2019 Gravitas Loan Agreement - - 5 % September 1, 2019 333 18.00 The September 2019 Schiller Loan Agreement - - 4.5 % October 9, 2019 333 18.00 The September 2019 Tal Loan Agreement - - 5 % October 7, 2019 62 18.00 The December 2019 Gravitas Loan Agreement 300,000 - 6.7 % March 1, 2020 - - 5,155,863 1,231,695 Less: Debt Discount - (8,125 ) Less: Debt Issuance Costs (26,521 ) - 5,129,342 1,223,073 Less: Current Debt (5,129,342 ) (1,223,073 ) $ - $ - Outstanding Principal as of Warrants granted December 31,
2021 December 31,
2020 Interest
Rate Maturity
Date Quantity Exercise
Price The September 2020 Goldberg Loan Agreement - 16,705 7 % September 2022 - - The September 2020 Rosen Loan Agreement - 3,295 7 % September 2022 - - - 20,000 Less: Debt Discount - (17,068 ) - 2,932 Less: Current Debt - (2,932 ) $ - $ - F-28The May 2016 Rosen Loan AgreementOn May 26, 2016, the Company entered into a loan agreement (the “May 2016 Rosen Loan Agreement”) with Arthur Rosen, an individual (“Rosen”), pursuant to which on May 26, 2016 (the “Closing Date”), Rosen provided the Company a secured term loan in the principal amount of $1,000,000 (the “May 2016 Rosen Loan”). In connection with the May 2016 Rosen Loan Agreement, on May 26, 2016, the Company and Rosen entered into a security agreement (the “Rosen Security Agreement”), pursuant to which the Company granted to Rosen a senior security interest in substantially all of the Company’s assets as security for repayment of the May 2016 Rosen Loan. Pursuant to the May 2016 Rosen Loan Agreement, the May 2016 Rosen Loan bears interest at a rate of 12.5% per annum, compounded annually and payable on the maturity date of May 26, 2017 (the “May 2016 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the May 2016 Rosen Loan are due. The Company entered into an amendment to the May 2016 Rosen Loan extending the May 2016 Rosen Maturity Date to November 26, 2017. As additional consideration for entering in the May 2016 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 16,666 shares of the Company’s common stock at a purchase price of $24.00 per share (the “May 2016 Rosen Warrant”). The May 2016 Rosen Warrant contains anti-dilution provisions as further described therein. On September 7, 2017 (the “Conversion Date”), Rosen converted all accrued but unpaid interest on the May 2016 Rosen Loan from May 26, 2016 through September 6, 2017 in the amount of $124,306 (the “May 2016 Rosen Loan Interest”) into the Company’s August Convertible Note Offering, after which May 2016 Rosen Loan Interest was deemed paid in full through the Conversion Date. On March 29, 2019, the Company entered into an agreement with Mr. Rosen to further extend the maturity date of this loan to May 15, 2019. On June 3, 2019, this loan was converted into The June 2019 Loan Agreement (as defined below).The September 2017 Rosen Loan AgreementOn September 8, 2017, the Company entered into a loan agreement (the “September 2017 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $224,000 (the “September 2017 Rosen Note”). The September 2017 Rosen Note is secured by an officer of the Company. As additional consideration for entering in the September 2017 Rosen Note Loan Agreement, the Company issued Rosen a five-year warrant to purchase 416 shares of the Company’s common stock at a purchase price of $12.00 per share. On November 13, 2017, in consideration for extending the September 2017 Rosen Note, Rosen was issued a warrant to purchase 1,666 shares of the Company’s common stock exercisable within five (5) years and with an exercise price of $12.00 per share.On February 20, 2018, the Company entered into a forbearance agreement whereby the Company issued Rosen a five-year warrant to purchase 7,466 shares of the Company’s common stock at a purchase price of $12.00 per share. These warrants had a fair value of $65,378 which was recorded to Loss on extinguishment of debt. The new maturity date of the September 2017 Rosen Loan Agreement is September 8, 2018.F-29During the year December 31, 2018, the Company converted $224,000 of principal and $20,496 of unpaid interest pursuant to the August 2018 Equity Raise (as defined below) and the loan is no longer outstanding.The November 2017 Schiller Loan AgreementOn November 20, 2017, the Company entered into a loan agreement (the “November 2017 Schiller Loan Agreement”) with Mr. Len Schiller (“Schiller”), a member of the Company’s Board of Directors, whereby the Company issued Schiller a promissory note in the principal amount of $25,000 (the “November 2017 Schiller Note”). Pursuant to the November 2017 Schiller Loan Agreement, the November 2017 Schiller Note bears interest at a rate of 15% per annum. During the year ended December 31, 2018 the Company repaid $25,000 in principal and $637 in interest and the loan is no longer outstanding. The January 2018 Rosen Loan AgreementOn January 16, 2018, the Company entered into a loan agreement (the “January 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $60,000 (the “January 2018 Rosen Note”). The January 2018 Rosen Note is secured by Jeremy Frommer, whereas upon default Mr. Frommer would owe his own personal default shares of the Company’s common stock to Rosen equal to the amount of principal outstanding divided by 12.00. Pursuant to the January 2018 Rosen Loan Agreement, the January 2018 Rosen Note bears interest at a rate of 6% per annum and was payable on the maturity date of January 31, 2018 (the “January 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the May 2016 Rosen Loan became due. During the year ended December 31, 2018, the Company repaid $60,000 in principal and $200 in interest and the loan is no longer outstanding.The January 2018 Gordon Loan AgreementOn January 16, 2018, the Company entered into a loan agreement (the “January 2018 Gordon Loan Agreement”) with Mr. Christopher Gordon (“Gordon”), whereby the Company issued Gordon a promissory note in the principal amount of $40,000 (the “January 2018 Gordon Note”). The January 2018 Gordon Note is secured by Jeremy Frommer, whereas upon default Mr. Frommer would owe his own personal default shares of the Company’s common stock to Gordon equal to the amount of principal outstanding divided by 12.00. Pursuant to the January 2018 Gordon Loan Agreement, the January 2018 Gordon Note bears interest at a rate of 6% per annum and payable on the maturity date of January 31, 2018 (the “January 2018 Gordon Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the January 2018 Gordon Note became due. During the year ended December 31, 2018, the Company repaid $40,000 in principal and $105 in interest and the loan is no longer outstanding. The First March 2018 Rosen Loan AgreementOn March 4, 2018, the Company entered into a loan agreement (the “First March 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $10,000 (the “First March 2018 Rosen Note”). As additional consideration for entering in the First March 2018 Rosen Note Loan Agreement, the Company issued Rosen a five-year warrant to purchase 166 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the First March 2018 Rosen Loan Agreement, the First March 2018 Rosen Note bears interest at a rate of 12% per annum and is payable on the maturity date of March 19, 2018 (the “First March 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First March 2018 Rosen Note was due. During the year ended December 31, 2018, the Company repaid $10,000 in principal and $260 in interest and the loan is no longer outstanding. The Second March 2018 Rosen Loan AgreementOn March 9, 2018, the Company entered into a loan agreement (the “Second March 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $15,000 (the “Second March 2018 Rosen Note”). As additional consideration for entering in the Second March 2018 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 250 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the Second March 2018 Rosen Loan Agreement, the Second March 2018 Rosen Note bears interest at a rate of 12% per annum and is payable on the maturity date of March 24, 2018 (the “Second March 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Second March 2018 Rosen Note was due. During the year ended December 31, 2018, the Company repaid $15,000 in principal and $365 in interest and the loan is no longer outstanding.F-30The Third March 2018 Rosen Loan AgreementOn March 13, 2018, the Company entered into a loan agreement (the “Third March 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $10,000 (the “Third March 2018 Rosen Note”). As additional consideration for entering in the Third March 2018 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 166 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the Third March 2018 Rosen Loan Agreement, the Third March 2018 Rosen Note bears interest at a rate of 12% per annum and is payable on the maturity date of March 28, 2018 (the “Third March 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Third March 2018 Rosen Note was due. During the year ended December 31, 2018, the Company repaid $10,000 in principal and $230 in interest and the loan is no longer outstanding. The May 2018 Schiller Loan AgreementOn May 2, 2018, the Company entered into a loan agreement (the “May 2018 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Schiller a promissory note in the principal amount of $100,000 (the “May 2018 Schiller Note”). As additional consideration for entering in the May 2018 Schiller Loan Agreement, the Company issued Schiller a four-year warrant to purchase 5,000 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the May 2018 Schiller Loan Agreement, the May 2018 Schiller Note bears interest at a rate of 13% per annum and is payable on the maturity date of February 02, 2019 (the “May 2018 Schiller Maturity Date”).During the year ended December 31, 2018, the Company converted $100,000 of principal and $4,369 of unpaid interest pursuant to the August 2018 Equity Raise (as defined below) and the loan is no longer outstanding. 7,30, 2019. As part of the extension agreement, the Company issued Frommer an additional 692 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019, the Company entered into an agreement with Mr. Frommer that further extended the maturity date of this loan to May 15, 2019. On June 29, 2019 the Company entered into an agreement with Mr. Frommer that further extended the maturity date of this loan to December 15, 2019. On December 15, 2019 the Company entered into an agreement with Mr. Frommer that further extended the maturity date to May 15, 2020.F-31The First July 2018 Schiller Loan AgreementOn July 3, 2018, the Company entered into a loan agreement (the “First July 2018 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Schiller a promissory note in the principal aggregate amount of $35,000 (the “First July 2018 Schiller Note”). As additional consideration for entering in the First July 2018 Schiller Loan Agreement, the Company issued Schiller a four-year warrant to purchase 1,250 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the agreement, the note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. Subsequent to the balance sheet date, on November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Schiller warrants to purchase 2,383 shares of common stock of the Company at an exercise price of $18.00. On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the First July 2018 Schiller Loan Agreement to March 7, 2019. As part of the extension agreement, the Company issued Schiller an additional 1,068 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company entered into an agreement with Mr. Schiller that extended the maturity date of this loan to May 15, 2019.2019 $15,000 in2020, the Company converted $10,000 of principal and $863$2,748 of unpaid interest was converted into the February 2019 Convertible Note OfferingSeptember 2020 Equity Raise and the loanJune 2018 Frommer Note is no longer outstanding. Second July 2018 Schiller Loan AgreementThe First July 2018 Rosen Loan AgreementsOn July 12, 2018, the Company entered into a loan agreement (the “First July 2018 Rosen Loan Agreement”) with Rosen, an officer of the Company, whereby the Company issued Rosen a promissory note in the principal aggregate amount of $10,000 (the “First July 2018 Rosen Note”). Pursuant to the First July 2018 Rosen Loan Agreement, the note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. On November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Rosen warrants to purchase 459 shares of common stock of the Company at an exercise price of $18.00. On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the First July 2018 Rosen Loan Agreement to March 7, 2019. As part of the extension agreement, the Company issued Rosen an additional 3,456 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company entered into an agreement with Mr. Rosen that further extended the maturity date of this loan to May 15, 2019.2019 the company repaid $10,000 of principal and $1,123 of unpaid interest and the loan is no longer outstanding.F-32The Second July 2018 Rosen Loan AgreementsOn July 18, 2018, the Company entered into a loan agreement (the “Second July 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal aggregate amount of $50,000 (the “Second July 2018 Rosen Note”) resulting from the conversion of a demand note (as described below). As additional consideration for entering into the Second July 2018 Rosen Loan Agreement, the Company issued Rosen a four-year warrant to purchase 2,500 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the Second July 2018 Rosen Loan Agreement, the Second July 2018 Rosen Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. On November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Rosen warrants to purchase 3,399 shares of common stock of the Company at an exercise price of $18.00. On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the Second July 2018 Rosen Loan Agreement to March 7, 2019. As part of the extension agreement, the Company issued Rosen an additional 690 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company entered into an agreement with Mr. Rosen that further extended the maturity date of this loan to May 15, 2019.During the year ended December 31, 2019 the company repaid $50,000 of principal and $2,900 of unpaid interest and the loan is no longer outstanding.The November 2018 Rosen Loan AgreementOn November 29, 2018, the Company entered into a loan agreement (the “November 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $25,000 (the “November 2018 Rosen Note”). As additional consideration for entering in the November 2018 Rosen Note Loan Agreement, the Company issued Rosen a four-year warrant to purchase 416 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the November 2018 Rosen Loan Agreement, the November 2018 Rosen Note bears interest at a rate of 6% per annum and payable on the maturity date of December 23, 2018 (the “November 2018 Rosen Maturity Date”).During the year ended December 31, 2018,2020 the Company repaid $25,000 of principal and $33 of unpaid interest and the loan is no longer outstanding.The December 2018 Rosen Loan AgreementOn December 27, 2018, the Company entered into a loan agreement (the “December 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $75,000 (the “December 2018 Rosen Note”). As additional consideration for entering in the December 2018 Rosen Note Loan Agreement, the Company issued Rosen a four-year warrant to purchase 1,250 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the December 2018 Rosen Loan Agreement, the December 2018 Rosen Note bears interest at a rate of 6% per annum and payable on the maturity date of January 26, 2019 (the “December 2018 Rosen Maturity Date”). On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the December 2018 Rosen Loan Agreement to March 7, 2019. As part of the extension agreement, the Company issued Rosen an additional 11,731 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company entered into an agreement with Mr. Rosen that extended the maturity date of this loan to May 15, 2019. On August 8, 2019 the Company entered into an agreement further extending the maturity date to September 20, 2019.During the year ended December 31, 2019 $75,000$20,863 in principal and $3,463 of unpaid interest was converted into the June 2019 Loan Agreement and the loan is no longer outstanding.The December 2018 Gravitas Capital Loan AgreementOn December 27, 2018, the Company entered into a loan agreement (the “December 2018 Gravitas Capital Loan Agreement”) with Gravitas Capital, whereby the Company issued Gravitas Capital a promissory note in the principal amount of $50,000 (the “December 2018 Gravitas Capital Note”). As additional consideration for entering in the December 2018 Gravitas Capital Note Loan Agreement, the Company issued Gravitas Capital a four-year warrant to purchase 833 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the December 2018 Gravitas Capital Loan Agreement, the December 2018 Gravitas Capital Note bears interest at a rate of 6% per annum and payable on the maturity date of January 27, 2019 (the “December 2018 Gravitas Capital Maturity Date”).F-33During the year ended December 31, 2019 the Company repaid $50,000 in principal and $250 in interest and the loan is no longer outstanding.The January 2019 Rosen Loan AgreementOn January 30, 2019, the Company entered into a loan agreement (the “January 2019 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $175,000 (the “January 2019 Rosen Note”). As additional consideration for entering in the January 2019 Rosen Note Loan Agreement, the Company issued Rosen a four-year warrant to purchase 5,000 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the January 2019 Rosen Loan Agreement, the January 2019 Rosen Note bears interest at a rate of 10% per annum and payable on the maturity date of February 15, 2019 (the “January 2019 Rosen Maturity Date”). On February 19, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Rosen warrants to purchase 11,731 shares of common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company entered into an agreement with Mr. Rosen that extended the maturity date of this loan to May 15, 2019. On August 8, 2019 the Company entered into an agreement further extending the maturity date to September 20, 2019.During the year ended December 31, 2019 $175,000 in principal and $15,073 in interest was converted into the June 2019 Loan Agreement and the loan is no longer outstanding.The February 2019 Gravitas Capital Loan AgreementOn February 6, 2019, the Company entered into a loan agreement (the “February 2019 Gravitas Capital Loan Agreement”) with Gravitas Capital, whereby the Company issued Gravitas Capital a promissory note in the principal amount of $75,000 (the “February 2019 Gravitas Capital Note”). As additional consideration for entering in the February 2019 Gravitas Capital Note Loan Agreement, the Company issued Gravitas Capital a four-year warrant to purchase 125 shares of the Company’s common stock at a purchase price of $6.00 per share. Pursuant to the February 2019 Gravitas Capital Loan Agreement, the February 2019 Gravitas Capital Note bears interest at a rate of 5% per annum and payable on the maturity date of February 28, 2019 (the “February 2019 Gravitas Capital Maturity Date”).During the year ended December 31, 2019 the Company repaid $75,000 in principal and $3,500 in interest and the loan is no longer outstanding. The February 2019 Rosen Loan AgreementOn February 14, 2019, the Company entered into a loan agreement (the “February 2019 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $50,000 (the “February 2019 Rosen Note”). As additional consideration for entering in the February 2019 Rosen Note Loan Agreement, the Company issued Rosen a four-year warrant to purchase 1,666 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the February 2019 Rosen Loan Agreement, the February 2019 Rosen Note bears interest at a rate of 10% per annum and payable on the maturity date of February 28, 2019 (the “February 2019 Rosen Maturity Date”). On March 29, 2019 the Company entered into an agreement with Mr. Rosen that extended the maturity date of this loan to May 15, 2019. On August 8, 2019 the Company entered into an agreement further extending the maturity date to September 20, 2019.During the year ended December 31, $50,000 in principal and $3,208 in interest was converted into the June 2019 Loan Agreement and the loan is no longer outstanding.The March 2019 Gravitas Capital Loan AgreementOn March 11, 2019, the Company entered into a loan agreement (the “March 2019 Gravitas Capital Loan Agreement”) with Gravitas Capital, whereby the Company issued Gravitas Capital a promissory note in the principal amount of $80,000 (the “March 2019 Gravitas Capital Note”). As additional consideration for entering in the March 2019 Gravitas Capital Note Loan Agreement, the Company issued Gravitas Capital a four-year warrant to purchase 125 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the March 2019 Gravitas Capital Loan Agreement, the March 2019 Gravitas Capital Note bears interest at a rate of 6% per annum and payable on the maturity date of April 11, 2019 (the “March 2019 Gravitas Capital Maturity Date”). On April 12, 2019 the Company executed upon an agreement that further extended the maturity date of the March 2019 Gravitas Capital Loan Agreement to May 15, 2019. As part of the extension agreement, the Company issued Gravitas Capital an additional 166 warrants to purchase common stock of the Company at an exercise price of $18.00.During the year ended December 31, 2019 the company repaid $80,000 of principal and $10,000 of unpaid interest and the loan is no longer outstanding.F-34The May 2019 Loan AgreementOn May 31, 2019, the Company entered into a loan agreement (the “May 2019 Loan Agreement”), whereby the Company issued a promissory note in the principal amount of $10,000 (the “May 2019 Note”). Pursuant to the May 2019 Loan Agreement, the May 2019 Note bears interest at a rate of $500 per month. As additional consideration for entering in the May 2019 Loan Agreement, the Company issued a four-year warrant to purchase 50 shares of the Company’s common stock at a purchase price of $12.00 per share.During the year ended December 31, 2019 the Company repaid $10,000 in principal and $500 in interest and the loan is no longer outstanding. On June 3, 2019, the Company entered into a loan agreement (the “June 2019 Loan Agreement”), pursuant to which the Company was to be indebted in the amount of $2,400,000, of which $1,200,000 was funded by September 30, 2019 and $1,200,000 was exchanged from the May 2016 Rosen Loan Agreement dated May 26, 2016 in favor of Rosen for a joint and several interest in the Term Loan pursuant to the Debt Exchange Agreement. The June 2019 Loan Agreement, the June 2019 Loan bears interest at a rate of 12.5% per annum, compounded annually and payable on the maturity date of December 3, 2019 (the “June 2019 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the June 2019. If not paid by the maturity date, interest increases to 14.5%. In connection with the conversion of the May 2016 Rosen Loan Agreement the Company recorded a debt discount of $92,752. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.On July 29, 2019, the Company entered into the First Amendment Agreement to the June 2019 Loan Agreement pursuant to which the parties agreed to amend the June 2019 Loan Agreement and the June 2019 Security Agreement so as to (i) increase the principal aggregate amount of the June 2019 Loan to $2,500,000, and (ii) amend the provisions regarding the ranking of interest of such loan.On August 12, 2019, the Company entered into the Second Amendment Agreement to the June 2019 Loan Agreement pursuant to which the parties agreed to further amend the June 2019 Loan Agreement and the June 2019 Security Agreement so as to (i) increase the principal aggregate amount of the June 2019 Loan to $3,000,000, and (ii) amend the provisions regarding the ranking of interest of such loan.On September 16, 2019, the Company entered into the Third Amendment Agreement to the June 2019 Loan Agreement pursuant to which the parties agreed to further amend the June 2019 Loan Agreement and the June 2019 Security Agreement so as to (i) increase the principal amount of the June 2019 Loan to $4,000,000; and (ii) amend the provisions therein with regard to the ranking of security interests.On October 10, 2019 the Company and investors entered into the Fourth Amendment Agreement to the June 2019 Loan Agreement, whereby the parties thereto agreed to (i) increase the principal amount of the June 2019 Loan to $4,825,000; and (ii) amend the interest, conversion terms, and other covenants of the note.On February 27, 2020, the Company entered into a fifth amendment agreement to the June 2019 Loan Agreement, whereby the parties agreed to amend Section 2.6 of the June 2019 Loan Agreement and provide for: (i) an additional 10% of shares to be issued at the time of conversion in the event that the price per share (or unit, as applicable) of securities issued in a Qualified Public Offering (as such term is defined in the Fifth Amendment) is below $15.00; and (ii) provide for the acceleration of all outstanding interest due on the Loan upon the consummation of a Qualified Public Offering.As of December 31, 2019 this loan had not been repaid and the Company began accruing interest at 14.5% as of the Maturity Date.The July 2019 Gravitas Capital Loan AgreementOn July 16, 2019, the Company entered into a loan agreement (the “July 2019 Gravitas Capital Loan Agreement”) with Gravitas Capital, whereby the Company issued Gravitas Capital a promissory note in the principal amount of $100,000 (the “July 2019 Gravitas Capital Note”). As additional consideration for entering in the July 2019 Gravitas Capital Note Loan Agreement, the Company issued Gravitas Capital a five-year warrant to purchase 333 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the July 2019 Gravitas Capital Loan Agreement, the July 2019 Gravitas Capital Note bears interest at a rate of 5% per annum and payable on the maturity date of September 1, 2019 (the “July 2019 Gravitas Capital Maturity Date”). On September 19, 2018 the Company executed upon an agreement that extended the maturity date of this loan to November 1, 2019. As part of the extension agreement, the Company issued Gravitas Capital warrants to purchase 333 shares of common stock of the Company at an exercise price of $18.00 per share.During the year ended December 31, 2019 the Company repaid $100,000 in principal $15,000 in interest and extended the maturity date of the loan. F-35The August 2019 Schiller Loan AgreementOn August 6, 2019, the Company entered into a loan agreement (the “August 2019 Schiller Loan Agreement”), whereby the Company issued a promissory note in the principal amount of $15,000 (the “August 2019 Schiller Note”). Pursuant to the August 2019 Schiller Loan Agreement, the August 2019 Schiller Note bears interest at a rate of $750 per month. As additional consideration for entering in the August 2019 Schiller Loan Agreement, the Company issued a five-year warrant to purchase 75 shares of the Company’s common stock at a purchase price of $18.00 per share.During the year ended December 31, 2019 the Company repaid $15,000 in principal and $750 in interest and the loan is no longer outstanding. The September 2019 Schiller Loan AgreementOn September 26, 2019, the Company entered into a loan agreement (the “September 2019 Schiller Loan Agreement”), whereby the Company issued Schiller a promissory note in the principal amount of $50,000 (the “September 2019 Schiller Note”). Pursuant to the September 2019 Schiller Loan Agreement, the September 2019 Schiller Note bears interest at a rate of $2,250 per month. As additional consideration for entering in the First September 2019 Schiller Loan Agreement, the Company issued Schiller a five-year warrant to purchase 333 shares of the Company’s common stock at a purchase price of $18.00 per share.During the year ended December 31, 2019 the Company repaid $50,000 in principal and $2,250 in interest and the loan is no longer outstanding. The October 2019 Frommer Loan AgreementOn October 7, 2019, the Company entered into a loan agreement (the “October 2019 Frommer Loan Agreement”) with Jeremy Frommer, whereby the Company issued Frommer a promissory note in the principal amount of $10,000 (the “October 2019 Frommer Note”). Pursuant to the October 2019 Frommer Loan Agreement, the October 2019 Frommer Note has a flat interest rate of $500. As additional consideration for entering in the October 2019 Frommer Loan Agreement, the Company issued Frommer a five-year warrant to purchase 50 shares of the Company’s common stock at a purchase price of $18.00 per share.During the year ended December 31, 2019 the Company repaid $10,000 in principal and $225 in interest and the loan is no longer outstanding. The December 2019 Gravitas Loan AgreementOn December 23, 2019, the Company entered into a loan agreement (the “December 2019 Gravitas Loan Agreement”), whereby the Company issued Gravitas a promissory note in the principal amount of $300,000 (the “December 2019 Gravitas Note”). Pursuant to the December 2019 Gravitas Loan Agreement, the December 2019 Gravitas Note has a flat interest payment of $20,000. As of the date of this filing, the note has not been repaid, but the Company is in negotiations with the holder about an extension agreement.Demand loanOn June 6, 2018, Rosen made non-interest bearing loans of $50,000 to the Company in the form of cash. The loan is due on demand and unsecured. On July 12, 2018, this note was converted into The Second July 2018 Rosen Loan Agreements.On March 29, 2019, Mark Standish made non-interest bearing loans of $300,000 to the Company in the form of cash. The loan is due on demand and is unsecured. In April 2019 the company papered this note as part of the February 2019 Convertible Note Offering.On June 13, 2019, Standish made non-interest bearing loans of $100,000 to the Company in the form of cash. The loan is due on demand and unsecured. During the year ended the company repaid $25,000 of principal.On December 17, 2019, Standish made non-interest bearing loans of $150,000 to the Company in the form of cash. The loan is due on demand and unsecured.Officer compensationDuring the years ended December 31, 2019 and 2018 the Company paid $122,470 and $109,407, respectively for living expenses for officers of the Company.Note 9 – Stockholders’ DeficitShares AuthorizedThe Company is authorized to issue up to one hundred twenty million (120,000,000) shares of capital stock, of which one hundred million (100,000,000) 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.F-36Reverse Stock SplitOn July 25, 2019, following board of directors approval, the Company filed a Certificate of Change to its Articles of Incorporation (the “Amendment”), with the Secretary of State of the State of Nevada to effectuate a one-for-twenty (1:20) reverse stock split (the “Reverse Stock Split”) of its common stock, par value $0.001 per share, without any change to its par value. The Amendment became effective on July 30, 2019. The number of common stock authorized was proportionately reduced pursuant to Reverse Stock Split. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to the next whole share.All share and per share amounts for the common stock have been retroactively restated to give effect to the reverse splits.Preferred StockAs of December 31, 2019, and 2018 there were no preferred stock issued or outstanding.Series A Cumulative Convertible Preferred StockOn February 13, 2015, 100,000 shares of preferred stock were designated as Series A Cumulative Convertible Preferred Stock (“Series A”). Each share of Series A shall have a stated value equal to $100 (as adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Series A Stated Value”).The holders of the Series A shall be entitled to receive preferential dividends at the rate of 6% per share per annum on the Series A Stated Value, but before any dividend or other distribution will be paid or declared and set apart for payment on any shares of any Junior Stock, as defined. Such dividends shall compound annually and be fully cumulative, and shall accumulate from the date of original issuance of the Series A and shall be payable quarterly, in arrears, commencing on the first day of the calendar quarter following the date on which the Series A is issued. Upon the occurrence of an Event of Default (as defined below) and while such Event of Default is outstanding, such dividend rate shall be increased to 15% per annum on the Series A Stated Value. At the Company’s option, such dividend payments may be made in (i) cash (ii) additional shares of Series A valued at the Series A Stated Value thereof, in an amount equal to 150% of the cash dividend otherwise payable or (iii) a combination of cash and additional shares of Series A, provided there is not an existing current Event of Default on the date on which a dividend payment is payable, in which event the Holder entitled to receive such dividend may elect to receive such dividends in cash or additional shares of Series A Preferred. The dividends on the Series A shall be cumulative whether or not declared so that, if at any time full cumulative dividends at the rate aforesaid on all shares of the Series A then outstanding from the date from and after which dividends thereon are cumulative to the end of the annual dividend period next preceding such time shall not have been paid or declared and set apart for payment, or if the full dividend on all such outstanding Series A for the then current dividend period shall not have been paid or declared and set apart for payment, the amount of the deficiency shall be paid or declared and set apart for payment before any sum shall be set apart for or applied by the Corporation or a subsidiary of the Corporation to the purchase, redemption or other acquisition of the Series A or any shares of any other class of stock ranking on a parity with the Series A and before any dividend or other distribution shall be paid or declared and set apart for payment on any Junior Stock and before any sum shall be set aside for or applied to the purchase, redemption or other acquisition of any Junior Stock.Holder of Series A shall have the right at any time after the issuance, to convert such shares, accrued but unpaid declared dividends on the Series A and any other sum owed by the Corporation arising from the Series A into fully paid and non-assessable shares of Common Stock (the “Conversion Shares”) of the Corporation determined in accordance with the applicable conversion price (the “Conversion Price”). The number of Conversion Shares issuable upon conversion shall equal (i) the sum of (A) the Series A Stated Value being converted and/or (B) at the Holder’s election, accrued and unpaid dividends or any other component of the Conversion Amount, divided by (ii) the Conversion Price. The Conversion Price of the Series A shall be $15.00, subject to adjustment.F-37During the year ended December 31, 2016 the conversion price was adjusted to $9.84The Corporation and the Holder may not convert that amount of the Conversion Amount on a Conversion Date in amounts that would result in the Holder having a beneficial ownership of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates on such Conversion Date, and (ii) the number of Conversion Shares issuable upon the conversion of the Conversion Amount with respect to which the determination of this provision is being made on such Conversion Date, which would result in the aggregate beneficial ownership by the Holder and its Affiliates of more than 4.99% of the outstanding shares of Common Stock of the Corporation. For the purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to successive exercises which would result in the aggregate issuance of more than 4.99%. The Holder may allocate which of the equity of the Corporation deemed beneficially owned by the Holder shall be included in the 4.99% amount described above and which shall be allocated to the excess above 4.99%. The Holder may waive the conversion limitation described in this Section in whole or in part, upon and effective after sixty-one (61) days’ prior written notice to the Corporation. The holders of our Series A do vote together with the holders of our Common Stock on an as converted basis on each matter submitted to a vote of holders of Common Stock. The number of votes that may be cast by a holder of Series A shall be equal to the number of shares of Common Stock issuable upon conversion of such Holder’s Series A on the record date for determining those stockholders entitled to vote on the matter. In addition, the affirmative vote of the holders of a majority of our outstanding Series A is required to for the following actions:(a) amending the Corporation’s articles of incorporation or by-laws if such amendment would adversely affect the Series A(b) purchasing any of the Corporation’s securities other than required redemptions of Series A and repurchase under restricted stock and option agreements authorizing the Corporation’s employees;(c) effecting a Liquidation Event;(d) declaring or paying any dividends other than in respect of the Series A; and(e) issuing any additional securities having rights senior to or on parity with the Series A.During the years ended December 31, 2018, the Company accrued $0 for liquidating damages on the Series A and $0 on the warrants associated with the Series A. During the year ended December 31, 2018 the Company converted the remaining Series A into the August 2018 Equity Raise. See below.Series B Cumulative Convertible Preferred StockOn December 21, 2015, 20,000 shares of preferred stock were designated as Series B Cumulative Convertible Preferred Stock (“Series B”). Each share of Series B shall have a stated value equal to $100.00 (as adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Series B Stated Value”).The holders of outstanding shares of Series B shall be entitled to receive preferential dividends at the rate of 6% per share per annum on the Series B Stated Value, but before any dividend or other distribution will be paid or declared and set apart for payment on any shares of any Junior Stock as defined. Such dividends shall compound annually and be fully cumulative and shall accumulate from the date of original issuance of the Series B, and shall be payable quarterly, in arrears, commencing on the first day of the calendar quarter following the date on which the Series B is issued. Upon the occurrence of an Event of Default as defined below and while such Event of Default is outstanding, such dividend rate shall be increased to 15% per annum on the Series B Stated Value. At the Corporation’s option, such dividend payments may be made in (i) cash (ii) additional shares of Series B valued at the Series B Stated Value thereof, in an amount equal to 100% of the cash dividend otherwise payable or (iii) a combination of cash and additional shares of Series B, provided there is not an existing current Event of Default on the date on which a dividend payment is payable, in which event the Holder entitled to receive such dividend may elect to receive such dividends in cash or additional shares of Series B Preferred.F-38The dividends on the Series B shall be cumulative whether or not declared so that, if at any time full cumulative dividends at the rate aforesaid on all shares of the Series B then outstanding from the date from and after which dividends thereon are cumulative to the end of the annual dividend period next preceding such time shall not have been paid or declared and set apart for payment, or if the full dividend on all such outstanding Series B for the then current dividend period shall not have been paid or declared and set apart for payment, the amount of the deficiency shall be paid or declared and set apart for payment before any sum shall be set apart for or applied by the Corporation or a subsidiary of the Corporation to the purchase, redemption or other acquisition of the Series B or any shares of any other class of stock ranking on a parity with the Series B and before any dividend or other distribution shall be paid or declared and set apart for payment on any Junior Stock and before any sum shall be set aside for or applied to the purchase, redemption or other acquisition of any Junior Stock.Holders of shares of Series B shall have the right at any time commencing after the issuance to convert such shares, accrued but unpaid declared dividends on the Series B into fully paid and non-assessable shares of Common Stock (the “Conversion Shares”) of the Corporation determined in accordance with the applicable conversion price (the “Conversion Price”). All declared or accrued but unpaid dividends may be converted at the election of the Holder together with or independent of the conversion of the Series B Stated Value of the Series B. The number of Conversion Shares issuable upon conversion of the Conversion Amount shall equal (i) the sum of (A) the Series B Stated Value being converted and/or (B) at the Holder’s election, accrued and unpaid dividends or any other component of the Conversion Amount, divided by (ii) the Conversion Price. The Conversion Price of the Series B shall be $18.00, subject to adjustment.During the year ended December 31, 2016 the conversion price was adjusted to $11.82.The Corporation and the Holder may not convert that amount of the Conversion Amount on a Conversion Date in amounts that would result in the Holder having a beneficial ownership of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates on such Conversion Date, and (ii) the number of Conversion Shares issuable upon the conversion of the Conversion Amount with respect to which the determination of this proviso is being made on such Conversion Date, which would result in the aggregate beneficial ownership by the Holder and its Affiliates of more than 4.99% of the outstanding shares of Common Stock of the Corporation. For the purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to successive exercises which would result in the aggregate issuance of more than 4.99%. The Holder may allocate which of the equity of the Corporation deemed beneficially owned by the Holder shall be included in the 4.99% amount described above and which shall be allocated to the excess above 4.99%. The Holder may waive the conversion limitation described in this Section in whole or in part, upon and effective after sixty-one (61) days’ prior written notice to the Corporation.The holders of our Series B do vote together with the holders of our Common Stock on an as converted basis on each matter submitted to a vote of holders of Common Stock. The number of votes that may be cast by a holder of Series B shall be equal to the number of shares of Common Stock issuable upon conversion of such Holder’s Series B on the record date for determining those stockholders entitled to vote on the matter. In addition, the affirmative vote of the holders of a majority of our outstanding Series B is required to for the following actions:(a) amending the Corporation’s articles of incorporation or by-laws if such amendment would adversely affect the Series B(b) purchasing any of the Corporation’s securities other than required redemptions of Series B and repurchase under restricted stock and option agreements authorizing the Corporation’s employees;(c) effecting a Liquidation Event;(d) declaring or paying any dividends other than in respect of the Company’s Series A or Series B; and(e) issuing any additional securities having rights senior to the Series B. During the years ended December 31, 2018, the Company accrued $0 for liquidating damages on the Series B and $0 on the warrants associated with the Series B.During the year ended December 31, 2018 the Company converted the remaining Series B into the August 2018 Equity Raise. See below.F-39Common StockOn January 31, 2018, the Company issued 6,250 shares of its restricted common stock to settle outstanding vendor liabilities of $3,750. In connection with this transaction the Company also recorded a gain on settlement of vendor liabilities of $375. During the year ended December 31, 2018, the Company issued 10,166 shares of its restricted common stock to consultants in exchange for services at a fair value of $116,300. These shares were recorded as common stock issued for prepaid services and will be expensed over the life of the consulting contract to share based payments. During the year ended December 31, 2018 the Company recorded $72,835 to share based payments.On January 4, 2019, the Company issued 33,333 shares of its restricted common stock to consultants in exchange for services at a fair value of $240,000.On January 3, 2019, the Company issued 8,333 shares of its restricted common stock to consultants in exchange for services at a fair value of $70,050.August 2018 Equity RaiseEffective August 31, 2018 (the “Effective Date”), the Company consummated the initial closing (the “Initial Closing”) of a private placement offering of its securities of up to $5,000,000 (the “August 2018 Equity Raise”). In connection with the August 2018 Equity Raise, the Company entered into definitive securities purchase agreements (the “Purchase Agreements”) for aggregate gross proceeds of $649,829 and $2,787,462 during the years ended December 31, 2019 and 2018 respectively. Pursuant to the Purchase Agreement, the Purchasers purchased an aggregate of 43,322 and 185,830 shares of common stock at $15.00 per share and received warrants to purchase 43,322 and 185,830 shares of common stock at an exercise price of $18.00 per share (the “Purchaser Warrants”, collectively, the “Securities”).The Purchaser Warrants are exercisable for a term of five years from the Initial Exercise Date (as defined in the Purchaser Warrants).In connection with the August 2018 Equity Raise, the Company will issue 36,666 shares of Common Stock, will pay fees of $161,406 and will grant warrants to purchase 2,333 shares of common stock at an exercise price of $18.00 per share for services rendered as the Company’s placement agent in the Private Offering. The Company has recorded $334,985 to stock issuance costs, which are part of Additional Paid-in Capital. Letter Agreements for the Conversion of Debt and Preferred StockIn connection with the August 2018 Equity Raise, the Company entered into those certain letter agreements (the “Debt Conversion Agreements”) with certain holders of its debt securities (the “Debt Holders”), for the conversion of an aggregate amount of $7,997,939 of principal and $1,028,890 of accrued but unpaid interest of the Company’s debt obligations into 752,149 shares of Common Stock at a conversion price equal to $12.00 per share. Additionally, as inducement to enter into the Debt Conversion Agreement, the Debt Holders were issued warrants to purchase 376,075 shares of Common Stock at an exercise price equal to $18.00 per share, expiring five years from the date of issuance (the “Incentive Debt Warrants”). The Company recorded a Loss on extinguishment of debt of $2,913,934 in connection with of the debt conversions. See Notes 7, 8 and 9.Concurrently with its entrance in the Debt Conversion Agreements, the Company entered into those letter agreements (the “Preferred Stock Conversion Agreements”) with certain holders (the “Preferred Holders”) of its Series A Cumulative Convertible Preferred Stock and Series B Cumulative Convertible Preferred Stock (the “collectively, the Preferred Stock”) whereby the Preferred Holders converted 38,512 shares of the Preferred Stock into an aggregate of 447,776 shares of Common Stock at conversion prices equal to $11.82 per share for Series A and $9.84 per share for Series B. As in an inducement to enter into the Preferred Stock Conversion Agreements, the Preferred Holders were issued warrants to purchase 223,888 shares of Common Stock at an exercise price equal to $18.00 per share, expiring five years from the date of issuance (the “Incentive Preferred Warrants”, and together with the Incentive Debt Warrants, the “Incentive Warrants”). The Company recorded an inducement of $2,016,634 in connection with of the Preferred conversions and is recorded as an adjustment to net loss attributable to common shareholders, on the statements of operations.F-40Tender offers Warrants
subject to
tender Common
shares
issuable Warrants
tendered Shares
issued Tender offer 1 1,030,549 343,513 848,860 282,951 Tender offer 2 895,914 445,457 834,202 417,106 Total 1,926,463 788,970 1,683,062 700,057 Tender 1In February 2019 the Company offered to its holders of certain outstanding warrants (the “Tender 1 Warrants”), each with an exercise price of $12.00, by agreeing to receive five hundred fifty five (555) Shares in exchange for every one thousand, six hundred, sixty seven (1,667) Warrants tendered by the holders of Warrants (the “Exchange Ratio”). The Exchange Ratio was selected by the Company in order to provide the holders of the Warrants with an incentive to exchange the Warrants. The Tender closed on April 15, 2019. The Company considered the fair value accounting for all share-based payments awards. The fair value of each warrant tendered is estimated on the tender date using the Black-Scholes option-pricing model. Since the fair of the warrants were in excess of the fair value of common stock the company did not record an inducement expense.Tender 2In April 2019 the Company offered to its holders of certain outstanding warrants (the “Tender 2 Warrants”), each with an exercise price of $18.00, by agreeing to receive eight hundred thirty three (833) Shares in exchange for every one thousand, six hundred, sixty seven (1,667) Warrants tendered by the holders of Warrants (the “Exchange Ratio”). The Exchange Ratio was selected by the Company in order to provide the holders of the Warrants with an incentive to exchange the Warrants. The Tender closed on May 17, 2019. The Company considered the fair value accounting for all share-based payments awards. The fair value of each warrant tendered is estimated on the tender date using the Black-Scholes option-pricing model. Since the fair of the warrants were in excess of the fair value of common stock the company did not record an inducement expense.Stock OptionsThe 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 year ended December 31, 2019 and 2018 are as follows: December 31,
2019 December 31,
2018 Exercise price $ 13.20-6.60 18.00-45 Expected dividends 0 % 0 % Expected volatility 102.76 % 93.64%-116.27 % Risk free interest rate 1.61 % 2.2%-2.56 Expected life of option 10 years 3.6 - 4.3 years F-41The following is a summary of the Company’s stock option activity: Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Life
(in years) Balance – December 31, 2017 – outstanding 294,166 $ 25.20 3.27 Granted - - - Exercised - - - Cancelled/Modified - - - Balance – December 31, 2018 – outstanding 294,166 25.20 3.27 Balance – December 31, 2018 – exercisable 255,277 21.60 3.25 Balance – December 31, 2018 – outstanding 294,166 25.20 3.27 Granted 9,666 9.66 10.01 Exercised - - - Cancelled/Modified - - - Balance – December 31, 2019 – outstanding 303,833 24.48 2.51 Balance – December 31, 2019 – exercisable 303,833 $ 24.48 2.51 During the year ended December 31, 2019 the Company granted options of 9,666 to consultants. As of the date of this filing the company has not issued these options.At December 31, 2019, the aggregate intrinsic value of options outstanding and exercisable was $0 and $0, respectively.Stock-based compensation for stock options has been recorded in the consolidated statements of operations and totaled $14,336 and $446,123, for the year ended December 31, 2018 and 2019, respectively.The following is a summary of the Company’s stock options granted during the year ended December 31, 2019:Options Value Purpose for Grant 9,666 $ 3,021 Service Rendered The following is a summary of the Company’s stock options granted during the year ended December 31, 2018:Options Value Purpose for Grant 11,666 $ 56,495 Service Rendered WarrantsThe 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 year ended December 31, 2019 are as follows: December 31,
2019 December 31,
2018 Exercise price $ 18.00 $ 12.00-$18.00 Expected dividends 0 % 0 % Expected volatility 78.50% - 116.92 % 92.14% - 109.54 % Risk free interest rate 1.32% - 2.75 % 1.64% - 3.09 % Expected life of warrant 4 – 5 years 4 – 5 years F-42Warrant ActivitiesThe following is a summary of the Company’s warrant activity: Warrants Weighted
Average
Exercise
Price Outstanding – December 31, 2017 770,666 $ 15.00 Granted 1,078,713 16.20 Exercised - - Forfeited/Cancelled - - Outstanding – December 31, 2018 1,849,380 16.20 Granted 154,610 17.67 Exercised - - Forfeited/Cancelled (1,756,584 ) 15.96 Outstanding and Exercisable – December 31, 2019 247,407 $ 15.75 Warrants Outstanding Warrants Exercisable Exercise price Number
Outstanding Weighted
Average
Remaining
Contractual
Life
(in years) Weighted
Average
Exercise Price Number
Exercisable Weighted
Average
Exercise Price $ 15.75 247,407 2.71 15.75 247,407 8.13 During the year ended December 31, 2019, a total of 44,396 warrants were issued with convertible notes (See Note 6 above). The warrants have a grant date fair value of $252,533 using a Black-Scholes option-pricing model and the above assumptions.During the year ended December 31, 2019, a total of 42,968 warrants were issued with notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $205,509 using a Black-Scholes option-pricing model and the above assumptions.During the year ended December 31, 2019, a total of 440 warrants were issued with convertible notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $2,465 using a Black-Scholes option-pricing model and the above assumptions. During the year ended December 31, 2019, a total of 43,322 warrants were issued with the August 2018 Equity Raise (See above). The warrants have a grant date fair value of $334,985 using a Black-Scholes option-pricing model and the above assumptions.During the year ended December 31, 2019, a total of 14,147 warrants were issued in exchange for services. The warrants have a grant date fair value of $122,777 using a Black-Scholes option-pricing model and the above assumptions. During the year ended December 31, 2018, a total of 49,381 warrants were issued with promissory notes (See Note 6 above). The warrants have a grant date fair value of $501,268 using a Black-Scholes option-pricing model and the above assumptions.During the year ended December 31, 2018, a total of 174,683 warrants were issued with convertible notes (See Note 7 above). The warrants have a grant date fair value of $1,284,683 using a Black-Scholes option-pricing model and the above assumptions.During the year ended December 31, 2018, a total of 42,170 warrants were issued with notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $429,340 using a Black-Scholes option-pricing model and the above assumptions.F-43During the year ended December 31, 2018, a total of 23,391 warrants were issued with convertible notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $162,834 using a Black-Scholes option-pricing model and the above assumptions. During the year ended December 31, 2018, a total of 788,127 warrants were issued with the August 2018 Equity Raise (See above). The warrants have a grant date fair value of $6,418,381 using a Black-Scholes option-pricing model and the above assumptions.Note 10 – Commitments and ContingenciesLease AgreementsOn 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. 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. Total amount due under this lease is $108,229The components of lease expense were as follows: Year Ended
December 31,
2019 Operating lease cost $ 101,341 Short term lease cost (6,434 ) Total net lease cost $ 94,907 Supplemental cash flow and other information related to leases was as follows:Year EndedDecember 31,2019Cash paid for amounts included in the measurement of lease liabilities:ROU asset obtained in exchange for lease obligation349,997Operating lease payments60,764Weighted average remaining lease term (in years):3.5Weighted average discount rate:13%Total future minimum payments required under the lease as of December 31, 2019 are as follows:Twelve Months Ending December 31, 2020 $ 104,922 2021 108,983 2022 114,627 2023 53,094 Total $ 381,626 Rent expense for the years ended December 31, 2019 and 2018 was $198,473 and $179,186 respectively. Note 11 – Income TaxesComponents of deferred tax assets are as follows: December 31,
2019 December 31,
2018 Net deferred tax assets – Non-current: Depreciation $ (63,676 ) $ 14,168 Amortization 7,437 - Stock based compensation 659,384 533,187 Expected income tax benefit from NOL carry-forwards 5,229,445 3,413,650 Less valuation allowance (5,832,590 ) (3,961,005 ) Deferred tax assets, net of valuation allowance $ - $ - F-44Income Tax Provision in the Consolidated Statements of OperationsA reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows: For the Year Ended
December 31,
2019 For the Year Ended
December 31,
2018 Federal statutory income tax rate 21.0 % 21.0 % State tax rate, net of federal benefit 6.5 % 6.5 % Change in valuation allowance on net operating loss carry-forwards (27.5 )% (27.5 )% Effective income tax rate 0.0 % 0.0 % Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets of the Company will not be fully realizable for the year ended December 31, 2019 and 2018. Accordingly, management had applied a full valuation allowance against net deferred tax assets as of December 31, 2019 and 2018.As of December 31, 2019, the Company had approximately $21 million of federal net operating loss carryforwards available to reduce future taxable income which will begin to expire in 2033 for both federal and state purposes.On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code of 1986, as amended (the “Code”). The Act reduces the federal corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017. ASC 470 requires the Company to remeasure the existing net deferred tax asset in the period of enactment. The Act also provides for immediate expensing of 100% or the costs of qualified property that is incurred and placed in service during the period from September 27, 2017 to December 31, 2022. Beginning January 1, 2023, the immediate expensing provision is phased down by 20% per year until it is completely phased out as of January 1, 2027. Additionally, effective January 1, 2018, the Act imposes possible limitations on the deductibility of interest expense. As a result of the provisions of the Act, the Company’s deduction for interest expense could be limited in future years. The effects of other provisions of the Act are not expected to have a material impact on the Company’s financial statements.On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to provide guidance on accounting for the tax effects of the Act. SAB 118 provides a measurement period that begins in the reporting period that includes the Act’s enactment date and ends when an entity has obtained, prepared and analyzed the information that was needed in order to complete the accounting requirements under ASC 720. However, in no circumstance should the measurement period extend beyond one year from the enactment date. In accordance with SAB 118, a company must reflect in its financial statements the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. SAB 118 provides that to the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.The Company does not reflect a deferred tax asset in its financial statements but includes that calculation and valuation in its footnotes. We are still analyzing the impact of certain provisions of the Act and refining our calculations. The Company will disclose any change in the estimates as it refines the accounting for the impact of the Act.Federal and state tax laws impose limitations on the utilization of net operating losses and credit carryforwards in the event of an ownership change for tax purposes, as defined in Section 382 of the Internal Revenue Code. Accordingly, the Company’s ability to utilize these carryforwards may be limited as a result of an ownership change which may have already happened or may happen in the future. Such an ownership change could result in a limitation in the use of the net operating losses in future years and possibly a reduction of the net operating losses available.Note 12 – Subsequent EventsSubsequent to December 31, 2019 the company entered into seven promissory note agreements. The Company received proceeds of $584,900. As additional consideration for entering in the promissory note agreements, the investors were granted a total of 249 warrants to purchase the Company’s common stock.Subsequent to December 31, 2019 the company entered into five convertible promissory note agreements. The Company received proceeds of $770,000. As additional consideration for entering in the convertible promissory note agreements, the investors were granted a total of 48,331 warrants to purchase the Company’s common stock. On August 17, 2020, we filed a certificate of amendment to our Second Amended and Restated Articles of Incorporation (the “Amendment”), with the Secretary of State of the State of Nevada to effectuate a one-for-three (1:3) reverse stock split (the “August 2020 Reverse Stock Split”) of our common stock without any change to its par value. The Amendment became effective on upon such filing. No fractional shares were issued in connection with the August 2020 Reverse Stock Split as all fractional shares were rounded down to the next whole share.F-45Condensed 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; 3,327,398 issued and 3,319,937 outstanding as of June 30, 2020 and 3,059,645 issued and 3,006,362 outstanding as of December 31, 2019 3,327 3,059 Additional paid in capital 39,075,662 36,391,819 Accumulated deficit (51,708,425 ) (44,580,437 ) Accumulated other comprehensive income (loss) (34,525 ) (5,995 ) Less: Treasury stock, 7,461 and 53,283 shares, respectively (60,162 ) (367,174 ) (12,730,776 ) (8,564,848 ) Total Liabilities and Stockholders’ Deficit $ 2,729,415 $ 2,572,046 The accompanying notes are an integral part of these condensed consolidated financial statements.F-46Condensed 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,
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 $ (1.30 ) $ (0.59 ) $ (2.28 ) $ (1.41 ) Weighted average number of common shares outstanding 3,194,321 2,690,752 3,122,926 2,463,188 The accompanying notes are an integral part of these condensed consolidated financial statements.F-47Consolidated 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 - $ - - $ - - $ - 3,140,894 $ 3,141 (53,283 ) $ (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 Conversion of warrants to stock - - - - - - 2,239 7 - - (10,007 ) - - (10,000 ) �� Conversion of options to stock - - - - - - 229,491 2 - - 1,405,434 - - 1,405,664 Stock warrants issued with note payable - - - - - - - - - - 247,281 - - 247,281 Cancellation of Treasury stock - - - - - - (50,650 ) (51 ) 50,650 349,030 (348,979 ) - - - Purchase of treasury stock - - - - - - - - (4,828 ) (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 $ 3,327 (7,461 ) $ (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.F-48Jerrick Media Holdings, Inc.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 - $ - - $ - - $ - 3,059,646 $ 3,060 (53,283 ) $ (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 ) 50,650 349,030 (348,979 ) - - - Purchase of treasury stock - - - - - - - - (4,828 ) (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 - $ - - $ - - $ - 3,378,698 $ 3,327 (7,461 ) $ (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.F-49Jerrick 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 - $ - - $ - - $ - 2,243,435 $ 2,243 (37,222 ) $ (220,781 ) $ 34,096,415 $ (38,429,506 ) $ (3,551,629 ) Stock based compensation - - - - - - - - - - 122,776 - 122,776 Cash received for common stock and warrants - - - - - - - - - - - - - Tender offering - - - - - - 700,058 700 - - (700 ) - - 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 - - - - - - - - (12,728 ) (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 - $ - - $ - - $ - 2,943,492 $ 2,943 (49,950 ) $ (362,174 ) $ 35,247,810 $ (40,007,294 ) $ (5,118,715 ) See accompanying notes to the consolidated financial statementsF-50Jerrick Media Holdings, Inc.Consolidated Statement of Changes in Stockholders’ Equity (Deficit)For the Six 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, December 31, 2018 - $ - - $ - - $ - 2,158,447 $ 2,158 (9,222 ) $ (52,341 ) $ 34,104,644 $ (36,545,065 ) $ (2,490,604 ) Stock based compensation - - - - - - 41,667 42 - - 434,043 - 434,085 Cash received for common stock and warrants - - - - - - 43,322 43 - - 649,786 - 649,829 Tender offering - - - - - - 700,057 700 (700 ) - - Stock issuance cost - - - - - - - - - - (178,146 ) - (178,146 ) Stock warrants issued with note payable - - - - - - - - - - 328,777 - 328,777 Purchase of treasury stock and warrants - - - - - - - - (40,728 ) (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 - $ - - $ - - $ - 2,943,493 $ 2,943 (49,950 ) $ (362,174 ) $ 35,247,810 $ (40,007,294 ) $ (5,118,715 ) See accompanying notes to the consolidated financial statementsF-51Condensed Consolidated Statements of Cash Flows (Unaudited) 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.F-52June 30, 2020Notes to the Condensed Consolidated Financial StatementsNote 1 – Organization and OperationsJerrick Media Holdings, Inc. (“we,” “us,” the “Company,” or “Jerrick Media” or “Jerrick”) is a technology company focused on the development of digital communities, marketing branded digital content, and e-commerce opportunities. Jerrick’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’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 475,000 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.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 digital e-commerce agency based in New Jersey (see Note 4).Note 2 – Significant and Critical Accounting Policies and PracticesManagement 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.F-53Basis of PresentationThe 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 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, 2020 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, included in the Company’s 2019 Annual Report on Form 10-K filed with the SEC. The balance sheet as of December 31, 2019 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 AssumptionsThe 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:(i)Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.(ii)Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.(iii) Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses and (b) general economic conditions.(iv)Estimates and assumptions used in valuation of equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk-free rate(s) to value share options and similar instruments.(v)Operating lease estimates and assumptions: These assets and liabilities are recognized based on the present value of future payments over the lease term at the commencement date. We estimate the incremental borrowing rate for each lease based on an evaluation of our credit ratings and the prevailing market rates for collateralized debt in a similar economic environment with similar payment terms and maturity dates commensurate with the terms of the lease.F-54These 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.Actual results could differ from those estimates.Principles of consolidationThe Company consolidates all majority-owned subsidiaries, if any, in which the parent’s power to control exists.As of June 30, 2020, the Company’s consolidated subsidiaries and/or entities are as follows:Name of combined affiliateState or other jurisdictionofincorporationor organizationCompanyOwnership InterestJerrick Ventures LLCDelaware100%Abacus Tech Pty LtdAustralia100%Seller’s Choice, LLCNew Jersey100%Jerrick Global, LLCDelaware100%Jerrick Investment Advisors LLCDelaware100%Jerrick Partners LLCDelaware100%Maven Tech LLCDelaware100%OG Collection LLCDelaware100%VMENA LLCDelaware100%Vocal For Brands, LLCDelaware100%Vocal Ventures LLCDelaware100%What to Buy, LLCDelaware100%All inter-company balances and transactions have been eliminated.F-55Fair Value of Financial InstrumentsThe 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 to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:Level 1Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.Level 2Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.Level 3Pricing inputs that are generally observable inputs and not corroborated by market data.Financial assets or liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, notes payable, convertible debt, accounts payable and accrued liabilities approximate their fair value because of the short maturity of those instruments. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.The assets or liabilities’ fair value measurement within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The following table provides a summary of the relevant assets and liabilities that are measured at fair value on a recurring basis:Fair Value Measurements as ofJune 30, 2020 Quoted Prices Quoted Prices in Active for Similar Markets for Assets or Identical Liabilities in Significant Assets or Active Unobservable Liabilities Markets Inputs Total (Level 1) (Level 2) (Level 3) Assets: Marketable securities - debt securities $ 150,000 $ - $ - $ 150,000 Marketable securities - equity securities 26,325 26,325 - - Total assets $ 176,325 $ 26,325 $ - $ 150,000 F-56The 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. Marketable debt securities as of June 30, 2020 are as follows: Fair Value
Hierarchy Cost Unrealized
Gains
(Loss) Fair Value Marketable securities - debt securities 3 $ 150,000 $ - $ 150,000 The change in net unrealized holding gain (loss) on debt securities available for sale that has been included in Accumulated Other Comprehensive Income as a separate component of Stockholder’s Equity for the six months ended June 30, 2020 and 2019 was $0 and $0, respectively.Our marketable equity securities are publicly traded stocks measured at fair value using quoted prices for identical assets in active markets and classified as Level 1 within the fair value hierarchy. Marketable equity securities as of June 30, 2020 are as follows: Fair Value Hierarchy
Gains
(Loss) Fair Value Marketable securities - equity securities 1 $ 16,283 $ 10,042 $ 26,325 The change in net realized and unrealized appreciation on equity trading securities that has been included in other expenses for the six months ended June 30, 2020 and 2019 was $10,042 and $0, respectively.Cash EquivalentsThe Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.Property and EquipmentProperty and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:Estimated Useful Life(Years)Computer equipment and software3Furniture and fixtures5Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations.Long-lived Assets Including Goodwill and Other Acquired Intangibles AssetsWe evaluate the recoverability of property and equipment and acquired finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any significant impairment charges during the six months ended June 30, 2020.F-57We review goodwill for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value of our single reporting unit below its carrying value. As of June 30, 2020, no impairment of goodwill has been identified.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.InvestmentsThe Company accounts for its investments in debt securities, in accordance with sub-topic 320-10 of the FASB Accounting Standards Codification (“Sub-topic 320-10”).Pursuant to Paragraph 320-10-35-1, investments in debt securities that are classified as available for sale shall be measured subsequently at fair value in the consolidated balance sheets at each balance sheet date. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized except an available-for-sale security that is designated as being hedged in a fair value hedge, from which all or a portion of the unrealized holding gain and loss of shall be recognized in earnings during the period of the hedge, pursuant to paragraphs 815-25-35-1 through 815-25-35-4.The Company follows Paragraphs 326-30-35-1 through 326-30-35-4 to assess whether an investment is impaired in each reporting period. An investment in debt security is impaired if the fair value of the investment is less than its amortized cost. Impairment indicators include, but are not limited to the following: a. asset quality, or business prospects of the investee; b. a significant adverse change in the regulatory, economic, or technological environment of the investee; c. a significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates. If the fair value of an investment is less than its amortized cost at the balance sheet date of the reporting period for which impairment is assessed, the impairment is either temporary or other than temporary. The following table sets forth a summary of the changes in marketable securities that are measured at fair value on a recurring basis: For the three months ended
June 30,
2020 For the six months ended
June 30,
2020 Total Total January 1, 2020 $ - $ - Purchase of marketable securities 166,283 166,283 Gain on trading securities 10,042 10,042 June 30, 2020 $ 176,325 $ 176,325 We invest in debt and equity securities. Our investments in debt securities are subject to interest rate risk. To minimize the exposure due to an adverse shift in interest rates, we invest in securities with maturities of two years or less and maintain a weighted average maturity of one year or less. As of June 30, 2020, all of our investments had maturities between one and two years.F-58Commitments and ContingenciesThe Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s 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 CurrencyForeign 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 shareholders’ equity in accumulated other comprehensive income. Gains and losses from foreign currency transactions, which are included in SG&A, have not been significant in any period presented.Revenue RecognitionUnder 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:●identification of the contract, or contracts, with a customer;●identification of the performance obligations in the contract;●determination of the transaction price;●allocation of the transaction price to the performance obligations in the contract; and●recognition of revenue when, or as, we satisfy a performance obligation.Revenue disaggregated by revenue source for the six months ended June 30, 2020 and 2019 consists of the following: Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Branded content $ 68,728 $ 2,350 $ 124,728 $ 22,421 Managed Services 190,106 - 382,357 - Creator Subscriptions 54,972 - 90,934 - Affiliate sales 8,195 2,539 16,344 5,661 Other revenue 539 2,292 1,319 13,433 $ 322,540 $ 7,181 $ 615,682 $ 41,515 F-59Branded ContentBranded 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.Below are the significant components of a typical agreement pertaining to branded content revenue:●The Company collects fixed fees ranging from $5,000 to $45,000●The articles are created and published within three months of the signed agreement, or as previously negotiated with the client●The articles are promoted per the contract and engagement reports are provided to the client●The client pays 50% at signing and 50% upon completion●Most contracts include provisions for clients to acquire content rights at the end of the campaign for a flat feeAffiliate SalesAffiliate 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.SubscriptionVocal+ 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. Vocal+ subscribers receive access to value-added features such as increased rate of CPM cost per mille (thousand) (“CPM”) monetization, a decreased minimum withdrawal threshold, a discount on platform processing fees, member badges for their profiles, 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. Managed ServicesThe 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 categories Partners, Monthly Services, and Projects. Contract amounts for Partner and Monthly Services clients range from approximately $500-$7,500 per month while Project amounts vary depending on the scope of work. Partner and Monthly clients are billed monthly for the work completed within that month. Partner Clients may or may not have an additional billing component referred to as Sales Performance Fee, which is a fee based upon a previously agreed upon percentage point of the client’s total sales for the month. Some Partners may also have projects within their contracts that get billed and recognized as agreed upon project milestones are achieved.F-60Deferred RevenueDeferred revenue consists of billings and payments from clients in advance of revenue recognition. As of June 30, 2020 and December 31, 2019, the Company had deferred revenue of $55,959 and $50,691, respectively.Accounts Receivable and AllowancesAccounts 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, 2020 the Company recorded $34,737 as a reserve for doubtful accounts. As of June 30, 2020 and December 31, 2019 the Company has an allowance for doubtful accounts of $68,240 and $33,503 respectively.Stock-Based CompensationThe Company recognizes compensation expense for all equity–based payments granted in accordance with ASC 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a five-year period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of Company stock on the grant date.The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is benchmarked against similar companies in a similar industry over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future. The expected forfeiture rate is estimated based on management’s best estimate. Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If the Company’s actual forfeiture rate is materially different from its estimate, the equity–based compensation could be significantly different from what the Company has recorded in the current period.F-61Loss Per ShareBasic 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 six months ended June 30, 2020 and 2019 presented in these condensed consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.The Company had the following common stock equivalents at June 30, 2020 and 2019: June 30, 2020 2019 Options 150,841 294,166 Warrants 312,080 237,712 Convertible notes - related party 1,858 1,726 Convertible notes 520,712 183,974 Totals 985,491 717,580 ReclassificationsCertain prior year amounts in the condensed consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current year presentation. The company reclassified $105,763 from current portion of operating lease right of use asset to operating lease right of use asset within the December 31, 2019 Balance Sheet. These reclassifications did not affect the prior period total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities. Recently Adopted Accounting GuidanceThe Company invests in equity and debt securities. The Company’s investments in debt securities are classified at the date of purchase as available-for-sale securities. Debt securities are reported at fair value with unrealized gains and losses, net of the related tax effect, reflected as an accumulated other comprehensive income component of stockholder’s equity until such gains or losses are realized. In accordance with ASU 2016-01, Equity securities are now reported at fair value with unrealized gains and losses, net of the related tax effect, reflected as a gain or loss on the statement of operations.In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The adoption of ASU 2016-16 did not have a material impact on its condensed consolidated financial statements.In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). The updated guidance, which became effective for fiscal years beginning after December 15, 2019, did not have a material impact on its condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements for fair value measurements. The adoption of ASU 2018-13 did not have a material impact on its condensed consolidated financial statements.F-62In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This guidance requires companies to apply the internal-use software guidance in Accounting Standards Codification (“ASC”) 350-40 to implementation costs incurred in a hosting arrangement that is a service contract to determine whether to capitalize certain implementation costs or expense them as incurred. The adoption of ASU 2018-15 did not have a material impact on its condensed consolidated financial statements.Recent Accounting Guidance Not Yet AdoptedIn 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 Company is currently evaluating the potential impact of this guidance on its consolidated financial statements.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. We are currently evaluating the impact of the new guidance on our 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 ConcernThe 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, the Company had an accumulated deficit at June 30, 2020, a net loss of $7.1 million and net cash used in operating activities of $2.9 million for the reporting period then ended. The Company is in default on debentures as of the date of this filing. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.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.F-63Note 4 – Acquisition of Seller’s ChoiceOn September 11, 2019, the Company entered into a Membership Interest Purchase Agreement (the “Seller’s Choice Purchase Agreement”) by and between the Company and Home Revolution, LLC, a Delaware limited liability company (the “Seller”). Pursuant to the Seller’s Choice Purchase Agreement, subject to the terms and conditions set forth therein, at the closing of the transactions contemplated by the Seller’s Choice Purchase Agreement (the “Seller’s Choice Closing”), the Company acquired 100% of the membership interests of Seller’s Choice. As a result of the transactions contemplated by the Seller’s Choice Purchase Agreement, Seller’s Choice became a wholly owned subsidiary of the Company (collectively, the “Seller’s Choice Acquisition”).At the Seller’s Choice Closing, the aggregate consideration (the “Consideration”) paid to the Seller was as follows: (i) $340,000, in cash; (ii) 111,111 shares of the Company’s common stock; and (iii) a secured promissory note in the principal amount of $660,000 (the “Seller’s Choice Note”). In connection with the Seller’s Choice Note, the Company, Seller, and Seller’s Choice entered into a Security Agreement whereby the Seller’s Choice Note is secured by the assets of Seller’s Choice. Following the closing of the transaction, Seller’s Choice’s financial statements as of the Closing were consolidated with the Condensed consolidated financial statements of the Company. These amounts are provisional and may be adjusted during the measurement period.Following the closing of the merger transaction the Company’s investment in Seller’s Choice consisted of the following: Shares Amount Consideration paid: Cash paid $ 340,000 Common stock issued at closing (1) 111,111 $ 1,166,669 Note payable 660,000 Total consideration paid $ 2,166,669 Total consideration $ 2,166,669 (1)The common stock issued at the closing of the Seller’s Choice Acquisition had a closing price of $10.50 per share on the date of the transaction.The following presents the unaudited pro-forma combined results of operations of the Company with Seller’s Choice as if the entities were combined on January 1, 2019. Six Months Ended June 30,
2019 Revenues, net $ 708,205 Net loss attributable to common shareholders $ (3,619,885 ) Net loss per share $ (1.40 ) Weighted average number of shares outstanding 2,574,299 The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2019 or to project potential operating results as of any future date or for any future periods. The Company consolidated Seller’s Choice as of the closing date of the Seller’s Choice Acquisition, and the results of operations of the Company since that date include that of Seller’s Choice.F-64Note 5 – Notes PayableNotes payable as of June 30, 2020 and December 31, 2019 is as follows: Outstanding Principal as of June 30,
2020 December 31,
2019 Interest Rate Maturity Date Seller’s Choice Note 660,000 660,000 9.5 % September 2020 The First January 2020 Loan Agreement - - 6 % January 2020 The Second January 2020 Loan Agreement - - 5 % January 2020 The Third January 2020 Loan Agreement - - 10 % January 2020 The Fourth January 2020 Loan Agreement - - 7 % February 2020 The February 2020 Loan agreement - - 5 % March 2020 The First March 2020 Loan Agreement 3,300 - 25 % September 2020 The Second March 2020 Loan Agreement 6,474 - 19 % September 2021 The April 2020 PPP Loan Agreement 412,500 - 1 % April 2022 The May 2020 PPP Loan Agreement 282,432 - 1 % May 2022 The June 2020 Loan Agreement 351,692 - 15 % July 2020 1,716,398 660,000 Less: Debt Discount - - Less: Debt Issuance Costs - - 1,716,398 660,000 Less: Current Debt (1,314,634 ) Total Long-Term Debt $ 401,764 $ Seller’s Choice NoteOn 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.During the six months ended June 30, 2020 the Company accrued interest of $41,300 and paid $21,400 of interest.The First January 2020 Loan AgreementOn January 3, 2020, the Company entered into a loan agreement (the “First January 2020 Loan Agreement”) with an individual (the “First January 2020 Lender”) whereby the First January 2020 Lender issued the Company a promissory note of $250,000 (the “First January 2020 Note”). Pursuant to the First January 2020 Loan Agreement, the First January 2020 Note has an effective interest rate of 6%. As additional consideration for entering in the First January 2020 Loan Agreement, the Company issued the First January 2020 Lender was issued 1,333 shares of the Company’s common stock. The maturity date of the First January 2020 Note was January 15, 2020 (the “First January 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First January 2020 Note were due.F-65During the six months ended June 30, 2020 the Company converted $250,000 in principal to the Third February 2020 convertible Note.The Second January 2020 Loan AgreementOn January 14, 2020, the Company entered into a loan agreement (the “Second January 2020 Loan Agreement”) with an individual (the “Second January 2020 Lender”) whereby the Second January 2020 Lender issued the Company a promissory note of $10,000 (the “Second January 2020 Note”). Pursuant to the Second January 2020 Loan Agreement, the Second January 2020 Note has an effective interest rate of 5%. The maturity date of the Second January 2020 Note was January 24, 2020 (the “Second January 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Second January 2020 Note were due. As additional consideration for entering in the Second January Loan Agreement, the Company issued a five-year warrant to purchase 50 shares of the Company’s common stock at a purchase price of $18.00 per share. The Company recorded a $580 debt discount relating to 50 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.During the six months ended June 30, 2020 the Company repaid $10,000 in principal and $500 in interest.The Third January 2020 Loan AgreementOn January 22, 2020, the Company entered into a loan agreement (the “Third January 2020 Loan Agreement”) with an individual (the “Third January 2020 Lender”) whereby the Third January 2020 Lender issued the Company a promissory note of $15,000 (the “Third January 2020 Note”). Pursuant to the Third January 2020 Loan Agreement, the Third January 2020 Note has an effective interest rate of 10%. The maturity date of the Third January 2020 Note was January 29, 2020 (the “Third January 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Third January 2020 Note were due. As additional consideration for entering in the Third January Loan Agreement, the Company issued a five-year warrant to purchase 75 shares of the Company’s common stock at a purchase price of $18.00 per share. The Company recorded a $892 debt discount relating to 75 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.During the six months ended June 30, 2020 the Company repaid $15,000 in principal and $1,500 in interest.The Fourth January 2020 Loan AgreementOn January 23, 2020, the Company entered into a loan agreement (the “Fourth January 2020 Loan Agreement”) with an individual (the “Fourth January 2020 Lender”) whereby the Fourth January 2020 Lender issued the Company a promissory note of $135,000 (the “Fourth January 2020 Note”). Pursuant to the Fourth January 2020 Loan Agreement, the Fourth January 2020 Note has an effective interest rate of 7%. As additional consideration for entering in the First January 2020 Loan Agreement, the Company issued the First January 2020 Lender was issued 750 shares of the Company’s common stock. The maturity date of the Fourth January 2020 Note was February 23, 2020 (the “Fourth January 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Fourth January 2020 Note were due.During the six months ended June 30, 2020 the Company converted $135,000 in principal to the Second February 2020 convertible Note.F-66The February 2020 Loan AgreementOn February 25, 2020, the Company entered into a loan agreement (the “February 2020 Loan Agreement”) with an individual (the “February 2020 Lender”) whereby the February 2020 Lender issued the Company a promissory note of $15,000 (the “February 2020 Note”). Pursuant to the February 2020 Loan Agreement, the February 2020 Note has an effective interest rate of 5%. The maturity date of the February 2020 Note was March 3, 2020 (the “February 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the February 2020 Note were due. As additional consideration for entering in the February 2020 Loan Agreement, the Company issued a five-year warrant to purchase 75 shares of the Company’s common stock at a purchase price of $18.00 per share. The Company recorded a $801 debt discount relating to 75 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.During the six months ended June 30, 2020 the Company repaid $15,000 in principal and $750 in interest.The First March 2020 Loan AgreementOn March 23, 2020, the Company entered into a loan agreement (the “First March 2020 Loan Agreement”) with an individual (the “First March 2020 Lender”) whereby the First March 2020 Lender issued the Company a promissory note of $11,000 (the “First March 2020 Note”). Pursuant to the First March 2020 Loan Agreement, the First March 2020 Note has an effective interest rate of 25%. The maturity date of the First March 2020 Note is September 23, 2020 (the “First March 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First March 2020 Note are due.During the six months ended June 30, 2020 the Company accrued interest of $2,695. During the six months ended June 30, 2020 the Company repaid $7,700 in principal.The Second March 2020 Loan AgreementOn March 26, 2020, the Company entered into a loan agreement (the “Second March 2020 Loan Agreement”) with an individual (the “Second March 2020 Lender”) whereby the Second March 2020 Lender issued the Company a promissory note of $17,000 (the “Second March 2020 Note”). Pursuant to the Second March 2020 Loan Agreement, the Second March 2020 Note has an effective interest rate of 19%. The maturity date of the Second March 2020 Note is September 17, 2020 (the “Second March 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Second March 2020 Note are due. During the six months ended June 30, 2020 the Company accrued interest of $1,734.During the six months ended June 30, 2020 the Company repaid $10,526 in principal.The April 2020 PPP Loan AgreementOn April 30, 2020, Jerrick Ventures, LLC (“Jerrick Ventures”), the Company’s wholly-owned subsidiary, was granted a loan from PNC Bank, N.A. with a principal amount of $282,432, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The Loan, which was in the form of a Note dated April 30, 2020 matures on April 30, 2022 and bears interest at a fixed rate of 1.00% per annum, payable monthly commencing on October 30, 2020. The Note may be prepaid by Jerrick Ventures at any time prior to maturity without payment of any premium. Funds from the Loan may only be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments.During the six months ended June 30, 2020 the Company accrued interest of $644. The Company is in the process of returning the funds received from this loan.F-67The May 2020 PPP Loan AgreementOn May 4, 2020, the Company was granted a loan from a banking institution with a principal amount of $412,500, pursuant to the Paycheck Protection Program (the “PPP”). The Loan, which was in the form of a Note dated May 4, 2020 matures on May 4, 2022 and bears interest at a fixed rate of 1.00% per annum, payable monthly commencing on November 4, 2020. The Note may be prepaid by Jerrick Ventures at any time prior to maturity without payment of any premium. Funds from the Loan may only be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments. Jerrick Ventures intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.During the six months ended June 30, 2020 the Company accrued interest of $472. The June 2020 Loan AgreementOn June 30, 2020, the Company entered into a loan agreement (the “June 2020 Loan Agreement”) with banking institution (the “June 2020 Lender”) whereby the June 2020 Lender issued the Company a promissory note of A$510,649 Australian dollar (“AUD”) or $351,692 United States Dollar (the “June 2020 Note”). Pursuant to the June 2020 Loan Agreement, the June 2020 Note has an effective interest rate of 15%. The maturity date of the June 2020 Note is July 31, 2020 (the “June 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the June 2020 Note are due in AUD currency. This loan is secured by the Australian research & development credit.During the six months ended June 30, 2020 the Company accrued interest of $3,902. Note 6 – Convertible Note PayableConvertible notes payable as of June 30, 2020 and December 31, 2019 is as follows: Outstanding Principal
as of Warrants granted June 30,
2020 December 31,
2019 Interest
Rate Conversion
Price Maturity
Date Quantity Exercise
Price The February 2018 Convertible Note Offering - 75,000 15 % 12.00 (*) January – February 2020 84,639 12.00 The March 2018 Convertible Note Offering 75,000 75,000 14 % 12.00 (*) March – April 2020 80,114 12.00 The February 2019 Convertible Note Offering 2,311,703 2,311,703 10 % 15.00 (*) February – March 2020 44,396 18.00 The November 2019 Convertible Note Offering 559,433 559,433 12 % 13.50 (*) May – June 2020 - - The First January 2020 convertible Loan Agreement 87,473 - 12 % $ 13.50 (*) July – August 2020 - - The First February 2020 convertible Loan Agreement 85,000 - 10 % $ 12.00 (*) August 2020 - - The Second February 2020 convertible Loan Agreement 200,000 - 12 % $ 13.50 (*) February 2021 6,666 15.00 The Third February 2020 convertible Loan Agreement 1,500,000 - 12 % $ 13.50 (*) February 2021 41,665 15.00 The April 2020 Convertible Note Offering 350,010 - 12 % $ 13.50 (*) October 2020 - - The June 2020 Convertible Loan Agreement 550,000 - 12 % $ - (*) June 2021 49,603 11.55 5,718,619 3,021,136 Less: Debt Discount (528,130 ) (124,096 ) Less: Debt Issuance Costs (38,949 ) (614 ) 5,151,540 2,896,425 Less: Current Debt (5,151,540 ) (2,896,425 ) Total Long-Term Debt $ - $ - (*)As subject to adjustment as further outlined in the notesF-68The February 2018 Convertible Note OfferingDuring the three months ended March 31, 2018, the Company conducted multiple closings of a private placement offering to accredited investors (the “February 2018 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “February 2018 Investors”) for aggregate gross proceeds of $725,000. In addition, $250,000 of the Company’s short-term debt along with accrued but unpaid interest of $40,675 was exchanged for convertible debt in the February 2018 Offering. These conversions resulted in the issuance of 24,223 warrants with a fair value of $181,139. These were recorded as a loss on extinguishment of debt.The February 2018 Convertible Note Offering consisted of a maximum of $750,000 of units of the Company’s securities (each, a “February 2018 Unit” and collectively, the “February 2018 Units”), with each February 2018 Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a “February 2018 Convertible Note” and together the “February 2018 Convertible Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“February 2018 Conversion Shares”) at a conversion price of $12.00 per share (the “February 2018 Note Conversion Price”), and (b) a five-year warrant (each a “February 2018 Offering Warrant and together the “February 2018 Offering Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the February 2018 Convertible Notes can be converted into (“February 2018 Warrant Shares”) at an exercise price of $12.00 per share (“February 2018 Warrant Exercise Price”). The February 2018 Offering Notes mature on the second (2nd) anniversary of their issuance dates. The February 2018 Offering Notes are secured by a second priority security interest in the Company’s assets up to $1,000,000.The February 2018 Note Conversion Price and the February 2018 Offering Warrant Exercise Price are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.The conversion feature of the February 2018 Convertible Note Offering provides for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a beneficial conversion feature (“BCF”). When the Company records a BCF the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF and related debt discount of $37,350, the discount is being accreted over the life of the first Debenture to accretion of debt discount and issuance cost.The Company recorded a $316,875 debt discount relating to 60,416 February 2018 Offering Warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost.In connection with the February 2018 Convertible Note Offering, the Company retained a placement agent (the “Placement Agent”), to carry out the Offering on a “best-efforts” basis. For services in its capacity as Placement Agent, the Company has paid the Placement Agent a cash fee of $94,250 and issued to the Placement Agent shares of the Company’s common stock equal to ten percent (10%) of the Conversion Shares underlying the February 2018 Convertible Notes or 6,041 shares that had a fair value of $74,881, which was recorded as issuance cost and is being accreted over the life of these notes to accretion of debt discount and issuance cost.F-69During the year ended December 31, 2018, the Company converted $940,675 of principal and $86,544 of unpaid interest into the August 2018 Equity Raise.During the year ended December 31, 2019 the Company repaid $19,758 in interest.During the six months ended June 30, 2020 the Company repaid $75,000 in principal and $781.25 in interest, and the Notes are no longer outstanding.The March 2018 Convertible Note OfferingDuring the three months ended March 31, 2018, the Company conducted multiple closings of a private placement offering to accredited investors (the “March 2018 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “March 2018 Investors”) for aggregate gross proceeds of $770,000. In addition, $50,000 of the Company’s short-term debt, $767 accrued but unpaid interest and $140,600 of the Company’s vendor liabilities was exchanged for convertible debt within the March 2018 Convertible Note Offering. These conversions resulted in the issuance of 15,947 warrants with a fair value of $84,087. These were recorded as a loss on extinguishment of debt.The March 2018 Convertible Note Offering consisted of a maximum of $900,000, with an over-allotment option of an additional $300,000 of units of the Company’s securities (each, a “March 2018 Unit” and collectively, the “March 2018 Units”), with each March 2018 Unit consisting of (a) a 14% Convertible Secured Promissory Note (each a “March 2018 Note” and together the “March 2018 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at a conversion price of $12.00 per share (the “Conversion Price”), and (b) a four-year warrant (each a “Warrant and together the “Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into (“Warrant Shares”) at an exercise price of $12.00 per share (“Exercise Price”). The March 2018 Notes mature on the second (2nd) anniversary of their issuance dates.The Conversion Price of the March 2018 Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.The Company recorded a $254,788 debt discount relating to 80,114 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.During the year ended December 31, 2018, the Company converted $886,367 of principal and $51,293 of unpaid interest pursuant to the August 2018 Equity Raise.During the six months ended June 30, 2020 the Company accrued interest of $5,625.The February 2019 Convertible Note OfferingDuring the nine months ended September 30, 2019, the Company conducted an offering to accredited investors (the “February 2019 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “February 2019 Investors”) for aggregate gross proceeds of $1,993,025.F-70The February 2019 Convertible Note Offering consisted of (a) a 10% Convertible Promissory Note (each a “February 2019 Note” and together, the “February 2019 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $15.00 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company between February 21, 2019 and the date on which the Company’s consummates a listing onto a national securities exchange, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”), and (b) a four-year stock purchase warrant (each a “Warrant and together the “Warrants”) to purchase a quantity of shares of the Company’s common stock up to thirty-three percent (33%) of the number of shares of common stock into which the underlying Notes may be converted, at an exercise price of $18.00 per share (“Exercise Price”). During the nine months ended September 30, 2019 a total of 44,396 Warrants were issued in conjunction with The February 2019 Convertible Note Offering.The February 2019 Notes mature on the first (1st) anniversary of their issuance dates. In the event that the Offering’s Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Dates, the principal and interest evidenced by the Note shall be mandatorily converted upon the earlier of (i) the listing of the Common Stock onto a national securities exchange, or (ii) upon a Qualified Offering.The Conversion Price of the February 2019 Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.The Company recorded a $222,632 debt discount relating to 44,396 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.During the six months ended June 30, 2020 the Company accrued interest of $140,662.The November 2019 Convertible Note OfferingDuring the year ended December 31, 2019, the Company conducted an offering to accredited investors (the “November 2019 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “November 2019 Investors”) for aggregate gross proceeds of $479,500. In addition, the Company converted $318,678 in Accounts Payable into this offering.The November 2019 Convertible Note Offering consisted of (a) a 10% Convertible Promissory Note (each a “November 2019 Note” and together, the “November 2019 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at a fixed conversion price equal to $13.50 per share.The November 2019 Notes mature six months after the anniversary of their issuance dates. At any time on or after the Maturity Date, at the election of the Offering’s Purchaser, this Note may convert into Common Stock equal to the quotient obtained by dividing the outstanding principal and unpaid accrued interest of this Note on the date of such conversion by $13.50.The Company recorded a $84,377 debt discount relating to an original issue discount equal to $79,933 and a beneficial conversion feature of $4,444. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.During the six months ended June 30, 2020 the company accrued interest of $41,625.F-71The January 2020 Convertible Note OfferingDuring the three months ended March 31, 2020, the Company conducted an offering to accredited investors (the “January 2020 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “January 2020 Investors”) for aggregate gross proceeds of $87,473.The January 2020 Convertible Note Offering consisted of (a) a 12% Convertible Promissory Note (each a “January 2020 Note” and together, the “January 2020 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $13.50 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”).The January 2020 Notes mature on the first (6th) month anniversary of their issuance dates. If an event of default occurs and is not cured within 30 days of the Company receiving notice, the notes will be convertible at 80% multiplied by the lowest VWAP of the common stock during the five (5) consecutive trading day period immediately preceding the date of the respective conversion, and a default interest rate of 24% will become effective.The Conversion Price of the January 2020 Note are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price being reduced to such lower purchase price, subject to carve-outs as described therein.The Company recorded a $12,473 debt discount relating to original issue discount associated with these notes. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.During the six months ended June 30, 2020 the Company accrued interest of $4,762.The First February 2020 Convertible Loan AgreementOn February 4, 2020, the Company entered into a loan agreement (the “First February 2020 Loan Agreement”) with an individual (the “First February 2020 Lender”), the First February 2020 Lender issued the Company a promissory note of $85,000 (the “First February 2020 Note”). Pursuant to the First February 2020 Loan Agreement, the First February 2020 Note has interest of ten percent (10%).The First February 2020 Note are convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $12.00 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”).The First February 2020 Notes mature on the first (6th) month anniversary of their issuance dates. In the event that the Offering’s Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Dates and the Notes have not been repaid or an event of default occurs as defined in the Notes, the notes will be convertible at the lesser of the fixed conversion price or 65% multiplied by the lowest trade of the common stock during the twenty (20) consecutive trading day period immediately preceding the date of the respective conversion and a default interest rate of 15% will be applied. The Conversion Price of the First February 2020 Note are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price being reduced to such lower purchase price, subject to carve-outs as described therein.F-72The Company recorded a $8,000 debt discount relating to original issue discount associated with these notes. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.During the six months ended June 30, 2020 the Company accrued interest of $4,108. The Second February 2020 Convertible Loan AgreementOn February 11, 2020, the Company entered into a loan agreement (the “Second February 2020 Loan Agreement”) with an individual (the “Second February 2020 Lender”), the Second February 2020 Lender issued the Company a promissory note of $200,000 (the “Second February 2020 Note”). Pursuant to the Second February 2020 Loan Agreement, the Second February 2020 Note has interest of twelve percent (12%). As additional consideration for entering in the Second February 2020 convertible Loan Agreement, the Company issued a five-year warrant to purchase 6,666 shares of the Company’s common stock at a purchase price of $15.00 per share.The Second February 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $13.50 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”).The Second February 2020 Note matures on the first (12th) month anniversary of its issuance date. In the event that the Offering’s Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Date and the Note is unpaid, the note will be convertible at the lesser of the fixed conversion price or 75% multiplied by the lowest trade of the common stock during the twenty (20) consecutive trading day period immediately preceding the date of the respective conversion.The Conversion Price of the First February 2020 Note is subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price being reduced to such lower purchase price, subject to carve-outs as described therein.The Company recorded a $33,340 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.During the six months ended June 30, 2020 the company accrued interest of $11,267.The Third February 2020 convertible Loan AgreementOn February 25, 2020, the Company entered into a loan agreement (the “Third February 2020 Loan Agreement”) with an individual (the “Third February 2020 Lender”), the Third February 2020 Lender issued the Company a promissory note of $1,500,000 (the “Third February 2020 Note”). The Company received proceeds of $864,950 and converted notes payable of $385,000 in exchange for the note (see Note 5). Pursuant to the Third February 2020 Loan Agreement, the Second February 2020 Note has interest of twelve percent (12% ).The Third February 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $4.50 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”).The Third February 2020 mature on the first (12th) month anniversary of their issuance dates. In the event that the Offering’s Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Dates and the note is unpaid, the notes will be convertible at the lower of the fixed conversion price or 75% multiplied by the lowest trade of the common stock during the twenty (20) consecutive trading day period immediately preceding the date of the respective conversion.F-73The Conversion Price of the Third February 2020 Note are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price being reduced to such lower purchase price, subject to carve-outs as described therein.In accordance with ASC 470-50, since the present value of the cash flows under the new debt instrument was at least ten percent different from the present value of the remaining cash flows under the terms of the original debt instrument, the Company accounted for the note exchange as described above as a debt extinguishment. The Company recorded a loss on debt extinguishment of $535,041. This represents the fair value of the warrants issued $445,705 and a debt premium of $89,336. The note has an effective interest rate of 24%. The Company recorded a debt discount of $160,714. This is made up of an original issue discount of $250,050 less a debt premium of $89,336.During the six months ended June 30, 2020 the Company accrued interest of $62,500. The April 2020 Convertible Note OfferingDuring April of 2020, the Company conducted multiple closings of a private placement offering to accredited investors (the “April 2020 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “April 2020 Investors”) for aggregate gross proceeds of $350,010. The April 2020 Convertible Note Offering accrues interest at a rate of twelve percent per annum (12%). The April 2020 Convertible Note Offering mature on the six (6th) month anniversary of their issuance dates.The April 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $13.50 per share after the maturity date or (ii) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”).The Company recorded a $50,010 debt discount relating to original issue discount associated with these notes. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.During the six months ended June 30, 2020 the Company accrued interest of $8,050. The June 2020 Convertible Loan AgreementOn June 19, 2020, the Company entered into a loan agreement (the “June 2020Loan Agreement”) with an individual (the “June 2020 Lender”), the June 2020 Lender issued the Company a promissory note of $550,000 (the “June 2020 Note”). Pursuant to the June 2020 Loan Agreement, the June 2020 Note has interest of twelve percent (12%). As additional consideration for entering in the June 2020 convertible Loan Agreement, the Company issued a five-year warrant to purchase 49,603 shares of the Company’s common stock at a purchase price of $11.55 per share. The June 2020 Note matures on the first (12th) month anniversary of its issuance date. Upon default the June 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion.The Company recorded a $67,500 debt discount relating to original issue discount associated with this note. The Company recorded a $274,578 debt discount relating to 49,603 warrants and 5,424 shares issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.During the six months ended June 30, 2020 the Company accrued interest of $13,317. F-74Note 7 – Related PartyConvertible notesConvertible notes payable – related party as of June 30, 2020 and 2019 is as follows: Outstanding Principal as of Warrants granted June 30,
2019 December 31,
2019 Interest
Rate Maturity
Date Quantity Exercise
Price The March 2018 Convertible Note Offering - 400 14 % April 2020 19,950 12.00 The February 2019 Convertible Note Offering 20,000 20,000 10 % May 2020 440 18.00 20,000 20,400 Less: Debt Discount - (13 ) Less: Debt Issuance Costs - - 20,000 20,387 Less: Current Debt (20,000 ) (20,387 ) Total Long-Term Debt $ - $ - The March 2018 Convertible Note OfferingDuring the year ended December 31, 2018, the Company conducted multiple closings of a private placement offering to accredited investors (the “March 2018 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “Investors”) for aggregate gross proceeds of $239,400.The March 2018 Convertible Note Offering consisted of a maximum of $900,000, with an over-allotment option of an additional $300,000, of units of the Company’s securities (each, a “March 2018 Unit” and collectively, the “March 2018 Units”), with each March 2018 Unit consisting of (a) a 14% Convertible Secured Promissory Note (each a “March 2018 Note” and together the “March 2018 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at a conversion price of $12.00 per share (the “Conversion Price”), and (b) a four-year warrant (each a “Warrant and together the “Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into (“Warrant Shares”) at an exercise price of $12.00 per share (“Exercise Price”). The Notes mature on the second (2nd) anniversary of their issuance dates.The Conversion Price of the Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.The Company recorded a $84,854 debt discount relating to 19,950 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost.During the year ended December 31, 2018, the Company converted $239,000 of principal and $15,401 of unpaid interest into the August 2018 Equity Raise.During the six months ended June 30, 2020 the lender forgave $400 of principal and $70 of unpaid interest. This was recorded as a gain on settlement of debt on the Condensed Consolidated Statements of Comprehensive Income (Loss).F-75The February 2019 Convertible Note OfferingDuring the Nine months ended September 30, 2019, the Company conducted an offering to accredited investors (the “February 2019 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “February 2019 Investors”) for aggregate gross proceeds of $20,000.The February 2019 Convertible Note Offering consisted of (a) a 10% Convertible Promissory Note (each a “February 2019 Note” and together, the “February 2019 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $15.00 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company between February 21, 2019 and the date on which the Company’s consummates a listing onto a national securities exchange, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”), and (b) a four-year stock purchase warrant (each a “Warrant and together the “Warrants”) to purchase a quantity of shares of the Company’s common stock up to thirty-three percent (33%) of the number of shares of common stock into which the underlying Notes may be converted, at an exercise price of $18.00 per share (“Exercise Price”). During the nine months ended September 30, 2019 a total of 440 Warrants were issued in conjunction with The February 2019 Convertible Note Offering. The February 2019 Notes mature on the first (1st) anniversary of their issuance dates. In the event that the Offering’s Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Dates, the principal and interest evidenced by the Note shall be mandatorily converted upon the earlier of (i) the listing of the Common Stock onto a national securities exchange, or (ii) upon a Qualified Offering.The Company recorded a $2,465 debt discount relating to 440 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.During the year ended December 31, 2019, $20,000 in principal was converted from a promissory note into this Offering.During the six months ended June 30, 2020 the company accrued interest of $1,000. Notes payableNotes payable – related party as of June 30, 2020 and December 31, 2019 is as follows: Outstanding Principal as of Warrants granted June 30,
2020 December 31,
2019 Interest
Rate Maturity
Date Quantity Exercise
Price The June 2018 Frommer Loan Agreement 10,000 10,000 6 % August 17, 2018 500 12.00 The July 2018 Schiller Loan Agreements 20,863 20,863 6 % August 17, 2018 2,500 12.00 The June 2019 Loan Agreement 4,825,000 4,825,000 12.5 % December 3, 2019 - - The December 2019 Gravitas Loan Agreement 135,116 300,000 6.7 % March 1, 2020 - - The January 2020 Rosen Loan Agreement - - - February 2020 - - The February 2020 Banner Loan Agreement - - - February 2020 49 18.00 The February 2020 Frommer Loan Agreement - - - February 2020 15 18.00 4,990,979 5,155,863 Less: Debt Discount - - Less: Debt Issuance Costs - (26,521 ) 4,990,979 5,129,342 Less: Current Debt (4,990,979 ) (5,129,342 ) $ - $ - F-76The June 2018 Frommer Loan AgreementOn June 29, 2018, the Company entered into a loan agreement (the “June 2018 Frommer Loan Agreement”) with Jeremy Frommer, an officer of the Company, whereby the Company issued Frommer a promissory note in the principal amount of $10,000 (the “June 2018 Frommer Note”). As additional consideration for entering in the June 2018 Frommer Note Loan Agreement, the Company issued Frommer a four-year warrant to purchase 500 shares of the Company’s common stock at a purchase price of 12.00 per share. Pursuant to the June 2018 Frommer Loan Agreement, the June 2018 Frommer Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018 (the “June 2018 Frommer Maturity Date”). On November 8, 2018 the Company executed upon an agreement that extended the maturity date of the June 2018 Frommer Agreement to March 7, 2019. As part of the extension agreement, the Company issued Frommer an additional 681 warrants to purchase common stock of the Company at an exercise price of $18.00. These warrants had a fair value of $4,645 which was recorded to loss on extinguishment of debt. On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the June 2018 Frommer Agreement to March 7, 2019. As part of the extension agreement, the Company issued Frommer an additional 692 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company entered into an agreement with Mr. Frommer that further extended the maturity date of this loan to May 15, 2019. On June 29, 2019 the Company entered into an agreement with Mr. Frommer that further extended the maturity date of this loan to December 15, 2019. On December 15, 2019 the Company entered into an agreement with Mr. Frommer that further extended the maturity date to May 15, 2020.During the six months ended June 30, 2020 the Company accrued interest of $399.The July 2018 Schiller Loan AgreementOn July 17, 2018, the Company entered into a loan agreement (the “Second July 2018 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Schiller a promissory note in the principal aggregate amount of $25,000 (the “Second July 2018 Schiller Note”). As additional consideration for entering in the Second July 2018 Schiller Loan Agreement, the Company issued Schiller a four-year warrant to purchase 1,250 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the Second July 2018 Schiller Loan Agreement, the Second July 2018 Schiller Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. Subsequent to the balance sheet date, on November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Schiller warrants to purchase 1,698 shares of common stock of the Company at an exercise price of $18.00. On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the Second July 2018 Schiller Loan Agreement to March 7, 2019. As part of the extension agreement, the Company issued Schiller an additional 1,726 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019 the Company entered into an agreement with Mr. Schiller that further extended the maturity date of this loan to May 15, 2019. On December 15, 2019 the Company entered into an agreement that further extended the maturity date of this loan to May 15, 2020.During the six months ended June 30, 2020 the Company accrued interest of $832.During the year ended December 31, 2019 $4,137 in principal was converted into the February 2019 Convertible Note Offering. F-77The June 2019 Loan AgreementF-78six monthsyear ended June 30, 2020 the Company accrued interest of $26,966.During the six months ended June 30,December 31, 2020 the Company repaid $164,884$300,000 in principal.principal and $50,000 in accrued interest.six monthsyear ended June 30, 2020 the Company accrued interest of $15,273.During the six months ended June 30,December 31, 2020 the Company repaid $150,000 in principal and $15,273 in interest.six monthsyear ended June 30,December 31, 2020 the Company repaid $9,900 in principal and $495 in interest.six monthsyear ended June 30,December 31, 2020 the Company repaid $2,989 in principal and $160 in interest.Demand loanThe February 2020 Loan AgreementJune 13, 2019, Mark Standish, who was subsequently named ChairmanFebruary 25, 2020, the Company entered into a loan agreement (the “February 2020 Loan Agreement”) with an individual (the “February 2020 Lender”), whereby the February 2020 Lender issued the Company a promissory note of $15,000 (the “February 2020 Note”). Pursuant to the February 2020 Loan Agreement, the February 2020 Note has an effective interest rate of 5%. The maturity date of the Board, made non-interest bearing loans of $100,000 toFebruary 2020 Note was March 3, 2020 (the “February 2020 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the February 2020 Note were due. As additional consideration for entering in the February 2020 Loan Agreement, the Company inissued a five-year warrant to purchase 75 shares of the formCompany’s common stock at a purchase price of cash.$18.00 per share. The loanCompany recorded a $801 debt discount relating to 75 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is due on demandbeing accreted over the life of the note to accretion of debt discount and unsecured. issuance cost.20192020, the companyCompany repaid $25,000$15,000 in principal and $750 in interest.six monthsyear ended June 30,December 31, 2020 the Company repaid $150,000 inof principal.F-79Officer compensationsix monthsyear ended June 30,December 31, 2020, the Company converted $100,000 of principal and $6,707 of unpaid interest into the September 2020 Equity Raise.$56,479$138,713 and $57,455, respectively for living expenses for officers of the Company.811 – Derivative LiabilitiesYears Ended
December 31, 2021 and 2020Level 1 Level 2 Level 3 Derivative liabilities as January 1, 2020 $ - $ - $ - Addition - - 3,061,688 Changes in fair value - - (3,019,457 ) Derivative liabilities as January 1, 2021 - - 42,231 Addition - - 417,241 Extinguishment - - (431,458 ) Conversion to Note payable - related party - - (1,124,301 ) Changes in fair value - - 1,096,287 Derivative liabilities as December 31, 2021 $ - $ - $ - DeficitEquityDuring the period presented,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.CommonOn August 17, 2020, following board of director’s approval, the Company filed a Certificate of Change to its Articles of Incorporation (the “Amendment”), with the Secretary of State of the State of Nevada to effectuate a one-for-twenty (1:3) reverse stock split (the “Reverse Stock Split”) of its common stock, par value $0.001 per share, without any change to its par value. The Amendment became effective on August 17, 2020. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to the next whole share. As a result, all share information in the accompanying consolidated financial statements has been adjusted as if the reverse stock split happened on the earliest date presented.six monthsyear ended June 30,December 31, 2020 the Company recorded $585,000 to share based payments.$5,772$5,772. six monthsyear ended June 30,December 31, 2020 the Company cancelled 50,650 shares of treasury stock.Stock Options December 31,
2021 December 31,
2020 Exercise price $ 2.09 - 4.89 $ 8.55 Expected dividends 0% 0% Expected volatility 169.78 – 242.98% 229.95% Risk free interest rate 0.46 – 1.26% 0.25% Expected life of option 5 - 7 years 5.67 years F-80 Options Weighted
Average
Exercise
Price
Contractual
Life Balance – December 31, 2019 – outstanding 303,833 24.48 2.51 Granted - - - Exercised - - - Cancelled/Modified (152,992 ) 25.29 - Balance – June 30, 2020 – outstanding and exercisable 150,841 23.67 2.24 Options Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Life (in years) Balance – January 1, 2020 – outstanding 303,825 24.48 2.51 Granted 391,853 8.55 5.67 Exercised - - - Cancelled/Modified (154,657 ) 25.17 - Balance – December 31, 2020 – outstanding 541,021 12.75 4.29 Balance – December 31, 2020 – exercisable 149,168 23.77 1.75 Balance – December 31, 2020 – outstanding 541,021 12.75 3.27 Granted 2,425,762 5.97 5.91 Exercised - - - Forfeited/Cancelled (64,164 ) 13.06 - Balance – December 31, 2021 – outstanding 2,902,619 7.07 4.71 Balance – December 31, 2021 – exercisable 1,165,191 9.01 4.12 Option Outstanding Option Exercisable Exercise price Number
Outstanding Weighted
Average
Remaining
Contractual
Life (in years) Weighted
Average
Exercise
Price Number
Exercisable Weighted
Average
Remaining
Contractual
Life (in years) $ 7.07 2,902,619 4.71 9.01 1,165,191 4.12 166,66611,667 to consultants.consultants that has a fair value of $57,123. As of the date of this filing the company has not issued these options.options and they are recorded as an accrued liability on the Consolidated Balance Sheet.20,13, 2020 the Company entered into an exchange agreementsagreement with eight option holders. The company agreed to exchange 152,992 options previously issued under the 2015 Incentive Stock and Award Plan for 228,491229,491 shares of the Company common stock. In connection with this agreement the Company recorded stock basedincremental compensation on conversionthe exchange of options to stock of $1,405,664.Warrants$1,117,031.six monthsyear ended June 30, 2020December 31, 2021 are as follows: June 30,
2020 June 30,
2019 Exercise price $ 11.55 - 18.00 $ 12.00 - 18.00 Expected dividends 0 % 0 % Expected volatility 234.03% - 237.39 % 107.59%-114.13 % Risk free interest rate 0.33% - 1.63 % 1.93-2.41 % Expected life of warrant 5 years 4 – 5 years F-81 December 31,
2021 December 31,
2020 Exercise price $ 4.50 – 5.40 $ 4.50 - 18.00 Expected dividends 0 % 0 % Expected volatility 232.10% - 237.14 % 234.03% - 247 % Risk free interest rate 0.82% - 0.89 % 0.21% - 1.63 % Expected life of warrant 5 – 5.5 years 5 years Warrants Weighted
Average
Exercise
Price Aggregate
Intrinsic
Value Outstanding and Exercisable – December 31, 2019 247,407 $ 15.75 - Granted 98,199 13.26 Exercised - - Forfeited/Cancelled (33,526 ) 12.39 Outstanding – June 30, 2020 312,080 15.33 7,440 Exercisable – June 30, 2020 262,477 16.05 - Warrant Weighted
Average
Exercise
Price Balance – January 1, 2020 – outstanding 247,403 15.75 Granted 5,921,071 4.70 Exercised - - Cancelled/Modified (37,526 ) 13.31 Balance – December 31, 2020 – outstanding 6,130,948 4.96 Balance – December 31, 2020 – exercisable 3,228,235 5.37 Balance – December 31, 2020 – outstanding 6,130,948 4.96 Granted 1,961,267 5.60 Exercised (2,414,218 ) 4.55 Forfeited/Cancelled (19,167 ) 24.00 Balance – December 31, 2021 – outstanding 5,658,830 4.98 Balance – December 31, 2021 – exercisable 5,616,330 $ 4.97 Warrants Outstanding Warrants Exercisable Exercise price Number
Outstanding Weighted
Average
Remaining
Contractual
Life
(in years) Weighted
Average
Exercise Price Number
Exercisable Weighted
Average
Exercise Price $ 15.33 312,080 3.24 16.05 262,477 8.76 Warrants Outstanding Warrants Exercisable Exercise price Number
Outstanding Weighted
Average
Remaining
Contractual
Life (in years) Weighted
Average
Exercise
Price Number
Exercisable Weighted
Average
Exercise
Price $ 4.98 5,658,830 3.80 4.97 5,616,330 3.79 six monthsyear ended June 30,December 31, 2020 a total of 200214,080 warrants were issued with convertible notes payable (See Note 58 above). The warrants have a grant date fair value of $523,802$1,520,449 using a Black-Scholes option-pricing model and the above assumptions.six monthsyear ended June 30,December 31, 2020, a total of 97,934289 warrants were issued with convertible notes payable – related party (See Note 69 above). The warrants have a grant date fair value of $1,017,605$3,342 using a Black-Scholes option-pricing model and the above assumptions.six monthsyear ended June 30,December 31, 2020, a total of 643,922 warrants were issued with convertible notes payable – related party (See Note 79 above). The warrants have a grant date fair value of $753$37,927 using a Black-Scholes option-pricing model and the above assumptions.Restricted stock units (RSUs) Total
sharesGrant date
fair valueRSAs non-vested at January 1, 2021 - $ - RSAs granted 112,010 $ 2.71 – 4.32 RSAs vested - $ - RSAs forfeited (13,927 ) $ 3.75 – 4.32 RSAs non-vested December 31, 2021 98,083 $ 2.71 – 4.32 six monthsyear ended June 30,December 31, 2020.company isCompany initially submitted its application for the May 2020 PPP Loan in early April but received no response in the processaftermath 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.receivedin 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 April 30, 2020.F-82Litigationthe loan, absent a formal installment agreement due to difficulties reaching the lender. The Company intends to complete repayment before the end of 2021.(the “Court”), entitled Home Revolution, LLC, et alal. v. Jerrick Media Holdings, Inc. et al,al., Case No. 2:20-cv-07775-JMV-MF (the “Action”).20-cv-07775-JMV-MF. The complaint for the lawsuitComplaint alleges, among other things, that the CompanyCreatd, Inc. breached the Membership Interest Purchase Agreement, as modified, and ancillary transaction documents in connection with the acquisition of Seller’s Choice, LLC, from Home Revolution in September 2019. The complaintComplaint 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. Plaintiff also sought to have a receiver appointed by the Court to take over Creatd’s operations. After substantial motion practice, Creatd successfully settled this dispute from June 2020 for a total of $799,000, which includes $660,000 of note principal and $139,000 of accrued interest. The matter has been dismissed as of March 3, 2022.Company continuesComplaint alleges, among other things, that action for Declaratory Judgment under 28 U.S.C. § 2201 that Monster’s registration and use of the internet domain name VOCL.COM (the “Domain Name”) does not violate Creatd’s rights under the Anticybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. § 1125(d), or otherwise under the Lanham Act, 15 U.S.C. § 1051 et seq. Creatd claims trademark rights and certain other rights with respect to believethe term and the domain name VOCL.COM. Monster seeks a determination by the Court that Monster’s registration and/or use of VOCL.COM is not, and has not been in violation of the ActionACPA, and that Plaintiffs’ use of VOCL.COM constitutes neither a violation of the ACPA nor trademark infringement or dilution under the Lanham Act. Creatd believes the lawsuit lacks merit and has moved to dismiss the Action. In the event this Action is not summarily dismissed, Jerrick intends towill vigorously challenge it.the action. At this time, the Company iswe are unable to estimate potential damage exposure, if any, related to the litigation.In addition to the existing claim for damages contained in the Complaint, on July 29, 2020, Home Revolution moved, by order to show cause, for preliminary injunctive relief. On August 13, 2020, the Court denied Home Revolution’s request for a preliminary injunction.Lease Agreements$108,229$108,229.components ofoffice space is currently under construction and the Company’s commencement date was April 1, 2022. The total amount due under this lease expense were as follows:is $181,300. Six Months
Ended
June 30,
2020 Operating lease cost $ 34,970 Short term lease cost 7,950 Total net lease cost $ 42,920 Year
Ended
December 31,
2021 Operating lease cost $ 202,804 Short term lease cost 14,041 Total net lease cost $ 216,845 Six MonthsEndedJune 30,2020Cash paid for amounts included in the measurement of lease liabilities:Operating lease payments33,064Weighted average remaining lease term (in years):3.05Weighted average discount rate:13% Year
Ended
December 31,
2021 Cash paid for amounts included in the measurement of lease liabilities: Operating lease payments $ 100,100 Weighted average remaining lease term (in years): 0.17 Weighted average discount rate: 0 % F-83 future minimum payments required under the lease as of December 31, 2021, are $18,451 and will recognized in the first quarter of 2022.30, 20201, 2021, the Company, entered into a Membership Interest Purchase Agreement (the “MIPA”) with Angela Hein (“Hein”) and Heidi Brown (“Brown”, and together with Hein, the “Sellers”), pursuant to which the Purchaser acquired 490,863 common units (the “Membership Interests”) of Plant Camp LLC, a Delaware limited liability company (“Plant Camp”) from the Sellers, resulting in the Purchaser owning 33% of the issued and outstanding equity of Plant Camp. The Membership Interests were purchased for $175,000.Purchase price: Cash paid to seller $ 300,000 Fair value of equity investment purchased on June 1, 2021 175,000 Total purchase price 475,000 Assets acquired: Cash 5,232 Accounts Receivable 7,645 Inventory 19,970 Total assets acquired 32,847 Liabilities assumed: Accounts payable and accrued expenses 5,309 Deferred Revenue 671 Total liabilities assumed 5,980 Net assets acquired 26,867 Non-controlling interest in consolidated subsidiary 56,865 Excess purchase price $ 504,998 Goodwill $ 7,198 Trade Names & Trademarks 100,000 Know-How and Intellectual Property 316,500 Website 51,300 Customer Relationships 30,000 Excess purchase price $ 504,998 Year Ended December 31, 2021 Revenues $ 4,335,593 Net loss attributable to common shareholders $ (37,822,820 ) Net loss per share $ (2.99 ) Weighted average number of shares outstanding 12,652,470 Year Ended
December 31,
2020 Revenues $ 1,213,430 Net loss attributable to common shareholders $ (27,476,400 ) Net loss per share $ (5.71 ) Weighted average number of shares outstanding 4,812,153 Purchase price: Cash paid to seller $ 144,750 Shares granted to seller 893,521 Total purchase price 1,038,271 Assets acquired: Cash 26,575 Accounts Receivable 446,272 Total assets acquired 472,847 Liabilities assumed: Accounts payable and accrued expenses 353,017 Total liabilities assumed 353,017 Net assets acquired 119,830 Non-controlling interest in consolidated subsidiary 1,190,000 Excess purchase price $ 2,108,442 Goodwill $ 1,349,697 Trade Names & Trademarks 85,945 Non-Compete Agreements 45,190 Influencers / Customers 627,610 Excess purchase price $ 2,108,442 Year Ended December 31, 2021 Revenues $ 4,916,777 Net loss attributable to common shareholders $ (37,707,250 ) Net loss per share $ (2.98 ) Weighted average number of shares outstanding 12,652,470 Year Ended December 31, 2020 Revenues $ 1,685,336 Net loss attributable to common shareholders $ (27,235,057 ) Net loss per share $ (5.66 ) Weighted average number of shares outstanding 4,812,153 Purchase price: Shares granted to seller $ 424,698 Fair value of equity investment purchased before October 4, 2021 307,665 Total purchase price 732,363 Assets acquired: Cash 186,995 Inventory 47,250 Total assets acquired 234,246 Liabilities assumed: Accounts payable 40,000 Total liabilities assumed 40,000 Net assets acquired 194,246 Non-controlling interest in consolidated subsidiary 720,581 Excess purchase price $ 1,258,698 Goodwill $ 17,941 Trade Names & Trademarks 249,248 Know-How and Intellectual Property 788,870 Website 127,864 Customer Relationships 74,774 Excess purchase price $ 1,258,698 Year Ended December 31, 2021 Revenues $ 4,299,717 Net loss attributable to common shareholders $ (38,265,301 ) Net loss per share $ (3.02 ) Weighted average number of shares outstanding 12,652,470 Year Ended December 31, 2020 Revenues $ 1,212,870 Net loss attributable to common shareholders $ (27,382,216 ) Net loss per share $ (5.69 ) Weighted average number of shares outstanding 4,812,153 Operations of: Products and services provided: Creatd Labs Creatd Ventures Creatd Partners Creatd Partners fosters relationships between brands and creators through its suite of agency services, including content marketing (Vocal for Brands), performance marketing (Seller’s Choice), and influencer marketing (WHE Agency). Creatd Partners derives revenues in the form of brand fees and talent management commissions. As of December 31, 2021 Creatd Labs Creatd Ventures Creatd Partners Corporate Total Accounts receivable, net $ - $ 2,884 $ 334,556 $ - $ 337,440 Prepaid expenses and other current assets 48,495 - - 188,170 236,665 Deposits and other assets 626,529 - - 92,422 718,951 Intangible assets - 1,637,924 783,676 11,241 2,432,841 Goodwill - 25,139 1,349,696 - 1,374,835 Inventory - 106,403 - - 106,403 All other assets - - - 3,966,124 3,966,124 Total Assets $ 675,024 $ 1,772,350 $ 2,467,928 $ 4,257,957 $ 9,173,259 Accounts payable and accrued liabilities $ 9,693 $ 766,253 $ 6,232 $ 2,948,362 $ 3,730,540 Note payable, net of debt discount and issuance costs 313,979 - - 1,028,685 1,342,664 Deferred revenue 161,112 13,477 59,570 - 234,159 All other Liabilities - - - 177,644 177,644 Total Liabilities $ 484,784 $ 779,730 $ 65,802 $ 4,154,691 $ 5,485,007 As of December 31, 2020 Creatd Labs Creatd Partners Corporate Total Accounts receivable, net $ 3,800 $ 86,555 $ - $ 90,355 Prepaid expenses and other current assets 19,631 - 4,225 23,856 Intangible assets - 960,611 - 960,611 Goodwill - 1,035,795 - 1,035,795 All other assets - - 8,673,863 8,673,863 Total Assets $ 23,431 $ 2,082,961 $ 8,678,088 $ 10,784,480 Accounts payable and accrued liabilities $ 6,221 $ 83,964 $ 2,548,503 $ 2,638,688 Note payable, net of debt discount and issuance costs 55,928 - 1,165,611 1,221,539 Deferred revenue - 88,637 - 88,637 All other Liabilities - - 1,390,420 1,390,420 Total Liabilities $ 62,149 $ 172,601 $ 5,104,534 $ 5,339,284 For the year ended December 31, 2021 Creatd Labs Creatd Ventures Creatd Partners Corporate Total Net revenue $ 1,926,374 $ 90,194 $ 2,283,149 $ - $ 4,299,717 Cost of revenue 3,186,240 148,989 1,964,808 - 5,300,037 Gross margin (1,259,866 ) (58,940 ) 318,341 - (1,000,320 ) Research and development 758,293 131 225,104 - 983,528 Marketing 8,182,935 - 962,698 481,349 9,626,982 Stock based compensation 1,727,021 1,560,546 1,884,986 4,488,615 9,661,168 Impairment of goodwill - - 1,035,795 - 1,035,795 General and administrative not including depreciation, amortization, or Impairment 3,918,130 1,665,783 1,600,212 2,791,236 9,975,360 Depreciation and amortization - 100,633 252,730 44,076 397,440 Impairment of intangibles - - 688,127 - 688,127 Total operating expenses $ 14,586,379 $ 3,327,093 $ 6,649,652 $ 11,803,003 $ 32,368,400 Interest expense (12,706 ) - - (359,400 ) (372,106 ) All other expenses - - - (3,638,327 ) (3,638,327 ) Other expenses, net (12,706 ) (3,997,727 ) (4,010,433 ) Loss before income tax provision and equity in net loss from unconsolidated investments $ (15,858,951 ) $ (3,385,888 ) $ (6,331,311 ) $ (11,803,003 ) $ (37,379,153 ) For the year ended December 31, 2020 Creatd Labs Creatd Partners Corporate Total Net revenue $ 375,043 $ 837,827 $ - $ 1,212,870 Cost of revenue 652,259 842,783 - 1,495,042 Gross margin (277,216 ) (4,956 ) - (282,172 ) Research and development 227,656 29,775 - 257,431 Marketing 2,426,668 285,490 142,745 2,854,904 Stock based compensation 1,226,495 1,338,678 4,295,990 6,861,163 General and administrative not including depreciation, amortization, or Impairment 2,301,088 939,792 2,592,581 5,858,454 Depreciation and amortization - 132,768 24,993 157,761 Impairment of intangibles - - 11,450 11,450 Total operating expenses $ 6,181,907 $ 2,726,504 $ 7,067,759 $ 16,001,163 Interest expense (15,828 ) - (356,278 ) (372,106 ) All other expenses - - (7,557,342 ) (7,557,342 ) Other expenses, net (15,828 ) - (7,913,620 ) (7,929,448 ) Loss before income tax provision and equity in net loss from unconsolidated investments $ (6,474,951 ) $ (2,731,460 ) $ (14,981,379 ) $ (24,212,783 ) Twelve Months Ending December 31, 2020 $ 106,927 2021 111,257 2022 109,730 2023 2,081 Total $ 329,995 December 31,
2021 December 31,
2020 Net deferred tax assets – Non-current: Depreciation $ (70,194 ) $ (145,749 ) Amortization 95,115 21,096 Stock based compensation 4,369,372 1,653,617 Expected income tax benefit from NOL carry-forwards 15,073,606 8,780,233 Less valuation allowance (19,467,900 ) (10,309,197 ) Deferred tax assets, net of valuation allowance $ - $ - Rent expenseIncome Tax Provision in the Consolidated Statements of Operations For the
Year Ended
December 31,
2021 For the
Year Ended
December 31,
2020 Federal statutory income tax rate 21.0 % 21.0 % State tax rate, net of federal benefit 7.1 % 6.5 % Change in valuation allowance on net operating loss carry-forwards (28.1 )% (27.5 )% Effective income tax rate 0.0 % 0.0 % six monthsyears ended June 30, 2020December 31, 2021 and 2019 was $59,168 and $36,671 respectively. 2020: 2021 2020 Balance at January 1, $ - $ 68,000 Additions based on tax positions relating to the current year - - Reductions for tax positions of prior years - (68,000 ) Balance at December 31, $ - $ - 1017 – Subsequent EventsSubsequentBoard of Directors and ManagementJune 30, 2020serve as members of the Board. Ms. Bloor has been nominated to, and will serve as, chair of the Compensation Committee, and to be a member of the Audit Committee and Nominating & Corporate Governance Committee. Mr. Justus has been nominated, and will serve as, chair of the Nominating & Corporate Governance Committee, and to be a member of the Compensation Committee and Audit Committee. Ms. Hendrickson has been nominated to, and will serve as, chair of the Audit Committee and to be a member of the Compensation and Nominating & Corporate Governance Committee.fivesecurities purchase agreements with twenty-eight accredited investors whereby, at the closing, such investors purchased from the Company an aggregate of 1,401,457 shares of the Company’s common stock and (ii) 1,401,457 warrants to purchase shares of common stock, for an aggregate purchase price of $2,452,550. Such warrants are exercisable for a term of five-years from the date of issuance, at an exercise price of $1.75 per share.agreementsagreement with net proceeds of $318,000$300,000 and one promissory note agreement with net proceeds of $230,000. The Company also subsequently repaid $5,000 in principal from two of the promissory note agreements.AUD$224,540.June 30, 2020December 31, 2021, the Company also issued 391,854 five-year stock183,590 shares of Common Stock to consultants.its employees. These options all havevest immediately with a vesting date of 4/1/2021, an exercisestrike price of $8.55.$1.75, and (d) 50,000 shares of the Company’s restricted common stock; (ii) Laurie Weisberg, Chief Executive Officer, who will receive (a) an annual salary of $475,000; (b) 121,000 options, to vest immediately with a strike price of $1.75, and (c) 50,000 shares of the Company’s restricted common stock; (iii) Justin Maury, Chief Operating Officer & President, who will receive (a) an annual salary of $475,000 (b) 81,000 options, to vest immediately with a strike price of $1.75, and (c) 50,000 shares of the Company’s restricted common stock; and (iv) Chelsea Pullano, Chief Financial Officer, who will receive (a) an annual salary of $250,000; (b) 37,000 options, to vest immediately with a strike price of $1.75, and (c) 35,000 shares of the Company’s restricted common stock (collectively, the “Executive Employment Arrangements”).On July 13, 2020,Pursuant to the Executive Employment Arrangements, the Company filed Second Amended and Restated Articles of Incorporationentered into executive employment agreements with the Secretary of Stateeach of the Staterespective executives as of Nevada.April 5, 2022 (the “Executive Employment Agreements”). The Second AmendedExecutive Employment Agreements contain customary terms, conditions and Restated Articles of Incorporation authorize the issuance of 100,000,000 shares of common stock, and 20,000,000 shares of preferred stock.rights.F-84Units consisting of:WarrantsJERRICK MEDIA HOLDINGS, INC.PROSPECTUSBook-Running ManagerTHE BENCHMARK COMPANYCo-ManagerBROOKLINE CAPITAL MARKETS , 2020ITEMItem 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.Other Expenses of Issuance and Distribution.of such expensesamounts shown are estimates, other than the filing fees payable to the Securities and Exchange Commission and to FINRA. Amount
to be paid SEC registration fee $ 2,239 FINRA filing fee $ 2,360 The Nasdaq Capital Market initial listing fee $ 55,000 Accounting fees and expenses $ 30,000 Legal fees and expenses $ 250,000 Printing and engraving expenses $ 10,000 Miscellaneous $ 5,401 Total $ 355,000 All amounts are estimated except for the SEC registration fee, the FINRA filing fee,fee. We will bear all expenses shown below.SEC registration fee $ 1,020 Legal fees and expenses $ 75,000 Accounting fees and expenses $ 50,000 Miscellaneous fees and expenses $ - Total $ 126,020 The Nasdaq Capital Market initial listing fee.Officers.ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.II-1ITEMItem 15. RECENT SALES OF UNREGISTERED SECURITIES.Recent Sales of Unregistered Securities.2020Consultant SharesThe Second January 2020 Loan Agreement
Acquisition of OrbitJanuary 14, 2020,August 1, 2022 the Company entered into a loan agreement (the “Second January 2020 Loan Agreement”) with an individual (the “Second January 2020 Lender”)Membership Interest Purchase Agreement whereby the Second January 2020 LenderCompany purchased a majority stake in Orbit Media LLC, a New York limited liability company. Pursuant to the Agreement, Creatd issued the Company a promissory note of $10,000 (the “Second January 2020 Note”). As additional consideration for entering in the Second January Loan Agreement, the Company issued a five-year warrant to purchase 5057,576 shares of the Company’s common stock at a purchase price of $18.00 per share.The Third January 2020 Loan AgreementOn January 22, 2020, the Company entered into a loan agreement (the “Third January 2020 Loan Agreement”) with an individual (the “Third January 2020 Lender”) whereby the Third January 2020 Lender issued the Company a promissory note of $15,000 (the “Third January 2020 Note”). As additional consideration for entering in the Third January Loan Agreement, the Company issued a five-year warrant to purchase 75 shares of the Company’s common stock at a purchase price of $18.00 per share.The Second February 2020 convertible Loan AgreementOn February 11, 2020, the Company entered into a loan agreement (the “Second February 2020 Loan Agreement”) with an individual (the “Second February 2020 Lender”), the Second February 2020 Lender issued the Company a promissory note of $200,000 (the “Second February 2020 Note”). As additional consideration for entering in the Second February 2020 convertible Loan Agreement, the Company issued a five-year warrant to purchase 6,666 shares of the Company’s common stock at a purchase price of $15.00 per share.The February 2020 Banner Loan AgreementOn February 15 2020, the Company entered into a loan agreement (the “February 2020 Banner Loan Agreement”), whereby the Company issued a promissory note in the principal amount of $9,900 (the “February 2020 Note”). As additional consideration for entering in the February 2020 Loan Agreement, the Company issued a five-year warrant to purchase 49 shares of the Company’s common stock at a purchase price of $18.00 per share.The February 2020 Frommer Loan AgreementOn February 18, 2020, the Company entered into a loan agreement (the “February 2020 Frommer Loan Agreement”) with Jeremy Frommer, an officer of the Company, whereby the Company issued Frommer a promissory note in the principal amount of $2,989 (the “February 2020 Frommer Note”). As additional consideration for entering in the June 2018 Frommer Note Loan Agreement, the Company issued Frommer a five-year warrant to purchase 15 shares of the Company’s common stock at a purchase price of $18.00 per share.The February 2020 Loan AgreementOn February 25, 2020, the Company entered into a loan agreement (the “February 2020 Loan Agreement”) with an individual (the “February 2020 Lender”) whereby the February 2020 Lender issued the Company a promissory note of $15,000 (the “February 2020 Note”). As additional consideration for entering in the February 2020 Loan Agreement, the Company issued a five-year warrant to purchase 75 shares of the Company’s common stock at a purchase price of $18.00 per share.The June 2020 Loan AgreementOn June 19, 2020, the Company entered into a loan agreement (the “June 2020 Loan Agreement”) with an individual (the “June 2020 Lender”) whereby the June 2020 Lender issued the Company a promissory note of $550,000 (the “June 2020 Note”). As additional consideration for entering in the June 2020 Loan Agreement, the Company issued a five-year warrant to purchase 49,603 shares of the Company’s common stock at a purchase price of $11.55 per share. In addition, the Company issued 5,424 commitment sharesCommon Stock to the June 2020 Lender.The July 2020 Loan AgreementOn July 16, 2020, the Company entered into a loan agreement (the “July 2020 Loan Agreement”) with an individual (the “July 2020 Lender”) whereby the July 2020 Lender issued the Company a promissory note of $250,000 (the “July 2020 Note”). As additional consideration for entering in the July 2020 Loan Agreement, the Company issued 6,666 commitment shares to the July 2020 Lender.Consultant SharesDuring the 3 months ended March 31, 2020, the Company issued 53,565 shares to consultants.The July 2020 Convertible Loan AgreementsBetween July 29, 2020 and August 14, 2020, the Company issued convertible promissory notes in the amount of $250,000, convertible into 19,608 shares of common stock. As additional consideration for entering into these notes, the Company issued warrants to issue 19,608 shares of the Company’s common stock at a purchase price of $8.55.2019During 2019, we issued the securities below that were not registered under the Securities Act. All of the securities discussed herein were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act. II-2March 2019 Gravitas Capital Loan AgreementOn April 12, 2019 the Company executed upon an agreement that further extended the maturity date of the March 2019 Gravitas Capital Loan Agreement to May 15, 2019. As part of the extension agreement, the Company issued Gravitas Capital an additional 166 warrants to purchase common stock of the Company at an exercise price of $18.00.The Company issued 33,333 shares of Common Stock to individuals in consideration for consulting services.May 2019 Loan AgreementOn May 31, 2019 the Company entered into a loan agreement (the “May 2019 Loan Agreement”), whereby the Company issued the investor a promissory note in the principal amount of $10,000. As additional consideration for entering in the May 2019 Loan Agreement, the Company issued the investor a five-year warrant to purchase 50 shares of the Company’s common stock at a purchase price of $12.00 per share.July 2019 Loan AgreementOn July 26, 2019, the Company entered into a loan agreement (the “July 2019 Loan Agreement”) with an investor, whereby the Company issued a promissory note in the principal amount of $12,000 (the “July 2019 Note”). As additional consideration for entering in the July 2019 Loan Agreement, the Company issued a five-year warrant to purchase 180 shares of the Company’s common stock at a purchase price of $6.00 per share. Pursuant to the July 2019 Loan Agreement, the July 2019 Note bears interest at a flat rate of $600Item 16. Exhibits and payable on the maturity date of August 2, 2019 (the “July 2019 Maturity Date”).This note was subsequently repaid.July 2019 Gravitas Capital Loan AgreementOn July 16, 2019, the Company entered into a loan agreement (the “August 2019 Gravitas Capital Loan Agreement”) with Gravitas Capital, whereby the Company issued Gravitas Capital a promissory note in the principal amount of $100,000 (the “August 2019 Gravitas Capital Note”). As additional consideration for entering in the August 2019 Gravitas Capital Loan Agreement, the Company issued Gravitas Capital a five-year warrant to purchase 333 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the August 2019 Gravitas Capital Loan Agreement, the August 2019 Gravitas Capital Note bears interest at a flat rate of $5,000 and payable on the maturity date of September 1, 2019 (the “July 2019 Gravitas Capital Maturity Date”).August 2019 Schiller Loan AgreementOn August 6, 2019, the Company entered into a loan agreement (the “August 2019 Schiller Loan Agreement”) with Gravitas Capital, whereby the Company issued Leonard Schiller a promissory note in the principal amount of $15,000 (the “August 2019 Schiller Note”). As additional consideration for entering in the August 2019 Schiller Note Loan Agreement, the Company issued Leonard Schiller a five-year warrant to purchase 75 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the August 2019 Schiller Loan Agreement, the August 2019 Schiller Note bears interest at a flat rate of $750 and payable on the maturity date of August 9, 2019 (the “August 2019 Schiller Note Maturity Date”).This note was subsequently repaid.August 2019 Loan AgreementOn August 6, 2019, the Company entered into a loan agreement (the “August 2019 Loan Agreement”) with an investor, whereby the Company issued a promissory note in the principal amount of $12,000 (the “August 2019 Note”). As additional consideration for entering in the August 2019 Loan Agreement, the Company issued a five-year warrant to purchase 60 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the August 2019 Loan Agreement, the August 2019 Note bears interest at a flat rate of $600 and payable on the maturity date of August 9, 2019 (the “August 2019 Maturity Date”).This note was subsequently repaid.September 2019 Loan AgreementOn September 4, 2019, the Company entered into a loan agreement (the “September 2019 Loan Agreement”) with an investor, whereby the Company issued a promissory note in the principal amount of $15,000 (the “September 2019 Note”). As additional consideration for entering in the September 2019 Loan Agreement, the Company issued a five-year warrant to purchase 75 shares of the Company’s common stock at a purchase price of $18.00 per share. Pursuant to the September 2019 Loan Agreement, the September 2019 Note bears interest at a flat rate of $750 and payable on the maturity date of September 9, 2019 (the “September 2019 Maturity Date”).II-3This note was subsequently repaid.On September 17, 2019 the Company entered into an agreement to extend the July 2019 Gravitas Capital Loan Agreement. In consideration for this extension, the Company issued the accredited investor a five-year warrant to purchase 333 shares of the Company’s common stock with an exercise price of $18.00 per share.On September 26, 2019, the Company entered into loan agreements with accredited investors (the “September 2019 Loan Agreements”), whereby the Company issued such accredited investors promissory notes in the aggregate principal amount of $62,500 (the “September 2019 Notes”). As additional consideration for entering into the September 2019 Loan Agreements, the Company issued such accredited investors five-year warrants to purchase up to an aggregate of 396 shares of the Company’s common stock with an exercise price of $18.00 per share.On October 23, 2019, the Company issued warrants to purchase up to 6,666 shares of common stock to a director in connection with his resignation for past board services rendered.November 2019 Convertible Promissory NotesIn November 2019, the Company issued to accredited investors a series of convertible promissory notes with an aggregate principal amount of $554,182.50 (the “November 2019 Notes”). The November 2019 Notes are convertible into shares of the Company’s common stock at a conversion price of $13.50 per share or upon a Qualified Public Offering (as defined in the November 2019 Notes) at the option of the holder at a conversion price per share equal to the lesser of 80% of the lowest per share weighted average volume price or $13.50.Consultant SharesDuring the 3 months ended December 31, 2019, the Company issued 4,965 shares to consultants.2018During the year ended December 31, 2018, we issued the securities below that were not registered under the Securities Act. All of the securities discussed herein were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.January 2018 Rosen Loan AgreementOn January 16, 2018, the Company entered into a loan agreement (the “January 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $60,000 (the “January 2018 Rosen Note”). The January 2018 Rosen Note is secured by Jeremy Frommer, whereas upon default Mr. Frommer would owe his own personal default shares of the Company’s common stock to Rosen equal to the amount of principal outstanding divided by 12.00. Pursuant to the January 2018 Rosen Loan Agreement, the January 2018 Rosen Note bears interest at a rate of 6% per annum and is payable on the maturity date of January 31, 2018 (the “January 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the secured term loan in the principal amount of $1,000,000 issued by Mr. Rosen are due. During the year ended December 31, 2018, the Company repaid $60,000 in principal and $200 in interest and the loan is no longer outstanding. January 2018 Gordon Loan AgreementOn January 16, 2018, the Company entered into a loan agreement (the “January 2018 Gordon Loan Agreement”) with Mr. Christopher Gordon (“Gordon”), whereby the Company issued Gordon a promissory note in the principal amount of $40,000 (the “January 2018 Gordon Note”). The January 2018 Gordon Note is secured by Jeremy Frommer, whereas upon default Mr. Frommer would owe his own personal default shares of the Company’s common stock to Gordon equal to the amount of principal outstanding divided by 12.00. Pursuant to the January 2018 Gordon Loan Agreement, the January 2018 Gordon Note bears interest at a rate of 6% per annum and payable on the maturity date of January 31, 2018 (the “January 2018 Gordon Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the January 2018 Gordon Note are due. During the year ended December 31, 2018, the Company repaid $40,000 in principal and $105 in interest and the loan is no longer outstanding. February 2018 NoteOn February 8, 2018, the Company issued a convertible note to a third-party lender totaling $40,750 (the “February 2018 Note”). The February 2018 Note accrues interest at 18% per annum and matures with interest and principal both due on February 8, 2020. In addition, the Company issued a warrant to purchase 1,358 shares of Company common stock. The warrant entitles the holder to purchase the Company’s common stock at a purchase price of $12.00 per share for a period of five years from the issue date. The Company recorded a $7,963 debt discount relating to the warrants issued to the investor based on the relative fair value of each equity instrument on the dates of issuance and an original issue discount of $5,298. The debt discount is being accreted over the life of the note. The February 2018 Note and accrued interest is convertible at a conversion price of $12.00 per share, subject to adjustment. During the year ended December 31, 2018 the Company repaid $40,750 of principal and $3,548 of unpaid interest and the loan is no longer outstanding.II-4First March 2018 Rosen Loan AgreementOn March 4, 2018, the Company entered into a loan agreement (the “First March 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $10,000 (the “First March 2018 Rosen Note”). As additional consideration for entering in the First March 2018 Rosen Note Loan Agreement, the Company issued Rosen a five-year warrant to purchase 166 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the First March 2018 Rosen Loan Agreement, the First March 2018 Rosen Note bears interest at a rate of 12% per annum and is payable on the maturity date of March 19, 2018 (the “First March 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First March 2018 Rosen Note was due. During the year ended December 31, 2018, the Company repaid $10,000 in principal and $260 in interest and the loan is no longer outstanding.Second March 2018 Rosen Loan AgreementOn March 9, 2018, the Company entered into a loan agreement (the “Second March 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $15,000 (the “Second March 2018 Rosen Note”). As additional consideration for entering in the Second March 2018 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 250 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the Second March 2018 Rosen Loan Agreement, the Second March 2018 Rosen Note bears interest at a rate of 12% per annum and is payable on the maturity date of March 24, 2018 (the “Second March 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Second March 2018 Rosen Note was due. During the year ended December 31, 2018, the Company repaid $15,000 in principal and $365 in interest and the loan is no longer outstanding. Third March 2018 Rosen Loan AgreementOn March 13, 2018, the Company entered into a loan agreement (the “Third March 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $10,000 (the “Third March 2018 Rosen Note”). As additional consideration for entering in the Third March 2018 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 166 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the Third March 2018 Rosen Loan Agreement, the Third March 2018 Rosen Note bears interest at a rate of 12% per annum and is payable on the maturity date of March 28, 2018 (the “Third March 2018 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Third March 2018 Rosen Note was due. During the year ended December 31, 2018, the Company repaid $10,000 in principal and $230 in interest and the loan is no longer outstanding. The May 2018 Schiller Loan AgreementOn May 2, 2018, the Company entered into a loan agreement (the “May 2018 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Schiller a promissory note in the principal amount of $100,000 (the “May 2018 Schiller Note”). As additional consideration for entering in the May 2018 Schiller Loan Agreement, the Company issued Schiller a four-year warrant to purchase 5,000 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the May 2018 Schiller Loan Agreement, the May 2018 Schiller Note bears interest at a rate of 13% per annum and is payable on the maturity date of February 02, 2019 (the “May 2018 Schiller Maturity Date”). During the year ended December 31, 2018, the Company converted $100,000 of principal and $4,369 of unpaid interest into the August 2018 Equity Raise (as defined below) and the loan is no longer outstanding. June 2018 Frommer Loan AgreementOn June 29, 2018, the Company entered into a loan agreement (the “June 2018 Frommer Loan Agreement”) with Jeremy Frommer, an officer of the Company, whereby the Company issued Frommer a promissory note in the principal amount of $10,000 (the “June 2018 Frommer Note”). As additional consideration for entering in the June 2018 Frommer Note Loan Agreement, the Company issued Frommer a four-year warrant to purchase 500 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the June 2018 Frommer Loan Agreement, the June 2018 Frommer Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018 (the “June 2018 Frommer Maturity Date”). On November 8, 2018 the Company executed an agreement that extended the maturity date of the June 2018 Frommer Loan Agreement to March 7, 2019. As part of the extension agreement, the Company issued Frommer an additional 680 warrants to purchase common stock of the Company at an exercise price of $18.00. On March 29, 2019, the Company executed an agreement to further extend the maturity date of the June 2018 Frommer Loan Agreement to May 15, 2019.II-5First July 2018 Schiller Loan AgreementOn July 3, 2018, the Company entered into a loan agreement (the “First July 2018 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Schiller a promissory note in the principal aggregate amount of $35,000 (the “First July 2018 Schiller Note”). As additional consideration for entering in the First July 2018 Schiller Loan Agreement, the Company issued Schiller a four-year warrant to purchase 1,250 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the agreement, the note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. Subsequent to the balance sheet date, on November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Schiller warrants to purchase 2,383 shares of common stock of the Company at an exercise price of $18.00. On March 29, the Company executed an agreement to further extend the maturity date of this loan to May 15, 2019.Second July 2018 Schiller Loan AgreementOn July 17, 2018, the Company entered into a loan agreement (the “Second July 2018 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Schiller a promissory note in the principal aggregate amount of $25,000 (the “Second July 2018 Schiller Note”). As additional consideration for entering in the Second July 2018 Schiller Loan Agreement, the Company issued Schiller a four-year warrant to purchase 1,250 shares of the Company’s common stock at a purchase price of $12.00 per share. Pursuant to the Second July 2018 Schiller Loan Agreement, the Second July 2018 Schiller Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. On November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Schiller warrants to purchase 1,698 shares of common stock of the Company at an exercise price of $18.00. On March 29, the Company executed an agreement to further extend the maturity date of this loan to May 15, 2019.First July 2018 Rosen Loan AgreementsOn July 12, 2018, the Company entered into a loan agreement (the “First July 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal aggregate amount of $10,000 (the “First July 2018 Rosen Note”). Pursuant to the First July 2018 Rosen Loan Agreement, the note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. Subsequent to the On November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Rosen warrants to purchase 458 shares of common stock of the Company at an exercise price of $18.00. On March 29, the Company executed an agreement to further extend the maturity date of this loan to May 15, 2019.Second July 2018 Rosen Loan AgreementsOn July 18, 2018, the Company entered into a loan agreement (the “Second July 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal aggregate amount of $50,000 (the “Second July 2018 Rosen Note”) resulting from the conversion of a demand note (as described below). As additional consideration for entering into the Second July 2018 Rosen Loan Agreement, the Company issued Rosen a four-year warrant to purchase 2,500 shares of the Company’s common stock at a purchase price of $12.00 per share. The Second July 2018 Rosen Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. On November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Rosen warrants to purchase 3,399 shares of common stock of the Company at an exercise price of $18.00. On March 29, the Company executed an agreement to further extend the maturity date of this loan to May 15, 2019. II-6November 2018 Rosen Loan AgreementOn November 29, 2018, the Company entered into a loan agreement (the “November 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $25,000 (the “November 2018 Rosen Note”). As additional consideration for entering in the November 2018 Rosen Note Loan Agreement, the Company issued Rosen a four-year warrant to purchase 1,250 shares of the Company’s common stock at a purchase price of $18.00 per share. The November 2018 Rosen Note bears interest at a rate of 6% per annum and is payable on the maturity date of December 23, 2018. During the year ended December 31, 2018, the Company repaid $25,000 of principal and $33 of unpaid interest and the loan is no longer outstanding.December 2018 Rosen Loan AgreementOn December 27, 2018, the Company entered into a loan agreement (the “December 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $75,000 (the “December 2018 Rosen Note”). As additional consideration for entering in the December 2018 Rosen Note Loan Agreement, the Company issued Rosen a four-year warrant to purchase 1,250 shares of the Company’s common stock at a purchase price of $6.00 per share. The December 2018 Rosen Note bears interest at a rate of 6% per annum and is payable on the maturity date of January 26, 2019. On March 29, the Company executed an agreement to further extend the maturity date of this loan to May 15, 2019.December 2018 Gravitas Capital Loan AgreementOn December 27, 2018, the Company entered into a loan agreement (the “December 2018 Gravitas Capital Loan Agreement”) with Gravitas Capital, whereby the Company issued Gravitas Capital a promissory note in the principal amount of $50,000 (the “December 2018 Gravitas Capital Note”). As additional consideration for entering in the December 2018 Gravitas Capital Note Loan Agreement, the Company issued Gravitas Capital a four-year warrant to purchase 833 shares of the Company’s common stock at a purchase price of $18.00 per share. The December 2018 Gravitas Capital Note bears interest at a rate of 6% per annum and is payable on the maturity date of January 27, 2019.In January 2019, the Company repaid $50,000 in principal and $250 in interest, and the loan is no longer outstanding.2017During the year ended December 31, 2017, we issued the securities below that were not registered under the Securities Act. All of the securities discussed herein were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.On February 7, 2017, the Company issued 29,460 shares of its restricted Common Stock to consultants in exchange for services at a fair value of $293,427.In March of 2017, the Company issued 20,000 shares of Common Stock to ProActive Capital Resources Group, under an Advisory Agreement for their services as an Investor Relations group.On April 25, 2017, the Company issued convertible notes to Arthur Rosen, totaling $25,000 (the “April Rosen Notes”). The April Rosen Notes accrue interest at 12% per annum and mature with interest and principal both due on September 1, 2017. In addition, in connection with the April Rosen Notes, the Company issued a five-year warrant to purchase 291 shares of Company common stock at a purchase price of $12.00 per share. On September 7, 2017, the April Rosen Notes and accrued interest was converted into the August 2017 Convertible Note Offering.On April 25, 2017, the Company issued a convertible note to Chris Gordon, totaling $25,000 (the “April Gordon Notes”). The April Gordon Notes accrue interest at 12% per annum and matures with interest and principal both due on September 1, 2017. In addition, the Company issued a five-year warrant to purchase 291 shares of Company common stock at a purchase price of $12.00 per share. The April Gordon Notes and accrued interest were converted into the August 2017 Convertible Note Offering.In November of 2017, the Company issued a warrant to purchase 1,666 shares of Common Stock to Arthur Rosen in consideration for the extension of an outstanding Promissory Note. The warrants have an exercise price of $12.00 and an expiration date of November 13, 2022.II-7ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.II-8II-9II-10II-11II-12+ Indicates management contract or compensatory plan. * filed herewith.+To be filed by amendment. (b) Consolidated Financial Statement Schedules II-13II-4ITEMItem 17. UNDERTAKINGS.Undertakings.The undersigned registrant hereby undertakes:(1)(a)The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by sectionSection 10(a)(3) of the Securities Act;(ii) To reflect in the prospectus any facts or events arising after the effective date of thethis registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high endand of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20%20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.statement; and(iii) thethis registration statement or any material change to such information in this registration statement;statement;statement is on Form S-1 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement.(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, ifpurchaser:(i) Each prospectus filed by the registrant is subjectpursuant to Rule 430C, each424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and(ii) Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. II-14II-5(5) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:(i) Anyany preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;(ii) Anyany free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;(iii) Thethe portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and(iv)Any(iv) any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.The undersigned registrant hereby undertakes that:(1)(b)The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act, as amended, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act (“Act”) in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act. (d) The undersigned registrant hereby undertakes that: (i) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1)(I) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.effective; and(2)(ii)For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-15II-6Registration Statementregistration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the BoroughCity of Fort Lee,New York, State of New Jersey,York, on the 20th day of August, 2020.November 22, 2022.Creatd, Inc. JERRICK MEDIA HOLDINGS, INC.By: By:/s/ Jeremy Frommer Name: Jeremy Frommer Title: Chief Executive Officer (Principal Executive Officer) indicated.indicated:Signature Title Date /s/ Jeremy Frommer Chief Executive Officer, and DirectorChairman August 20, 2020November 22, 2022Jeremy Frommer (Principal Executive Officer) */s/ Chelsea Pullano Chief Financial Officer August 20, 2020November 22, 2022Chelsea Pullano (Principal Financial and Accounting Officer) */s/ Justin Maury Chairman of the BoardChief Operating Officer, Director August 20, 2020November 22, 2022Mark StandishJustin Maury */s/ Peter Majar Director August 20, 2020November 22, 2022Mark PattersonPeter Majar */s/ Erica Wagner Director August 20, 2020November 22, 2022Leonard Schiller*DirectorAugust 20, 2020Laurie WeisbergErica Wagner * By:/s/ Jeremy FrommerJeremy Frommer, Attorney-in-factII-16II-7