Creatd, Inc. 10-Q

Item 1. Financial Statements. Creatd, Inc. March 31, 2022 Index to the Condensed Consolidated Financial Statements Contents Page(s) Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021 2 Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021 (unaudited) 3 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (unaudited) 4 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (unaudited) 6 Notes to the Condensed Consolidated Financial Statements (unaudited) 7 1 Creatd, Inc. Condensed Consolidated Balance Sheets March 31, 2022 December 31, 2021 (Unaudited) Assets Current Assets Cash $ 3,229,627 $ 3,794,734 Accounts receivable, net 390,605 337,440 Inventory 436,981 106,403 Prepaid expenses and other current assets 274,840 236,665 Total Current Assets 4,332,053 4,475,242 Property and equipment, net 139,479 102,939 Intangible assets 2,520,373 2,432,841 Goodwill 1,383,785 1,374,835 Deposits and other assets 914,700 718,951 Minority investment in businesses 50,000 50,000 Operating lease right of use asset - 18,451 Total Assets $ 9,340,390 $ 9,173,259 Liabilities and Stockholders’ Deficit Current Liabilities Accounts payable and accrued liabilities $ 4,832,103 $ 3,730,540 Convertible Notes, net of debt discount and issuance costs - 159,193 Current portion of operating lease payable - 18,451 Note payable, net of debt discount and issuance costs 1,151,087 1,278,672 Deferred revenue 211,676 234,159 Total Current Liabilities 6,194,866 5,421,015 Non-current Liabilities: Note payable 35,905 63,992 Total Non-current Liabilities 35,905 63,992 Total Liabilities 6,230,771 5,485,007 Commitments and contingencies Stockholders’ Equity Common stock par value $ 0.001 : 100,000,000 shares authorized; 19,915,090 issued and 19,909,433 outstanding as of March 31, 2021 and 16,691,170 issued and 16,685,513 outstanding as of December 31, 2021 19,915 16,691 Additional paid in capital 117,949,487 111,563,618 Subscription receivable - - Less: Treasury stock, 5,657 and 5,657 shares, respectively ( 62,406 ) ( 62,406 ) Accumulated deficit ( 115,977,464 ) ( 109,632,574 ) Accumulated other comprehensive income ( 83,222 ) ( 78,272 ) Total Creatd, Inc. Stockholders’ Equity 1,846,310 1,807,057 Non-controlling interest in consolidated subsidiaries 1,263,309 1,881,195 3,109,619 3,688,252 Total Liabilities and Stockholders’ Equity $ 9,340,390 $ 9,173,259 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 Creatd, Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) For the Three Months Ended For the Three Months Ended March 31, 2022 March 31, 2021 Net revenue $ 1,348,738 $ 743,913 Cost of revenue 1,572,170 867,150 Gross margin (loss) ( 223,432 ) ( 123,237 ) Operating expenses Research and development 226,654 328,852 Marketing 2,092,021 2,042,655 Stock based compensation 1,080,792 1,570,239 General and administrative 3,386,385 1,881,014 Total operating expenses 6,785,852 5,822,760 Loss from operations ( 7,009,284 ) ( 5,945,997 ) Other income (expenses) Other income 99 - Interest expense ( 13,896 ) ( 198,671 ) Accretion of debt discount and issuance cost ( 23,477 ) ( 497,165 ) Derivative expense - ( 100,502 ) Change in derivative liability 3,729 ( 197,389 ) Settlement of vendor liabilities 14,525 92,909 Gain on extinguishment of debt 147,256 203,578 Other expenses, net 128,236 ( 697,240 ) Loss before income tax provision ( 6,881,048 ) ( 6,643,237 ) Income tax provision - - Net loss ( 6,881,048 ) ( 6,643,237 ) Non-controlling interest in net loss 617,886 - Net Loss attributable to Creatd, Inc. ( 6,263,162 ) ( 6,643,237 ) Deemed dividend ( 81,728 ) - Net loss attributable to common shareholders $ ( 6,344,890 ) $ ( 6,643,237 ) Comprehensive loss Net loss ( 6,881,048 ) ( 6,643,237 ) Currency translation gain (loss) ( 4,950 ) ( 7,311 ) Comprehensive loss $ ( 6,885,998 ) $ ( 6,650,548 ) Per-share data Basic and diluted loss per share $ ( 0.36 ) $ ( 0.68 ) Weighted average number of common shares outstanding 17,707,951 9,836,443 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Creatd, Inc. Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) For the Three Months Ended March 31, 2022 (Unaudited) Series E Preferred Stock Common Stock Treasury stock Additional Paid In Accumulated Non- Controlling Other Comprehensive Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Interest Income Equity Balance, January 1, 2022 500 $ - 16,691,170 $ 16,691 ( 5,657 ) $ ( 62,406 ) $ 111,563,618 $ ( 109,632,574 ) $ 1,881,195 $ ( 78,272 ) $ 3,688,252 Stock based compensation - - 18,171 18 - - 1,067,591 - - - 1,067,609 Shares issued for prepaid services - - 50,000 50 - - 68,950 - - - 69,000 Cash received for common stock and warrants, net of $ 115,000 of issuance costs - - 3,046,314 3,046 - - 4,994,254 - - - 4,997,300 Common stock issued upon conversion of notes payable - - 109,435 110 - - 173,346 - - - 173,456 Foreign currency translation adjustments - - - - - - - - - ( 4,950 ) ( 4,950 ) Dividends - - - - - - 81,728 ( 81,728 ) - - - Net loss for the three months ended March 31, 20222 - - - - - - - ( 6,263,162 ) ( 617,886 ) - ( 6,881,048 ) Balance, March 31, 2022 500 $ - 19,915,090 $ 19,915 ( 5,657 ) $ ( 62,406 ) $ 117,949,487 $ ( 115,977,464 ) $ 1,263,309 $ ( 83,222 ) $ 3,109,619 The accompanying notes are an integral part of these consolidated financial statements. 4 Creatd, Inc. Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) For the Three Months Ended March 31, 2021 (Unaudited) Series E Additional Other Preferred Stock Common Stock Treasury stock Paid In Subscription Accumulated Comprehensive Stockholders’ Shares Amount Shares Amount Shares Amount Capital Receivable Deficit Income Equity Balance, January 1, 2021 7,738 $ 8 8,736,378 $ 8,737 ( 5,657 ) $ ( 62,406 ) $ 77,505,013 $ ( 40,000 ) $ ( 71,928,922 ) $ ( 37,234 ) $ 5,445,196 Stock based compensation - - 112,261 112 - - 1,345,803 - - - 1,345,915 Shares issued for prepaid services - - 40,000 40 - - 191,960 - - - 192,000 Shares issued to settle vendor liabilities - - 44,895 45 - - 181,341 - - - 181,386 Common stock issued upon conversion of notes payable - - 65,328 65 - - 142,735 - - - 142,800 Exercise of warrants to stock - - 302,434 302 - - 1,272,370 - - - 1,272,672 Cash received for preferred series E and warrants 40 - - - - - ( 4,225 ) 40,000 - - 35,775 Conversion of preferred series E to stock ( 6,690 ) ( 7 ) 1,623,730 1,624 - - ( 1,617 ) - - - - Foreign currency translation adjustments - - - - - - - - - ( 7,311 ) ( 7,311 ) Net loss for the three months ended March 31, 2021 - - - - - -- - - ( 6,643,237 ) - ( 6,643,237 ) Balance, March 31, 2021 1,088 $ 1 10,925,026 $ 10,925 ( 5,657 ) $ ( 62,406 ) $ 80,633,380 $ - $ ( 78,572,159 ) $ ( 44,545 ) $ 1,965,196 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Creatd, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended For the Three Months Ended March 31, 2022 March 31, 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 6,881,048 ) $ ( 6,643,237 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 141,892 41,199 Accretion of debt discount and issuance cost 23,477 497,165 Share-based compensation 1,080,491 1,570,239 Bad debt expense 92,987 - Settlement of vendor liabilities ( 14,525 ) ( 92,908 ) Change in fair value of derivative liability ( 3,729 ) 197,389 Derivative expense - 100,502 Gain on extinguishment of debt ( 147,256 ) ( 203,578 ) Non cash lease expense 18,451 19,709 Changes in operating assets and liabilities: Prepaid expenses ( 6,373 ) ( 391,918 ) Inventory ( 136,213 ) - Accounts receivable ( 139,388 ) ( 61,374 ) Deposits and other assets ( 195,749 ) - Deferred revenue ( 22,483 ) 60,123 Accounts payable and accrued expenses 1,170,738 ( 370,528 ) Operating lease liability ( 18,451 ) ( 19,421 ) Net Cash Used In Operating Activities ( 5,037,179 ) ( 5,296,638 ) CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for property and equipment ( 44,927 ) ( 12,637 ) Deposits - ( 100,000 ) Cash paid for minority investment in business - ( 100,000 ) Cash acquired from acquisition 44,977 - Purchases of digital assets ( 51,000 ) - Net Cash Used In Investing Activities ( 50,950 ) ( 212,637 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the exercise of warrant - 1,312,672 Net proceeds from issuance of notes 463,559 85,500 Repayment of notes ( 932,888 ) ( 43,716 ) Repayment of convertible notes - ( 941,880 ) Proceeds from issuance of common stock and warrants 4,997,301 - Net Cash Provided By Financing Activities 4,527,972 412,576 Effect of exchange rate changes on cash ( 4,950 ) ( 7,311 ) Net Change in Cash ( 565,107 ) ( 5,104,010 ) Cash – Beginning of period 3,794,734 7,906,752 Cash – End of period $ 3,229,627 $ 2,802,742 SUPPLEMENTARY CASH FLOW INFORMATION: Cash Paid During the Year for: Income taxes $ - $ - Interest $ 139,000 $ 55,276 SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Settlement of vendor liabilities $ 20,297 $ 168,667 Issuance of common stock for prepaid services $ 69,000 $ 155,178 Deferred offering costs $ - $ 4,225 Common stock and warrants issued upon conversion of notes payable $ 173,456 $ 142,800 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Creatd, Inc. March 31, 2022 Notes to the Condensed Consolidated Financial Statements Note 1 – Organization and Operations Creatd, Inc., formerly Jerrick Media Holdings, Inc. (“we,” “us,” the “Company,” or “Creatd”), is a technology company focused on providing economic opportunities for creators, which it accomplishes through its four main business pillars: Creatd Labs, Creatd Partners, Creatd Ventures, and Creatd Studios. Creatd’s flagship product, Vocal, delivers a robust long-form, digital publishing platform organized into highly engaged niche-communities capable of hosting all forms of rich media content. Through Creatd’s proprietary algorithm dynamics, Vocal enhances the visibility of content and maximizes viewership, providing advertisers access to target markets that most closely match their interests. The Company was originally incorporated under the laws of the State of Nevada on December 30, 1999 under the name LILM, Inc. The Company changed its name on December 3, 2013 to Great Plains Holdings, Inc. as part of its plan to diversify its business. On February 5, 2016 (the “Closing Date”), GTPH, GPH Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of GTPH (“Merger Sub”), and Jerrick Ventures, Inc., a privately-held Nevada corporation headquartered in New Jersey (“Jerrick”), entered into an Agreement and Plan of Merger (the “Merger”) pursuant to which the Merger Sub was merged with and into Jerrick, with Jerrick surviving as a wholly-owned subsidiary of GTPH (the “Merger”). GTPH acquired, pursuant to the Merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “Jerrick Shareholders”), pro-rata, a total of 475,000 shares of GTPH’s common stock. In connection therewith, GTPH acquired 33,415 shares of Jerrick’s Series A Convertible Preferred Stock (the “Jerrick Series A Preferred”) and 8,064 shares of Series B Convertible Preferred Stock (the “Jerrick Series B Preferred”). In connection with the Merger, on the Closing Date, GTPH and Kent Campbell entered into a Spin-Off Agreement (the “Spin-Off Agreement”), pursuant to which Mr. Campbell purchased from GTPH (i) all of GTPH’s interest in Ashland Holdings, LLC, a Florida limited liability company, and (ii) all of GTPH’s interest in Lil Marc, Inc., a Utah corporation, in exchange for the cancellation of 39,091 shares of GTPH’s Common Stock held by Mr. Campbell. In addition, Mr. Campbell assumed all debts, obligations and liabilities of GTPH, including any existing prior to the Merger, pursuant to the terms and conditions of the Spin-Off Agreement. Upon closing of the Merger on February 5, 2016, the Company changed its business plan to that of Jerrick. Effective February 28, 2016, GTPH entered into an Agreement and Plan of Merger (the “Statutory Merger Agreement”) with Jerrick, pursuant to which GTPH became the parent company of Jerrick Ventures, LLC, a wholly-owned operating subsidiary of Jerrick (the “Statutory Merger”) and GTPH changed its name to Jerrick Media Holdings, Inc. to better reflect its new business strategy. On September 11, 2019, the Company acquired 100 % of the membership interests of Seller’s Choice, LLC, a New Jersey limited liability company (“Seller’s Choice”). Seller’s Choice is a digital e-commerce agency based in New Jersey. On September 9, 2020, the Company filed a certificate of amendment with the Secretary of State of the State of Nevada to change our name to “Creatd, Inc.”, which became effective on September 10, 2020. On June 4, 2021, the Company acquired 89 % of the membership interests of Plant Camp, LLC, a Delaware limited liability company (“Plant Camp”), which the Company subsequently rebranded as Camp. Plant Camp is a direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. The results of Plant Camp’s operations have bene included since the date of acquisition in the Statements of Operations. On July 20, 2021, the Company acquired 44 % of the membership interests of WHE Agency, Inc. WHE Agency, Inc, is a talent management and public relations agency based in New York. WHE Agency, Inc, has been consolidated due to the Company’s ownership of 55 % voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations. 7 On August 16, 2021, the Company acquired 16 % of the membership interests of Dune, Inc. bring our total membership interests to 21 %. On October 3, 2021, the Company acquired 29 % of the membership interests of Dune, Inc. bring our total membership interests to 50 %. Dune, Inc. is a direct-to-consumer brand focused on promoting wellness through its range of health-oriented beverages. Dune, Inc, has been consolidated due to the Company’s ownership of 50 % voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations. On March 7, 2022, the Company acquired 100 % of the membership interests of Denver Bodega, LLC, d/b/a Basis, a Colorado limited liability company (“Basis”). Basis is a direct-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Denver Bodega, LLC has been consolidated due to the Company’s ownership of 100 % voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations. Note 2 – Significant Accounting Policies and Practices Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by the accounting principles generally accepted in the United States of America. Basis of Presentation The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or any other interim period or for any other future year. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021, included in the Company’s 2021 Annual Report on Form 10-K filed with the SEC. The balance sheet as of December 31, 2021 has been derived from audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements. Use of Estimates and Critical Accounting Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. The Company uses estimates in accounting for, among other items, revenue recognition, allowance for doubtful accounts, stock-based compensation, income tax provisions, excess and obsolete inventory reserve, and impairment of intellectual property. Actual results could differ from those estimates. 8 Presentation During 2021, we adopted a change in presentation on our Condensed Consolidated Statements of Comprehensive Loss in order to present a gross profit line and allocate certain overhead expenses, the presentation of which is consistent with our peers. Under the new presentation, we began allocating overhead expenses related to cost of goods sold. Prior periods have been revised to reflect this change in presentation . Principles of consolidation The Company consolidates all majority-owned subsidiaries, if any, in which the parent’s power to control exists. As of March 31, 2022, the Company’s consolidated subsidiaries and/or entities are as follows: Name of combined affiliate State or other jurisdiction of incorporation or organization Company Ownership Interest Jerrick Ventures LLC Delaware 100 % Abacus Tech Pty Ltd Australia 100 % Seller’s Choice, LLC New Jersey 100 % Creatd Studios, LLC Delaware 100 % Give, LLC Delaware 100 % Creatd Partners LLC Delaware 100 % Denver Bodega, LLC Colorado 100 % Dune Inc. Delaware 50 % Plant Camp LLC Delaware 89 % Sci-Fi.com, LLC Delaware 100 % OG Collection LLC Delaware 100 % OG Gallery, Inc. Delaware 100 % VMENA LLC Delaware 100 % Vocal For Brands, LLC Delaware 100 % Vocal Ventures LLC Delaware 100 % What to Buy, LLC Delaware 100 % WHE Agency, Inc. Delaware 44 % All inter-company balances and transactions have been eliminated. The condensed consolidated financial statements include Denver Bodega, LLC activity since March 7, 2022. Variable Interest Entities Management performs an ongoing assessment of its noncontrolling interests from investments in unrelated entities to determine if those entities are variable interest entities (VIEs), and if so, whether the Company is the primary beneficiary. If an entity in such a transaction, by design, meets the definition of a VIE and the Company determines that it, or a condensed consolidated subsidiary is the primary beneficiary, the Company will include the VIE in its condensed consolidated financial statements. If such an entity is deemed to not be condensed consolidated, the Company records only its investment in equity securities as a marketable security or investment under the equity method, as applicable Fair Value of Financial Instruments The fair value measurement disclosures are grouped into three levels based on valuation factors: ● Level 1 – quoted prices in active markets for identical investments ● Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs) ● Level 3 – significant unobservable inputs (including our own assumptions in determining the fair value of investments) 9 The Company’s Level 1 assets/liabilities include cash, accounts receivable, marketable trading securities, accounts payable, prepaid and other current assets, line of credit and due to related parties. Management believes the estimated fair value of these accounts at March 31, 2022 approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments or the use of market interest rates for debt instruments. The Company’s Level 2 assets/liabilities include certain of the Company’s notes payable. Their carrying value approximates their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of similar debt currently available to the Company in the marketplace. The Company’s Level 3 assets/liabilities include goodwill, intangible assets, equity investments at cost, and derivative liabilities. Inputs to determine fair value are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities. The following tables provides a summary of the relevant assets that are measured at fair value on non-recurring basis: Fair Value Measurements as of March 31, 2022 Total Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2) Significant Unobservable Inputs (Level 3) Assets: Equity investments, at cost $ 50,000 $ - $ - $ 50,000 Total assets $ 50,000 $ - $ - $ 50,000 Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) or Financial Claims Scheme (“FCS”) insurable limits. The Company has never experienced any losses related to these balances. As of March 31, 2022, cash amounts in excess of $ 250,000 were not fully insured. The uninsured cash balance as of March 31, 2022, was approximately $ 2.4 million. The Company does not believe it is exposed to significant credit risk on cash and cash equivalents. Concentration of Credit Risk and Other Risks and Uncertainties The Company provides credit in the normal course of business. The Company maintains allowances for credit losses on factors surrounding the credit risk of specific customers, historical trends, and other information. The Company operates in Australia and holds total assets of $ 935,285 that are considered to be reasonably possible that operations located outside an entity’s home country will be disrupted in the near term. 10 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 fixtures 5 Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the condensed consolidated statements of operations. Long-lived Assets Including Goodwill and Other Acquired Intangible Assets We evaluate the recoverability of property and equipment and acquired finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. During the three months ended March 31, 2022, the Company recorded an impairment charge of $ 0 for intangible assets. Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. We routinely review the remaining estimated useful lives of property and equipment and finite-lived intangible assets. If we change the estimated useful life assumption for any asset, the remaining unamortized balance is amortized or depreciated over the revised estimated useful life. The remaining weighted average life of the intangible assets are 6.94 years. Scheduled amortization over the next five years are as follows: Twelve months ending March 31, 2023 $ 498,641 2024 429,030 2025 325,307 2026 246,840 2027 228,499 Thereafter 792,056 Total $ 2,520,373 Goodwill is not amortized but is subject to periodic testing for impairment in accordance with ASC Topic 350 “Intangibles – Goodwill and Other – Testing Indefinite-Lived Intangible Assets for Impairment” (“ASC Topic 350”). The Company tests goodwill for impairment on an annual basis as of the last day of the Company’s fiscal December each year or more frequently if events occur or circumstances change indicating that the fair value of the goodwill may be below its carrying amount. The Company has four reporting units. The Company uses an income-based approach to determine the fair value of the reporting units. This approach uses a discounted cash flow methodology and the ability of our reporting units to generate cash flows as measures of fair value of our reporting units. 11 During the year ended December 31, 2021, the Company completed its annual impairment test of goodwill. The Company performed the qualitative assessment as permitted by ASC 350-20 and determined for three of its reporting units that the fair value of those reporting units was more likely than not greater than their carrying value, including Goodwill. However, based on this qualitative assessment, the Company determined that the carrying value of the Seller’s Choice reporting unit was more likely than not greater than its carrying value, including Goodwill. Based on completion of the annual impairment test, the Company recorded an impairment charge of $ 1,035,795 for goodwill During the year ended December 31, 2021. The following table sets forth a summary of the changes in goodwill for the three months ended March 31, 2022. For the three months ended March 31, 2022 Total As of January 1, 2022 $ 1,374,835 Goodwill acquired in a business combination 8,950 Impairment of goodwill - As of March 31, 2022 1,383,785 Commitments and Contingencies The Company follows subtopic 450-20 of the FASB ASC to report accounting for contingencies. Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Foreign Currency Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at our Condensed Consolidated Balance Sheet dates. Results of operations and cash flows are translated using the average exchange rates throughout the periods. The effect of exchange rate fluctuations on the translation of assets and liabilities is included as a component of stockholders’ equity in accumulated other comprehensive income. Gains and losses from foreign currency transactions, which are included in operating expenses, have not been significant in any period presented. Derivative Liability The Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the 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. 12 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 utilizes a binomial option model for convertible notes that have an option to convert at a variable number of shares to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The inputs utilized in the application of the Binomial model included a stock price on valuation date, an expected term of each debenture remaining from the valuation date to maturity, an estimated volatility, and a risk-free rate. The Company records the change in the fair value of the derivative as other income or expense in the condensed consolidated statements of operations. Shipping and Handling Costs The Company classifies freight billed to customers as sales revenue and the related freight costs as cost or revenue. Revenue Recognition Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We determine revenue recognition through the following steps: ● identification of the contract, or contracts, with a customer; ● identification of the performance obligations in the contract; ● determination of the transaction price. The transaction price for any given subscriber could decrease based on any payments made to that subscriber. A subscriber may be eligible for payment through one or more of the monetization features offered to Vocal creators, including earnings through reads (on a cost per mile basis) and cash prizes offered to Challenge winners; ● allocation of the transaction price to the performance obligations in the contract; and ● recognition of revenue when, or as, we satisfy a performance obligation. Revenue disaggregated by revenue source for the three months ended March 31, 2022 and 2021 consists of the following: Three Months Ended March 31, 2022 2021 Agency (Managed Services, Branded Content, & Talent Management Services) $ 583,141 $ 428,300 Platform (Creator Subscriptions) 508,233 306,902 Ecommerce (Tangible products) 254,724 - Affiliate Sales 2,640 8,008 Other Revenue - 703 $ 1,348,738 $ 743,913 13 The Company utilizes the output method to measures the results achieved and value transferred to a customer over time. Timing of revenue recognition for the three months ended March 31, 2022 and 2021 consists of the following: Three Months Ended March 31, 2022 2021 Products and services transferred over time $ 1,091,374 $ 735,202 Products and services transferred at a point in time 257,364 8,711 $ 1,348,738 $ 743,913 Agency Revenue Managed Services The Company provides Studio/Agency Service offerings to business-to-business (B2B) and business-to-consumer (B2C) product and service brands which encompasses a full range of digital marketing and e-commerce solutions. The Company’s services include the setup and ongoing management of clients’ websites, Amazon and Shopify storefronts and listings, social media pages, search engine marketing, and other various tools and sales channels utilized by e-commerce sellers for sales and growth optimization. Contracts are broken into three categories: Partners, Monthly Services, and Projects. Contract amounts for Partner and Monthly Services clients range from approximately $ 500 -$ 7,500 per month while Project amounts vary depending on the scope of work. Partner and Monthly clients are billed monthly for the work completed within that month. Partner Clients may or may not have an additional billing component referred to as Sales Performance Fee, which is a fee based upon a previously agreed upon percentage point of the client’s total sales for the month. Some Partners may also have projects within their contracts that get billed and recognized as agreed upon project milestones are achieved. Revenue is recognized over time as service obligations and milestones in the contract are met. Branded Content Branded content represents the revenue recognized from the Company’s obligation to create and publish branded articles and/or branded challenges for clients on the Vocal platform and promote said stories, tracking engagement for the client. In the case of branded articles, the performance obligation is satisfied when the Company successfully publishes the articles on its platform and meets any required promotional milestones as per the contract. In the case of branded challenges, the performance obligation is satisfied when the Company successfully closes the challenge and winners have been announced. The Company utilizes the completed contract method when revenue is recognized over time as the services are performed and any required milestones are met. Certain contracts contain separate milestones whereas the Company separates its performance obligations and utilizes the stand-alone selling price method and residual method to determine the estimate of the allocation of the transaction price. Below are the significant components of a typical agreement pertaining to branded content revenue: ● The Company collects fixed fees ranging from $ 10,000 to $ 110,000 , with branded challenges ranging from $ 10,000 to $ 25,000 and branded articles ranging from $ 2,500 to $ 7,500 per article. ● Branded articles are created and published, and challenges are completed, within three months of the signed agreement, or as previously negotiated with the client. 14 ● Branded articles and challenges are promoted per the contract and engagement reports are provided to the client. ● Most contracts include provisions for clients to acquire content rights at the end of the campaign for a flat fee. Talent Management Services Talent Management represents the revenue recognized by WHE Agency, Inc. (“WHE”) from the Company’s obligation to manage and oversee influencer-led campaigns from the contract negotiation stage through content creation and publication. WHE acts in an agent capacity for influencers and collects a management fee of 20 % of the value of an influencer’s contract with a brand. Revenue is recognized net of the 80 % of the contract that is collected by the influencer and is recognized when performance obligations of the contract are met. Performance obligations are complete when milestones and deliverables of contracts are delivered to the client. Below are the significant components of a typical agreement pertaining to talent management revenue: ● Total gross contracts range from $ 500 -$ 50,000 . ● The Company collects fixed fees in the amount of 20 % of the gross contract amount, ranging from $ 100 to $ 20,000 in net revenue per contract. ● The campaign is created and made live by the influencer within one month of the signed agreement, or as previously negotiated with the client. ● Campaigns are promoted per the contract and the customer is provided a link to the live deliverables on the influencer’s social media channels. ● Most billing for contracts occur 100 % at execution of the performance obligation. Net payment terms vary by client. Platform Revenue Creator Subscriptions Vocal+ is a premium subscription offering for Vocal creators. In addition to joining for free, Vocal creators now have the option to sign up for a Vocal+ membership for either $9.99 monthly or $99 annually, though these amounts are subject to promotional discounts and free trials. Vocal+ subscribers receive access to value-added features such as increased rate of cost per mille (thousand) (“CPM”) monetization, a decreased minimum withdrawal threshold, a discount on platform processing fees, member badges for their profiles, access to exclusive Vocal+ Challenges, and early access to new Vocal features. Subscription revenues stem from both monthly and annual subscriptions, the latter of which is amortized over a twelve-month period. Any customer payments received are recognized over the subscription period, with any payments received in advance being deferred until they are earned. The transaction price for any given subscriber could decrease based on any payments made to that subscriber. A subscriber may be eligible for payment through one or more of the monetization features offered to Vocal creators, including earnings through reads (on a cost per mille basis) and cash prizes offered to Challenge winners. Estimates are utilized for payments made for earnings through reads, by establishing the lifetime a subscriber has had a Vocal account, determining the percentage of that lifetime that the subscriber has been a paying customer, and applying that percentage to payments for earnings through reads in the relevant reporting period. 15 Affiliate Sales Revenue Affiliate sales represents the commission the Company receives when a purchase is made through affiliate links placed within content hosted on the Vocal platform. Affiliate revenue is earned on a “click through” basis, upon referring visitors, via said links, to an affiliate’s site and having them complete a specific outcome, most commonly a product purchase. The Company uses multiple affiliate platforms, such as Skimlinks, Amazon, and Tune, to form and maintain thousands of vendor relationships. Each vendor establishes their own commission percentage, which typically range from 2 - 20 %. The revenue is recognized upon receipt as reliable estimates could not be made. E-Commerce Revenue The Company’s e-commerce businesses are housed under Creatd Ventures, and currently consists of three majority-owned e-commerce companies, Camp (previously Plant Camp), Dune Glow Remedy (“Dune”), and Basis. The Company generates revenue through the sale of Camp, Dune, and Basis’ consumer products through its e-commerce distribution channels. The Company satisfies its performance obligation upon shipment of product to its customers and recognizes shipping and handling costs as a fulfillment cost. Customers have 30 days from receipt of an item to return unopened, unused, or damaged items for a full refund. All returns are processed within the relevant recording period and accounted for as a reduction in revenue. The Company runs discounts from time to time to promote sales, improve market penetration, and increase customer retention. Any discounts are run as coupon codes applied at the time of transaction and accounted for as a reduction in gross revenue. The Company assesses variable consideration using the most likely amount method. Deferred Revenue Deferred revenue consists of billings and payments from clients in advance of revenue recognition. The Company has two types of deferred revenue, subscription revenue whereas the revenue is recognized over the subscription period and contract liabilities where the performance obligation was not satisfied. The Company will recognize the deferred revenue over the next year. As of March 31, 2022, the Company had deferred revenue of $211,676. Accounts Receivable and Allowances Accounts receivable are recorded and carried when the Company has performed the work in accordance with managed services, project, partner, consulting and branded content agreements. For example, we bill a managed service client monthly when we have updated their Amazon store, modified SEO or completed the other services listed in the agreement. For projects and branded content, we will bill the client and record the receivable once milestones are reached that are set in the agreement. We make estimates for the allowance for doubtful accounts and allowance for unbilled receivables based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, and other factors that may affect our ability to collect from customers. During the three months ended March 31, 2022, the Company recorded $ 92,987 , as a bad debt expense. As of March 31, 2022, the Company has an allowance for doubtful accounts of $ 279,133 . Inventory Inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value. Inventories are periodically evaluated to identify obsolete or otherwise impaired products and are written off when management determines usage is not probable. The Company estimates the balance of excess and obsolete inventory by analyzing inventory by age using last used and original purchase date and existing sales pipeline for which the inventory could be used. As of March 31, 2022, the Company has no valuation allowance. Stock-Based Compensation The Company recognizes compensation expense for all equity–based payments granted in accordance with Accounting Standards Codification (“ASC”) 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation over the requisite service period of the award. The company has a relatively low forfeiture rate of stock based compensation and forfeitures are recognized as they occur. 16 Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods. The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is volatility is derived from the Company’s historical data over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future. Forfeitures are recognized as they occur. Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. The Company issues awards of equity instruments, such as stock options and restricted stock units, to employees and certain non-employee directors. Compensation expense related to these awards is based on the fair value of the underlying stock on the award date and is amortized over the service period, defined as the vesting period. The vesting period is generally one to three years. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock units. Compensation expense is reduced for actual forfeitures as they occur. Loss Per Share Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the three months ended March 31, 2022 and 2021 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 March 31, 2022 and 2021: March 31, 2022 2021 Options 1,891,348 2,350,062 Warrants 8,591,206 6,273,778 Convertible notes - 49,629 Totals 10,482,554 8,673,469 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’s presentation. These reclassifications did not affect the prior period’s total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities. During the year ended December 31, 2021, we adopted a change in presentation on our condensed consolidated statements of operations and comprehensive loss in order to present a gross profit line, the presentation of which is consistent with our peers. Under the new presentation, we began allocating payroll and related expenses, professional services and creator payouts. Prior periods have been revised to reflect this change in presentation. 17 Recently Adopted Accounting Guidance In May 2021, the FASB issued authoritative guidance intended to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. (ASU 2021-04), “Derivatives and Hedging Contracts in Entity’s Own Equity (Topic 815). This guidance’s amendments provide measurement, recognition, and disclosure guidance for an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. The updated guidance, which became effective for fiscal years beginning after December 15, 2021, did not have a material impact on the Company’s condensed consolidated financial statements . Recent Accounting Guidance Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU-2016-13”). ASU 2016-13 affects loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. ASU 2016-13 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements. In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. ASU 2020-6 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements. In July 2021, the FASB issued ASU No. 2021-05, Lessors—Certain Leases with Variable Lease Payments (Topic 842), Which requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate (hereafter referred to as “variable payments”) as an operating lease on the commencement date of the lease if specified criteria are met. ASU 2021-05 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s condensed consolidated financial statements upon the adoption of this ASU. In October 2021, the FASB issued ASU No. 2021-08, Business Combinations — Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805), Which aims to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in recognition and payment terms that effect subsequent revenue recognition. ASU 2021-08 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s condensed consolidated financial statements upon the adoption of this ASU. Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying condensed consolidated financial statements. Note 3 – Going Concern The Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the condensed consolidated financial statements, as of March 31, 2022, the Company had an accumulated deficit of $ 116 million, a net loss of $ 6.9 million and net cash used in operating activities of $ 5.1 million for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. 18 On January 30, 2020, the World Health Organization declared the COVID-19 novel coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial impact will be to the Company, capital raising efforts and our operations may be negatively affected. The Company is attempting to further implement its business plan and generate sufficient revenues; however, its cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds by way of a public or private offering of its debt or equity securities, there can be no assurance that it will be able to do so on reasonable terms, or at all. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenues and its ability to raise additional funds by way of a public or private offering. The condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Note 4 – Inventory Inventory was comprised of the following at March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 Raw Materials $ 16,904 $ - Packaging 20,342 2,907 Finished goods 399,735 103,496 $ 436,981 $ 106,403 Note 5 – Property and Equipment Property and equipment stated at cost, less accumulated depreciation and amortization, consisted of the following: March 31, 2022 December 31, 2021 Computer Equipment $ 376,436 $ 353,880 Furniture and Fixtures 124,787 102,416 Leasehold Improvements 11,456 11,457 512,679 467,753 Less: Accumulated Depreciation ( 373,200 ) ( 364,814 ) $ 139,479 $ 102,939 Depreciation expense was $ 8,386 and $ 10,047 for the three months ended March 31, 2022 and 2021, respectively. 19 Note 6 – Notes Payable Notes payable as of March 31, 2022 and December 31, 2021 is as follows: Outstanding Principal as of March 31, 2022 December 31, 2021 Interest Rate Maturity Date Seller’s Choice Note $ - $ 660,000 30 % September 2020 The April 2020 PPP Loan Agreement 198,577 198,577 1 % May 2022 The First December 2021 Loan Agreement 140,931 185,655 10 % June 2023 The Second December 2021 Loan Agreement 323,094 313,979 14 % June 2022 The First February 2022 Loan Agreement 337,163 - - % June 2023 The Second February 2022 Loan Agreement 164,123 - 14 % June 2022 First Denver Bodega LLC Loan 50,000 - Second Denver Bodega LLC Loan 15,724 - 1,229,612 1,358,211 Less: Debt Discount ( 42,620 ) ( 15,547 ) Less: Debt Issuance Costs - - 1,186,992 1,342,664 Less: Current Debt ( 1,151,087 ) ( 1,278,672 ) Total Long-Term Debt $ 35,905 $ 63,992 Seller’s Choice Note On September 11, 2019, the Company entered into Seller’s Choice Purchase Agreement with Home Revolution LLC. As a part of the consideration provided pursuant to the Seller’s Choice Acquisition, the Company issued the Seller’s Choice Note to the Seller in the principal amount of $ 660,000 . The Seller’s Choice Note bears interest at a rate of 9.5% per annum and is payable on March 11, 2020 (the “Seller’s Choice Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts become due. Upon maturity the Company utilized an automatic extension up to 6 months. This resulted in a 5 % increase in the interest rate every month the Seller’s Choice Note is outstanding. As of December 31, 2021, the Company is in default on the Seller’s Choice note. On March 3, 2022, after substantial motion practice, Creatd successfully settled the dispute with Home Revolution, LLC for a total of $ 799,000 , which includes $ 660,000 of note principal and $ 139,000 of accrued interest. The matter has been dismissed. As part of the settlement the Company recorded a Gain on extinguishment of debt of $ 147,256 . The April 2020 PPP Loan Agreement On April 30, 2020, the Company was granted a loan with a principal amount of $ 282,432 (the “Loan”), pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The Loan, which was in the form of a Note dated April 30, 2020, matures on April 30, 2022, and bears interest at a fixed rate of 1.00% per annum, payable monthly commencing on October 30, 2020. The Note may be prepaid by the Company at any time prior to maturity without payment of any premium. Funds from the Loan may only be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments. During the three months ended March 31, 2022, the Company accrued interest of $ 490 . The Company is in the process of returning the funds received from the Loan. 20 The First December 2021 Loan Agreement On December 3, 2021, the Company entered into a loan agreement (the “First December 2021 Loan Agreement”) with a lender (the “First December 2021 Lender”) whereby the First December 2021 Lender issued the Company a promissory note of $ 191,975 (the “First December 2021 Note”). Pursuant to the First December 2021 Loan Agreement, the First December 2021 Note has an effective interest rate of 9 %. The maturity date of the First December 2021 Note is June 3, 2023 (the “First December 2021 Maturity Date”), at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First December 2021 Note are due. During the three months ended March 31, 2022, the Company repaid $ 44,725 in principal. The Second December 2021 Loan Agreement On December 14, 2021, the Company entered into a secured loan agreement (the “Second December 2021 Loan Agreement”) with a lender (the “Second December 2021 Lender”), whereby the Second December 2021 Lender issued the Company a secured promissory note of $ 438,096 AUD or $ 329,127 United States Dollars (the “Second December 2021 Note”). Pursuant to the Second December 2021 Loan Agreement, the Second December 2021 Note has an effective interest rate of 14 %. The maturity date of the Second December 2021 Note is June 30, 2022 (the “Second December 2021 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Second December 2021 Loan Agreement are due. The loan is secured by the Australian research & development credit. During the three months ended March 31, 2022, the Company accrued $ 15,123 AUD in interest. The First February 2022 Loan Agreement On February 22, 2022, the Company entered into a secured loan agreement (the “First February 2022 Loan Agreement”) with a lender (the “First February 2022 Lender”), whereby the First February 2022 Lender issued the Company a secured promissory note of $ 222,540 AUD or $ 159,223 United States Dollars (the “First February 2022 Note”). Pursuant to the First February 2022 Loan Agreement, the First February 2022 Note has an effective interest rate of 14 %. The maturity date of the First February 2022 Note is June 30, 2022 (the “First February 2022 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First February 2022 Loan Agreement are due. The loan is secured by the Australian research & development credit. During the three months ended March 31, 2022, the Company accrued $ 3,158 AUD in interest. 21 The Second February 2022 Loan Agreement On February 22, 2022, the Company entered into a loan agreement (the “Second February 2022 Loan Agreement”) with a lender (the “Second February 2022 Lender”), whereby the Second February 2022 Lender issued the Company a promissory note of $ 337,163 (the “Second February 2022 Note”). Pursuant to the Second February 2022 Loan Agreement, the Second February 2022 Note has an effective interest rate of 11 %. The maturity date of the Second February 2022 Note is February 22, 2023 (the “Second February 2022 Maturity Date”). The Company is required to make 10 monthly payment of $ 37,425 . The Company recorded a $ 37,163 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. Denver Bodega LLC Notes payable On March 7, 2022, The Company acquired five note payable agreements from the acquisition of Denver Bodega LLC. See note 12. The total liabilities of these notes amounted to $ 293,888 . During the three months ended March 31, 2022, the Company repaid $ 228,164 . As of March 31, 2022, the Company has two notes outstanding. The First Denver Bodega LLC Loan has a principal balance of $ 50,000 , bears interest at 5 %, and requires 36 monthly payments of $ 1,496 . The second Denver Bodega LLC Loan has a principal balance of $ 15,724 and has a maturity date of April 16, 2022 . Note 7 – Convertible Notes Payable The July 2021 Convertible Loan Agreement On July 6, 2021, the Company entered into a loan agreement (the “July 2021 Loan Agreement”) with an individual (the “July 2021 Lender”), whereby the July 2021 Lender issued the Company a promissory note of $ 168,850 (the “July 2021 Note”). Pursuant to the July 2021 Loan Agreement, the July 2021 Note has interest of six percent ( 6 %). The July 2021 Note matures on the first (12 th ) month anniversary of its issuance date. Upon default or 180 days after issuance the July 2021 Note is convertible into shares of the Company’s common stock, par value $ 0.001 per share (“Conversion Shares”) equal to 75 % of average the lowest three trading prices of the Company’s common stock on the fifteen-trading day immediately preceding the date of the respective conversion. The Company recorded a $ 15,850 debt discount relating to an original issue discount and $ 3,000 of debt issuance costs related to fees paid to vendors relating to the offering. The debt discount and debt issuance costs are being accreted over the life of the note to accretion of debt discount and issuance cost. During the three months ended March 31, 2022, the July 2021 Note became convertible. Due to the fact that these convertible notes have an option to convert at a variable amount, they are subject to derivative liability treatment. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The conversion feature has been measured at fair value using a Binomial model at the conversion date. The conversion feature of July 2021 Note gave rise to a derivative liability of $ 100,532 . The Company recorded this as a debt discount. The debt discount is charged to accretion of debt discount over the remaining term of the convertible note. During the three months ended March 31, 2022, the note holder converted $ 168,850 of principal and $ 4,605 of interest into 109,435 shares of the Company’s common stock. The unamortized debt discount of $ 96,803 was recorded to extinguishment of debt due to conversion. Note 8 – Related Party Equity raises During the three months ended March 31, 2022, the company conducted two equity raises in which officers, directors, employees, and an affiliate of an officer cumulatively invested $ 421,001 for 240,571 shares of common stock and 240,571 warrants to purchase common stock. Officer compensation During the three months ended March 31, 2022 and 2021, the Company paid $ 35,637 and $ 20,082 , respectively for living expenses for officers of the Company. 22 Note 9 – Derivative Liabilities The Company has identified derivative instruments arising from convertible notes that have an option to convert at a variable number of shares in the Company’s convertible notes payable during the three months ended March 31, 2022. For the terms of the conversion features see Note 7. The Company had no derivative assets measured at fair value on a recurring basis as of March 31, 2022. The Company utilizes a binomial option model for convertible notes that have an option to convert at a variable number of shares to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The inputs utilized in the application of the Binomial model included a stock price on valuation date, an expected term of each debenture remaining from the valuation date to maturity, an estimated volatility, and a risk-free rate. The Company records the change in the fair value of the derivative as other income or expense in the condensed consolidated statements of operations. Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note adjusted to be on a continuous return basis to align with the Monte Carlo simulation model and binomial model. Dividend yield: The Company uses a 0 % expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future. Volatility: The Company calculates the expected volatility based on the company’s historical stock prices with a look back period commensurate with the period to maturity. Expected term: The Company’s remaining term is based on the remaining contractual maturity of the convertible notes. The following are the changes in the derivative liabilities during the three months ended March 31, 2022. Three Months Ended March 31, 2022 Level 1 Level 2 Level 3 Derivative liabilities as January 1, 2022 $ - $ - $ - Addition - - 100,532 Changes in fair value - - ( 3,729 ) Extinguishment - - ( 96,803 ) Derivative liabilities as March 31, 2022 $ - $ - $ - Note 10 – Stockholders’ Equity Shares Authorized The Company is authorized to issue up to one hundred and twenty million ( 120,000,000 ) shares of capital stock, of which one hundred million ( 100,000,000 ) shares are designated as common stock, par value $ 0.001 per share, and twenty million ( 20,000,000 ) are designated as preferred stock, par value $ 0.001 per share. 23 Preferred Stock Series E Convertible Preferred Stock The Company has designated 8,000 shares of Series E Convertible Preferred stock and has 500 shares issued and outstanding as of March 31, 2022. The shares of Series E Preferred Stock have a stated value of $ 1,000 per share and are convertible into Common Stock at the election of the holder of the Series E Preferred Stock, at any time following the Original Issue Date at a price of $ 4.12 per share, subject to adjustment. Each holder of Series E Preferred Stock shall be entitled to receive, with respect to each share of Series E Preferred Stock then outstanding and held by such holder, dividends on an as-converted basis in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. The holders of Series E Preferred Stock shall be paid pari passu with the holders of Common Stock with respect to payment of dividends and rights upon liquidation and shall have no voting rights. In addition, as further described in the Series E Designation, as long as any of the shares of Series E Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of Series E Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series E Preferred Stock or alter or amend this Series E Designation, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of the Series E Preferred Stock, (c) increase the number of authorized shares of Series E Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing. Each share of Series E Preferred Stock shall be convertible, at any time and from time to time at the option of the holder of such shares, into that number of shares of Common Stock determined by dividing the Series E Stated Value by the Conversion Price, subject to certain beneficial ownership limitations. Common Stock On January 1, 2022, the Company issued 8,590 shares of its restricted common stock to settle outstanding vendor liabilities of $ 20,297 . In connection with this transaction the Company also recorded a gain on settlement of vendor liabilities of $ 369 . On January 6, 2022, the Company issued 8,850 shares of its restricted common stock to consultants in exchange for services at a fair value of $ 19,736 . On February 24, 2022, the Company issued 50,000 shares of its restricted common stock to consultants in exchange for four months of services at a fair value of $ 69,000 . These shares were recorded as common stock issued for prepaid services and will be expensed over the life of the consulting contract to share based payments. During the three months ended March 31, 2022 the Company recorded $ 33,110 to share based payments. On March 1, 2022, the Company entered into securities purchase agreements with twenty-eight accredited investors whereby, at the closing, such investors purchased from the Company an aggregate of 1,401,457 shares of the Company’s common stock and (ii) 1,401,457 warrants to purchase shares of common stock, for an aggregate purchase price of $2,452,550. Such warrants are exercisable for a term of five-years from the date of issuance, at an exercise price of $1.75 per share. The Company has recorded $40,000 to stock issuance costs, which are part of Additional Paid-in Capital. On March 7, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with thirteen accredited investors resulting in the raise of $ 2,659,750 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell in a registered direct offering an aggregate of 1,519,857 shares of the Company’s common stock together with warrants to purchase an aggregate of 1,519,857 shares of Common Stock at an exercise price of $ 1.75 per share. The warrants are immediately exercisable and will expire on March 9, 2027. The Company has recorded $ 75,000 to stock issuance costs, which are part of Additional Paid-in Capital. On March 30, 2022, the Company issued 731 shares of its restricted common stock to consultants in exchange for services at a fair value of $ 863 . 24 Stock Options The following is a summary of the Company’s stock option activity: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Balance – January 1, 2022 – outstanding 2,902,619 7.07 4.71 Granted - - - Exercised - - - Forfeited/Cancelled ( 19,093 ) 15.36 - Balance – March 31, 2022 – outstanding 2,883,526 7.02 4.48 Balance – March 31, 2022 – exercisable 1,891,348 7.60 4.27 Option Outstanding Option Exercisable Exercise price Number Outstanding Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Number Exercisable Weighted Average Remaining Contractual Life (in years) $ 7.02 2,883,526 4.48 7.60 1,891,348 4.27 During the year ended December 31, 2018 the Company granted options of 11,667 to consultants that has a fair value of $ 57,123 . As of the date of this filing the company has not issued these options and they are recorded as an accrued liability on the Condensed Consolidated Balance Sheet. Stock-based compensation for stock options has been recorded in the condensed consolidated statements of operations and totaled $ 1,027,083 , for the three months ended March 31, 2022. As of March 31, 2022, there was $1,649,068 of total unrecognized compensation expense related to unvested employee options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately 0.89 year. Warrants The Company applied fair value accounting for all share-based payments awards. The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model. Warrant Activities The following is a summary of the Company’s warrant activity: Warrant Weighted Average Exercise Price Balance – January 1, 2022 – outstanding 5,658,830 4.98 Granted 2,988,487 2.12 Exercised - - Forfeited/Cancelled ( 13,611 ) 12.00 Balance – December 31, 2021 – outstanding 8,633,706 3.82 Balance – December 31, 2021 – exercisable 8,591,206 $ 3.81 25 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 $ 3.82 8,633,706 4.01 3.81 8,591,206 4.01 During the three months ended March 31, 2022, some of the Company’s warrants had a down-round provision triggered that also resulted in an additional 67,173 warrants to be issued. A deemed dividend of $ 81,728 was recorded to the Statements of Comprehensive Loss. Note 11 – Commitments and Contingencies Litigation On or about June 25, 2020, Home Revolution, LLC (“Home Revolution”) filed a lawsuit in the United States District Court for the District of New Jersey, Home Revolution, LLC, et al. v. Jerrick Media Holdings, Inc. et al., Case No. 2:20-cv-07775-JMV-MF. The Complaint alleges, among other things, that Creatd, Inc. breached the Membership Interest Purchase Agreement, as modified, and ancillary transaction documents in connection with the acquisition of Seller’s Choice, LLC, from Home Revolution in September 2019. The Complaint additionally alleges violation of the New Jersey Uniform Securities Law, violations of the Exchange Act and Rule 10b-5 thereunder, fraud, equitable accounting, breach of fiduciary duty, conversion and unjust enrichment. Plaintiff also sought to have a receiver appointed by the Court to take over Creatd’s operations. After substantial motion practice, Creatd successfully settled this dispute from June 2020 for a total of $ 799,000 , which includes $ 660,000 of note principal and $ 139,000 of accrued interest. The matter has been dismissed as of March 3, 2022. On or about August 30, 2021, Robert W. Monster and Anonymize, Inc. (“Monster”) filed a lawsuit in the United States District Court for the Western District of Washington at Seattle, Robert W. Monster, et al. v. Creatd, Inc., et al. (Western District of Washington at Seattle 2:21-CV-1177). The Complaint alleges, among other things, that action for Declaratory Judgment under 28 U.S.C. § 2201 that Monster’s registration and use of the internet domain name VOCL.COM (the “Domain Name”) does not violate Creatd’s rights under the Anticybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. § 1125(d), or otherwise under the Lanham Act, 15 U.S.C. § 1051 et seq. Creatd claims trademark rights and certain other rights with respect to the term and the domain name VOCL.COM. Monster seeks a determination by the Court that Monster’s registration and/or use of VOCL.COM is not, and has not been in violation of the ACPA, and that Plaintiffs’ use of VOCL.COM constitutes neither a violation of the ACPA nor trademark infringement or dilution under the Lanham Act. Creatd believes the lawsuit lacks merit and will vigorously challenge the action. At this time, we are unable to estimate potential damage exposure, if any, related to the litigation. Appointment of New Directors On February 17, 2022, the Board of Directors (the “Board”) of the Company appointed Joanna Bloor, Brad Justus, and Lorraine Hendrickson to serve as members of the Board. Ms. Bloor has been nominated to, and will serve as, chair of the Compensation Committee, and to be a member of the Audit Committee and Nominating & Corporate Governance Committee. Mr. Justus has been nominated, and will serve as, chair of the Nominating & Corporate Governance Committee, and to be a member of the Compensation Committee and Audit Committee. Ms. Hendrickson has been nominated to, and will serve as, chair of the Audit Committee and to be a member of the Compensation and Nominating & Corporate Governance Committee. Departure of Directors On February 17, 2022, the Board received notice that effective immediately, Mark Standish resigned as Chair of the Board, Chair of the Audit Committee and as a member of the Compensation Committee and Nominating & Corporate Governance Committee; Leonard Schiller resigned as member of the Board, Chair of the Compensation Committee and as a member of the Audit Committee and Nominating & Corporate Governance Committee; and LaBrena Martin resigned as a member of the Board, Chair of the Nominating & Corporate Governance Committee and as a member of the Audit Committee and Compensation Committee. Such resignations are not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. 26 Management Restructuring On February 17, 2022, the Board of the Company approved the restructuring of the Company’s senior management team to eliminate the Co-Chief Executive Officer role, appointing Jeremy Frommer as Executive Chairman and Founder, and appointing Laurie Weisberg as Chief Executive Officer (the “Second Restructuring”). Prior to the Second Restructuring, Mr. Frommer and Ms. Weisberg served as the Company’s co-Chief Executive Officers and Ms. Weisberg served as the Company’s Chief Operating Officer. The Second Restructuring does not impact the role or functions of the Company’s Chief Financial Officer, Chelsea Pullano, or the role or functions of the Company’s President and Chief Operating Officer, Justin Maury. Nasdaq Notice of Delisting On January 4, 2021, the Company received a letter from the staff of The Nasdaq Capital Market (the “Exchange”) notifying the Company that the Exchange had determined to delist the Company’s common stock and warrants from the Exchange based on the Company’s non-compliance with the Exchange’s (i) $5 million stockholders’ equity requirement for initial listing pursuant to Nasdaq Listing Rule 5505(b), (ii) the $2.5 million stockholders’ equity requirement or any of the alternatives for continued listing pursuant to Nasdaq Listing Rule 5550(b), and (iii) the Company’s failure to provide material information to the Exchange pursuant to Nasdaq Listing Rule 5250(a)(1). On February 11, 2021, the Company met with the Exchange’s Hearings Panel (the “Panel”) with respect to such determination, in accordance with the Exchange’s rules and, pursuant to such request by the Company to appeal, the delisting of the Company’s securities and the Form 25 Notification of Delisting filing was stayed pending the Panel’s decision. On March 9, 2021, the Exchange notified the Company that the Panel had determined to continue the listing of the Company on the Exchange. Notwithstanding the Panel’s determination to continue the listing of the Company’s securities on the Exchange, the Panel issued a public reprimand letter to the Company, pursuant to Listing Rule 5815(c)(1)(D), based on its finding “that the Company failed to meet the initial listing criteria with respect to stockholders’ equity and failed to provide Nasdaq with material information with respect to that deficiency.” Specifically, the Panel found that the Company failed to comply with Listing Rule 5250(a)(1), requiring it to notify Nasdaq of certain significant developments that led to the Company’s prior representations about its ability to satisfy the initial listing requirements being inaccurate. In reaching its determination to continue the listing of the Company on Nasdaq, the Panel acknowledged that the Company has since demonstrated compliance with the initial listing requirement for stockholders’ equity and all other applicable initial listing requirements. The Panel also determined that the violations were inadvertent and that the Company had relied on advice of counsel at the time in its interactions with the Nasdaq staff (“Staff”). The Panel also acknowledged the Company’s efforts to implement structural changes within the Company to avoid similar misstatements in the future and that would allow for proper accounting and disclosure on an ongoing basis. On March 1, 2022, the Company received a letter (the “Letter”) from the staff of The Nasdaq Capital Market (the “Exchange”) notifying the Company that the Exchange has determined to delist the Company’s common stock from the Exchange based on the Company’s Market Value of Listed Securities for the 30-consecutive day period between January 15, 2022 and February 25, 2022 falling short of the requirements under Listing Rule 5550(b)(2) (the “Rule”). Although a 180-day period is typically allowed for an issuer to regain compliance, the Company is not eligible to use such compliance period, as the Exchange had instituted a Panel Monitor through March 9, 2022. The Company pursued an appeal to the Nasdaq Hearings Panel (the “Panel”) of such determination, in accordance with the Exchange’s rules and, pursuant to such request by the Company to appeal, the delisting of the Company’s securities and the Form 25 Notification of Delisting filing was stayed pending the Panel’s decision. On April 22, 2022, the Exchange notified the Company that the Panel has determined to continue the listing of the Company on the Exchange, subject to the following conditions: (i) on or before May 16, 2022, the Company will file its Quarterly Report on Form 10-Q for the period ended March 31, 2022 demonstrating compliance with Nasdaq Listing Rule 550(b)(1) requiring shareholders’ equity of $2.5 million and (ii) on or before August 29, 2022, the Company will file a Form 8-K documenting the successful completion of any fund-raising activity that has taken place since April 14, 2022 and the Company’s long-term compliance with the continued listing requirements of the Nasdaq Capital Market. The Panel has advised that August 29, 2022 represents the full extent of the Panel’s discretion to grant continued listing during the time the Company is non-compliant and should the Company fail to demonstrate compliance by such date, the Panel will issue a final delist determination and the Company will be suspended from trading on the Exchange. 27 Note 12 – Acquisitions Denver Bodega, LLC d/b/a Basis On March 7, 2022, the Company entered into a Membership Interest Purchase (the “Agreement”) with Henry Springer and Kyle Nowak (collectively the “Sellers”), whereby the Company purchased a majority stake in Denver Bodega, LLC, a Colorado limited liability company whose product is Basis, a direct-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Pursuant to the Agreement, Creatd acquired all of the issued and outstanding membership interests of Denver Bodega, LLC for consideration of one dollar ($ 1.00 ), as well as the Company’s payoff, assumption, or satisfaction of certain debts and liabilities. The following sets forth the components of the purchase price: Purchase price: Cash paid to seller $ 1 Total purchase price 1 Assets acquired: Cash 44,977 Accounts Receivable 2,676 Inventory 194,365 Total assets acquired 242,018 Liabilities assumed: Accounts payable and accrued expenses 127,116 Notes payable 293,888 Total liabilities assumed 421,004 Net liabilities acquired ( 178,986 ) Excess purchase price $ 178,987 The excess purchase price amounts are provisional and may be adjusted during the one-year measurement period as required by U.S. GAAP. The following table provides a summary of the preliminary allocation of the excess purchase price. Goodwill $ 8,950 Trade Names & Trademarks 8,949 Know-How and Intellectual Property 107,392 Website 8,949 Customer Relationships 44,747 Excess purchase price $ 178,987 The goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisition. 28 The following presents the unaudited pro-forma combined results of operations of the Company with Plant Camp, WHE, Dune, and Denver Bodega as if the entities were combined on January 1, 2021. Three Months Ended March 31, 2022 Revenues $ 1,482,270 Net loss attributable to common shareholders $ ( 6,352,445 ) Net loss per share $ ( 0.36 ) Weighted average number of shares outstanding 17,707,951 Three Months Ended March 31, 2021 Revenues $ 1,143,732 Net loss attributable to common shareholders $ ( 6,592,675 ) Net loss per share $ ( 0.66 ) Weighted average number of shares outstanding 10,060,946 Note 13 – Segment Information We operate in three reportable segments: Creatd Labs, Creatd Ventures, and Creatd Partners. Our segments were determined based on the economic characteristics of our products and services, our internal organizational structure, the manner in which our operations are managed and the criteria used by our Chief Operating Decision Maker (CODM) to evaluate performance, which is generally the segment’s operating losses. Operations of: Products and services provided: Creatd Labs Creatd Labs is the segment focused on development initiatives. Creatd Labs houses the Company’s proprietary technology, including its flagship platform, Vocal, as well as oversees the Company’s content creation framework, and management of its digital communities. Creatd Labs derives revenues from Vocal creator subscriptions, platform processing fees and technology licensing fees. Creatd Ventures Creatd Ventures builds, develops, and scales e-commerce brands. This segment generates revenues through product sales of its two majority-owned direct-to-consumer brands, Camp and Dune Glow Remedy. Creatd Partners Creatd Partners fosters relationships between brands and creators through its suite of agency services, including content marketing (Vocal for Brands), performance marketing (Seller’s Choice), and influencer marketing (WHE Agency). Creatd Partners derives revenues in the form of brand fees and talent management commissions. The following tables present certain financial information related to our reportable segments and Corporate: As of March 31, 2022 Creatd Labs Creatd Ventures Creatd Partners Corporate Total Accounts receivable, net $ - $ 7,649 $ 382,956 $ - $ 390,605 Prepaid expenses and other current assets 45,815 - - 229,025 274,840 Deposits and other assets 839,114 - - 75,586 914,700 Intangible assets - 1,733,673 724,459 62,241 2,520,373 Goodwill - 34,089 1,349,696 - 1,383,785 Inventory - 436,981 - - 436,981 All other assets - - - 3,419,106 3,419,106 Total Assets $ 884,929 $ 2,212,392 $ 2,457,111 $ 3,785,958 $ 9,340,390 Accounts payable and accrued liabilities $ 22,784 $ 1,129,605 $ 19,985 $ 3,659,729 $ 4,832,103 Note payable, net of debt discount and issuance costs 487,217 65,724 - 634,051 1,186,992 Deferred revenue 161,112 43,545 7,019 - 211,676 All other Liabilities - - - - Total Liabilities $ 671,113 $ 1,238,874 $ 27,004 $ 4,293,780 $ 6,230,771 29 As of December 31, 2021 Creatd Labs Creatd Ventures Creatd Partners Corporate Total Accounts receivable, net $ - $ 2,884 $ 334,556 $ - $ 337,440 Prepaid expenses and other current assets 48,495 - - 188,170 236,665 Deposits and other assets 626,529 - - 92,422 718,951 Intangible assets - 1,637,924 783,676 11,241 2,432,841 Goodwill - 25,139 1,349,696 - 1,374,835 Inventory - 106,403 - - 106,403 All other assets - - - 3,966,124 3,966,124 Total Assets $ 675,024 $ 1,772,350 $ 2,467,928 $ 4,257,957 $ 9,173,259 Accounts payable and accrued liabilities $ 9,693 $ 766,253 $ 6,232 $ 2,948,362 $ 3,730,540 Note payable, net of debt discount and issuance costs 313,979 - - 1,028,685 1,342,664 Deferred revenue 161,112 13,477 59,570 - 234,159 All other Liabilities - - - 177,644 177,644 Total Liabilities $ 484,784 $ 779,730 $ 65,802 $ 4,154,691 $ 5,485,007 For the three months ended March 31, 2022 Creatd Labs Creatd Ventures Creatd Partners Corporate Total Net revenue $ 508,268 $ 254,690 $ 585,780 $ - $ 1,348,738 Cost of revenue 706,196 409,969 456,005 - 1,572,170 Gross margin (loss) ( 197,928 ) ( 155,279 ) 129,775 - ( 223,432 ) Research and development 134,876 - 91,778 - 226,654 Marketing 970,484 1,013,706 - 107,831 2,092,021 Stock based compensation 251,907 226,298 248,548 354,039 1,080,792 General and administrative not including depreciation, amortization, or Impairment 218,766 288,272 378,492 2,358,963 3,244,493 Depreciation and amortization - 71,271 31,599 39,022 141,892 Total operating expenses $ 1,576,033 $ 1,599,547 $ 750,417 $ 2,859,855 $ 6,785,852 Interest expense ( 13,229 ) - - ( 667 ) ( 13,896 ) All other expenses - - - 142,132 142,132 Other expenses, net ( 13,229 ) 141,465 128,236 Loss before income tax provision $ ( 1,787,190 ) $ ( 1,754,826 ) $ ( 728,474 ) $ ( 2,610,558 ) $ ( 6,881,048 ) 30 For the three months ended March 31, 2021 Creatd Labs Creatd Partners Corporate Total Net revenue $ 167,983 $ 575,930 $ - $ 743,913 Cost of revenue 242,134 625,016 - 867,150 Gross margin ( 74,151 ) ( 49,086 ) - ( 123,237 ) Research and development 195,691 133,161 - 328,852 Marketing 1,736,257 204,266 102,132 2,042,655 Stock based compensation 365,985 361,105 843,149 1,570,239 General and administrative not including depreciation, amortization, or Impairment 124,053 214,627 1,501,135 1,932,552 Depreciation and amortization 2,753 9,175 29,271 41,199 Total operating expenses $ 2,424,740 $ 922,333 $ 2,475,687 $ 5,822,760 Interest expense ( 24,596 ) - ( 174,075 ) ( 198,671 ) All other expenses - - ( 498,569 ) ( 498,569 ) Other expenses, net ( 24,596 ) - ( 672,644 ) ( 697,240 ) Loss before income tax provision $ ( 2,523,487 ) $ ( 971,419 ) $ ( 3,148,331 ) $ ( 6,643,237 ) Note 14 – Subsequent Events Employment Agreements On April 5, 2022, upon the recommendation of the Compensation Committee of the Board, the Board approved employment agreements with, and equity issuances for, (i) Jeremy Frommer, Executive Chairman, who will receive (a) an signing award of $80,000, (b) an annual salary of $420,000; (c) 121,000 options, to vest immediately with a strike price of $1.75, and (d) 50,000 shares of the Company’s restricted common stock; (ii) Laurie Weisberg, Chief Executive Officer, who will receive (a) an annual salary of $475,000; (b) 121,000 options, to vest immediately with a strike price of $1.75, and (c) 50,000 shares of the Company’s restricted common stock; (iii) Justin Maury, Chief Operating Officer & President, who will receive (a) an annual salary of $475,000 (b) 81,000 options, to vest immediately with a strike price of $1.75, and (c) 50,000 shares of the Company’s restricted common stock; and (iv) Chelsea Pullano, Chief Financial Officer, who will receive (a) an annual salary of $250,000; (b) 37,000 options, to vest immediately with a strike price of $1.75, and (c) 35,000 shares of the Company’s restricted common stock (collectively, the “Executive Employment Arrangements”). Pursuant to the Executive Employment Arrangements, the Company entered into executive employment agreements with each of the respective executives as of April 5, 2022 (the “Executive Employment Agreements”). The Executive Employment Agreements contain customary terms, conditions and rights. 31