Creatd, Inc. - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2021

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

For the transition period from __________ to __________

Commission File No. 001-39500

Creatd, Inc.

(Exact name of registrant as specified in its charter)

Nevada		87-0645394
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

2050 Center Avenue Suite 640

Fort Lee, New Jersey 07024

(Address of principal executive offices)

(201) 258-3770

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	CRTD	The Nasdaq Stock Market LLC

Common Stock Purchase Warrants	CRTDW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of a “large accelerated filer,” “accelerated filer,” “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 check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐ No ☒

As of November 15, 2021, the registrant had 16,295,455 shares of its common stock, par value $0.001 per share, outstanding.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

		Page
Special Note Regarding Forward-Looking Statements and Other Information Contained in this Report		ii

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53

Item 4.	Controls and Procedures	53

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	54

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	55

Item 4.	Mine Safety Disclosures	55

Item 5.	Other Information	55

Item 6.	Exhibits	55

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND
OTHER INFORMATION CONTAINED IN THIS REPORT

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may” or other similar expressions in this Form 10-Q. In particular, these include statements relating to future actions; prospective products, applications, customers and technologies; future performance or results of anticipated products; anticipated expenses; and projected financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

●

our ability to continue as a going concern;

●

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

●

our ability to obtain additional capital, which may be difficult to raise as a result of our limited operating history or any number of other reasons;

●

our ability to provide digital content that is useful to users;

●

our ability to retain existing users or add new users;

●

competition from traditional media companies;

●

general economic conditions and events and the impact they may have on us and our users; and

●

other factors discussed in this Form 10-Q.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into.

You should read this Form 10-Q and the documents that we have filed as exhibits to this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Unless otherwise stated or the context otherwise requires, the terms “Creatd,” “we,” “us,” “our” and the “Company” refer collectively to Creatd, Inc. and its subsidiaries.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Creatd, Inc.

September 30, 2021

Index to the Condensed Consolidated Financial Statements

Contents		Page(s)
Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020		2

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)		3

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)		4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (unaudited)		8

Notes to the Condensed Consolidated Financial Statements (unaudited)		9

Creatd, Inc.

Condensed Consolidated Balance Sheets

	September 30, 2021			December 31, 2020
	(Unaudited)
Assets
Current Assets
Cash	$	1,508,528		$	7,906,782
Accounts receivable, net		393,291			90,355
Inventory		88,061			-
Prepaid expenses and other current assets		561,031			23,856
Total Current Assets		2,550,911			8,020,993

Property and equipment, net		86,900			56,258
Intangible assets		2,488,903			960,611
Goodwill		1,978,793			1,035,795
Deposits and other assets		84,721			191,836
Marketable securities		-			62,733
Minority investment in businesses		152,096			217,096
Equity method investment		732,297			-
Operating lease right of use asset		178,402			239,158
Total Assets	$	8,253,023		$	10,784,480

Liabilities and Stockholders’ Deficit

Current Liabilities
Accounts payable and accrued liabilities	$	2,728,967		$	2,638,688
Derivative liabilities		-			42,231
Convertible Notes, net of debt discount and issuance costs		154,037			897,516
Current portion of operating lease payable		96,817			79,816
Note payable - related party, net of debt discount		1,134,712			-
Note payable, net of debt discount and issuance costs		1,072,190			1,221,539
Deferred revenue		200,500			88,637
Total Current Liabilities		5,387,223			4,968,427

Non-current Liabilities:
Note payable		18,959			213,037
Convertible Notes		640,496			-
Operating lease payable		79,214			157,820

Total Non-current Liabilities		738,669			370,857
Total Liabilities		6,125,892			5,339,284

Commitments and contingencies

Stockholders’ Equity
Series E Preferred stock, $0.001 par value, 1,088 and 7,738 shares issued and outstanding, respectively		1			8
Common stock par value $0.001: 100,000,000 shares authorized; 14,033,197 issued and 14,023,847 outstanding as of September 30, 2021 and 8,736,378 issued and 8,727,028 outstanding as of December 31, 2020		14,032			8,737
Additional paid in capital		98,264,091			77,505,013
Subscription receivable		-			(40,000	)
Less: Treasury stock, 5,657 and 5,657 shares, respectively		(62,406	)		(62,406	)
Accumulated deficit		(97,341,964	)		(71,928,922	)
Accumulated other comprehensive income		(53,533	)		(37,234	)
Total Creatd, Inc. Stockholders’ Equity		820,221			5,445,196
Non-controlling interest in consolidated subsidiaries		1,306,910			-
		2,127,131			5,445,196
Total Liabilities and Stockholders’ Equity	$	8,253,023		$	10,784,480

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

Creatd, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

	For the Three Months Ended			For the Three Months Ended			For the Nine Months Ended			For the Nine Months Ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020

Net revenue	$	1,179,620		$	424,814		$	2,894,390		$	1,040,496

Cost of revenue		1,418,213			731,309			4,160,743			1,863,148

Gross margin (loss)		(238,593	)		(306,495	)		(1,266,353	)		(822,652	)

Operating expenses
Research and development		322,946			158,528			708,396			329,803
Marketing		1,812,400			540,555			8,049,579			1,396,119
Stock based compensation		2,151,900			4,582,766			5,662,389			6,577,558
General and administrative		2,385,135			1,435,520			5,551,049			3,258,933
Total operating expenses		6,672,381			6,717,369			19,971,413			11,562,413

Loss from operations		(6,910,974	)		(7,023,864	)		(21,237,766	)		(12,385,065	)

Other income (expenses)
Other income		123,710			437,657			123,710			515,442
Interest expense		(59,859	)		(512,650	)		(319,290	)		(1,379,386	)
Accretion of debt discount and issuance cost		(2,176,651	)		(4,058,286	)		(3,028,015	)		(4,385,507	)
Derivative expense		-			-			(100,502	)		-
Change in derivative liability		(833,456	)		-			(1,096,287	)		-
Impairment of investment		-						(62,733	)		-
Settlement of vendor liabilities		-			-			92,909			(126,087	)
Loss on marketable securities		-			(17,495	)		-			(7,453	)
Gain (loss) on extinguishment of debt		137,109			(5,004,060	)		423,118			(5,539,100	)
Gain on forgiveness of debt		-			-			279,022			470
Other expenses, net		(2,809,147	)		(9,154,834	)		(3,688,068	)		(10,921,621	)

Loss before income tax provision and equity in net loss from unconsolidated investments		(9,720,121	)		(16,178,698	)		(24,925,834	)		(23,306,686	)

Equity in net loss from equity method investment		(16,413	)		-			(16,413	)		-
Income tax provision		-			-			-			-
Net loss		(9,736,534	)		(16,178,698	)		(24,942,247	)		(23,306,686	)

Non-controlling interest in net loss		(60,477	)		-			(60,045	)		-

Net Loss attributable to Creatd, Inc.		(9,797,011	)		(16,178,698	)		(25,002,292	)		(23,306,686	)

Deemed dividend		-			(18,421	)		(410,750	)		(18,421	)

Net loss attributable to common shareholders	$	(9,797,011	)	$	(16,197,119	)	$	(25,413,042	)	$	(23,325,107	)

Comprehensive loss

Net loss	$	(9,736,534	)	$	(16,178,698	)	$	(24,942,247	)	$	(23,306,686	)

Currency translation gain (loss)		(8,436	)		5,735			(16,299	)		(22,795	)

Comprehensive loss	$	(9,744,970	)	$	(16,172,963	)	$	(24,958,546	)	$	(23,329,481	)

Per-share data
Basic and diluted loss per share	$	(0.71	)	$	(3.81	)	$	(2.20	)	$	(6.65	)

Weighted average number of common shares outstanding		13,710,111			4,254,300			11,563,150			3,506,393

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

Creatd, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Three Months Ended September 30, 2021 (Unaudited)

	Series E Preferred Stock					Common Stock				Treasury stock						Additional Paid In			Accumulated			Non-Controlling		Other Comprehensive			Stockholders’
	Shares			Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Interest		Income			Equity
Balance, July 1, 2021		1,048		$	1		11,857,675	$	11,858		(5,657	)	$	(62,406	)	$	87,131,333		$	(87,544,953	)	$	56,433	$	(45,097	)	$	(452,831	)

Stock based compensation		-			-		22,934		23		-			-			2,094,787			-			-		-			2,094,810

Conversion of warrants to stock		-			-		954,568		955		-			-			4,198,442			-			-		-			4,199,397

Shares issued for acquisition		-			-		224,503		224		-			-			893,297			-			-		-			893,521

Cash received for common stock		-			-		87,500		87		-			-			248,613			-			-		-			248,700

Common stock issued upon conversion of notes payable		-			-		779,706		779		-			-			3,697,725			-			-		-			3,698,504

Conversion of preferred series E to stock		(438	)		-		106,311		106		-			-			(106	)		-			-		-			-

Foreign currency translation adjustments		-			-		-		-		-			-			-			-			-		(8,436	)		(8,436	)

Non-controlling interest in consolidated subsidiary from acquisition		-			-		-		-		-			-			-			-			1,190,000		-			1,190,000

Net loss for the three months ended September 30, 2021		-			-		-		-		-			-			-			(9,797,011	)		60,477		-			(9,736,534	)
Balance, September 30, 2021		610		$	1		14,033,197	$	14,032		(5,657	)	$	(62,406	)	$	98,264,091		$	(97,341,964	)	$	1,306,910	$	(53,533	)	$	2,127,131

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

Creatd, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

For the Nine Months Ended September 30, 2021 (Unaudited)

	Series E Preferred Stock						Common Stock				Treasury stock						Additional Paid In			Subscription			Accumulated			Non- Controlling		Other Comprehensive			Stockholders’
	Shares			Amount			Shares		Amount		Shares			Amount			Capital			Receivable			Deficit			Interest		Income			Equity
Balance, January 1, 2021		7,738		$	8			8,736,378	$	8,737		(5,657	)	$	(62,406	)	$	77,505,013		$	(40,000	)	$	(71,928,922	)	$	-	$	(37,234	)	$	5,445,196

Stock based compensation		-			-			224,245		224		-			-			5,505,165			-			-			-		-			5,505,389

Shares issued for prepaid services		-			-			50,000		50		-			-			226,450			-			-			-		-			226,500

Shares issued to settle vendor liabilities		-			-			44,895		44		-			-			181,341			-			-			-		-			181,385

Common stock issued upon conversion of notes payable		-			-			900,665		901		-			-			4,014,424			-			-			-		-			4,015,325

Exercise of warrants to stock		-			-			1,275,261		1,275		-			-			5,470,793			-			-			-		-			5,472,068

Cash received for common		-			-			837,500		837		-			-			2,461,363			-			-			-		-			2,462,200

Cash received for preferred series E and warrants		40			-			-		-		-			-			(4,225	)		40,000			-			-		-			35,775

Conversion of preferred series E to stock		(7,168	)		(7	)		1,739,750		1,739		-			-			(1,732	)		-			-			-		-			-

Stock warrants issued with note payable		-			-			-		-		-			-			1,601,452			-			-			-		-			1,601,452

Shares issued for acquisition		-			-			224,503		225		-			-			893,297			-			-			-		-			893,522

Foreign currency translation adjustments		-			-			-		-		-			-			-			-			-			-		(16,299	)		(16,299	)

Non-controlling interest in consolidated subsidiary from acquisition		-			-			-		-		-			-			-			-			-			1,246,865		-			1,246,865

Dividends		-			-			-		-		-			-			410,750			-			(410,750	)		-		-			-

Net loss for the nine months ended September 30, 2021		-			-			-		-		-			-			-			-			(25,002,292	)		60,045		-			(24,942,247	)
Balance, September 30, 2021		610		$	1			14,033,197	$	14,032		(5,657	)	$	(62,406	)	$	98,264,091		$	-		$	(97,341,964	)	$	1,306,910	$	(53,533	)	$	2,127,131

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

Creatd, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Three Months Ended September 30, 2020 (Unaudited)

	Common Stock				Treasury stock						Additional Paid In		Accumulated			Other Comprehensive			Stockholders
	Shares		Amount		Shares			Amount			Capital		Deficit			Income			Equity
Balance, July 1, 2020		3,327,398	$	3,327		(7,461	)	$	(60,162	)	$	39,075,664	$	(51,708,425	)	$	(34,525	)	$	(12,724,121	)

Shares Issued with note payable		6,667		7		-			-			71,322		-			-			71,329

Stock warrants issued with note payable		-		-		-			-			326,364		-			-			326,364

Stock based compensation		91,167		91		-			-			4,582,674		-			-			4,582,765

Recognition of intrinsic value of beneficial conversion features – convertible notes		-		-		-			-			5,109,680		-			-			5,109,680
																				-
Cash received for common stock and warrants		1,725,000		1,725		-			-			7,025,962		-			-			7,027,687
																				-
Purchase of treasury stock		-		-		(1,889	)		(27,398	)		-		-			-			(27,398	)

Common stock and warrants issued upon conversion of notes payable		3,512,513		3,513		-			-			11,213,850		-			-			11,217,363

Foreign currency translation adjustments		-		-		-			-			-		-			5,735			5,735

Dividends		-		-		-			-			18,421		(18,421	)		-			-

Net loss for the three months ended September 30, 2020		-		-		-			-			-		(16,178,698	)		-			(16,178,698	)
Balance, September 30, 2020		8,662,745	$	8,663		(9,350	)	$	(87,560	)	$	67,423,937	$	(67,905,544	)	$	(28,790	)	$	(589,294	)

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

Creatd, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Nine Months Ended September 30, 2020 (Unaudited)

	Common Stock						Treasury stock						Additional Paid In			Accumulated			Other Comprehensive			Stockholders’
	Shares			Amount			Shares			Amount			Capital			Deficit			Income			Equity

Balance, Jan 1, 2019		3,059,646		$	3,060			(53,283	)	$	(367,174	)	$	36,391,818		$	(44,580,437	)	$	(5,995	)	$	(8,558,728	)

Shares issued with notes payable		14,774			15			-			-			130,244			-			-			130,259

Stock based compensation		141,167			141			-			-			5,167,633			-			-			5,167,774

Shares issued for services		-			-			-			-			-			-			-			-

Shares issued to settle vendor liabilities		23,565			24			-			-			235,607			-			-			235,631

Conversion of warrants to stock		7,239			7			-			-			(4,236	)		-			-			(4,229	)

Conversion of options to stock		229,491			229			-			-			1,405,436			-			-			1,405,665

Stock warrants issued with note payable		-			-			-			-			1,078,501			-			-			1,078,501

Cancellation of Treasury stock		(50,650	)		(51	)		50,650			349,030			(348,979	)		-			-			-

Purchase of treasury stock		-			-			(6,717	)		(69,416	)		-			-			-			(69,416	)

Recognition of intrinsic value of beneficial conversion features – convertible notes		-			-			-			-			5,109,680			-			-			5,109,680

Cash received for common stock and warrants		1,725,000			1,725			-			-			7,025,962			-			-			7,027,687

Common stock and warrants issued upon conversion of notes payable		3,512,513			3,513			-			-			11,213,850			-			-			11,217,363

Dividends		-			-			-			-			18,421			(18,421	)		-			-

Foreign currency translation adjustments		-			-			-			-			-			-			(22,795	)		(22,795	)

Net loss for the nine months ended September 30, 2020		-			-			-			-			-			(23,306,686	)		-			(23,306,686	)
Balance, September 30, 2020		8,662,745		$	8,663			(9,350	)	$	(87,560	)	$	67,423,937		$	(67,905,544	)	$	(28,790	)	$	(589,294	)

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

Creatd, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

	For the Nine Months Ended			For the Nine Months Ended
	September 30, 2021			September 30, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(24,942,247	)	$	(23,306,686	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		194,929			116,614
Impairment of note receivable		62,733			-
Impairment of intangible assets		93,791			-
Accretion of debt discount and issuance cost		3,028,015			4,385,507
Share-based compensation		5,662,389			6,577,558
Bad debt expense		-			52,849
Gain on marketable securities		-			7,453
Gain on Forgiveness of debt		(279,022	)		(470	)
Settlement of vendor liabilities		(92,909	)		126,087
Change in fair value of derivative liability		1,096,287			-
Derivative Expense		100,502			-
Loss on extinguishment of debt		(423,118	)		5,539,100
Non cash lease expense		60,756			53,462
Equity interest granted for other income		(123,710	)		-
Equity in net loss from unconsolidated investment		16,413			-
Changes in operating assets and liabilities:
Prepaid expenses		(471,899	)		-
Inventory		(68,091	)		-
Accounts receivable		150,980			(92,319	)
Deposits and other assets		107,115			(5,407	)
Deferred revenue		111,192			(13,270	)
Accounts payable and accrued expenses		160,434			1,578,302
Operating lease liability		(61,605	)		(51,268	)
Net Cash Used In Operating Activities		(15,617,065	)		(5,032,488	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for property and equipment		(65,971	)		(19,460	)
Deposits		-			(175,000	)
Cash paid for minority investment in business		(325,000	)		-
Cash paid for equity method investment		(510,000	)		-
Cash paid for investments in marketable securities		-			(238,272	)
Sale of marketable securities		-			36,048
Cash acquired in business acquisition		31,807			-
Cash consideration for acquisition		(444,750	)		-
Purchases of digital assets		(11,241	)		-
Net Cash Used In Investing Activities		(1,325,155	)		(396,684	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of warrant		5,472,068			-
Net proceeds from issuance of notes		321,229			1,396,649
Repayment of notes		(403,843	)		(447,024	)
Proceeds from issuance of demand loan		-			440,000
Repayment of demand Loan		-			(90,000	)
Proceeds from issuance of convertible note		3,610,491			2,904,255
Repayment of convertible notes		(941,880	)		(1,658,001	)
Proceeds from issuance of convertible notes - related party		-			50,000
Proceeds from issuance of note payable - related party		-			152,989
Repayment of note payable - related party		-			(983,752	)
Proceeds from issuance of common stock and warrants		2,502,200			6,662,015
Purchase of treasury stock and warrants		-			(89,416	)
Net Cash Provided By Financing Activities		10,560,265			8,337,715
Effect of exchange rate changes on cash		(16,299	)		(22,795	)
Net Change in Cash		(6,398,254	)		2,885,748
Cash – Beginning of Year		7,906,782			11,637
Cash – End of period	$	1,508,528		$	2,897,385
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash Paid During the Year for:
Income taxes	$	-		$	-
Interest	$	58,395		$	175,626
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Settlement of vendor liabilities	$	168,667		$	475,220
Beneficial conversion feature on convertible notes	$	-		$	5,498,313
Warrants issued with debt	$	1,601,452		$	1,079,213
Shares issued with debt	$	-		$	130,264
Issuance of common stock for prepaid services	$	226,500		$	585,000
Cancellation of Treasury stock	$	-		$	349,030
Conversion of note payable and interest into convertible notes	$	-		$	385,000
Conversion of Demand loan into notes payable	$	-		$	150,000
Deferred offering costs	$	4,225		$	-
Common stock and warrants issued upon conversion of notes payable	$	4,015,325		$	11,217,362
Shares issued for acquisition	$	893,520		$	-
Conversion of note payable and interest into convertible notes	$	-		$	385,000

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

Creatd, Inc.

September 30, 2021

Notes to the Condensed Consolidated Financial Statements

Note 1 – Organization and Operations

Creatd, Inc., formerly Jerrick Media Holdings, Inc. (“we,” “us,” the “Company,” or “Creatd”), is a technology company focused on providing economic opportunities for creators, which it accomplishes through its four main business pillars: Creatd Labs, Creatd Partners, Creatd Ventures, and Creatd Studios. Creatd’s flagship product, Vocal, delivers a robust long-form, digital publishing platform organized into highly engaged niche-communities capable of hosting all forms of rich media content. Through Creatd’s proprietary algorithm dynamics, Vocal enhances the visibility of content and maximizes viewership, providing advertisers access to target markets that most closely match their interests.

The Company was originally incorporated under the laws of the State of Nevada on December 30, 1999 under the name LILM, Inc. The Company changed its name on December 3, 2013 to Great Plains Holdings, Inc. as part of its plan to diversify its business.

On February 5, 2016 (the “Closing Date”), GTPH, GPH Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of GTPH (“Merger Sub”), and Jerrick Ventures, Inc., a privately-held Nevada corporation headquartered in New Jersey (“Jerrick”), entered into an Agreement and Plan of Merger (the “Merger”) pursuant to which the Merger Sub was merged with and into Jerrick, with Jerrick surviving as a wholly-owned subsidiary of GTPH (the “Merger”). GTPH acquired, pursuant to the Merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “Jerrick Shareholders”), pro-rata, a total of 475,000 shares of GTPH’s common stock. In connection therewith, GTPH acquired 33,415 shares of Jerrick’s Series A Convertible Preferred Stock (the “Jerrick Series A Preferred”) and 8,064 shares of Series B Convertible Preferred Stock (the “Jerrick Series B Preferred”).

In connection with the Merger, on the Closing Date, GTPH and Kent Campbell entered into a Spin-Off Agreement (the “Spin-Off Agreement”), pursuant to which Mr. Campbell purchased from GTPH (i) all of GTPH’s interest in Ashland Holdings, LLC, a Florida limited liability company, and (ii) all of GTPH’s interest in Lil Marc, Inc., a Utah corporation, in exchange for the cancellation of 39,091 shares of GTPH’s Common Stock held by Mr. Campbell. In addition, Mr. Campbell assumed all debts, obligations and liabilities of GTPH, including any existing prior to the Merger, pursuant to the terms and conditions of the Spin-Off Agreement.

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

Effective February 28, 2016, GTPH entered into an Agreement and Plan of Merger (the “Statutory Merger Agreement”) with Jerrick, pursuant to which GTPH became the parent company of Jerrick Ventures, LLC, a wholly-owned operating subsidiary of Jerrick (the “Statutory Merger”) and GTPH changed its name to Jerrick Media Holdings, Inc. to better reflect its new business strategy.

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

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

On June 4, 2021, the Company acquired 89% of the membership interests of Plant Camp, LLC, a Delaware limited liability company (“Plant Camp”), which the Company subsequently rebranded as Camp. Plant Camp is a direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. The results of Plant Camp’s operations have bene included since the date of acquisition in the Statements of Operations.

On July 20, 2021, the Company acquired 44% of the membership interests of WHE Agency, Inc,. WHE Agency, Inc, is a talent management and public relations agency based in New York. WHE Agency, Inc, has been consolidated due to the company’s ownership of 55% voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations.

On August 16, 2021, the Company acquired 16% of the membership interests of Dune, Inc. bring our total membership interests to 21%. Dune, Inc. is a direct-to-consumer brand focused on promoting wellness through its range of health-oriented beverages.

Note 2 – Significant Accounting Policies and Practices

Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by the accounting principles generally accepted in the United States of America.

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or any other interim period or for any other future year. These unaudited condensed financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020, included in the Company’s 2020 Annual Report on Form 10-K filed with the SEC. The balance sheet as of December 31, 2020 has been derived from audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.

Use of Estimates and Critical Accounting Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

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

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

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. The Company uses estimates in accounting for, among other items, revenue recognition, allowance for doubtful accounts, stock-based compensation, income tax provisions, excess and obsolete inventory reserve, and impairment of intellectual property.

Actual results could differ from those estimates.

Principles of consolidation

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

As of September 30, 2021, the Company’s consolidated subsidiaries and/or entities are as follows:

Name of combined affiliate	State or other jurisdiction of incorporation or organization	Company Ownership Interest
Jerrick Ventures LLC	Delaware		100	%
Abacus Tech Pty Ltd	Australia		100	%
Seller’s Choice, LLC	New Jersey		100	%
Recreatd, LLC	Delaware		100	%
Give, LLC	Delaware		100	%
Creatd Partners LLC	Delaware		100	%
Plant Camp LLC	Delaware		89	%
Sci-Fi Shop, LLC	Delaware		100	%
OG Collection LLC	Delaware		100	%
VMENA LLC	Delaware		100	%
Vocal For Brands, LLC	Delaware		100	%
Vocal Ventures LLC	Delaware		100	%
What to Buy, LLC	Delaware		100	%
WHE Agency, Inc.	Delaware		44	%

All inter-company balances and transactions have been eliminated.

Fair Value of Financial Instruments

The fair value measurement disclosures are grouped into three levels based on valuation factors:

●

Level 1 – quoted prices in active markets for identical investments

●

Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs)

●

Level 3 – significant unobservable inputs (including our own assumptions in determining the fair value of investments)

The Company’s Level 1 assets/liabilities include cash, accounts receivable, marketable trading securities, accounts payable, prepaid and other current assets, line of credit and due to related parties. Management believes the estimated fair value of these accounts at September 30, 2021 approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments or the use of market interest rates for debt instruments.

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

The Company’s Level 3 assets/liabilities include goodwill, intangible assets, marketable debt securities, equity investments at cost, and derivative liabilities. Inputs to determine fair value are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.

The following table provides a summary of the relevant assets and liabilities that are measured at fair value on recurring basis:

Fair Value Measurements as of

September 30, 2021

Total

Quoted Prices in Active Markets for Identical Assets or Liabilities
(Level 1)

Quoted Prices for Similar Assets or Liabilities in Active Markets
(Level 2)

Significant Unobservable Inputs
(Level 3)

Assets:

Marketable securities - debt securities

Total assets

Liabilities:

Derivative liabilities

Total Liabilities

The following table shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on recurring basis as of September 30, 2021:

	Fair Value		Valuation Methodology	Unobservable Inputs
Marketable securities - debt securities	$	-	Discounted cash flow analysis	Expected cash flows from the investment

Derivative liabilities	$	-	Monte Carlo simulations and Binomial model	Risk free rate Expected volatility; Drift rate

The following table provides a summary of the relevant assets that are measured at fair value on non-recurring basis:

Fair Value Measurements as of

September 30, 2021

	Total		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Equity investments, at cost	$	152,096	$	-	$	-	$	152,096
Total assets	$	152,096	$	-	$	-	$	152,096

The following table shows the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on non-recurring basis as of September 30, 2021:

		Fair Value				Valuation Methodology		Unobservable Inputs
Equity investments, at cost		$	152,096			Qualitative assessment per ASC 321-10-35		Qualitative factors

The Company valued the initial value of debt securities, which are investments in convertible notes receivable, by assessing the separate values of the debt and equity components for similar instruments convertible into private company equity (Level 3). The investment was initially measured at cost, which was determined to approximate fair value due to the lack of marketability of the conversion shares underlying these convertible instruments and the expected recoverability of the note principal. The key assumption affecting the level 3 fair values would be observable price changes to the equity investments. The Company monitors for impairment indicators at each balance sheet date.

Cash Equivalents

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

At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurable limits. The Company has never experienced any losses related to these balances. As of September 30, 2021, and December 31, 2020, cash amounts in excess of $250,000 were not fully insured. The uninsured cash balance as of September 30, 2021 was approximately $1.3 million. The Company does not believe it is exposed to significant credit risk on cash and cash equivalents.

Long-lived Assets Including Goodwill and Other Acquired Intangibles Assets

We evaluate the recoverability of property and equipment and acquired finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. During the three and nine months ended September 30, 2021 the Company recorded an impairment charge of $93,791 for intangible assets.

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

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

Investments

Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in earnings. Debt securities not classified as held-to-maturity or as trading are classified as available-for-sale, and are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive income and reported in stockholders’ equity.

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

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

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

The following table sets forth a summary of the changes in marketable securities - available-for-sale debt securities that are measured at fair value on a recurring basis:

	For the nine months ended September 30, 2021
	Total
Beginning of period	$	62,733
Purchase of marketable securities		-
Interest due at maturity		-
Other than temporary impairment		(62,733	)
Conversion of marketable securities		-
September 30, 2021	$	-

We invest in debt securities. Our investments in debt securities are subject to interest rate risk. To minimize the exposure due to an adverse shift in interest rates, we invest in securities with maturities of two years or less and maintain a weighted average maturity of one year or less. As of September 30, 2021, all of our investments had maturities between one and three years. The marketable debt security investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable. During the nine months ended September 30, 2021 the Company recognized a $62,733 impairment of the debt security.

The following table sets forth a summary of the changes in equity investments, at cost that are measured at fair value on a non-recurring basis:

	For the three months ended September 30, 2021			For the nine months ended September 30, 2021
	Total			Total
Beginning of period	$	367,096		$	217,096
Purchase of equity investments		-			150,000
Conversion to equity method investments		(215,000	)		(215,000	)
September 30, 2021	$	152,096		$	152,096

The Company has elected to measure its equity securities without a readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. An election to measure an equity security in accordance with this paragraph shall be made for each investment separately.

The Company performed a qualitative assessment considering impairment indicators to evaluate whether these investments were impaired. Impairment indicators that the Company considered included the following: a) a significant deterioration in the earnings performance, credit rating, asset quality or business prospects of the investee; b) a significant adverse change in the regulatory, economic or technology environment of the investee; c) a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates; d) a bona fide offer to purchase or an offer by the investee to sell the investment; e) factors that raise significant concerns about the investee’s ability to continue as a going concern.

Equity Method Investments

Investments in unconsolidated entities over which we have significant influence are accounted for under the equity method of accounting. Under the equity method of accounting, the Company does not consolidate the investment’s financial statements within its consolidated financial statements. Equity method investments are initially recorded at cost, then our proportional share of the underlying net income or loss is recorded as equity in net loss from equity method investments in our statement of operations, with a corresponding increase or decrease to the carrying value of the investment. Distributions received from the investee reduce our carrying value of the investment and are recorded in the consolidated statements of cash flows using the cumulative earnings approach. These investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable. There were no indicators of impairment related to our equity method investments for the three and nine months ended September 30, 2021.

Commitments and Contingencies

The Company follows subtopic 450-20 of the FASB ASC to report accounting for contingencies. Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

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

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

Foreign Currency

Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at our Consolidated Balance Sheet dates. Results of operations and cash flows are translated using the average exchange rates throughout the periods. The effect of exchange rate fluctuations on the translation of assets and liabilities is included as a component of stockholders’ equity in accumulated other comprehensive income. Gains and losses from foreign currency transactions, which are included in operating expenses, have not been significant in any period presented.

Derivative Liability

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

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

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

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

The Company utilizes a Monte Carlo simulation model for the make whole feature and a binomial option model for convertible notes that have an option to convert at a variable number of shares to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The inputs utilized in the application of the Monte Carlo model included a starting stock price, an expected term of each debenture remaining from the valuation date to maturity, an estimated volatility, drift, and a risk-free rate. The inputs utilized in the application of the Binomial model included a stock price on valuation date, an expected term of each debenture remaining from the valuation date to maturity, an estimated volatility, and a risk-free rate. The Company records the change in the fair value of the derivative as other income or expense in the consolidated statements of operations.

Revenue Recognition

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

We determine revenue recognition through the following steps:

●

identification of the contract, or contracts, with a customer;

●

identification of the performance obligations in the contract;

●

determination of the transaction price. The transaction price for any given subscriber could decrease based on any payments made to that subscriber. A subscriber may be eligible for payment through one or more of the monetization features offered to Vocal creators, including earnings through reads (on a cost per mile basis) and cash prizes offered to Challenge winners;

●

allocation of the transaction price to the performance obligations in the contract; and

●

recognition of revenue when, or as, we satisfy a performance obligation.

Revenue disaggregated by revenue source for the three and nine months ended September 30, 2021 and 2020 consists of the following:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Agency (Managed Services, Branded Content, & Talent Management Services)	$	555,766	$	349,148	$	1,472,902	$	856,233
Platform (Creator Subscriptions)		611,714		66,198		1,370,581		157,132
Ecommerce		4,153		-		9,679		-
Affiliate Sales		7,619		8,400		23,425		24,744
Other Revenue		368		1,068		17,803		2,387
	$	1,179,620	$	424,814	$	2,894,390	$	1,040,496

The Company utilizes the output method to measures the results achieved and value transferred to a customers over time. Timing of revenue recognition for the three and nine months ended September 30, 2021 and 2020 consists of the following:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Products and services transferred over time	$	1,167,480	$	415,346	$	2,843,483	$	1,013,365
Products and services transferred at a point in time		12,140		9,468		50,907		27,131
	$	1,179,620	$	424,814	$	2,894,390	$	1,040,496

Agency Revenue

Managed Services

The Company provides Studio/Agency Service offerings to business-to-business (B2B) and business-to-consumer (B2C) product and service brands which encompasses a full range of digital marketing and e-commerce solutions. The Company’s services include the setup and ongoing management of clients’ websites, Amazon and Shopify storefronts and listings, social media pages, search engine marketing, and other various tools and sales channels utilized by e-commerce sellers for sales and growth optimization. Contracts are broken into three categories: Partners, Monthly Services, and Projects. Contract amounts for Partner and Monthly Services clients range from approximately $500-$7,500 per month while Project amounts vary depending on the scope of work. Partner and Monthly clients are billed monthly for the work completed within that month. Partner Clients may or may not have an additional billing component referred to as Sales Performance Fee, which is a fee based upon a previously agreed upon percentage point of the client’s total sales for the month. Some Partners may also have projects within their contracts that get billed and recognized as agreed upon project milestones are achieved. Revenue is recognized over time as service obligations and milestones in the contract are met.

Branded Content

Branded content represents the revenue recognized from the Company’s obligation to create and publish branded articles for clients on the Vocal platform and promote said stories, tracking engagement for the client. The performance obligation is satisfied when the Company successfully publishes the articles on its platform and meets any required promotional milestones as per the contract. The revenue is recognized over time as the services are performed and any required milestones are met.

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

	●	The Company collects fixed fees ranging from $10,000 to $110,000.

	●	The articles are created and published within three months of the signed agreement, or as previously negotiated with the client.

	●	The articles are promoted per the contract and engagement reports are provided to the client.

	●	Most billing for contracts occurs 50% at signing and 50% upon completion of the services, with net payment terms varying per client.

	●	Most contracts include provisions for clients to acquire content rights at the end of the campaign for a flat fee.

Talent Management Services

Talent Management represents the revenue recognized by WHE Agency, Inc. (“WHE”) from the Company’s obligation to manage and oversee influencer-led campaigns from the contract negotiation stage through content creation and publication. WHE acts in an agent capacity for influencers and collects a management fee of 20% of the value of an influencer’s contract with a brand. Revenue is recognized net of the 80% of the contract that is collected by the influencer and is recognized when performance obligations of the contract are met. Performance obligations are complete when milestones and deliverables of contracts are delivered to the client.

Below are the significant components of a typical agreement pertaining to talent management revenue:

	●	Total gross contracts range from $500-$50,000.

	●	The Company collects fixed fees in the amount of 20% of the gross contract amount, ranging from $100 to $10,000 in net revenue per contract.

	●	The campaign is created and made live by the influencer within one month of the signed agreement, or as previously negotiated with the client.

	●	Campaigns are promoted per the contract and the customer is provided a link to the live deliverables on the influencer’s social media channels.

●

Most billing for contracts occur 100% at execution of the performance obligation. Net payment terms vary by client.

Platform Revenue

Creator Subscriptions

Vocal+ is a premium subscription offering for Vocal creators. In addition to joining for free, Vocal creators now have the option to sign up for a Vocal+ membership for either $9.99 monthly or $99 annually, though these amounts are subject to promotional discounts and free trials. Vocal+ subscribers receive access to value-added features such as increased rate of cost per mille (thousand) (“CPM”) monetization, a decreased minimum withdrawal threshold, a discount on platform processing fees, member badges for their profiles, access to exclusive Vocal+ Challenges, and early access to new Vocal features. Subscription revenues stem from both monthly and annual subscriptions, the latter of which is amortized over a twelve-month period. Any customer payments received are recognized over the subscription period, with any payments received in advance being deferred until they are earned.

The transaction price for any given subscriber could decrease based on any payments made to that subscriber. A subscriber may be eligible for payment through one or more of the monetization features offered to Vocal creators, including earnings through reads (on a cost per mille basis) and cash prizes offered to Challenge winners. Estimates are utilized for payments made for earnings through reads, by establishing the lifetime a subscriber has had a Vocal account, determining the percentage of that lifetime that the subscriber has been a paying customer, and applying that percentage to payments for earnings through reads in the relevant reporting period.

Affiliate Sales Revenue

Affiliate sales represents the commission the Company receives when a purchase is made through affiliate links placed within content hosted on the Vocal platform. Affiliate revenue is earned on a “click through” basis, upon referring visitors, via said links, to an affiliate’s site and having them complete a specific outcome, most commonly a product purchase. The Company uses multiple affiliate platforms, such as Skimlinks, Amazon, and Tune, to form and maintain thousands of vendor relationships. Each vendor establishes their own commission percentage, which typically range from 2-20%. The revenue is recognized upon receipt as reliable estimates could not be made.

E-Commerce Revenue

The Company’s e-commerce businesses are housed under Creatd Ventures, and currently consists of two majority-owned e-commerce companies, Camp (previously Plant Camp) and Dune Glow Remedy (“Dune”). The Company generates revenue through the sale of Camp and Dune’s consumer products through its e-commerce distribution channels. The Company satisfies its performance obligation upon shipment of product by its customers.

Deferred Revenue

Deferred revenue consists of billings and payments from clients in advance of revenue recognition. As of September 30, 2021, and December 31, 2020, the Company had deferred revenue of $200,500 and $88,637, respectively.

Accounts Receivable and Allowances

Accounts receivable are recorded and carried when the Company has performed the work in accordance with managed services, project, partner, consulting and branded content agreements. For example, we bill a managed service client monthly when we have updated their Amazon store, modified SEO or completed the other services listed in the agreement. For projects and branded content, we will bill the client and record the receivable once milestones are reached that are set in the agreement. We make estimates for the allowance for doubtful accounts and allowance for unbilled receivables based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, and other factors that may affect our ability to collect from customers. During the nine months ended September 30, 2021, the Company recorded $0 as a bad debt expense. As of September 30, 2021, and December 31, 2020, the Company has an allowance for doubtful accounts of $76,340 and $80,509, respectively.

Stock-Based Compensation

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

Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods.

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

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

Loss Per Share

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the three and nine months ended September 30, 2021 and 2020 presented in these condensed consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

The Company had the following common stock equivalents at September 30, 2021 and 2020:

	September 30,
	2021		2020
Options		2,327,445		542,687
Warrants		6,558,705		3,059,040
Convertible notes		228,334		-
Totals		9,114,484		3,601,727

Reclassifications

Certain prior year amounts in the consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current year’s presentation. These reclassifications did not affect the prior period’s total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities. During the three months ended September 30, 2021, we adopted a change in presentation on our consolidated statements of operations and comprehensive loss in order to present a gross profit line, the presentation of which is consistent with our peers. Under the new presentation, we began allocating payroll and related expenses, professional services and creator payouts. Prior periods have been revised to reflect this change in presentation.

Recently Adopted Accounting Guidance

In December 2019, the FASB issued authoritative guidance intended to simplify the accounting for income taxes (ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”). This guidance eliminates certain exceptions to the general approach to the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. This guidance is effective for annual periods after December 15, 2020, including interim periods within those annual periods. The updated guidance, which became effective for fiscal years beginning after December 15, 2020, did not have a material impact on the Company’s condensed consolidated financial statements.

Recent Accounting Guidance Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU-2016-13”). ASU 2016-13 affects loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. ASU 2016-13 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2021, and interim periods within those annual periods and early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements.

In May 2021, the FASB issued authoritative guidance intended to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. (ASU 2021-04), “Derivatives and Hedging Contracts in Entity’s Own Equity (Topic 815). This guidance amendments provide measurement, recognition, and disclosure guidance for an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. This guidance is effective for annual periods after December 15, 2021, including interim periods within those annual periods. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements.

In July 2021, the FASB issued ASU No. 2021-05, Lessors—Certain Leases with Variable Lease Payments (Topic 842), Which requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate (hereafter referred to as “variable payments”) as an operating lease on the commencement date of the lease if specified criteria are met. ASU 2021-05 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s condensed consolidated financial statements upon the adoption of this ASU.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations — Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805), Which aims to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in recognition and payment terms that effect subsequent revenue recognition. ASU 2021-08 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s condensed consolidated financial statements upon the adoption of this ASU.

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

Note 3 – Going Concern

The Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the condensed consolidated financial statements, as of September 30, 2021, the Company had an accumulated deficit of $97.3 million, a net loss of $25.0 million and net cash used in operating activities of $15.6 million for the reporting period then ended. The Company is in default on debentures as of the date of this filing. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.

On January 30, 2020, the World Health Organization declared the COVID-19 novel coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial impact will be to the Company, capital raising efforts and our operations may be negatively affected.

The Company is attempting to further implement its business plan and generate sufficient revenues; however, its cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds by way of a public or private offering of its debt or equity securities, there can be no assurance that it will be able to do so on reasonable terms, or at all. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenues and its ability to raise additional funds by way of a public or private offering.

The condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 4 – Inventory

Inventory was comprised of the following at September 30, 2021:

	September 30, 2021
Raw Materials	$	75,585
Packaging		769
Finished goods		11,707
	$	88,061

Note 5 – Equity investments, at cost

On October 2, 2020, the Company converted $102,096 of its marketable debt security into 119,355 shares of preferred stock or a 1.3% equity investment in a private company.

On October 23, 2020, the Company entered into an equity interest purchase agreement whereas the Company purchased 3.8% ownership of a private company for $115,000. During the three months ended September 30, 2021, the Company acquired additional equity interests that resulted in the Company achieving significant influence over this investee, therefore the investments were reclassified as an equity method investment (see Note 6).

On February 17, 2021, the Company entered into a membership interest purchase agreement whereas the Company purchased another 3.3% ownership of a private company for $100,000. During the three months ended September 30, 2021, the Company acquired additional equity interests that resulted in the Company achieving significant influence over this investee, therefore the investments were reclassified as an equity method investment (see Note 6).

On May 21, 2021, the Company entered into a common stock purchase agreement whereas the Company purchased 10.0% ownership of a private company for $50,000.

Note 6 – Equity Method Investments

During the nine months ended September 30, 2021, we invested $410,000 in cash into Dune, Inc., and received equity interest for services that were recorded to other income on the Statement of Operations. Our investment in Dune, Inc., is accounted for under the equity method and is included within Equity method investment in our consolidated balance sheet as of September 30, 2021. Our ownership percentage in Dune, Inc. which is recorded under the equity method investment, is 21%. During the three and nine months ended September 30, 2021, we recorded $16,413 of losses from this investment as equity in net loss from equity method investment within our consolidated statements of operations. As of September 30, 2021, our Equity method investment total $732,297.

Note 7 – Notes Payable

Notes payable as of September 30, 2021 and December 31, 2020 is as follows:

	Outstanding Principal as of
	September 30, 2021			December 31, 2020			Interest Rate			Maturity Date
Seller’s Choice Note	$	660,000		$	660,000			30	%	September 2020
The May 2020 PPP Loan Agreement		232,432			412,500			1	%	April 2022
The April 2020 PPP Loan Agreement		-			282,432			1	%	May 2022
The October 2020 Loan Agreement		54,412			55,928			14	%	July 2021
The November 2020 Loan Agreement		-			23,716			14	%	May 2021
The February 2021 Loan Agreement		81,789			-			14	%	July 2021
The July 2021 Loan Agreement		72,204			-			10	%	October 2022
		1,100,837			1,434,576
Less: Debt Discount		(9,688	)		-
Less: Debt Issuance Costs		-			-
		1,091,149			1,434,576
Less: Current Debt		(1,072,190	)		(1,221,539	)
Total Long-Term Debt	$	18,959		$	213,037

Seller’s Choice Note

On September 11, 2019, the Company entered into Seller’s Choice Purchase Agreement with Home Revolution LLC. As a part of the consideration provided pursuant to the Seller’s Choice Acquisition, the Company issued the Seller’s Choice Note to the Seller in the principal amount of $660,000. The Seller’s Choice Note bears interest at a rate of 9.5% per annum and is payable on March 11, 2020 (the “Seller’s Choice Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts become due. Upon maturity the Company utilized an automatic extension up to 6 months. This resulted in a 5% increase in the interest rate every month the Seller’s Choice Note is outstanding. As of September 30, 2021, the Company is in default on the Seller’s Choice note.

During the nine months ended September 30, 2021, the Company accrued interest of $148,093.

The April 2020 PPP Loan Agreement

On April 30, 2020, the Company was granted a loan with a principal amount of $282,432 (the “Loan”), pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The Loan, which was in the form of a Note dated April 30, 2020, matures on April 30, 2022, and bears interest at a fixed rate of 1.00% per annum, payable monthly commencing on October 30, 2020. The Note may be prepaid by the Company at any time prior to maturity without payment of any premium. Funds from the Loan may only be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments.

During the nine months ended September 30, 2021, the Company accrued interest of $1,395.

During the nine months ended September 30, 2021, the Company repaid $50,000 in principal.

The Company is in the process of returning the funds received from the Loan.

When the applications for PPP first opened up, there was limited available funding and much confusion surrounding the application process. The Company initially submitted its application for the May 2020 PPP Loan in early April but received no response in the aftermath of submitting the application. After consulting multiple advisors, the Company made the decision to apply elsewhere, due to the rampant media coverage of institutions running out of funding and the Company’s need for the capital and belief that if 2 separate loans were approved, the remaining application could simply be withdrawn.

Therefore, in late April, the company proceeded with applying for the April 2020 PPP Loan. After some conflicting communications regarding acceptance, the Company attempted to contact the lender to clarify but got no response. After continued attempts to follow up with both lenders, the Company received approval for the May 2020 PPP Loan and funding for the April 2020 PPP Loan on the same day, followed the next day by the funding of the May 2020 PPP Loan. The Company immediately separated the funds for the April 2020 PPP Loan into a separate reserved bank account with the intention of returning the funds. However, after several attempts to contact the lender with no response, the Company was faced with difficulty raising funds in the early-Covid economy and made the decision to utilize the funds for operations and pursue an installment repayment plan when they were able to reach the lender. As of the date of this filing, the Company has begun making repayments on the loan, absent a formal installment agreement due to difficulties reaching the lender. The Company intends to complete repayment before the end of 2021.

As each company is only permitted one loan under the CARES Act, there is a possibility the loan may be called by the SBA and the Company would have to repay the loan in full at such time.

The May 2020 PPP Loan Agreement

On May 4, 2020, Jerrick Ventures, LLC (“Jerrick Ventures”), the Company’s wholly-owned subsidiary, was granted a loan from PNC Bank, N.A. with a principal amount of $412,500, pursuant to the Paycheck Protection Program (the “PPP”). The Loan, which was in the form of a Note dated May 4, 2020, matures on May 4, 2022, and bears interest at a fixed rate of 1.00% per annum, payable monthly commencing on November 4, 2020. The Note may be prepaid by Jerrick Ventures at any time prior to maturity without payment of any premium. Funds from the Loan may only be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments. Jerrick Ventures intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

During the nine months ended September 30, 2021, the Company accrued interest of $1,017.

During the nine months ended September 30, 2021, the Company repaid $136,597 in principal and was forgiven $275,903 of principal and $3,119 of accrued interest.

The October 2020 Loan Agreement

On October 6, 2020, the Company entered into a secured loan agreement (the “October 2020 Loan Agreement”) with a lender (the “October 2020 Lender”), whereby the October 2020 Lender issued the Company a secured promissory note of $74,300 AUD or $54,412 United States Dollars (the “October 2020 Note”). Pursuant to the October 2020 Loan Agreement, the October 2020 Note has an effective interest rate of 14%. The maturity date of the October 2020 Note is September 30, 2021 (the “October 2020 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the October 2020 Loan Agreement are due. The loan is secured by the Australian research & development credit.

During the nine months ended September 30, 2021, the Company accrued $7,780 AUD in interest.

The November 2020 Loan Agreement

On November 24, 2020, the Company entered into a loan agreement (the “November 2020 Loan Agreement”) with a lender (the “November 2020 Lender”) whereby the November 2020 Lender issued the Company a promissory note of $34,000 (the “November 2020 Note”). Pursuant to the November 2020 Loan Agreement, the November 2020 Note has an effective interest rate of 14%. The maturity date of the November 2020 Note is May 25, 2021 (the “November 2020 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the November 2020 Note are due.

During the nine months ended September 30, 2021, the Company repaid $23,716 in principal and $4,736 of accrued interest.

The February 2021 Loan Agreement

On February 24, 2021, the Company entered into a secured loan agreement (the “February 2021 Loan Agreement”) with a lender (the “February 2021 Lender”), whereby the February 2021 Lender issued the Company a secured promissory note of $111,683 AUD or $81,789 United States Dollars (the “February 2021 Note”). Pursuant to the February 2021 Loan Agreement, the February 2021 Note has an effective interest rate of 14%. The maturity date of the February 2021 Note is July 31, 2021 (the “February 2021 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the February 2021 Loan Agreement are due. The loan is secured by the Australian research & development credit.

During the nine months ended September 30, 2021, the Company accrued $9,339 AUD in interest.

The April 2021 Loan Agreement

On April 9, 2021, the Company entered into a loan agreement (the “April 2021 Loan Agreement”) with a lender (the “April 2021 Lender”) whereby the April 2021 Lender issued the Company a promissory note of $128,110 (the “April 2021 Note”). Pursuant to the April 2021 Loan Agreement, the April 2021 Note has an effective interest rate of 11%. The maturity date of the April 2021 Note is October 8, 2022 (the “April 2021 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the April 2021 Note are due.

During the nine months ended September 30, 2021, the Company repaid $92,140 in principal and converted $35,970 into the July 2021 Loan Agreement. As part of the conversion the Company recorded $8,341 as extinguishment expense.

The July 2021 Loan Agreement

On July 2, 2021, the Company entered into a loan agreement (the “July 2021 Loan Agreement”) with a lender (the “July 2021 Lender”) whereby the July 2021 Lender issued the Company a promissory note of $137,625 (the “July 2021 Note”). Pursuant to the July 2021 Loan Agreement, the July 2021 Note has an effective interest rate of 10%. The maturity date of the July 2021 Note is December 31, 2022 (the “July 2021 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the July 2021 Note are due.

During the nine months ended September 30, 2021, the Company repaid $65,421 in principal.

Note 8 – Convertible Note Payable

Convertible notes payable as of September 30, 2021, and December 31, 2020, is as follows:

	Outstanding Principal as of													Warrants granted
	September 30, 2021			December 31, 2020			Interest Rate			Conversion Price			Maturity Date	Quantity		Exercise Price
The September 2020 convertible Loan Agreement	$	-		$	341,880			12	%		-	(*)	September-21		85,555		5
The First December 2020 convertible Loan Agreement		-			600,000			12	%		-	(*)	December-21		-		-
The October 2020 convertible Loan Agreement		-			169,400			6	%		-	(*)	October-21		-		-
The Second December 2020 convertible Loan Agreement		500			169,400			6	%		-	(*)	December-21		-		-
The May 2021 Loan		1,141,669			-			-	%		5.00	(*)	November-22		1,090,908		4.50
The July 2021 Loan		168,850			-			6	%		-	(*)	July - 22
		1,311,019			1,280,680
Less: Debt Discount		(430,026	)		(309,637	)
Less: Debt Issuance Costs		(86,460	)		(73,527	)
		794,533			897,516
Less: Current Debt		(154,037	)		(897,516	)
Total Long-Term Debt	$	640,496		$	-

(*)	As subject to adjustment as further outlined in the notes

The First July 2020 Convertible Loan Agreement

On July 01, 2020, the Company entered into a loan agreement (the “First July 2020 Loan Agreement”) with an individual (the “First July 2020 Lender”), whereby the First July 2020 Lender issued the Company a promissory note of $68,000 (the “First July 2020 Note”). Pursuant to the First July 2020 Loan Agreement, the First July 2020 Note has interest of ten percent (10%). The First July 2020 Note matures on June 29, 2021.

Upon default or 180 days after issuance the First July 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) equal to 61% multiplied by the lowest trade of the common stock during the twenty (15) consecutive trading day period immediately preceding the date of the respective conversion.

During the nine months ended September 30, 2021, the First July 2020 Note became convertible. Due to the fact that these convertible notes have an option to convert at a variable amount, they are subject to derivative liability treatment. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The conversion feature has been measured at fair value using a Binomial model at the conversion date and the period end. The conversion feature of First July 2020 Note gave rise to a derivative liability of $112,743. The Company recorded $68,000 as a debt discount and $44,743 was recorded to derivative expense. The debt discount is charged to accretion of debt discount over the remaining term of the convertible note.

During the nine months ended September 30, 2021, the Company converted $68,000 in principal and $3,400 in interest into 35,469 shares of the Company’s common stock.

The August 2020 Convertible Loan Agreement

On August 17, 2020, the Company entered into a loan agreement (the “August 2020 Loan Agreement”) with an individual (the “August 2020 Lender”), whereby the August 2020 Lender issued the Company a promissory note of $68,000 (the “August 2020 Note”). Pursuant to the August 2020 Loan Agreement, the August 2020 Note has interest of twelve percent (12%). The August 2020 Note matures on August 17, 2021.

Upon default or 180 days after issuance the August 2020 Convertible Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) equal to 61% multiplied by the lowest trade of the common stock during the twenty (15) consecutive trading day period immediately preceding the date of the respective conversion.

The Company recorded a $3,000 debt discount relating to original issue discount associated with this note. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.t

During the nine months ended September 30, 2021, the August 2020 Note became convertible. Due to the fact that these convertible notes have an option to convert at a variable amount, they are subject to derivative liability treatment. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The conversion feature has been measured at fair value using a Binomial model at the conversion date and the period end. The conversion feature of August 2020 Note gave rise to a derivative liability of $120,759. The Company recorded $65,000 was recorded as a debt discount and $55,759 was recorded to derivative expense. The debt discount is charged to accretion of debt discount over the remaining term of the convertible note.

During the nine months ended September 30, 2021 the Company converted $68,000 in principal and $3,400 in interest into 29,859 shares of the Company’s common stock.

The September 2020 Convertible Loan Agreement

On September 23, 2020, the Company entered into a loan agreement (the “September 2020 Loan Agreement”) with an individual (the “September 2020 Lender”), whereby the September 2020 Lender issued the Company a promissory note of $385,000 (the “September 2020 Note”). Pursuant to the September 2020 Loan Agreement, the September 2020 Note has interest of twelve percent (12%). The September 2020 Note matures on September 23, 2021.

Upon default or 180 days after issuance the Second July 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion.

The Company recorded a $68,255 debt discount relating to original issue discount associated with this note. The Company recorded a $146,393 debt discount relating to 85,555 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.

During the nine months ended September 30, 2021 the Company repaid $341,880 in principal and $46,200 in interest.

The October 2020 Convertible Loan Agreement

On October 2, 2020, the Company entered into a loan agreement (the “October 2020 Loan Agreement”) with an individual (the “October 2020 Lender”), whereby the October 2020 Lender issued the Company a promissory note of $169,400 (the “October 2020 Note”). Pursuant to the October 2020 Loan Agreement, the October 2020 Note has interest of six percent (6%). The October 2020 Note matures on the first (12^th) month anniversary of its issuance date.

Upon default or 180 days after issuance the October 2020 Note is convertible into shares of the Company’s common stock, par value $0.001 per share (“Conversion Shares”) equal to 75% of average the lowest three trading prices of the Company’s common stock on the fifteen-trading day immediately preceding the date of the respective conversion.

The Company recorded a $19,400 debt discount relating to original issue discount associated with this note. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.

During the nine months ended September 30, 2021, the Second July 2020 Note became convertible. Due to the fact that these convertible notes have an option to convert at a variable amount, they are subject to derivative liability treatment. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The conversion feature has been measured at fair value using a Binomial model at the conversion date and the period end. The conversion feature of Second July 2020 Note gave rise to a derivative liability of $74,860. The Company recorded this as a debt discount. The debt discount is charged to accretion of debt discount over the remaining term of the convertible note.

During the nine months ended September 30, 2021, the Company converted $169,400 in principal and $4,620 in interest into 55,631 shares of the Company’s common stock.

The First December 2020 convertible Loan Agreement

On December 9, 2020, the Company entered into a loan agreement (the “First December 2020 Loan Agreement”) with an individual (the “First December 2020 Lender”), whereby the First December 2020 Lender issued the Company a promissory note of $600,000 (the “First December 2020 Note”). Pursuant to the First December 2020 Loan Agreement, the First December 2020 Note has interest of twelve percent (12%). As additional consideration for entering in the First December 2020 convertible Loan Agreement, the Company issued 45,000 shares of the Company’s common stock. The First December 2020 Note matures on the first (12^th) month anniversary of its issuance date.

Upon default the First December 2020 Note is convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) equal to the closing bid price of the Company’s common stock on the trading day immediately preceding the date of the respective conversion.

The Company recorded a $110,300 debt discount relating to original issue discount associated with this note. The Company recorded a $113,481 debt discount relating to 45,000 shares issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.

During the nine months ended September 30, 2021 the Company repaid $600,000 in principal and $4,340 in interest.

The Second December 2020 Convertible Loan Agreement

On December 30, 2020, the Company entered into a loan agreement (the “Second December 2020 Loan Agreement”) with an individual (the “Second December 2020 Lender”), whereby the Second December 2020 Lender issued the Company a promissory note of $169,400 (the “Second December 2020 Note”). Pursuant to the Second December 2020 Loan Agreement, the Second December 2020 Note has interest of six percent (6%). The Second December 2020 Note matures on the first (12^th) month anniversary of its issuance date.

Upon default the Second December 2020 Note is convertible into shares of the Company’s common stock, par value $0.001 per share (“Conversion Shares”) equal to 75% of average the lowest three trading prices of the Company’s common stock on the fifteen-trading day immediately preceding the date of the respective conversion.

The Company recorded a $18,900 debt discount relating to original issue discount associated with this note. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.

During the nine months ended September 30, 2021, the Second December 2020 Note became convertible. Due to the fact that these convertible notes have an option to convert at a variable amount, they are subject to derivative liability treatment. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The conversion feature has been measured at fair value using a Binomial model at the conversion date and the period end. The conversion feature of Second December 2020 Note gave rise to a derivative liability of $108,880. The Company recorded this as a debt discount. The debt discount is charged to accretion of debt discount over the remaining term of the convertible note.

During the nine months ended September 30, 2021, the Company converted $168,900 in principal and $4,605 in interest into 74,706 shares of the Company’s common stock.

The May 2021 Convertible Note Offering

On May 14, 2021, the Company conducted multiple closings of a private placement offering to accredited investors (the “May 2021 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “May 2021 Investors”) for aggregate gross proceeds of $3,690,491. The May 2021 convertible notes are convertible into shares of the Company’s common stock, par value $.001 per share at a conversion price of $5.00 per share. As additional consideration for entering in the May 2021 Convertible Note Offering, the Company issued 1,090,908 warrants of the Company’s common stock. The May 2021 Convertible Note matures on November 14, 2022.

The Company recorded a $1,601,452 debt discount relating to 1,090,908 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost.

The Company recorded a $666,669 debt discount relating to an original issue discount and $539,509 of debt issuance costs related to fees paid to vendors relating to the offering. The debt discount and debt issuance costs are being accreted over the life of the note to accretion of debt discount and issuance cost.

During the nine months ended September 30, 2021, the Company converted $3,525,000 in principal into 705,000 shares of the Company’s common stock.

The July 2021 Convertible Loan Agreement

On July 6, 2021, the Company entered into a loan agreement (the “July 2021 Loan Agreement”) with an individual (the “July 2021 Lender”), whereby the July 2021 Lender issued the Company a promissory note of $168,850 (the “July 2021 Note”). Pursuant to the July 2021 Loan Agreement, the July 2021 Note has interest of six percent (6%). The July 2021 Note matures on the first (12^th) month anniversary of its issuance date.

Upon default or 180 days after issuance the July 2021 Note is convertible into shares of the Company’s common stock, par value $0.001 per share (“Conversion Shares”) equal to 75% of average the lowest three trading prices of the Company’s common stock on the fifteen-trading day immediately preceding the date of the respective conversion.

The Company recorded a $15,850 debt discount relating to an original issue discount and $3,000 of debt issuance costs related to fees paid to vendors relating to the offering. The debt discount and debt issuance costs are being accreted over the life of the note to accretion of debt discount and issuance cost.

During the nine months ended September 30, 2021, the Company accrued 2,387 in interest.

Note 9 – Related Party

Notes payable

Notes payable – related party as of September 30, 2021 and December 31, 2020 is as follows:

	Outstanding Principal as of										Warrants granted
	September 30, 2021			December 31, 2020			Interest Rate			Maturity Date	Quantity		Exercise Price
The September 2020 Goldberg Loan Agreement		188,574			16,705			7	%	September 2022		-		-
The September 2020 Rosen Loan Agreement		955,727			3,295			7	%	September 2022		-		-
		1,144,301			20,000
Less: Debt Discount		(9,589	)		(17,068	)
		1,134,712			2,932
Less: Current Debt		(1,134,712	)		(2,932	)
	$	-		$	-

The September 2020 Goldberg Loan Agreement

On September 15, 2020, the Company entered into a loan agreement (the “September 2020 Goldberg Loan Agreement”) with Goldberg whereby the Company issued a promissory note of $16,705 (the “September 2020 Goldberg Note”). Pursuant to the September 2020 Goldberg Loan Agreement, the September 2020 Goldberg Note has an interest rate of 7%. The maturity date of the September 2020 Goldberg Note is September 15, 2022 (the “September 2020 Goldberg Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under note are due. The September 2020 Goldberg Loan is secured by the tangible and intangible property of the Company.

Since the September 2020 Goldberg Note has a make-whole provision if the shares of the Company’s common stock issued to the lender in accordance with the Lender’s Exchange Agreement (see note 10) have a value equal to or less than $6,463,363 determined by using the lowest VWAP of the last 30 days prior to September 14, 2021. The principal amount of the September 2020 Goldberg Note shall increase by 200% of the difference between the initial consideration and the September 14, 2021, value. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The make-whole feature gave rise to a derivative liability that has been marked to market during the three and nine months ended September 30, 2021, and the change in derivative liability is recorded on Condensed Consolidated Statements of Comprehensive Loss. See note 10.

On September 15, 2021, the make-whole provision was triggered, causing an increase in principal of the September 2020 Goldberg Note by $939,022.

During the nine months ended September 30, 2021, the Company accrued interest of $3,576.

Subsequent to September 30, 2021, the Company agreed to a settlement of the amount owed under the September 2020 Goldberg Note in the amount of $350,000, payable as $200,000 in cash and $150,000 in shares of Common Stock.

The September 2020 Rosen Loan Agreement

On September 15, 2020, the Company entered into a loan agreement (the “September 2020 Rosen Loan Agreement”) with Rosen whereby the Company issued a promissory note of $3,295 (the “September 2020 Rosen Note”). Pursuant to the September 2020 Rosen Loan Agreement, the September 2020 Rosen Note has an interest rate of 7%. The maturity date of the September 2020 Rosen Note is September 15, 2022 (the “September 2020 Rosen Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the note are due. The September 2020 Rosen Loan is secured by the tangible and intangible property of the Company.

Since the September 2020 Rosen Note has a make-whole provision if the shares of the Company’s common stock issued to the lender in accordance with the Lender’s Exchange Agreement (see note 10) have a value equal to or less than $1,274,553 determined by using the lowest VWAP of the last 30 days prior to September 14, 2021. The principal amount of the September 2020 Rosen Note shall increase by 200% of the difference the initial consideration and the September 14, 2021 value. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The make-whole feature of gave rise to a derivative that has been marked to market during the three and nine months ended September 30, 2021, and the change in derivative liability is recorded on Condensed Consolidated Statements of Comprehensive Loss. See note 10.

On September 15, 2021 the make-whole provision was triggered, causing an increase in principal of the September 2020 Rosen Note by $185,279.

During the nine months ended September 30, 2021, the Company accrued interest of $706.

Subsequent to September 30, 2021, the Company repaid all outstanding principal and interest on this Note.

Officer compensation

During the nine months ended September 30, 2021, the Company paid $72,690 for living expenses for officers of the Company.

Note 10 – Derivative Liabilities

The Company has identified derivative instruments arising from a make-whole feature in the Company’s notes payable during the nine months ended September 30, 2021. For the terms of the make-whole features see the September 2020 Rosen Loan Agreement and the September 2020 Goldberg Loan Agreement in Note 9. The Company has also identified derivative instruments arising from convertible notes that have an option to convert at a variable number of shares in the Company’s convertible notes payable during the nine months ended September 30, 2021. For the terms of the conversion features see Note 9. The Company had no derivative assets or liabilities measured at fair value on a recurring basis as of September 30, 2021.

Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note adjusted to be on a continuous return basis to align with the Monte Carlo simulation model and binomial model.

Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.

Volatility: The Company calculates the expected volatility based on the company’s historical stock prices with a look back period commensurate with the period to maturity.

Expected term: The Company’s remaining term is based on the remaining contractual maturity of the convertible notes.

The following are the changes in the derivative liabilities during the three and nine months ended September 30, 2021.

	Three Months Ended September 30, 2021
	Level 1		Level 2		Level 3
Derivative liabilities as July 1, 2021	$	-	$	-	$	436,294
Addition		-		-		-
Extinguishment						(145,449	)
Conversion to Note payable - related party						(1,124,301	)
Changes in fair value		-		-		833,456
Derivative liabilities as September 30, 2021	$	-	$	-	$	-

	Nine Months Ended September 30, 2021
	Level 1		Level 2		Level 3
Derivative liabilities as January 1, 2021	$	-	$	-	$	42,231
Addition		-		-		417,241
Extinguishment						(431,458	)
Conversion to Note payable - related party						(1,124,301	)
Changes in fair value		-		-		1,096,287
Derivative liabilities as September 30, 2021	$	-	$	-	$	-

Note 11 – Stockholders’ Equity

Shares Authorized

Prior to July 13, 2020, the Company was authorized to issue up to thirty-five million (35,000,000) shares of capital stock, of which fifteen million (15,000,000) shares are designated as common stock, par value $0.001 per share, and twenty million (20,000,000) are designated as “blank check” preferred stock, par value $0.001 per share. The designations, rights, and preferences of such preferred stock are to be determined by the Company’s board of directors.

On July 13, 2020, the Company filed the Second Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada, which authorize the issuance of 100,000,000 shares of common stock, and 20,000,000 shares of preferred stock.

On August 17, 2020, following board of director’s approval, the Company filed a Certificate of Change to its Articles of Incorporation (the “Amendment”), with the Secretary of State of the State of Nevada to effectuate a one-for-twenty (1:3) reverse stock split (the “Reverse Stock Split”) of its common stock, par value $0.001 per share, without any change to its par value. The Amendment became effective on August 17, 2020. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to the next whole share. As a result, all share information in the accompanying condensed consolidated financial statements has been adjusted as if the reverse stock split happened on the earliest date presented.

Preferred Stock

Series E Convertible Preferred Stock

On December 29, 2020, the Company entered into securities purchase agreements with thirty-three accredited investors whereby the Investors have agreed to purchase from the Company an aggregate of 7,778 shares of the Company’s Series E Convertible Preferred Stock, par value $0.001 per share and 2,831,715 warrants to purchase shares of the Company’s common stock, par value $0.001 per share. The Series E Preferred Stock is convertible into a total of 1,887,810 shares of Common Stock. The combined purchase price of one Conversion Share and one and a half warrant was $4.12. The aggregate purchase price for the Series E Preferred Stock and warrants was $7,777,777. The Company has recorded $817,353 to stock issuance costs, which are part of Additional Paid-in Capital.

The warrants are exercisable for a term of five-years from the date of issuance, at an exercise price of $4.50 per share. The warrants provide for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock.

The placement agent for the transaction and received cash compensation equal to 10% of the aggregate purchase price and warrants to purchase 471,953 shares of the Company’s common stock, at an exercise price of $5.15 per share (the “PA Warrants”). The PA Warrants are exercisable for a term of five-years from the date of issuance.

During the nine months ended September 30, 2021, the Company received the $40,000 of the subscription receivable for the Series E Convertible Preferred Stock. The Company has recorded $4,225 to stock issuance costs, which are part of Additional Paid-in Capital.

During the nine months ended September 30, 2021, investors converted 7,168 shares of the Company’s Series E Convertible Preferred Stock into 1,739,750 shares of the Company’s common stock.

Common Stock

On January 14, 2021, the Company issued 30,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $133,200.

On January 20, 2021, the Company issued 40,000 shares of its restricted common stock to consultants in exchange for a year of services at a fair value of $192,000. On May 24, 2021, the Company amended the contract and issued and additional 10,000 shares of its restricted common stock. these shares had a fair value of $34,500. The shares issued to the consultant were recorded as common stock issued for prepaid services and will be expensed over the life of the consulting contract to share based payments. During the nine months ended September 30, 2021, the Company recorded $99,908 to stock-based compensation expense related to these shares.

On February 1, 2021, the Company issued 50,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $196,000.

On February 3, 2021, the Company issued 1,929 shares of its restricted common stock to consultants in exchange for services at a fair value of $8,198.

On February 8, 2021, the Company entered into a consulting agreement whereas the Company issued a total of 2,092 shares of common stock in exchange for services at a fair value of $7,502.

On February 18, 2021, the Company issued 10,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $48,000.

On February 18, 2021, the Company issued 10,417 shares of its restricted common stock to consultants in exchange for services at a fair value of $50,002.

On February 26, 2021, the Company issued 291 shares of its restricted common stock to consultants in exchange for services at a fair value of $1,499.

On March 17, 2021, the Company issued 9,624 shares of its restricted common stock to consultants in exchange for services at a fair value of $49,371.

On March 28, 2021, the Company issued 31,782 shares of its restricted common stock to settle outstanding vendor liabilities of $125,000.

On March 31, 2021, the Company issued 13,113 shares of its restricted common stock to settle outstanding vendor liabilities of $43,667. In connection with this transaction the Company also recorded a loss on settlement of vendor liabilities of $12,719.

On April 10, 2021, the Company issued 16,275 shares of its restricted common stock to consultants in exchange for services at a fair value of $69,332.

On April 21, 2021, the Company entered into a consulting agreement whereas the Company issued a total of 1,048 shares of common stock in exchange for services at a fair value of $3,587.

On June 17, 2021, the Company entered into an underwriting agreement with The Benchmark Company LLC, pursuant to which we agreed to sell to the Underwriter in a firm commitment underwritten public offering an aggregate of 750,000 shares of the Company’s common stock, at a public offering price of $3.40 per share. The Company also granted the Underwriter a 30-day option to purchase up to an additional 112,500 shares of Common Stock to cover over-allotments, if any. The Offering closed on June 21, 2021. The net proceeds to the Company from the equity raise was $2,213,500. As part of the underwriting agreement the Company issued 46,667 warrants of the Company’s common stock to Benchmark. The warrants have an exercise price $5.40 and a term of five years. On July 9, 2021, the Representative exercised the over-allotment option to purchase an additional 954,568 shares of Common Stock.

On July 20, 2021, the Company issued 2,154 shares of its restricted common stock to consultants in exchange for services at a fair value of $8,570.

On July 15, 2021, the Company issued 715 shares of its restricted common stock to consultants in exchange for services at a fair value of $2,500.

On August 15, 2021, the Company issued 820 shares of its restricted common stock to consultants in exchange for services at a fair value of $2,500.

On September 15, 2021, the Company issued 793 shares of its restricted common stock to consultants in exchange for services at a fair value of $2,500.

Stock Options

The Company applied fair value accounting for all share-based payments awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model.

The assumptions used for options granted during the nine months ended September 30, 2021, are as follows:

	September 30, 2021
Exercise price	$	2.55 – 14.10
Expected dividends		0	%
Expected volatility		194.39% – 242.98	%
Risk free interest rate		0.46 – 0.98	%
Expected life of option		5 - 7 years

The following is a summary of the Company’s stock option activity:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Balance – December 31, 2020 – outstanding		541,021			12.75		3.27
Granted		1,850,588			6.32		6.20
Exercised		-			-		-
Forfeited/Cancelled		(64,164	)		13.06		-
Balance – September 30, 2021 – outstanding		2,327,445			7.63		4.29
Balance – September 30, 2021 – exercisable		608,524			12.75		3.75

Option Outstanding						Option Exercisable
Exercise price		Number Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Remaining Contractual Life (in years)
$	7.63		2,327,445		4.92		12.75		608,524		3.75

During the ended December 31, 2018 the Company granted options of 11,667 to consultants that has a fair value of $57,123. As of the date of this filing the company has not issued these options and they are recorded as an accrued liability on the Consolidated Balance Sheet.

Stock-based compensation for stock options has been recorded in the consolidated statements of operations and totaled $4,100,729, for the nine months ended September 30, 2021.

As of September 30, 2021, there was $4,472,344 of total unrecognized compensation expense related to unvested employee options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately 1.06 year.

Warrants

The Company applied fair value accounting for all share-based payments awards. The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model.

The assumptions used for warrants granted during the nine months ended September 30, 2021 are as follows:

	September 30, 2021
Exercise price	$	4.50 – 4.95
Expected dividends		0	%
Expected volatility		237.14% - 237.68	%
Risk free interest rate		0.82% - 0.86	%
Expected life of warrant		5 years

Warrant Activities

The following is a summary of the Company’s warrant activity:

	Warrant			Weighted Average Exercise Price
Balance – December 31, 2020 – outstanding		6,130,948			4.96
Granted		1,881,267			5.63
Exercised		(1,438,788	)		4.59
Forfeited/Cancelled		(14,722	)		24.00
Balance – September 30, 2021 – outstanding		6,558,705			4.92
Balance – September 30, 2021 – exercisable		6,558,705		$	4.92

Warrants Outstanding								Warrants Exercisable
Exercise price		Number Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	4.92		6,558,705		4.06		4.92		6,558,705		4.06

During the nine months ended September 30, 2021, the Company issued 1,275,261 shares of common stock to a certain warrant holder upon the cashless exercise of a warrant to purchase 1,438,788 shares of common stock. The Company received $5,472,068 in connection with the exercise of the warrant.

During the nine months ended September 30, 2021, a total of 486,516 warrants were issued in connection with the Series E Convertible Preferred Stock raise.

During the nine months ended September 30, 2021, a total of 1,090,908 warrants were issued with convertible notes (See Note 8 above). The warrants have a grant date fair value of $3,067,617 using a Black-Scholes option-pricing model and the above assumptions.

During the nine months ended September 30, 2021, some of the Company’s warrants had a reset provision triggered that also resulted in an additional 127,801 warrants to be issued. A deemed dividend of $410,750 was recorded to the Statements of Comprehensive Loss.

On June 17, 2021, the Company issued 46,667 warrants in connection with the underwriting agreement.

Stock-based compensation for stock warrants has been recorded in the consolidated statements of operations and totaled $480,863, for the nine months ended September 30, 2021

Share-based awards, restricted stock award (“RSAs”)

On February 4, 2021 the Board resolved that, the Company shall pay each member of the Board, for each calendar quarter during which such member continues to serve on the Board, compensation as a group amounts to $62,500 per quarter. The shares vest one year after issuance.

A summary of the activity related to RSUs for the nine months ended September 30, 2021 is presented below:

Restricted stock units (RSUs)	Total shares			Grant date fair value
RSAs non-vested at January 1, 2021		-		$	-
RSAs granted		88,086		$	2.71 – 4.32
RSAs vested		-		$	-
RSAs forfeited		(13,927	)	$	3.75 – 4.32
RSAs non-vested September 30, 2021		74,159		$	2.71 – 4.32

Stock-based compensation for RSA’s has been recorded in the consolidated statements of operations and totaled $341,035, for the nine months ended September 30, 2021.

Note 12 – Commitments and Contingencies

The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”). Corporate taxpayers may carry back net operating losses (NOLs) originating between 2018 and 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act.

In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act did not result in any material adjustments to our income tax provision for the year ended December 31, 2020.

On March 26, 2020 and April 30, 2020, the Company received 2 separate loans pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act.

As each company is only permitted one loan under the CARES Act, there is a possibility the loan may be called by the SBA and the Company would have to repay the loan in full at such time.

As of September 30, 2021, the May 2020 PPP Loan is no longer outstanding, as during the nine months ended September 30, 2021, the Company repaid $136,597 in principal and was forgiven $275,903 of principal and $3,119 of accrued interest. As of September 30, 2021 there was $232,432 in principal outstanding on the April 2020 PPP Loan.

Subsequent to September 30, 2021, the Company made a payment of $33,855 towards repayment of this Loan.

Litigation

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

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

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

Lease Agreements

On May 5, 2018, the Company signed a 5-year lease for approximately 2,300 square feet of office space at 2050 Center Avenue Suite 640, Fort Lee, New Jersey 07024. Commencement date of the lease is June 1, 2018. The total amount due under this lease is $411,150.

On April 1, 2019, the Company signed a 4-year lease for approximately 796 square feet of office space at 2050 Center Avenue Suite 660, Fort Lee, New Jersey 07024. Commencement date of the lease is April 1, 2019. The total amount due under this lease is $108,229.

On July 28, 2021, the Company signed a 3-year lease for approximately 1,364 square feet of office space at 1674 Meridian Avenue, Miami Beach, Florida 33139. The office space is currently under construction and the Company’s commencement date is expected to be before December 1, 2021. The total amount due under this lease is $181,300.

The components of lease expense were as follows:

	Three Months Ended September 30, 2021
Operating lease cost	$	26,934
Short term lease cost		3,714
Total net lease cost	$	30,648

	Nine Months Ended September 30, 2021
Operating lease cost	$	80,803
Short term lease cost		11,142
Total net lease cost	$	91,945

Supplemental cash flow and other information related to leases was as follows:

	Nine Months Ended September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating lease payments		81,309
Weighted average remaining lease term (in years):		1.7
Weighted average discount rate:		13	%

Total future minimum payments required under the lease as of December 31, 2020 are as follows:

Twelve Months Ending December 31,
2021	$	27,674
2022		114,627
2023		53,094
Total	$	195,394

Rent expense for the nine months ended September 30, 2021 and 2020 was $ 121,266 and $80,803, respectively.

Note 13 – Acquisition

Plant Camp LLC

On June 1, 2021, the Company, entered into a Membership Interest Purchase Agreement (the “MIPA”) with Angela Hein (“Hein”) and Heidi Brown (“Brown”, and together with Hein, the “Sellers”), pursuant to which the Purchaser acquired 490,863 common units (the “Membership Interests”) of Plant Camp LLC, a Delaware limited liability company (“Plant Camp”) from the Sellers, resulting in the Purchaser owning 33% of the issued and outstanding equity of Plant Camp. The Membership Interests were purchased for $175,000.

On June 4, 2021, the Company, entered into a MIPA with Sellers, pursuant to which the Purchaser acquired 841,005 common units of Plant Camp from the Sellers, resulting in the Purchaser owning a total of 89% of the issued and outstanding equity of Plant Camp. The additional Membership Interests were purchased for $300,000.

The following sets forth the components of the purchase price:

Purchase price:
Cash paid to seller	$	300,000
Fair value of equity investment purchased on June 1, 2021		175,000
Total purchase price		475,000

Assets acquired:
Cash		5,232
Accounts Receivable		7,645
Inventory		19,970
Total assets acquired		32,847

Liabilities assumed:
Accounts payable and accrued expenses		5,309
Deferred Revenue		671
Loan Payable		100,000
Total liabilities assumed		105,980

Net assets acquired		(73,133	)

Non-controlling interest in consolidated subsidiary		56,865

Excess purchase price	$	604,998

The excess purchase price amounts are provisional and may be adjusted during the one-year measurement period as required by U.S. GAAP. The following table provides a summary of the preliminary allocation of the excess purchase price.

Goodwill	$	2,198
Trade Names & Trademarks		105,500
Know-How and Intellectual Property		422,000
Website		51,300
Customer Relationships		24,000

Excess purchase price	$	604,998

WHE Agency, Inc.

On July 20, 2021, the Company entered into a Stock Purchase Agreement to purchase 44% ownership and 55% of voting power of the issued and outstanding shares of WHE Agency, Inc., (“WHE”). The aggregate closing consideration was $1,038,271, which consists of a combination of $144,750 in cash and $893,521 in the form of 224,503 shares of the Company’s restricted common stock at a price of $3.98 per share. Based on the purchase price of $1,038,271 for 44% ownership, the fair value of the non-controlling interest was estimated to be $1,190,000.

WHE is a talent management and public relations agency dedicated to the representation and management of family- and lifestyle-focused influencers and digital creators. The transaction leverages the existing synergies between Creatd and WHE, specifically enabling WHE to utilize the Vocal platform and technology to further expand its creator network, introduce new verticals, and deepen existing brand ties. At the same time, the addition of WHE has enabled Creatd to expand its existing agency offerings, specifically within the scope of influencer marketing. With WHE in its portfolio, Creatd has expanded the pool of talent available to partner with its brand clients. Finally, the integration of WHE and its influencer network into Creatd’s existing business has provided Creatd the benefit of a significantly expanded customer base.

The following sets forth the components of the purchase price:

Purchase price:
Cash paid to seller	$	144,750
Shares granted to seller		893,521
Total purchase price		1,038,271

Assets acquired:
Cash		26,575
Accounts Receivable		446,272
Total assets acquired		472,847

Liabilities assumed:
Accounts payable and accrued expenses		353,017
Total liabilities assumed		353,017

Net assets acquired		119,830

Non-controlling interest in consolidated subsidiary		1,190,000

Excess purchase price	$	2,108,442

The excess purchase price amounts were recorded to goodwill and is provisional and may be adjusted during the one-year measurement period as required by U.S. GAAP. The following table provides a summary of the preliminary allocation of the excess purchase price.

Goodwill	$	940,800
Trade Names & Trademarks		152,663
Non-Compete Agreements		71,926
Influencers / Customers		943,053

Excess purchase price	$	2,108,442

Note 14 – Segment Information

We operate in three reportable segments: Creatd Labs, Creatd Ventures, and Creatd Partners. Our segments were determined based on the economic characteristics of our products and services, our internal organizational structure, the manner in which our operations are managed and the criteria used by our Chief Operating Decision Maker (CODM) to evaluate performance, which is generally the segment’s operating losses.

Operations of:		Products and services provided:
Creatd Labs		Creatd Labs is the segment focused on development initiatives. Creatd Labs houses the Company’s proprietary technology, including its flagship platform, Vocal, as well as oversees the Company’s content creation framework, and management of its digital communities. Creatd Labs derives revenues from Vocal creator subscriptions, platform processing fees and technology licensing fees.
Creatd Ventures		Creatd Ventures builds, develops, and scales e-commerce brands. This segment generates revenues through product sales of its two majority-owned direct-to-consumer brands, Camp and Dune Glow Remedy.
Creatd Partners		Creatd Partners fosters relationships between brands and creators through its suite of agency services, including content marketing (Vocal for Brands), performance marketing (Seller’s Choice), and influencer marketing (WHE Agency). Creatd Partners derives revenues in the form of brand fees and talent management commissions.

The following tables present certain financial information related to our reportable segments and Corporate:

	As of September 30, 2021
	Creatd Labs		Creatd Ventures		Creatd Partners		Corporate		Total

Accounts receivable, net	$	-	$	4,320	$	388,971	$	-	$	393,291
Prepaid expenses and other current assets		324,927		-		-		236,104		561,031
Intangible assets		-		571,502		1,906,160		11,241		2,488,903
Goodwill		-		2,198		1,976,595		-		1,978,793
Inventory		-		88,061		-		-		88,061
All other assets		-		-		-		2,742,944		2,742,944
Total Assets	$	324,927	$	666,081	$	4,271,726	$	2,990,289	$	8,253,023

Accounts payable and accrued liabilities	$	34,807	$	42,021	$	83,964	$	2,568,175	$	2,728,967
Note payable, net of debt discount and issuance costs		136,201		-		-		935,989		1,072,190
Deferred revenue		-		-		200,500		-		200,500
All other Liabilities		-		-		-		2,124,235		2,124,235
Total Liabilities	$	171,008	$	42,021	$	284,464	$	5,628,399	$	6,125,892

	As of December 31, 2020
	Creatd Labs		Creatd Partners		Corporate		Total

Accounts receivable, net	$	3,800	$	86,555	$	-	$	90,355
Prepaid expenses and other current assets		19,631		-		4,225		23,856
Intangible assets		-		960,611		-		960,611
Goodwill		-		1,035,795		-		1,035,795
All other assets		-		-		8,673,863		8,673,863
Total Assets	$	23,431	$	2,082,961	$	8,678,088	$	10,784,480

Accounts payable and accrued liabilities	$	6,221	$	83,964	$	2,548,503	$	2,638,688
Note payable, net of debt discount and issuance costs		55,928		-		1,165,611		1,221,539
Deferred revenue		-		88,637		-		88,637
All other Liabilities		-		-		1,390,420		1,390,420
Total Liabilities	$	62,149	$	172,601	$	5,104,534	$	5,339,284

	For the three months ended September 30, 2021
	Creatd Labs			Creatd Ventures			Creatd Partners			Corporate			Total

Net revenue	$	565,852		$	3,919		$	609,849		$	-		$	1,179,620
Cost of revenue		849,079			174,438			394,696			-			1,418,213

Gross margin		(283,227	)		(170,519	)		215,153			-			(238,593	)

Research and development		250,474			60			72,412			-			322,946
Marketing		1,540,540			-			181,240			90,620			1,812,400
Stock based compensation		337,026			-			332,531			1,179,579			2,151,900
General and administrative		386,844			302,764			293,296			1,672,176			2,385,135
Total operating expenses		2,514,884			32,819			879,479	)		2,942,375			6,672,381

Loss before income tax provision and equity in net loss from unconsolidated investments	$	(2,802,443	)	$	(506,162	)	$	(664,326	)	$	(5,747,190	)	$	(9,720,121	)

	For the three months ended September 30, 2020
	Creatd Labs			Creatd Partners			Corporate			Total

Net revenue	$	82,746		$	342,068		$	-		$	424,814
Cost of revenue		501,026			230,283			-			731,309
Gross margin		(418,280	)		111,785			-			(306,495	)

Research and development		126,822			31,706			-			158,528
Marketing		459,472			54,056			27,027			540,555
Stock based compensation		93,360			120,034			4,369,372			4,582,766
General and administrative		252,263			82,891			1,100,366			1,435,520
Total operating expenses		931,917			288,687			5,496,765			6,717,369

Loss before income tax provision and equity in net loss from unconsolidated investments	$	(1,354,529	)	$	(176,902	)	$	(14,647,267	)	$	(16,178,698	)

	For the nine months ended September 30, 2021
	Creatd Labs			Creatd Ventures			Creatd Partners			Corporate			Total

Net revenue	$	1,388,411		$	9,616		$	1,496,363		$	-		$	2,894,390
Cost of revenue		2,482,848			497,194			1,180,701			-			4,160,743
Gross margin		(1,094,437	)		(487,578	)		315,662			-			(1,266,353	)

Research and development		549,426			131			158,839			-			708,396
Marketing		6,842,142			-			804,958			402,479			8,049,579
Stock based compensation		886,832			796,676			875,004			3,103,877			5,662,389
General and administrative		900,323			76,381			682,602			3,891,743			5,551,049
Total operating expenses	$	9,178,723		$	873,188		$	2,521,403		$	7,398,099		$	19,971,413

Loss before income tax provision and equity in net loss from unconsolidated investments	$	(10,286,156	)	$	(1,360,766	)	$	(2,205,741	)	$	(11,073,171	)	$	(24,925,834	)

	For the nine months ended September 30, 2020
	Creatd Labs			Creatd Partners			Corporate			Total

Net revenue	$	202,669		$	837,827		$	-		$	1,040,496
Cost of revenue		1,239,892			623,256			-			1,863,148
Gross margin		(1,037,223	)		214,571			-			(822,652	)

Research and development		263,842			65,961			-			329,803
Marketing		1,186,701			139,612			69,806			1,396,119
Stock based compensation		133,998			172,283			6,271,277			6,577,558
General and administrative		572,690			188,181			2,498,062			3,258,933
Total operating expenses	$	2,157,231		$	566,037		$	8,839,145		$	11,562,413

Loss before income tax provision and equity in net loss from unconsolidated investments	$	(3,207,450	)	$	(351,466	)	$	(19,747,770	)	$	(23,306,686	)

Note 15 – Subsequent Events

Dune Transaction

On October 3, 2021, we, through Creatd Partners, LLC (“Buyer”), entered into a Stock Purchase Agreement (the “Dune Agreement”) with Standard Holdings, Inc. (“SHI”) and Mark De Luca (“De Luca”) (SHI and De Luca, collectively the “Dune Sellers”), and Stephanie Roy Dufault, whereby Buyer purchased a majority stake in Dune, Inc., a Delaware corporation (“Dune”). Pursuant to the Dune Agreement, which closed on October 4, 2021, Buyer acquired a total of 3,905,634 shares of the common stock of Dune (the “Purchased Shares”). The Company issued 163,344 restricted shares of the Company’s common stock to the Dune Sellers.

In addition, pursuant to the Dune Agreement, $50,000 worth of the Company’s common stock issuable to the Dune Sellers on a pro rata basis, priced in accordance with the terms and conditions set forth in the Dune Agreement (the “Indemnification Escrow Amount”), shall be held in escrow and reserved in each Dune Seller’s name by the Company’s transfer agent until such time as release is authorized under the Agreement.

Based on the purchase price of $1,173,405 for 50.41% ownership, the fair value of the non-controlling interest would be approximately $1,154,780.

Warrant Exercises

Subsequent to September 30, 2021, a total of 975,430 warrants were exercised, resulting in the cancellation of 975,430 warrants, the issuance of 975,430 shares of common stock, and gross proceeds of $4,389,435 to the Company.

Note Conversions

Subsequent to September 30, 2021, a total of $1,141,669 in principal of convertible notes converted into shares of common stock at $5.00 per share, resulting in the issuance of 228,334 shares of common stock.

Series E Preferred Conversions

Subsequent to September 30, 2021, 110 shares of Series E Preferred Stock converted into common stock, resulting in the issuance of 26,744 shares of common stock.

Registered Direct Offering

On October 25, 2021, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with institutional investors (collectively, the “Purchasers”) resulting in the raise of $3,825,000 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell, in a registered direct offering, an aggregate of 850,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a purchase price of $4.50 per Share (the “Offering”). The Offering closed on October 27, 2021, subject to customary closing conditions.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

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

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

We intend for this discussion to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion should be read in conjunction with our financial statements and accompanying notes for the year ended December 31, 2020, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 31, 2021.

Overview

Creatd, Inc. (“CRTD,” “the Company,” or “Creatd”) is a holding company focused on providing economic opportunities for creators. We accomplish this through four main business pillars: Creatd Labs, Creatd Partners, Creatd Ventures, and Creatd Studios. Together, Creatd's pillars work together to create multiple flywheel effects and growth drivers, supporting our core vision of creating a viable ecosystem for all stakeholders in the creator economy.

Creatd Labs, our first pillar, is dedicated to building a home base for creators of all kinds. Creatd Labs houses our proprietary technology platforms, including Creatd’s flagship product, Vocal and its 40 niche communities. Vocal is an all-in-one platform where creators can share their stories, build an audience, and earn money. To date, over 1.2 million freemium creators, including 100,000 Vocal+ (premium) creators now call Vocal their home, from bloggers to podcasters, makers, musicians, photographers, and more.

Creatd Partners, Creatd’s second pillar, fosters relationships between creators and brands. This pillar houses Creatd’s three primary agency businesses: Vocal for Brands (content marketing), Seller’s Choice (performance marketing), and WHE Agency (influencer marketing). Creatd Partners leverages its network of brands and influencers, along with resources from across Creatd, to help direct-to-consumer brands achieve conversions and reach their target audiences, while driving success for all of Creatd’s stakeholders.

Creatd Ventures, our third pillar, is focused on building, developing, and scaling e-commerce brands, by providing needed capital, operational support, marketing expertise, and other resources. Creatd Ventures houses Creatd's portfolio of e-commerce businesses, both majority and minority-owned, including Camp, Dune Glow Remedy, and Untamed Photographer, with additional potential transactions under review. The ideal candidate for a Creatd Ventures partnership is an individual that shares in our mission of serving the creator economy and are accretive to our pillars.

Creatd Studios is our fourth pillar and focuses on identifying opportunities to leverage Creatd’s stories–including those from Vocal creators and from our owned IP library–for transmedia production and adaptation to print, podcasts, TV, film, digital video, games, comics, and more. Housed under Creatd Studios is Creatd’s intellectual property and legacy media assets, including acquired artwork, photographs and media memorabilia. Creatd Studios represents an initiative by Creatd to revitalize and transform this content, by partnering with the entertainment and publishing industries on bespoke productions, while utilizing Vocal’s technology, data, and marketing capabilities for optimal distribution.

Creatd Labs

Creatd Labs is building the home base for creators.

Vocal

Vocal, Creatd’s flagship product, is a robust, proprietary technology platform that provides best-in-class tools, safe and curated communities, and monetization opportunities that enable creators to find a receptive audience and get rewarded. Creators of all types call Vocal their home, from bloggers to podcasters, makers, musicians, photographers, and more.

Vocal+ is Creatd’s premium subscription membership program. Vocal+ members pay a membership fee for premium features, including a higher rate of earnings per read, reduced platform processing fees on tips received, a Vocal+ badge on their creator page, eligibility to participate in exclusive Vocal+ Challenges, access to Vocal’s ‘Quick Edit’ feature for published stories, and more. Creators may sign up for a Vocal+ membership when they create an account, or they can upgrade an existing Vocal Free account to a Vocal+ account at any time. The current cost of a Vocal+ membership is either $9.99 per month or $99 annually. From time to time, the Company offers Vocal+ subscriptions at a discount for a predetermined number of months as a promotion for new subscribers.

Since its initial launch in 2016, Vocal has grown to be one of the fastest growing communities for content creators of all shapes and sizes. As of September 30, 2021, Vocal had reached over 1.1 million freemium creators and over 30,000 Vocal+ paid subscribers across its 39 owned and operated niche communities. Subsequent to the close of the third quarter 2021, Creatd had announced that it reached over 1.2 million freemium creators and over 100,000 Vocal+ paid subscribers, and additionally launched its 40th owned and operated niche community.

Why Over 1 Million Creators Choose Vocal:

●

Easy-to-use, Open-Canvas Content Creation Editor: Vocal’s storytelling tools enable creators to produce beautiful and engaging stories in a simple, user-friendly interface, and incorporate rich-media content of all kinds, including streaming content, photos, videos, podcasts, product links, written text, and more. Vocal’s open canvas content creation editor makes it easy to create high-quality and engaging stories and is a cost-effective alternative to managing a blog content management system (CMS).

●

Numerous Monetization Features: Both of Vocal’s membership tiers–Vocal freemium and the Vocal+ premium tier – provide multiple monetization opportunities for creators. Creators can earn money i) every time their story is read, ii) by competing in Challenges, iii) by receiving Bonuses, iv) by collaborating on branded content campaigns through the company’s in-house agency, Vocal for Brands, v) through ‘Subscribe,’ which enables creators to receive payment directly from their audience via monthly subscriptions and one-off microtransactions. vi) through the Vocal Ambassador Program, which enables creators to receive additional rewards whenever they refer a new Vocal+ member. For freemium members, content ‘reads’ are monetized at a rate of $3.80 per 1,000 reads (calculated based on time on page, scrolling behavior, and other internal metrics), whereas Vocal+ members monetize at $6.00 per 1,000 reads. These rates are subject to change based on market trends or the introduction of additional features and plan tiers.

●

Brand-safe advertising platform: Vocal was designed to target consumers in an authentic, non-interruptive way. Brand partnerships and collaborations allow companies tap into the power of Vocal through campaign-optimized stories, authored by real Vocal creators, that build brand affinity, trust, and drive sales.

●

Transparent Performance Data: Creators can view their “Stats” at any time to view their individual performance data, such as how many Reads a given story received, how much money they have earned, and how many Tips, Bonuses, or ‘Likes,’ they received. Additionally, Vocal users have the ability to view key metrics such as community-specific data and Vocal+ membership data.

●

Valuable Audience: The nature of Vocal’s genre-specific (niche) community structure is such that it generates a positively selected audience, a quality which makes Vocal an attractive prospect for creators and brands alike. In a niche community, audiences are inherently more likely to be interested in the particular content housed in that community. Vocal Moderation and Compliance One of the key differentiating factors between Vocal and most other user-generated content platforms is the fact that each story submitted to Vocal is run through the Company’s proprietary moderation process before it goes live on the platform. The decision to implement moderation into the submission process was in direct response to the rise of misinformation and bad actors on many social platforms. In response to these inherent pitfalls within the content landscape, Vocal’s proprietary moderation system combines the algorithmic detection of copyrighted material, hate speech, graphic violence, and nudity, and human-led curation to ensure the quality and safety of each story published on Vocal, thus fostering a safe and trustworthy environment for creators, audiences, and brands. Moderation and compliance are more important than ever in a world where ambiguity can systematically damage value. Vocal’s enforcement of community guidelines and emphasis on content moderation protects the platform, its creators, and Creatd shareholders. Trust and safety are paramount to the Vocal ecosystem. We follow best practices when handling personally identifiable information, with guidance from the European Union’s General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), and the Digital Millennium Copyright Act (DMCA). Platform Compliance Policies include:

	●	Human-led, technology assisted moderation of every story submitted;

	●	Algorithmic detection of hate speech, nudity, and copyright infringement;

	●	Brand, creator, and audience safety enforced through community watch; and

	●	The rejection of what we consider toxic content, with the understanding that diverse opinions are encouraged.

Creatd Partners

Creatd Partners fosters relationships between brands and creators through its agency services, which encompass content marketing, performance marketing, and influencer marketing.

Vocal for Brands

All brands have a story to tell, and our creator community helps them tell it. Vocal for Brands, Creatd's internal content marketing studio, specializes in pairing leading brands with authentic Vocal creators to produce marketing campaigns that are non-interruptive, engaging, and direct-response driven.

●

Authentic Storytelling: Our internal data group partners brands with real Vocal creators to tell their brand’s story in a way that is both engaging and trustworthy. In addition, brands can opt to sponsor a Challenge, which effectively yields a collection of crowdsourced branded content for brands and helps them reach a wider audience.

●

Valuable Audience: Vocal’s first-party data provides an opportunity to create highly targeted and segmented audiences to promote branded content. Most importantly, Vocal’s technology helps brands target the right audience by utilizing and applying that first-party data.

●

Transparent Analytics: For every campaign we produce, our brand clients have access to story performance data, engagement data, behavioral data, and interest data. Brands can apply this data to further increase awareness and optimize audience targeting.

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

Vocal for Brands typically collects fixed fees ranging from $30,000 to $50,000, depending on campaign duration and specific client objectives.

Additionally, brands can collaborate with Vocal on a sponsored Challenge, prompting the creation of high-quality stories that are centered around the brand’s mission and further disseminated through creators’ respective social channels and promotional outlets.

Seller’s Choice

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

WHE Agency

The WHE Agency (“WHE”), acquired by Creatd in 2021, was founded by Tracy Willis with the goal of supporting top creators and influencers, by connecting them with leading family and lifestyle brands and global audiences. Today, WHE represents a roster of approximately 60 family and lifestyle-focused creators, that collectively reach an audience of nearly 70 million.

Creatd Ventures

Creatd Ventures houses Creatd's portfolio of e-commerce businesses, both majority and minority-owned as well as associated e-commerce technology and infrastructure. The Company supports founders by providing capital, as well as a host of services including design and development, marketing and distribution, and go-to-market strategy. Currently, the Creatd Ventures portfolio includes:

●

Camp, previously Plant Camp, a direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. Each of Camp’s products are created with hidden servings of vegetables and contain Vitamins A, C, D, E, B1 + B6. In the fourth quarter of 2021, Camp added two new products to its expanding line of healthy, veggie-based, family-friendly foods. Currently, Camp has four flavors available for purchase: Classic Cheddar Mac 'N' Cheese, White Cheddar Mac 'N' Cheese, Vegan Cheezy Mac, and Twist Veggie Pasta. Camp, which first launched in 2020, represents the first investment within the Creatd Ventures portfolio.

●

Launched in second quarter 2021, Untamed Photographer is an online art marketplace that couples limited-edition, hand-selected wildlife photography, with the compelling stories behind each shot. Untamed Photographer has cultivated a network of international environmental artists who preserve the beauty of the planet through their art, donating a portion of profits back to environmental causes.

●

In the third quarter of 2021, the Company announced its intent to purchase a controlling stake in Dune Glow Remedy (“Dune”). The Company subsequently announced the completion of its purchase of a 50.4% majority stake in the fourth quarter of 2021. Brought to market in 2021, Dune is a beverage brand focused on promoting wellness and beauty from within. Each beverage in Dune’s product line is meticulously crafted with functional ingredients that nourish skin from the inside out and enhance one's natural glow.

Creatd Studios

The goal of Creatd Studios is to elevate creators’ stories to TV, film, books, podcasts, video, and more.

●

Transmedia Assets: With millions of compelling stories in its midst, Creatd’s technology surfaces the best candidates for transmedia adaptations, through community and creator data insights. Then, Creatd Studios helps creators tell their existing stories in new ways, by partnering them with entertainment and publishing studios to create unique content experiences that accelerate earnings, discoverability, and open doors.

●

OG Gallery: Acquired by Creatd's founders, the OG Collection is an extensive library of original artwork and imagery from the archives of some of the most iconic magazines of the 20th century. OG Gallery is an exploratory initiative aimed at identifying opportunities to propel the OG Collection into a new technological sphere: the NFT marketplace.

Acquisition Strategy

Creatd’s hybrid finance and design culture is key to its acquisition strategy. Acquisition targets are companies that meet a set of opportunistic or financial standards or that are part of specific digital environments that are accretive and can seamlessly integrate into Creatd’s existing revenue lines. Creatd will continue to make strategic acquisitions when presented with opportunities that are in the interest of shareholder value.

Recent Developments

Board of Directors and Management

Mark Patterson resigned from the Board effective July 31, 2021. Such resignation is not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

On August 13, 2021, the Board approved the restructuring of the Company’s senior management team to be comprised of two Co-Chief Executive Officers and appointed Jeremy Frommer and Laurie Weisberg to such positions (the “Restructuring”). Additionally, Justin Maury was appointed Chief Operating Officer and retains his position as President. Prior to the Restructuring, Mr. Frommer served as the Company’s Chief Executive Officer and Ms. Weisberg served as the Company’s Chief Operating Officer. Mr. Frommer and Ms. Weisberg continue to serve as members of the Board. The Restructuring did not impact the role or functions of the Company’s Chief Financial Officer, Chelsea Pullano.

On October 27, 2021, the Board, upon the recommendation of the Compensation Committee of the Board, approved and authorized certain compensation arrangements with Jeremy Frommer, Co-Chief Executive Officer; Laurie Weisberg, Co-Chief Executive Officer; Justin Maury, President; and Chelsea Pullano, Chief Financial Officer (collectively, the “Compensation Arrangements”).

The Compensation Arrangements consist of both base salary and option awards as follows:

●

for Mr. Frommer: (i) annual base salary of $500,000, effective retroactive to October 1, 2021; (ii) 121,000 options, having a strike price of $5.00 per share, vesting immediately; and (iii) 121,000 options, having a strike price of $5.00 per share, to vest upon the achievement of certain metrics during the course of the 2022 fiscal year, to be set by the Board by not later than December 31, 2021;

●

for Ms. Weisberg: (i) annual base salary of $475,000, effective retroactive to October 1, 2021; (ii) 121,000 options, having a strike price of $5.00 per share, vesting immediately; and (iii) 121,000 options, having a strike price of $5.00 per share, to vest upon the achievement of certain metrics during the course of the 2022 fiscal year, to be set by the Board by not later than December 31, 2021;

●

for Mr. Maury: (i) annual base salary of $475,000, effective retroactive to October 1, 2021; (ii) 81,000 options, having a strike price of $5.00 per share, vesting immediately; and (iii) 81,000 options, having a strike price of $5.00 per share, to vest upon the achievement of certain metrics during the course of the 2022 fiscal year, to be set by the Board by not later than December 31, 2021; and

●

for Ms. Pullano: (i) annual base salary of $250,000, effective retroactive to October 1, 2021; (ii) 37,000 options, having a strike price of $5.00 per share, vesting immediately; and (iii) 37,000 options, having a strike price of $5.00 per share, to vest upon the achievement of certain metrics during the course of the 2022 fiscal year, to be set by the Board by not later than December 31, 2021.

WHE Agency Transaction

On July 20, 2021, the Company entered into, through its wholly owned subsidiary, Creatd Partners, LLC (“Creatd Partners”), a Stock Purchase Agreement (the “Purchase Agreement”) with individuals named therein (collectively, the “Sellers”), pursuant to which Creatd Partners acquired from the Sellers, subject to the terms and conditions of the Purchase Agreement and other related agreements (the “Transaction Documents”) 1,158,000 shares of common stock of WHE Agency, Inc. (“WHE Agency”), a talent management and public relations agency that primarily focuses on representation and management of family and lifestyle-focused influencers and digital creators. The equity interest acquired in the Transaction (as defined below) along with the Voting Agreements described below equals fifty-five (55%) of the voting power and forty-four (44%) of the ownership of WHE Agency’s issued and outstanding shares, determined on a fully diluted basis post-transaction.

Pursuant to the Purchase Agreement, the Sellers sold, transferred, assigned, conveyed and delivered to Creatd Partners their respective issued and outstanding shares of common stock in WHE Agency (the “Transaction”). The aggregate closing consideration of the Transaction is $1,038,271, which consists of a combination of cash, in the amount of $144,750 (“Cash Consideration”), and the remaining $893,521 issued to the Sellers in the form of 224,503 shares of the Company’s restricted common stock (“Closing Share Consideration”).

The Transaction closed on July 23, 2021 (the “Closing”). At the Closing, Sellers received their respective portion of the aggregate closing consideration in the form of a combination of Cash Consideration and Closing Share Consideration, except for 5% of the total Closing Share Consideration that will be subject to a twelve (12) month Indemnification Holdback Period.

The 224,503 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), were issued as part of the Closing Share Consideration (the “Shares”) to the Sellers are “restricted securities,” as defined in Rule 144(a)(3) under the Securities Act of 1933, as amended (the “Act”), and accordingly the Shares may not be resold by the Sellers without registration under the Act or an available exemption from registration. Under the Purchase Agreement, the Company will be obligated to file with the Securities and Exchange Commission (the “SEC”) within ten business days after the Closing, a registration statement on Form S-1 or Form S-3 registering the resale of the Shares by the Sellers under the Act to cover the resale of the Shares issued to the Sellers.

The Purchase Agreement contain representations and warranties made by and to the parties thereto as of specific dates. The Purchase Agreement includes customary representations, warranties and covenants of the Company, Sellers and WHE Agency. The representations and warranties made by each party were made solely for the benefit of the other parties and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk between the parties to the Purchase Agreement if those statements prove to be inaccurate; (ii) may have been qualified in the Purchase Agreement by disclosures that were made to the other party in disclosure schedules to the Purchase Agreement, and (iii) were made only as of the date of the Purchase Agreement or such other date or dates as may be specified in the Purchase Agreement.

In connection with entering into the Purchase Agreement, Creatd Partners entered into a certain Voting Agreement and Proxy (the “Voting Agreement”) with certain beneficial owners that collectively own 11% percent of WHE Agency’s issued and outstanding restricted common stock (“Restricted Stockholders”). Through the Voting Agreements entered into with the Restricted Stockholders, Creatd Partners effectively controls 55% of the total voting power of the Company in the aggregate. The Voting Agreements generally require that the stockholders who are party to the Voting Agreements vote or cause to be voted their WHE Agency shares, and execute and deliver written consents and otherwise exercise all voting and other rights with respect to the WHE Agency shares at the direction of Creatd Partners. In addition, in connection with the Voting Agreements, the Restricted Stockholders delivered irrevocable proxies to Creatd Partners. The Voting Agreements terminate upon the twenty-year anniversary of executing the Voting Agreements.

Dune Transaction

In addition, pursuant to the Dune Agreement, $50,000 worth of the Company’s common stock issuable to the Dun Sellers on a pro rata basis, priced in accordance with the terms and conditions set forth in the Dune Agreement (the “Indemnification Escrow Amount”), shall be held in escrow and reserved in each Dune Seller’s name by the Company’s transfer agent until such time as release is authorized under the Agreement.

Each of the Dune Sellers and Buyer have made customary representations and warranties, and covenants in the Agreement.

In connection with the Dune Agreement, Dune, Creatd Partners, Mark De Luca and SHI entered into a Stockholders Agreement dated October 3, 2021, providing for the purchase of the Purchased Shares representing a majority stake in Dune. The Stockholders Agreement contains customary representations and warranties, and covenants.

Registered Direct Offering

On October 25, 2021, we entered into a securities purchase agreement (the “Purchase Agreement”) with institutional investors (collectively, the “Purchasers”) resulting in the raise of $3,825,000 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell, in a registered direct offering, an aggregate of 850,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a purchase price of $4.50 per Share (the “Offering”). The Offering closed on October 27, 2021, subject to customary closing conditions.

Pursuant to the terms of the Purchase Agreement, each of the Purchasers was granted the right to participate in a subsequent financing in an amount up to 25% of such subsequent financing. Additionally, under the terms of the Purchase Agreement, the Company and its subsidiaries are prohibited from issuing Common Stock or common stock equivalents for a period of 30 days from the date of the closing of the Purchase Agreement, other than with respect to Exempt Issuances (as defined in the Purchase Agreement) and the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of the Purchasers holding a majority in interest of the Shares, except as may be required in connection with the satisfaction of the minimum bid price requirement of the principal Trading Market.

The Benchmark Company, LLC acted as exclusive placement agent (the “Placement Agent”) for the Company in connection with the Offering. Pursuant to that certain Placement Agency Agreement, dated as of October 25, 2021, between the Company and the Placement Agent (the “Placement Agency Agreement”), the Placement Agent is entitled to a cash fee equal to $267,750, which represents seven percent (7.0%) of the aggregate gross proceeds raised in the Offering, the reimbursement of certain of the Placement Agent’s expenses, and warrants to purchase up to 42,500 shares of Common Stock at an exercise price of $5.40 per share, which represents five percent (5.0%) of the aggregate number of Shares sold in the Offering (the “Placement Agent Warrants”). The Placement Agent Warrants will not be exercisable for a period of six months following the date of the closing and thereafter are exercisable for a period of five years.

The Company estimates that net proceeds to the Company from the Offering will be approximately $3,407,250 after deducting the Placement Agent fees and estimated expenses payable by the Company.

The Shares were issued to the Purchasers in a registered direct offering pursuant to which the Shares will be registered under the Securities Act of 1933, as amended, pursuant to a prospectus supplement to the Company’s currently effective registration statement on Form S-3 (File No. 333-250982), which was initially filed with the Securities and Exchange Commission (the “SEC”) on November 25, 2020, as amended on April 9, 2021, and was declared effective on April 23, 2021 (the “Shelf Registration Statement”). A Prospectus Supplement for the closing dated October 25, 2021 was filed with the SEC and is available on the SEC’s website at http://www.sec.gov.

Results of Operations

Liquidity and Capital Resources

The following table summarizes total current assets, liabilities and working capital at September 30, 2021 compared to December 31, 2020:

	September 30, 2021			December 31, 2020		Increase / (Decrease)
Current Assets	$	2,550,911		$	8,020,993	$	(5,470,082	)
Current Liabilities	$	5,387,223		$	4,968,427	$	418,796
Working Capital (Deficit)	$	(2,836,312	)	$	3,052,566	$	(5,888,878	)

At September 30, 2021, we had a working capital (deficit) of $(2,836,312) as compared to a working capital of $3,052,566 at December 31, 2020, a decrease in working capital of $5,888,878. The decrease is primarily attributable to a reduction in cash and an increase in deferred revenue and notes payable. This was offset by an increase in prepaid expense and a decrease in convertible notes payable.

Net Cash

Net cash used in operating activities for the nine months ended September 30, 2021, and 2020, was $15,617,065 and $5,032,488, respectively. The net loss for the nine months ended September 30, 2021, and 2020 was $24,942,247 and $23,306,686, respectively. This change is primarily attributable to the net loss for the current period offset by share-based payments in the amount of $5,662,389 to employees and consultants for services rendered, accretion of debt discount and debt issuance costs of $3,028,015 due to incentives given with debentures, and a Change in fair value of derivative liability of $1,096,287, as well as a change in accounts payable and accrued expenses of $160,434.

The increased net cash used in 2021 reflected an extraordinary cash outlay for marketing, which went toward generating a lower creator acquisition cost for paid Vocal subscribers, and an increase in general and administrative expenses.

Net cash used in investing activities for the nine months ended September 30, 2021, was $1,325,155. This is primarily attributable to the purchase of Plant Camp, WHE Agency, property and equipment, deposits on investments related to the Memorandum of Understanding with Dune, Inc., and cash paid for the purchase of investments.

Net cash provided by financing activities for the nine months ended September 30, 2021, and 2020 was $10,560,265 and $8,337,715, respectively. During the nine months ended September 30, 2021, the Company’s operations were predominantly financed by net proceeds of $5,472,068 from the exercise of warrants, the proceeds from loans and notes of $3,931,720, and proceeds from the issuance of stock and warrants, which were partially offset by the repayment of notes and loans of $1,345,723. Similarly, the Company’s financing activity for the nine months ended September 30, 2020, generated $4,893,893 from loans and note issuances, the proceeds of which were partially offset by repayment of notes of $3,178,777.

Summary of Statements of Operations for the Three Months Ended September 30, 2021, and 2020:

	Three Months Ended September 30,
	2021			2020
Revenue	$	1,179,620		$	424,814
Cost of revenue	$	1,418,213		$	731,309
Operating expenses	$	(6,672,381	)	$	(6,717,369	)
Loss from operations	$	(6,910,974	)	$	(7,023,864	)
Other expenses	$	(2,809,147	)	$	(9,154,834	)
Net loss	$	(9,736,534	)	$	(16,178,698	)
Loss per common share – basic and diluted	$	(0.71	)	$	(3.81	)

Revenue

Revenue totaled $1,179,620 for the three months ended September 30, 2021, as compared to $424,814 for the comparable three months ended September 30, 2020, an increase of $754,806. The year-over-year increase in quarterly revenue is attributable to the steady growth of Vocal+ memberships as well as the acquisition of WHE and its contribution to growth in the Company’s agency businesses.

Cost of Revenue

Cost of revenue for the three months ended September 30, 2021, were $1,418,213 as compared to $731,309 for the three months ended September 30, 2020. The increase of $686,904 in cost of revenue is mainly related to R&D efforts and other overhead required to continue to increase Vocal+ memberships as well as the acquisition of WHE and its contribution to growth in the Company’s agency businesses. The Company expects the gross margin to improve over time as it continues to grow and improve upon a self-sustaining, organically driven revenue model across its business segments.

Operating Expenses

Operating expenses for the three months ended September 30, 2021, were $6,672,381 as compared to $6,717,369 for the three months ended September 30, 2020. The decrease of $44,988 in operating expenses is mainly related to an by a decrease in stock-based compensation, offset by an increase in marketing and research and development expenditure. We expect marketing expenditure to remain approximately the same over coming quarters as the Company continues to execute on its new organic subscriber growth strategies and works to reduce reliance on third party social media platforms.

Loss from Operations

Loss from operations for the three months ended September 30, 2021, was $6,910,974 as compared to $7,023,864 for the three months ended September 30, 2020. The decrease in the loss from operations this quarter primarily reflects continued revenue growth coupled with increased operating expenses compared to the prior year. Going forward, the Company expects the loss from operations to continue to decrease as revenues continue to grow and expenses remain consistent.

Other Income and Expenses

Other expenses for the three months ended September 30, 2021, were $2,809,147 as compared to $9,154,834 for the three months ended September 30, 2020. The decrease in third quarter 2021 other expenses was predominantly due to an increased gain on extinguishment of debt and a decrease in an accretion of debt discount and issuance cost.

Net Loss

Net loss attributable to common shareholders for the three months ended September 30, 2021, was $9,797,011, or loss per share of $0.71, as compared to a net loss attributable to common shareholders of $16,197,119, or loss per share of $3.81, for the three months ended September 30, 2020.

Summary of Statements of Operations for the Nine Months Ended September 30, 2021, and 2020:

	Nine Months Ended September 30,
	2021			2020
Revenue	$	2,894,390		$	1,040,496
Cost of revenue	$	4,160,743		$	1,863,148
Operating expenses	$	(19,971,413	)	$	(11,562,413	)
Loss from operations	$	(21,237,766	)	$	(12,385,065	)
Other expenses	$	(3,688,068	)	$	(10,921,621	)
Net loss	$	(24,942,247	)	$	(23,306,686	)
Loss per common share – basic and diluted	$	(2.20	)	$	(6.65	)

Revenue

Revenue was $2,894,390 for the nine months ended September 30, 2021, as compared to $1,040,496 for the comparable nine months ended September 30, 2020, an increase of $1,853,894. The year-over-year increase in quarterly revenue is attributable to the steady growth of Vocal+ memberships as well as consistent growth in the Company’s agency businesses.

Cost of Revenue

Cost of revenue for the three months ended September 30, 2021, were $4,160,743 as compared to $1,863,148 for the three months ended September 30, 2020. The increase of $2,297,595 in cost of revenue is mainly related to an increase in Vocal+ memberships as well as the acquisition of WHE and its contribution to growth in the Company’s agency businesses.

Operating Expenses

Operating expenses for the nine months ended September 30, 2021, were $19,971,413 as compared to $11,562,413 for the nine months ended September 30, 2020. The increase of $8,409,000 in operating expenses is mainly related to a $6.7 million increase in marketing expenditure and $2.2 million increase in general and administrative expenses. Much of the increase in marketing expenditure occurred during the company’s second quarter 2021 as it focused significant resources on tactical experimentation utilizing our internal data to generate a lower creator acquisition cost, resulting in significant Vocal+ membership growth, with the Company ending the second quarter 2021 having achieved a new milestone of over 30,000 Vocal+ members. The Company went on to significantly reduce marketing spend in third quarter, 2021 and expects future quarterly spend to reflect levels consistent with third quarter.

Loss from Operations

Loss from operations for the nine months ended September 30, 2021, was $21,237,766 as compared to $12,385,065 for the nine months ended September 30, 2020. The operating loss increase primarily reflects added marketing expenses during the first half of 2021 as the company launched a comprehensive marketing campaign and the need for duplicate expenditures during transition period as new staff hires are trained by the outsourced third-party service providers whom they will be replacing. The majority of these additional costs have been eliminated during third quarter 2021. Going forward, the Company expects the loss from operations to decrease as revenues continue to increase and expenses remain relatively constant.

Other Income and Expenses

Other expenses for the nine months ended September 30, 2021, was $3,688,068 as compared to $10,921,621 for the nine months ended September 30, 2020. The decrease in other expenses was predominantly due to the change in extinguishment of debt and a reduction in interest expense. This was offset by an increase in derivative expense, change in fair value of derivative liability, and the impairment of investments.

Net Loss

Net loss attributable to common shareholders for the nine months ended September 30, 2021, was $25,413,042, or loss per share of $2.20, as compared to a net loss attributable to common shareholders of $23,325,107, or loss per share of $6.65, for the nine months ended September 30, 2020.

Off-Balance Sheet Arrangements

As of September 30, 2021, we had no off-balance sheet arrangements.

Significant Accounting Policies

Our significant accounting policies are described in Note 2 of the Financial Statements. If we complete an acquisition, we will be required to make estimates and assumptions typical of other companies. For example, we will be required to make critical accounting estimates related to valuation and accounting for business combinations. The estimates will require us to rely upon assumptions that were highly uncertain at the time the accounting estimates are made, and changes in them are reasonably likely to occur from period to period. Changes in estimates used in these and other items could have a material impact on our financial statements in the future. Our estimates will be based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differ significantly from our estimates. For detailed information regarding our critical accounting policies and estimates, see our financial statements and notes thereto included in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to our critical accounting policies and estimates from those disclosed in our most recent Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in our exposures to market risk since December 31, 2020. For details on the Company’s interest rate, foreign currency exchange, and credit risks, see “Item 7A. Quantitative and Qualitative Information About Market Risks” in our 2020 Annual Report.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are not effective.

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. However, during throughout 2021, the Company continued the complete review of all of its financial procedures and controls that was requisitioned and begun during 2020 and is continuing the process of updating and optimizing its infrastructure around these controls. Over the past year, the Company has hired additional finance and accounting personnel, significantly improving the segregation of duties within that department and providing additional bandwidth for management to focus on improving controls and procedures. This review is ongoing, and the Company believes that this process will continue to positively affect our internal control over financial reporting in the future.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

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

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

Item 1A. Risk Factors.

Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our most recent Annual Report on Form 10-K for the year ended December 31, 2020, the occurrence of any one of which could have a material adverse effect on our actual results.

There have been no material changes to the Risk Factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the three months ended September 30, 2021, we issued securities that were not registered under the Securities Act and were not previously disclosed in a Current Report on Form 8-K or Quarterly Report on Form 10-Q as listed below. All of the securities discussed in this Item 2 were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.

Board Issuances

During the nine months ended September 30, 2021, the Company issued 69,635 shares of common stock and options to purchase 352,500 shares of common stock to members of the board of directors under the Jerrick Media Holdings, Inc. 2020 Omnibus Equity Incentive Plan. The options have an exercise price ranging from $2.55 - $14.10, vest on the one-year anniversary and expire 5 years from the date of vesting.

Consultant Shares

During the three months ended September 30, 2021, the Company issued 29,415 shares of Common Stock to consultants and employees.

Debt Conversion

During the three months ended September 30, 2021, a lender converted $168,900 in promissory notes into 74,706 shares of Common Stock.

Item 3. Defaults Upon Senior Securities.

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

There is no other information required to be disclosed under this item which was not previously disclosed.

Item 6. Exhibits.

Exhibit No.		Description

10.1		Stock Purchase Agreement, dated as of July 20, 2021, by and among, Creatd Partners, LLC, WHE Agency, Inc., and individuals named therein (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed with the Commission on July 26, 2021).

10.2		Voting Agreement and Proxy, dated as of July 19, 2021, by and among, Creatd Partners, LLC, and individuals named therein (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed with the Commission on July 26, 2021).

17.1		Letter of resignation of Mark Patterson (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed with the Commission on July 22, 2021).

31.1*		Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).

31.2*		Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).

32.1#		Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2#		Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Filed herewith

This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CREATD, INC.

Date: November 15, 2021	By:	/s/ Jeremy Frommer
	Name:	Jeremy Frommer
	Title:	Co-Chief Executive Officer
		(Principal Executive Officer)

Date: November 15, 2021	By:	/s/ Chelsea Pullano
	Name:	Chelsea Pullano
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)