Creatd, Inc. 10-Q

10-Q 1 f10q0919_jerrickmedia.htm QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File No. 000-51872 JERRICK MEDIA HOLDINGS, INC. (Exact name of registrant as specified in its charter) Nevada 87-0645394 (State or other jurisdiction of incorporation) (IRS 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: None. 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 past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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 Exchange Act). Yes ☐ No ☒ As of November 13, 2019, there were 9,164,040 shares outstanding of the registrant’s common stock. TABLE OF CONTENTS PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements 1 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 3. Quantitative and Qualitative Disclosures About Market Risk 36 Item 4. Controls and Procedures 37 PART II – OTHER INFORMATION Item 1. Legal Proceedings 38 Item 1A. Risk Factors 38 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 38 Item 3. Defaults Upon Senior Securities 39 Item 4. Mine Safety Disclosures 39 Item 5. Other Information 39 Item 6. Exhibits 39 Signatures 40 i PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Jerrick Media Holdings, Inc. Unaudited Financial Statements as of September 30, 2019 and 2018 and for the Nine Months Ended September 30, 2019 and 2018 Index to the Condensed Consolidated Financial Statements Contents Page(s) Condensed Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018 2 Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2019 and 2018 (unaudited) 3 Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended September 30, 2019 (unaudited) 4 Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2019 (unaudited) 5 Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended September 30, 2018 (unaudited) 6 Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2018 (unaudited) 7 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (unaudited) 8 Notes to the Condensed Consolidated Financial Statements (unaudited) 9 - 1 - Jerrick Media Holdings, Inc. Condensed Consolidated Balance Sheets September 30, 2019 December 31, 2018 Assets (Unaudited) Current Assets Cash $ 167,254 $ - Accounts receivable 85,783 6,500 Note receivable 11,450 - Current portion of operating lease right of use asset 105,763 - Total Current Assets 370,250 6,500 Property and equipment, net 56,526 42,443 Excess Purchase Price Over Net Assets Acquired 2,148,407 - Deferred offering costs - 143,146 Security deposit 16,836 16,836 Operating lease right of use asset 222,821 - Total Assets $ 2,814,840 $ 208,925 Liabilities and Stockholders' Deficit Current Liabilities Cash overdraft $ - $ 33,573 Accounts payable and accrued liabilities 1,078,754 1,246,207 Demand loan 100,000 - Convertible Notes - related party, net of debt discount 20,377 - Convertible Notes, net of debt discount and issuance costs 2,019,983 - Current portion of operating lease payable 105,763 - Note payable - related party, net of debt discount 4,459,284 1,223,073 Note payable, net of debt discount and issuance costs 660,000 49,926 Deferred revenue 66,008 9,005 Deferred rent - 7,800 Total Current Liabilities 8,510,169 2,569,584 Non-current Liabilities: Operating lease payable 217,531 - Deferred rent - 6,150 Convertible Notes - related party, net of debt discount - 314 Convertible Notes, net of debt discount and issuance costs - 123,481 Total Non-current Liabilities 217,531 129,945 Total Liabilities 8,727,700 2,699,529 Commitments and contingencies Stockholders' Deficit Common stock par value $0.001: 300,000,000 shares authorized; 9,164,040 and 6,475,340 issued and outstanding as of September 30, 2019 and December 31, 2018 respectively 9,164 6,475 Additional paid in capital 36,411,455 34,100,327 Accumulated deficit (41,941,305 ) (36,545,065 ) Less: Treasury stock, 349,850 and 27,667 shares, respectively (392,174 ) (52,341 ) (5,912,860 ) (2,490,604 ) Total Liabilities and Stockholders' Deficit $ 2,814,840 $ 208,925 The accompanying notes are an integral part of these consolidated financial statements. - 2 - Jerrick Media Holdings, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Net revenue $ 91,386 $ 25,119 $ 132,901 $ 65,391 Gross margin 91,386 25,119 132,901 65,391 Operating expenses Compensation 531,502 446,094 1,803,113 1,548,923 Consulting fees 412,394 73,603 810,025 520,206 Research and development 11,349 117,660 366,247 441,566 General and administrative 792,664 270,350 1,917,154 1,326,564 Total operating expenses 1,747,909 907,707 4,896,539 3,837,259 Loss from operations (1,656,523 ) (882,588 ) (4,763,638 ) (3,771,868 ) Other expenses Interest expense (164,439 ) (279,163 ) (329,040 ) (888,359 ) Accretion of debt discount and issuance cost (111,027 ) (1,449,656 ) (228,017 ) (2,039,589 ) Settlement of vendor liabilities - 1,011 - 2,886 Loss on extinguishment of debt (2,022 ) (2,938,719 ) (83,171 ) (3,370,505 ) Gain (loss) on settlement of debt - 1,823 - 15,275 Other expenses, net (277,488 ) (4,664,704 ) (640,228 ) (6,280,292 ) Loss before income tax provision (1,934,011 ) (5,547,292 ) (5,403,866 ) (10,052,160 ) Income tax provision - - - - Net loss $ (1,934,011 ) $ (5,547,292 ) $ (5,403,866 ) $ (10,052,160 ) Deemed dividend - 45,367 - 174,232 Inducement expense - 2,016,634 (7,628 ) 2,016,634 Net loss attributable to common shareholders (1,934,011 ) (7,609,293 ) (5,396,238 ) (12,243,026 ) Per-share data Basic and diluted loss per share $ (0.22 ) $ (1.67 ) $ (0.68 ) $ (4.10 ) Weighted average number of common shares outstanding 8,899,320 3,330,404 7,900,217 2,452,328 The accompanying notes are an integral part of these consolidated financial statements. - 3 - Jerrick Media Holdings, Inc. Consolidated Statement of Changes in Stockholders' Equity For the Three Months ended September 30, 2019 Series A Preferred Stock Series B Preferred Stock Series D Preferred Stock Common Stock Treasury stock Additional Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Paid In Capital Accumulated Deficit Stockholders’ Equity Balance, June 30, 2019 - - - - - - 8,830,706 8,831 (149,850 ) (362,174 ) 35,241,922 (40,007,294 ) (5,118,715 ) Shares issued for acquisition - - - - - - 333,334 333 - - 1,166,336 - 1,166,669 Stock warrants issued with note payable - - - - - - - - 8,197 - 8,197 Purchase of treasury stock and warrants - - - - - - - - (200,000 ) (30,000 ) (5,000 ) - (35,000 ) Inducement expense - - - - - - - - - - - - - Net loss for the three months ended September 30, 2019 - - - - - - - - - - - (1,934,011 ) (1,934,011 ) Balance, September 30, 2019 - - - - - - 9,164,040 9,164 (349,850 ) (392,174 ) 36,411,455 (41,941,305 ) (5,912,860 ) See accompanying notes to the consolidated financial statements - 4 - Jerrick Media Holdings, Inc. Consolidated Statement of Changes in Stockholders' Equity For the Nine Months Ended September 30, 2019 Series A Preferred Stock Series B Preferred Stock Series D Preferred Stock Common Stock Treasury stock Additional Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Paid In Capital Accumulated Deficit Stockholders” Equity Balance, December 31, 2018 - - - - - - 6,475,340 6,475 (27,667 ) (52,341 ) 34,100,327 (36,545,065 ) (2,490,604 ) Stock based compensation - - - - - - 125,227 126 - - 433,958 - 434,084 Cash received for common stock and warrants 0 0 0 0 0 0 129,966 130 - - 649,699 - 649,829 Tender offering 0 0 0 0 0 0 2,100,173 2100 (2,100 ) - - Stock issuance cost - - - - - - - - - - (178,146 ) - (178,146 ) Stock warrants issued with note payable - - - - - - - - - - 336,975 - 336,975 Purchase of treasury stock and warrants - - - - - - - - (322,183 ) (339,833 ) (95,594 ) - (435,427 ) Shares issued for acquisition - - - - - - 333,334 333 - - 1,166,336 - 1,166,669 Inducement expense - - - - - - - - - - - 7,626 7,626 Net loss for the six months ended September 30, 2019 - - - - - - - - - - - (5,403,866 ) (5,403,866 ) Balance, September 30, 2019 - - - - - - 9,164,040 9,164 (349,850 ) (392,174 ) 36,411,455 (41,941,305 ) (5,912,860 ) See accompanying notes to the consolidated financial statements - 5 - Jerrick Media Holdings, Inc. Consolidated Statement of Changes in Stockholders' Equity For the Three Months ended September 30, 2018 Series A Preferred Stock Series B Preferred Stock Series D Preferred Stock Common Stock Treasury stock Additional Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Paid In Capital Accumulated Deficit Stockholders’ Equity Balance, June 30, 2018 31,581 31 8,063 8 - - 2,026,222 2,026 (11,000 ) (19,007 ) 16,381,979 (26,279,975 ) (9,914,938 ) Stock based compensation - - - - - - - - - - 19,757 - 19,757 August 2018 equity raise (31,581 ) (31 ) (8,063 ) (8 ) - - 3,939,832 3,940 - - 15,621,670 - 15,625,570 Stock warrants issued with note payable - - - - - - - - - - 80,781 - 80,781 Inducement expense - - - - - - - - - - - (2,016,634 ) (2,016,634 ) Dividends - - - - - - - - - - - (739,783 ) (739,783 ) Net loss for the three months ended June 30, 2018 - - - - - - - - - - - (5,547,292 ) (5,547,292 ) Balance, September 30, 2018 - - - - - - 5,966,054 5,966 (11,000 ) (19,007 ) 32,104,187 (34,583,684 ) (2,492,539 ) See accompanying notes to the consolidated financial statements - 6 - Jerrick Media Holdings, Inc. Consolidated Statement of Changes in Stockholders' Equity For the Nine Months Ended September 30, 2018 Series A Preferred Stock Series B Preferred Stock Series D Preferred Stock Common Stock Treasury stock Additional Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Paid In Capital Accumulated Deficit Stockholders’ Equity Balance, December 31, 2017 31,581 31 8,063 8 - - 1,976,034 1,976 (11,000 ) (19,007 ) 14,424,792 (21,775,107 ) (7,367,307 ) Issuance of common stock for prepaid services - - - - - - 30,500 31 - - 116,269 - 116,300 Common stock issued to settle vendor liabilities - - - - - - 938 1 - - 3,374 - 3,375 Common stock issued with note payable - - - - - - 18,750 19 - - 77,468 - 77,487 August 2018 equity raise (31,581 ) (31 ) (8,063 ) (8 ) - - 3,939,832 3,939 - - 15,621,670 - 15,625,569 Stock warrants issued with note payable - - - - - - - - - - 1,566,824 - 1,566,824 BCF issued with note payable - - - - - - - - - - 38,413 - 38,413 Stock based compensation - - - - - - - - - - 255,376 - 255,375 Inducement expense - - - - - - - - - - - (2,016,634 ) (2,016,634 ) Dividends - - - - - - - - - - - (739,783 ) (739,783 ) Net loss for the six months ended September 30, 2018 - - - - - - - - - - - (10,052,160 ) (10,052,160 ) Balance, September 30, 2018 - - - - - - 5,966,054 5,966 (11,000 ) (19,007 ) 32,104,187 (34,583,684 ) (2,492,539 ) See accompanying notes to the consolidated financial statements - 7 - Jerrick Media Holdings, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (5,403,866 ) $ (10,052,160 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 11,922 33,109 Accretion of debt discount and issuance cost 228,017 2,039,589 Inducement expense 7,626 - Share-based compensation 441,412 329,857 Gain (loss) on settlement of vendor liabilities - (2,886 ) Gain (loss) on settlement of debt - (15,275 ) Gain on extinguishment of debt 83,171 3,370,505 Changes in operating assets and liabilities: Prepaid expenses 669 3,366 Accounts receivable (49,532 ) (5,632 ) Operating lease right of use asset (76,317 ) - Security deposit - 164 Deferred revenue 57,003 - Accounts payable and accrued expenses (7,912 ) 848,171 Deferred rent - 3,429 Net Cash Used In Operating Activities (4,707,807 ) (3,447,763 ) CASH FLOWS FROM INVESTING ACTIVITIES: Issuance of note receivable (11,450 ) - Cash paid for property and equipment (27,887 ) (24,084 ) Cash consideration for acquisition (368,004 ) Net cash received in business combination 16,049 - Net Cash Used In Investing Activities (391,292 ) (24,084 ) CASH FLOWS FROM FINANCING ACTIVITIES: Cash overdraft (33,573 ) - Net proceeds from issuance of notes - 791,833 Repayment of notes (50,000 ) (214,939 ) Proceeds from issuance of demand loan 100,000 50,000 Proceeds from issuance of convertible note 1,993,025 1,525,154 Repayment of convertible notes - (86,798 ) Proceeds from issuance of convertible notes - related party - 299,852 Proceeds from issuance of note payable - related party 3,406,500 315,000 Repayment of note payable - related party (329,000 ) (163,305 ) Investor Deposit - 208,428 Proceeds from issuance of common stock and warrants 649,829 1,155,832 Repayment of line of credit - (44,996 ) Cash paid to preferred holder - (87,111 ) Cash paid for debt issuance costs - (166,761 ) Cash paid for stock issuance costs (35,115 ) Purchase of treasury stock and warrants (435,428 ) Net Cash Provided By Financing Activities 5,266,353 3,547,074 Net Change in Cash 167,254 75,227 Cash - Beginning of Year - 111,051 Cash - End of Year $ 167,254 $ 186,278 SUPPLEMENTARY CASH FLOW INFORMATION: Cash Paid During the Year for: Income taxes $ - $ - Interest $ 42,262 $ 64,892 SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Settlement of vendor liabilities $ - $ 3,750 Deferred offering costs $ 143,146 $ - Beneficial conversion feature on convertible notes $ - $ 38,413 Accrued dividends $ - $ 174,232 Warrants issued with debt $ 336,975 $ 1,122,292 Issuance of common stock for prepaid services $ - $ 116,300 Operating Lease liability $ 288,790 $ - Option liability $ 7,328 $ - Conversion of note payable and interest into convertible notes $ - $ 341,442 Warrants with amendment to notes payable $ - $ 135,596 Inducement to convert convertible preferred stock $ - $ 2,016,634 Promissory Note issued for acquisition $ 660,000 $ - Shares issued for acquisition $ 1,166,669 $ - Conversion of note payable - related party and interest into convertible notes - related party $ 20,000 $ - The accompanying notes are an integral part of these consolidated financial statements. - 8 - Jerrick Media Holdings, Inc. September 30, 2019 and 2018 Notes to the Consolidated Financial Statements (Unaudited) Note 1 – Organization and Operations Jerrick Media Holdings, Inc. (“we,” “us,” the “Company,” or “Jerrick Media” or “Jerrick”) is a technology company focused on the development of digital communities, marketing branded digital content, and e-commerce opportunities. Jerrick’s content distribution platform, Vocal, delivers a robust long-form, digital publishing platform organized into highly engaged niche-communities capable of hosting all forms of rich media content. Through Jerrick’s proprietary algorithm dynamics, Vocal enhances the visibility of content and maximizes viewership, providing advertisers access to target markets that most closely match their interests. The Company was originally incorporated under the laws of the State of Nevada on December 30, 1999 under the name LILM, Inc. The Company changed its name on December 3, 2013 to Great Plains Holdings, Inc. as part of its plan to diversify its business. On February 5, 2016 (the “Closing Date”), GTPH, GPH Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of GTPH (“Merger Sub”), and Jerrick Ventures, Inc., a privately-held Nevada corporation headquartered in New Jersey (“Jerrick”), entered into an Agreement and Plan of Merger (the “Merger”) pursuant to which the Merger Sub was merged with and into Jerrick, with Jerrick surviving as a wholly-owned subsidiary of GTPH (the “Merger”). GTPH acquired, pursuant to the Merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “Jerrick Shareholders”), pro-rata, a total of 1,425,000 shares of GTPH’s common stock. In connection therewith, GTPH acquired 33,415 shares of Jerrick’s Series A Convertible Preferred Stock (the “Jerrick Series A Preferred”) and 8,064 shares of Series B Convertible Preferred Stock (the “Jerrick Series B Preferred”). In connection with the Merger, on the Closing Date, GTPH and Kent Campbell entered into a Spin-Off Agreement (the “Spin-Off Agreement”), pursuant to which Mr. Campbell purchased from GTPH (i) all of GTPH’s interest in Ashland Holdings, LLC, a Florida limited liability company, and (ii) all of GTPH’s interest in Lil Marc, Inc., a Utah corporation, in exchange for the cancellation of 39,091 shares of GTPH’s Common Stock held by Mr. Campbell. In addition, Mr. Campbell assumed all debts, obligations and liabilities of GTPH, including any existing prior to the Merger, pursuant to the terms and conditions of the Spin-Off Agreement. Upon closing of the Merger on February 5, 2016, the Company changed its business plan to that of Jerrick Media. Effective February 28, 2016, GTPH entered into an Agreement and Plan of Merger (the “Statutory Merger Agreement”) with Jerrick, pursuant to which GTPH became the parent company of Jerrick Ventures, LLC, a wholly-owned operating subsidiary of Jerrick (the “Statutory Merger”) and GTPH changed its name to Jerrick Media Holdings, Inc. to better reflect its new business strategy. On September 11, 2019, the Company acquired 100% of the membership interests of Seller’s Choice, LLC, a New Jersey limited liability company (“Seller’s Choice”). Seller’s Choice is digital e-commerce agency based in New Jersey (see Note 4). Note 2 – Significant and Critical Accounting Policies and 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. - 9 - Basis of Presentation - Interim Financial Information The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were: (i) Assumption as a going concern : Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. (ii) Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. (iii) Valuation allowance for deferred tax assets : Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors. (iv) Estimates and assumptions used in valuation of equity instruments : Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk-free rate(s) to value share options and similar instruments. - 10 - 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. 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, 2019, 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% Jerrick Australia Pty Ltd Australia 100% Seller’s Choice, LLC New Jersey 100% Jerrick Global , LLC Delaware 100% Jerrick Investment Advisors LLC Delaware 100% Jerrick Partners LLC Delaware 100% Maven Tech LLC Delaware 100% OG Collection LLC Delaware 100% VMENA LLC Delaware 100% Vocal For Brands , LLC Delaware 100% Vocal Ventures LLC Delaware 100% What to Buy , LLC Delaware 100% All inter-company balances and transactions have been eliminated. Fair Value of Financial Instruments The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below: Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data. - 11 - Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued liabilities and accrued liquidating damages approximate their fair value because of the short maturity of those instruments. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. Property and Equipment Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows: Estimated Useful Life (Years) Computer equipment and software 3 Furniture and fixture 2 Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the condensed consolidated statements of operations. Commitments and Contingencies The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. - 12 - 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. 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 condensed consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair value is reclassified to equity. 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 year ended December 31, 2017 on a retrospective basis. The Company utilizes an option pricing model 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 Company records the change in the fair value of the derivative as other income or expense in the condensed consolidated statements of operations. Revenue Recognition On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605), using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported in accordance with our historic accounting under Topic 605. The impact of adopting the new revenue standard was not material to our condensed consolidated financial statements and there was no adjustment to beginning retained earnings on January 1, 2018. Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. - 13 - We determine revenue recognition through the following steps: ● identification of the contract, or contracts, with a customer; ● identification of the performance obligations in the contract; ● determination of the transaction price; ● allocation of the transaction price to the performance obligations in the contract; and ● recognition of revenue when, or as, we satisfy a performance obligation. Revenue disaggregated by revenue source for the nine months ended September 30, 2019 and 2018 consists of the following: Nine Months Ended September 30, 2019 2018 Branded content $ 57,885 $ 49,999 Managed Services $ 60,937 Affiliate sales 6,816 8,920 Other revenue 7,263 6,472 $ 132,901 $ 65,391 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. Below are the significant components of a typical agreement pertaining to branded content revenue: ● The Company collects fixed fees ranging from $5,000 to $45,000 ● The articles are created and published within three months of the signed agreement, or as previously negotiated with the client ● The articles are promoted per the contract and engagement reports are provided to the client ● The client pays 50% at signing and 50% upon completion ● Most contracts include provisions for clients to acquire content rights at the end of the campaign for a flat fee Affiliate Sales 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. - 14 - Subscription 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. Vocal+ subscribers receive access to value-added features such as increased rate of CPM cost per mille (thousand) (“CPM”) monetization, a decreased minimum withdrawal threshold, a discount on platform processing fees, member badges for their profiles, and early access to new Vocal features. Subscription revenues stem from both monthly and annual subscriptions, the latter of which is amortized over a twelve-month period. Any customer payments received are recognized over the subscription period, with any payments received in advance being deferred until they are earned. Managed Services The Company provides a Managed Services offering 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 Managed 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. In addition to partnering with Managed Services clients, the Company offers a range a la carte services. Contract amounts for Managed Services and a la carte clients range from approximately $500-$7,500 per month. Deferred Revenue Deferred revenue consists of billings and payments from clients in advance of revenue recognition. As of September 30, 2019, the Company had deferred revenue of $66,088. Accounts Receivable and Allowances Accounts receivable are recorded and carried when the Company uploads the articles and reaches the required number of views on the platform. We make estimates for the allowance for doubtful accounts and allowance for unbilled receivables based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, and other factors that may affect our ability to collect from customers. The Company did not record an allowance during the nine months ended September 30, 2019 and 2018. Stock-Based Compensation The Company recognizes compensation expense for all equity–based payments granted to employees in accordance with ASC 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award. Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a five-year period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of Company stock on the grant date. The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is benchmarked against similar companies in a similar industry over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future. The expected forfeiture rate is estimated based on management’s best estimate. Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If the Company’s actual forfeiture rate is materially different from its estimate, the equity–based compensation could be significantly different from what the Company has recorded in the current period. - 15 - 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 nine months ended September 30, 2019 and 2018 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, 2019 and 2018: September 30, 2019 2018 Series A Preferred stock - - Series B Preferred stock - - Options 882,500 882,500 Warrants 786,252 5,167,087 Convertible notes - related party 5,309 100 Convertible notes 564,794 81,025 Totals 2,238,855 6,130,712 Reclassifications Certain prior year amounts in the condensed consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current year presentation. These reclassifications did not affect the prior period total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities. Recently Adopted Accounting Guidance In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” Under ASU 2016-02, lessees will, among other things, require lessees to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model and ASC Topic 606, “Revenue from Contracts with Customers.” ASU 2016-02 became effective for us on January 1, 2019 and initially required transition using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) - Targeted Improvements,” which, among other things, provides an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In December 2018, the FASB also issued ASU 2018-20, “Leases (Topic 842) - Narrow-Scope Improvements for Lessors,” which provides for certain policy elections and changes lessor accounting for sales and similar taxes and certain lessor costs. As of January 1, 2019, the Company adopted ASU 2016-02 and has recorded a right-of-use asset and lease liability on the balance sheet for its operating leases. We elected to apply certain practical expedients provided under ASU 2016-02 whereby we will not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. We also do not expect to apply the recognition requirements of ASU 2016-02 to any short-term leases (as defined by related accounting guidance). We expect to account for lease and non-lease components separately because such amounts are readily determinable under our lease contracts and because we expect this election will result in a lower impact on our balance sheet. - 16 - Recent Accounting Guidance Not Yet Adopted In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard. Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying 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, the Company had an accumulated deficit at September 30, 2019, a net loss of $5.4 million and net cash used in operating activities of $4.7 for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. 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 – Acquisition of Seller’s Choice On September 11, 2019, the Company entered into a Membership Interest Purchase Agreement (the “Seller’s Choice Purchase Agreement”) by and between the Company and Home Revolution, LLC, a Delaware limited liability company (the “Seller”). Pursuant to the Seller’s Choice Purchase Agreement, subject to the terms and conditions set forth therein, at the closing of the transactions contemplated by the Seller’s Choice Purchase Agreement (the “Seller’s Choice Closing”), the Company acquired 100% of the membership interests of Seller’s Choice. As a result of the transactions contemplated by the Seller’s Choice Purchase Agreement, Seller’s Choice became a wholly-owned subsidiary of the Company (collectively, the “Seller’s Choice Acquisition”). At the Seller’s Choice Closing, the aggregate consideration (the “Consideration”) paid to the Seller was as follows: (i) $340,000, in cash; (ii) 333,334 shares of the Company’s common stock; and (iii) a secured promissory note in the principal amount of $660,000 (the “Seller’s Choice Note”). In connection with the Seller’s Choice Note, the Company, Seller, and Seller’s Choice entered into a Security Agreement whereby the Seller’s Choice Note is secured by the assets of Seller’s Choice. The Company also assumed $28,004 of Seller’s Choice’s payable obligations as part of the Consideration. Following the closing of the transaction, Seller’s Choice’s financial statements as of the Closing were consolidated with the Consolidated Financial Statements of the Company. These amounts are provisional and may be adjusted during the measurement period. - 17 - Following the Seller’s Choice acquisition, the Company’s investment in Seller’s Choice consisted of the following: Shares Amount Consideration paid prior to Closing: Cash paid $ 40,000 Total consideration paid - $ 40,000 Consideration paid at Closing: Cash paid $ 328,004 Common stock issued at closing (1) 333,334 $ 1,166,669 Note payable due March 11, 2020 660,000 Total consideration to be paid $ 2,154,673 Total consideration $ 2,194,673 (1) The common stock issued at the closing of the Seller’s Choice Acquisition had a closing price of $3.50 per share on the date of the transaction. Following the closing of the Seller’s Choice Acquisition, Seller’s Choice’s financial statements as of the Closing were consolidated with the Consolidated Financial Statements of the Company. The following presents the unaudited pro-forma combined results of operations of the Company with Seller’s Choice as if the entities were combined on January 1, 2018. Nine Months Ended September 30, 2018 Revenues, net $ 446,786 Net loss $ (10,129,122 ) Net loss per share $ (4.13 ) Weighted average number of shares outstanding 2,452,328 Nine Months Ended September 30, 2019 Revenues, net $ 801,416 Net loss $ (5,438,813 ) Net loss per share $ (0.69 ) Weighted average number of shares outstanding 7,900,217 The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2018 or to project potential operating results as of any future date or for any future periods. The Company consolidated Seller’s Choice as of the closing date of the Seller’s Choice Acquisition, and the results of operations of the Company include that of Seller’s Choice. Note 5 – Notes Payable Notes payable as of September 30, 2019 and December 31, 2018 is as follows: Outstanding Principal as of Warrants granted September 30, 2019 December 31, 2018 Interest Rate Maturity Date Quantity Exercise Price July 2018 Loan Agreement - 50,000 6 % August 2018 15,000 - Seller's Choice Note 660,000 - 9.5 % March 2020 - - 660,000 50,000 Less: Debt Discount - - Less: Debt Issuance Costs - (74 ) $ 660,000 $ 49,926 - 18 - Seller’s Choice Note On September 11, 2019, the Company entered into the Seller’s Choice Purchase Agreement with Home Revolution LLC (see Note 4). As a part of the consideration provided pursuant to the Seller’s Choice Acquisition, the Company issued the Seller’s Choice Note to the Seller in the principal amount of $660,000. The Seller’s Choice Note bears interest at a rate of 9.5% per annum, and is payable on March 11, 2020 at which time all outstanding principal, accrued and unpaid interest and other amounts become due. During the three and nine months ended September 30, 2019 the Company repaid $50,000 in principal and $1,893 in interest on the Seller’s Choice Note. Note 6 – Convertible Note Payable Convertible notes payable as of September 30, 2019 and December 31, 2018 is as follows: Outstanding Principal as of Warrants granted September 30, 2019 December 31, 2018 Interest Rate Conversion Price Maturity Date Quantity Exercise Price The February 2018 Convertible Note Offering 75,000 75,000 15 % 0.20 (*) January – February 2020 253,919 4.00 The March 2018 Convertible Note Offering 75,000 75,000 14 % 0.20 (*) March – April 2020 240,342 4.00 The February 2019 Convertible Note Offering 1,993,025 - 10 % 0.25 (*) February – March 2020 133,190 6.00 2,143,025 150,000 Less: Debt Discount (120,254 ) (17,280 ) Less: Debt Issuance Costs (2,788 ) (9,239 ) 2,019,983 123,481 Less: Current Debt (2,019,983 ) - Total Long-Term Debt $ - $ 123,481 (*) As subject to adjustment as further outlined in the notes The February 2018 Convertible Note Offering During the three months ended March 31, 2018, the Company conducted multiple closings of a private placement offering to accredited investors (the “February 2018 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “February 2018 Investors”) for aggregate gross proceeds of $725,000. In addition, $250,000 of the Company’s short-term debt along with accrued but unpaid interest of $40,675 was exchanged for convertible debt in the February 2018 Offering. These conversions resulted in the issuance of 72,669 warrants with a fair value of $181,139. These were recorded as a loss on extinguishment of debt. - 19 - The February 2018 Convertible Note Offering consisted of a maximum of $750,000 of units of the Company’s securities (each, a “February 2018 Unit” and collectively, the “February 2018 Units”), with each February 2018 Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a “February 2018 Convertible Note” and together the “February 2018 Convertible Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“February 2018 Conversion Shares”) at a conversion price of $4.00 per share (the “February 2018 Note Conversion Price”), and (b) a five-year warrant (each a “February 2018 Offering Warrant and together the “February 2018 Offering Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the February 2018 Convertible Notes can be converted into (“February 2018 Warrant Shares”) at an exercise price of $4.00 per share (“February 2018 Warrant Exercise Price”). The February 2018 Offering Notes mature on the second (2nd) anniversary of their issuance dates. The February 2018 Offering Notes are secured by a second priority security interest in the Company’s assets up to $1,000,000. The February 2018 Note Conversion Price and the February 2018 Offering Warrant Exercise Price are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein. The conversion feature of the February 2018 Convertible Note Offering provides for an effective conversion price that is below market value on the date of issuance. Such feature is normally characterized as a beneficial conversion feature (“BCF”). When the Company records a BCF the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The Company recorded a BCF and related debt discount of $37,350, the discount is being accreted over the life of the first Debenture to accretion of debt discount and issuance cost. The Company recorded a $316,875 debt discount relating to 3,625,000 February 2018 Offering Warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost. In connection with the February 2018 Convertible Note Offering, the Company retained a placement agent (the “Placement Agent”), to carry out the Offering on a “best-efforts” basis. For services in its capacity as Placement Agent, the Company has paid the Placement Agent a cash fee of $94,250 and issued to the Placement Agent shares of the Company’s common stock equal to ten percent (10%) of the Conversion Shares underlying the February 2018 Convertible Notes or 362,500 shares that had a fair value of $74,881, which was recorded as issuance cost and is being accreted over the life of these notes to accretion of debt discount and issuance cost. During the year ended December 31, 2018, the Company converted $940,675 of principal and $86,544 of unpaid interest into the August 2018 Equity Raise (as defined in Note 7 below). During the nine months ended September 30, 2019 the company repaid $16,289 in interest. The March 2018 Convertible Note Offering During the three months ended March 31, 2018, the Company conducted multiple closings of a private placement offering to accredited investors (the “March 2018 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “March 2018 Investors”) for aggregate gross proceeds of $770,000. In addition, $50,000 of the Company’s short-term debt, $767 accrued but unpaid interest and $140,600 of the Company’s vendor liabilities was exchanged for convertible debt within the March 2018 Convertible Note Offering. These conversions resulted in the issuance of 47,842 warrants with a fair value of $84,087. These were recorded as a loss on extinguishment of debt. The March 2018 Convertible Note Offering consisted of a maximum of $900,000, with an over-allotment option of an additional $300,000 of units of the Company’s securities (each, a “March 2018 Unit” and collectively, the “March 2018 Units”), with each March 2018 Unit consisting of (a) a 14% Convertible Secured Promissory Note (each a “March 2018 Note” and together the “March 2018 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at a conversion price of $4.00 per share (the “Conversion Price”), and (b) a four-year warrant (each a “Warrant and together the “Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into (“Warrant Shares”) at an exercise price of $4.00 per share (“Exercise Price”). The March 2018 Notes mature on the second (2nd) anniversary of their issuance dates. - 20 - The Conversion Price of the March 2018 Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein. The Company recorded a $254,788 debt discount relating to 240,342 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the Year ended December 31, 2018, the Company converted $886,367 of principal and $51,293 of unpaid interest pursuant to the August 2018 Equity Raise (as defined below). The February 2019 Convertible Note Offering During the nine months ended September 30, 2019, the Company conducted an offering to accredited investors (the “February 2019 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “February 2019 Investors”) for aggregate gross proceeds of $1,993,025. The February 2019 Convertible Note Offering consisted of (a) a 10% Convertible Promissory Note (each a “February 2019 Note” and together, the “February 2019 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $5.00 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company between February 21, 2019 and the date on which the Company’s consummates a listing onto a national securities exchange, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”), and (b) a four-year stock purchase warrant (each a “Warrant and together the “Warrants”) to purchase a quantity of shares of the Company’s common stock up to thirty-three percent (33%) of the number of shares of common stock into which the underlying Notes may be converted, at an exercise price of $6.00 per share (“Exercise Price”). During the nine months ended September 30, 2019 a total of 133,190 Warrants were issued in conjunction with The February 2019 Convertible Note Offering. The February 2019 Notes mature on the first (1 st ) anniversary of their issuance dates. In the event that the Offering’s Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Dates, the principal and interest evidenced by the Note shall be mandatorily converted upon the earlier of (i) the listing of the Common Stock onto a national securities exchange, or (ii) upon a Qualified Offering. The Conversion Price of the February 2019 Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein. The Company recorded a $222,632 debt discount relating to 133,190 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. - 21 - Note 7 – Related Party Loans Convertible notes Convertible notes payable – related party as of September 30, 2019 and December 31, 2018 is as follows: Outstanding Principal as of Warrants granted September 30, 2019 December 31, 2018 Interest Rate Maturity Date Quantity Exercise Price The March 2018 Convertible Note Offering 400 400 14 % March 2020 59,850 4.00 The February 2019 Convertible Note Offering 20,000 - 10 % February – March 2020 1,320 6.00 20,400 400 Less: Debt Discount (23) (72 ) Less: Debt Issuance Costs - - 20,377 328 Less: Current Debt (20,377) - Total Long-Term Debt $ - $ 328 The March 2018 Convertible Note Offering During the three months ended March 31, 2018, the Company conducted multiple closings of a private placement offering to accredited investors (the “March 2018 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “Investors”) for aggregate gross proceeds of $239,400. The March 2018 Convertible Note Offering consisted of a maximum of $900,000, with an over-allotment option of an additional $300,000, of units of the Company’s securities (each, a “March 2018 Unit” and collectively, the “March 2018 Units”), with each March 2018 Unit consisting of (a) a 14% Convertible Secured Promissory Note (each a “March 2018 Note” and together the “March 2018 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at a conversion price of $4.00 per share (the “Conversion Price”), and (b) a four-year warrant (each a “Warrant and together the “Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into (“Warrant Shares”) at an exercise price of $4.00 per share (“Exercise Price”). The Notes mature on the second (2nd) anniversary of their issuance dates. The Conversion Price of the Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein. The Company recorded a $84,854 debt discount relating to 59,850 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost. During the year ended December 31, 2018, the Company converted $239,000 of principal and $15,401 of unpaid interest into the August 2018 Equity Raise (as defined below). The February 2019 Convertible Note Offering During the Nine months ended September 30, 2019, the Company conducted an offering to accredited investors (the “February 2019 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “February 2019 Investors”) for aggregate gross proceeds of $20,000. - 22 - The February 2019 Convertible Note Offering consisted of (a) a 10% Convertible Promissory Note (each a “February 2019 Note” and together, the “February 2019 Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at the lesser of (i) a fixed conversion price equal to $5.00 per share or (ii) the price provided to investors in connection with (a) any private placement offerings or one or more registered public offerings by the Company under the Securities Act, pursuant to which the Company receives monies in the amount greater than $1,500,000 in exchange for securities of the Company between February 21, 2019 and the date on which the Company’s consummates a listing onto a national securities exchange, or (b) any private placement offerings or one or more registered public offerings by the Company under the Securities Act in connection with its listing onto a national securities exchange (a “Qualified Offering”), and (b) a four-year stock purchase warrant (each a “Warrant and together the “Warrants”) to purchase a quantity of shares of the Company’s common stock up to thirty-three percent (33%) of the number of shares of common stock into which the underlying Notes may be converted, at an exercise price of $6.00 per share (“Exercise Price”). During the nine months ended September 30, 2019 a total of 1,320 Warrants were issued in conjunction with The February 2019 Convertible Note Offering. The February 2019 Notes mature on the first (1 st ) anniversary of their issuance dates. In the event that the Offering’s Purchasers do not choose to convert the Notes into the Common Stock on or prior to the Maturity Dates, the principal and interest evidenced by the Note shall be mandatorily converted upon the earlier of (i) the listing of the Common Stock onto a national securities exchange, or (ii) upon a Qualified Offering. The Company recorded a $2,465 debt discount relating to 1,320 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. Notes payable Notes payable – related party as of September 30, 2019 and December 31, 2018 is as follows: Outstanding Principal as of Warrants granted September 30, 2019 December 31, 2018 Interest Rate Maturity Date Quantity Exercise Price The May 2016 Rosen Loan Agreement $ - $ 1,000,000 13 % November 26, 2017 50,000 $ 8.00 The June 2018 Frommer Loan Agreement 10,000 10,000 6 % August 17, 2018 1,500 4.00 The July 2018 Rosen Loan Agreement - 56,695 6 % August 17, 2018 1,500 4.00 The July 2018 Schiller Loan Agreements 20,863 40,000 6 % August 17, 2018 7,500 4.00 The December 2018 Gravitas Loan Agreement - 50,000 6 % January 22, 2019 2,500 6.00 The December 2018 Rosen Loan Agreement 75,000 75,000 6 % January 26, 2019 3,750 6.00 The January 2019 Rosen Loan Agreement 175,000 - 10 % February 15, 2019 15,000 6.00 The February 2019 Gravitas Loan Agreement - - 5 % February 28, 2019 375 6.00 The February 2019 Rosen Loan Agreement 50,000 - 10 % February 28, 2019 5,000 6.00 The June 2019 Loan Agreement 4,000,000 - 12.5 % December 3, 2019 - - The July 2019 Gravitas Loan Agreement 100,000 - 5 % September 1, 2019 1,000 6.00 The September 2019 Schiller Loan Agreement 50,000 - 4.5 % October 9, 2019 1,000 6.00 The September 2019 Tal Loan Agreement 12,500 - 5 % October 7, 2019 188 6.00 4,493,363 1,231,695 Less: Debt Discount (34,079) (8,125 ) 4,459,284 1,223,073 Less: Current Debt (4,459,284) (1,223,073 ) $ - $ - - 23 - The May 2016 Rosen Loan Agreement On May 26, 2016, the Company entered into a loan agreement (the “May 2016 Rosen Loan Agreement”) with Arthur Rosen, an individual (“Rosen”), pursuant to which on May 26, 2016 (the “Closing Date”), Rosen provided the Company a secured term loan in the principal amount of $1,000,000 (the “May 2016 Rosen Loan”). In connection with the May 2016 Rosen Loan Agreement, on May 26, 2016, the Company and Rosen entered into a security agreement (the “Rosen Security Agreement”), pursuant to which the Company granted to Rosen a senior security interest in substantially all of the Company’s assets as security for repayment of the May 2016 Rosen Loan. Pursuant to the May 2016 Rosen Loan Agreement, the May 2016 Rosen Loan bears interest at a rate of 12.5% per annum, compounded annually and payable on the maturity date of May 26, 2017 (the “May 2016 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the May 2016 Rosen Loan are due. The Company entered into an amendment to the May 2016 Rosen Loan extending the May 2016 Rosen Maturity Date to November 26, 2017. As additional consideration for entering in the May 2016 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 50,000 shares of the Company’s common stock at a purchase price of $2.00 per share (the “May 2016 Rosen Warrant”). The May 2016 Rosen Warrant contains anti-dilution provisions as further described therein. On September 7, 2017 (the “Conversion Date”), Rosen converted all accrued but unpaid interest on the May 2016 Rosen Loan from May 26, 2016 through September 6, 2017 in the amount of $124,306 (the “May 2016 Rosen Loan Interest”) into the Company’s August Convertible Note Offering, after which May 2016 Rosen Loan Interest was deemed paid in full through the Conversion Date. On March 29, 2019, the Company entered into an agreement with Mr. Rosen to further extend the maturity date of this loan to May 15, 2019. On June 3, 2019, this loan was converted into The June 2019 Loan Agreement (as defined below). The June 2018 Frommer Loan Agreement On June 29, 2018, the Company entered into a loan agreement (the “June 2018 Frommer Loan Agreement”) with Jeremy Frommer, an officer of the Company, whereby the Company issued Frommer a promissory note in the principal amount of $10,000 (the “June 2018 Frommer Note”). As additional consideration for entering in the June 2018 Frommer Note Loan Agreement, the Company issued Frommer a four-year warrant to purchase 1,500 shares of the Company’s common stock at a purchase price of $4.00 per share. Pursuant to the June 2018 Frommer Loan Agreement, the June 2018 Frommer Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018 (the “June 2018 Frommer Maturity Date”). On November 8, 2018 the Company executed upon an agreement that extended the maturity date of the June 2018 Frommer Agreement to March 7, 2019. As part of the extension agreement, the Company issued Frommer an additional 2,043 warrants to purchase common stock of the Company at an exercise price of $6.00. These warrants had a fair value of $4,645 which was recorded to loss on extinguishment of debt. On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the June 2018 Frommer Agreement to March 7, 2019. As part of the extension agreement, the Company issued Frommer an additional 2,077 warrants to purchase common stock of the Company at an exercise price of $6.00. On March 29, 2019 the Company entered into an agreement with Mr. Frommer that further extended the maturity date of this loan to May 15, 2019. On June 29, 2019 the Company entered into an agreement with Mr. Frommer that further extended the maturity date of this loan to December 15, 2019. - 24 - The First July 2018 Schiller Loan Agreement On July 3, 2018, the Company entered into a loan agreement (the “First July 2018 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Schiller a promissory note in the principal aggregate amount of $35,000 (the “First July 2018 Schiller Note”). As additional consideration for entering in the First July 2018 Schiller Loan Agreement, the Company issued Schiller a four-year warrant to purchase 3,750 shares of the Company’s common stock at a purchase price of $4.00 per share. Pursuant to the agreement, the note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. Subsequent to the balance sheet date, on November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Schiller warrants to purchase 7,149 shares of common stock of the Company at an exercise price of $6.00. On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the First July 2018 Schiller Loan Agreement to March 7, 2019. As part of the extension agreement, the Company issued Schiller an additional 3,204 warrants to purchase common stock of the Company at an exercise price of $6.00. On March 29, 2019 the Company entered into an agreement with Mr. Schiller that extended the maturity date of this loan to May 15, 2019. During the nine months ended September 30, 2019 $15,000 in principal and $863 of unpaid interest was converted into the February 2019 Convertible Note Offering and the loan is no longer outstanding. The Second July 2018 Schiller Loan Agreement On July 17, 2018, the Company entered into a loan agreement (the “Second July 2018 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Schiller a promissory note in the principal aggregate amount of $25,000 (the “Second July 2018 Schiller Note”). As additional consideration for entering in the Second July 2018 Schiller Loan Agreement, the Company issued Schiller a four-year warrant to purchase 3,750 shares of the Company’s common stock at a purchase price of $4.00 per share. Pursuant to the Second July 2018 Schiller Loan Agreement, the Second July 2018 Schiller Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. Subsequent to the balance sheet date, on November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Schiller warrants to purchase 5,095 shares of common stock of the Company at an exercise price of $6.00. On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the Second July 2018 Schiller Loan Agreement to March 7, 2019. As part of the extension agreement, the Company issued Schiller an additional 5,180 warrants to purchase common stock of the Company at an exercise price of $6.00. On March 29, 2019 the Company entered into an agreement with Mr. Schiller that further extended the maturity date of this loan to May 15, 2019. During the nine months ended September 30, 2019 $4,137 in principal was converted into the February 2019 Convertible Note Offering. The First July 2018 Rosen Loan Agreements On July 12, 2018, the Company entered into a loan agreement (the “First July 2018 Rosen Loan Agreement”) with Rosen, an officer of the Company, whereby the Company issued Rosen a promissory note in the principal aggregate amount of $10,000 (the “First July 2018 Rosen Note”). Pursuant to the First July 2018 Rosen Loan Agreement, the note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. On November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Rosen warrants to purchase 1,377 shares of common stock of the Company at an exercise price of $6.00. On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the First July 2018 Rosen Loan Agreement to March 7, 2019. As part of the extension agreement, the Company issued Rosen an additional 10,370 warrants to purchase common stock of the Company at an exercise price of $6.00. On March 29, 2019 the Company entered into an agreement with Mr. Rosen that further extended the maturity date of this loan to May 15, 2019. During the nine months ended September 30, 2019 the company repaid $10,000 of principal and $1,123 of unpaid interest and the loan is no longer outstanding. - 25 - The Second July 2018 Rosen Loan Agreements On July 18, 2018, the Company entered into a loan agreement (the “Second July 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal aggregate amount of $50,000 (the “Second July 2018 Rosen Note”) resulting from the conversion of a demand note (as described below). As additional consideration for entering into the Second July 2018 Rosen Loan Agreement, the Company issued Rosen a four-year warrant to purchase 7,500 shares of the Company’s common stock at a purchase price of $6.00 per share. Pursuant to the Second July 2018 Rosen Loan Agreement, the Second July 2018 Rosen Note bears interest at a rate of 6% per annum and payable on the maturity date of August 17, 2018. On November 8, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Rosen warrants to purchase 10,198 shares of common stock of the Company at an exercise price of $6.00. On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the Second July 2018 Rosen Loan Agreement to March 7, 2019. As part of the extension agreement, the Company issued Rosen an additional 2,072 warrants to purchase common stock of the Company at an exercise price of $6.00. On March 29, 2019 the Company entered into an agreement with Mr. Rosen that further extended the maturity date of this loan to May 15, 2019. During the nine months ended September 30, 2019 the company repaid $50,000 of principal and $2,900 of unpaid interest and the loan is no longer outstanding. The December 2018 Rosen Loan Agreement On December 27, 2018, the Company entered into a loan agreement (the “December 2018 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $75,000 (the “December 2018 Rosen Note”). As additional consideration for entering in the December 2018 Rosen Note Loan Agreement, the Company issued Rosen a four-year warrant to purchase 3,750 shares of the Company’s common stock at a purchase price of $6.00 per share. Pursuant to the December 2018 Rosen Loan Agreement, the December 2018 Rosen Note bears interest at a rate of 6% per annum and payable on the maturity date of January 26, 2019 (the “December 2018 Rosen Maturity Date”). On February 18, 2019 the Company executed upon an agreement that further extended the maturity date of the December 2018 Rosen Loan Agreement to March 7, 2019. As part of the extension agreement, the Company issued Rosen an additional 35,194 warrants to purchase common stock of the Company at an exercise price of $6.00. On March 29, 2019 the Company entered into an agreement with Mr. Rosen that extended the maturity date of this loan to May 15, 2019. On August 8, 2019 the Company entered into an agreement further extending the maturity date to September 20, 2019. The December 2018 Gravitas Capital Loan Agreement On December 27, 2018, the Company entered into a loan agreement (the “December 2018 Gravitas Capital Loan Agreement”) with Gravitas Capital, whereby the Company issued Gravitas Capital a promissory note in the principal amount of $50,000 (the “December 2018 Gravitas Capital Note”). As additional consideration for entering in the December 2018 Gravitas Capital Note Loan Agreement, the Company issued Gravitas Capital a four-year warrant to purchase 2,500 shares of the Company’s common stock at a purchase price of $6.00 per share. Pursuant to the December 2018 Gravitas Capital Loan Agreement, the December 2018 Gravitas Capital Note bears interest at a rate of 6% per annum and payable on the maturity date of January 27, 2019 (the “December 2018 Gravitas Capital Maturity Date”). During the nine months ended September 30, 2019 the Company repaid $50,000 in principal and $250 in interest and the loan is no longer outstanding. The January 2019 Rosen Loan Agreement On January 30, 2019, the Company entered into a loan agreement (the “January 2019 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $175,000 (the “January 2019 Rosen Note”). As additional consideration for entering in the January 2019 Rosen Note Loan Agreement, the Company issued Rosen a four-year warrant to purchase 15,000 shares of the Company’s common stock at a purchase price of $6.00 per share. Pursuant to the January 2019 Rosen Loan Agreement, the January 2019 Rosen Note bears interest at a rate of 10% per annum and payable on the maturity date of February 15, 2019 (the “January 2019 Rosen Maturity Date”). On February 19, 2018 the Company executed upon an agreement that extended the maturity date of this loan to March 7, 2019. As part of the extension agreement, the Company issued Rosen warrants to purchase 35,194 shares of common stock of the Company at an exercise price of $6.00. On March 29, 2019 the Company entered into an agreement with Mr. Rosen that extended the maturity date of this loan to May 15, 2019. On August 8, 2019 the Company entered into an agreement further extending the maturity date to September 20, 2019. - 26 - The February 2019 Gravitas Capital Loan Agreement On February 6, 2019, the Company entered into a loan agreement (the “February 2019 Gravitas Capital Loan Agreement”) with Gravitas Capital, whereby the Company issued Gravitas Capital a promissory note in the principal amount of $75,000 (the “February 2019 Gravitas Capital Note”). As additional consideration for entering in the February 2019 Gravitas Capital Note Loan Agreement, the Company issued Gravitas Capital a four-year warrant to purchase 375 shares of the Company’s common stock at a purchase price of $6.00 per share. Pursuant to the February 2019 Gravitas Capital Loan Agreement, the February 2019 Gravitas Capital Note bears interest at a rate of 5% per annum and payable on the maturity date of February 28, 2019 (the “February 2019 Gravitas Capital Maturity Date”). During the nine months ended September 30, 2019 the Company repaid $75,000 in principal and $3,500 in interest and the loan is no longer outstanding. The February 2019 Rosen Loan Agreement On February 14, 2019, the Company entered into a loan agreement (the “February 2019 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note in the principal amount of $50,000 (the “February 2019 Rosen Note”). As additional consideration for entering in the February 2019 Rosen Note Loan Agreement, the Company issued Rosen a four-year warrant to purchase 5,000 shares of the Company’s common stock at a purchase price of $6.00 per share. Pursuant to the February 2019 Rosen Loan Agreement, the February 2019 Rosen Note bears interest at a rate of 10% per annum and payable on the maturity date of February 28, 2019 (the “February 2019 Rosen Maturity Date”). On March 29, 2019 the Company entered into an agreement with Mr. Rosen that extended the maturity date of this loan to May 15, 2019. On August 8, 2019 the Company entered into an agreement further extending the maturity date to September 20, 2019. The March 2019 Gravitas Capital Loan Agreement On March 11, 2019, the Company entered into a loan agreement (the “March 2019 Gravitas Capital Loan Agreement”) with Gravitas Capital, whereby the Company issued Gravitas Capital a promissory note in the principal amount of $80,000 (the “March 2019 Gravitas Capital Note”). As additional consideration for entering in the March 2019 Gravitas Capital Note Loan Agreement, the Company issued Gravitas Capital a four-year warrant to purchase 375 shares of the Company’s common stock at a purchase price of $6.00 per share. Pursuant to the March 2019 Gravitas Capital Loan Agreement, the March 2019 Gravitas Capital Note bears interest at a rate of 6% per annum and payable on the maturity date of April 11, 2019 (the “March 2019 Gravitas Capital Maturity Date”). On April 12, 2019 the Company executed upon an agreement that further extended the maturity date of the March 2019 Gravitas Capital Loan Agreement to May 15, 2019. As part of the extension agreement, the Company issued Gravitas Capital an additional 500 warrants to purchase common stock of the Company at an exercise price of $6.00. During the nine months ended September 30, 2019 the company repaid $80,000 of principal and $10,000 of unpaid interest and the loan is no longer outstanding. The May 2019 Loan Agreement On May 31, 2019, the Company entered into a loan agreement (the “May 2019 Loan Agreement”), whereby the Company issued a promissory note in the principal amount of $10,000 (the “May 2019 Note”). Pursuant to the May 2019 Loan Agreement, the May 2019 Note bears interest at a rate of $500 per month. As additional consideration for entering in the May 2019 Loan Agreement, the Company issued a four-year warrant to purchase 150 shares of the Company’s common stock at a purchase price of $4.00 per share. During the nine months ended September 30, 2019 the Company repaid $10,000 in principal and $500 in interest and the loan is no longer outstanding. - 27 - The June 2019 Loan Agreement On June 3, 2019, the Company entered into a loan agreement (the “June 2019 Loan Agreement”), pursuant to which the Company was to be indebted in the amount of $2,400,000, of which $1,200,000 was funded by September 30, 2019 and $1,200,000 was exchanged from the May 2016 Rosen Loan Agreement dated May 26, 2016 in favor of Rosen for a joint and several interest in the Term Loan pursuant to the Debt Exchange Agreement. The June 2019 Loan Agreement, the June 2019 Loan bears interest at a rate of 12.5% per annum, compounded annually and payable on the maturity date of December 3, 2019 (the “June 2019 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the June 2019. In connection with the conversion of the May 2016 Rosen Loan Agreement the Company recorded a debt discount of $92,752. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. The July 2019 Gravitas Capital Loan Agreement On July 16, 2019, the Company entered into a loan agreement (the “July 2019 Gravitas Capital Loan Agreement”) with Gravitas Capital, whereby the Company issued Gravitas Capital a promissory note in the principal amount of $100,000 (the “July 2019 Gravitas Capital Note”). As additional consideration for entering in the July 2019 Gravitas Capital Note Loan Agreement, the Company issued Gravitas Capital a five-year warrant to purchase 1,000 shares of the Company’s common stock at a purchase price of $6.00 per share. Pursuant to the July 2019 Gravitas Capital Loan Agreement, the July 2019 Gravitas Capital Note bears interest at a rate of 5% per annum and payable on the maturity date of September 1, 2019 (the “July 2019 Gravitas Capital Maturity Date”). On September 19, 2018 the Company executed upon an agreement that extended the maturity date of this loan to November 1, 2019. As part of the extension agreement, the Company issued Gravitas Capital warrants to purchase 1,000 shares of common stock of the Company at an exercise price of $6.00 per share. During the nine months ended September 30, 2019 the Company repaid $5,000 in interest and extended the maturity date of the loan. The July 2019 Tal Loan Agreement On July 26, 2019, the Company entered into a loan agreement (the “July 2019 Tal Loan Agreement”) with Robert Tal, whereby the Company issued Tal a promissory note in the principal amount of $12,000 (the “July 2019 Tal Note”). Pursuant to the July 2019 Tal Loan Agreement, the July 2019 Tal Note bears interest at a rate of $600 per month. As additional consideration for entering in the July 2019 Tal Loan Agreement, the Company issued Tal a five-year warrant to purchase 180 shares of the Company’s common stock at a purchase price of $6.00 per share. During the nine months ended September 30, 2019 the Company repaid $12,000 in principal and $600 in interest and the loan is no longer outstanding. The August 2019 Schiller Loan Agreement On August 6, 2019, the Company entered into a loan agreement (the “August 2019 Schiller Loan Agreement”), whereby the Company issued a promissory note in the principal amount of $15,000 (the “August 2019 Schiller Note”). Pursuant to the August 2019 Schiller Loan Agreement, the August 2019 Schiller Note bears interest at a rate of $750 per month. As additional consideration for entering in the August 2019 Schiller Loan Agreement, the Company issued a five-year warrant to purchase 225 shares of the Company’s common stock at a purchase price of $6.00 per share. During the nine months ended September 30, 2019 the Company repaid $15,000 in principal and $750 in interest and the loan is no longer outstanding. The August 2019 Tal Loan Agreement On August 6, 2019, the Company entered into a loan agreement (the “August 2019 Tal Loan Agreement”), whereby the Company issued Tal a promissory note in the principal amount of $12,000 (the “August 2019 Tal Note”). Pursuant to the August 2019 Tal Loan Agreement, the August 2019 Tal Note bears interest at a rate of $600 per month. As additional consideration for entering in the August 2019 Tal Loan Agreement, the Company issued Tal a five-year warrant to purchase 180 shares of the Company’s common stock at a purchase price of $6.00 per share. During the nine months ended September 30, 2019 the Company repaid $12,000 in principal and $600 in interest and the loan is no longer outstanding. - 28 - The First September 2019 Tal Loan Agreement On September 4, 2019, the Company entered into a loan agreement (the “First September 2019 Tal Loan Agreement”), whereby the Company issued Tal a promissory note in the principal amount of $15,000 (the “First September 2019 Tal Note”). Pursuant to the First September 2019 Tal Loan Agreement, the First September 2019 Tal Note bears interest at a rate of $750 per month. As additional consideration for entering in the First September 2019 Tal Loan Agreement, the Company issued Tal a five-year warrant to purchase 225 shares of the Company’s common stock at a purchase price of $6.00 per share. During the nine months ended September 30, 2019 the Company repaid $15,000 in principal and $750 in interest and the loan is no longer outstanding. The Second September 2019 Tal Loan Agreement On September 26, 2019, the Company entered into a loan agreement (the “Second September 2019 Tal Loan Agreement”), whereby the Company issued Tal a promissory note in the principal amount of $12,500 (the “Second September 2019 Tal Note”). Pursuant to the Second September 2019 Tal Loan Agreement, the Second September 2019 Tal Note bears interest at a rate of $625 per month. As additional consideration for entering in the First September 2019 Tal Loan Agreement, the Company issued Tal a five-year warrant to purchase 188 shares of the Company’s common stock at a purchase price of $6.00 per share. The September 2019 Schiller Loan Agreement On September 26, 2019, the Company entered into a loan agreement (the “September 2019 Schiller Loan Agreement”), whereby the Company issued Schiller a promissory note in the principal amount of $50,000 (the “September 2019 Schiller Note”). Pursuant to the September 2019 Schiller Loan Agreement, the September 2019 Schiller Note bears interest at a rate of $2,250 per month. As additional consideration for entering in the First September 2019 Schiller Loan Agreement, the Company issued Schiller a five-year warrant to purchase 1,000 shares of the Company’s common stock at a purchase price of $6.00 per share. Demand loan On March 29, 2019, Mark Standish made non-interest bearing loans of $300,000 to the Company in the form of cash. The loan is due on demand and is unsecured. In April 2019 the company papered this note as part of the February 2019 Convertible Note Offering. On June 13, 2019, Standish made non-interest bearing loans of $100,000 to the Company in the form of cash. The loan is due on demand and unsecured. Officer compensation During the nine months ended September 30, 2019 the Company paid $38,105 for living expenses for officers of the Company. Note 8 – Stockholders’ Deficit Shares Authorized The Company is 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. - 29 - Reverse Stock Split On July 25, 2019, following board of directors approval, the Company filed a Certificate of Change to its Articles of Incorporation (the “Amendment”), with the Secretary of State of the State of Nevada to effectuate a one-for-twenty (1:20) reverse stock split (the “Reverse Stock Split”) of its common stock, par value $0.001 per share, without any change to its par value. The Amendment became effective on July 30, 2019. The number of shares authorized for common and preferred stock were not affected by the Reverse Stock Split. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were “rounded up” to the next whole share. All share and per share amounts for the common stock have been retroactively restated to give effect to the reverse splits. Preferred Stock As of September 30, 2019, and December 31, 2018 there were no preferred stock issued or outstanding. Common Stock On January 4, 2019, the Company issued 2,000,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $240,000. On January 3, 2019, the Company issued 500,000 shares of its restricted common stock to consultants in exchange for services at a fair value of $70,050. August 2018 Equity Raise Effective August 31, 2018 (the “Effective Date”), the Company consummated the initial closing (the “Initial Closing”) of a private placement offering of its securities of up to $5,000,000 (the “August 2018 Equity Raise”). During the three months ended March 31, 2019 the Company entered into definitive securities purchase agreements (the “Purchase Agreements”) for aggregate gross proceeds of $649,829 . Pursuant to the Purchase Agreement, the Purchasers purchased an aggregate of 2,599,320 shares of common stock at $0.25 per share and received warrants to purchase 129,966 shares of common stock at an exercise price of $6.00 per share (the “Purchaser Warrants”, collectively, the “Securities”). The Purchaser Warrants are exercisable for a term of five years from the Initial Exercise Date (as defined in the Purchaser Warrants). Tender offers Warrants subject to tender Common shares issuable Warrants tendered Shares issued Tender offer 1 61,832,962 20,610,782 50,602,968 16,977,084 Tender offer 2 53,754,849 26,727,425 50,052,133 25,026,377 Total 115,587,811 47,338,207 100,655,101 42,003,461 Tender 1 In February 2019 the Company offered to its holders of certain outstanding warrants (the “Tender 1 Warrants”), each with an exercise price of $4.00, by agreeing to receive thirty-three thousand three hundred and thirty three (33,333) Shares in exchange for every one-hundred thousand (100,000) Warrants tendered by the holders of Warrants (the “Exchange Ratio”). The Exchange Ratio was selected by the Company in order to provide the holders of the Warrants with an incentive to exchange the Warrants. The Tender closed on April 15, 2019. The Company considered the fair value accounting for all share-based payments awards. The fair value of each warrant tendered is estimated on the tender date using the Black-Scholes option-pricing model. Since the fair of the warrants were in excess of the fair value of common stock the company did not record an inducement expense. Tender 2 In April 2019 the Company offered to its holders of certain outstanding warrants (the “Tender 2 Warrants”), each with an exercise price of $6.00, by agreeing to receive fifty thousand (50,000) Shares in exchange for every one-hundred thousand (100,000) Warrants tendered by the holders of Warrants (the “Exchange Ratio”). The Exchange Ratio was selected by the Company in order to provide the holders of the Warrants with an incentive to exchange the Warrants. The Tender closed on May 17, 2019. The Company considered the fair value accounting for all share-based payments awards. The fair value of each warrant tendered is estimated on the tender date using the Black-Scholes option-pricing model. Since the fair of the warrants were in excess of the fair value of common stock the company did not record an inducement expense. - 30 - 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, 2019 are as follows: September 30, 2019 September 30, 2018 Exercise price $ 6.00 $4.00-$6.00 Expected dividends 0% 0% Expected volatility 78.5% - 114.13% 102% - 107 % Risk free interest rate 1% - 3% 2% - 3% Expected life of warrant 4 – 5 years 4 – 5 years Warrant Activities The following is a summary of the Company’s warrant activity: Warrants Weighted Average Exercise Price Outstanding – December 31, 2018 5,548,141 $ 5.40 Granted 426,312 5.90 Exercised - - Forfeited/Cancelled (5,188,201 ) 5.34 Outstanding and Exercisable – September 30, 2019 786,252 $ 5.11 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 $ 5.11 786,252 2.87 5.11 786,252 2.87 During the nine months ended September 30, 2019, a total of 133,190 warrants were issued with convertible notes (See Note 5 above). The warrants have a grant date fair value of $252,533 using a Black-Scholes option-pricing model and the above assumptions. During the nine months ended September 30, 2019, a total of 98,755 warrants were issued with notes payable – related party (See Note 6 above). The warrants have a grant date fair value of $114,777 using a Black-Scholes option-pricing model and the above assumptions. - 31 - During the nine months ended September 30, 2019, a total of 1,320 warrants were issued with convertible notes payable – related party (See Note 6 above). The warrants have a grant date fair value of $2,465 using a Black-Scholes option-pricing model and the above assumptions. During the nine months ended September 30, 2019, a total of 2,599,320 warrants were issued with the August 2018 Equity Raise (See above). The warrants have a grant date fair value of $334,985 using a Black-Scholes option-pricing model and the above assumptions. During the nine months ended September 30, 2019, a total of 69,201 warrants were issued in exchange for services. The warrants have a grant date fair value of $ $206,884 using a Black-Scholes option-pricing model and the above assumptions. Note 9 – Commitments and Contingencies 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. Total amount due under this lease is $411,150. On April 1, 2019, the Company signed a 4-year lease for approximately 796 square feet of office space at 2050 Center Avenue Suite 660, Fort Lee, New Jersey 07024. Commencement date of the lease is April 1, 2019. Total amount due under this lease is $108,229 Total future minimum payments required under the lease as of September 30, 2019 are as follows: Twelve Months Ending September 30, 2020 $ 103,925 2021 107,955 2022 112,942 2023 82.453 Total $ 407,274 Rent expense for the nine months ended September 30, 2019 and 2018 was $116,209 and $140,056 respectively. Note 10 – Subsequent Events June 2019 Loan Agreement Amendments On October 10, 2019 the Company and investors entered into a fourth amendment agreement to the June 2019 Loan Agreement, whereby the parties thereto agreed to (i) increase the principal amount of the June 2019 Loan to $4,825,000; and (ii) amend the interest, conversion terms, and other covenants of the note. October 2019 Loan Agreement In October 2019, the Company entered into a loan agreement for funds of $10,000. This loan was subsequently repaid. - 32 - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This Quarterly Report on Form 10-Q and other reports filed by Jerrick Media Holdings, Inc. (the “Company”) from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events 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 report. Overview Jerrick Media Holdings, Inc. (OTCQB: JMDA) is a technology company. The Company provides technology solutions for content creators, brands and their respective audiences. Jerrick’s flagship product Vocal is a long-form, digital publishing platform focused on providing storytelling tools, monetization features and engaged communities for content creators to get discovered and fund their creativity. Vocal is home to content creators and brands of all shapes and sizes, and attracts audiences across a network of owned-and-operated communities. The platform’s open-canvas content creation editor supports a wide range of rich-media assets including photos, videos, podcasts, product links, written word, and more, making it easy for creators to produce beautiful, engaging content. Additionally, creators can upgrade to Vocal+, Vocal’s premium subscription offering, to access a suite of additional features such as increased earnings, brand collaborations, rewards, and early access to new features. Jerrick’s in-house content studio Vocal for Brands collaborates with brands to create beautiful, campaign-optimized branded experiences on the Vocal platform that build brand affinity, trust, and drive results. The Company employs an agile design and development process, yielding a balanced portfolio of revenue streams that ensures institutional stability. In the third quarter, Jerrick implemented a $10 monthly renewal option in addition to the $99 annual renewal option for the Vocal+ subscription offering. Additionally, following Jerrick’s acquisition of the Seller’s Choice agency in September 2019, the Company successfully integrated Seller’s Choice into its sales team and operations. - 33 - Results of Operations Liquidity and Capital Resources The following table summarizes total current assets, liabilities and working capital at September 30, 2019 compared to December 31, 2018: September 30, 2019 December 31, 2018 Increase / (Decrease) Current Assets $ 370,250 $ 6,500 $ 363,750 Current Liabilities $ 8,510,169 $ 2,569,584 $ 5,940,585 Working Capital Deficit $ (8,139,919 ) $ (2,563,084 ) $ (5,576,835 ) At September 30, 2019, we had a working capital deficit of $8,139,919 as compared to a working capital deficit of $2,563,084 at December 31, 2018, an increase of $5,576,835. The increase is primarily attributable to an increase in notes payable related party, convertible notes payable, and the current portion of operating lease payable. These were offset by a decrease in cash and a decrease in accounts payable and accrued liabilities. Net Cash Net cash used in operating activities for the nine months ended September 30, 2019 and 2018, was $4,707,807 and $3,447,763, respectively. The net loss for the nine months ended September 30, 2019 and 2018 was $5,403,866 and $10,052,160, respectively. This change is primarily attributable to the net loss for the current period offset by share-based payments in the amount of $441,412 to employees and consultants for services rendered, the accretion of debt discount and debt issuance costs of $228,017 due to the incentives given with debentures, and a gain on extinguishment of debt of $83,171 in addition to a change in accounts payable and accrued expenses of $84,229. These increases were offset by a change in accounts receivable of $49,532 during the nine months ended September 30, 2019. Net cash used in investing activities for the nine months ended September 30, 2019 and 2018 was $391,292 and $24,084, respectively. This change is attributable to the cash paid for property and equipment and the cash consideration for the acquisition. Net cash provided by financing activities for the nine months ended September 30, 2019 and 2018 was $5,266,353 and $3,547,074. During the 2019 period, the Company was predominantly financed by issuance of common stock, debt and related party notes of $649,829, $2,093,025 and $3,406,500, respectively to fund operations. These increases were offset by repayment of notes and related party notes of $50,000 and $329,000, respectively. Summary of Statements of Operations for the Three Months Ended September 30, 2019 and 2018: Three Months Ended September 30, 2019 2018 Revenue $ 91,386 $ 25,119 Gross Margin $ 91,386 $ 25,119 Operating Expenses $ (1,747,909 ) $ (907,707 ) Loss from operations $ (1,656,523 ) $ (882,588 ) Other Expenses $ (277,488 ) $ (4,664,704 ) Net loss $ (1,934,011 ) $ (5,547,292 ) Loss per common share – basic and diluted $ (0.22 ) $ (0.12 ) Revenue Revenue was $91,386 for the three months ended September 30, 2019, as compared to $25,119 for the comparable three months ended September 30, 2018, an increase of $66,267. The increase in revenue is primarily attributable to the launch and steady growth of Vocal+ paid subscribers, the rising price points for Vocal for Brands campaigns, and the integration of Seller’s Choice into Jerrick following the Company’s successful acquisition of Seller’s Choice in late third-quarter. - 34 - Operating Expenses Operating expenses for the three months ended September 30, 2019 were $1,747,909 as compared to $907,707 for the three months ended September 30, 2018. The increase of $840,202 in operating expenses is the result of an increase in general and administrative expenses, consulting fees and increased employee headcount mainly related to the acquisition of Seller’s Choice and the implementation of the Company’s plan to uplist to a national exchange. Loss from Operations Loss from operations for the three months ended September 30, 2019 was $1,656,523 as compared to loss of $882,588 for the three months ended September 30, 2018. The increase in the loss from operations is primarily due to increased expenses due to the continued development of the Vocal platform and increased marketing costs. Other Expenses Other expenses for the three months ended September 30, 2019 was $277,488 as compared to $4,664,704 for the three months ended September 30, 2018. Other expenses during the three months ended September 30, 2019 was comprised of interest expense of $164,439 on notes and related party notes, accretion of debt discount and issuance cost of $111,027 due to the incentives given with debentures, and a loss on extinguishment of debt of $2,022. During the three months ended September 30, 2018, other expenses were comprised of interest expense of $279,163 on notes and related party notes and accretion of debt discount and issuance cost of $1,449,656 due to the incentives given with debentures, loss on extinguishment of liabilities of $2,938,719 for the incentives given to amend or convert debt. Net Loss Net loss attributable to common shareholder for three months ended September 30, 2019, was $1,934,011, or loss per share of $(0.22), as compared to a net loss of $5,547,292, or loss per share of $(0.11), for the three months ended September 30, 2018. Inflation did not have a material impact on the Company’s operations for the applicable period. Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company’s results of operations. Summary of Statements of Operations for the Nine Months Ended September 30, 2019 and 2018: Nine Months Ended September 30, 2019 2018 Revenue $ 132,901 $ 65,391 Gross Margin $ 132,901 $ 65,391 Operating Expenses $ (4,896,539 ) $ (3,837,259 ) Loss from operations $ (4,763,638 ) $ (3,771,868 ) Other Expenses $ (640,228 ) $ (6,280,292 ) Net loss $ (5,403,866 ) $ (10,052,160 ) Loss per common share – basic and diluted $ (0.68 ) $ (0.25 ) Revenue Revenue was $132,901 for the nine months ended September 30, 2019, as compared to $65,391 for the comparable nine months ended September 30, 2018, an increase of $67,510. The increase in revenue is primarily attributable to the acquisition of Seller’s Choice, the introduction of the Vocal+ subscription offering, and the continued growth of Vocal for Brands. Operating Expenses Operating expenses for the nine months ended September 30, 2019 were $4,896,539 as compared to $3,837,259 for the nine months ended September 30, 2018. The increase of $1,059,280 in operating expenses was the result of increases in R&D expenses related to the replatforming of Vocal and development of Vocal+ subscription features, consulting fees, compensation related to headcount and general and administrative expenses as the Company scales its business. - 35 - Loss from Operations Loss from operations for the nine months ended September 30, 2019 was $4,763,638 as compared to loss of $3,771,868 for the nine months ended September 30, 2018. The increase in the loss from operations is primarily due to increased expenses resulting from the continued development of the Vocal platform and increased marketing costs. Other income (expenses) Other expenses for the nine months ended September 30, 2019 were $640,228 as compared to $6,280,292 for the nine months ended September 30, 2018. Other expenses during the nine months ended September 30, 2019 were comprised of interest expense of $329,040 on notes and related party notes, accretion of debt discount and issuance cost of $228,017 due to the incentives given with debentures, and a loss on extinguishment of debt of $83,171. During the nine months ended September 30, 2018, other expenses were comprised of interest expense of $888,359 on notes and related party notes and accretion of debt discount and issuance cost of $2,039,589 due to the incentives given with debentures, and a loss on extinguishment of liabilities of $3,370,505 for the incentives given to amend or convert debt. Net Loss Net loss attributable to common shareholder for nine months ended September 30, 2019, was $5,403,866, or loss per share of $(0.68), as compared to a net loss of $10,052,160, or loss per share of $(0.25), for the nine months ended September 30, 2018. Inflation did not have a material impact on the Company’s operations for the applicable period. Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company’s results of operations. Off-Balance Sheet Arrangements As of September 30, 2019, we had no off-balance sheet arrangements. Critical Accounting Policies Our significant accounting policies are described in Note 2 of the Condensed Consolidated Financial Statements. During the nine months ending September 30, 2019, we were not required to make any material estimates and assumptions that affect the reported amounts and related disclosures of assets, liabilities, revenue and expenses. However, 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. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 229.10(f)(1). - 36 - Item 4. Controls and Procedures Limitations on Effectiveness of Controls and Procedures The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact there are resource constraints and management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Principal Executive and Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934). Based on that evaluation, our Principal Executive and Financial Officer concluded our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2019. Changes in Internal Control Over Financial Reporting No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) has occurred during the three and nine months ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. - 37 - PART II - OTHER INFORMATION Item 1. Legal Proceedings. We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. Item 1A. Risk Factors. The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 229.10(f)(1). Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. During the three months ended September 30, 2019, 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. On July 26, 2019, the Company entered into a loan agreement with an accredited (the “July 2019 Loan Agreement”) investor whereby the Company issued such accredited investor a promissory note in the principal amount of $12,000 (the “July 2019 Note”). As additional consideration for entering into the July 2019 Loan Agreement, the Company issued the accredited investor a five-year warrant to purchase 180 shares of the Company’s common stock with an exercise price of $6.00 per share. On August 6, 2019, the Company entered into a loan agreements with accredited investors (the “August 2019 Loan Agreements”), whereby the Company issued such accredited investors promissory notes in the aggregate principal amount of $27,000 (the “August 2019 Notes”). As additional consideration for entering into the August 2019 Loan Agreements, the Company issued such accredited investors five-year warrants to purchase up to an aggregate of 405 shares of the Company’s common stock with an exercise price of $6.00 per share. On September 4, 2019, the Company entered into a loan agreement with an accredited investor (the “First September 2019 Loan Agreement”), whereby the Company issued such accredited investor a promissory note in the principal amount of $15,000 (the “First September 2019 Note”). As additional consideration for entering into the First September 2019 Loan Agreement, the Company issued such accredited investor a five-year warrant to purchase 225 shares of the Company’s common stock at a purchase price of $6.00 per share. On September 17, 2019 the Company entered into an agreement to extend the July 2019 Gravitas Capital Loan Agreement. In consideration for this extension, the Company issued the accredited investor a five year warrant to purchase 1,000 shares of the Company’s common stock with an exercise price of $6.00 per share. On September 26, 2019, the Company entered into a loan agreements with accredited investors (the “September 2019 Loan Agreements”), whereby the Company issued such accredited investors promissory notes in the aggregate principal amount of $62,500 (the “September 2019 Notes”). As additional consideration for entering into the September 2019 Loan Agreements, the Company issued such accredited investors five-year warrants to purchase up to an aggregate of 1,188 shares of the Company’s common stock with an exercise price of $6.00 per share. - 38 - Item 3. Defaults Upon Senior Securities. None. 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 Amendment No. 3 to Loan and Security Agreement, dated September 16, 2019 10.2 Amendment No. 4 to Loan and Security Agreement, dated October 11, 2019 31.1** Certification by the Principal Executive and 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. 101.INS* XBRL Instance Document 101.SCH* XBRL Taxonomy Extension Schema Document 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* XBRL Taxonomy Extension Label Linkbase Document 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document * Filed herewith ** Furnished herewith - 39 - 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. JERRICK MEDIA HOLDINGS, INC. Date: November 14, 2019 By: /s/ Jeremy Frommer Name: Jeremy Frommer Title: Chief Executive Officer (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer) -40-