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CREATD, INC.

Date Filed : May 15, 2023

As filed with the Securities and Exchange Commissionon May 12, 2023

Registration No. 333-      

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

 

CREATD, INC.

(Exact name of registrant as specified in itscharter)

 

Nevada   7819   87-0645394
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

 

419 Lafayette Street

6th Floor

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

419 Lafayette Street, 6th Floor

New York, NY 10003

Telephone: (201) 258-3770

(Name, address, including zip code and telephonenumber, including area code, of agent for service)

 

Copies of all communications, including communicationssent to agent for service, should be sent to:

 

Joseph M. Lucosky, Esq.

Scott E. Linsky, Esq.

Lucosky Brookman LLP

101 Wood Avenue South, 5th Floor

Iselin, NJ 08830

(732) 395-4400 

 

Approximate date of commencement of proposed saleto the public:

As soon as practicable after the effective dateof this registration statement.

 

If any of the securities being registered on thisForm 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 securitiesfor an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statementnumber of the earlier effective registration statement for the same offering.  

 

If this Form is a post-effective amendment filedpursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number ofthe earlier effective registration statement for the same offering.  

 

If this Form is a post-effective amendment filedpursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number ofthe earlier effective registration statement for the same offering.  

 

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

 

Large accelerated filer  Accelerated filer 
Non-accelerated filer  Smaller reporting company 
  Emerging growth company 

 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  

 

The registrant hereby amends this registrationstatement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment whichspecifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the SecuritiesAct of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, actingpursuant to said Section 8(a), may determine. 

 

 

 

 

 

The information inthis preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filedwith the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and weare not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION,DATED MAY 12, 2023

 

PRELIMINARY PROSPECTUS

 

 

 

21,133,750 Shares of Common Stock

 

This prospectus relates to the resale, from timeto time, of up to 21,133,750 shares (the “Shares”) of our common stock, par value $0.001 per share (“Common Stock”),by the selling stockholders identified in this prospectus under “Selling Stockholders” (the “Offering”), comprisedof:

 

(i)upto 1,250,000 Shares, pursuant to the securities purchase agreement the Company entered into andclosed on December 12, 2022 with one accredited investor (the “December Investor”), whereby the December Investor purchasedfrom the Company for an aggregate of $750,000 in subscription amount, an unsecured debenture in the principal amount of $750,000 (the“December Debenture”);          

 

(ii)up to 18,383,750 Shares, which underly warrants, issued pursuantto that certain letter agreement dated December 22, 2022 (the “Letter Agreement”), between the Company and the respectiveholders of an aggregate of 4,775,000 warrants described in the Prospectus (the “December Warrants”), exercisable immediately,for a term of 60 months, at a price of $0.77 per share, subject to customary adjustment provisions, the effect of which has increasedthe number of warrants to 45,959,375 and reduced the exercise price to $0.08; and

 

(iii)upto 1,500,000 Shares, pursuant to the securities purchase agreement the Company entered into andclosed on January 18, 2023 with Dorado Goose LLC, whereby the Dorado Goose purchased from the Company for an aggregate of $1,500,000in subscription amount, (i) an unsecured debenture in the principal amount of $847,500, and (ii) 1,562,500 shares of common stock (the“January Debenture”);

 

We are not selling any shares of our Common Stockunder this prospectus and will not receive any proceeds from the sale of the Shares. We will, however, receive proceeds from any warrantsthat are exercised through the payment of the exercise price in cash. The Selling Stockholders will bear all commissions and discounts,if any, attributable to the sale of the Shares. We will bear all costs, expenses and fees in connection with the registration of the Shares.

  

Our common stock is quoted on the OTCQB Marketplaceoperated by OTC Markets Group Inc. (“OTCQB”) under the symbol “VOCL.” Our stock had previously been quoted onOTCQB under the symbol “CRTD,” with such change having become effective on April 4, 2023, following approval from FINRA.

 

Our common stock is dual-listed on Upstream underthe symbol “VOCL.” Upstream is the trading app for digital securities and NFTs powered by Horizon Fintex and MERJ ExchangeLimited (“MERJ”). U.S. investors are not permitted to purchase, deposit or sell securities listed on Upstream.

 

On May 10, 2023, the last reported sale price of our common stock onOTCQB was $0.07 per share.

 

Investing in our securities involves risks.See “Risk Factors” beginning on page 17 of this prospectus. We and our board of directors are not making any recommendationregarding the exercise of your rights.

 

No securities may be sold without delivery ofthis prospectus and the applicable prospectus supplement describing the method and terms of the offering of such securities.

 

Neither the Securities and Exchange Commissionnor 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 date of this prospectus is May 12, 2023.

 

 

 

 

TABLE OF CONTENTS

 

    Page
PROSPECTUS SUMMARY   1
RISK FACTORS   17
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS   31
USE OF PROCEEDS   32
CAPITALIZATION   32
MARKET FOR COMMON STOCK AND DIVIDEND POLICY   33
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   34
BUSINESS   37
MANAGEMENT   55
EXECUTIVE COMPENSATION   60
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS   63
PRINCIPAL STOCKHOLDERS   64
DESCRIPTION OF SECURITIES   68
PLAN OF DISTRIBUTION   70
LEGAL MATTERS   71
EXPERTS   71
WHERE YOU CAN FIND ADDITIONAL INFORMATION   72

 

i

 

 

Unless the context requires otherwise, referencesin this prospectus to “Creatd,” “our company,” “we,” “our” “us” and similarterms refer to Creatd, Inc., a Nevada corporation, and its subsidiaries, unless the context otherwise requires.

 

ii

 

 

PROSPECTUS SUMMARY

 

The following summary highlights selected information contained inthis prospectus. Because the following is only a summary, it does not contain all of the information you should consider before investingin our securities. Before making an investment decision, you should carefully read all of the information contained in this prospectus,including the risks described under “Risk Factors” and our consolidated financial statements and the related notes from our2022 Annual Report and most recent Form 10-Q before making an investment decision.

 

Overview

 

Creatd, Inc. provides economic opportunities forcreators through access to its curated social platform called Vocal, enabling creators to share their stories, build an audience, andbe rewarded.  In addition to revenues generated directly from the platform from subscribers and microtransactions, the existenceof Vocal, and the first-party data it produces, has resulted in the creation of numerous derivative business opportunities for the Company.Secondary opportunities with the potential to eventually exceed the core Vocal revenues include well-known brands activating through theVocal platform under Creatd’s “Vocal for Brands” business unit. In addition to this branded content production, theestablishment of a portfolio of consumer brands owned and operated in-house, will similarly leverage the core data and intelligence derivedfrom the Company’s core Vocal platform.   

 

Creator-Centric Strategy

 

Creatd exists to support the boundless capacityof creators. Our mission is to empower creators by providing best-in-class tools, supportive audience communities, and avenues for monetization.Our creator-first approach is the cornerstone of our culture and purpose and is what drives every decision we make. We are committed tochanneling our resources toward fueling the dreams and ambitions of creators and helping them to unleash their full potential.

 

That’s why we built our flagship proprietarytechnology platform, Vocal—a home base for creators offering an unparalleled suite of digital tools and resources, curated communities,and monetization opportunities.

 

Vocal

 

Our flagship technology, Vocal, provides the Companywith a core platform that is highly scalable on its own but also provides the foundation upon which other revenue sources rely. The firstdirect core business of Vocal has proven to be a scalable revenue source—Creator Subscriptions. The core will be augmented in thenear term with the introduction of the ability for writers and creators to monetize their followings further by directly charging forpremium content such as newsletters. Vocal will charge a recurring commission on these new premium content subscriptions. As discussedabove, the core Vocal platform underlies numerous derivative revenue sources for the Company.

 

Since its launch in 2016, Vocal has quickly becomethe go-to platform for content creators of all kinds, with over 1.5 million registered creators and counting. Whether you’re a blogger,social media influencer, podcaster, founder, musician, photographer, or anything in between, Vocal has everything you need to unleashyour creativity and monetize your content.

 

Creators can opt to use Vocal for free, or upgradeto the premium membership tier, Vocal+. Upon joining Vocal, either as a freemium or premium member, creators can immediately begin toutilize Vocal’s storytelling tools to create and publish their stories, as well as benefit from Vocal’s monetization features. 

 

At Creatd, we believe in rewarding creators fortheir hard work and dedication. That’s why we offer a range of monetization features on Vocal, whereby creators earn in numerousways including i) the number of ‘reads’ their story receives; ii) via Vocal Challenges, or writing contests with cash prizes;iii) receiving Bonuses; iv) by participating in Vocal for Brands marketing campaigns; v) through ‘Subscribe,’ which enablescreators to receive payment directly from their audience via monthly subscriptions and one-off microtransactions; vi) via Vocal’sAmbassador Program, which enables creators to be compensated for referring new premium members. But what sets Vocal apart from other platformsis our commitment to innovation and scalability. Built on Keystone, the same open-source framework used by industry leaders in the SaaSspace, Vocal’s technology is designed for speed, sustainability, and scalability. And with our capital-light infrastructure andfocus on research and development, we are able to continuously improve and enhance the platform, without incurring the operational coststhat have weighed down legacy media platforms.

 

Creatd firmly believes that the future belongsto creators. And with Vocal, we’re proud to be leading the charge in providing them with the tools, resources, and opportunitiesthey need to succeed.

 

1

 

 

Branded Content

 

In developing our creator ecosystem, we came tounderstand that like individual creators, all brands have a unique story to tell. That’s why we’ve developed Vocal for Brands,our in-house content studio that specializes in creating best-in-class organic marketing campaigns. Our approach combines the productionof branded content influencer and performance marketing initiatives that work together to increase sales, revenue, visibility, and brandaffinity for our clients.

 

We work with leading brands to pair them withour network of creators, tapping into their communities to help share their stories in a way that is engaging, direct-response driven,and non-interruptive. Similarly, through Sponsored Challenges, we prompt the creation of thousands of high-quality stories that are centeredaround the brand’s mission, further disseminated through creators’ respective social channels and promotional outlets.

 

Our campaigns are amplified with the help of Vocal’sfirst-party data insights, allowing us to create highly targeted, segmented audiences for brands with optimal results. 

 

Consumer Products Group

 

At Creatd, we are proud of our internally ownedand operated e-commerce businesses and associated technology and infrastructure. Our Consumer Products Group has grown to become a significantrevenue contributor and we continue to invest in our portfolio to support direct-to-consumer brands with a wide range of services includingdesign and development, marketing and distribution, and go-to-market strategies. We additionally remain on the lookout for up-and-comingbrands that can potentially be acquired and easily consolidated into our shared supply chain, resources, and infrastructure to furtherbroaden our portfolio.

 

The Company’s Consumer Products portfoliocurrently includes:

 

Camp, a direct-to-consumer (DTC) food brandwhich creates healthy upgrades to classic comfort food favorites. Each of Camp’s products is created with servings of vegetablesand contains Vitamins A, C, D, E, B1, and 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, VeganCheezy 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. Eachbeverage in Dune’s product line is meticulously crafted with functional ingredients that nourish skin from the inside out and enhanceone’s natural glow. During 2022, Dune has continued to advance its retail and wholesale distribution strategy, securing numerouspartnerships including with lifestyle retailer Urban Outfitters, Equinox, and the Los Angeles-based Erewhon Market.

 

Basis is a hydrating electrolyte drinkmix that was acquired in the first quarter of 2022. This brand has a history of strong sales volume both on the brand’s websiteas well as through third-party distribution channels such as Amazon.

 

Brave is a plant-based food companythat provides convenient and healthy breakfast food products. Our Company acquired 100% of the membership interests of Brave Foods, LLCin September 2022. What started as a search for a better morning routine evolved into a business serving thousands of go-getters of everytype. We are thrilled to have these amazing brands as part of our portfolio and we are excited to continue expanding our Consumer Productsportfolio.

 

IP Development and Production

 

At Creatd, we’re always looking for waysto bring our creators’ stories to new audiences across different media. Our IP Development and Production efforts involve partneringwith our top creators to develop their content for television, film, podcasts, and print. With our cutting-edge Vocal platform, we haveaccess to a wealth of intellectual property that’s constantly being curated by a blend of human moderation and advanced machinelearning models. Our Vocal technology allows us to analyze community, creator, and audience insights to surface the best candidates fortransmedia adaptations. We’re committed to leveraging our vast library of compelling stories to create engaging and impactful contentacross multiple platforms. As of early 2023, Creatd announced a series of newly released and production projects. They include podcasts,books, and Web 3.0 opportunities.  

 

2

 

 

Application of First-Party Data

 

First-party data is information that a creatorplatform collects directly from its users, such as their demographics, interests, and behaviors. By utilizing this data, Vocal’screator platform can gain insights into its users’ preferences and tailor marketing campaigns accordingly.

 

For example, a large segment of Vocal users isinterested in health and fitness, as evidenced through the Longevity community. This information can additionally be used not only tocreate more personalized experiences for Vocal audiences, but additionally to help fitness-oriented brands create targeted campaigns forworkout equipment, supplements, or fitness apparel. With our ability to understand users’ niche interests and behaviors, the platformcan create campaigns that resonate with its audience and drive better engagement and conversions.

 

The use of first-party data also helps the creatorplatform maintain a closer relationship with its users, as it enables a more personalized experience of content consumption and engagementfor Vocal users. This can lead to higher retention rates, increased user loyalty, and improved user satisfaction. Finally, our businessintelligence team pairs first-party Vocal data with third-party data from distribution platforms such as Instagram, TikTok, Twitter, andSnapchat providing a more granular profile of creators, brands, and audiences. By generating this valuable first-party data, the Companycan continually enrich and refine its targeting capabilities for branded content marketing and creator acquisition, specifically, to reducecreator acquisition costs (CAC) and subscriber acquisition costs (SAC).

 

Competitive Advantage 

 

The idea for Vocal came as a response to whatCreatd’s founders recognized as systemic flaws inherent to the digital media industry and its operational infrastructures, and thecompetitive advantage that a closed and safe platform ecosystem would provide. First-party data is widely understood as a tool for companiesto collect and analyze data about their users directly from the source, providing valuable insights into their behaviors, preferences,and interests. Importantly, by leveraging this data within a closed and safe platform ecosystem, companies can create more personalizedexperiences for their users, deliver more relevant content and advertising, and increase user engagement and retention.

 

A secondary, and crucial, advantage of a closedecosystem is that it allows companies to control the user experience and ensure a high level of safety and security. By controlling thedata that is shared and the interactions that take place within the ecosystem, companies can minimize the risk of fraud, abuse, and otherharmful behaviors that can undermine user trust and loyalty. This can be particularly important in industries where user safety and privacyare paramount, such as social networking, e-commerce, and financial services.

 

Finally, the existence of Vocal and its ecosystemenables the Company to optimize our operations and increase efficiencies, effectively creating a more defensible business model by reducingthe risk of competition and disintermediation. By controlling the data and interactions within the ecosystem, we create barriers to entryfor competitors and reduce the risk of users migrating to other platforms. This can be particularly important in an industry such as Creatd’s,in which network effects and economies of scale are critical to success, such as social networking, e-commerce, and digital advertising.

 

Leveraging these advantages has enabled the Companyto differentiate itself in the market, attract and retain users, and drive sustainable growth and profitability.

 

3

 

 

Acquisition Strategy

 

Creatd’s strategic business line expansionhas led to the acquisition of several complementary businesses. These acquisitions have allowed Creatd to expand its reach and diversifyits revenue streams, enabling the company to leverage its internal resources and expertise to drive continued growth. In addition, theacquisitions have provided opportunities for cost synergies and operational efficiencies, further enhancing the company’s profitabilityand positioning it for long-term success.

 

Revenue Model

 

Creatd’s revenues are primarily generated through:

 

Platform: Creatd’s flagshiptechnology product, Vocal, generates revenues through subscription fees from premium Vocal creators, a membership program known as Vocal+.The Vocal+ subscription offering provides creators with increased monetization and access to premium tools and features. At approximately$10 per month, Vocal+ offers creators a strong value proposition for freemium users to upgrade, while providing a scalable source of monthlyrecurring gross revenue for Creatd. Additional platform-based revenues are generated from Tipping and other transactions that occur onthe platform. For each such transaction, which are designed to enable Vocal audiences to engage and support their favorite creators, Vocal takes platform processing fees ranging from approximately 3% to 7%.

 

E-commerce: The majority of the Company’se-commerce revenues comes from sales associated with Creatd’s portfolio of internally owned and operated e-commerce businesses,Camp, Dune, Basis, and Brave. Additionally, the Company’s e-commerce strategy involves revitalizing archival imagery and media contentin dormant legacy portfolios. Creatd maintains an exclusive license to leverage the stories housed on Vocal, reimagining them for films,episodic shows, games, graphic novels, collectibles, books, and more.

 

Agency: The Company derives revenuesfrom marketing partnerships through its internal branded content studio, Vocal for Brands, which specializes in pairing leading brandswith select Vocal creators to produce content marketing campaigns, including sponsored Challenges, that leverage the power of Vocal. Brandedstories and Challenges are distributed to a targeted audience based on Vocal’s first-party data, and are optimized for conversionsto maximize revenue growth.

 

Corporate History and Information

 

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

 

On February 5, 2016 (the “Merger ClosingDate”), we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GPH Merger Sub, Inc., a Nevadacorporation and our wholly-owned subsidiary (“Merger Sub”), and Jerrick Ventures, Inc., a privately-held Nevada corporationheadquartered in New Jersey (“Jerrick”), pursuant to which the Merger Sub was merged with and into Jerrick, with Jerrick survivingas our wholly-owned subsidiary (the “Merger”). Pursuant to the terms of the Merger Agreement, we acquired, through a reversetriangular merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “JerrickShareholders”), 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 ClosingDate, 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 13,030 shares of our common stock held by Mr. Campbell. In addition, Mr. Campbellassumed all of our debts, obligations and liabilities, including any existing prior to the Merger, pursuant to the terms and conditionsof the Spin-Off Agreement.

 

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

 

4

 

 

On February 28, 2016, we changed our name to JerrickMedia Holdings, Inc. to better reflect our new business strategy.

 

On July 25, 2019, we filed a certificate of amendmentto our articles of incorporation, as amended (the “Amendment”), with the Secretary of State of the State of Nevada to effectuatea one-for-twenty (1:20) reverse stock split (the “Reverse Stock Split”) of our common stock without any change to its parvalue. The Amendment became effective on July 30, 2019. The number of shares of authorized common stock was proportionately reduced asa result of the Reverse Stock Split. The number of shares of authorized preferred stock was not affected by the Reverse Stock Split. Nofractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to thenext whole share.

 

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. On March 3, 2022, the Company settled the Seller’s ChoiceNote for a cash payment of $799,000.

 

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

 

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

 

On September 9, 2020, the Company filed a certificateof amendment with the Secretary of State of the State of Nevada to change our name to “Creatd, Inc.”, which became effectiveon 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 subsequentlyrebranded as Camp. Camp is a direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. Theresults 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 operationshave 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 of Dune, Inc. Dune, Inc. is a direct-to-consumer brand focused on promotingwellness through its range of health-oriented beverages.

 

On October 3, 2021, the Company acquired anadditional 29% of the membership interests of Dune, Inc., bringing our total membership interests to 50%. Dune, Inc., has beenconsolidated due to the Company’s ownership of 50% voting control, and the results of operations have been included since thedate 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 adirect-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Denver Bodega, LLC has been consolidateddue to the Company’s ownership of 100% voting control, and the results of operations have been included since the date of acquisitionin 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. Orbitis a app-based stock trading platform designed to empower a new generation of investors. Orbit has been consolidated due to the Company’sownership of 51% voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations.

 

OnSeptember 13, 2022, the Company acquired 100% of the membership interests of Brave Foods, LLC, a Maine limited liability company. Braveis a plant-based food company that provides convenient and healthy breakfast food products. Brave Foods, LLC has been consolidated dueto the Company’s ownership of 100% voting control, and the results of operations have been included since the date of acquisitionin the Statement of Operations.

 

5

 

 

On December 13, 2022, an investor entered into a Subscription Agreementwhereby it purchased from OG Collection, Inc., a subsidiary of the Company (“OG”), 150,000 shares of common stock of OG fora purchase price of $750,000, and, in connection therewith OG, the Company, and the Investor entered into a Shareholder Agreement.

 

On January 9, 2023, the Company acquired an additional51% of the equity interest in WHE Agency, Inc. bringing our total ownership to 95%. WHE Agency, Inc., has been consolidated due to theCompany’s ownership of over 50% voting control, and the results of operations have been included since the date of acquisition inthe Statements of Operations.

 

On January 25, 2023, the Company acquired an additional23% equity interest in Dune, Inc. bringing our total ownership to 85%. Dune, Inc., has been consolidated due to the Company’s ownershipof over 50% voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations.

 

On February 1, 2023, an investor entered intoa Subscription Agreement whereby it purchased from OG Collection, Inc., a subsidiary of the Company (“OG”), 50,000 sharesof common stock of OG for a purchase price of $250,000, and, in connection therewith OG, the Company, and the Investor entered into aShareholder Agreement.

 

On February 3, 2023, the Company acquired an additional5% of the membership interests of Orbit Media, LLC., bringing our total membership interests to 56%. Orbit Media LLC., has been consolidateddue to the Company’s ownership of 85% voting control, and the results of operations have been included since the date of acquisitionin the Statements of Operations.

 

Recent Developments

 

May 2022 Securities Purchase Agreement

 

On May 31, 2022 the Company entered into and closedsecurities purchase agreements with eight accredited investors, whereby the Investors purchased from the Company for an aggregate of $3,600,036in subscription amount (i) debentures in the principal amount of $4,000,000; (ii) 2,000,000 Series C Common Stock Purchase Warrants topurchase shares of the Company’s common stock, par value $0.001 per share; and (iii) 2,000,000 Series D Common Stock Purchase Warrantsto purchase shares of Common Stock. The Company and the Investors also entered into registration rights agreements pursuant to the securitiespurchase agreements. The Debentures had an original issue discount of 10%, 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 Stockat a conversion price of $2.00 per share, subject to adjustment upon certain events including a one-time adjustment to the price of theCommon Stock offered in the Rights Offering (as defined therein), with such adjusted conversion price not to be lower than $1.00. TheWarrants are exercisable for a term of five years from the initial exercise date of November 30, 2022, until November 30, 2027. The SeriesC Warrants are exercisable at an exercise price of $3.00, subject to adjustment upon certain events including a one-time adjustment tothe price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $0.96. The SeriesD Warrants are exercisable at an exercise price of $6.00 subject to adjustment upon certain events including a one-time adjustment tothe price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $0.96. The Warrantsprovide for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock.The securities purchase agreements contain customary representations, warranties, covenants, indemnification and other terms for transactionsof a similar nature. Additionally, in connection with the securities purchase agreements, the subsidiaries of the Company delivereda guarantee in favor of the Investors whereby each such subsidiary guaranteed the full payment and performance of all obligations of theCompany pursuant to the securities purchase agreements. The Debentures, Warrants, Common Stock underlying the Debentures and the CommonStock underlying the Warrants were not registered under the Securities Act, but qualified for exemption under Section 4(a)(2) and Rule506 promulgated thereunder. 

 

July 2022 Securities Purchase Agreement

 

On July 25, 2022, the Company, entered into andclosed securities purchase agreements with five accredited investors, whereby the Investors purchased from the Company for an aggregateof $1,935,019 in subscription amount (i) debentures in the principal amount of $2,150,000; (ii) 1,075,000 Series E Common Stock PurchaseWarrants to purchase shares of the Company’s common stock, par value $0.001 per share; and (iii) 1,075,000 Series F Common StockPurchase Warrants to purchase shares of Common Stock. The Company and the investors also entered into registration rights agreements pursuantto the securities purchase agreements. 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 Stockat a conversion price of $2.00 per share, subject to adjustment upon certain events including a one-time adjustment to the price of theCommon Stock offered in the rights offering, with such adjusted conversion price not to be lower than $1.25. The Warrants are immediatelyexercisable for a term of five years until July 25, 2027. The Series E Warrants are exercisable at an exercise price of $3.00, subjectto adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the rights offering, withsuch adjusted exercise price not to be lower than $1.01. The Series F Warrants are exercisable at an exercise price of $6.00 subject toadjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the rights offering, with suchadjusted exercise price not to be lower than $1.01. The warrants provide for cashless exercise to the extent that there is no registrationstatement available for the underlying shares of Common Stock. Additionally, in connection with the security purchase agreements, thesubsidiaries of the Company delivered a guarantee in favor of the investors whereby each such subsidiary guaranteed the full payment andperformance of all obligations of the Company pursuant to the securities purchase agreements. The debentures, warrants, Common Stockunderlying the debentures and the Common Stock underlying the warrants were not registered under the Securities Act, but qualified forexemption under Section 4(a)(2) and Rule 506 promulgated thereunder. 

 

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Trigger of Price Reset

 

On July 29, 2022, the Company announced that itwas not moving forward with its previously announced Rights Offering. In doing so, it triggered a price reset in the July 2022 Financingand the May 2022 Securities Purchase Agreement. As a result of this price reset, the May 2022 Securities Purchase Agreement debenturesnow 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 pricereset, the July 2022 Financing debentures now have a conversion price of $1.25, and both the Series E and Series F warrants have exerciseprices of $1.01.

 

Registered Direct Offering

 

On September 15, 2022, the Company entered intoand closed a securities purchase agreement with five accredited investors resulting in the raise of $800,000 in gross proceeds to theCompany. Pursuant to the terms of the securities purchase agreement, the Company agreed to sell in a registered direct offering an aggregateof 4,000,000 shares of the Company’s common stock, par value $0.001 per share. In a concurrent private placement, the Company issuedto such investors warrants to purchase up to 4,000,000 shares of Common Stock, representing 100% of the shares of common stock purchasedin the offering. The warrants and the shares of common stock issuable upon the exercise of the warrants are not being registered underthe Securities Act of 1933, as amended. Gross proceeds from the offering totaled $800,000, before deducting offering expenses. The warrantsare 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 statementavailable for the underlying shares of Common Stock.

 

Restructuring Agreement

 

On September 15, 2022, in connection with theoffering, the Company entered into an agreement with the holders of certain of the Company’s previously issued securities (the “RestructuringAgreement”).

 

The Restructuring Agreement, among other things,modified certain provisions of the following securities of the Company:

 

(i)Original Issue Discount SeniorConvertible Debentures issued on May 31, 2022 (the “May 2022 Debentures”);

 

(ii)Original Issue Discount SeniorConvertible Debentures issued on July 25, 2022 (the “July 2022 Debentures” and, together with the May 2022 Debentures, the“Debentures”);

 

(iii)Common Stock Purchase Warrantsissued on February 28, 2022 (the “February 2022 Warrants”);

 

(iv)Common Stock Purchase Warrantsissued on March 9, 2022 (the “March 2022 Warrants”);

 

(v)Series C Common Stock PurchaseWarrants issued on May 31, 2022 (the “Series C Warrants”);

 

(vi)Series D Common Stock PurchaseWarrants issued on May 31, 2022 (the “Series D Warrants”);

 

(vii)Series E Common Stock PurchaseWarrants issued on July 25, 2022 (the “Series E Warrants”);

 

(viii)Series F Common Stock PurchaseWarrants 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 Companyand the Holders agreed to, among other things, to (i) reduce the conversion price of the Debentures down to $0.20, subject to adjustmentfor reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock; (ii) reducethe exercise price of the Restructured Warrants 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; (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 rightsoffering 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 RestructuringAgreement, (i) the Company entered into a Registration Rights Agreement (“Registration Rights Agreement”), providing for thefiling of a registration statement covering the Restructured Warrants and shares underlying the Warrants by not later than 10 tradingdays after the date of the Registration Rights Agreement or the earliest practical date on which the Company is permitted by Commissionguidance to file such registration statement; (ii) the Company and its subsidiaries entered into a Security Agreement (the “SecurityAgreement”), 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 subsidiaryguaranteed the full payment and performance of all obligations of the Company pursuant to the Debentures.

 

Each of our directors and officers entered intolock-up agreements (the “Lock-up Agreements”) in favor of the Holders, whereby they 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 sharesof 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.

 

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October 2022 Common Stock Purchase Agreement,Securities Purchase Agreement and Promissory Note

 

On October 20, 2022, the Company entered intoa 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 followingthe date of effectiveness of the Registration Statement, the Investor purchase up to $15,000,000 of the Company’s common stock,par value $0.001 per share, pursuant to drawdown notices, covering the registrable securities. The purchase price of the shares underthe Investment Agreement is equal to 82% of the lowest volume weighted average price (VWAP) during the last ten trading days after theCompany delivers to the Investor a put notice or drawdown notice in writing requiring Investor to purchase shares of the Company, subjectto the terms of the Investment Agreement. On October 20, 2022, the Company also entered into a securities purchase agreement with theInvestor, pursuant to which the Company issued to the Investor on that date a Promissory Note (the “Note”) in the principalamount of $300,000 in exchange for a purchase price of $255,000, which the Investor funded on October 20,2022. The proceeds of theNote to be used by the Company for general working capital purposes. The Note bears interest at the rate of 10% per annum.  Startingon the fifth month anniversary of the funding of the Note, and for the next six months thereafter, the Company will make seven equal monthlypayments of $47,142.85 to the Investor. On October 20, 2022, in connection with the entry by the Company and the Investor into the economicagreements, (i.e., the Investment Agreement, the Purchase Agreement, and the Note and the funding thereof), the Company issued800,000 shares of its common stock to the Investor.

 

October 2022 Securities Purchase Agreement;Side Letter

 

On October 24, 2022, the Company entered intoand closed a securities purchase agreement with one accredited investor, whereby the Investor purchased from the Company for an aggregateof $1,500,000 in subscription amount, an unsecured debenture in the principal amount of $1,666,650. The Company and the Investor alsoentered into a registration rights agreement pursuant to the securities purchase agreement. The debenture has an original issue discountof 10%, a term of six months with a maturity date of April 24, 2023, may be extended by six months at the Company’s option subjectto certain conditions, and are convertible into shares of Common Stock at a conversion price of $0.20 per share, subject to adjustmentupon certain events. The Company also entered into a side letter agreement with the holders of debentures of the Company, the Series CWarrants 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 agreementeach 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 30days after the date on which the registration statement registering for resale the shares of the Company’s common stock underlyingthe debenture is declared effective by the Securities and Exchange Commission. Additionally, the letter agreement, provides that the MayInvestors and July Investors have agreed to a further lock up of such shares for a further 30 days upon the receipt of a certain amountof the proceeds from future potential issuances of debentures, common stock or similar securities by the Company. Additionally, pursuantto the letter agreement, the May Investors and the July Investors 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 andJuly 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 reductionin 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 numberof 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 ReplacementWarrants are unchanged from the date as set forth in the respective exchanged Series C, Series D, Series E or Series F Warrant. Thedebenture, and the Common Stock underlying the warrants were not registered under the Securities Act, but qualified for exemption underSection 4(a)(2) and Rule 506 promulgated thereunder. 

 

November 2022 Warrant Amendment and Issuance

 

On November 18, 2022, the Company entered intoa letter agreement with the respective holders of an aggregate of 471,953 warrants issued as placement agent fees in connection with theCompany’s entry into securities purchase agreements with 33 accredited investors, whereby, at the closing, the investors agreedto purchase from the Company an aggregate of (i) 7,778 shares of the Company’s Series E Convertible Preferred Stock, par value $0.001per share (the “Series E Preferred Stock”); and (ii) 2,831,721 warrants to purchase shares of the Company’s common stock,pursuant to which the exercise price of such warrants was amended and such warrants were immediately exercised. Additionally, pursuantto the letter agreement, the Company issued to such warrant holders 471,953 new warrants, exercisable immediately, for a term of 60 months,at a price of $0.77 per share, subject to customary adjustment provisions. As a result of the triggering of such adjustment provisions,the number of warrants increased to 1,817,019 and the exercise price decreased to $0.20.

 

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December 2022 Securities Purchase Agreement

 

On December 12, 2022, the Company entered intoand closed a securities purchase agreement with one accredited investor, whereby the Investor purchased from the Company for an aggregateof $750,000 in subscription amount, an unsecured debenture in the principal amount of $750,000. The Company and the investor also enteredinto a registration rights agreement pursuant to the securities purchase agreement. The debenture has a term of six months with a maturitydate of June 12, 2023, which may be extended by six months at the Company’s option subject to certain conditions and monthly redemptionoptions at the election of the holder and are convertible into shares of Common Stock at a conversion price of $0.20 per share, subjectto adjustment upon certain events.

 

December 2022 Warrant Amendment and Issuance

 

On December 22, 2022, the Company entered intoa letter agreement with the respective holders of an aggregate of 4,775,000 warrants. Pursuant to the letter agreement, in exchange forthe immediate exercise of the 4,775,000 warrants at an exercise price of $0.20, the Company issued to such warrant holders 4,775,000 newwarrants, exercisable immediately, for a term of 60 months, at a price of $0.77 per share, subject to customary adjustment provisions.

 

Dorado Goose Transaction

 

On January 18, 2023, the Company, entered intoand closed two securities purchase agreements with Dorado Goose LLC or the investor, whereby the investor purchased from the Company foran aggregate of $1,500,000 in subscription amount, (i) an unsecured debenture in the principal amount of $847,500 and (ii) 1,562,500 sharesof common stock. The Company and the investor also entered into a registration rights agreement pursuant to the securities purchase agreements.The subsidiaries of the Company delivered a guarantee in favor of the investor whereby each such subsidiary guaranteed the full paymentand performance of all obligations of the Company pursuant to the debenture. The debenture has an original issue discount of 13%,has a maturity date of June 13, 2023, may be extended by six months at the Company’s option subject to certain conditions, and areconvertible into shares of common stock at a conversion price of $0.20 per share, subject to adjustment upon certain events. Thedebenture and the common stock were not registered under the Securities Act but qualified for exemption under Section 4(a)(2) and Rule506 promulgated thereunder. 

 

Nasdaq Notice of Delisting

 

On January 4, 2021, the Company received a letterfrom the staff of The Nasdaq Capital Market (the “Exchange”) notifying the Company that the Exchange had determined to delistthe Company’s common stock and warrants from the Exchange based on the Company’s non-compliance with the Exchange’s(i) $5 million stockholders’ equity requirement for initial listing pursuant to Nasdaq Listing Rule 5505(b), (ii) the $2.5 millionstockholders’ equity requirement or any of the alternatives for continued listing pursuant to Nasdaq Listing Rule 5550(b), and (iii)the Company’s failure to provide material information to the Exchange pursuant to Nasdaq Listing Rule 5250(a)(1). On February 11,2021, the Company met with the Exchange’s Hearings Panel (the “Panel”) with respect to such determination, in accordancewith the Exchange’s rules and, pursuant to such request by the Company to appeal, the delisting of the Company’s securitiesand the Form 25 Notification of Delisting filing was stayed pending the Panel’s decision. On March 9, 2021, the Exchange notifiedthe Company that the Panel had determined to continue the listing of the Company on the Exchange. Notwithstanding the Panel’s determinationto continue the listing of the Company’s securities on the Exchange, the Panel issued a public reprimand letter to the Company,pursuant to Listing Rule 5815(c)(1)(D), based on its finding “that the Company failed to meet the initial listing criteria withrespect to stockholders’ equity and failed to provide Nasdaq with material information with respect to that deficiency.” Specifically,the Panel found that the Company failed to comply with Listing Rule 5250(a)(1), requiring it to notify Nasdaq of certain significant developmentsthat led to the Company’s prior representations about its ability to satisfy the initial listing requirements being inaccurate.In reaching its determination to continue the listing of the Company on Nasdaq, the Panel acknowledged that the Company had since demonstratedcompliance with the initial listing requirement for stockholders’ equity and all other applicable initial listing requirements.The Panel also determined that the violations were inadvertent and that the Company had relied on advice of counsel at the time in itsinteractions with the Nasdaq staff (“Staff”). The Panel also acknowledged the Company’s efforts to implement structuralchanges within the Company to avoid similar misstatements in the future and that would allow for proper accounting and disclosure on anongoing basis. A Panel Monitor was implemented under Listing Rule 5815(d)(4)(A) for a period of one year from the date of the Letter.In the event that the Company became deficient with respect to any continued listing requirement, the Company would not be afforded theopportunity to submit a compliance plan for Staff’s consideration and Staff would issue a Delist Determination Letter and promptlyschedule a new hearing under Listing Rule 5810(c)(2), at which the Company may present a compliance plan for the Panel’s consideration.In the event of a new hearing, any suspension or delisting action would be stayed pending the completion of the hearings process and theexpiration of any additional extension period granted by the Panel following the hearing.

 

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On March 1, 2022, the Company received a letterfrom the staff of the Exchange notifying the Company that the Exchange had determined to delist the Company’s common stock fromthe Exchange based on the Company’s Market Value of Listed Securities for the 30-consecutive day period between January 15, 2022and February 25, 2022 falling short of the requirements under Listing Rule 5550(b)(2) (the “Rule”). Although a 180-day periodis typically allowed for an issuer to regain compliance, the Company was not eligible to use such compliance period, as the Exchange hadinstituted a Panel Monitor through March 9, 2022.

 

On April 22, 2022, the Company received a letterfrom the Exchange notifying the Company that the Nasdaq Hearing Panel had determined to continue the listing of the Company on the Exchange,subject to the following conditions: (i) on or before May 16, 2022, the Company would file its Quarterly Report on Form 10-Q for the periodended March 31, 2022 demonstrating compliance with Nasdaq Listing Rule 550(b)(1) requiring shareholders’ equity of $2.5 millionand (ii) on or before August 29, 2022, the Company would file a Form 8-K documenting the successful completion of any fund-raising activitythat had taken place since April 14, 2022 and the Company’s long-term compliance with the continued listing requirements of theNasdaq Capital Market. The Panel advised that August 29, 2022 represented the full extent of the Panel’s discretion to grant continuedlisting during the time the Company was non-compliant and should the Company fail to demonstrate compliance by such date, the Panel wouldissue a final delist determination and the Company would be suspended from trading on the Exchange.

 

On September 2, 2022, the Company received a letterfrom the Exchange notifying the Company that the Nasdaq Hearings Panel had determined to delist the Company’s common stock fromthe Exchange, based on the Company’s failure to comply with the listing requirements of Nasdaq Rule 5550(b)(1) as a result of theCompany’s shareholder equity deficit for the period ended June 30, 2022, as demonstrated in Company’s Quarterly Report onForm 10-Q filed on August 15, 2022, following the Company having not complied with the market value of listed securities requirement inNasdaq Rule 5550(b)(2) on March 1, 2022, while the Company was under a Panel Monitor, as had been previously disclosed, suspension oftrading in the Company’s shares on the Exchange would be effective at the opening of business on September 7, 2022. Followingpassage of the proscribed 15-day time period for appeal as stated in the letter, on October 26, 2022, Nasdaq completed the delisting byfiling a Form 25 Notification of Delisting with the Securities and Exchange Commission. The Company’s receipt of the Letterdoes not affect the Company’s business, operations or reporting requirements with the Commission.

 

Quotation on OTCQB

 

Effective on September 7, 2022, our common stockis quoted on the OTCQB Marketplace operated by OTC Markets Group Inc. (“OTCQB”) under the symbol “CRTD.” EffectiveApril 4, 2023, our symbol changed to “VOCL.”

 

Board of Directors and Management

 

On June 1, 2022, the Board of Directors approvedthe Creatd, Inc. 2022 Omnibus Securities and Incentive Plan. On November 10, 2022, the Board of Directors approved an amendment to theCreatd, Inc. 2022 Omnibus Securities and Incentive Plan. The plan provides for the granting of distribution equivalent rights, incentiveshare options, non-qualified share options, performance unit awards, restricted share awards, restricted share unit awards, share appreciationrights, tandem share appreciation rights, unrestricted share awards or any combination of the foregoing, as may be best suited to thecircumstances of the particular employee, director or consultant as provided in the plan. the aggregate number of common shares (includingcommon shares underlying options designated as incentive share options or non-qualified share options) that may be issued under the planshall not exceed the sum of (i) 30,000,000 common shares plus (ii) an annual increase on the first day of each calendar year beginningJanuary 1, 2023 and ending on and including January 1, 2031 equal to the lesser of (a) five percent (5%) of the common shares outstandingon the final day of the immediately preceding calendar year, and (b) such smaller number of common shares as determined by the Board.

 

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On January 18, 2023, the Company held its AnnualMeeting of Stockholders. The results of the matters voted on by the Company’s stockholders included the election of Directors toserve on the Company’s board; Amendment to our Articles of Incorporation to Increase Authorized Stock; and the approval of Creatd2022 Omnibus Securities and Incentive Plan.

 

On February 8, 2023 (the “Effective Date”),the Board of Directors (the “Board”) of Creatd, Inc., a Nevada corporation (the “Company”) approved, based onthe recommendation of the Compensation Committee (the “Committee”) of the Board, certain equity and cash compensation forcertain key members of the Company’s management team and non-employee directors as discussed below.

 

The Company has made certain equity awards tothe key members of the Company’s management team (the “Equity Awards”), comprised of 10,692,308 shares of the Company’scommon stock (“Common Stock”) to Jeremy Frommer, Chief Executive Officer of the Company, 5,894,788 shares of Common Stockto Justin Maury, Chief Operating Officer of the Company, and 1,663,223 shares of Common Stock to Chelsea Pullano, Chief Financial Officerof the Company. As a condition to receiving the Equity Awards, each such officer agreed to lock-up terms such that only 10% of the sharescomprising such individual’s Equity Award can be sold until 90 days after the date of the issuance of the Equity Awards (the “LockUp Period”) and that during the Lock Up Period, and for nine months thereafter, each such individual can only sell the number ofshares equal to the lesser of 5% of the trailing 30 day average volume or 25,000 shares in any single trading day. Additionally, beginningone year after the issuance of the Equity Awards, each individual receiving Equity Awards can only sell the number of shares equal tothe lesser of 5% of the trailing 30-day average volume or 40,000 shares in any single trading day (the “Volume Restrictions”).

 

The Company will also pay cash bonuses to thekey members of the Company’s management team (the “Executive Bonuses”) in the amounts of $125,000 to Jeremy Frommer,$62,500 to Justin Maury and $31,250 to Chelsea Pullano, to be paid out on a discretionary basis as determined by the Committee. In addition,each of Jeremy Frommer and Justin Maury will receive monthly housing stipends in the amount of $6,300 (the “Housing Stipends”).

 

Additionally, the Company will make certain cashpayments and equity awards to the non-employee members of the Board (the “Director Compensation”), comprised of annual cashcompensation of $140,000, payable in monthly installments, an annual grant of $140,000 in Common Stock, issued quarterly and priced atthe average of the last five trading days of the previous quarter. In the fiscal year 2023, each independent director shall be eligiblefor a cash bonus of $20,000, which shall be paid on a discretionary basis. As a share bonus, 1,700,000 shares of Common Stock shall beissuable to Peter Majar and 1,000,000 shares of Common Stock shall be issuable to Erica Wagner, with such shares subject to the same lock-upand volume restrictions as the Equity Awards.

 

The Company will offer the chair of the auditcommittee of the Board (the “Audit Committee Chair”) an additional annual cash compensation of $20,000, payable in monthlyinstallments, and an annual grant of $20,000 in Common Stock, issued quarterly and priced at the average of the last five trading daysof the previous quarter. 

 

All equity awards made to the independent directorsof the Company are made pursuant to the Creatd, Inc. 2022 Omnibus Securities and Incentive Plan (the “Plan”).

 

The February 2023 Securities Purchase Agreement

 

On February 1, 2023, the Company entered intoand closed a securities purchase agreement with one accredited investor, whereby the Investor purchased from the Company for an aggregateof $1,250,000 in subscription amount, an unsecured debenture in the principal amount of $1,250,000. The Company and the investor alsoentered into a registration rights agreement pursuant to the securities purchase agreement. The debenture has a term of six months witha maturity date of August 1, 2023, which may be extended by six months at the Company’s option subject to certain conditions andmonthly redemption options at the election of the holder and are convertible into shares of Common Stock at a conversion price of $0.20per share, subject to adjustment upon certain events.

 

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Listing on Upstream

 

On February 14, 2023, the Company completed thelisting on Upstream of the Company’s shares of common stock, comprising the same class of common shares currently registered withthe Commission that are currently issued and outstanding. Upstream is the trading app for digital securities and NFTs powered by HorizonFintex and MERJ Exchange Limited (“MERJ”). The shares listed on Upstream are represented on MERJ Exchange as a “digitalsecurity” in the form of uncertificated securities that have the same shareholder rights as all other shares of such issuer. Itis a representation of common stock in an uncertificated form. The Company has not issued any new securities pursuant to the listing onUpstream. All common shares have been registered with the Commission and comprise the entire number of shares of the Company issued andoutstanding and all of the Company’s shares of common stock have the same CUSIP/ISIN number.

 

MERJ operates Upstream as a fully regulated andlicensed integrated securities exchange, clearing system and depository for digital and non-digital securities. MERJ is an affiliate ofthe World Federation of Exchanges (WFE), recognized by HM Revenue and Customs UK, a full member of the Association of National NumberingAgencies (ANNA) and a Qualifying Foreign Exchange for OTC Markets in the US. MERJ is also a member of the Sustainable Stock ExchangesInitiative. MERJ is regulated in the Seychelles by the Financial Services Authority Seychelles, https://fsaseychelles.sc/. MERJ is notregistered or regulated in any manner in the United States.

 

Upstream is accessible via the major app stores.After downloading the application, users will have access to review all the securities that trade on Upstream including trading activity,regulatory disclosures and other corporate information. Further there is a direct link of information on our Company at https://investors.creatd.com/resources/faqs/default.aspx.This includes a listing particulars document, which is a required disclosure as part of the requirements of MERJ Exchange Limited as definedby Securities Act 2007 of the Seychelles (as amended) and any other measure prescribed thereunder by the Minister or the Securities Authority.Investors are encouraged to review the listing particulars that may be found at the following link: https://upstream.exchange/creatd.

 

Pursuant to Upstream’s policy, terms andconditions, investors based in the United States or Canada are prohibited from buying shares on the Upstream secondary market.However, U.S.- and Canada-based investors may sell securities they previously purchased or acquired from an issuer, stockbrokeror stock exchange that has dual-listed on Upstream. U.S.- or Canada-based investors are those investors who citizens of the United Statesor Canada, including those living abroad, or permanent residents of the United States or Canada. To the extent shares had been depositedat a time prior to Upstream’s policy prohibiting such deposits, such shares cannot be sold at this time, and such shareholder wouldneed to have such shares returned to the Company’s transfer agent to complete a sale.

 

The Press Release stated, “Global investorscan now trade by downloading Upstream from their preferred app store at https://upstream.exchange/, creating an account by tapping signup...”. This was not to suggest that investors based in the United States or Canada can buy shares on the Upstream secondarymarket, but to suggest that investors who are not U.S.- and Canada-based can trade on Upstream.

 

Investors who have deposited shares with Upstreammay subsequently elect, at any time, to transfer such shares to from Upstream to the Company’s transfer agent for trade via theirU.S. broker.

 

The Company is providing our investors with detailedinformation on the process on how to deposit and trade shares on Upstream directly on our website at the following link: https://investors.creatd.com/resources/faqs/default.aspx.

 

Shares transferred into Upstream will be effectedvia the Company’s Transfer Agent, Pacific Stock Transfer Company (“Pacific”). For shares already recorded with Pacific,investors can transfer such shares to Upstream by taking the following steps: Open Upstream, then choose Investor: Manage Securities,Deposit Securities and, next, Enter the Company’s Ticker Symbol and Number of Shares their requesting to deposit. Investors wouldthen confirm the shares are unrestricted or “free trading” and tap Submit. The value of each share deposit request on theUpstream app may not exceed $100,000, with such value determined by the closing price of the security on the previous trading day multipliedby the number of shares being deposited. Once the investor makes the share deposit request using the Upstream app, and the transfer agenthas the investor’s shares in ‘book entry’, the deposit is typically processed within 48 hours during business days.Once the transfer has been completed investors will receive a push notification in the Upstream app and see the share deposit in theirUpstream Portfolio.

 

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If the investor’s shares are currently inthe investor’s brokerage account, then the investor will be required to transfer its shares to Pacific to have shares recorded as“direct registration” in “book entry” with Pacific. To make such transfer request, an investor would need to contacttheir brokerage firm and request to transfer their shares back to “book entry” with the transfer agent.

 

All shares transferred to Upstream shall be heldin MERJ Dep., which is a company licensed as a Securities Facility pursuant to the Seychelles Securities Act, 2007. The Company has appointedMERJ Dep. to act as the Depository Nominee in respect of any securities traded which are quoted on Upstream and granted MERJ Dep. as theDepository Nominee, pursuant to the Securities Facility Rules Directive on Depository Interests.

 

Shares may be withdrawn from Upstream back tothe transfer agent. The Upstream app has a function under Investor Services, Manage Securities, Withdraw Securities. The shareholder thenenters the ticker symbol and the number of shares to being withdrawn and taps ‘Notarize’ to cryptographically sign this transaction.The shares are removed from the user’s Upstream portfolio and an email is sent to the transfer agent with a share withdrawal requestwhereafter the transfer agent will liaise directly with the shareholder to ensure the share balance is entered in ‘book entry’into the user’s name & address. Third party share withdrawals from Upstream are not permitted, the share withdrawal requestname and address (as retrieved from the Upstream know your customer (KYC) information by Upstream compliance) is required to be the samename and address that will be entered in the transfer agents ‘book entry’ for such shareholder.

 

The NFTs traded on Upstream are issued by theCompany and convey no ownership interest in the Company, nor do they provide any dividends, royalties, or other equity interests or rightsthat would indicate an expectation of profit. The NFTs are issued only on Upstream and can only be traded on Upstream.

 

The Commission evaluates whether a particulardigital asset, including an NFT, is a security based on what is commonly referred to as the Howey Test. The Howey Test looks at four factors:(i) an investment of money (ii) in a common enterprise (iii) with the expectation of profit (iv) to be derived from the efforts of others.We believe the commemorative NFTs issued by Creatd do not meet the definition for securities under the Howey Test. Such NFTs, issued toinvestors who deposited shares of Creatd with Upstream, are commemorative in nature, memorializing the listing on Upstream, as a noveltyitem, being akin to a tombstone, plaque, sticker, poster or t-shirt commemorating the listing, similar to what NASDAQ and the NYSE mayprovide to its issuers. The NFT issued by Creatd conveys no ownership interest in Creatd, nor does it provide any dividends, royalties,or other equity interests or rights that would indicate an expectation of profit. The NFTs are issued only on Upstream and can only betraded on Upstream. No consideration was paid for the NFTs, and such investors are still able to transfer such shares back to PacificStock Transfer following receipt of the NFTs.

 

To trade on Upstream, users create a trading accountusing the Upstream smartphone app, with a random-generated username (in the form of an address that’s a 42-character hexadecimaladdress derived from the last 20 bytes of a random public key) and a password (in the form of a random cryptographic private key).Thepublic and private key (the cryptographic keypair) is generated locally on the smartphone and only the public key is everknown to Upstream, MERJ Dep., or peer to peer trading counterparties on Upstream. Only the individual users hold their private keys. Thisprivacy ensures that only the Upstream user can cryptographically sign a securities transaction (bid/offer/buy/sell/cancel) for it tobe executed on Upstream, that is, all transactions such as share sales are self-directed, peer to peer, and instantly settled using theUpstream distributed ledger platform.

 

In order to buy, sell, deposit or withdraw shareson Upstream, an Upstream user that has created their account as outlined in the previous paragraph, is required to submit KYC informationfor the Upstream compliance team to review. KYC information is then linked to the user’s public key, and if the user passes KYCreview, then this user’s cryptographic keypair’s transactions will be accepted as legitimate self-directed securities transactionrequests to Upstream for execution on the platform.

 

Shareholders should be aware that there are risksand uncertainties with the Company’s dual listing on Upstream. In particular, the restriction on trading for US- and Canada-basedinvestors may affect the liquidity of our common stock and lead to volatility in the price and trading volume of our common stock.

 

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In addition, though the NFTs traded on Upstreamare commemorative in nature, the regulatory regime governing blockchain technologies, cryptocurrencies and tokens is uncertain, and newregulations or policies may materially affect our NFT marketplace and our business generally.

 

Although we believe that these NFTs are not securities,there is risk that the issuance of NFTs may be considered a public offering in violation of the federal securities laws, and perhaps certainstate securities laws. For issuances that are deemed to be public offerings under federal securities laws or in violation of certain statesecurities laws, purchasers of such products might be granted the right to rescind the sale of these products and demand that we returnthe purchase price of these products. We did not receive a purchase price for these NFTs; however, there is risk that the Companymay be subject to other penalties or that other remedies may apply.

 

Additional information regarding Upstream can be found at Revolutionaryexchange & trading app for digital securities (Upstream exchange).

 

Appointment of New Directors

 

On February 17, 2022, the Board appointed JoannaBloor, Brad Justus, and Lorraine Hendrickson to serve as members of the Board.

 

On September 2, 2022, the Board appointed JeremyFrommer, Executive Chairman, as Chief Executive Officer.

 

On September 2, 2022, the Board appointed JustinMaury, President and Chief Operating Officer, as Director to the Board

 

On November 2, 2022, the Board appointed PeterMajar as Director to the Board.

 

On November 16, 2022, the Board appointed EricaWagner as Director to the Board.

  

Departure of Directors

 

On February 17, 2022, the Board received noticethat effective immediately, Mark Standish resigned as Chair of the Board, Chair of the Audit Committee and as a member of the CompensationCommittee and Nominating & Corporate Governance Committee; Leonard Schiller resigned as member of the Board, Chair of the CompensationCommittee and as a member of the Audit Committee and Nominating & Corporate Governance Committee; and LaBrena Martin resigned as amember of the Board, Chair of the Nominating & Corporate Governance Committee and as a member of the Audit Committee and CompensationCommittee. Such resignations are not the result of any disagreement with the Company on any matter relating to the Company’s operations,policies or practices.

 

On September 2, 2022, the Company entered intoan executive separation agreement with Laurie Weisberg the Company’s Chief Executive Officer and member of the Board of Directorssetting forth the terms and conditions related to the executive’s resignation as Chief Executive Officer, Director and any otherpositions held with the Company or any subsidiary. Pursuant to the agreement, the Company agreed to pay the severance in the aggregateamount of $475,000, payable as follows: (i) 1/24 of the severance amount paid to executive on each of September 15, 2022, October 1, 2022and November 1, 2022, respectively; (ii) 1/8 of the severance amount paid on each of December 1, 2022, January 1, 2023 and February 1,2023, respectively; (iii) 1/4 of the severance amount to be paid on April 1, 2023; and (iv) the balance of the severance amount to bepaid on May 1, 2023. Under the agreement, all unvested and/or outstanding stock options held by the executive as of the effective datethat are not subject to metric-based vesting shall automatically and fully vest as of the effective date. The executive shall continueto hold all unvested and/or outstanding stock options held by the executive as of the effective date that are subject to metric-basedvesting and such metric based vesting options shall vest in accordance with their respective original terms. In connection with the separationagreement with Ms. Weisberg, the Company entered into a Confession of Judgment, to which $475,000 in amounts owed through May 1, 2023is subject, accounting for payments made to Ms. Weisberg from time to time in partial satisfaction of such amounts owing.

 

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On September 21, 2022, the Board received noticefrom Brad Justus of his resignation as a member of the Board, and from all committees of the Board on which he served, with such resignationto become effective on September 30, 2022. Such resignation was not the result of any disagreement with the Company on any matter relatingto the Company’s operations, policies or practices.

 

On November 1, 2022, the Board received noticefrom Lorraine Hendrickson of her resignation as a Director and from all committees of the Board on which she served, effective as of suchdate. Ms. Hendrickson’s resignation as a member of the Board was not the result of any disagreement with the Company on any matterrelating to the Company’s operations, policies or practices.

 

On November 17, 2022, the Board received noticefrom Joanna Bloor of her resignation as a Director and from all committees of the Board on which she served, effective as of such date.Ms. Bloor’s resignation as a member of the Board was not the result of any disagreement with the Company on any matter relatingto the Company’s operations, policies or practices.

 

Acquisition Transactions

 

Denver Bodega, LLC Acquisition

 

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 adirect-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Denver Bodega, LLC has been consolidateddue to the Company’s ownership of 100% voting control, and the results of operations have been included since the date of acquisitionin the statement of operations.

 

Orbit Media LLC Acquisition

 

On August 1, 2022, the Company acquired 51% ofthe membership interests of Orbit Media LLC, a New York limited liability company. Orbit is a app-based stock trading platform designedto 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. 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-fourthousand dollars ($44,000) in cash and 57,576 shares of the Company’s Common Stock.

 

On February 3, 2023, the Company acquired an additional5% of the membership interests of Orbit Media, LLC., bringing our total membership interests to 56%.

 

Brave Foods, LLC Acquisition

 

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 providesconvenient 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.

 

Employees

 

As of May 11, 2023, we had 14 full-time employeesand 8 part-time employees. None of our employees are subject to a collective bargaining agreement, and we believe our relationship withour employees to be good.

 

We believe that our future success will dependin 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 purposesof our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-basedcompensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform tothe best of their abilities and achieve our objectives.

 

Corporate Information

 

The Company’s address is 419 Lafayette Street,6th Floor New York, New York 10003. The Company’s telephone number is (929) 504-3090. Our website is https://creatd.com. The informationon, or that can be accessed through, this website is not part of this Form 10-K, and you should not rely on any such information in makingthe decision whether to purchase the Common Stock.

 

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SUMMARY OF THE OFFERING

 

This prospectus relates to the resale, from time to time, of up to21,133,750 shares (the “Shares”) of our common stock, par value $0.001 per share (“Common Stock”), by the sellingstockholders identified in this prospectus under “Selling Stockholders” (the “Offering”), comprised of (i) upto 18,383,750 Shares, which underly warrants, issued pursuant to that certain letter agreement dated December 22, 2022 (the “LetterAgreement”), between the Company and the respective holders of an aggregate of 4,775,000 warrants described in the Prospectus (the“December Warrants”), exercisable immediately, for a term of 60 months, at a price of $0.77 per share, subject to customaryadjustment provisions, the effect of which has increased the number of warrants to 45,959,375 and reduced the exercise price to $0.08;and (ii) up to 1,250,000 Shares, pursuant to the securities purchase agreement the Companyentered into and closed on December 12, 2022 with one accredited investor (the “December Investor”), whereby the DecemberInvestor purchased from the Company for an aggregate of $750,000 in subscription amount, an unsecured debenture in the principal amountof $750,000 (the “December Debenture”), and (iii) up to 1,500,000 Shares, pursuant tothe securities purchase agreement the Company entered into and closed on January 18, 2023 with Dorado Goose LLC, whereby DoradoGoose purchased from the Company for an aggregate of $1,500,000 in subscription amount, (i) an unsecured debenture in the principal amountof $847,500, and (ii) 1,562,500 shares of common stock (the “January Debenture”).

 

We are not selling any shares of our Common Stockunder this prospectus and will not receive any proceeds from the sale of the Shares. We will, however, receive proceeds from any warrantsthat are exercised through the payment of the exercise price in cash. The Selling Stockholders will bear all commissions and discounts,if any, attributable to the sale of the Shares. We will bear all costs, expenses and fees in connection with the registration of the Shares.

 

Issuer   Creatd, Inc.
     
Shares of Common Stock offered by us   None
     
Shares of Common Stock offered by the Selling Stockholders   21,133,750 shares (1)
     
Shares of Common Stock outstanding before the Offering   91,283,558 shares (2)
     
Shares of Common Stock outstanding after completion of this offering, assuming the sale of all shares offered hereby   112,417,308 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 the OTCQB Marketplace operated by OTC Markets Group Inc. (“OTCQB”) under the symbol “VOCL.” Our stock had previously been quoted on OTCQB under the symbol “CRTD,” with such change having become effective on April 4, 2023, following approval from FINRA.

 

Our common stock is dual-listed on Upstream under the symbol “VOCL.” Upstream is the trading app for digital securities and NFTs powered by Horizon Fintex and MERJ Exchange Limited (“MERJ”). U.S. investors are not permitted to purchase, deposit or sell securities listed on Upstream.

     
Risk Factors   Investing in our securities involves a high degree of risk. See the “Risk Factors” section of this prospectus on page 17 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 (i) up to 18,383,750 shares of Common Stock issuable upon exercise of the December Warrants, (ii) up to 1,250,000 shares of Common Stock issuable upon conversion of the December Debenture; and (iii) up to 1,500,000 shares of Common Stock issuable upon conversion of the January Debenture.

 

(2) The number of shares of Common Stock outstanding before and after theOffering is based on 91,283,558 shares outstanding as of May 12, 2023 and excludes the following:

 

 

4,408,267 shares of Common Stock issuable upon the exercise of outstandingstock options having a weighted average exercise price of $4.05 per share;

 

  92,865,654 shares of common stock issuable upon the exercise of outstanding warrants having a weighted average exercise price of $1.02 per share;

 

  12,425,000 shares of common stock issuable upon the conversion of convertible promissory notes having a conversion price of $0.20 per share.

 

  990,000 shares of common stock issuable upon the conversion of convertible promissory notes having a conversion price of $1.00 per share.

 

  28,125,000 shares of common stock issuable upon the conversion of convertible promissory notes having a conversion price of $0.08 per share.

 

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RISK FACTORS

 

Investing in our securities involves a highdegree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other informationcontained in this prospectus, before making an investment decision with respect to our securities. The occurrence of any of the followingrisks or those incorporated by reference, or additional risks and uncertainties not presently known to us or that we currently believeto be immaterial could materially and adversely affect our business, financial condition, results of operations or cash flows. In anysuch case, the trading price of common stock and the trading price of Series A warrants, if any, could decline, and you may lose all orpart of your 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, includingthe risks and uncertainties described below and those incorporated by reference.

 

Risks Related to ourBusiness

 

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

 

Our current line of businesshas 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 encounteredin connection with development and expansion of a new business enterprise. We have incurred losses and may continue to operate at a netloss for at least the next several years as we execute our business plan. We had a net loss of approximately $35.7 million for the yearended December 31, 2022, and a working capital deficit and an accumulated deficit of approximately $13.7 million and approximately $146.1million, respectively.

 

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

 

There can be no assurancesthat we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or obtain funding or additionalfinancing through private placements, public offerings and/or bank financing necessary to support our working capital requirements. Tothe extent that funds generated from any private placements, public offerings and/or bank financing are insufficient, we will have toraise additional working capital and no assurance can be given that additional financing will be available, or if available, will be onacceptable terms. These conditions raise substantial doubt about our ability to continue as a going concern. If adequate working capitalis 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 April18, 2023 management stated that our financial statements for the year ended December 31, 2022 were prepared assuming substantialdoubt 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 it will continue as a going concern, which contemplatescontinuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

We are not profitableand may never be profitable.

 

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

 

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

 

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

 

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

 

Currently the Companyhas considerable obligations under notes, related party notes and lines of credit outstanding with various lenders. Our ability to makepayments on such indebtedness will depend on our ability to generate cash flow. The Company may not generate sufficient cash flow fromoperations to enable us to repay this indebtedness and to fund other liquidity needs, including capital expenditure requirements. Suchindebtedness 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 indebtednessincreases the risk that we may default on our debt obligations. We may not be able to generate sufficient cash flows to pay the principalor 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 areotherwise unable to arrange financing, our assets may be foreclosed upon which could have a material adverse effect on our business, financialcondition and results of operations.

 

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

 

We expect that we willneed to raise additional capital within the next 12 months. However, in the event that we exceed our expected growth, we would need toraise additional capital. There is no assurance that additional equity or debt financing will be available to us when needed, on acceptableterms, or even at all. Our limited operating history makes investor evaluation and an estimation of our future performance substantiallymore difficult. As a result, investors may be unwilling to invest in us or such investment may be offered on terms or conditions thatare 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 intensecompetition. If we do not provide digital content that is useful to users, we may not remain competitive, and our potential revenues andoperating results could be adversely affected.

 

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

 

We face competition fromothers in the digital content creation industry and media companies. Our current and potential competitors range from large and establishedcompanies to emerging start-ups. Established companies have longer operating histories and more established relationships with customersand 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 servicesfaster than we can.

 

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

 

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

 

The size of our user base and our user’slevel 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 generallydecline over time as the size of our active user base increases, and it is possible that the size of our active user base may fluctuateor decline in one or more markets, particularly in markets where we have achieved higher penetration rates. If people do not perceiveVocal to be useful, reliable, and trustworthy, we may not be able to attract or retain users or otherwise maintain or increase the frequencyand duration of their engagement. A number of other content management systems and publishing platforms that achieved early popularityhave since seen their active user bases or levels of engagement decline, in some cases precipitously. There is no guarantee that we willnot experience a similar erosion of our active user base or engagement levels. Our user engagement patterns have changed over time, anduser engagement can be difficult to measure, particularly as we introduce new and different products and services. Any number of factorscould potentially negatively affect user retention, growth, and engagement, including if:

 

  Users increasingly engage with other competitive products or services;

 

  We fail to introduce new features, products or services that users find engaging or if we introduce new products or services, or make changes to existing products and services, that are not favorably received;

 

  User behavior on any of our products changes, including decreases in the quality and frequency of content shared on our products and services;

 

  There are decreases in user sentiment due to questions about the quality or usefulness of our products or our user data practices, or concerns related to privacy and sharing, safety, security, well-being, or other factors;

 

  We are unable to manage and prioritize information to ensure users are presented with content that is appropriate, interesting, useful, and relevant to them;

 

  We are unable to obtain or attract engaging third-party content;

 

  Users adopt new technologies where our products may be displaced in favor of other products or services, or may not be featured or otherwise available;

 

  There are changes mandated by legislation, regulatory authorities, or litigation that adversely affect our products or users;

 

  Technical or other problems prevent us from delivering our products in a rapid and reliable manner or otherwise affect the user experience, such as security breaches or failure to prevent or limit spam or similar content;

 

  We adopt terms, policies, or procedures related to areas such as sharing, content, user data, or advertising that are perceived negatively by our users or the general public;

 

  We elect to focus our product decisions on longer-term initiatives that do not prioritize near-term user growth and engagement;

 

  We make changes in how we promote different products and services across our family of apps;

 

  Initiatives designed to attract and retain users and engagement are unsuccessful or discontinued, whether as a result of actions by us, third parties, or otherwise;

 

  We fail to provide adequate customer service to users, marketers, developers, or other partners;

 

  We, developers whose products are integrated with our products, or other partners and companies in our industry are the subject of adverse media reports or other negative publicity, including as a result of our or their user data practices; or

 

  Our current or future products, such as our development tools and application programming interfaces that enable developers to build, grow, and monetize mobile and web applications, reduce user activity on our products by making it easier for our users to interact and share on third-party mobile and web applications.

 

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

 

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We face competition from traditional mediacompanies, 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 competitionfrom companies that offer traditional media advertising opportunities. Most large advertisers have set advertising budgets, a very smallportion of which is allocated to Internet advertising. We expect that large advertisers will continue to focus most of their advertisingefforts on traditional media. If we fail to convince these companies to spend a portion of their advertising budgets with us, or if ourexisting 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 acquiredentities, assumed or unforeseen liabilities that arise in connection with the acquired businesses, the failure of counterparties to satisfyany obligations to indemnify us against liabilities arising from the acquired businesses, and unfavorable market conditions that couldnegatively impact our growth expectations for the acquired businesses. Fully integrating an acquired company or business into our operationsmay take a significant amount of time. We cannot assure you that we will be successful in overcoming these risks or any other problemsencountered with acquisitions and other strategic transactions. These risks may prevent us from realizing the expected benefits from acquisitionsand could result in the failure to realize the full economic value of a strategic transaction or the impairment of goodwill and/or intangibleassets recognized at the time of an acquisition. These risks could be heightened if we complete a large acquisition or multiple acquisitionswithin a short period of time.

 

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

 

Maintaining and enhancing our brands’ profilesmay 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, asour market becomes increasingly competitive, maintaining and enhancing our brands’ profiles may become increasingly difficult andexpensive. Maintaining and enhancing our brands will depend largely on our ability to be a technology leader and to continue to provideattractive products and services, which we may not do successfully.

 

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

 

We place substantial reliance upon the effortsand abilities of Jeremy Frommer, our Chairman of the Board of Directors, and our other executive officers and directors. Though no individualis 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.

 

If we are unable to protect our intellectualproperty, 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 combinationof 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 UnitedStates and internationally, we have filed various applications for protection of certain aspects of our intellectual property, and wecurrently hold a number of registered trademarks and issued patents in multiple jurisdictions and have acquired patents and patent applicationsfrom third parties. Third parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietaryrights held by us, and pending and future trademark and patent applications may not be approved. In addition, effective intellectual propertyprotection 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 havegenerally taken measures to protect our proprietary rights, there can be no assurance that others will not offer products or conceptsthat are substantially similar to ours and compete with our business. In addition, we regularly contribute software source code underopen source licenses and have made other technology we developed available under other open licenses, and we include open source softwarein 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 

 

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We are subject to payment processing risk.

 

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

 

We are subject to risk as it relates tosoftware 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 thelicense agreements. If any of these relationships were terminated or if any of these parties were to cease doing business or cease tosupport 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-partysoftware on which we rely could impair the availability of our platform and applications and adversely affect our business.

 

We license software from third partiesfor integration into our Vocal platform, including open source software. These licenses might not continue to be available to us on acceptableterms, or at all. While we are not substantially dependent upon any third-party software, the loss of the right to use all or a significantportion of our third-party software required for the development, maintenance and delivery of our applications could result in delaysin 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 softwarewe use could result in errors, interruptions, cyber incidents or a failure of our applications. Any significant interruption in the availabilityof all or a significant portion of such software could have an adverse impact on our business unless and until we can replace the functionalityprovided by these applications at a similar cost. Furthermore, this software may not be available on commercially reasonable terms, orat 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 timelyand cost-effective basis and respond to emerging industry standards and other technological changes. We may be unable to effect changesto such third-party technologies, which may prevent us from rapidly responding to evolving customer requirements. We also may be unableto replace the functionality provided by the third-party software currently offered in conjunction with our applications in the eventthat such software becomes obsolete or incompatible with future versions of our platform and applications or is otherwise not adequatelymaintained or updated.

 

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We need to manage growth in operations tomaximize 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 currentand potential markets, we believe that we must expand our marketing operations. This expansion will place a significant strain on ourmanagement and our operational, accounting, and information systems. We expect that we will need to continue to improve our financialcontrols, 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 ofour company we need to maintain and search for hard-working employees who have innovative initiatives, while at the same time, keep aclose eye on any and all expanding opportunities in our marketplace.

 

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

 

We plan to generate a substantial portion of ourrevenues from advertisers. Our advertisers may be able to terminate prospective contracts with us at any time. Advertisers will not continueto do business with us if their investment in advertising with us does not generate sales leads, and ultimately customers, or if we donot deliver their advertisements in an appropriate and effective manner. If we are unable to remain competitive and provide value to ouradvertisers, they may stop placing ads with us, which would adversely affect our revenues and business. In addition, expenditures by advertiserstend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. Adverse macroeconomic conditions can alsohave 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 inthe technology industry. We believe that we take reasonable steps to protect the security, integrity and confidentiality of the informationwe 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 havenot experienced any material security breaches to date, we may in the future experience attempts to disable our systems or to breach thesecurity of our systems. Techniques used to obtain unauthorized access to personal information, confidential information and/or the systemson which such information are stored and/or to sabotage systems change frequently and generally are not recognized until launched againsta 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 consequencesto our business. A security breach could adversely affect the digital content experience and cause the loss or corruption of data, whichcould harm our business, financial condition and operating results. Any failure to maintain the security of our infrastructure could resultin loss of personal information and/or other confidential information, damage to our reputation and customer relationships, early terminationof our contracts and other business losses, indemnification of our customers, financial penalties, litigation, regulatory investigationsand other significant liabilities. In the event of a major third-party security incident, we may incur losses in excess of their insurancecoverage.

 

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

 

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

 

Customers view our content online, using third-partyplatforms and networks and on mobile devices. We collect and store significant amounts of information about our customers—both personallyidentifying and non-personally identifying information. We are subject to laws from a variety of jurisdictions regarding privacy and theprotection of this player information. For example, the European Union (EU) has traditionally taken a broader view than the United Statesand 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 informationfrom 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 tous, failure to comply with COPPA may increase our costs, subject us to expensive and distracting government investigations and could resultin substantial fines.

 

Data privacy protection laws are rapidly changingand likely will continue to do so for the foreseeable future. The U.S. government, including the Federal Trade Commission and the Departmentof Commerce, is continuing to review the need for greater regulation over the collection of personal information and information aboutconsumer 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 playersthat is necessary for compliance with these various types of regulations.

 

Customer interaction with our content is subjectto 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 complywith existing privacy-related or data protection laws and regulations, it could result in proceedings or litigation against us by governmentalauthorities or others, which could result in fines or judgments against us, damage our reputation, impact our financial condition andharm our business. If regulators, the media or consumers raise any concerns about our privacy and data protection or consumer protectionpractices, even if unfounded, this could also result in fines or judgments against us, damage our reputation, and negatively impact ourfinancial 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 adoptionof minimum information security standards that are often vaguely defined and difficult to implement. Our security measures and standardsmay 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 andultimately in a loss of customers, which could adversely affect our business and impact our financial condition. This could also subjectus to liability under applicable security breach-related laws and regulations and could result in additional compliance costs, costs relatedto regulatory inquiries and investigations, and an inability to conduct our business.

 

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

 

Our business is subject to a variety of federal, state and internationallaws and regulations, including those with respect to privacy, data, and other laws. These laws and regulations, and the interpretationor 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 affectour business. 

 

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If any of our relationships with internetsearch websites terminate, if such websites’ methodologies are modified or if we are outbid by competitors, traffic to our websitescould 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 websitestypically provide two types of search results, algorithmic and purchased listings. Algorithmic listings generally are determined and displayedas a result of a set of unpublished formulas designed by search engine companies in their discretion. Purchased listings generally aredisplayed if particular word searches are performed on a search engine. We rely on both algorithmic and purchased search results, as wellas advertising on other internet websites, to direct a substantial share of visitors to our websites and to direct traffic to the advertisercustomers we serve. If these internet search websites modify or terminate their relationship with us or we are outbid by our competitorsfor purchased listings, meaning that our competitors pay a higher price to be listed above us in a list of search results, traffic toour websites could decline. Such a decline in traffic could affect our ability to generate advertising revenue and could reduce the desirabilityof advertising on our websites.

 

Our business involves risks of liabilityclaims 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 potentialliability for defamation, invasion of privacy, negligence, copyright or trademark infringement, obscenity, violation of rights of publicityand/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 ofliability 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 takesteps 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 exposeus 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 ofthird-party patents and trademarks and other violations of third-party intellectual property rights. Intellectual property disputes aregenerally time-consuming and expensive to litigate or settle and the outcome of such disputes is uncertain and difficult to predict. Theexistence of such disputes may require us to set-aside substantial reserves and has the potential to significantly affect our overallfinancial standing. To the extent that claims against us are successful, they may subject us to substantial liability, and we may haveto pay substantial monetary damages, change aspects of our business model, and/or discontinue any of our services or practices that arefound to be in violation of another party’s rights. Such outcomes may severely restrict or hinder ongoing business operations andimpact 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, thecost of the license may significantly increase our operating burden and expenses, potentially resulting in a negative effect on our business,financial condition and results of operations.

 

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

 

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

 

Our website addresses, or domain names, are criticalto our business. We currently own more than 415 domain names. However, the regulation of domain names is subject to change, and it maybe difficult for us to prevent third parties from acquiring domain names that are similar to ours, that infringe our trademarks or thatotherwise 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 adaptingour existing network infrastructure to accommodate increased traffic and technology advances or changing business requirements, whichcould cause us to incur significant expenses and lead to the loss of users and advertisers.

 

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

 

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

 

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

 

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Risks Related To Our Common Stock 

 

Risks Relating to our Common Stock and the Offering

 

Future sales or potential sales of our commonstock in the public market could cause our share price to decline.

 

If the existing holders of our common stock, particularlyour directors and officers, sell a large number of shares, they could adversely affect the market price for our common stock. Sales ofsubstantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market priceof our common stock to decline.

 

Because we will not pay dividends on ourcommon stock in the foreseeable future, stockholders will only benefit from owning common stock if it appreciates.

 

We have never paid cash dividends on our commonstock, 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 likelycontinue 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 whichare beyond our control.

 

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The market price for our securities may be influencedby 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 declinein 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, securitiesclass-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantialcosts and diversion of management’s attention and resources, which could materially and adversely affect our business, operatingresults and financial condition.

 

Because our shares of common stock are subjectto the penny stock rules, it is more difficult to trade our shares.

 

The SEC has adopted rules that regulate broker-dealerpractices 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 delivera standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effectingany transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination thatthe penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receiptof a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy ofa written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary marketfor our common stock, and therefore stockholders may have difficulty selling their shares.

 

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

 

Even though we have our shares quoted with TheOTCQB, the market price of our Common Stock may be highly volatile and subject to wide fluctuations in response to a variety of factorsand risks, many of which are beyond our control. In addition to the risks noted elsewhere in this Form 10-K, some of the other factorsaffecting our stock price may include:

 

  Variations in our operating results;

 

  The level and quality of securities analysts’ coverage of our Common Stock;

 

  Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

 

  Announcements by third parties of significant claims or proceedings against us; and

 

  Future sales of our Common Stock.

 

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

 

You may lose all of your investment.

 

Investing in our common stock involves a highdegree of risk. As an investor, you might never recoup all, or even part of, your investment and you may never realize any return on yourinvestment. You must be prepared to lose all your investment.

 

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

 

Our Second Amended and Restated Articles of Incorporation authorizethe issuance of 1,500,000,000 shares of common stock, and 20,000,000 shares of preferred stock. Currently the Company has 450 sharesof Preferred Series E stock outstanding. Additionally, as of May 12, 2023 there are outstanding (i) warrants to purchase 92,865,654 sharesof our common stock; (ii) options exercisable into 4,408,267 shares of our common stock; (iii) 109,223 shares underlying the conversionof Preferred Series E shares; and (iv) 41,540,000 shares underlying the conversion of convertible notes. 

 

Assuming all of the Company’s currentlyoutstanding warrants and options are exercised and all convertible notes and preferred shares are converted, the Company would have toissue an additional 138,923,144 shares of common stock representing 152% of our current issued and outstanding common stock. The futureissuance 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 acquisitionsor other corporate actions may have the effect of diluting the value of the shares held by our investors and might have an adverse effecton any trading market for our common stock.

 

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Liability of directors for breach of dutyis limited under Nevada law.

 

Nevada law provides that directors must dischargetheir duties as a director in good faith and with a view to the interests of the corporation. Under Nevada law, directors owe a fiduciaryduty to the corporation, which is generally comprised of the duty of care and duty of loyalty to the corporation. Except under limitedcircumstances set forth in NRS 78.138(7), or unless our Second Amended and Restated Articles of Incorporation or an amendment theretoprovide for greater individual liability (which ours does not provide), a director or officer is not individually liable to the corporationor 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 officerunless it is proven that the director’s or officer’s act or failure to act constituted a breach of his or her fiduciary dutiesas a director or officer, and the breach of those duties involved intentional misconduct, fraud or a knowing violation of law. Ourstockholders’ ability to recover damages for fiduciary breaches may be reduced by this statute.

 

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

 

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

 

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

 

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

 

Pursuant to our Second Amended and Restated Articlesof Incorporation, the aggregate number of shares of capital stock which we are authorized to issue is 1,520,000,000 shares, of which 1,500,000,000shares are common stock, and 20,000,000 shares are “blank check” preferred stock with such designations, rights and preferencesas 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 interestof, or impair the voting power of, our common stockholders. As of the date of this filing, we do have 450 shares of Preferred Series Estock outstanding.

 

The issuance of a series of preferred stock couldbe used as a method of discouraging, delaying or preventing a change in control. For example, it would be possible for our board of directorsto issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control ofour 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 toour assets upon liquidation, the right to receive dividends before dividends are declared to holders of our common stock, and the rightto the redemption of such preferred shares, together with a premium, prior to the redemption of the common stock. To the extent that wedo issue such additional shares of preferred stock, your rights as holders of common stock could be impaired thereby, including, withoutlimitation, dilution of your ownership interests in us.

 

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

 

Each of our Second Amended and Restated Articlesof Incorporation and our Amended and Restated Bylaws provide that unless the Company consents in writing to the selection of an alternativeforum, the Eighth Judicial District Court of Clark County, Nevada shall be the sole and exclusive forum for state law claims with respectto: (i) any derivative action or proceeding brought in the name or right of the Company or on its behalf, (ii) any action assertinga claim for breach of any fiduciary duty owed by any director, officer, employee or agent of the Company to the Company or the Company’sstockholders, (iii) any action arising or asserting a claim arising pursuant to any provision of Nevada Revised Statutes Chapters 78 or92A or any provision of the Company’s Second Amended and Restated Articles of Incorporation or Amended and Restated Bylaws or (iv) anyaction asserting a claim governed by the internal affairs doctrine, including, without limitation, any action to interpret, apply, enforceor 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 theExchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be basedupon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any dutyor liability created by the Exchange Act or the rules and regulations thereunder.

 

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

 

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

 

Dual listing on OTCQB and Upstream may leadto additional stock price volatility and heightened regulation.

 

Dual listing on two stock exchanges has the riskof the additional regulatory and compliance requirements that come with operating on multiple exchanges. We will need to comply with therules and regulations of each of OTCQB and Upstream, which may include different reporting requirements, disclosure obligations, and accountingstandards. Dual listing may increase the exposure of the Company to market risks, including currency fluctuations and geopolitical events,as it may be subject to different economic conditions and political environments in each exchange, which could potentially lead to greatervolatility in the Company’s stock price and may negatively impact investor sentiment. There also is a risk that the additional scrutinyand regulatory requirements associated with dual listing may discourage some investors from investing in the Company, or make it moredifficult for the Company to attract new investors. This could potentially limit the Company’s access to capital and its abilityto fund its growth and expansion plans.

 

There are risks associated with issuingNFTs, including a potential finding of a violation of securities laws by a regulatory authority. 

 

In connection with its listing on Upstream, theCompany issued NFTs to shareholders who transferred their shares to the Upstream platform. The NFTs traded on Upstream are issuedby the Company and convey no ownership interest in the Company, nor do they provide any dividends, royalties, or other equity interestsor rights that would indicate an expectation of profit. The NFTs are issued only on Upstream and can only be traded on Upstream.

 

The Commission evaluates whether a particulardigital asset, including an NFT, is a security based on what is commonly referred to as the Howey Test. The Howey Test looks at four factors:(i) an investment of money (ii) in a common enterprise (iii) with the expectation of profit (iv) to be derived from the efforts of others.We believe the commemorative NFTs issued by Creatd do not meet the definition for securities under the Howey Test. Such NFTs, issued toinvestors who deposited shares of Creatd with Upstream, are commemorative in nature, memorializing the listing on Upstream, as a noveltyitem, being akin to a tombstone, plaque, sticker, poster or t-shirt commemorating the listing, similar to what NASDAQ and the NYSE mayprovide to its issuers. The NFT issued by Creatd conveys no ownership interest in Creatd, nor does it provide any dividends, royalties,or other equity interests or rights that would indicate an expectation of profit. The NFTs are issued only on Upstream and can only betraded on Upstream. No consideration was paid for the NFTs, and such investors are still able to transfer such shares back to PacificStock Transfer following receipt of the NFTs.

 

Although we believe that these NFTs are not securities,there is risk that the issuance of NFTs may be considered a public offering in violation of the federal securities laws, and perhaps certainstate securities laws. For issuances that are deemed to be public offerings under federal securities laws or in violation of certain statesecurities laws, purchasers of such products might be granted the right to rescind the sale of these products and demand that we returnthe purchase price of these products. We did not receive a purchase price for these NFTs; however, there is risk that the Companymay be subject to other penalties or that other remedies may apply.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statementswithin the meaning of Section 27A of the Securities Act of 1933 or the Securities Act, Section 21E of the Securities Exchange Act of 1934or the Exchange Act, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that reflect our currentviews with respect to future events and financial performance, and all statements other than statements of historical fact are statementsthat are, or could be, deemed forward-looking statements. In some cases, you can identify forward-looking statements by terms such as“may,” “might,” “will,” “intend,” “should,” “could,” “can,”“would,” “believe,” “expect,” “seek,” “anticipate,” “intend,”“estimate,” “plan,” “target,” “project,” “forecast,” “envision”or the negative of these terms, and other similar phrases. All statements contained in this prospectus and any prospectus supplement regardingfuture financial position, sales, costs, earnings, losses, cash flows, other measures of results of operations, capital expenditures ordebt levels and plans, objectives, outlook, targets, guidance or goals are forward-looking statements.

 

You should not place undue reliance on our forward-lookingstatements because they are not guarantees of future performance or expectations, and involve risks and uncertainties. Our forward-lookingstatements are based on the information currently available to us and speak only as of the date on the cover of this prospectus, the dateof any prospectus supplement, or, in the case of forward-looking statements incorporated by reference, the date of the filing that includesthe statement. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statementsrelate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and otherfactors that may cause our actual results, performance or achievements to be materially different from any future results, performanceor 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 setforth principally in “Risk Factors” above, and in “Risk Factors,” “Management’s Discussionand Analysis of Financial Condition and Results of Operations,” “Business” and other sections in our 2022Annual Report and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”“Risk Factors.” In addition, there may be events in the future that we are not able to predict accurately or controlwhich may cause actual results to differ materially from expectations expressed or implied by forward-looking statements. Please considerour forward-looking statements in light of these risks as you read this prospectus.

 

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USE OF PROCEEDS

 

All proceeds from the resale of the shares ofour Common Stock offered by this prospectus will belong to the Selling Shareholders. We will not receive any proceeds from the resaleof the shares of our Common Stock by the Selling Shareholders.

 

We will receive proceeds from any cash exercise of the Warrants. Ifall 18,383,750 of the December Warrants are exercised on a cash basis, the Company would receivegross cash proceeds of $1,470,700, subject to adjustment upon certain events. We expect to use the proceeds from the exercise ofsuch warrants, if any, for general corporate purposes. General corporate purposes may include providing working capital, funding capitalexpenditures, or paying for acquisitions. We currently do not have any arrangements or agreements for any acquisitions. We cannot preciselyestimate the allocation of the net proceeds from any exercise of the warrants for cash. Accordingly, in the event the Warrants are exercisedfor cash, our management will have broad discretion in the application of the net proceeds of such exercises. There is no assurance thatthe Warrants will ever be exercised for cash.

 

CAPITALIZATION

 

The table below sets forth our cash and cash equivalents and capitalizationas of December 31, 2022, on an actual basis and on a pro forma basis to reflect our issuance of the shares of our Common Stock offeredby this prospectus and our receipt and application of the proceeds in the amount of approximately $1,345,000 from the exercise of warrants,after deducting our estimated offering expenses. This table should be read in conjunction with “Use of Proceeds” aboveand our consolidated audited and unaudited financial statements and the notes thereto set forth in this prospectus.

 

       December 31,
2022
 
   Actual   Adjustments   Pro Forma as
Adjusted
 
Cash  $706,224    1,345,564   $2,051,788 
Notes Payable   1,683,694    -    1,683,694 
Convertible Notes Payable   5,369,599    -    5,369,599 
Common stock par value $0.001: 1,500,000,000 shares authorized; 39,062,386 issued and 38,969,013 outstanding as of December 31, 2022; 60,196,136 issued and 60,102,763 outstanding after the Offering.   39,062    21,134    60,196 
Additional paid-in capital   134,570,600    1,324,430    135,895,030 
Accumulated deficit   (146,142,373)   -    (146,142,373)
Accumulated other comprehensive income (loss)   (140,183)   -    (140,183)
Treasury Stock   (78,456)   -    (78,456)
Stockholders’ equity   (12,503,199)   1,345,564    (11,157,635)
Total capitalization   (5,449,906)   1,345,564    (4,104,342)

 

The table above excludes:

 

4,408,267 shares of Common Stock issuable upon the exercise of outstandingstock options having a weighted average exercise price of $4.05 per share;

 

92,865,654 shares of commonstock issuable upon the exercise of outstanding warrants having a weighted average exercise price of $1.02 per share;

 

12,425,000 shares of commonstock issuable upon the conversion of convertible promissory notes having a conversion price of $0.20 per share.

 

990,000 shares of common stockissuable upon the conversion of convertible promissory notes having a conversion price of $1.00 per share.

 

28,125,000 shares of commonstock issuable upon the conversion of convertible promissory notes having a conversion price of $0.08 per share.

 

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MARKET FOR COMMON STOCK AND DIVIDEND POLICY

 

Our common stock is quoted on the OTCQB under the symbol “VOCL.”As of May 10, 2023, the last reported sale price of the common stock as reported on OTCQB was $0.07 per share.

 

As of May 5, 2023, there were approximately 209registered holders of record of our Common Stock, and approximately 5 holders of record of our Series E Convertible Preferred Stock. Sincecertain shares of our Common Stock are held by brokers and other institutions on behalf of stockholders, the foregoing number of holdersof our Common Stock is not representative of the number of beneficial holders of our Common Stock.

 

To date, we have not paid cash dividends on ourCommon Stock and do not plan to pay such dividends in the foreseeable future. Our Board will determine our future dividend policy on thebasis of many factors, including results of operations, capital requirements, and general business conditions. Dividends, under the NevadaRevised Statutes, may only be paid from our net profits or surplus. To date, we have not had a fiscal year with net profits and, subjectto a valuation by the Board of the present value of the Company’s assets, do not have surplus.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis shouldbe read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this prospectus. In additionto 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, includingbut not limited to those set forth in “Risk Factors.”

 

This prospectus and otherreports filed by Creatd, Inc. (the “Company”), from time to time with the SEC (collectively, the “Filings”) containor may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, theCompany’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to placeundue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in theFilings, 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 theCompany’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect tofuture events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’sbusiness, 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 may differ significantly from those anticipated, believed, estimated,expected, intended, or planned.

 

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

 

Our financial statementsare prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principlesrequire us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which werely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. Theseestimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statementsas well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to theextent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particulartransaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areasin which management’s judgment in selecting any available alternative would not produce a materially different result. The followingdiscussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this prospectus.

 

We intend for this discussionto provide information that will assist in understanding our financial statements, the changes in certain key items in those financialstatements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financialstatements. This discussion should be read in conjunction with our financial statements and accompanying notes for the year ended December31, 2022, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on April 19, 2023.

 

Overview

 

The creator economy is well-established and thriving,consisting of hundreds of millions of creators and billions of viewers. Creatd plays a crucial role within this ecosystem, with a rangeof businesses established to help creators realize their potential both creatively and monetarily, partnering with peers in their communityand brands when the opportunity arises. At the center of our businesses lies Vocal, our core technology platform that hosts our creatorcommunity and generates the first-party data that powers our revenue generation. 

 

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Results of Operations

 

Liquidity and CapitalResources

 

The following table summarizes total current assets,liabilities and working capital at December 31, 2022 compared to December 31, 2021:

 

   December 31,
2022
   December 31,
2021
   Increase /
(Decrease)
 
Current Assets  $1,479,164   $4,475,242   $(2,996,078)
Current Liabilities  $15,207,316   $5,421,015   $9,786,301 
Working Capital (Deficit)  $(13,728,152)  $(945,773)  $(12,782,379)

 

At December 31, 2022, the Company had a workingcapital deficit of $13,728,152 as compared to a working capital deficit of $945,773 at December 31, 2021, an increase in working capitaldeficit of $12,782,379. The increase is primarily attributable to the decrease in cash, and prepaids and other current assets, as wellas an increase in accounts payable, notes payable and deferred revenue. This was offset by an increase in accounts receivable and inventory.

 

Net Cash

 

Net cash used in operating activities for theyear ended December 31, 2022, and 2021, was $16,805,429 and $20,518,807, respectively. The net loss for the year ended December 31, 2022,and 2021 was $35,676,315 and $37,379,153, respectively. This change is primarily attributable to the net loss for the current period offsetby share-based payments in the amount of $4,183,844 to employees and consultants for services rendered, accretion of debt discount anddebt issuance costs of $4,668,039, due to incentives given with debentures, and a change in accounts payable and accrued expenses of $4,773,551.  

 

The decreased net cash used in 2022 reflectedan extraordinary cash outlay for marketing in 2021 that went toward generating a lower creator acquisition cost for paid Vocal subscribersand was not repeated in 2022, as well as a decrease in payroll expenses from 2021 to 2022.

 

Net cash provided by investing activities forthe year ended December 31, 2022, was $373,206. This is primarily attributable to the sale of minority interest in OG Collection, Inc.This was offset by the sale and purchase of digital assets.

 

Net cash provided by financing activities forthe year ended December 31, 2022, and 2021 was $13,405,624 and $17,615,915, respectively. During the year ended December 31, 2022, theCompany’s operations were predominantly financed by net proceeds of $1,781,947 from the exercise of warrants, the proceeds fromsale of common stock and warrants of $5,722,300, and the proceeds from loans and notes of $10,611,124, which were partially offset bythe repayment of notes and loans of $4,693,967. Similarly, the Company’s financing activity for the year ended December 31, 2021,generated $4,358,428 from loans and note issuances, the proceeds of which were partially offset by repayment of notes of $1,398,113.

 

Summary of Statements of Operations for theYear Ended December 31, 2022, and 2021:

 

   Year Ended
December 30,
 
   2022   2021 
Revenue  $4,796,474   $4,299,717 
Cost of revenue  $6,109,206   $5,300,037 
Operating expenses  $(27,718,380)  $(32,368,400)
Loss from operations  $(29,031,112)  $(33,368,720)
Other expenses  $6,645,203   $4,010,433 
Net loss  $(35,676,315)  $(37,379,153)
Loss per common share - basic and diluted  $(1.66)  $(2.98)

 

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Revenue 

 

Revenue was $4,796,474 for the year ended December31, 2022, as compared to $4,299,717 for the year ended December 31, 2021. The increase of $496,757 was attributable to our ecommerce business,which grew from $90,433 in revenue in 2021 to $1,456,593 in 2022. This growth in ecommerce revenues was partially offset by a decreasein agency revenues in a slowing market for influencer-based sales. Vocal revenues were stable though down year over year as the companytransitioned from a pay-to-play marketing model to an organic growth framework.

 

Cost of Revenue

 

Cost of revenue for the year ended December 31, 2022, was $6,109,206as compared to $5,300,037 for the year ended December 31, 2021, an increase of $809,169 attributable to increased supply side costs inour direct-to-consumer product business, a portion of which were due to our increased revenue in our direct-to-consumer businesses.

 

Operating Expenses

 

Operating expenses for the year ended December31, 2022, were $27,718,380 as compared to $32,368,400 for the year ended December 31, 2021. The decrease of $4,650,020 is primarily attributableto a significant reduction in overhead, including an almost $5 million reduction in marketing spend and reductions in research and development.In addition, there was a reduction in stock-based compensation from $9.7 million in 2021 to $4.2 million in 2022. These decreases werepartially offset by an increase in impairment of intangible assets, legal and consulting fees, as well as office rent.

 

Loss from Operations

 

Loss from operations for the year ended December31, 2022, was $29,031,112 as compared to $33,368,720 for the year ended December 31, 2021.

 

Other Expenses

 

Other expenses for the year ended December 31,2022, were $6,645,203 as compared to $4,010,433 for the year ended December 31, 2021. The increase in other expenses was predominantlydue to an increase in accretion of debt discount and issuance cost, interest expense, loss of extinguishment of debt, and loss from settlementof vendor liabilities. This was offset by the decrease from the impairment of investment and change in derivative liability.

 

Net Loss

 

Net loss attributable to common shareholders forthe year ended December 31, 2022, was $35,676,315, or loss per share of $1.66, as compared to a net loss attributable to common shareholdersof $37,703,652, or loss per share of $2.98, for the year ended December 31, 2021.

 

Off-Balance SheetArrangements

 

As of May 12, 2023, we had no off-balance sheet arrangements.

 

Significant AccountingPolicies

 

Our significant accountingpolicies are described in Note 2 of the Financial Statements. If we complete an acquisition, we will be required to make estimates andassumptions typical of other companies. For example, we will be required to make critical accounting estimates related to valuation andaccounting for business combinations. The estimates will require us to rely upon assumptions that were highly uncertain at the time theaccounting estimates are made, and changes in them are reasonably likely to occur from period to period. Changes in estimates used inthese and other items could have a material impact on our financial statements in the future. Our estimates will be based on our experienceand our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differsignificantly from our estimates. For detailed information regarding our critical accounting policies and estimates, see our financialstatements and notes thereto included in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2022. Therehave been no material changes to our critical accounting policies and estimates from those disclosed in our most recent Annual Reporton Form 10-K.

 

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BUSINESS

 

Overview

 

Creatd, Inc. provides economic opportunities forcreators through access to its curated social platform called Vocal, enabling creators to share their stories, build an audience, andbe rewarded.  In addition to revenues generated directly from the platform from subscribers and microtransactions, the existenceof Vocal, and the first-party data it produces, has resulted in the creation of numerous derivative business opportunities for the Company.Secondary opportunities with the potential to eventually exceed the core Vocal revenues include well-known brands activating through theVocal platform under Creatd’s “Vocal for Brands” business unit. In addition to this branded content production, theestablishment of a portfolio of consumer brands owned and operated in-house, will similarly leverage the core data and intelligence derivedfrom the Company’s core Vocal platform.   

 

Creator-Centric Strategy

 

Creatd exists to support the boundless capacityof creators. Our mission is to empower creators by providing best-in-class tools, supportive audience communities, and avenues for monetization.Our creator-first approach is the cornerstone of our culture and purpose and is what drives every decision we make. We are committed tochanneling our resources toward fueling the dreams and ambitions of creators and helping them to unleash their full potential.

 

That’s why we built our flagship proprietarytechnology platform, Vocal—a home base for creators offering an unparalleled suite of digital tools and resources, curated communities,and monetization opportunities.

 

Vocal

 

Our flagship technology, Vocal, provides the Companywith a core platform that is highly scalable on its own but also provides the foundation upon which other revenue sources rely. The firstdirect core business of Vocal has proven to be a scalable revenue source—Creator Subscriptions. The core will be augmented in thenear term with the introduction of the ability for writers and creators to monetize their followings further by directly charging forpremium content such as newsletters. Vocal will charge a recurring commission on these new premium content subscriptions. As discussedabove, the core Vocal platform underlies numerous derivative revenue sources for the Company.

 

Since its launch in 2016, Vocal has quickly becomethe go-to platform for content creators of all kinds, with over 1.5 million registered creators and counting. Whether you’re a blogger,social media influencer, podcaster, founder, musician, photographer, or anything in between, Vocal has everything you need to unleashyour creativity and monetize your content.

 

Creators can opt to use Vocal for free, or upgradeto the premium membership tier, Vocal+. Upon joining Vocal, either as a freemium or premium member, creators can immediately begin toutilize Vocal’s storytelling tools to create and publish their stories, as well as benefit from Vocal’s monetization features. 

 

At Creatd, we believe in rewarding creators fortheir hard work and dedication. That’s why we offer a range of monetization features on Vocal, whereby creators earn in numerousways including i) the number of ‘reads’ their story receives; ii) via Vocal Challenges, or writing contests with cash prizes;iii) receiving Bonuses; iv) by participating in Vocal for Brands marketing campaigns; v) through ‘Subscribe,’ which enablescreators to receive payment directly from their audience via monthly subscriptions and one-off microtransactions; vi) via Vocal’sAmbassador Program, which enables creators to be compensated for referring new premium members. But what sets Vocal apart from other platformsis our commitment to innovation and scalability. Built on Keystone, the same open-source framework used by industry leaders in the SaaSspace, Vocal’s technology is designed for speed, sustainability, and scalability. And with our capital-light infrastructure andfocus on research and development, we are able to continuously improve and enhance the platform, without incurring the operational coststhat have weighed down legacy media platforms.

 

Creatd firmly believes that the future belongsto creators. And with Vocal, we’re proud to be leading the charge in providing them with the tools, resources, and opportunitiesthey need to succeed.

 

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Branded Content

 

In developing our creator ecosystem, we came tounderstand that like individual creators, all brands have a unique story to tell. That’s why we’ve developed Vocal for Brands,our in-house content studio that specializes in creating best-in-class organic marketing campaigns. Our approach combines the productionof branded content influencer and performance marketing initiatives that work together to increase sales, revenue, visibility, and brandaffinity for our clients.

 

We work with leading brands to pair them withour network of creators, tapping into their communities to help share their stories in a way that is engaging, direct-response driven,and non-interruptive. Similarly, through Sponsored Challenges, we prompt the creation of thousands of high-quality stories that are centeredaround the brand’s mission, further disseminated through creators’ respective social channels and promotional outlets.

 

Our campaigns are amplified with the help of Vocal’sfirst-party data insights, allowing us to create highly targeted, segmented audiences for brands with optimal results. 

 

Consumer Products Group

 

At Creatd, we are proud of our internally ownedand operated e-commerce businesses and associated technology and infrastructure. Our Consumer Products Group has grown to become a significantrevenue contributor and we continue to invest in our portfolio to support direct-to-consumer brands with a wide range of services includingdesign and development, marketing and distribution, and go-to-market strategies. We additionally remain on the lookout for up-and-comingbrands that can potentially be acquired and easily consolidated into our shared supply chain, resources, and infrastructure to furtherbroaden our portfolio.

 

The Company’s Consumer Products portfoliocurrently includes:

 

Camp, a direct-to-consumer (DTC) food brandwhich creates healthy upgrades to classic comfort food favorites. Each of Camp’s products is created with servings of vegetablesand contains Vitamins A, C, D, E, B1, and 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, VeganCheezy 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. Eachbeverage in Dune’s product line is meticulously crafted with functional ingredients that nourish skin from the inside out and enhanceone’s natural glow. During 2022, Dune has continued to advance its retail and wholesale distribution strategy, securing numerouspartnerships including with lifestyle retailer Urban Outfitters, Equinox, and the Los Angeles-based Erewhon Market.

 

Basis is a hydrating electrolyte drinkmix that was acquired in the first quarter of 2022. This brand has a history of strong sales volume both on the brand’s websiteas well as through third-party distribution channels such as Amazon.

 

Brave is a plant-based food companythat provides convenient and healthy breakfast food products. Our Company acquired 100% of the membership interests of Brave Foods, LLCin September 2022. What started as a search for a better morning routine evolved into a business serving thousands of go-getters of everytype. We are thrilled to have these amazing brands as part of our portfolio and we are excited to continue expanding our Consumer Productsportfolio.

 

IP Development and Production

 

At Creatd, we’re always looking for waysto bring our creators’ stories to new audiences across different media. Our IP Development and Production efforts involve partneringwith our top creators to develop their content for television, film, podcasts, and print. With our cutting-edge Vocal platform, we haveaccess to a wealth of intellectual property that’s constantly being curated by a blend of human moderation and advanced machinelearning models. Our Vocal technology allows us to analyze community, creator, and audience insights to surface the best candidates fortransmedia adaptations. We’re committed to leveraging our vast library of compelling stories to create engaging and impactful contentacross multiple platforms. As of early 2023, Creatd announced a series of newly released and production projects. They include podcasts,books, and Web 3.0 opportunities.  

 

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Application of First-Party Data

 

First-party data is information that a creatorplatform collects directly from its users, such as their demographics, interests, and behaviors. By utilizing this data, Vocal’screator platform can gain insights into its users’ preferences and tailor marketing campaigns accordingly.

 

For example, a large segment of Vocal users isinterested in health and fitness, as evidenced through the Longevity community. This information can additionally be used not only tocreate more personalized experiences for Vocal audiences, but additionally to help fitness-oriented brands create targeted campaigns forworkout equipment, supplements, or fitness apparel. With our ability to understand users’ niche interests and behaviors, the platformcan create campaigns that resonate with its audience and drive better engagement and conversions.

 

The use of first-party data also helps the creatorplatform maintain a closer relationship with its users, as it enables a more personalized experience of content consumption and engagementfor Vocal users. This can lead to higher retention rates, increased user loyalty, and improved user satisfaction. Finally, our businessintelligence team pairs first-party Vocal data with third-party data from distribution platforms such as Instagram, TikTok, Twitter, andSnapchat providing a more granular profile of creators, brands, and audiences. By generating this valuable first-party data, the Companycan continually enrich and refine its targeting capabilities for branded content marketing and creator acquisition, specifically, to reducecreator acquisition costs (CAC) and subscriber acquisition costs (SAC).

 

Competitive Advantage 

 

The idea for Vocal came as a response to whatCreatd’s founders recognized as systemic flaws inherent to the digital media industry and its operational infrastructures, and thecompetitive advantage that a closed and safe platform ecosystem would provide. First-party data is widely understood as a tool for companiesto collect and analyze data about their users directly from the source, providing valuable insights into their behaviors, preferences,and interests. Importantly, by leveraging this data within a closed and safe platform ecosystem, companies can create more personalizedexperiences for their users, deliver more relevant content and advertising, and increase user engagement and retention.

 

A secondary, and crucial, advantage of a closedecosystem is that it allows companies to control the user experience and ensure a high level of safety and security. By controlling thedata that is shared and the interactions that take place within the ecosystem, companies can minimize the risk of fraud, abuse, and otherharmful behaviors that can undermine user trust and loyalty. This can be particularly important in industries where user safety and privacyare paramount, such as social networking, e-commerce, and financial services.

 

Finally, the existence of Vocal and its ecosystemenables the Company to optimize our operations and increase efficiencies, effectively creating a more defensible business model by reducingthe risk of competition and disintermediation. By controlling the data and interactions within the ecosystem, we create barriers to entryfor competitors and reduce the risk of users migrating to other platforms. This can be particularly important in an industry such as Creatd’s,in which network effects and economies of scale are critical to success, such as social networking, e-commerce, and digital advertising.

 

Leveraging these advantages has enabled the Companyto differentiate itself in the market, attract and retain users, and drive sustainable growth and profitability.

 

Acquisition Strategy

 

Creatd’s strategic business line expansionhas led to the acquisition of several complementary businesses. These acquisitions have allowed Creatd to expand its reach and diversifyits revenue streams, enabling the company to leverage its internal resources and expertise to drive continued growth. In addition, theacquisitions have provided opportunities for cost synergies and operational efficiencies, further enhancing the company’s profitabilityand positioning it for long-term success.

 

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Revenue Model

 

Creatd’s revenues are primarily generated through:

 

Platform: Creatd’s flagshiptechnology product, Vocal, generates revenues through subscription fees from premium Vocal creators, a membership program known as Vocal+.The Vocal+ subscription offering provides creators with increased monetization and access to premium tools and features. At approximately$10 per month, Vocal+ offers creators a strong value proposition for freemium users to upgrade, while providing a scalable source of monthlyrecurring gross revenue for Creatd. Additional platform-based revenues are generated from Tipping and other transactions that occur onthe platform. For each such transaction, which are designed to enable Vocal audiences to engage and support their favorite creators, Vocal takes platform processing fees ranging from approximately 3% to 7%.

 

E-commerce: The majority of the Company’se-commerce revenues comes from sales associated with Creatd’s portfolio of internally owned and operated e-commerce businesses,Camp, Dune, Basis, and Brave. Additionally, the Company’s e-commerce strategy involves revitalizing archival imagery and media contentin dormant legacy portfolios. Creatd maintains an exclusive license to leverage the stories housed on Vocal, reimagining them for films,episodic shows, games, graphic novels, collectibles, books, and more.

 

Agency: The Company derives revenuesfrom marketing partnerships through its internal branded content studio, Vocal for Brands, which specializes in pairing leading brandswith select Vocal creators to produce content marketing campaigns, including sponsored Challenges, that leverage the power of Vocal. Brandedstories and Challenges are distributed to a targeted audience based on Vocal’s first-party data, and are optimized for conversionsto maximize revenue growth.

 

Corporate History and Information

 

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

 

On February 5, 2016 (the “Merger ClosingDate”), we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GPH Merger Sub, Inc., a Nevadacorporation and our wholly-owned subsidiary (“Merger Sub”), and Jerrick Ventures, Inc., a privately-held Nevada corporationheadquartered in New Jersey (“Jerrick”), pursuant to which the Merger Sub was merged with and into Jerrick, with Jerrick survivingas our wholly-owned subsidiary (the “Merger”). Pursuant to the terms of the Merger Agreement, we acquired, through a reversetriangular merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “JerrickShareholders”), 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 ClosingDate, 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 13,030 shares of our common stock held by Mr. Campbell. In addition, Mr. Campbellassumed all of our debts, obligations and liabilities, including any existing prior to the Merger, pursuant to the terms and conditionsof the Spin-Off Agreement.

 

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

  

On February 28, 2016, we changed our name to JerrickMedia Holdings, Inc. to better reflect our new business strategy.

 

On July 25, 2019, we filed a certificate of amendmentto our articles of incorporation, as amended (the “Amendment”), with the Secretary of State of the State of Nevada to effectuatea one-for-twenty (1:20) reverse stock split (the “Reverse Stock Split”) of our common stock without any change to its parvalue. The Amendment became effective on July 30, 2019. The number of shares of authorized common stock was proportionately reduced asa result of the Reverse Stock Split. The number of shares of authorized preferred stock was not affected by the Reverse Stock Split. Nofractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to thenext whole share.

 

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. On March 3, 2022, the Company settled the Seller’s ChoiceNote for a cash payment of $799,000.

 

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

 

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

 

On September 9, 2020, the Company filed a certificateof amendment with the Secretary of State of the State of Nevada to change our name to “Creatd, Inc.”, which became effectiveon 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 subsequentlyrebranded as Camp. Camp is a direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. Theresults 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 operationshave 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 of Dune, Inc. Dune, Inc. is a direct-to-consumer brand focused on promotingwellness through its range of health-oriented beverages.

 

On October 3, 2021, the Company acquired anadditional 29% of the membership interests of Dune, Inc., bringing our total membership interests to 50%. Dune, Inc., has beenconsolidated due to the Company’s ownership of 50% voting control, and the results of operations have been included since thedate 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 adirect-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Denver Bodega, LLC has been consolidateddue to the Company’s ownership of 100% voting control, and the results of operations have been included since the date of acquisitionin 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 theCompany’s ownership of 51% voting control, and the results of operations have been included since the date of acquisition inthe Statement of Operations.

 

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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 providesconvenient 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.

 

On December 13, 2022, an investor entered intoa Subscription Agreement whereby it purchased from OG Collection, Inc., a subsidiary of the Company (“OG”), 150,000 sharesof common stock of OG for a purchase price of $750,000, and, in connection therewith OG, the Company, and the Investor entered into aShareholder Agreement.

 

On January 9, 2023, the Company acquired an additional51% of the equity interest in WHE Agency, Inc. bringing our total ownership to 95%. WHE Agency, Inc., has been consolidated due to theCompany’s ownership of over 50% voting control, and the results of operations have been included since the date of acquisition inthe Statements of Operations.

 

On January 25, 2023, the Company acquired an additional23% equity interest in Dune, Inc. bringing our total ownership to 85%. Dune, Inc., has been consolidated due to the Company’s ownershipof over 50% voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations.

 

On February 1, 2023, an investor entered intoa Subscription Agreement whereby it purchased from OG Collection, Inc., a subsidiary of the Company (“OG”), 50,000 sharesof common stock of OG for a purchase price of $250,000, and, in connection therewith OG, the Company, and the Investor entered into aShareholder Agreement.

 

On February 3, 2023, the Company acquired an additional5% of the membership interests of Orbit Media, LLC., bringing our total membership interests to 56%. Orbit Media LLC., has been consolidateddue to the Company’s ownership of 85% voting control, and the results of operations have been included since the date of acquisitionin the Statements of Operations.

 

Recent Developments

 

May 2022 Securities Purchase Agreement

 

On May 31, 2022 the Company entered into and closedsecurities purchase agreements with eight accredited investors, whereby the Investors purchased from the Company for an aggregate of $3,600,036in subscription amount (i) debentures in the principal amount of $4,000,000; (ii) 2,000,000 Series C Common Stock Purchase Warrants topurchase shares of the Company’s common stock, par value $0.001 per share; and (iii) 2,000,000 Series D Common Stock Purchase Warrantsto purchase shares of Common Stock. The Company and the Investors also entered into registration rights agreements pursuant to the securitiespurchase agreements. The Debentures had an original issue discount of 10%, 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 Stockat a conversion price of $2.00 per share, subject to adjustment upon certain events including a one-time adjustment to the price of theCommon Stock offered in the Rights Offering (as defined therein), with such adjusted conversion price not to be lower than $1.00. TheWarrants are exercisable for a term of five years from the initial exercise date of November 30, 2022, until November 30, 2027. The SeriesC Warrants are exercisable at an exercise price of $3.00, subject to adjustment upon certain events including a one-time adjustment tothe price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $0.96. The SeriesD Warrants are exercisable at an exercise price of $6.00 subject to adjustment upon certain events including a one-time adjustment tothe price of the Common Stock offered in the Rights Offering, with such adjusted exercise price not to be lower than $0.96. The Warrantsprovide for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock.The securities purchase agreements contain customary representations, warranties, covenants, indemnification and other terms for transactionsof a similar nature. Additionally, in connection with the securities purchase agreements, the subsidiaries of the Company delivereda guarantee in favor of the Investors whereby each such subsidiary guaranteed the full payment and performance of all obligations of theCompany pursuant to the securities purchase agreements. The Debentures, Warrants, Common Stock underlying the Debentures and the CommonStock underlying the Warrants were not registered under the Securities Act, but qualified for exemption under Section 4(a)(2) and Rule506 promulgated thereunder. 

 

July 2022 Securities Purchase Agreement

 

On July 25, 2022, the Company, entered into andclosed securities purchase agreements with five accredited investors, whereby the Investors purchased from the Company for an aggregateof $1,935,019 in subscription amount (i) debentures in the principal amount of $2,150,000; (ii) 1,075,000 Series E Common Stock PurchaseWarrants to purchase shares of the Company’s common stock, par value $0.001 per share; and (iii) 1,075,000 Series F Common StockPurchase Warrants to purchase shares of Common Stock. The Company and the investors also entered into registration rights agreements pursuantto the securities purchase agreements. 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 Stockat a conversion price of $2.00 per share, subject to adjustment upon certain events including a one-time adjustment to the price of theCommon Stock offered in the rights offering, with such adjusted conversion price not to be lower than $1.25. The Warrants are immediatelyexercisable for a term of five years until July 25, 2027. The Series E Warrants are exercisable at an exercise price of $3.00, subjectto adjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the rights offering, withsuch adjusted exercise price not to be lower than $1.01. The Series F Warrants are exercisable at an exercise price of $6.00 subject toadjustment upon certain events including a one-time adjustment to the price of the Common Stock offered in the rights offering, with suchadjusted exercise price not to be lower than $1.01. The warrants provide for cashless exercise to the extent that there is no registrationstatement available for the underlying shares of Common Stock. Additionally, in connection with the security purchase agreements, thesubsidiaries of the Company delivered a guarantee in favor of the investors whereby each such subsidiary guaranteed the full payment andperformance of all obligations of the Company pursuant to the securities purchase agreements. The debentures, warrants, Common Stockunderlying the debentures and the Common Stock underlying the warrants were not registered under the Securities Act, but qualified forexemption under Section 4(a)(2) and Rule 506 promulgated thereunder. 

 

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Trigger of Price Reset

 

On July 29, 2022, the Company announced that itwas not moving forward with its previously announced Rights Offering. In doing so, it triggered a price reset in the July 2022 Financingand the May 2022 Securities Purchase Agreement. As a result of this price reset, the May 2022 Securities Purchase Agreement debenturesnow 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 pricereset, the July 2022 Financing debentures now have a conversion price of $1.25, and both the Series E and Series F warrants have exerciseprices of $1.01.

 

Registered Direct Offering

 

On September 15, 2022, the Company entered intoand closed a securities purchase agreement with five accredited investors resulting in the raise of $800,000 in gross proceeds to theCompany. Pursuant to the terms of the securities purchase agreement, the Company agreed to sell in a registered direct offering an aggregateof 4,000,000 shares of the Company’s common stock, par value $0.001 per share. In a concurrent private placement, the Company issuedto such investors warrants to purchase up to 4,000,000 shares of Common Stock, representing 100% of the shares of common stock purchasedin the offering. The warrants and the shares of common stock issuable upon the exercise of the warrants are not being registered underthe Securities Act of 1933, as amended. Gross proceeds from the offering totaled $800,000, before deducting offering expenses. The warrantsare 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 statementavailable for the underlying shares of Common Stock.

 

Restructuring Agreement

 

On September 15, 2022, in connection with theoffering, the Company entered into an agreement with the holders of certain of the Company’s previously issued securities (the “RestructuringAgreement”).

 

The Restructuring Agreement, among other things,modified certain provisions of the following securities of the Company:

 

(i)Original Issue Discount SeniorConvertible 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”);

 

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Pursuant to the Restructuring Agreement, the Companyand the Holders agreed to, among other things, to (i) reduce the conversion price of the Debentures down to $0.20, subject to adjustmentfor reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock; (ii) reducethe exercise price of the Restructured Warrants 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; (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 rightsoffering 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 RestructuringAgreement, (i) the Company entered into a Registration Rights Agreement (“Registration Rights Agreement”), providing for thefiling of a registration statement covering the Restructured Warrants and shares underlying the Warrants by not later than 10 tradingdays after the date of the Registration Rights Agreement or the earliest practical date on which the Company is permitted by Commissionguidance to file such registration statement; (ii) the Company and its subsidiaries entered into a Security Agreement (the “SecurityAgreement”), 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 subsidiaryguaranteed the full payment and performance of all obligations of the Company pursuant to the Debentures.

 

Each of our directors and officers entered intolock-up agreements (the “Lock-up Agreements”) in favor of the Holders, whereby they 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 sharesof 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.

 

October 2022 Common Stock Purchase Agreement,Securities Purchase Agreement and Promissory Note

 

On October 20, 2022, the Company entered intoa 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 followingthe date of effectiveness of the Registration Statement, the Investor purchase up to $15,000,000 of the Company’s common stock,par value $0.001 per share, pursuant to drawdown notices, covering the registrable securities. The purchase price of the shares underthe Investment Agreement is equal to 82% of the lowest volume weighted average price (VWAP) during the last ten trading days after theCompany delivers to the Investor a put notice or drawdown notice in writing requiring Investor to purchase shares of the Company, subjectto the terms of the Investment Agreement. On October 20, 2022, the Company also entered into a securities purchase agreement with theInvestor, pursuant to which the Company issued to the Investor on that date a Promissory Note (the “Note”) in the principalamount of $300,000 in exchange for a purchase price of $255,000, which the Investor funded on October 20,2022. The proceeds of theNote to be used by the Company for general working capital purposes. The Note bears interest at the rate of 10% per annum.  Startingon the fifth month anniversary of the funding of the Note, and for the next six months thereafter, the Company will make seven equal monthlypayments of $47,142.85 to the Investor. On October 20, 2022, in connection with the entry by the Company and the Investor into the economicagreements, (i.e., the Investment Agreement, the Purchase Agreement, and the Note and the funding thereof), the Company issued800,000 shares of its common stock to the Investor.

 

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October 2022 Securities Purchase Agreement;Side Letter

 

On October 24, 2022, the Company entered intoand closed a securities purchase agreement with one accredited investor, whereby the Investor purchased from the Company for an aggregateof $1,500,000 in subscription amount, an unsecured debenture in the principal amount of $1,666,650. The Company and the Investor alsoentered into a registration rights agreement pursuant to the securities purchase agreement. The debenture has an original issue discountof 10%, a term of six months with a maturity date of April 24, 2023, may be extended by six months at the Company’s option subjectto certain conditions, and are convertible into shares of Common Stock at a conversion price of $0.20 per share, subject to adjustmentupon certain events. The Company also entered into a side letter agreement with the holders of debentures of the Company, the Series CWarrants 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 agreementeach 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 30days after the date on which the registration statement registering for resale the shares of the Company’s common stock underlyingthe debenture is declared effective by the Securities and Exchange Commission. Additionally, the letter agreement, provides that the MayInvestors and July Investors have agreed to a further lock up of such shares for a further 30 days upon the receipt of a certain amountof the proceeds from future potential issuances of debentures, common stock or similar securities by the Company. Additionally, pursuantto the letter agreement, the May Investors and the July Investors 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 andJuly 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 reductionin 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 numberof 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 ReplacementWarrants are unchanged from the date as set forth in the respective exchanged Series C, Series D, Series E or Series F Warrant. Thedebenture, and the Common Stock underlying the warrants were not registered under the Securities Act, but qualified for exemption underSection 4(a)(2) and Rule 506 promulgated thereunder. 

 

November 2022 Warrant Amendment and Issuance

 

On November 18, 2022, the Company entered intoa letter agreement with the respective holders of an aggregate of 471,953 warrants issued as placement agent fees in connection with theCompany’s entry into securities purchase agreements with 33 accredited investors, whereby, at the closing, the investors agreedto purchase from the Company an aggregate of (i) 7,778 shares of the Company’s Series E Convertible Preferred Stock, par value $0.001per share (the “Series E Preferred Stock”); and (ii) 2,831,721 warrants to purchase shares of the Company’s common stock,pursuant to which the exercise price of such warrants was amended and such warrants were immediately exercised. Additionally, pursuantto the letter agreement, the Company issued to such warrant holders 471,953 new warrants, exercisable immediately, for a term of 60 months,at a price of $0.77 per share, subject to customary adjustment provisions. As a result of the triggering of such adjustment provisions,the number of warrants increased to 1,817,019 and the exercise price decreased to $0.20.

 

December 2022 Securities Purchase Agreement

 

On December 12, 2022, the Company entered intoand closed a securities purchase agreement with one accredited investor, whereby the Investor purchased from the Company for an aggregateof $750,000 in subscription amount, an unsecured debenture in the principal amount of $750,000. The Company and the investor also enteredinto a registration rights agreement pursuant to the securities purchase agreement. The debenture has a term of six months with a maturitydate of June 12, 2023, which may be extended by six months at the Company’s option subject to certain conditions and monthly redemptionoptions at the election of the holder and are convertible into shares of Common Stock at a conversion price of $0.20 per share, subjectto adjustment upon certain events.

 

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December 2022 Warrant Amendment and Issuance

 

On December 22, 2022, the Company entered intoa letter agreement with the respective holders of an aggregate of 4,775,000 warrants. Pursuant to the letter agreement, in exchange forthe immediate exercise of the 4,775,000 warrants at an exercise price of $0.20, the Company issued to such warrant holders 4,775,000 newwarrants, exercisable immediately, for a term of 60 months, at a price of $0.77 per share, subject to customary adjustment provisions.

 

Dorado Goose Transaction

 

On January 18, 2023, the Company, entered intoand closed two securities purchase agreements with Dorado Goose LLC or the investor, whereby the investor purchased from the Company foran aggregate of $1,500,000 in subscription amount, (i) an unsecured debenture in the principal amount of $847,500 and (ii) 1,562,500 sharesof common stock. The Company and the investor also entered into a registration rights agreement pursuant to the securities purchase agreements.The subsidiaries of the Company delivered a guarantee in favor of the investor whereby each such subsidiary guaranteed the full paymentand performance of all obligations of the Company pursuant to the debenture. The debenture has an original issue discount of 13%,has a maturity date of June 13, 2023, may be extended by six months at the Company’s option subject to certain conditions, and areconvertible into shares of common stock at a conversion price of $0.20 per share, subject to adjustment upon certain events. Thedebenture and the common stock were not registered under the Securities Act but qualified for exemption under Section 4(a)(2) and Rule506 promulgated thereunder. 

 

Nasdaq Notice of Delisting

 

On January 4, 2021, the Company received a letterfrom the staff of The Nasdaq Capital Market (the “Exchange”) notifying the Company that the Exchange had determined to delistthe Company’s common stock and warrants from the Exchange based on the Company’s non-compliance with the Exchange’s(i) $5 million stockholders’ equity requirement for initial listing pursuant to Nasdaq Listing Rule 5505(b), (ii) the $2.5 millionstockholders’ equity requirement or any of the alternatives for continued listing pursuant to Nasdaq Listing Rule 5550(b), and (iii)the Company’s failure to provide material information to the Exchange pursuant to Nasdaq Listing Rule 5250(a)(1). On February 11,2021, the Company met with the Exchange’s Hearings Panel (the “Panel”) with respect to such determination, in accordancewith the Exchange’s rules and, pursuant to such request by the Company to appeal, the delisting of the Company’s securitiesand the Form 25 Notification of Delisting filing was stayed pending the Panel’s decision. On March 9, 2021, the Exchange notifiedthe Company that the Panel had determined to continue the listing of the Company on the Exchange. Notwithstanding the Panel’s determinationto continue the listing of the Company’s securities on the Exchange, the Panel issued a public reprimand letter to the Company,pursuant to Listing Rule 5815(c)(1)(D), based on its finding “that the Company failed to meet the initial listing criteria withrespect to stockholders’ equity and failed to provide Nasdaq with material information with respect to that deficiency.” Specifically,the Panel found that the Company failed to comply with Listing Rule 5250(a)(1), requiring it to notify Nasdaq of certain significant developmentsthat led to the Company’s prior representations about its ability to satisfy the initial listing requirements being inaccurate.In reaching its determination to continue the listing of the Company on Nasdaq, the Panel acknowledged that the Company had since demonstratedcompliance with the initial listing requirement for stockholders’ equity and all other applicable initial listing requirements.The Panel also determined that the violations were inadvertent and that the Company had relied on advice of counsel at the time in itsinteractions with the Nasdaq staff (“Staff”). The Panel also acknowledged the Company’s efforts to implement structuralchanges within the Company to avoid similar misstatements in the future and that would allow for proper accounting and disclosure on anongoing basis. A Panel Monitor was implemented under Listing Rule 5815(d)(4)(A) for a period of one year from the date of the Letter.In the event that the Company became deficient with respect to any continued listing requirement, the Company would not be afforded theopportunity to submit a compliance plan for Staff’s consideration and Staff would issue a Delist Determination Letter and promptlyschedule a new hearing under Listing Rule 5810(c)(2), at which the Company may present a compliance plan for the Panel’s consideration.In the event of a new hearing, any suspension or delisting action would be stayed pending the completion of the hearings process and theexpiration of any additional extension period granted by the Panel following the hearing.

 

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On March 1, 2022, the Company received a letterfrom the staff of the Exchange notifying the Company that the Exchange had determined to delist the Company’s common stock fromthe Exchange based on the Company’s Market Value of Listed Securities for the 30-consecutive day period between January 15, 2022and February 25, 2022 falling short of the requirements under Listing Rule 5550(b)(2) (the “Rule”). Although a 180-day periodis typically allowed for an issuer to regain compliance, the Company was not eligible to use such compliance period, as the Exchange hadinstituted a Panel Monitor through March 9, 2022.

 

On April 22, 2022, the Company received a letterfrom the Exchange notifying the Company that the Nasdaq Hearing Panel had determined to continue the listing of the Company on the Exchange,subject to the following conditions: (i) on or before May 16, 2022, the Company would file its Quarterly Report on Form 10-Q for the periodended March 31, 2022 demonstrating compliance with Nasdaq Listing Rule 550(b)(1) requiring shareholders’ equity of $2.5 millionand (ii) on or before August 29, 2022, the Company would file a Form 8-K documenting the successful completion of any fund-raising activitythat had taken place since April 14, 2022 and the Company’s long-term compliance with the continued listing requirements of theNasdaq Capital Market. The Panel advised that August 29, 2022 represented the full extent of the Panel’s discretion to grant continuedlisting during the time the Company was non-compliant and should the Company fail to demonstrate compliance by such date, the Panel wouldissue a final delist determination and the Company would be suspended from trading on the Exchange.

 

On September 2, 2022, the Company received a letterfrom the Exchange notifying the Company that the Nasdaq Hearings Panel had determined to delist the Company’s common stock fromthe Exchange, based on the Company’s failure to comply with the listing requirements of Nasdaq Rule 5550(b)(1) as a result of theCompany’s shareholder equity deficit for the period ended June 30, 2022, as demonstrated in Company’s Quarterly Report onForm 10-Q filed on August 15, 2022, following the Company having not complied with the market value of listed securities requirement inNasdaq Rule 5550(b)(2) on March 1, 2022, while the Company was under a Panel Monitor, as had been previously disclosed, suspension oftrading in the Company’s shares on the Exchange would be effective at the opening of business on September 7, 2022. Followingpassage of the proscribed 15-day time period for appeal as stated in the letter, on October 26, 2022, Nasdaq completed the delisting byfiling a Form 25 Notification of Delisting with the Securities and Exchange Commission. The Company’s receipt of the Letterdoes not affect the Company’s business, operations or reporting requirements with the Commission.

 

Quotation on OTCQB

 

Effective on September 7, 2022, our common stockis quoted on the OTCQB Marketplace operated by OTC Markets Group Inc. (“OTCQB”) under the symbol “CRTD.” EffectiveApril 4, 2023, our symbol changed to “VOCL.”

 

Board of Directors and Management

 

On June 1, 2022, the Board of Directors approvedthe Creatd, Inc. 2022 Omnibus Securities and Incentive Plan. On November 10, 2022, the Board of Directors approved an amendment to theCreatd, Inc. 2022 Omnibus Securities and Incentive Plan. The plan provides for the granting of distribution equivalent rights, incentiveshare options, non-qualified share options, performance unit awards, restricted share awards, restricted share unit awards, share appreciationrights, tandem share appreciation rights, unrestricted share awards or any combination of the foregoing, as may be best suited to thecircumstances of the particular employee, director or consultant as provided in the plan. the aggregate number of common shares (includingcommon shares underlying options designated as incentive share options or non-qualified share options) that may be issued under the planshall not exceed the sum of (i) 30,000,000 common shares plus (ii) an annual increase on the first day of each calendar year beginningJanuary 1, 2023 and ending on and including January 1, 2031 equal to the lesser of (a) five percent (5%) of the common shares outstandingon the final day of the immediately preceding calendar year, and (b) such smaller number of common shares as determined by the Board.

 

On January 18, 2023, the Company held its AnnualMeeting of Stockholders. The results of the matters voted on by the Company’s stockholders included the election of Directors toserve on the Company’s board; Amendment to our Articles of Incorporation to Increase Authorized Stock; and the approval of Creatd2022 Omnibus Securities and Incentive Plan.

 

On February 8, 2023 (the “Effective Date”),the Board of Directors (the “Board”) of Creatd, Inc., a Nevada corporation (the “Company”) approved, based onthe recommendation of the Compensation Committee (the “Committee”) of the Board, certain equity and cash compensation forcertain key members of the Company’s management team and non-employee directors as discussed below.

 

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The Company has made certain equity awards tothe key members of the Company’s management team (the “Equity Awards”), comprised of 10,692,308 shares of the Company’scommon stock (“Common Stock”) to Jeremy Frommer, Chief Executive Officer of the Company, 5,894,788 shares of Common Stockto Justin Maury, Chief Operating Officer of the Company, and 1,663,223 shares of Common Stock to Chelsea Pullano, Chief Financial Officerof the Company. As a condition to receiving the Equity Awards, each such officer agreed to lock-up terms such that only 10% of the sharescomprising such individual’s Equity Award can be sold until 90 days after the date of the issuance of the Equity Awards (the “LockUp Period”) and that during the Lock Up Period, and for nine months thereafter, each such individual can only sell the number ofshares equal to the lesser of 5% of the trailing 30 day average volume or 25,000 shares in any single trading day. Additionally, beginningone year after the issuance of the Equity Awards, each individual receiving Equity Awards can only sell the number of shares equal tothe lesser of 5% of the trailing 30-day average volume or 40,000 shares in any single trading day (the “Volume Restrictions”).

 

The Company will also pay cash bonuses to thekey members of the Company’s management team (the “Executive Bonuses”) in the amounts of $125,000 to Jeremy Frommer,$62,500 to Justin Maury and $31,250 to Chelsea Pullano, to be paid out on a discretionary basis as determined by the Committee. In addition,each of Jeremy Frommer and Justin Maury will receive monthly housing stipends in the amount of $6,300 (the “Housing Stipends”).

 

Additionally, the Company will make certain cashpayments and equity awards to the non-employee members of the Board (the “Director Compensation”), comprised of annual cashcompensation of $140,000, payable in monthly installments, an annual grant of $140,000 in Common Stock, issued quarterly and priced atthe average of the last five trading days of the previous quarter. In the fiscal year 2023, each independent director shall be eligiblefor a cash bonus of $20,000, which shall be paid on a discretionary basis. As a share bonus, 1,700,000 shares of Common Stock shall beissuable to Peter Majar and 1,000,000 shares of Common Stock shall be issuable to Erica Wagner, with such shares subject to the same lock-upand volume restrictions as the Equity Awards.

 

The Company will offer the chair of the auditcommittee of the Board (the “Audit Committee Chair”) an additional annual cash compensation of $20,000, payable in monthlyinstallments, and an annual grant of $20,000 in Common Stock, issued quarterly and priced at the average of the last five trading daysof the previous quarter. 

 

All equity awards made to the independent directorsof the Company are made pursuant to the Creatd, Inc. 2022 Omnibus Securities and Incentive Plan (the “Plan”).

 

The February 2023 Securities Purchase Agreement

 

On February 1, 2023, the Company entered intoand closed a securities purchase agreement with one accredited investor, whereby the Investor purchased from the Company for an aggregateof $1,250,000 in subscription amount, an unsecured debenture in the principal amount of $1,250,000. The Company and the investor alsoentered into a registration rights agreement pursuant to the securities purchase agreement. The debenture has a term of six months witha maturity date of August 1, 2023, which may be extended by six months at the Company’s option subject to certain conditions andmonthly redemption options at the election of the holder and are convertible into shares of Common Stock at a conversion price of $0.20per share, subject to adjustment upon certain events.

 

Listing on Upstream

 

On February 14, 2023, the Company completed thelisting on Upstream of the Company’s shares of common stock, comprising the same class of common shares currently registered withthe Commission that are currently issued and outstanding. Upstream is the trading app for digital securities and NFTs powered by HorizonFintex and MERJ Exchange Limited (“MERJ”). The shares listed on Upstream are represented on MERJ Exchange as a “digitalsecurity” in the form of uncertificated securities that have the same shareholder rights as all other shares of such issuer. Itis a representation of common stock in an uncertificated form. The Company has not issued any new securities pursuant to the listing onUpstream. All common shares have been registered with the Commission and comprise the entire number of shares of the Company issued andoutstanding and all of the Company’s shares of common stock have the same CUSIP/ISIN number.

 

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MERJ operates Upstream as a fully regulated andlicensed integrated securities exchange, clearing system and depository for digital and non-digital securities. MERJ is an affiliate ofthe World Federation of Exchanges (WFE), recognized by HM Revenue and Customs UK, a full member of the Association of National NumberingAgencies (ANNA) and a Qualifying Foreign Exchange for OTC Markets in the US. MERJ is also a member of the Sustainable Stock ExchangesInitiative. MERJ is regulated in the Seychelles by the Financial Services Authority Seychelles, https://fsaseychelles.sc/. MERJ is notregistered or regulated in any manner in the United States.

 

Upstream is accessible via the major app stores.After downloading the application, users will have access to review all the securities that trade on Upstream including trading activity,regulatory disclosures and other corporate information. Further there is a direct link of information on our Company at https://investors.creatd.com/resources/faqs/default.aspx.This includes a listing particulars document, which is a required disclosure as part of the requirements of MERJ Exchange Limited as definedby Securities Act 2007 of the Seychelles (as amended) and any other measure prescribed thereunder by the Minister or the Securities Authority.Investors are encouraged to review the listing particulars that may be found at the following link: https://upstream.exchange/creatd.

 

Pursuant to Upstream’s policy, terms andconditions, investors based in the United States or Canada are prohibited from buying shares on the Upstream secondary market.However, U.S.- and Canada-based investors may sell securities they previously purchased or acquired from an issuer, stockbrokeror stock exchange that has dual-listed on Upstream. U.S.- or Canada-based investors are those investors who citizens of the United Statesor Canada, including those living abroad, or permanent residents of the United States or Canada. To the extent shares had been depositedat a time prior to Upstream’s policy prohibiting such deposits, such shares cannot be sold at this time, and such shareholder wouldneed to have such shares returned to the Company’s transfer agent to complete a sale.

 

The Press Release stated, “Global investorscan now trade by downloading Upstream from their preferred app store at https://upstream.exchange/, creating an account by tapping signup...”. This was not to suggest that investors based in the United States or Canada can buy shares on the Upstream secondarymarket, but to suggest that investors who are not U.S.- and Canada-based can trade on Upstream.

 

Investors who have deposited shares with Upstreammay subsequently elect, at any time, to transfer such shares to from Upstream to the Company’s transfer agent for trade via theirU.S. broker.

 

The Company is providing our investors with detailedinformation on the process on how to deposit and trade shares on Upstream directly on our website at the following link: https://investors.creatd.com/resources/faqs/default.aspx.

 

Shares transferred into Upstream will be effectedvia the Company’s Transfer Agent, Pacific Stock Transfer Company (“Pacific”). For shares already recorded with Pacific,investors can transfer such shares to Upstream by taking the following steps: Open Upstream, then choose Investor: Manage Securities,Deposit Securities and, next, Enter the Company’s Ticker Symbol and Number of Shares their requesting to deposit. Investors wouldthen confirm the shares are unrestricted or “free trading” and tap Submit. The value of each share deposit request on theUpstream app may not exceed $100,000, with such value determined by the closing price of the security on the previous trading day multipliedby the number of shares being deposited. Once the investor makes the share deposit request using the Upstream app, and the transfer agenthas the investor’s shares in ‘book entry’, the deposit is typically processed within 48 hours during business days.Once the transfer has been completed investors will receive a push notification in the Upstream app and see the share deposit in theirUpstream Portfolio.

 

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If the investor’s shares are currently inthe investor’s brokerage account, then the investor will be required to transfer its shares to Pacific to have shares recorded as“direct registration” in “book entry” with Pacific. To make such transfer request, an investor would need to contacttheir brokerage firm and request to transfer their shares back to “book entry” with the transfer agent.

 

All shares transferred to Upstream shall be heldin MERJ Dep., which is a company licensed as a Securities Facility pursuant to the Seychelles Securities Act, 2007. The Company has appointedMERJ Dep. to act as the Depository Nominee in respect of any securities traded which are quoted on Upstream and granted MERJ Dep. as theDepository Nominee, pursuant to the Securities Facility Rules Directive on Depository Interests.

 

Shares may be withdrawn from Upstream back tothe transfer agent. The Upstream app has a function under Investor Services, Manage Securities, Withdraw Securities. The shareholder thenenters the ticker symbol and the number of shares to being withdrawn and taps ‘Notarize’ to cryptographically sign this transaction.The shares are removed from the user’s Upstream portfolio and an email is sent to the transfer agent with a share withdrawal requestwhereafter the transfer agent will liaise directly with the shareholder to ensure the share balance is entered in ‘book entry’into the user’s name & address. Third party share withdrawals from Upstream are not permitted, the share withdrawal requestname and address (as retrieved from the Upstream know your customer (KYC) information by Upstream compliance) is required to be the samename and address that will be entered in the transfer agents ‘book entry’ for such shareholder.

 

The NFTs traded on Upstream are issued by theCompany and convey no ownership interest in the Company, nor do they provide any dividends, royalties, or other equity interests or rightsthat would indicate an expectation of profit. The NFTs are issued only on Upstream and can only be traded on Upstream.

 

The Commission evaluates whether a particulardigital asset, including an NFT, is a security based on what is commonly referred to as the Howey Test. The Howey Test looks at four factors:(i) an investment of money (ii) in a common enterprise (iii) with the expectation of profit (iv) to be derived from the efforts of others.We believe the commemorative NFTs issued by Creatd do not meet the definition for securities under the Howey Test. Such NFTs, issued toinvestors who deposited shares of Creatd with Upstream, are commemorative in nature, memorializing the listing on Upstream, as a noveltyitem, being akin to a tombstone, plaque, sticker, poster or t-shirt commemorating the listing, similar to what NASDAQ and the NYSE mayprovide to its issuers. The NFT issued by Creatd conveys no ownership interest in Creatd, nor does it provide any dividends, royalties,or other equity interests or rights that would indicate an expectation of profit. The NFTs are issued only on Upstream and can only betraded on Upstream. No consideration was paid for the NFTs, and such investors are still able to transfer such shares back to PacificStock Transfer following receipt of the NFTs.

 

To trade on Upstream, users create a trading accountusing the Upstream smartphone app, with a random-generated username (in the form of an address that’s a 42-character hexadecimaladdress derived from the last 20 bytes of a random public key) and a password (in the form of a random cryptographic private key).Thepublic and private key (the cryptographic keypair) is generated locally on the smartphone and only the public key is everknown to Upstream, MERJ Dep., or peer to peer trading counterparties on Upstream. Only the individual users hold their private keys. Thisprivacy ensures that only the Upstream user can cryptographically sign a securities transaction (bid/offer/buy/sell/cancel) for it tobe executed on Upstream, that is, all transactions such as share sales are self-directed, peer to peer, and instantly settled using theUpstream distributed ledger platform.

 

In order to buy, sell, deposit or withdraw shareson Upstream, an Upstream user that has created their account as outlined in the previous paragraph, is required to submit KYC informationfor the Upstream compliance team to review. KYC information is then linked to the user’s public key, and if the user passes KYCreview, then this user’s cryptographic keypair’s transactions will be accepted as legitimate self-directed securities transactionrequests to Upstream for execution on the platform.

 

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Shareholders should be aware that there are risksand uncertainties with the Company’s dual listing on Upstream. In particular, the restriction on trading for US- and Canada-basedinvestors may affect the liquidity of our common stock and lead to volatility in the price and trading volume of our common stock.

 

In addition, though the NFTs traded on Upstreamare commemorative in nature, the regulatory regime governing blockchain technologies, cryptocurrencies and tokens is uncertain, and newregulations or policies may materially affect our NFT marketplace and our business generally.

 

Although we believe that these NFTs are not securities,there is risk that the issuance of NFTs may be considered a public offering in violation of the federal securities laws, and perhaps certainstate securities laws. For issuances that are deemed to be public offerings under federal securities laws or in violation of certain statesecurities laws, purchasers of such products might be granted the right to rescind the sale of these products and demand that we returnthe purchase price of these products. We did not receive a purchase price for these NFTs; however, there is risk that the Companymay be subject to other penalties or that other remedies may apply.

 

Additional information regarding Upstream canbe found at Revolutionary exchange & trading app for digital securities (upstream.exchange).

 

Appointment of New Directors

 

On February 17, 2022, the Board appointed JoannaBloor, Brad Justus, and Lorraine Hendrickson to serve as members of the Board.

 

On September 2, 2022, the Board appointed JeremyFrommer, Executive Chairman, as Chief Executive Officer.

 

On September 2, 2022, the Board appointed JustinMaury, President and Chief Operating Officer, as Director to the Board

 

On November 2, 2022, the Board appointed PeterMajar as Director to the Board.

 

On November 16, 2022, the Board appointed EricaWagner as Director to the Board.

 

Departure of Directors

 

On February 17, 2022, the Board received noticethat effective immediately, Mark Standish resigned as Chair of the Board, Chair of the Audit Committee and as a member of the CompensationCommittee and Nominating & Corporate Governance Committee; Leonard Schiller resigned as member of the Board, Chair of the CompensationCommittee and as a member of the Audit Committee and Nominating & Corporate Governance Committee; and LaBrena Martin resigned as amember of the Board, Chair of the Nominating & Corporate Governance Committee and as a member of the Audit Committee and CompensationCommittee. Such resignations are not the result of any disagreement with the Company on any matter relating to the Company’s operations,policies or practices.

 

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On September 2, 2022, the Company entered intoan executive separation agreement with Laurie Weisberg the Company’s Chief Executive Officer and member of the Board of Directorssetting forth the terms and conditions related to the executive’s resignation as Chief Executive Officer, Director and any otherpositions held with the Company or any subsidiary. Pursuant to the agreement, the Company agreed to pay the severance in the aggregateamount of $475,000, payable as follows: (i) 1/24 of the severance amount paid to executive on each of September 15, 2022, October 1, 2022and November 1, 2022, respectively; (ii) 1/8 of the severance amount paid on each of December 1, 2022, January 1, 2023 and February 1,2023, respectively; (iii) 1/4 of the severance amount to be paid on April 1, 2023; and (iv) the balance of the severance amount to bepaid on May 1, 2023. Under the agreement, all unvested and/or outstanding stock options held by the executive as of the effective datethat are not subject to metric-based vesting shall automatically and fully vest as of the effective date. The executive shall continueto hold all unvested and/or outstanding stock options held by the executive as of the effective date that are subject to metric-basedvesting and such metric based vesting options shall vest in accordance with their respective original terms. In connection with the separationagreement with Ms. Weisberg, the Company entered into a Confession of Judgment, to which $475,000 in amounts owed through May 1, 2023is subject, accounting for payments made to Ms. Weisberg from time to time in partial satisfaction of such amounts owing.

 

On September 21, 2022, the Board received noticefrom Brad Justus of his resignation as a member of the Board, and from all committees of the Board on which he served, with such resignationto become effective on September 30, 2022. Such resignation was not the result of any disagreement with the Company on any matter relatingto the Company’s operations, policies or practices.

 

On November 1, 2022, the Board received noticefrom Lorraine Hendrickson of her resignation as a Director and from all committees of the Board on which she served, effective as of suchdate. Ms. Hendrickson’s resignation as a member of the Board was not the result of any disagreement with the Company on any matterrelating to the Company’s operations, policies or practices.

 

On November 17, 2022, the Board received noticefrom Joanna Bloor of her resignation as a Director and from all committees of the Board on which she served, effective as of such date.Ms. Bloor’s resignation as a member of the Board was not the result of any disagreement with the Company on any matter relatingto the Company’s operations, policies or practices.

 

Acquisition Transactions

 

Dune, Inc. Acquisition

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 promotingwellness through its range of health-oriented beverages.

 

On October 3, 2021, the Company acquired anadditional 29% of the membership interests of Dune, Inc., bringing our total membership interests to 50%. Dune, Inc., has beenconsolidated due to the Company’s ownership of 50% voting control, and the results of operations have been included since thedate of acquisition in the Statements of Operations. 

 

On January 25, 2023, the Company acquired an additional23% equity interest in Dune, Inc. bringing our total ownership to 85%.

 

On January 9, 2023, the Company acquired an additional51% of the equity interest in WHE Agency, Inc. bringing our total ownership to 95%. WHE Agency, Inc., has been consolidated due to theCompany’s ownership of over 50% voting control, and the results of operations have been included since the date of acquisition inthe Statements of Operations.

 

WHE Agency, Inc. Acquisition

 

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 operationshave been included since the date of acquisition in the Statements of Operations.

 

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On January 9, 2023, the Company acquired an additional51% of the equity interest in WHE Agency, Inc. bringing our total ownership to 95%.

 

Denver Bodega, LLC Acquisition

 

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 adirect-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Denver Bodega, LLC has been consolidateddue to the Company’s ownership of 100% voting control, and the results of operations have been included since the date of acquisitionin the statement of operations.

 

Orbit Media LLC Acquisition

 

On August 1, 2022, the Company acquired 51% ofthe membership interests of Orbit Media LLC, a New York limited liability company. Orbit is a app-based stock trading platform designedto 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. 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-fourthousand dollars ($44,000) in cash and 57,576 shares of the Company’s Common Stock.

 

Brave Foods, LLC Acquisition

 

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 providesconvenient 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.

 

Employees

 

As of May 5, 2023, we had 15 full-time employeesand 10 part-time employees. None of our employees are subject to a collective bargaining agreement, and we believe our relationship withour employees to be good.

 

We believe that our future success will dependin 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 purposesof our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-basedcompensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform tothe best of their abilities and achieve our objectives.

 

Facilities

 

Our corporate headquarters consists of a totalof approximately 8,000 square feet and is located at 419 Lafayette Street, 6th Floor, New York, NY 10003. The current leaseterm 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 increasein rent of 3% for every year thereafter.

 

Previously in 2022, the Company also had additionaloffice space located at 648 Broadway, Suite 200, New York, NY 10012. The lease term was effective September 9, 2021 through September9, 2022, with monthly rent of $12,955 for the leasing period.

 

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During 2021, the Company also had additional officespace located at 2050 Center Ave, Suite 640 and Suite 660, Fort Lee, NJ 07024. The lease term was effective June 5, 2018 through July5, 2023, with monthly rent of $7,693 for the first year and increases at a rate of 3% for each subsequent year thereafter. The Companyreached 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 variouslawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and anadverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, we are currentlynot 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.

 

Skube v. WHE Agency Inc., et al

 

A complaint against WHE, Creatd and Jeremy Frommerfiled December 22, 2022, was filed in the Supreme Court of the State of New York, New York County, by Jessica Skube, making certain claimsalleging conversion, trespass to chattel, unjust enrichment, breach of contract, fraud in the inducement, seeking damages of $161,000and punitive damages of $500,000. Skube filed an Order to Show Cause, which the Company opposed, which is currently pending. Given thepremature nature of this case, it is still too early for the Company to make an assessment as to
liability, but the $161,000 figure is far more likely than the $500,000.


Lind Global v. Creatd, Inc.

 

A complaint against Creatd 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 FundII LP, making certain claims alleging breach of contract related to two Securities Purchase Agreements executed on May 31, 2022, seekingdamages in excess of $920,000. The Company filed a Motion to Dismiss, which is currently pending. Given the premature nature of this case,it is still too early for the Company to make an assessment as to liability.

 

Laurie Weisberg v. Creatd, Inc.

 

A confession of judgment against Creatd dated September 2, 2022, hasbeen filed in the Supreme Court of the State of New York, New York County, by Laurie Weisberg, seeking to enforce payment of approximately$415,000 under an executive separation agreement also dated September 2, 2022. Ms. Weisberg also seeks payment of legal fees amountingto approximately $5,000. The Company and Ms. Weisberg are actively negotiating in an attempt to resolve the dispute. The Company doesnot expect the liability to exceed $420,000.

 

Corporate Information

 

The 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. Theinformation on, or that can be accessed through, this website is not part of this prospectus, and you should not rely on any such informationin making the decision whether to purchase the Common Stock.

 

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MANAGEMENT

 

The following table and biographical summariesset forth information, including principal occupation and business experience, about our directors and executive officers as of the dateof this prospectus:

 

Name   Age     Positions
Jeremy Frommer     54     Chief Executive Officer, Executive Chairman of the Board of Directors
Peter Majar     58     Director
Erica Wagner     55     Director
Justin Maury     34     Chief Operating Officer, President and Director
Chelsea Pullano     32     Chief Financial Officer
Robert Tal     33     Chief Information Officer

 

Jeremy Frommer – Chief ExecutiveOfficer

 

Mr. Frommer was appointed Executive Chairman inFebruary 2022 and has been a member of our board of directors since February 2016. Previously, he served as our Chief Executive Officerfrom February 2016 to August 2021, and Co-Chief Executive Officer from August 2021 to February 2022. Mr. Frommer has over 20 years ofexperience in the financial technology industry. Previously, Mr. Frommer held key leadership roles in the investment banking and tradingdivisions of large financial institutions. From 2009 to 2012, Mr. Frommer was briefly retired until beginning concept formation for JerrickVentures which he officially founded in 2013. From 2007 to 2009, Mr. Frommer was Managing Director of Global Prime Services at RBC CapitalMarkets, the investment banking arm of the Royal Bank of Canada, the largest financial institution in Canada, after the sale of CarlinFinancial Group, a professional trading firm. From 2004 to 2007, Mr. Frommer was the Chief Executive Officer of Carlin Financial Groupafter 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 Tradingat Bank of America, a financial services firm. Mr. Frommer was also a director of LionEye Capital, a hedge fund from June 2012 to June2014. 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 hisfinancial and leadership experience.

 

Peter Majar– Director

 

Mr. Majar joined theBoard in November 2022. Mr. Majar, Founder and Managing Member of Majar Advisors, previously held numerous senior management and executivepositions 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 PiperJaffray & Co. (now Piper Sandler Companies). From 2017 to 2018, Mr. Majar provided management consulting services through his self-establishedfirm, Majar Advisors LLC, which remains in operation through the present. From 2018 to 2021, Mr. Majar served as Managing Director, Headof 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 longtimeadvisor to the firm. Mr. Majar holds an undergraduate degree from University of Washington and an MBA from Columbia University. As a boarddirector, Mr. Majar will add considerable value, including through his comprehensive and diverse investment management experience, deepknowledge of financial technology services and transactions, and broad experience with corporate development, strategy consulting, andexecutive leadership.

 

Erica Wagner – Director

 

Ms. Wagner joined theBoard in November 2022. From 2016 through 2021, Ms. Wagner was a Lecturer, and later Senior Lecturer, at Goldsmith’s College, Universityof London, where she taught creative writing. Ms. Wagner was previously Lead Editorial Innovator for Creatd, Inc., has previously andcurrently held roles as a freelance editor, journalist, and contributing writer for numerous outlets both in the U.K. and the U.S., including TheNew StatesmanHarper’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 twicebeen a judge of the Booker Prize and has been judge and Chair of the Goldsmiths Prize. In 2015, Ms. Wagner was awarded an Honorary PhDby the University of East Anglia, and currently Goldsmith’s College Distinguished Writers’ Centre Fellow. She has an undergraduatedegree from University of Cambridge, a Master’s degree from University of East Anglia, and an Honorary PhD from the University ofEast Anglia. As a member of Creatd’s board of directors, Ms. Wagner will add significant expertise with respect to informing theCompany’s literary and creative direction, having worked closely with news organizations, commercial companies and publishers, toadvise their creative direction and its application towards commercial success.

 

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Justin Maury – Chief OperatingOfficer, Co-Founder and Director

 

Mr. Maury has served as our President since January2019, 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 artsand technology ultimately resulted in the vision for Vocal. Since joining Creatd in 2013, Maury has overseen the development and launchof the company’s flagship product, Vocal, an innovative platform that provides storytelling tools and engaged communities for creatorsand brands to get discovered while funding their creativity. Under Maury’s supervision, Vocal has achieved growth to over 380,000creators across 34 genre-specific communities in its first two years since launch.

 

Chelsea Pullano – Chief FinancialOfficer

 

Ms. Pullano has been our Chief Financial Officersince June 2020. She has a long history of leadership at Creatd, serving as a member of the Company’s Management Committee for fouryears. Prior to her current role, Ms. Pullano was an integral member of our finance department since 2017, most recently serving as ourHead of Corporate Finance, a role in which she coordinated our periodic reports under the Exchange Act and other financial matters. Priorto joining the Finance Department, Ms. Pullano was a member of our operations team from 2015 to 2017. She holds a B.A. from the StateUniversity of New York College at Geneseo.

   

Robert Tal - Chief InformationOfficer

 

Robert Tal is Chief Information Officer atCreatd, Inc., a role to which he was appointed following nearly eight years of experience building and running data management and analyticscapabilities, leading the Company’s growth marketing strategy and team encompassing acquisition and lifecycle, managing data scienceprojects focused on subscription growth and maintaining strong collaboration with the product team; under Mr. Tal’s supervision,the Company has significantly increased its return on advertising spend as well as lowered its customer acquisition costs. During hislengthy tenure with Creatd, beginning in 2015, Mr. Tal has gained in-depth knowledge of the Company’s business and operations,and has worked closely with executive team, board of directors, and leaders of each of Creatd’s business units to advance the Company’sbusiness intelligence capabilities, develop and maintain information systems controls and strengthen Creatd’s information technologyorganization. Mr. Tal has an undergraduate degree in information technology and informatics from Rutgers University.

 

Director Terms; Qualifications

 

Members of our board of directors serve untilthe next annual meeting of stockholders, or until their successors have been duly elected.

 

When considering whether directors and nomineeshave the experience, qualifications, attributes and skills to enable the board of directors to satisfy its oversight responsibilitieseffectively in light of the Company’s business and structure, the board of directors focuses primarily on the industry and transactionalexperience, and other background, in addition to any unique skills or attributes associated with a director. 

 

Director or Officer Involvement in CertainLegal Proceedings

 

There are no material proceedings to which anydirector or officer, or any associate of any such director or officer, is a party that is adverse to our Company or any of our subsidiariesor has a material interest adverse to our Company or any of our subsidiaries. No director or executive officer has been a director orexecutive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the pastten years. No director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceedingduring the past ten years. No director or executive officer has been the subject of any order, judgment or decree of any court permanentlyor temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activitiesduring the past ten years. No director or officer has been found by a court to have violated a federal or state securities or commoditieslaw 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 officersand directors. In addition, officers and directors also have indemnification rights under applicable laws, and the Company’s SecondAmended and Restated Articles of Incorporation and Amended and Restated Bylaws.

 

56

 

 

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. Inaddition, 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 forthin 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 theexercise of independent judgment in carrying out the responsibilities of a director.

 

Our board of directors has undertaken a reviewof the independence of our directors and considered whether any director has a material relationship with it that could compromise hisor her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from andprovided by each director concerning his background, employment and affiliations, including family relationships, the board of directorshas determined that Peter Majar is “independent” as that term is defined under the applicable rules and regulations of theSEC and the listing standards of Nasdaq. In making these determinations, our board of directors considered the current and prior relationshipsthat each non-employee director has with the Company and all other facts and circumstances our board of directors deemed relevantin 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 anddirector independence.”

 

Board Committees

 

The Company’s Board has established threestanding committees: Audit, Compensation, and Nominating and Corporate Governance. Each of the committees operates pursuant to its charter.The committee charters will be reviewed annually by the Nominating and Corporate Governance Committee. If appropriate, and in consultationwith the chairs of the other committees, the Nominating and Corporate Governance Committee may propose revisions to the charters. Theresponsibilities of each committee are described in more detail below.

 

Nasdaq permits a phase-in period of up to oneyear for an issuer registering securities in an initial public offering to meet the Audit Committee, Compensation Committee and Nominatingand Corporate Governance Committee independence requirements. Under the initial public offering phase-in period, only one member of eachcommittee is required to satisfy the heightened independence requirements at the time our registration statement becomes effective, amajority of the members of each committee must satisfy the heightened independence requirements within 90 days following the effectivenessof our registration statement, and all members of each committee must satisfy the heightened independence requirements within one yearfrom the effectiveness of our registration statement.

 

Audit Committee

 

The Audit Committee, among other things, willbe responsible for:

 

  Appointing; approving the compensation of; overseeing the work of; and assessing the independence, qualifications, and performance of the independent auditor;

 

  Reviewing the internal audit function, including its independence, plans, and budget;

 

  Approving, in advance, audit and any permissible non-audit services performed by our independent auditor;

 

  Reviewing our internal controls with the independent auditor, the internal auditor, and management;

 

  Reviewing the adequacy of our accounting and financial controls as reported by the independent auditor, the internal auditor, and management;

 

  Overseeing our financial compliance system; and

 

  Overseeing our major risk exposures regarding the Company’s accounting and financial reporting policies, the activities of our internal audit function, and information technology.

  

The board of directorshas affirmatively determined that each member of the Audit Committee meets the additional independence criteria applicable to audit committeemembers under SEC rules and Nasdaq listing rules. The board of directors has adopted a written charter setting forth the authority andresponsibilities of the Audit Committee. The Board has affirmatively determined that each member of the Audit Committee is financiallyliterate, and that Mr. Majar meets the qualifications of an Audit Committee financial expert.

 

The Audit Committee consistsof Mr. Majar, Chair.

 

57

 

 

 

Compensation Committee

 

The Compensation Committee will be responsiblefor:

 

  Reviewing and making recommendations to the Board with respect to the compensation of our officers and directors, including the CEO;

 

  Overseeing and administering the Company’s executive compensation plans, including equity-based awards;

 

  Negotiating and overseeing employment agreements with officers and directors; and

 

  Overseeing how the Company’s compensation policies and practices may affect the Company’s risk management practices and/or risk-taking incentives.

 

The board of directorshas adopted a written charter setting forth the authority and responsibilities of the Compensation Committee.

 

The Compensation Committeeconsists of Mr. Majar, who serves as chair, and Ms. Wagner. The board of directors has affirmatively determined that Peter Majar meetsthe independence criteria applicable to compensation committee members under SEC rules and Nasdaq listing rules. The Company believesthat the composition of the Compensation Committee meets the requirements for independence under, and the functioning of such CompensationCommittee 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, is responsible for:

 

  Reviewing and assessing the development of the executive officers and considering and making recommendations to the Board regarding promotion and succession issues;
     
  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.

 

The board of directorshas adopted a written charter setting forth the authority and responsibilities of the Corporate Governance/Nominating Committee.

 

The Nominating and CorporateGovernance Committee consists of Ms. Wagner, who serves as chair, and Mr. Majar. The Company’s board of directors has determinedthat Peter Majar is independent within the meaning of the independent director guidelines of Nasdaq listing rules. 

 

58

 

 

 

Compensation Committee Interlocks and InsiderParticipation

 

None of the Company’s executive officersserves, or in the past has served, as a member of the board of directors or compensation committee, or other committee serving an equivalentfunction, of any entity that has one or more executive officers who serve as members of the Company’s board of directors or itscompensation committee. None of the members of the Company’s compensation committee is, or has ever been, an officer or employeeof the company.

 

Code of Business Conduct and Ethics

 

The Company’s Board of Directors has adopteda code of business conduct and ethics applicable to its employees, directors and officers, in accordance with applicable U.S. federalsecurities laws and the corporate governance rules of Nasdaq. The code of business conduct and ethics will be publicly available on theCompany’s website. Any substantive amendments or waivers of the code of business conduct and ethics or code of ethics for seniorfinancial officers may be made only by the Company’s board of directors and will be promptly disclosed as required by applicableU.S. federal securities laws and the corporate governance rules of Nasdaq.

 

Corporate Governance Guidelines

 

The Company’s board of directors has adoptedcorporate governance guidelines in accordance with the corporate governance rules of Nasdaq. 

 

Delinquent Section 16(A) Reports

 

Section 16(a) of the Exchange Act requires theCompany’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equitysecurities, to file reports of ownership and changes in ownership with the SEC and are required to furnish copies to the Company. Basedsolely 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.

 

59

 

 

EXECUTIVE COMPENSATION

 

The following information is related to the compensationpaid, distributed or accrued by us for the years ended December 31, 2022 and December 31, 2021 for our Chief Executive Officer (principalexecutive officer) serving during the year ended December 31, 2022 and the three other executive officers serving at December 31, 2021whose 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
($)
   Total
($)
 
Laurie Weisberg   2022   $361,234    -   $52,000   $316,949          -               -   $542,679(1)  $1,272,862 
Former Chief Executive Officer (9)   2021   $313,750   $25,000    20,226    763,894    -    -   $24,925(2)  $1,147,795 
                                              
Justin Maury   2022   $426,731   $62,500   $52,000   $859,011    -    -   $8,344(3)  $828,164 
President & Chief Operating Officer   2021   $306,923   $5,000    -   $1,479,328    -    -   $7,919(4)  $1,799,170 
                                              
Chelsea Pullano   2022   $230,961   $31,250    36,400   $319,788    -    -   $8,706(5)  $394,315 
Chief Financial Officer   2021   $207,616    -    -   $610,052    -    -   $7,632(6)  $825,300 
                                              
Jeremy Frommer   2022   $329,344   $342,317    52,000   $937,721    -    -   $87,363(7)  $1,127,974 
Chief Executive Officer (10)   2021   $665,433   $200,000    -   $1,709,628    -    -   $98,237(8)  $2,673,298 

 

(1) The $542,679 includes payment to Ms. Weisberg for living expenses, health insurance, and severance pay.
   
(2) The $24,925 includes payment to Ms. Weisberg for health insurance.
   
(3) The $8,344 includes payment to Mr. Maury for health insurance.
   
(4) The $7,919 includes payment to Mr. Maury for health insurance.
   
(5) The $8,706 includes payment to Ms. Pullano for health insurance.
   
(6) The $7,632 includes payment to Ms. Pullano for health insurance.
   
(7) The $87,363 includes payment to Mr. Frommer for living expenses, health insurance and a vehicle allowance.
   
(8) The $98,237 includes payment to Mr. Frommer for living expenses, health insurance and a vehicle allowance.
   
(9) Ms. Weisberg served as Chief Operating Officer from September 2020 to August 2021, Co-Chief Executive Officer with Jeremy Frommer from August 2021 to February 2022, and Chief Executive Officer from February 2022 until her resignation in September 2022.
   
(10) Mr. Frommer served as Chief Executive Officer until August 2021, Co-Chief Executive Officer with Laurie Weisberg from August 2021 to February 2022, Executive Chairman from February 2022 to September 2022, and Chief Executive Officer after September 2022.

 

Employment Agreements

 

On April 5, 2022, upon the recommendation of theCompensation Committee of the Board, the Board approved employment agreements with, and equity issuances for, (i) Jeremy Frommer, ExecutiveChairman, who will receive (a) an signing award of $80,000, (b) an annual salary of $420,000; (c) 121,000 options, to vest immediatelywith a strike price of $1.75, and (d) 50,000 shares of the Company’s restricted common stock; (ii) Laurie Weisberg, Chief ExecutiveOfficer, 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 willreceive (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 ofthe Company’s restricted common stock; and (iv) Chelsea Pullano, Chief Financial Officer, who will receive (a) an annual salaryof $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 restrictedcommon 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 “ExecutiveEmployment Agreements”). The Executive Employment Agreements contain customary terms, conditions and rights.

 

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2022 Equity Incentive Plan 

 

Our Omnibus Securities and Incentive Plan (the“2022 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 30,000,000shares originally reserved under the 2022 Plan.

 

No further awards may be issued under the JerrickVentures 2015 Incentive and Award Plan (the “2015 Plan”) or the 2020 Equity Incentive Plan (the “2020 Plan”) butall awards under the 2015 Plan and the 2020 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.

 

Outstanding Equity Awards at Fiscal Year-End2022

 

At December 31, 2022, 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)       726,188    395,000        -   $3.89    February19, 2028(5)       -   $     -        -        - 
Laurie Weisberg (2)     540,750    195,000    -   $3.18    February19, 2028(6)    -   $-    -    - 
Justin Maury (3)     612,333    382,000    -   $3.79    February19, 2028(7)    -   $-    -    - 
Chelsea Pullano (4)       249,000    125,000    -   $3.30    February19, 2028(8)   -   $-    -    - 

 

(1)Mr. Frommer served as ChiefExecutive Officer until August 2021, Co-Chief Executive Officer with Laurie Weisberg from August 2021 to February 2022, Executive Chairmanfrom February 2022 to September 2022, and Chief Executive Officer after September 2022.

 

(2) Ms. Weisberg served as Chief Operating Officer from September 2020 to August 2021, Co-Chief Executive Officer with Jeremy Frommer from August 2021 to February 2022, and Chief Executive Officer from February 2022 until her resignation in September 2022.
   
(3) Effective January 31, 2019, to August 13, 2021, Justin Maury was appointed as our President. Starting August 13, 2021, Justin Maury was appointed Chief Operating Officer in addition to President.

 

(4) Effective June 29, 2020, Chelsea Pullano was appointed Chief Financial Officer.
   
(5) 89,188 options expire on April 1, 2026; 121,000 options expire on October 28, 2026; 200,000 options expire on February 19, 2027; 121,000 options expire on April 5, 2027; 195,000 options expire on June 1, 2027; 195,000 options expire on December 31, 2027; 200,000 options expire on February 19, 2028.
   
(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; 121,000 options expire on April 5, 2027; 195,000 options expire on June 1, 2027; 195,000 options expire on December 31, 2027; 25,000 options expire on February 19, 2028.
   
(7) 68,333 options expire on April 1, 2026; 81,000 options expire on October 28, 2026; 187,000 options expire on February 19, 2027; 81,000 options expire on April 5, 2027; 195,000 options expire on June 1, 2027; 195,000 options expire on December 31, 2027; 187,000 options expire on February 19, 2028.
   
(8) 50,000 options expire on April 1, 2026; 37,000 options expire on October 28, 2026; 75,000 options expire on February 19, 2027; 37,000 options expire on April 5, 2027; 50,000 options expire on June 1, 2027; 50,000 options expire on December 31, 2027; 75,000 options expire on February 19, 2028.

 

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Director Compensation 

 

The following table presents the total compensationfor each person who served as a non-employee member of our board of directors and received compensation for such service during the fiscalyear ended December 31, 2022. Other than as set forth in the table and described more fully below, we did not pay any compensation, makeany equity awards or non-equity awards to, or pay any other compensation to any of the non-employee members of our board of directorsin 2022.

 

Director  Option
Awards (1) 
   Fees
Earned or
Paid in Cash
   Total 
Mark Standish (2)  $35,249   $-   $35,249 
Leonard Schiller (2)  $18,760   $-   $18,760 
LaBrena Martin (2)  $18,224   $-   $18,224 
Laurie Weisberg (3)  $474,948   $-   $474,948 
Brad Justus (4)  $-   $49,600   $49,600 
Joanna Bloor (5)  $-   $49,600   $49,600 
Lorraine Hendrickson (6)  $-   $49,600   $49,600 
Peter Majar  $-   $20,000   $20,000 
Erica Wagner  $-   $10,000   $10,000 

 

(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) Mark Standish, Leonard Schiller, and LaBrena Martin resigned from the board of directors effective February 17, 2022.
   
(3) Laurie Weisberg resigned from the board of directors effective September 2, 2022.
   
(4) Brad Justus resigned from the board of directors effective September 30, 2022.
   
(5) Joanna Bloor resigned from the board of directors effective November 17, 2022.
   
(6) Lorraine Hendrickson resigned from the board of directors effective November 1, 2022.

 

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

The following includes a summary of transactionsduring our fiscal years ended December 31, 2022 and December 31, 2021 to which we have been a party, including transactions in whichthe amount involved in the transaction exceeds the lesser of  $120,000 or 1% of the average of our total assets at year-end forthe last two completed fiscal years, and in which any of our directors, executive officers or, to our knowledge, beneficial ownersof 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 orindirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which aredescribed elsewhere in this Annual Report. We are not otherwise a party to a current related party transaction, and no transaction iscurrently proposed, in which the amount of the transaction exceeds the lesser of $120,000 or 1% of the average of our total assets atyear-end for the last two completed fiscal years and in which a related person had or will have a direct or indirect material interest.

 

Revenue

 

During the year ended December 31, 2021 the Companyreceived revenue of $80,000 from Dune for branded content services prior to consolidation but after recognition as an equity method investee.

 

Equity raises

 

During the year ended December 31, 2022, the Company conducted twoequity raises in which officers, directors, employees, and an affiliate of an officer cumulatively invested $476,003 for 272,000shares of common stock and 272,000 warrants to purchase common stock.

 

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PRINCIPAL STOCKHOLDERS

 

The following table sets forth certain information, as of May 12, 2023,with respect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five (5%) percent; (ii) eachof 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 beneficiallyowned. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the sharesbeneficially 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     12,537,609 (2)     13.57 %
Justin Maury     6,860,324 (3)     7.45 %
Chelsea Pullano     2,034,041 (4)     2.22 %
Erica Wagner     1,476,937 (5)     1.62 %
Peter Majar     2,207,623 (6)     2.42 %
Robert Tal     808,077 (7)     * %  
All current directors and officers as a group     25,924,611       28.16  %  

 

  * 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 11,417,070 shares of common stock, 926,188 shares of common stock underlying stock options, and 194,351 shares of common stock underlying warrants.

 

  (3) Includes 6,053,848 shares of common stock, 799,333 shares of common stock underlying stock options, and 7,143 shares of common stock underlying warrants.

 

  (4) Includes 1,708,041 shares of common stock, 324,000 shares of common stock underlying stock options and 2,000 shares of common stock underlying warrants.

 

  (5) Includes 1,451,233 shares of common stock, 20,000 shares of common stock underlying stock options and 5,714 shares of common stock underlying warrants.

 

  (6) Includes 2,207,623 shares of common stock.

 

  (7) Includes 592,020 shares of common stock, 212,667 shares of common stock underlying stock options and 3,390 shares of common stock underlying warrants.

 

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Securities Authorized for Issuance Under EquityCompensation Plans 

 

As of December 31, 2022, we had awards outstandingunder our 2020 Equity Incentive Plan:

  

   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)  $1.38    2,272,475 
Equity compensation plans not approved by stockholders   N/A    N/A    N/A 
Total   2,950,402   $1.38    2,272,475 

 

(1) During the year ended December 31, 2022, we had awards outstanding under the 2020 Plan. As of the end of fiscal year 2022, we had 4,408,267 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.

 

65

 

 

SELLING STOCKHOLDERS FOR WHOSE ACCOUNTS WE AREREGISTERING SHARES

 

The shares of our Common Stock being offered bythe Selling Stockholders are issuable upon conversion of the December Debentures, conversion of the January Debentures and exercise ofthe December Warrants. For additional information regarding the issuance of such debentures and warrants see above descriptions of theLetter Agreement, the December Debenture, and the January Debenture. We are registering the shares of our Common Stock in order to permitthe Selling Stockholders to offer the shares for resale from time to time. Except as otherwise described in the footnotes to the tablebelow and for the ownership of the registered shares issued pursuant to the Letter Agreement, the December Debenture, and/or the JanuaryDebenture, neither the Selling Stockholders nor any of the persons that control them has had any material relationships with us or ouraffiliates within the past three (3) years.

 

The table below lists the Selling Stockholdersand other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, asamended (the “Exchange Act”) (and the rules and regulations thereunder) of the shares of our Common Stock by each of the SellingStockholders.

 

The second column lists the number of shares ofour Common Stock beneficially owned by each Selling Stockholder before this Offering (including shares which the Selling Stockholder hasthe right to acquire within 60 days, including upon conversion of any convertible securities)

 

The third column lists the shares of our CommonStock being offered by this prospectus by each Selling Stockholder.

 

The fourth and fifth columns list the number ofshares of Common Stock beneficially owned by each Selling Stockholder and their percentage ownership after the Offering (including shareswhich the Selling Stockholder has the right to acquire within 60 days, including upon conversion of any convertible securities), assumingthe sale of all of the shares offered by each Selling Stockholder pursuant to this prospectus.

 

Under the terms of the Letter Agreement, the DecemberDebenture, and the January Debenture a Selling Stockholder may not convert any such securities to the extent such conversion or exercisewould cause such Selling Stockholder, together with any other person with which the Selling Stockholder is considered to be part of agroup under Section 13 of the Exchange Act or with which the Selling Stockholder otherwise files reports under Section 13 and/or 16 ofthe Exchange Act, to beneficially own a number of shares of Common Stock which exceeds 4.99% or 9.99%, as applicable, of the Equity Interestsof a class that is registered under the Exchange Act that is outstanding at such time.

 

66

 

 

The amounts and information set forth below arebased upon information provided to us by the Selling Stockholders as of May 11, 2023, except as otherwise noted below. The Selling Stockholdersmay sell all or some of the shares of Common Stock it is offering, and may sell, unless indicated otherwise in the footnotes below, sharesof our common stock otherwise than pursuant to this prospectus. The tables below assume the Selling Stockholders sell all of the sharesoffered by them in offerings pursuant to this prospectus, and do not acquire any additional shares. We are unable to determine the exactnumber of shares that will actually be sold or when or if these 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    7,315,000    0    0.00%
Anson East Master Fund (3)   0    1,828,750    0    0.00%
L1 Capital Global Opportunities Master Fund (4)   0    433,125    0    0.00%
Joseph Reda (5)   0    5,197,500    0    0.00%
Gregory Castaldo (6)   0    2,213,750    0    0.00%
Andrew Arno (7)   0    1,155,000    0    0.00%
Dorado Goose, LLC (8)   7,400,000    2,750,000    7,400,000    6.58%
Brio Capital Master Fund (9)   52,500    240,625    52,500    0.05%

 

(1)

Percentages are calculated based on an aggregate of 91,283,558 sharesof Common Stock outstanding as of May 12 2023. As applicable, such percentages have been further adjusted to account for outstanding convertiblesecurities of such Selling Stockholder.

   
(2) Represents 7,315,000 shares of 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 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.
   
(3) Represents 1,828,750 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 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 433,125 shares issuable upon the exercise of warrants. David Feldman is a director of L1 Capital Global Opportunities Master Fund and may be deemed to having voting and investment power over the securities listed in the table above. Such Selling Stockholder’s address is 161A Shedden Road, 1 Artillery Court, PO Box 10085, Grand Cayman KY1-1001, Cayman Islands.
   
(5) Represents 5,197,500 shares issuable upon the exercise of warrants.
   
(6) Represents 2,213,750 shares issuable upon the exercise of warrants.
   
(7) Represents 1,155,000 shares issuable upon the exercise of warrants.
   
(8) Represents 2,750,000 shares issuable upon the conversion of convertible notes. Tommy Wang is a director of Dorado Goose, LLC and may be deemed to having voting and investment power over the securities listed in the table above. Such Selling Stockholder’s address is 170 Dorado Bch E, Dorado, Puerto Rico 00646.
   
(9) Represents 240,625 shares issuable upon the exercise of warrants.
   

 

67

 

 

DESCRIPTION OF SECURITIES

 

The following description of the Company’scapital stock and provisions of its Second Amended and Restated Articles of Incorporation and Amended and Restated Bylaws are summariesand are qualified by reference to the Company’s Second Amended and Restated Articles of Incorporation and Amended and Restated Bylaws.

 

Description of Stock

 

The Company is authorized to issue 1,520,000,000shares of capital stock, par value $0.001 per share, of which 1,500,000,000 are shares of common stock and 20,000,000 are shares of “blankcheck” preferred stock. On January 26, 2023, the Company filed an amendment to the Company’s Second Amended and Restated Articlesof Incorporation increasing the number of common shares that the Company is authorized to issue to 1.5 billion.

 

As of May 12, there were 91,283,558 shares of Common Stock issued andoutstanding, and there were 450 shares of Preferred Series E Stock issued and outstanding.

 

On August 13, 2020, we filed a certificate ofamendment to our Second Amended and Restated Articles of Incorporation (the “Amendment”), with the Secretary of State of theState of Nevada to effectuate a one-for-three (1:3) reverse stock split (the “August 2020 Reverse Stock Split”) of our commonstock without any change to its par value. The Amendment became effective on August 17, 2020. No fractional shares were issued in connectionwith the August 2020 Reverse Stock Split as all fractional shares were rounded down to the next whole share.

 

The holders of the Common Stock are entitled toone 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 directorsis to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of the Company’scommon stock are entitled to share ratably in all assets that are legally available for distribution. The holders of the Company’scommon stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of theCompany’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.

 

The Common Stock is quoted on the OTCQB marketplace operated by OTCMarkets Group Inc. under the trading symbol “VOCL” and on Upstream, the tradingapp for digital securities and NFTs powered by Horizon Fintex and MERJ Exchange Limited under the trading symbol “VOCL.”

 

The Company’s transfer agent is Pacific Stock Transfer Company.

 

Description of Common Stock Purchase Warrants

 

Each Warrant entitles the holder to purchase oneshare of our Common Stock at a price equal to $4.50 per share, subject to adjustment as set forth below, at any time until at 5:00 p.m.,New York City time, on September 15, 2025.

 

The material provisions of the Warrants are setforth herein and a copy of the Warrant Agent Agreement has been filed as an exhibit to the Annual Report for year ended December 31, 2020,on Form 10-K (the “Warrant Agent Agreement”). The Company and the Warrant Agent (as defined in the Warrant Agent Agreement”)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 mattersor 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 orwritten consent of holders of at least 50.1%. The exercise price and number of shares of Common Stock issuable upon exercise of the Warrantsmay be adjusted in certain circumstances, including in the event of a stock dividend, extraordinary dividend on or recapitalization, reorganization,merger or consolidation.

 

68

 

 

The Warrants may be exercised upon surrender ofthe warrant certificate on or prior to the expiration date at the offices of the Warrant Agent, with the exercise form attached to thewarrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified or official bankcheck payable to us, for the number of Warrants being exercised. The Warrant holders do not have the rights or privileges of holders ofCommon Stock and any voting rights until they exercise their Warrants and receive shares of Common Stock. After the issuance of sharesof Common Stock upon exercise of the Warrants, each holder will be entitled to one vote for each share held of record on all matters tobe voted on by stockholders.

 

No Warrants will be exercisable unless at thetime of the exercise a prospectus or prospectus relating to Common Stock issuable upon exercise of the Warrants is current and the CommonStock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of theWarrants. Under the terms of the Warrant Agent Agreement, we have agreed to use our best efforts to maintain a current prospectus or prospectusrelating to Common Stock issuable upon exercise of the Warrants until the expiration of the Warrants. If we are unable to maintain thequalification or effectiveness of such registration statement until the expiration of the Warrants, and therefore are unable to deliverregistered shares of Common Stock, the Warrants may become worthless. Additionally, the market for the Warrants may be limited if theprospectus or prospectus relating to the Common Stock issuable upon exercise of the Warrants is not current or if the Common Stock isnot qualified or exempt from qualification in the jurisdictions in which the holders of such warrants reside. In no event will the registeredholders of a Warrant be entitled to receive a net-cash settlement, stock or other consideration in lieu of physical settlement in sharesof our Common Stock.

 

No fractional shares of Common Stock will be issuedupon 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 exerciseof all the Warrants. 

 

The Warrants are quoted on the OTCPink marketplaceoperated by OTC Markets Group Inc. under the trading symbol “CRTDW”. The Company’s transfer agent is VStock Transfer,LLC.

 

Applicable Anti-Takeover Law

 

Set forth below is a summary of provisions inour Articles of Incorporation and the Bylaws that could have the effect of delaying or preventing a change in control of the Company.The following description is only a summary and it is qualified by refence our Articles of Incorporation, Bylaws and relevant provisionsof the Nevada Revised Statutes.

 

No Cumulative Voting

 

Our Articles of Incorporation and the Bylaws donot provide holders of our common stock cumulative voting rights in the election of directors. The absence of cumulative voting couldhave the effect of preventing stockholders holding a minority of our shares of common stock from obtaining representation on our boardof directors. The absence of cumulative voting might also, under certain circumstances, render more difficult or discourage a merger,tender offer or proxy contest favored by a majority of our stockholders, the assumption of control by a holder of a large block of ourstock or the removal of incumbent management.

 

69

 

 

PLAN OF DISTRIBUTION

 

Each Selling Stockholder and any of their pledgees,assignees and successors-in-interest may, from time to time, sell any or all of their 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 ormore of the following methods when selling securities:

 

  ordinary 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 block as principal to facilitate the transaction;

 

  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

  an exchange distribution in accordance with the rules of the applicable exchange;

 

  privately negotiated transactions;

 

  settlement of 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;

 

  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.

 

The Selling Stockholders may also sell securitiesunder Rule 144 or any other exemption from registration under the Securities Act, if available, rather than under this prospectus.

 

Broker-dealers engaged by the Selling Stockholdersmay arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Shareholders(or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, exceptas set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commissionin compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

 

In connection with the sale of the securitiesor 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 Stockholdersmay also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealersthat in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealersor other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or otherfinancial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution mayresell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The Selling Stockholders and any broker-dealersor agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the SecuritiesAct in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resaleof the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholderhas informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any personto distribute the securities.

 

The Company is required to pay certain fees andexpenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the Selling Stockholdersagainst certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

 

70

 

 

 

We agreed to keep this prospectus effective untilthe earlier of (i) the date on which the securities may be freely resold by the Selling Stockholders without registration and withoutregard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliancewith the current public information under Rule 144 under the Securities Act or any other rule of similar effect, or (ii) all of the securitieshave been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect, under circumstancesin which any legend borne by such securities 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 statesecurities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registeredor qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is compliedwith.

  

 

Under applicable rules and regulations under theExchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activitieswith respect to the securities for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution.In addition, the Selling Stockholders will be subject to applicable provisions 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 person.We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of thisprospectus to each purchaser of the securities at or prior to the time of the sale (including by compliance with Rule 172 under the SecuritiesAct).

 

LEGAL MATTERS

 

The validity of the securities offered herebywill be passed upon for us by Lucosky Brookman LLP.

 

EXPERTS

 

The financial statements as of the fiscal yearended December 31, 2022 and 2021 have been audited by Rosenberg Rich Baker Berman, P.A., an independent registered public accounting firm,as stated in their reports. Such financial statements have been so included in reliance upon the reports of such firm given upon theirauthority as experts in accounting and auditing.

 

CHANGE IN AUDITOR

 

On April 27, 2023, the Board of Directors (the“Board”) of Creatd, Inc. (the “Company”), upon the recommendation of the Audit Committee of the Board, approvedthe dismissal of Rosenberg Rich Baker Berman, P.A. (“RRBB”) as the Company’s independent registered public accountingfirm.

 

The audit report of RRBB on the financial statementsas of December 31, 2022 expressed substantial doubt about the Company’s ability to continue as a going concern. During the periodfrom January 1, 2022 through December 31, 2022, and any subsequent interim period through the date of dismissal, there were no disagreementsbetween RRBB and the Company on any matter of accounting principles or practices, financial statement disclosure, or auditing scope orprocedure, which disagreements, if not resolved to the satisfaction of RRBB, would have caused RRBB to make a reference in connectionwith their opinion to the subject matter of the disagreement or reportable events as defined in Item 304(a)(1)(v) of Regulation S-K (“RegulationS-K”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

The Company has provided RRBB with a copy of theforegoing disclosures pursuant to Item 304(a) of Regulation S-K under the Exchange Act, and has requested that RRBB furnish the Companywith a letter addressed to the Securities and Exchange Commission stating whether it agrees with the statements herein made by the Companyset forth above in response to Item 304(a) of Regulation S-K under the Exchange Act and, if not, stating the respects in which it doesnot agree. A letter from RRBB is filed as Exhibit 16.1 to the registration statement of which this prospectus forms a part.

 

71

 

 

On May 1, 2023, the Board, upon the recommendationof the Audit Committee of the Board, approved the engagement of Turner, Stone & Company, L.L.P. (“Turner Stone”) as theCompany’s independent registered public accounting firm. The Company entered into an engagement letter with Turner Stone on May1, 2023. During the Company’s two most recent fiscal years, neither the Company nor anyone acting on its behalf consulted with TurnerStone regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed, or thetype of audit opinion that might be rendered on the Company’s financial statements, in connection with which either a written reportor oral advice was provided to the Company that Turner Stone concluded was an important factor considered by the Company in reaching adecision as to the accounting, auditing or financial reporting issue or (ii) any matter that was either the subject of a disagreement(as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or reportable event (as defined in Item 304(a)(1)(v)of Regulation S-K).

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

Available Information

 

We file reports, proxy statements and other informationwith the SEC. Information filed with the SEC by us can be inspected and copied at the Public Reference Room maintained by the SEC at 100F Street, N.E., Washington, D.C. 20549. You may also obtain copies of this information by mail from the Public Reference Room of the SECat prescribed rates. Further information on the operation of the SEC’s Public Reference Room in Washington, D.C. can be obtainedby calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site that contains reports, proxy and information statements and otherinformation about issuers, such as us, who file electronically with the SEC. The address of that website is http://www.sec.gov.

 

Our website address is https://creatd.com.The information on our website, however, is not, and should not be deemed to be, a part of this prospectus.

 

This prospectus and any prospectus supplementare part of a registration statement that we filed with the SEC and do not contain all of the 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 ofthe offered securities are or may be filed as exhibits to the registration statement. Statements in this prospectus or any prospectussupplement about these documents are summaries and each statement is qualified in all respects by reference to the document to which itrefers. You should refer to the actual documents for a more complete description of the relevant matters. You may inspect a copy of theregistration statement at the SEC’s Public Reference Room in Washington, D.C. or through the SEC’s website, as provided above.

 

72

 

 

Creatd, Inc.

December 31, 2022 and 2021

Index to the Consolidated Financial Statements

 

Contents   Page(s)
Report Of Independent Registered Public Accounting Firm (PCAOB Firm ID 0089)   F-1
     
Consolidated Balance Sheets as of December 31, 2022 and 2021   F-5
     
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2022 and 2021   F-6
     
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2022 and 2021   F-7
     
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021   F-8
     
Notes to the Consolidated Financial Statements   F-9

 

F-1

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM

 

To the Board of Directors and
Stockholders of Creatd, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidatedbalance sheets of Creatd, Inc. (the “Company”) as of December 31, 2022 and 2021, and the related statements of operationsand comprehensive income (loss), stockholders’ equity (deficit), and cash flows for each of the years in the two-year period endedDecember 31, 2022, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statementspresent fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of itsoperations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principlesgenerally accepted in the United States of America.

 

Substantial Doubt about the Company’sAbility to Continue as a Going Concern

 

The accompanying financial statements have beenprepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company hada significant accumulated deficit, significant net loss and net cash used in operating activities that raise substantial doubt about itsability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statementsdo not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

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

 

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

 

Our audits included performing procedures to assessthe risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respondto 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 evaluatingthe 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 beloware matters arising from the current period audit of the financial statements that were communicated or required to be communicated tothe audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved ourespecially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinionon the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinionson the critical audit matters or on the accounts or disclosures to which they relate.

 

F-2

 

 

Goodwill and Finite-Lived Intangible AssetsImpairment Evaluation

 

As discussed in Note 2 to the financial statements,management conducts a goodwill impairment assessment on an annual basis and when events or changes in circumstances indicate that thecarrying value of a reporting unit exceeds its fair value. The fair value of a reporting unit is determined through the use of the incomeapproach using estimates of future cash flows attributable to the respective reporting units. As a result of the annual impairment assessment,the Company recognized approximately $1.4 million of goodwill impairment related to its reporting units.

 

Additionally, as discussed in Note 2 to the financialstatements, management evaluates the recoverability of acquired finite-lived intangible assets for possible impairment whenever eventsor circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured bya comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from their use and eventualdisposition. As a result of the intangible asset impairment assessment, the Company recognized approximately $1.9 million of impairmentrelated to finite-lived intangible assets.

 

 

We identified the impairment of Goodwill and finite-livedintangible assets as a critical audit matter because of significant judgments required by management to estimate the fair value, includingforecasted cash flows, revenue growth rates and expectations for operating expenses. The Goodwill assessment also requires judgment relatedto the discount rate utilized and other significant valuation assumptions. This required a high degree of auditor judgment and an increasedextent of effort when performing audit procedures to evaluate the reasonableness of management’s cash flow estimates and the selectionof cash flow multiples used in the income approach for valuing Goodwill.

 

How the Critical Audit Matter Was Addressedin the Audit

 

Our audit procedures related to the forecastsof management’s estimates of future cash flows, the selection of cash flow multiples for the Company’s reporting units, andthe evaluation of the discount rate for Goodwill assessments included the following, among others:

 

We obtained an understanding of the controls over the assessment of Goodwill and intangible asset impairment,including those over qualitative assessments and the determination of fair value based on relevant cash flow forecasts.

 

Tested the mathematical accuracy of the calculations and evaluated significant assumptions and the underlyingdata used by the Company by performing procedures to test the projected revenues, projected direct costs, and projected operating expensesby comparing them with the historical forecasted results of the respective entities’ operations, evaluating the feasibility of generatingrevenues and cost-cutting strategies and assessing the impacts of internal and/or external economic factors.

 

We used experienced personnel to evaluate the expertise, valuation assumptions and methodologies utilizedby valuation professionals with specialized skills and knowledge engaged by the Company, and critically evaluated management’s assumptionsused in the valuations.

 

Inventory

 

As discussed in Note 2 to the financial statements,inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value and are periodically evaluated to identifyobsolete or otherwise impaired products and are written off when management determines usage is not probable. The Company estimates thebalance of excess and obsolete inventory by analyzing inventory by age using last used and original purchase date and existing sales pipelinefor which the inventory could be used.

 

We identified the audit of inventory as a criticalaudit matter for the following reasons based on different aspects of the audit of inventory.

 

(a)Existence of inventory – we encountered difficulty in gaining timely access to observe physicalinventory counts at multiple locations or confirm existence in other locations. Certain counts could only be done virtually. These factorsrequired the need for inventory roll back procedures, which were also complicated.

 

(b)Valuation of inventory – (1) The determination of the proper allocation of inventory value to unitcosts was complex and the Company lacked formal controls over this area; (2) The determination of inventory obsolescence required significantassumptions about expiration and spoilage or breakage.

 

F-3

 

 

How the Critical Audit Matter Was Addressedin the Audit

 

Our audit procedures related to the testing theexistence and valuation of inventory included the following, among others:

 

We obtained an understanding of the controls over inventory recognition, valuation and monitoring, includingthose related to allocation of unit costs, inventory obsolescence, and tracking of remote inventories.

 

Tested the mathematical accuracy of the calculations and evaluated significant assumptions and the underlyingdata used by the Company in allocating unit costs by performing procedures to test the underlying value of inventory components in relationto historical bill of materials and finished goods observed during inventory counts. We also evaluated this information by performingour own independent allocations of predicted unit costs and comparing to Company estimates.

 

We critically evaluated the assumptions and methodology employed by the Company in evaluating inventoryobsolescence, including consideration of subsequent events, and assessing the reasonableness of estimates to historical data for spoilageor breakage.

 

During inventory observations, we required live counts, ensured that count procedures were prepared andproperly followed, the counting team member was adequately familiar with the inventory items to be counted, count locations were properlyidentified and tracked accurately, and observed the contents of certain boxes and observed all sides of palleted items.

 

We tested the verifiability of inventory reports and tested detailed transactions for the inventory rollback procedures.

 

/s/ Rosenberg Rich Baker Berman, P.A.
   
We have served as the Company’s auditor since 2018.
   
Somerset, New Jersey
   
April 18, 2023  

 

F-4

 

 

Creatd, Inc.

Consolidated Balance Sheets

 

   December 31,
2022
   December 31,
2021
 
Assets        
Current Assets        
Cash  $706,224   $3,794,734 
Accounts receivable, net   239,423    337,440 
Inventory   404,970    106,403 
Prepaid expenses and other current assets   128,547    236,665 
Total Current Assets   1,479,164    4,475,242 
           
Property and equipment, net   212,545    102,939 
Intangible assets   230,084    2,432,841 
Goodwill   46,460    1,374,835 
Deposits and other assets   797,231    718,951 
Minority investment in businesses   
-
    50,000 
Operating lease right of use asset   2,054,265    18,451 
           
Total Assets  $4,819,749   $9,173,259 
           
Liabilities and Stockholders’ Deficit          
           
Current Liabilities          
Accounts payable and accrued liabilities  $7,565,720   $3,730,540 
Convertible Notes, net of debt discount and issuance costs   5,369,599    159,193 
Current portion of operating lease payable   326,908    18,451 
Note payable, net of debt discount and issuance costs   1,645,680    1,278,672 
Deferred revenue   299,409    234,159 
           
Total Current Liabilities   15,207,316    5,421,015 
           
Non-current Liabilities:          
Note payable   38,014    63,992 
Operating lease payable   2,077,618    
-
 
           
Total Non-current Liabilities   2,115,632    63,992 
           
           
Total Liabilities   17,322,948    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 450 and 500 shares issued and outstanding, respectively   
-
    
-
 
Common stock par value $0.001: 100,000,000 shares authorized; 39,062,386 issued and 38,969,013 outstanding as of December 31, 2022 and 16,691,170 issued and 16,685,513 outstanding as of December 31, 2021   39,062    16,691 
Additional paid in capital   134,570,600    111,563,618 
Less: Treasury stock, 93,373 and 5,657 shares, respectively   (78,456)   (62,406)
Accumulated deficit   (146,142,373)   (109,632,574)
Accumulated other comprehensive income   (140,183)   (78,272)
Total Creatd, Inc. Stockholders’ Equity   (11,751,350)   1,807,057 
Non-controlling interest in consolidated subsidiaries   (751,849)   1,881,195 
    (12,503,199)   3,688,252 
           
Total Liabilities and Stockholders’ Equity (Deficit)  $4,819,749   $9,173,259 

 

The accompanying notes are an integral partof these consolidated financial statements.

 

F-5

 

 

Creatd, Inc.

Consolidated Statements of Comprehensive Loss

 

   For the Year Ended   For the Year Ended 
   December 31,
2022
   December 31,
2021
 
         
Net revenue  $4,796,474   $4,299,717 
           
Cost of revenue   6,109,206    5,300,037 
           
Gross margin (loss)   (1,312,732)   (1,000,320)
           
Operating expenses          
Compensation   4,678,390    5,812,057 
Research and development   951,414    983,528 
Marketing   4,700,171    9,626,982 
Stock based compensation   4,183,844    9,661,168 
Impairment of goodwill   1,433,815    1,035,795 
Impairment of intangible assets   2,043,011    688,127 
General and administrative   9,727,735    4,560,743 
           
Total operating expenses   27,718,380    32,368,400 
           
Loss from operations   (29,031,112)   (33,368,720)
           
Other income (expenses)          
Other income   99    396,223 
Interest expense   (821,051)   (372,106)
Accretion of debt discount and issuance cost   (4,668,039)   (3,612,669)
Derivative expense   
-
    (100,502)
Change in derivative liability   3,729    (1,096,287)
Impairment of investment   (50,000)   (589,461)
Settlement of vendor liabilities   (265,717)   59,692 
Loss on marketable securities   (11,742)   
-
 
Gain (loss) on extinguishment of debt   (832,482)   1,025,655 
Gain on forgiveness of debt   
-
    279,022 
           
Other income (expenses), net   (6,645,203)   (4,010,433)
           
Loss before income tax provision   (35,676,315)   (37,379,153)
           
Income tax provision   
-
    
-
 
           
Net loss   (35,676,315)   (37,379,153)
           
Non-controlling interest in net loss   3,383,044    86,251 
           
Net Loss attributable to Creatd, Inc.   (32,293,271)   (37,292,902)
           
Deemed dividend   (4,216,528)   (410,750)
           
Net loss attributable to common shareholders  $(36,509,799)  $(37,703,652)
           
Comprehensive loss          
           
Net loss   (35,676,315)   (37,379,153)
           
Currency translation loss   (61,911)   (41,038)
           
Comprehensive loss  $(35,738,226)  $(37,420,191)
           
Per-share data          
Basic and diluted loss per share
  $(1.66)  $(2.98)
           
Weighted average number of common shares outstanding
   22,035,260    12,652,470 

 

The accompanying notes are an integral partof these consolidated financial statements.

 

F-6

 

 

Creatd, Inc.

Consolidated Statement of Changes in Stockholders’Equity (Deficit)

For the Years Ended December 31, 2022 and2021

 

    Series E
Preferred Stock
    Common Stock     Treasury stock     Additional
Paid In
    Subscription     Accumulated     Non-Controlling     Other
Comprehensive
    Stockholders’
Equity
 
    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Receivable     Deficit     Interest     Income     (Deficit)  
                                                                         
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     -       -       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  
                                                                                                 
Conversion of  preferred series E to stock     (50 )             12,136       12       -       -       (12 )     -       -       -       -       -  
                                                                                                 
Stock based compensation     -       -       444,162       444       -       -       4,086,960       -       -       -       -       4,087,404  
                                                                                                 
Shares issued to settle vendor liabilities     -       -       307,342       307       -       -       410,192       -       -       -       -       410,499  
                                                                                                 
Shares issued for prepaid services     -       -       150,000       150       -       -       141,000       -       -       -       -       141,150  
                                                                                                 
Shares issued for in process research and development     -       -       57,576       58       -       -       40,937       -       -       -       -       40,995  
                                                                                                 
BCF issued with note payable     -       -       -       -       -       -       2,008,227       -       -       -       -       2,008,227  
                                                                                                 
Exercise  of warrants to stock     -       -       9,172,772       9,173       -       -       1,772,774       -       -       -       -       1,781,947  
                                                                                                 
Purchase of treasury stock     -       -       -       -       (87,716 )     (16,050 )