Creatd, Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File No. 001-39500 Creatd, Inc. (Exact name of registrant as specified in its charter) Nevada 87-0645394 (State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.) 419 Lafayette Street , 6 th Floor New York , NY 10003 (Address of principal executive offices) (201) 258-3770 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered N/A N/A N/A Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of a “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ As of November 14, 2022, the registrant had 29,072,301 shares of its common stock, par value $0.001 per share, outstanding. FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2022 TABLE OF CONTENTS Page Special Note Regarding Forward-Looking Statements and Other Information Contained in this Report ii PART I - FINANCIAL INFORMATION 1 Item 1. Financial Statements Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 48 Item 3. Quantitative and Qualitative Disclosures About Market Risk 59 Item 4. Controls and Procedures 59 PART II - OTHER INFORMATION 60 Item 1. Legal Proceedings 60 Item 1A. Risk Factors 60 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 60 Item 3. Defaults Upon Senior Securities 61 Item 4. Mine Safety Disclosures 61 Item 5. Other Information 61 Item 6. Exhibits 62 i SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION CONTAINED IN THIS REPORT This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may” or other similar expressions in this Form 10-Q. In particular, these include statements relating to future actions; prospective products, applications, customers and technologies; future performance or results of anticipated products; anticipated expenses; and projected financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: ● our ability to continue as a going concern; ● our operating expenses exceed our revenues and will likely continue to do so for the foreseeable future; ● our ability to obtain additional capital, which may be difficult to raise as a result of our limited operating history or any number of other reasons; ● our ability to provide digital content that is useful to users; ● our ability to retain existing users or add new users; ● competition from traditional media companies; ● general economic conditions and events and the impact they may have on us and our users; and ● other factors discussed in this Form 10-Q. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into. You should read this Form 10-Q and the documents that we have filed as exhibits to this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Unless otherwise stated or the context otherwise requires, the terms “Creatd,” “we,” “us,” “our” and the “Company” refer collectively to Creatd, Inc. and its subsidiaries. ii PART I - FINANCIAL INFORMATION Creatd, Inc. Condensed Consolidated Balance Sheets September 30, 2022 December 31, 2021 (Unaudited) Assets Current Assets Cash $ 439,539 $ 3,794,734 Accounts receivable, net 222,183 337,440 Inventory 879,050 106,403 Marketable securities 96 - Prepaid expenses and other current assets 139,726 236,665 Total Current Assets 1,680,594 4,475,242 Property and equipment, net 248,963 102,939 Intangible assets 2,536,599 2,432,841 Goodwill 1,365,328 1,374,835 Deposits and other assets 769,136 718,951 Minority investment in businesses - 50,000 Operating lease right of use asset 2,123,171 18,451 Total Assets $ 8,723,791 $ 9,173,259 Liabilities and Stockholders’ Deficit Current Liabilities Accounts payable and accrued liabilities $ 6,714,606 $ 3,730,540 Share liability 52,080 - Convertible Notes, net of debt discount and issuance costs 6,062,926 159,193 Current portion of operating lease payable 279,593 18,451 Note payable, net of debt discount and issuance costs 1,758,179 1,278,672 Deferred revenue 305,555 234,159 Total Current Liabilities 15,172,939 5,421,015 Non-current Liabilities: Note payable 28,920 63,992 Operating lease payable 2,135,393 - Total Non-current Liabilities 2,164,313 63,992 Total Liabilities 17,337,252 5,485,007 Commitments and contingencies Stockholders’ Equity (Deficit) Preferred stock, $ 0.001 par value, 20,000,000 shares authorized Series E Preferred stock, $ 0.001 par value, 8,000 shares authorized 500 and 500 shares issued and outstanding, respectively - - Common stock par value $ 0.001 : 100,000,000 shares authorized; 24,469,675 issued and 24,380,218 outstanding as of September 30, 2022 and 16,691,170 Outstanding 16,685,513 outstanding as of December 31, 2021 24,470 16,691 Additional paid in capital 124,667,772 111,563,618 Less: Treasury stock at cost, 89,457 and 5,657 shares, respectively ( 76,106 ) ( 62,406 ) Accumulated deficit ( 133,762,800 ) ( 109,632,574 ) Accumulated other comprehensive income ( 143,991 ) ( 78,272 ) Total Creatd, Inc. Stockholders’ Equity ( 9,290,655 ) 1,807,057 Non-controlling interest in consolidated subsidiaries 677,194 1,881,195 ( 8,613,461 ) 3,688,252 Total Liabilities and Stockholders’ Equity (Deficit) $ 8,723,791 $ 9,173,259 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 Creatd, Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) For the Three Months Ended For the Three Months Ended For the Nine Months Ended For the Nine Months Ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Net revenue $ 1,022,851 $ 1,179,620 $ 3,997,490 $ 2,894,390 Cost of revenue 1,404,562 1,418,213 4,771,151 4,160,743 Gross margin (loss) ( 381,711 ) ( 238,593 ) ( 773,661 ) ( 1,266,353 ) Operating expenses Research and development 234,965 322,946 686,131 708,396 Marketing 646,520 1,812,400 4,016,051 8,049,579 Stock based compensation 626,568 2,151,900 3,848,578 5,662,389 Impairment of intangible assets 249,586 - 257,117 93,791 General and administrative 3,837,469 2,385,135 11,397,989 5,457,258 Total operating expenses 5,595,108 6,672,381 20,205,866 19,971,413 Loss from operations ( 5,976,819 ) ( 6,910,974 ) ( 20,979,527 ) ( 21,237,766 ) Other income (expenses) Other income - 123,710 99 123,710 Interest expense ( 673,694 ) ( 59,859 ) ( 707,950 ) ( 319,290 ) Accretion of debt discount and issuance cost ( 1,884,679 ) ( 2,176,651 ) ( 2,531,687 ) ( 3,028,015 ) Derivative expense - - - ( 100,502 ) Change in derivative liability - ( 833,456 ) 3,729 ( 1,096,287 ) Impairment of investment - - ( 50,000 ) ( 62,733 ) Settlement of vendor liabilities - - ( 2,867 ) 92,909 Loss on marketable securities ( 11,415 ) - ( 11,646 ) - Gain (loss) on extinguishment of debt ( 979,738 ) 137,109 ( 832,482 ) 423,118 Gain on forgiveness of debt - - - 279,022 Other expenses, net ( 3,549,526 ) ( 2,809,147 ) ( 4,132,804 ) ( 3,688,068 ) Loss before income tax provision ( 9,526,345 ) ( 9,720,121 ) ( 25,112,331 ) ( 24,925,834 ) Equity in net loss from equity method investment - ( 16,413 ) - ( 16,413 ) Income tax provision - - - - Net loss ( 9,526,345 ) ( 9,736,534 ) ( 25,112,331 ) ( 24,942,247 ) Non-controlling interest in net loss 299,903 ( 60,477 ) 1,285,661 ( 60,045 ) Net Loss attributable to Creatd, Inc. ( 9,226,442 ) ( 9,797,011 ) ( 23,826,670 ) ( 25,002,292 ) Deemed dividend ( 221,829 ) - ( 303,557 ) ( 410,750 ) Net loss attributable to common shareholders $ ( 9,448,271 ) $ ( 9,797,011 ) $ ( 24,130,227 ) $ ( 25,413,042 ) Comprehensive loss Net loss ( 9,526,345 ) ( 9,736,534 ) ( 25,112,331 ) ( 24,942,247 ) Currency translation gain (loss) ( 36,110 ) ( 8,436 ) ( 65,719 ) ( 16,299 ) Comprehensive loss $ ( 9,562,455 ) $ ( 9,744,970 ) $ ( 25,178,050 ) $ ( 24,958,546 ) Per-share data Basic and diluted loss per share $ ( 0.45 ) $ ( 0.71 ) $ ( 1.23 ) $ ( 2.20 ) Weighted average number of common shares outstanding 21,030,188 13,710,111 19,669,411 11,563,150 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 Creatd, Inc. Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) For the Three Months Ended September 30, 2022 (Unaudited) Series E Preferred Stock Common Stock Treasury stock Additional Paid In Accumulated Non-Controlling Other Comprehensive Stockholders’ Equity Shares Amount Shares Amount Shares Amount Capital Deficit Interest Income (Deficit) Balance, July 1, 2022 500 $ - 20,254,839 $ 20,255 ( 5,657 ) $ ( 62,406 ) $ 122,068,892 $ ( 124,314,529 ) $ 895,437 $ ( 107,881 ) $ ( 1,500,232 ) Stock based compensation - - 107,260 107 - - 568,107 - - - 568,214 Shares issued for prepaid services - - 50,000 50 - - 34,900 - - - 34,950 Shares issued for acquisition - - 57,576 58 - - 40,937 - 81,660 - 122,655 Purchase of treasury stock - - - - ( 83,800 ) ( 13,700 ) - - - - ( 13,700 ) Cash received for common stock and warrants, net of $ 75,000 of issuance costs - - 4,000,000 4,000 - - 721,000 - - - 725,000 Stock warrants issued with note payable - - - - - - 1,012,107 - - - 1,012,107 Foreign currency translation adjustments - - - - - - - - - ( 36,110 ) ( 36,110 ) Dividends - - - - - - 221,829 ( 221,829 ) - - - Net loss for the three months ended September 30, 2022 - - - - - - - ( 9,226,442 ) ( 299,903 ) - ( 9,526,345 ) Balance, September 30, 2022 500 $ - 24,469,675 $ 24,470 ( 89,457 ) $ ( 76,106 ) $ 124,667,772 $ ( 133,762,800 ) $ 677,194 $ ( 143,991 ) $ ( 8,613,461 ) The accompanying notes are an integral part of these consolidated financial statements. 3 Creatd, Inc. Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) For the Nine Months Ended September 30, 2022 (Unaudited) Series E Preferred Stock Common Stock Treasury stock Additional Paid In Accumulated Non-Controlling Other Comprehensive Stockholders’ Equity Shares Amount Shares Amount Shares Amount Capital Deficit Interest Income (Deficit) Balance, January 1, 2022 500 $ - 16,691,170 $ 16,691 ( 5,657 ) $ ( 62,406 ) $ 111,563,618 $ ( 109,632,574 ) $ 1,881,195 $ ( 78,272 ) $ 3,688,252 Stock based compensation - - 415,180 415 - - 3,822,564 - - - 3,822,979 Shares issued for prepaid services - - 150,000 150 - - 141,000 - - - 141,150 Shares issued for acquisition - - 57,576 58 - - 40,937 - 81,660 - 122,655 Purchase of treasury stock - - - - ( 83,800 ) ( 13,700 ) - - - - ( 13,700 ) Stock warrants issued with note payable - - - - - - 2,907,497 - - - 2,907,497 Cash received for common stock and warrants, net of $ 190,000 of issuance costs - - 7,046,314 7,046 - - 5,715,254 - - - 5,722,300 Common stock issued upon conversion of notes payable - - 109,435 110 - - 173,346 - - - 173,456 Foreign currency translation adjustments - - - - - - - - - ( 65,719 ) ( 65,719 ) Dividends - - - - - - 303,556 ( 303,556 ) - - - Net loss for the nine months ended September 30, 2022 - - - - - - - ( 23,826,670 ) ( 1,285,661 ) - ( 25,112,331 ) Balance, September 30, 2022 500 $ - 24,469,675 $ 24,470 ( 89,457 ) $ ( 76,106 ) $ 124,667,772 $ ( 133,762,800 ) $ 677,194 $ ( 143,991 ) $ ( 8,613,461 ) 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 September 30, 2021 (Unaudited) Series E Preferred Stock Common Stock Treasury stock Additional Paid In Accumulated Non-Controlling Other Comprehensive Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Interest Income Equity Balance, July 1, 2021 1,048 $ 1 11,857,675 $ 11,858 ( 5,657 ) $ ( 62,406 ) $ 87,131,333 $ ( 87,544,953 ) $ 56,433 $ ( 45,097 ) $ ( 452,831 ) Stock based compensation - - 22,934 23 - - 2,094,787 - - - 2,094,810 Conversion of warrants to stock - - 954,568 955 - - 4,198,442 - - - 4,199,397 Shares issued for acquisition - - 224,503 224 - - 893,297 - - - 893,521 Cash received for common stock - - 87,500 87 - - 248,613 - - - 248,700 Common stock issued upon conversion of notes payable - - 779,706 779 - - 3,697,725 - - - 3,698,504 Conversion of preferred series E to stock ( 438 ) - 106,311 106 - - ( 106 ) - - - - Foreign currency translation adjustments - - - - - - - - - ( 8,436 ) ( 8,436 ) Non-controlling interest in consolidated subsidiary from acquisition - - - - - - - - 1,190,000 - 1,190,000 Net loss for the three months ended September 30, 2021 - - - - - - - ( 9,797,011 ) 60,477 - ( 9,736,534 ) Balance, September 30, 2021 610 $ 1 14,033,197 $ 14,032 ( 5,657 ) $ ( 62,406 ) $ 98,264,091 $ ( 97,341,964 ) $ 1,306,910 $ ( 53,533 ) $ 2,127,131 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Creatd, Inc. Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) For the Nine Months Ended September 30, 2021 (Unaudited) Series E Preferred Stock Common Stock Treasury stock Additional Paid In Subscription Accumulated Non- Controlling Other Comprehensive Stockholders’ Shares Amount Shares Amount Shares Amount Capital Receivable Deficit Interest Income Equity Balance, January 1, 2021 7,738 $ 8 8,736,378 $ 8,737 ( 5,657 ) $ ( 62,406 ) $ 77,505,013 $ ( 40,000 ) $ ( 71,928,922 ) $ - $ ( 37,234 ) $ 5,445,196 Stock based compensation - - 224,245 224 - - 5,505,165 - - - - 5,505,389 Shares issued for prepaid services - - 50,000 50 - - 226,450 - - - - 226,500 Shares issued to settle vendor liabilities - - 44,895 44 - - 181,341 - - - - 181,385 Common stock issued upon conversion of notes payable - - 900,665 901 - - 4,014,424 - - - - 4,015,325 Exercise of warrants to stock - - 1,275,261 1,275 - - 5,470,793 - - - - 5,472,068 Cash received for common - - 837,500 837 - - 2,461,363 - - - - 2,462,200 Cash received for preferred series E and warrants 40 - - - - - ( 4,225 ) 40,000 - - - 35,775 Conversion of preferred series E to stock ( 7,168 ) ( 7 ) 1,739,750 1,739 - - ( 1,732 ) - - - - - Stock warrants issued with note payable - - - - - - 1,601,452 - - - - 1,601,452 Shares issued for acquisition - - 224,503 225 - - 893,297 - - - - 893,522 Foreign currency translation adjustments - - - - - - - - - - ( 16,299 ) ( 16,299 ) Non-controlling interest in consolidated subsidiary from acquisition - - - - - - - - - 1,246,865 - 1,246,865 Dividends - - - - - - 410,750 - ( 410,750 ) - - - Net loss for the nine months ended September 30, 2021 - - - - - - - - ( 25,002,292 ) 60,045 - ( 24,942,247 ) Balance, September 30, 2021 610 $ 1 14,033,197 $ 14,032 ( 5,657 ) $ ( 62,406 ) $ 98,264,091 $ - $ ( 97,341,964 ) $ 1,306,910 $ ( 53,533 ) $ 2,127,131 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Creatd, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended For the Nine Months Ended September 30, 2022 September 30, 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 25,112,331 ) $ ( 24,942,247 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 441,943 194,929 Impairment of investment 50,000 62,733 Impairment of intangible assets 257,117 93,791 Accretion of debt discount and issuance cost 2,531,687 3,028,015 Share-based compensation 3,848,578 5,662,389 Bad debt expense 124,186 - Loss (Gain) on Forgiveness of debt 832,482 ( 702,140 ) Settlement of vendor liabilities 2,867 ( 92,909 ) Change in fair value of derivative liability ( 3,729 ) 1,096,287 Derivative Expense - 100,502 Loss on marketable securities 11,646 - Non cash lease expense 44,305 60,756 Equity interest granted for other income - ( 123,710 ) Equity in net loss from unconsolidated investment - 16,413 Changes in operating assets and liabilities: Prepaid expenses 114,925 ( 471,899 ) Inventory ( 492,128 ) ( 68,091 ) Accounts receivable ( 481,080 ) 150,980 Deposits and other assets ( 50,185 ) 107,115 Deferred revenue 71,396 111,192 Accounts payable and accrued expenses 3,805,245 160,434 Operating lease liability 145,887 ( 61,605 ) Net Cash Used In Operating Activities ( 13,857,189 ) ( 15,617,065 ) CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for property and equipment ( 213,975 ) ( 65,971 ) Deposits - ( 325,000 ) Cash paid for minority investment in business - ( 510,000 ) Cash paid for investments in marketable securities ( 48,878 ) - Sale of marketable securities 37,135 - Cash consideration for acquisition ( 75,679 ) ( 412,943 ) Purchases of digital assets ( 192,795 ) ( 11,241 ) Net Cash Used In Investing Activities ( 494,192 ) ( 1,325,155 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the exercise of warrant - 5,472,068 Net proceeds from issuance of notes 2,174,402 321,229 Repayment of notes ( 2,292,953 ) ( 403,843 ) Proceeds from issuance of convertible note 5,809,755 3,610,491 Repayment of convertible notes ( 337,899 ) ( 941,880 ) Purchase of treasury stock ( 13,700 ) - Proceeds from issuance of common stock and warrants 5,722,300 2,502,200 Net Cash Provided By Financing Activities 11,061,905 10,560,265 Effect of exchange rate changes on cash ( 65,719 ) ( 16,299 ) Net Change in Cash ( 3,355,195 ) ( 6,398,254 ) Cash - Beginning of period 3,794,734 7,906,782 Cash - End of period $ 439,539 $ 1,508,528 SUPPLEMENTARY CASH FLOW INFORMATION: Cash Paid During the Year for: Income taxes $ - $ - Interest $ 139,000 $ 58,395 SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Settlement of vendor liabilities $ 147,649 $ 168,667 Warrants issued with debt $ 2,907,497 $ 1,601,452 Issuance of common stock for prepaid services $ 141,150 $ 226,500 Operating Lease liability $ 2,250,648 $ - Deferred offering costs $ - $ 4,225 Common stock and warrants issued upon conversion of notes payable $ 173,455 $ 4,015,325 Shares issued for acquisition $ 40,994 $ 893,520 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Creatd, Inc. September 30, 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”), a digital e-commerce agency. 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. 8 On June 4, 2021, the Company acquired 89 % of the membership interests of Plant Camp, LLC, a Delaware limited liability company (“Plant Camp”), which the Company subsequently rebranded as Camp. Camp is a direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. The results of Plant Camp’s operations have been included since the date of acquisition in the Statements of Operations. On July 20, 2021, the Company acquired 44 % of the membership interests of WHE Agency, Inc. WHE Agency, Inc, is a talent management and public relations agency based in New York (“WHE”). WHE has been consolidated due to the Company’s ownership of 55 % voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations. Between October 21, 2020, and August 16, 2021, the Company acquired 21 % of the membership interests of Dune, Inc. Dune, Inc. is a direct-to-consumer brand focused on promoting wellness through its range of health-oriented beverages. On October 3, 2021, the Company acquired an additional 29 % of the membership interests of Dune, Inc., bringing our total membership interests to 50 %. Dune, Inc., has been consolidated due to the Company’s ownership of 50 % voting control, and the results of operations have been included since the date of acquisition in the Statements of Operations. On March 7, 2022, the Company acquired 100 % of the membership interests of Denver Bodega, LLC, d/b/a Basis, a Colorado limited liability company (“Basis”). Basis is a direct-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Denver Bodega, LLC has been consolidated due to the Company’s ownership of 100 % voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations. On August 1, 2022, the Company acquired 51 % of the membership interests of Orbit Media LLC, a New York limited liability company. Orbit is a app-based stock trading platform designed to empower a new generation of investors. Orbit has been consolidated due to the Company’s ownership of 51 % voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations. On September 13, 2022, the Company acquired 100 % of the membership interests of Brave Foods, LLC, a Maine limited liability company. Brave is a plant-based food company that provides convenient and healthy breakfast food products. Brave Foods, LLC has been consolidated due to the Company’s ownership of 100 % voting control, and the results of operations have been included since the date of acquisition in the Statement of Operations. Note 2 – Significant Accounting Policies and Practices Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by the accounting principles generally accepted in the United States of America. 9 Basis of Presentation 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. 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 . 10 Principles of consolidation The Company consolidates all majority-owned subsidiaries, if any, in which the parent’s power to control exists. As of September 30, 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 % Brave Foods, LLC Brave Foods, LLC 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, Inc. Delaware 100 % OG Gallery, LLC Delaware 100 % Orbit Media LLC New York 51 % 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, Orbit Media LLC activity since August 1, 2022, and Brave Foods, LLC activity since September 13, 2022. Variable Interest Entities Management performs an ongoing assessment of its noncontrolling interests from investments in unrelated entities to determine if those entities are variable interest entities (VIEs), and if so, whether the Company is the primary beneficiary. If an entity in such a transaction, by design, meets the definition of a VIE and the Company determines that it, or a condensed consolidated subsidiary is the primary beneficiary, the Company will include the VIE in its condensed consolidated financial statements. If such an entity is deemed to not be condensed consolidated, the Company records only its investment in equity securities as a marketable security or investment under the equity method, as applicable Fair Value of Financial Instruments The 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) 11 The Company’s Level 1 assets/liabilities include cash, accounts receivable, marketable trading securities, accounts payable, marketable trading securities, prepaid and other current assets, line of credit and due to related parties. Management believes the estimated fair value of these accounts at September 30, 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 a recurring basis: Fair Value Measurements as of September 30, 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: Marketable securities - equity securities $ 96 $ 96 $ - $ - Total assets $ 96 $ 96 $ - $ - Our marketable equity securities are publicly traded stocks measured at fair value using quoted prices for identical assets in active markets and classified as Level 1 within the fair value hierarchy. Marketable equity securities as of September 30, 2022 are $ 96 . The change in net realized depreciation on equity trading securities that has been included in other expenses for the nine months ended September 30, 2022 and 2021 was $ 11,646 and $ 0 , respectively. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) or Financial Claims Scheme (“FCS”) insurable limits. The Company has never experienced any losses related to these balances. The uninsured cash balance as of September 30, 2022, was $ 0 . The Company does not believe it is exposed to significant credit risk on cash and cash equivalents. 12 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 $ 622,445 . It is reasonably possible that operations located outside an entity’s home country will be disrupted in the near term. Property and Equipment Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows: 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, acquired finite-lived intangible assets and, purchased infinite life digital assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. Digital assets accounted for as intangible assets are subject to impairment losses if the fair value of digital assets decreases other than temporary below the carrying value. The fair value is measured using the quoted price of the crypto asset at the time its fair value is being measured. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. During the three months ended September 30, 2022, the Company recorded an impairment charge of $ 249,586 for intangible assets. During the nine months ended September 30, 2022, the Company recorded an impairment charge of $ 257,117 for intangible assets. Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. We routinely review the remaining estimated useful lives of property and equipment and finite-lived intangible assets. If we change the estimated useful life assumption for any asset, the remaining unamortized balance is amortized or depreciated over the revised estimated useful life. The remaining weighted average life of the intangible assets are 7.1 years. 13 Scheduled amortization over the next five years are as follows: Twelve months ending September 30, 2023 $ 415,215 2024 443,236 2025 280,223 2026 260,935 2027 239,934 Thereafter 739,762 Total 2,379,305 Intangible assets not subject to amortization 157,294 Total Intangible Assets $ 2,536,599 Amortization expense was $ 94,130 and $ 75,069 for the three months ended September 30, 2022 and 2021, respectively. Amortization expense was $ 355,509 and $ 143,776 for the nine months ended September 30, 2022 and 2021, respectively. Goodwill is not amortized but is subject to periodic testing for impairment in accordance with ASC Topic 350 “Intangibles – Goodwill and Other – Testing Indefinite-Lived Intangible Assets for Impairment” (“ASC Topic 350”). The Company tests goodwill for impairment on an annual basis as of the last day of the Company’s fiscal December each year or more frequently if events occur or circumstances change indicating that the fair value of the goodwill may be below its carrying amount. The Company has four reporting units. The Company uses an income-based approach to determine the fair value of the reporting units. This approach uses a discounted cash flow methodology and the ability of our reporting units to generate cash flows as measures of fair value of our reporting units. During the year ended December 31, 2021, the Company completed its annual impairment test of goodwill. The Company performed the qualitative assessment as permitted by ASC 350-20 and determined for three of its reporting units that the fair value of those reporting units was more likely than not greater than their carrying value, including Goodwill. However, based on this qualitative assessment, the Company determined that the carrying value of the Seller’s Choice reporting unit was more likely than not greater than its carrying value, including Goodwill. Based on completion of the annual impairment test, the Company recorded an impairment charge of $ 1,035,795 for goodwill. During the three months ended September 30, 2022, management observed impairment indicators that led them to believe the carrying amount of goodwill was below its carrying value. The Company determined that the carrying value of the Plant Camp and Dune reporting units were more likely than not greater than their carrying value, including Goodwill. Based on estimated impairment computed, the Company recorded an impairment charge of $ 25,139 for goodwill. The following table sets forth a summary of the changes in goodwill for the three months ended September 30, 2022. For the Three Months ended September 30, 2022 Total As of July 1, 2022 $ 1,383,785 Goodwill acquired in a business combination 6,682 Impairment of goodwill ( 25,139 ) As of September 30, 2022 $ 1,365,328 The following table sets forth a summary of the changes in goodwill for the nine months ended September 30, 2022. For the Nine Months ended September 30, 2022 Total As of January 1, 2022 $ 1,374,835 Goodwill acquired in a business combination 15,632 Impairment of goodwill ( 25,139 ) As of September 30, 2022 $ 1,365,328 14 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. 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. 15 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 of revenue. Revenue Recognition Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We determine revenue recognition through the following steps: ● 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. 16 Revenue disaggregated by revenue source for the three and nine months ended September 30, 2022 and 2021 consists of the following: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Agency (Managed Services, Branded Content, & Talent Management Services) $ 442,867 $ 555,766 $ 1,613,924 $ 1,472,902 Platform (Creator Subscriptions) 230,212 611,714 1,138,812 1,370,581 Ecommerce 347,944 4,153 1,237,634 9,679 Affiliate Sales 1,828 7,619 7,120 23,425 Other Revenue - 368 - 17,803 $ 1,022,851 $ 1,179,620 $ 3,997,490 $ 2,894,390 The Company utilizes the output method to measures the results achieved and value transferred to a customer over time. Timing of revenue recognition for the three and nine months ended September 30, 2022 and 2021 consists of the following: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Products and services transferred over time $ 673,079 $ 1,167,480 $ 2,752,736 $ 2,843,483 Products transferred at a point in time 349,772 12,140 1,244,754 50,907 $ 1,022,851 $ 1,179,620 $ 3,997,490 $ 2,894,390 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. 17 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. ● 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 the timeframe specified in the contract. ● Campaigns are promoted per the contract and the customer is provided a link to the live deliverables on the influencer’s social media channels. ● Most billing for contracts occur 100 % at execution of the performance obligation. Net payment terms vary by client. 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. 18 The transaction price for any given subscriber could decrease based on any payments made to that subscriber. A subscriber may be eligible for payment through one or more of the monetization features offered to Vocal creators, including earnings through reads (on a cost per mille basis) and cash prizes offered to Challenge winners. Potential revenue offset is calculated by reviewing a subscriber’s earnings in conjunction with payments made by the subscriber on a monthly and/or annual basis. Affiliate Sales Revenue Affiliate sales represents the commission the Company receives when a purchase is made through affiliate links placed within content hosted on the Vocal platform. Affiliate revenue is earned on a “click through” basis, upon referring visitors, via said links, to an affiliate’s site and having them complete a specific outcome, most commonly a product purchase. The Company uses multiple affiliate platforms, such as Skimlinks, Amazon, and Tune, to form and maintain thousands of vendor relationships. Each vendor establishes their own commission percentage, which typically range from 2 - 20 %. The revenue is recognized upon receipt as reliable estimates could not be made. E-Commerce Revenue The Company’s e-commerce businesses are housed under Creatd Ventures, and currently consists of four majority-owned e-commerce companies, Camp (previously Plant Camp), Dune Glow Remedy (“Dune”), Basis, and Brave. The Company generates revenue through the sale of Camp, Dune, and Basis, and Brave’s consumer products through its e-commerce distribution channels. The Company satisfies its performance obligation upon shipment of product to its customers and recognizes shipping and handling costs as a fulfillment cost. Customers have 30 days from receipt of an item to return unopened, unused, or damaged items for a full refund. All returns are processed within the relevant recording period and accounted for as a reduction in revenue. The Company runs discounts from time to time to promote sales, improve market penetration, and increase customer retention. Any discounts are run as coupon codes applied at the time of transaction and accounted for as a reduction in gross revenue. The Company assesses variable consideration using the most likely amount method. 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 within the next twelve months. As of September 30, 2022, the Company had deferred revenue of $ 305,555 . As of December 31, 2021, the Company had deferred revenue of $ 234,159 , of which $ 159,727 was recognized as revenue in the nine months ended September 30, 2022, and $ 13,512 was recognized as revenue in the three months ended September 30, 2022. Accounts Receivable and Allowances Accounts receivable are recorded and carried when the Company has performed the work in accordance with managed services, project, partner, consulting and branded content agreements. For example, we bill a managed service client monthly when we have updated their Amazon store, modified SEO or completed the other services listed in the agreement. For projects and branded content, we will bill the client and record the receivable once milestones are reached that are set in the agreement. We make estimates for the allowance for doubtful accounts and allowance for unbilled receivables based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, and other factors that may affect our ability to collect from customers. During the nine months ended September 30, 2022, the Company recorded $ 124,186 , as a bad debt expense. As of September 30, 2022, the Company has an allowance for doubtful accounts of $ 311,133 . As of December 31, 2021, the Company has an allowance for doubtful accounts of $ 186,147 . 19 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 September 30, 2022, and December 31, 2021, the Company had no valuation allowance. Stock-Based Compensation The Company recognizes compensation expense for all equity–based payments granted in accordance with Accounting Standards Codification (“ASC”) 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation over the requisite service period of the award. The company has a relatively low forfeiture rate of stock based compensation and forfeitures are recognized as they occur. Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods. The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is volatility is derived from the Company’s historical data over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future. Forfeitures are recognized as they occur. Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. The Company issues awards of equity instruments, such as stock options and restricted stock units, to employees and certain non-employee directors. Compensation expense related to these awards is based on the fair value of the underlying stock on the award date and is amortized over the service period, defined as the vesting period. The vesting period is generally one to three years. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock units. Compensation expense is reduced for actual forfeitures as they occur. Loss Per Share Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the three and nine months ended September 30, 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. 20 The Company had the following common stock equivalents at September 30, 2022 and 2021: September 30, 2022 2021 Series E preferred 121 148 Options 4,408,267 2,327,445 Warrants 20,429,630 6,558,705 Convertible notes 32,215,486 228,334 Totals 57,053,504 9,114,632 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. 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, During the nine months ended September 30, 2022 the Company recognized a deemed dividend of $ 63,064 from the modification of warrants. 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. On October 16, 2019, FASB approved a final ASU delaying the effective date of ASU 2016-13 for small reporting companies to interim and annual periods beginning after December 15, 2022. The Company is currently evaluating the impact of these amendments to the Company’s financial position and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. The Company does not believe the adoption will have a material impact on the Company’s condensed consolidated financial statements. The adoption of the guidance will affect disclosures and estimates around accounts receivable. 21 In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. ASU 2020-06 is effective for the fiscal year beginning after December 15, 2022, including interim periods within 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 September 30, 2022, the Company had an accumulated deficit of $ 133.8 million, a net loss of $ 25.1 million and net cash used in operating activities of $ 13.9 million for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. On January 30, 2020, the World Health Organization declared the COVID-19 novel coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial impact will be to the Company, capital raising efforts and our operations may be negatively affected. 22 The Company is attempting to further implement its business plan and generate sufficient revenues; however, its cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds by way of a public or private offering of its debt or equity securities, there can be no assurance that it will be able to do so on reasonable terms, or at all. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenues and its ability to raise additional funds by way of a public or private offering. The condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Note 4 – Inventory Inventory was comprised of the following at September 30, 2022 and December 31, 2021: September 30, 2022 December 31, 2021 Raw Materials $ 82,834 $ - Packaging 78,799 2,907 Finished goods 717,417 103,496 $ 879,050 $ 106,403 Note 5 – Property and Equipment Property and equipment stated at cost, less accumulated depreciation, consisted of the following: September 30, 2022 December 31, 2021 Computer Equipment $ 447,342 $ 353,880 Furniture and Fixtures 184,524 102,416 Leasehold Improvements 47,616 11,457 679,482 467,753 Less: Accumulated Depreciation ( 430,519 ) ( 364,814 ) $ 248,963 $ 102,939 Depreciation expense was $ 43,546 and $ 10,047 for the three months ended September 30, 2022 and 2021, respectively. Depreciation expense was $ 67,951 and $ 30,141 for the nine months ended September 30, 2022 and 2021, respectively. 23 Note 6 – Notes Payable Notes payable as of September 30, 2022 and December 31, 2021 is as follows: Outstanding Principal as of September 30, 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 47,990 185,655 10 % June 2023 The Second December 2021 Loan Agreement - 313,979 14 % June 2022 First Denver Bodega LLC Loan 44,008 - 5 % March 2025 The Third May 2022 Loan Agreement 16,169 - - % November 2022 The Fourth May 2022 Loan Agreement 30,558 - - % November 2022 The First August 2022 Loan Agreement 129,634 - 14 % November 2022 The Second August 2022 Loan Agreement 646,100 - - % January 2023 The First September 2022 Loan Agreement 87,884 - - % September 2023 The Second September 2022 Loan Agreement 848,625 - - % May 2023 The Third September 2022 Loan Agreement 351,964 - - % April 2023 2,401,509 1,358,211 Less: Debt Discount ( 614,410 ) ( 15,547 ) Less: Debt Issuance Costs - - 1,787,099 1,342,664 Less: Current Debt ( 1,758,179 ) ( 1,278,672 ) Total Long-Term Debt $ 28,920 $ 63,992 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 was 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 . 24 The April 2020 PPP Loan Agreement On April 30, 2020, the Company was granted a loan with a principal amount of $ 282,432 (the “Loan”), pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The Loan, which was in the form of a Note dated April 30, 2020, matures on April 30, 2022, and bears interest at a fixed rate of 1.00% per annum, payable monthly commencing on October 30, 2020. The Note may be prepaid by the Company at any time prior to maturity without payment of any premium. Funds from the Loan may only be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments. During the nine months ended September 30, 2022, the Company accrued interest of $ 4,815 . The Company is in the process of returning the funds received from the Loan. As of September 30, 2022, the Loan is in default, and the lender may require immediate payment of all amounts owed under the Loan or file suit and obtain judgment. The First December 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 nine months ended September 30, 2022, the Company repaid $ 137,665 in principal. The Second December 2021 Loan Agreement On December 14, 2021, the Company entered into a secured loan agreement (the “Second December 2021 Loan Agreement”) with a lender (the “Second December 2021 Lender”), whereby the Second December 2021 Lender issued the Company a secured promissory note of $ 438,096 AUD or $ 329,127 United States Dollars (the “Second December 2021 Note”). Pursuant to the Second December 2021 Loan Agreement, the Second December 2021 Note has an effective interest rate of 14 %. The maturity date of the Second December 2021 Note is June 30, 2022 (the “Second December 2021 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Second December 2021 Loan Agreement are due. The Company has the option to extend the Maturity date by 60 days. The loan is secured by the Australian research & development credit. During the nine months ended September 30, 2022, the Company accrued $ 22,287 in interest. As of the date of this filing the Company has exercised its option to extend the maturity date to August 29, 2022. During the nine months ended September 30, 2022, the Company repaid $ 293,499 of principal and $ 26,115 of interest. 25 The First February 2022 Loan Agreement On February 22, 2022, the Company entered into a secured loan agreement (the “First February 2022 Loan Agreement”) with a lender (the “First February 2022 Lender”), whereby the First February 2022 Lender issued the Company a secured promissory note of $ 222,540 AUD or $ 159,223 United States Dollars (the “First February 2022 Note”). Pursuant to the First February 2022 Loan Agreement, the First February 2022 Note has an effective interest rate of 14 %. The maturity date of the First February 2022 Note is June 30, 2022 (the “First February 2022 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First February 2022 Loan Agreement are due. The Company has the option to extend the Maturity date by 60 days. The loan is secured by the Australian research & development credit. During the nine months ended September 30, 2022, the Company accrued $ 8,120 in interest. As of the date of this filing the Company has exercised its option to extend the maturity date to August 29, 2022. During the nine months ended September 30, 2022, the Company repaid $ 149,089 of principal and $ 8,120 of interest. Denver Bodega LLC Notes payable On March 7, 2022, The Company acquired five note payable agreements from the acquisition of Denver Bodega LLC. See note 12. The total liabilities of these notes amounted to $ 293,888 . During the nine months ended September 30, 2022, the Company repaid $ 249,880 . As of September 30, 2022, the Company has one note outstanding. This note has a principal balance of $ 44,088 , bears interest at 5 %, and requires 36 monthly payments of $ 1,496 . The First May 2022 Loan Agreement On May 9, 2022, the Company entered into a loan agreement (the “First May 2022 Loan Agreement”) with a lender (the “First May 2022 Lender”), whereby the First May 2022 Lender issued the Company a promissory note of $ 693,500 (the “First May 2022 Note”). The Company received cash proceeds of $ 455,924 . Pursuant to the First May 2022 Loan Agreement, the First May 2022 Note has an effective interest rate of 143 %. The maturity date of the First May 2022 Note is December 18, 2022 (the “First May 2022 Maturity Date”). The Company is required to make weekly payment of $ 21,673 . The First May 2022 Note is secured by officers of the Company. The Company recorded a $ 237,576 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the Company repaid $ 390,114 in principal. On September 22, 2022, the Company and the First May 2022 Lender entered into an exchange agreement whereas both parties agreed to roll the remaining $ 303,386 in the Second September 2022 Loan Agreement. Since the PV cashflows of the new and old debt were more than 10 % differences the company used extinguishment accounting. As part of the agreement the Company recognized $ 33,115 as loss on extinguishment of debt due to the remaining debt discount on the First May 2022 Loan Agreement. 26 The Second May 2022 Loan Agreement On May 9, 2022, the Company entered into a loan agreement (the “Second May 2022 Loan Agreement”) with a lender (the “Second May 2022 Lender”), whereby the Second May 2022 Lender issued the Company a promissory note of $ 401,500 (the “Second May 2022 Note”). The Company received cash proceeds of $ 263,815 . Pursuant to the Second May 2022 Loan Agreement, the Second May 2022 Note has an effective interest rate of 162 %. The maturity date of the Second May 2022 Note is November 20, 2022 (the “Second May 2022 Maturity Date”). The Company is required to make weekly payment of $ 14,339 . The Second May 2022 Note is secured by officers of the Company. The Company recorded a $ 137,685 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the Company repaid $ 272,447 in principal. On September 23, 2022, the Company and the Second May 2022 Lender entered into an exchange agreement whereas both parties agreed to roll the remaining $ 129,053 in the Third September 2022 Loan Agreement. Since the PV cashflows of the new and old debt were more than 10 % differences the company used extinguishment accounting. As part of the agreement the Company recognized $ 3,905 as loss on extinguishment of debt due to the remaining debt discount on the Second May 2022 Loan Agreement. The Third May 2022 Loan Agreement On May 25, 2022, the Company entered into a loan agreement (the “Third May 2022 Loan Agreement”) with a lender (the “Third May 2022 Lender”), whereby the Third May 2022 Lender issued the Company a promissory note of $ 27,604 (the “Third May 2022 Note”). Pursuant to the Third May 2022 Loan Agreement, the Third May 2022 Note has an effective interest rate of 20 %. The maturity date of the Third May 2022 Note is November 23, 2022 (the “Third May 2022 Maturity Date”). The Company is required to make monthly payments of $ 3,067 . During the nine months ended September 30, 2022, the Company repaid $ 11,435 in principal. The Fourth May 2022 Loan Agreement On May 26, 2022, the Company entered into a loan agreement (the “Fourth May 2022 Loan Agreement”) with a lender (the “Fourth May 2022 Lender”), whereby the Fourth May 2022 Lender issued the Company a promissory note of $ 40,000 (the “Fourth May 2022 Note”). Pursuant to the Fourth May 2022 Loan Agreement, the Fourth May 2022 Note has an effective interest rate of 17 %. The maturity date of the Fourth May 2022 Note is November 23, 2022 (the “Fourth May 2022 Maturity Date”). During the nine months ended September 30, 2022, the Company repaid $ 9,442 in principal. The June 2022 Loan Agreement On June 17, 2022, the Company entered into a loan agreement (the “June 2022 Loan Agreement”) with a lender (the “June 2022 Lender”), whereby the June 2022 Lender issued the Company a promissory note of $ 568,000 (the “June 2022 Note”). The Company received cash proceeds of $ 378,000 . Pursuant to the June 2022 Loan Agreement, the June 2022 Note has an effective interest rate of 217 %. The maturity date of the June 2022 Note is November 4, 2022 (the “June 2022 Maturity Date”). The Company is required to make weekly payment of $ 28,400 . The June 2022 Note is secured by officers of the Company. The Company recorded a $ 190,000 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. 27 During the nine months ended September 30, 2022, the Company repaid $ 255,600 in principal. On August 19, 2022, the Company and the June 2022 Lender entered into an exchange agreement whereas both parties agreed to roll the remaining $ 312,400 in the Third September 2022 Loan Agreement. Since the PV cashflows of the new and old debt were more than 10 % differences the company used extinguishment accounting. As part of the agreement the Company recognized $ 66,749 as loss on extinguishment of debt due to the remaining debt discount on the Second May 2022 Loan Agreement. The First August 2022 Loan Agreement On August 18, 2022, the Company entered into a secured loan agreement (the “First August 2022 Loan Agreement”) with a lender (the “First August 2022 Lender”), whereby the First August 2022 Lender issued the Company a secured promissory note of $ 193,500 AUD or $ 129,64 United States Dollars (the “First August 2022 Note”). Pursuant to the First August 2022 Loan Agreement, the First August 2022 Note has an effective interest rate of 14 %. The maturity date of the First August 2022 Note is June 30, 2023 (the “First August 2022 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First August 2022 Loan Agreement are due. The Company has the option to extend the Maturity date by 60 days. The loan is secured by the Australian research & development credit. During the nine months ended September 30, 2022, the Company accrued $ 2,037 AUD in interest. The Second August 2022 Loan Agreement On August 19, 2022, the Company entered into a loan agreement (the “Second August 2022 Loan Agreement”) with a lender (the “Second August 2022 Lender”), whereby the Second August 2022 Lender issued the Company a promissory note of $ 923,000 (the “Second August 2022 Note”). The Company received cash proceeds of $ 300,100 and rolled the remaining $ 312,400 of principal from the June 2022 Loan Agreement. Pursuant to the Second August 2022 Loan Agreement, the Second August 2022 Note has an effective interest rate of 704 %. The maturity date of the Second August 2022 Note is January 9, 2022 (the “Second August 2022 Maturity Date”). The Company is required to make weekly payment of $ 46,150 . The Second August 2022 Note is secured by officers of the Company. The Company recorded a $ 310,500 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the Company repaid $ 276,900 in principal. The First September 2022 Loan Agreement On September 1, 2022, the Company entered into a loan agreement (the “First September 2022 Loan Agreement”) with a lender (the “First September 2022 Lender”), whereby the First September 2022 Lender issued the Company a promissory note of $ 87,884 (the “First September 2022 Note”). Pursuant to the First September 2022 Loan Agreement, the First September 2022 Note has an effective interest rate of 13 %. The maturity date of the First September 2022 Note is September 1, 2023 (the “First September 2022 Maturity Date”). During the nine months ended September 30, 2022, the Company repaid $ 0 in principal. The Second September 2022 Loan Agreement On September 22, 2022, the Company entered into a loan agreement (the “Second September 2022 Loan Agreement”) with a lender (the “Second September 2022 Lender”), whereby the Second September 2022 Lender issued the Company a promissory note of $ 876,000 (the “Second September 2022 Note”). The Company received cash proceeds of $ 272,614 and rolled the remaining $ 303,386 of principal from the First May 2022 Loan Agreement. Pursuant to the Second September 2022 Loan Agreement, the Second September 2022 Note has an effective interest rate of 475 %. The maturity date of the Second September 2022 Note is May 5, 2023 (the “Second September 2022 Maturity Date”). The Company is required to make weekly payment of $ 27,375 . The Second September 2022 Note is secured by officers of the Company. 28 The Company recorded a $ 300,000 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the Company repaid $ 27,375 in principal. The Third September 2022 Loan Agreement On September 22, 2022, the Company entered into a loan agreement (the “Third September 2022 Loan Agreement”) with a lender (the “Third September 2022 Lender”), whereby the Third September 2022 Lender issued the Company a promissory note of $ 365,000 (the “Third September 2022 Note”). The Company received cash proceeds of $ 110,762 and rolled the remaining $ 129,053 of principal from the Second May 2022 Loan Agreement. Pursuant to the Third September 2022 Loan Agreement, the Third September 2022 Note has an effective interest rate of 556 %. The maturity date of the Third September 2022 Note is May 5, 2023 (the “Second September 2022 Maturity Date”). The Company is required to make weekly payment of $ 13,036 . The Third September 2022 Note is secured by officers of the Company. The Company recorded a $ 300,000 debt discount relating to an original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the Company repaid $ 13,036 in principal. Note 7 – Convertible Notes Payable Convertible notes payable as of September 30, 2022, is as follows: Outstanding Principal as of Warrants granted September 30, 2022 Interest Rate Conversion Price Maturity Date Quantity Exercise Price The Second February 2022 Loan Agreement $ 112,613 11 % - (*) February-23 - - The May 2022 Convertible Loan Agreement 76,814 11 % - (*) May-23 - - The May 2022 Convertible Note Offering 4,090,000 18 % 2.00 (*) November-22 4,000,000 $ 3.00 – $ 6.00 The July 2022 Convertible Note Offering 2,150,000 18 % 2.00 (*) November-22 2,150,000 $ 3.00 – $ 6.00 6,429,427 Less: Debt Discount ( 360,854 ) Less: Debt Issuance Costs ( 5,648 ) 6,062,926 (*) As subject to adjustment as further outlined in the notes 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. 29 The Company recorded a $ 15,850 debt discount relating to an original issue discount and $ 3,000 of debt issuance costs related to fees paid to vendors relating to the offering. The debt discount and debt issuance costs are being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the July 2021 Note became convertible. Due to the fact that these convertible notes have an option to convert at a 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 nine months ended September 30, 2022, the note holder converted $ 168,850 of principal and $ 4,605 of interest into 109,435 shares of the Company’s common stock. The unamortized debt discount of $ 96,803 was recorded to extinguishment of debt due to conversion. The Second February 2022 Loan Agreement On February 22, 2022, the Company entered into a loan agreement (the “Second February 2022 Loan Agreement”) with a lender (the “Second February 2022 Lender”), whereby the Second February 2022 Lender issued the Company a promissory note of $ 337,163 (the “Second February 2022 Note”). Pursuant to the Second February 2022 Loan Agreement, the Second February 2022 Note has an interest rate of 11 %. The maturity date of the Second February 2022 Note is February 22, 2023 (the “Second February 2022 Maturity Date”). The Company is required to make 10 monthly payments of $ 37,425 . Upon default the May 2022 Note is convertible into shares of the Company’s common stock, par value $ 0.001 per share (“Conversion Shares”) equal to 75 % of average the lowest three trading prices of the Company’s common stock on the ten-trading day immediately preceding the date of the respective conversion. The 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. During the nine months ended September 30, 2022, the Company repaid $ 224,550 in principal. The May 2022 Convertible Loan Agreement On May 20, 2022, the Company entered into a loan agreement (the “May 2022 Loan Agreement”) with an individual (the “May 2022 Lender”), whereby the May 2022 Lender issued the Company a promissory note of $ 115,163 (the “July 2021 Note”). Pursuant to the Third May 2022 Loan Agreement, the Third May 2022 Note has an interest rate of 11 %. The May 2022 Note matures on the first (12 th ) month anniversary of its issuance date. Upon default the May 2022 Note is convertible into shares of the Company’s common stock, par value $ 0.001 per share (“Conversion Shares”) equal to 75 % of average the lowest three trading prices of the Company’s common stock on the ten-trading day immediately preceding the date of the respective conversion. The Company recorded a $ 15,163 debt discount relating to an original issue discount The debt discount and debt issuance costs are being accreted over the life of the note to accretion of debt discount and issuance cost. During the nine months ended September 30, 2022, the Company repaid $ 38,349 in principal. 30 The May 2022 Convertible Note Offering During May of 2022, the Company conducted multiple closings of a private placement offering to accredited investors (the “May 2022 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “May 2022 Investors”) for aggregate gross proceeds of $ 4,000,000 . The May 2022 convertible notes are convertible into shares of the Company’s common stock, par value $. 001 per share at a conversion price of $ 2.00 per share. As additional consideration for entering in the May 2022 Convertible Note Offering, the Company issued 4,000,000 warrants of the Company’s common stock. The May 2022 Convertible Note matures on November 30, 2022. The Company recorded a $ 1,895,391 debt discount relating to 4,000,000 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost. The Company recorded a $ 399,964 debt discount relating to an original issue discount and $ 125,300 of debt issuance costs related to fees paid to vendors relating to the 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. On September 2, 2022, the Company went into default on these notes. As part of the default terms the Company owes 110 % of the principal outstanding and the notes accrue interest at a rate of 18 %. On September 15, 2022, the Company and six out of eight lenders May 2022 Investors agreed to forgive default interest and extend the maturity date to March 31, 2023, for a reduced conversion price of $ 0.20 for the convertible notes and warrants. Since the PV cashflows of the new and old debt were more than 10 % differences the company used extinguishment accounting. As part of the agreement the Company recognized $ 737,756 as loss on extinguishment of debt due to the remaining debt discount and recognized $ 331,861 as a gain on extinguishment of debt due to the forgiveness of interest. The company also recognized an additional $ 75,610 of debt discount from the change in relative fair value on the warrants. During the nine months ended September 30, 2022, the Company accrued $ 103,670 in interest that was not forgiven. As of September 30, 2022, the Company is in default on $ 900,000 of principal and $ 103,670 of interest. Subsequent to September 30, 2022, the Company made a repayment of $ 35,714 towards these notes. The July 2022 Convertible Note Offering During July of 2022, the Company conducted multiple closings of a private placement offering to accredited investors (the “July 2022 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “July 2022 Investors”) for aggregate gross proceeds of $ 2,150,000 . The July 2022 convertible notes are convertible into shares of the Company’s common stock, par value $. 001 per share at a conversion price of $ 2.00 per share. As additional consideration for entering in the July 2022 Convertible Note Offering, the Company issued 2,150,000 warrants of the Company’s common stock. The July 2022 Convertible Note matures on November 30, 2022. The Company recorded a $ 863,792 debt discount relating to 2,150,000 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of these notes to accretion of debt discount and issuance cost. The Company recorded a $ 214,981 debt discount relating to an original issue discount. The debt discount are being accreted over the life of the note to accretion of debt discount and issuance cost. 31 On September 2, 2022, the Company went into default on these notes. As part of the default terms the Company owes 110 % of the principal outstanding and the notes accrue interest at a rate of 18 %. On September 15, 2022, the Company and the July Investors agreed to forgive default interest and extend the maturity date to March 31, 2023 for a reduced conversion price of $ 0.20 for the convertible notes and warrants. Since the present value of the cash flows of the new and old debt were more than 10 % different, the company used extinguishment accounting. As part of the agreement the Company recognized $ 640,521 as loss on extinguishment related to the change in fair value from the restructuring agreement. Subsequent to September 30, 2022, the Company made a repayment of $ 714,285 towards these notes. Note 8 – Related Party Equity raises During the nine months ended September 30, 2022, the Company conducted two equity raises in which officers, directors, employees, and an affiliate of an officer cumulatively invested $ 421,001 for 240,571 shares of common stock and 240,571 warrants to purchase common stock. Officer compensation During the nine months ended September 30, 2022 and 2021, the Company paid $ 87,275 and $ 72,328 , respectively for living expenses for officers of the Company. Note 9 – Derivative Liabilities The Company has identified derivative instruments arising from convertible notes that have an option to convert at a variable number of shares in the Company’s convertible notes payable during the nine months ended September 30, 2022. For the terms of the conversion features see Note 7. The Company had no derivative assets measured at fair value on a recurring basis as of September 30, 2022. The Company utilizes a binomial option model for convertible notes that have an option to convert at a variable number of shares to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The inputs utilized in the application of the Binomial model included a stock price on valuation date, an expected term of each debenture remaining from the valuation date to maturity, an estimated volatility, and a risk-free rate. The Company records the change in the fair value of the derivative as other income or expense in the condensed consolidated statements of operations. Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note adjusted to be on a continuous return basis to align with the Monte Carlo simulation model and binomial model. Dividend yield: The Company uses a 0 % expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future. Volatility: The Company calculates the expected volatility based on the company’s historical stock prices with a look back period commensurate with the period to maturity. Expected term: The Company’s remaining term is based on the remaining contractual maturity of the convertible notes. The following are the changes in the derivative liabilities during the nine months ended September 30, 2022. Nine Months Ended September 30, 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 September 30, 2022 $ - $ - $ - 32 Note 10 – Stockholders’ Equity Shares Authorized The Company is authorized to issue up to one hundred and twenty million ( 120,000,000 ) shares of capital stock, of which one hundred million ( 100,000,000 ) shares are designated as common stock, par value $ 0.001 per share, and twenty million ( 20,000,000 ) are designated as preferred stock, par value $ 0.001 per share. Preferred Stock Series E Convertible Preferred Stock The Company has designated 8,000 shares of Series E Convertible Preferred stock and has 500 shares issued and outstanding as of September 30, 2022. The shares of Series E Preferred Stock have a stated value of $ 1,000 per share and are convertible into Common Stock at the election of the holder of the Series E Preferred Stock, at any time following the Original Issue Date at a price of $ 4.12 per share, subject to adjustment. 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 During the nine months ended September 30, 2022, the Company issued 82,342 shares of its restricted common stock to settle outstanding vendor liabilities of $ 130,625 . In connection with this transaction the Company also recorded a loss on settlement of vendor liabilities of $ 17,024 . On January 6, 2022, the Company issued 8,850 shares of its restricted common stock to consultants in exchange for services at a fair value of $ 19,736 . On February 24, 2022, the Company issued 50,000 shares of its restricted common stock to consultants in exchange for four months of services at a fair value of $ 69,000 . These shares were recorded as common stock issued for prepaid services and will be expensed over the life of the consulting contract to share based payments. During the nine months ended September 30, 2022 the Company recorded $ 69,000 to share based payments. 33 On March 1, 2022, the Company entered into securities purchase agreements with twenty-eight accredited investors whereby, at the closing, such investors purchased from the Company an aggregate of 1,401,457 shares of the Company’s common stock and (ii) 1,401,457 warrants to purchase shares of common stock, for an aggregate purchase price of $2,452,550. Such warrants are exercisable for a term of five-years from the date of issuance, at an exercise price of $1.75 per share. The Company has recorded $40,000 to stock issuance costs, which are part of Additional Paid-in Capital. On March 7, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with thirteen accredited investors resulting in the raise of $ 2,659,750 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell in a registered direct offering an aggregate of 1,519,857 shares of the Company’s common stock together with warrants to purchase an aggregate of 1,519,857 shares of Common Stock at an exercise price of $ 1.75 per share. The warrants are immediately exercisable and will expire on March 9, 2027. The Company has recorded $ 75,000 to stock issuance costs, which are part of Additional Paid-in Capital. During the three months ended March 31, 2022, the Company issued 7,488 shares of its restricted common stock to consultants in exchange for services at a fair value of $ 8,364 . On April 5, 2022 the Company issued 185,000 shares of its restricted common stock to officers of the company in exchange for services at a fair value of $ 192,400 . On June 24, 2022, the Company issued 50,000 shares of its restricted common stock to consultants in exchange for four months of services at a fair value of $ 37,200 . These shares were recorded as common stock issued for prepaid services and will be expensed over the life of the consulting contract to share based payments. During the nine months ended September 30, 2022 the Company recorded $ 2,405 to share based payments. During the three months ended June 30, 2022, the Company issued 29,387 shares of its restricted common stock to consultants in exchange for services at a fair value of $ 24,001 . On September 15, 2022, the Company entered into a securities purchase agreement with five accredited investors resulting in the raise of $ 796,000 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell in a registered direct offering an aggregate of 4,000,000 shares of the Company’s common stock together with warrants to purchase an aggregate of 4,000,000 shares of Common Stock at an exercise price of $ 0.20 per share. The warrants are immediately exercisable and will expire on September 15, 2027. The Company has recorded $ 75,000 to stock issuance costs, which are part of Additional Paid-in Capital. During the three months ended September 30, 2022, the Company issued 50,000 shares of its restricted common stock to consultants in exchange for prepaid services at a fair value of $ 34,900 . During the three months ended September 30, 2022, the Company issued 107,206 shares of its restricted common stock to consultants in exchange for services at a fair value of $ 22,892 . During the three months ended September 30, 2022 the company repurchased 83,800 shares of common stock for $ 13,700 34 Stock Options The assumptions used for options granted during the nine months ended September 30, 2022 and 2021, are as follows: September 30, 2022 Exercise price $ 1.10 – 1.90 Expected dividends 0 % Expected volatility 165.38 % – 166.48 % Risk free interest rate 2.69 % – 2.95 % Expected life of option 5 years September 30, 2021 Exercise price $ 2.55 – 14.10 Expected dividends 0 % Expected volatility 194.39 % – 242.98 % Risk free interest rate 0.46 % – 0.98 % Expected life of option 5 - 7 years The following is a summary of the Company’s stock option activity: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Balance – December 31, 2020 – outstanding 541,021 12.75 3.27 Granted 1,850,588 6.32 6.20 Exercised - - - Forfeited/Cancelled ( 64,164 ) 13.06 - Balance – September 30, 2021 – outstanding 2,327,445 7.63 4.29 Balance – September 30, 2021 – exercisable 608,524 12.75 3.75 Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Balance – January 1, 2022 – outstanding 2,902,619 7.07 4.71 Granted 1,940,000 1.38 - Exercised - - - Forfeited/Cancelled ( 434,352 ) 13.56 - Balance – September 30, 2022 – outstanding 4,408,267 3.93 4.43 Balance – September 30, 2022 – exercisable 3,010,101 4.12 4.32 Option Outstanding Option Exercisable Exercise price Number Outstanding Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Number Exercisable Weighted Average Remaining Contractual Life (in years) $ 3.93 4,408,267 4.43 4.12 3,010,101 4.32 During the year ended December 31, 2018 the Company granted options of 11,667 to consultants that have a fair value of $ 57,123 . As of the date of this filing the company has not issued these options and they are recorded as an accrued liability on the Condensed Consolidated Balance Sheet. Stock-based compensation for stock options has been recorded in the consolidated statements of operations and totaled $ 4,100,729 , for the nine months ended September 30, 2021. Stock-based compensation for stock options has been recorded in the condensed consolidated statements of operations and totaled $ 523,749 , for the three months ended September 30, 2022. Stock-based compensation for stock options has been recorded in the condensed consolidated statements of operations and totaled $ 3,355,445 , for the nine months ended September 30, 2022. As of September 30, 2022, there was $1,283,111 of total unrecognized compensation expense related to unvested employee options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately 1.21 years. 35 Warrants The Company applied fair value accounting for all share-based payments awards. The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model. The assumptions used for warrants granted during the nine months ended September 30, 2022 and 2021 are as follows: September 30, 2021 Exercise price $ 4.50 – 4.95 Expected dividends 0 % Expected volatility 237.14 % - 237.68 % Risk free interest rate 0.82 % - 0.86 % Expected life of warrant 5 years September 30, 2022 Exercise price $ 0.20 – 6.00 Expected dividends 0 % Expected volatility 164.34 % - 169.75 % Risk free interest rate 2.81 % – 4.00 % Expected life of warrant 5.00 – 5.50 years Warrant Activities The following is a summary of the Company’s warrant activity: Warrant Weighted Average Exercise Price Balance – December 31, 2020 – outstanding 6,130,948 4.96 Granted 1,881,267 5.63 Exercised ( 1,438,788 ) 4.59 Forfeited/Cancelled ( 14,722 ) 24.00 Balance – September 30, 2021 – outstanding 6,558,705 4.92 Balance – September 30, 2021 – exercisable 6,558,705 $ 4.92 Warrant Weighted Average Exercise Price Balance – January 1, 2022 – outstanding 5,658,830 4.98 Granted 14,812,262 2.29 Exercised - - Forfeited/Cancelled ( 41,462 ) 12.00 Balance – September 30, 2022 – outstanding 20,429,630 1.88 Balance – September 30, 2022 – exercisable 16,429,630 $ 2.62 Warrants Outstanding Warrants Exercisable Exercise price Number Outstanding Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $ 1.88 20,429,630 4.07 2.62 16,429,630 3.81 36 During the nine months ended September 30, 2021, the Company issued 1,275,261 shares of common stock to a certain warrant holder upon the cashless exercise of a warrant to purchase 1,438,788 shares of common stock. The Company received $ 5,472,068 in connection with the exercise of the warrant. During the nine months ended September 30, 2021, a total of 486,516 warrants were issued in connection with the Series E Convertible Preferred Stock raise. During the nine months ended September 30, 2021, a total of 1,090,908 warrants were issued with convertible notes. The warrants have a grant date fair value of $ 3,067,617 using a Black-Scholes option-pricing model and the above assumptions. During the nine months ended September 30, 2021, some of the Company’s warrants had a reset provision triggered that also resulted in an additional 127,801 warrants to be issued. A deemed dividend of $ 410,750 was recorded to the Statements of Comprehensive Loss. On June 17, 2021, the Company issued 46,667 warrants in connection with the underwriting agreement. Stock-based compensation for stock warrants has been recorded in the consolidated statements of operations and totaled $ 480,863 , for the nine months ended September 30, 2021 During the nine months ended September 30, 2022, some of the Company’s warrants had a down-round provision triggered that also resulted in an additional 1,740,948 warrants to be issued. A deemed dividend of $ 303,557 was recorded to the Statements of Operations and Comprehensive Loss. During the nine months ended September 30, 2022, a total of 6,150,000 warrants were issued with convertible notes (See Note 7 above). The warrants have a grant date fair value of $ 5,185,826 using a Black-Scholes option-pricing model and the above assumptions and a relative fair value of $ 2,929,303 . Note 11 – Commitments and Contingencies Litigation On or about June 25, 2020, Home Revolution, LLC (“Home Revolution”) filed a lawsuit in the United States District Court for the District of New Jersey, Home Revolution, LLC, et al. v. Jerrick Media Holdings, Inc. et al., Case No. 2:20-cv-07775-JMV-MF. The Complaint alleges, among other things, that Creatd, Inc. breached the Membership Interest Purchase Agreement, as modified, and ancillary transaction documents in connection with the acquisition of Seller’s Choice, LLC, from Home Revolution in September 2019. The Complaint additionally alleges violation of the New Jersey Uniform Securities Law, violations of the Exchange Act and Rule 10b-5 thereunder, fraud, equitable accounting, breach of fiduciary duty, conversion and unjust enrichment. Plaintiff also sought to have a receiver appointed by the Court to take over Creatd’s operations. After substantial motion practice, Creatd successfully settled this dispute from June 2020 for a total of $ 799,000 , which includes $ 660,000 of note principal and $ 139,000 of accrued interest. The matter has been dismissed as of March 3, 2022. On or about August 30, 2021, Robert W. Monster and Anonymize, Inc. (“Monster”) filed a lawsuit in the United States District Court for the Western District of Washington at Seattle, Robert W. Monster, et al. v. Creatd, Inc., et al. (Western District of Washington at Seattle 2:21-CV-1177). The Complaint alleges, among other things, that action for Declaratory Judgment under 28 U.S.C. § 2201 that Monster’s registration and use of the internet domain name VOCL.COM (the “Domain Name”) does not violate Creatd’s rights under the Anticybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. § 1125(d), or otherwise under the Lanham Act, 15 U.S.C. § 1051 et seq. Creatd claims trademark rights and certain other rights with respect to the term and the domain name VOCL.COM. Monster seeks a determination by the Court that Monster’s registration and/or use of VOCL.COM is not, and has not been in violation of the ACPA, and that Plaintiffs’ use of VOCL.COM constitutes neither a violation of the ACPA nor trademark infringement or dilution under the Lanham Act. Creatd believes the lawsuit lacks merit and will vigorously challenge the action. At this time, we are unable to estimate potential damage exposure, if any, related to the litigation. A complaint against the Company, dated September 21, 2022, has been filed in the Supreme Court of the State of New York, New York County, by Lind Global Macro Fund LP and Lind Global Fund II LP, making certain claims alleging breach of contract related to two Securities Purchase Agreements executed on May 31, 2022, seeking damages in excess of $ 920,000 . No response to the Complaint has been filed at this time. The Company has not yet submitted a response to the Complaint or had the opportunity to conduct discovery as to the allegations. The Company will file an initial response on or before November 18, 2022. Given the premature nature of this case, it is still too early for the Company to make an assessment as to liability. 37 Inflation Reduction Act of 2022 On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA includes a 15 % Corporate Alternative Minimum Tax (“Corporate AMT”) for tax years beginning after December 31, 2022. We do not expect the Corporate AMT to have a material impact on our consolidated financial statements. Additionally, the IRA imposes a 1 % excise tax on net repurchases of stock by certain publicly traded corporations. The excise tax is imposed on the value of the net stock repurchased or treated as repurchased. The new law will apply to stock repurchases occurring after December 31, 2022. Lease Agreements On April 26, 2022, the Company signed a 7-year lease for approximately 8,000 square feet of office space at 419 Lafayette Street, 6th Floor, New York, NY, 10003. Commencement date of the lease is May 1, 2022. The total amount due under this lease is $ 3,502,033 . On July 28, 2022, the Company signed a 3-year lease for approximately 1,364 square feet of office space at 1674 Meridian Ave. , Miami Beach, FL, 33131. Commencement date of the lease is July 28, 2022. The total amount due under this lease is $ 181,299 . During the three months ended September 30, 2022, it was decided the company would not be using the office space and recorded an impairment of $ 101,623 on the right-of-use asset. The components of lease expense were as follows: Three Months Ended September 30, 2022 Operating lease cost $ 148,446 Short term lease cost 5,568 Total net lease cost $ 154,015 Nine Months Ended September 30, 2022 Operating lease cost $ 241,601 Short term lease cost 154,108 Total net lease cost $ 395,709 Supplemental cash flow and other information related to leases was as follows: Nine Months Ended September 30, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating lease payments 54,564 Weighted average remaining lease term (in years): 3.40 Weighted average discount rate: 12.50 % 38 Total future minimum payments required under the lease as of September 30, are as follows: For the Twelve Months Ended September 30, Operating Leases 2023 $ 534,880 2024 541,905 2025 513,507 2026 528,589 2027 544,122 Thereafter 892,399 Total lease payments 3,555,402 Less: Amounts representing interest ( 1,140,416 ) Total lease obligations 2,414,986 Less: Current ( 279,593 ) $ 2,135,393 Rent expense for the three months ended September 30, 2022 and 2021 was $ 154,015 and $ 67,397 , respectively. Rent expense for the nine months ended September 30, 2022 and 2021 was $ 395,709 and $ 121,266 , respectively. Market price risk of crypto (“digital”) assets The Company holds crypto and digital assets in third-party wallets. Crypto asset price risk could adversely affect its operating results and will depend upon the market price of Bitcoin, ETH, as well as other crypto assets. Crypto asset prices have fluctuated significantly from quarter to quarter. There is no assurance that crypto asset prices will reflect historical trends. A decline in the market price of Bitcoin, ETH, and Other crypto assets could have an adverse effect on our earnings, the carrying value of the crypto assets, and future cash flows. This may also affect the liquidity and the ability to meet our ongoing obligations. Appointment of New Directors On February 17, 2022, the Board of Directors (the “Board”) of the Company appointed Joanna Bloor, Brad Justus, and Lorraine Hendrickson to serve as members of the Board. Ms. Bloor has been nominated to, and will serve as, chair of the Compensation Committee, and to be a member of the Audit Committee and Nominating & Corporate Governance Committee. Mr. Justus has been nominated, and will serve as, chair of the Nominating & Corporate Governance Committee, and to be a member of the Compensation Committee and Audit Committee. Ms. Hendrickson has been nominated to, and will serve as, chair of the Audit Committee and to be a member of the Compensation and Nominating & Corporate Governance Committee. Departure of Directors On February 17, 2022, the Board received notice that effective immediately, Mark Standish resigned as Chair of the Board, Chair of the Audit Committee and as a member of the Compensation Committee and Nominating & Corporate Governance Committee; Leonard Schiller resigned as member of the Board, Chair of the Compensation Committee and as a member of the Audit Committee and Nominating & Corporate Governance Committee; and LaBrena Martin resigned as a member of the Board, Chair of the Nominating & Corporate Governance Committee and as a member of the Audit Committee and Compensation Committee. Such resignations are not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Management Restructuring On February 17, 2022, the Board of the Company approved the restructuring of the Company’s senior management team to eliminate the Co-Chief Executive Officer role, appointing Jeremy Frommer as Executive Chairman and Founder, and appointing Laurie Weisberg as Chief Executive Officer (the “Second Restructuring”). Prior to the Second Restructuring, Mr. Frommer and Ms. Weisberg served as the Company’s co-Chief Executive Officers and Ms. Weisberg served as the Company’s Chief Operating Officer. The Second Restructuring does not impact the role or functions of the Company’s Chief Financial Officer, Chelsea Pullano, or the role or functions of the Company’s President and Chief Operating Officer, Justin Maury. 39 Nasdaq Notice of Delisting On September 2, 2022, the Company received a letter from the staff of The Nasdaq Capital Market notifying the Company that the Nasdaq Hearings Panel has determined to delist the Company’s common stock from the Exchange, based on the Company’s failure to comply with the listing requirements of Nasdaq Rule 5550(b)(1) as a result of the Company’s shareholder equity deficit for the period ended June 30, 2022, as demonstrated in Company’s Quarterly Report on Form 10-Q filed on August 15, 2022, following the Company having not complied with the market value of listed securities requirement in Nasdaq Rule 5550(b)(2) on March 1, 2022, while the Company was under a Panel Monitor, as had been previously disclosed. Suspension of trading in the Company’s shares on the Exchange became effective at the opening of business on September 7, 2022, at which time the Company’s common stock, under the symbol “CRTD,” and publicly-traded warrants, under the symbol “CRTDW,” was quoted on the OTCPink marketplace operated by OTC Markets Group Inc. Following passage of the proscribed 15-day time period for appeal as stated in the Letter, on October 26, 2022, Nasdaq completed the delisting by filing a Form 25 Notification of Delisting with the Securities and Exchange Commission. The Company’s common stock, under the symbol “CRTD,” is quoted on the OTCQB marketplace operated by OTC Markets Group Inc. effective as of September 26, 2022. The Company’s publicly-traded warrants, under the symbol “CRTDW,” are quoted on the OTCPink marketplace operated by OTC Markets Group Inc. Employment Agreements On April 5, 2022, upon the recommendation of the Compensation Committee of the Board, the Board approved employment agreements with, and equity issuances for, (i) Jeremy Frommer, Executive Chairman, who will receive (a) an signing award of $80,000, (b) an annual salary of $420,000; (c) 121,000 options, to vest immediately with a strike price of $1.75, and (d) 50,000 shares of the Company’s restricted common stock; (ii) Laurie Weisberg, Chief Executive Officer, who will receive (a) an annual salary of $475,000; (b) 121,000 options, to vest immediately with a strike price of $1.75, and (c) 50,000 shares of the Company’s restricted common stock; (iii) Justin Maury, Chief Operating Officer & President, who will receive (a) an annual salary of $475,000 (b) 81,000 options, to vest immediately with a strike price of $1.75, and (c) 50,000 shares of the Company’s restricted common stock; and (iv) Chelsea Pullano, Chief Financial Officer, who will receive (a) an annual salary of $250,000; (b) 37,000 options, to vest immediately with a strike price of $1.75, and (c) 35,000 shares of the Company’s restricted common stock (collectively, the “Executive Employment Arrangements”). Pursuant to the Executive Employment Arrangements, the Company entered into executive employment agreements with each of the respective executives as of April 5, 2022 (the “Executive Employment Agreements”). The Executive Employment Agreements contain customary terms, conditions and rights. Executive Separation Agreement On September 2, 2022, the Company entered into an Executive Separation Agreement with Laurie Weisberg the Company’s Chief Executive Officer and member of the Board of Directors setting forth the terms and conditions related to the Executive’s resignation for good reason as Chief Executive Officer, Director and any other positions held with the Company or any subsidiary. The Company will pay severance in the aggregate amount of $ 475,000 , payable as follows: (i) 1/24 will be paid on each of September 15, 2022, October 1, 2022 and November 1, 2022, respectively; (ii) 1/8 will be paid on each of December 1, 2022, January 1, 2023 and February 1, 2023, respectively; (iii) 1/4 will be paid on April 1, 2023; and (iv) the balance will be paid on May 1, 2023. The Company has executed and delivered a Confession of Judgment concerning the severance amount, which is being held in escrow pending satisfaction of payment. Additionally, all unvested and/or outstanding stock options held by Ms. Weisberg as of the date of the separation agreement that are not subject to metric based vesting shall automatically and fully vest. All unvested and/or outstanding stock options held by Ms. Weisberg as of the date of the separation agreement that are subject to metric based vesting shall vest in accordance with their respective original terms. Note 12 – Acquisitions Denver Bodega, LLC d/b/a Basis On March 7, 2022, the Company entered into a Membership Interest Purchase (the “Agreement”) with Henry Springer and Kyle Nowak (collectively the “Sellers”), whereby the Company purchased a majority stake in Denver Bodega, LLC, a Colorado limited liability company whose product is Basis, a direct-to-consumer functional beverage brand that makes high-electrolyte mixes meant to aid hydration. Pursuant to the Agreement, Creatd acquired all of the issued and outstanding membership interests of Denver Bodega, LLC for consideration of one dollar ($ 1.00 ), as well as the Company’s payoff, assumption, or satisfaction of certain debts and liabilities. 40 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. Acquisition of Orbit On August 1, 2022 the Company entered into a Membership Interest Purchase (the “Agreement”) with Zachary Shenkman, Wuseok Jung, Wesley Petry, Nicholas Scibilia, Gary Rettig, Brandon Fallin (collectively the “Sellers”), whereby the Company purchased a majority stake in Orbit Media LLC, a New York limited liability company whose product is an app-based stock trading platform designed to empower a new generation of investors, providing users with a like-minded community as well as access to tools, content, and other resources to learn, train, and excel in the financial markets. Pursuant to the Agreement, Creatd acquired fifty one percent ( 51 %) of the issued and outstanding membership interests of Orbit Media LLC for consideration of forty-four thousand dollars ($ 44,000 ) in cash and 57,576 shares of the Company’s Common Stock. 41 The following sets forth the components of the purchase price: Purchase price: Cash paid to seller $ 44,000 Shares granted to seller 40,994 Total purchase price 84,994 Net Assets acquired - Non-controlling interest in consolidated subsidiary 81,661 Excess purchase price $ 166,655 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. Know-How and Intellectual Property $ 166,655 Excess purchase price $ 166,655 On September 13, 2022, the Company acquired 100 % of the membership interests of Brave Foods, LLC, a Maine limited liability company for $ 150,000 . Brave is a plant-based food company that provides convenient and healthy breakfast food products. The following sets forth the components of the purchase price: Purchase price: Cash paid to seller $ 150,000 Total purchase price 150,000 Assets acquired: Cash 73,344 Inventory 86,154 Total assets acquired 159,498 Liabilities assumed: Accounts payable and accrued expenses 1,316 Notes payable 75,000 Total liabilities assumed 76,316 Net assets acquired 83,182 Excess purchase price $ 66,818 42 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 $ 6,683 Trade Names & Trademarks 16,704 Know-How and Intellectual Property 16,704 Website 16,704 Customer Relationships 10,023 Excess purchase price $ 66,818 The goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisition. The following presents the unaudited pro-forma combined results of operations of the Company with Plant Camp, WHE, Dune, Denver Bodega, Orbit, and Brave as if the entities were combined on January 1, 2021. Three Months Ended September 30, 2021 Revenues $ 3,429,748 Net loss attributable to common shareholders $ ( 25,735,007 ) Net loss per share $ ( 2.17 ) Weighted average number of shares outstanding 11,845,229 Three Months Ended September 30, 2022 Revenues $ 4,057,080 Net loss attributable to common shareholders $ ( 9,425,313 ) Net loss per share $ ( 0.45 ) Weighted average number of shares outstanding 21,087,764 Nine Months Ended 2021 Revenues $ 5,069,181 Net loss attributable to common shareholders $ ( 26,428,192 ) Net loss per share $ ( 2.23 ) Weighted average number of shares outstanding 11,845,229 Nine Months Ended 2022 Revenues $ 4,683,843 Net loss attributable to common shareholders $ ( 24,217,030 ) Net loss per share $ ( 1.23 ) Weighted average number of shares outstanding 19,726,987 43 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 September 30, 2022 Creatd Labs Creatd Ventures Creatd Partners Corporate Total Accounts receivable, net $ - $ 4,973 $ 217,210 $ - $ 222,183 Prepaid expenses and other current assets 43,336 - - 96,390 139,726 Deposits and other assets 576,551 - - 192,585 769,136 Intangible assets 162,489 1,568,347 648,469 157,294 2,536,599 Goodwill - 15,632 1,349,696 - 1,365,328 Inventory - 879,050 - - 879,050 All other assets - - - 2,811,769 2,811,769 Total Assets $ 782,376 $ 2,468,002 $ 2,215,375 $ 3,258,038 $ 8,723,791 Accounts payable and accrued liabilities $ 1,365 $ 1,518,544 $ 68,063 $ 5,126,634 $ 6,714,606 Note payable, net of debt discount and issuance costs 129,634 170,365 - 1,487,100 1,787,099 Deferred revenue 161,112 - 144,443 - 305,555 All other Liabilities - - - 8,529,992 8,529,992 Total Liabilities $ 292,111 $ 1,688,909 $ 212,506 $ 15,143,726 $ 17,337,252 As of December 31, 2021 Creatd Labs Creatd Ventures Creatd Partners Corporate Total Accounts receivable, net $ - $ 2,884 $ 334,556 $ - $ 337,440 Prepaid expenses and other current assets 48,495 - - 188,170 236,665 Deposits and other assets 626,529 - - 92,422 718,951 Intangible assets - 1,637,924 783,676 11,241 2,432,841 Goodwill - 25,139 1,349,696 - 1,374,835 Inventory - 106,403 - - 106,403 All other assets - - - 3,966,124 3,966,124 Total Assets $ 675,024 $ 1,772,350 $ 2,467,928 $ 4,257,957 $ 9,173,259 Accounts payable and accrued liabilities $ 9,693 $ 766,253 $ 6,232 $ 2,948,362 $ 3,730,540 Note payable, net of debt discount and issuance costs 313,979 - - 1,028,685 1,342,664 Deferred revenue 161,112 13,477 59,570 - 234,159 All other Liabilities - - - 177,644 177,644 Total Liabilities $ 484,784 $ 779,730 $ 65,802 $ 4,154,691 $ 5,485,007 44 For the three months ended September 30, 2022 Creatd Labs Creatd Ventures Creatd Partners Corporate Total Net revenue $ 291,414 $ 316,654 $ 414,783 $ - $ 1,022,851 Cost of revenue 564,349 502,396 337,817 - 1,404,562 Gross margin (loss) ( 272,935 ) ( 185,742 ) 76,966 - ( 381,711 ) Research and development 139,997 - 94,968 - 234,965 Marketing 370,584 234,760 41,176 - 646,520 Stock based compensation 122,964 111,472 126,654 265,478 626,568 General and administrative not including depreciation, amortization, or Impairment 90,212 476,386 384,365 3,136,092 4,087,055 Depreciation and amortization 1,489 43,001 40,917 72,589 157,996 Impairment of intangibles - 85,406 - 164,180 249,586 Total operating expenses $ 723,757 $ 822,618 $ 647,163 $ 3,401,570 $ 5,595,108 Interest expense ( 17,048 ) - - ( 656,647 ) ( 673,694 ) All other expenses - - - ( 2,875,832 ) ( 2,875,832 ) Other expenses, net ( 17,048 ) - - ( 3,532,479 ) ( 3,549,526 ) Loss before income tax provision $ ( 1,001,024 ) $ ( 1,008,360 ) $ ( 570,197 ) $ ( 6,946,764 ) $ ( 9,526,345 ) For the three months ended September 30, 2021 Creatd Labs Creatd Ventures Creatd Partners Corporate Total Net revenue $ 565,852 $ 3,919 $ 609,849 $ - $ 1,179,620 Cost of revenue 849,079 174,438 394,696 - 1,418,213 Gross margin ( 283,227 ) ( 170,519 ) 215,153 - ( 238,593 ) Research and development 250,474 60 72,412 - 322,946 Marketing 1,540,540 - 181,240 90,620 1,812,400 Stock based compensation 337,026 - 332,531 1,179,579 2,151,900 General and administrative 386,844 302,764 293,296 1,672,176 2,385,135 Total operating expenses   2,514,884   32,819   879,479   2,942,375   6,672,381 Loss before income tax provision and equity in net loss from unconsolidated investments $ ( 2,802,443 ) $ ( 506,162 ) $ ( 664,326 ) $ ( 5,747,190 ) $ ( 9,720,121 ) For the Nine months ended September 30, 2022 Creatd Labs Creatd Ventures Creatd Partners Corporate Total Net revenue $ 1,138,904 $ 1,237,542 $ 1,621,044 $ - $ 3,997,490 Cost of revenue 1,917,039 1,706,586 1,147,526 - 4,771,151 Gross margin (loss) ( 778,135 ) ( 469,044 ) 473,518 - ( 773,661 ) Research and development 408,810 - 277,321 - 686,131 Marketing 2,301,994 1,458,280 255,777 - 4,016,051 Stock based compensation 755,284 684,697 777,948 1,630,649 3,848,578 General and administrative not including depreciation, amortization, or Impairment 242,330 1,279,676 1,032,487 8,401,553 10,956,046 Depreciation and amortization 4,166 120,282 114,453 203,042 441,943 Impairment of intangibles - 87,983 - 169,134 257,117 Total operating expenses $ 3,712,584 $ 3,630,918 $ 2,457,986 $ 10,404,378 $ 20,205,866 Interest expense ( 34,095 ) - - ( 673,855 ) ( 707,950 ) All other expenses - - ( 3,424,854 ) ( 3,424,854 ) Other expenses, net ( 34,095 ) - - ( 4,098,709 ) ( 4,132,804 ) Loss before income tax provision $ ( 4,524,814 ) $ ( 4,099,962 ) $ ( 1,984,468 ) $ ( 14,503,087 ) $ ( 25,112,331 ) 45 For the nine months ended September 30, 2021 Creatd Labs Creatd Ventures Creatd Partners Corporate Total Net revenue $ 1,388,411 $ 9,616 $ 1,496,363 $ - $ 2,894,390 Cost of revenue 2,482,848 497,194 1,180,701 - 4,160,743 Gross margin ( 1,094,437 ) ( 487,578 ) 315,662 - ( 1,266,353 ) Research and development 549,426 131 158,839 - 708,396 Marketing 6,842,142 - 804,958 402,479 8,049,579 Stock based compensation 886,832 796,676 875,004 3,103,877 5,662,389 General and administrative 900,323 76,381 682,602 3,891,743 5,551,049 Total operating expenses $ 9,178,723 $ 873,188 $ 2,521,403 $ 7,398,099 $ 19,971,413 Loss before income tax provision and equity in net loss from unconsolidated investments $ ( 10,286,156 ) $ ( 1,360,766 ) $ ( 2,205,741 ) $ ( 11,073,171 ) $ ( 24,925,834 ) Note 14 – Subsequent Events Warrant Exercises Subsequent to September 30, 2022, a total of 4,227,114 warrants were exercised, resulting in the cancellation of 4,227,114 warrants, the issuance of 3,802,626 shares of Common Stock, and gross proceeds of $ 354,994 to the Company. Promissory Notes Subsequent to September 30, 2022, the Company entered into one promissory note agreement with net proceeds of $ 100,000 . Common Stock Purchase Agreement, Securities Purchase Agreement and Promissory Note On October 20, 2022, Creatd, Inc. a Nevada corporation (the “Company”), entered into a Common Stock Purchase Agreement (the “Investment Agreement”) with an otherwise unaffiliated third party (the “Investor”). Pursuant to the terms of the Investment Agreement, for a period of thirty-six (36) months commencing on the trading day immediately following date of effectiveness of the Registration Statement (as defined below), the Investor purchase up to $ 15,000,000 of the Company’s common stock, par value $ 0.001 per share (the “Shares”), pursuant to Drawdown Notices (as defined below), covering the Registrable Securities (as defined below). The purchase price of the Shares under the Investment Agreement is equal to 82 % of the lowest volume weighted average price (VWAP) during the last ten trading days after the Company delivers to the Investor a Put notice (a “Drawdown Notice”) in writing requiring Investor to purchase shares of the Company, subject to the terms of the Investment Agreement. On October 20, 2022, the Company also entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Investor, pursuant to which the Company issued to the Investor on that date a Promissory Note (the “Note”) in the principal amount of $ 300,000 in exchange for a purchase price of $ 255,000 , which the Investor funded on October 20,2022. The proceeds of the Note will be used by the Company for general working capital purposes. 46 The Note bears interest at the rate of 10 % per annum. Starting on the fifth month anniversary of the funding of the Note, and for the next six months thereafter, the Company will make seven equal monthly payments of $ 47,142.85 to the Investor. On October 20, 2022, in connection with the entry by the Company and the Investor into the economic agreements, ( i.e. , the Investment Agreement, the Purchase Agreement, and the Note and the funding thereof), the Company issued 800,000 shares of its common stock to the Investor. Securities Purchase Agreement On October 24, 2022 (the “Effective Date”), the Company, entered into and closed securities purchase agreement (the “Purchase Agreement”) with one accredited investor (the “Investor”), whereby the Investor purchased from the Company for an aggregate of $ 1,500,000 in subscription amount, an unsecured debenture in the principal amount of $ 1,666,650 (the “Debenture”). The Debenture has an original issue discount of 10%, has a term of six months with a maturity date of April 24, 2023, may be extended by six months at the Company’s option subject to certain conditions, and are convertible into shares of Common Stock at a conversion price of $0.20 per share, subject to adjustment upon certain events. In connection with its entry into the Purchase Agreement and issuance of the Debenture, the Company also entered into a side letter agreement (the “Letter Agreement”) with the holders of debentures of the Company, the Series C Warrants and Series D Warrants issued as of May 31, 2022 (the “May Investors”) and the holders of debentures of the Company, the Series E Warrants and Series F Warrants issued as of July 25, 2022 (the “July Investors”). Pursuant to the Letter Agreement each of the May Investors and the July Investors have entered into a lock-up agreement whereby they may not sell any such debentures, warrants, the shares into which such debentures may be converted, or certain shares underlying such warrants until the date that is 30 days after the date on which the registration statement registering for resale the shares of the Company’s common stock underlying the Debenture is declared effective by the Securities and Exchange Commission. Additionally, the Letter Agreement, provides that the May Investors and July Investors have agreed to a further lock up of such shares for a further 30 days upon the receipt of a certain amount of the proceeds from future potential issuances of debentures, common stock or similar securities by the Company. Further additionally, pursuant to the Letter Agreement, the May Investors and the July Investors have agreed to exchange and return for cancellation the Series C Warrants, Series D Warrants, Series E Warrants and Series F Warrants, receiving replacement warrants from the Company (the “Replacement Warrants”), in consideration for (i) the Company’s payment of $ 750,000 of the proceeds from the sale of the Debenture to the May Investors and July Investors on a pro rata basis and (ii) the Company’s agreement to pay, on a pro rata basis to the May Investors and July Investors, the greater of (x) $ 750,000 and (y) 50 % of the gross proceeds raised in a subsequent financing. The Replacement Warrants reflect a reduction in the number of Series C and Series D Warrants from 1,550,000 in each class to 1,536,607 in each class and a reduction in the number of Series E and Series F Warrants from 1,075,000 in each class to 807,143 in each class, and the initial exercise date for the Replacement Warrants are unchanged from the date as set forth in the respective exchanged Series C, Series D, Series E or Series F Warrant. 47 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This Form 10-Q and other reports filed by Creatd, Inc. (the “Company”), from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Form 10-Q. We intend for this discussion to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion should be read in conjunction with our financial statements and accompanying notes for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on April 6, 2022. 48 Overview Creatd, Inc. provides economic opportunities to creators and brands by multiplying the impact of platforms, technology, and people. The Company has four main revenue lines, all directly related to its flagship technology platform, Vocal. The business lines complement one another, creating a flywheel effect. Working together, they provide shared data and resources to holistically leverage and organically grow the Company. Revenues are generated from creator subscriptions, consumer product sales, branded content, and IP development. Creator-Centric Strategy Creatd’s north star metric is to empower creators by providing best-in-class tools, supportive communities, and opportunities for monetization and audience expansion. This creator-first approach is the foundation of our culture and mission. Creator Subscriptions Creatd’s most scalable stream of revenues are derived from its flagship technology platform, Vocal. Vocal was built to serve as a home base for creators. This robust, proprietary technology platform provides digital tools and resources, safe and curated communities, and monetization opportunities that enable creators to find a receptive audience and be rewarded for their content. Creators of all types call Vocal their home, from bloggers to social media influencers, to podcasters, founders, musicians, photographers, and more. Since its initial launch in 2016, Vocal has grown to over 1.5 million registered creators and is one of the premier technology platforms for content creators of all shapes and sizes. Creators can opt to use Vocal for free, or upgrade to the premium membership tier, Vocal+. Upon joining Vocal, either as a freemium or premium member, creators can immediately begin to utilize Vocal’s storytelling tools to create and publish their stories, as well as benefit from Vocal’s monetization features. Creatd facilitates creators’ monetization on Vocal in many ways, including i) rewarding creators for each ‘read’ their story receives; ii) via Vocal Challenges, or writing contests through which creators can win cash and other rewards; iii) by awarding Bonuses; iv) by connecting creators with brands for opportunities to collaborate on Vocal for Brands branded content campaigns; v) through ’Subscribe,’ which enables creators to receive payment directly from their audience via monthly subscriptions and one-off microtransactions; vi) via Vocal’s Ambassador Program, which enables creators to receive additional rewards whenever they refer a new Vocal+ member. The Vocal app is available for both iOS and Android on the Apple App store and the Google Play store. Vocal’s proprietary technology is built on Keystone, the same underlying open-source framework used by industry leaders in the software as a service (SaaS) space. Some of the differentiating elements of Vocal’s technology are speed, sustainability, and scalability. The Company continues to invest heavily in research and development to continuously improve and innovate its platform, with the goal of optimizing the user experience for creators, brands and their audiences. Additionally, the Vocal platform and its underlying technology maintain an advantageous capital-light infrastructure. By using cloud service providers and data segment specialists, we are able to focus on building the platform, community, and revenue rather than building and maintaining the costly internal infrastructures that have materially affected so many legacy media platforms. Vocal’s technology has been specifically designed to significantly scale without a material corresponding increase in operational costs. While our users can embed rich media, such as video, audio, and product links, into their Vocal stories, the rich media content is hosted elsewhere (such as YouTube, Instagram, Vimeo, Shopify, and Spotify). The Vocal platform can accommodate content of all kinds without bearing the financial or operational costs associated with hosting the media itself. Creatd maintains a number of partnerships and initiatives with the primary content distribution and hosting platforms. In addition to the benefits this framework affords to the Company, it provides the additional benefit to our content creators, in that a creator can increase their monetization; for example, a creator can embed their YouTube video into a Vocal story and thus derive earnings from both platforms when their video is viewed. 49 Consumer Products Group Creatd’s portfolio of internally owned and operated e-commerce businesses and associated technology and infrastructure make up the majority of the company’s second most scalable revenue line. The Company supports founders by providing a host of services including design and development, marketing and distribution, and go-to-market strategies. The Company expects to broaden its portfolio through the acquisition of up and coming brands that are aligned and easily consolidated into its shared supply chain, resources, and infrastructure. This portfolio includes: ● Camp , a direct-to-consumer (DTC) food brand which creates healthy upgrades to classic comfort food favorites. Each of Camp’s products are created with servings of vegetables and contain Vitamins A, C, D, E, B1 + B6. Since its launch in 2020, Camp continues to add new products to its line of healthy, veggie-based, family-friendly foods, with flavors including Classic Cheddar Mac ‘N’ Cheese, White Cheddar Mac ‘N’ Cheese, Vegan Cheezy Mac, and Twist Veggie Pasta. ● Dune Glow Remedy (“Dune”), which the Company purchased and brought to market in 2021, is a beverage brand focused on promoting wellness and beauty from within. Each beverage in Dune’s product line is meticulously crafted with functional ingredients that nourish skin from the inside out and enhance one’s natural glow. During 2022, Dune has continued to advance its retail and wholesale distribution strategy, securing numerous partnerships including with lifestyle retailer Urban Outfitters, Equinox, and the Los Angeles-based Erewhon Market. ● Basis , a hydrating electrolyte drink mix formulated using rehydration therapies developed by the World Health Organization. Acquired by the Company in first quarter 2022, Basis has a history of strong sales volume both on the brand’s website as well as through third-party distribution channels such as Amazon. ● Brave, a plant-based food company that provides convenient and healthy breakfast food products. On September 13, 2022, the Company acquired 100% of the membership interests of Brave Foods, LLC, a Maine limited liability company (“Brave”). What started as a search for a better morning routine evolved into a business serving thousands of go-getters of every type. 50 Branded Content The branded content revenue line is driven primarily by its Vocal for Brands offering, the Company’s internal content studio. The business line works with premier brands developing best-in-class organic marketing campaigns. In addition to content creation, the Company generates revenues from its influencer and performance marketing agency opportunities. Brands have a story to tell. They leverage Vocal’s creator communities to help them tell it. Vocal for Brands’ content marketing studio specializes in pairing leading brands with Vocal creators, as well as discovering new talent and introducing them to the Vocal platform. The branded content business produces marketing campaigns on the platform that are non-interruptive, engaging, and direct-response driven. Additionally, brands can opt to collaborate with Vocal on sponsored Challenges, prompting the creation of thousands of high-quality stories that are centered around the brand’s mission and further disseminated through creators’ respective social channels and promotional outlets. Vocal for Brands campaigns leverage Vocal’s first-party audience insights, which enables the creation of highly targeted, segmented audiences and optimized campaign results. IP Development and Production Creatd’s fourth revenue stream is driven by partnering with its top creators to produce stories for TV, film, podcasts, and print. The Vocal platform is perpetually generating intellectual property sourced and curated by a combination of human let moderation and machine learning models. With millions of compelling stories in its midst, Creatd’s Vocal technology surfaces the best candidates for transmedia adaptations, through a deep analysis of community, creator, and audience insights. In 2022, Creatd announced a series of newly released and upcoming production projects, including: ● “Write Here, Write Now,” the Company’s first-ever podcast showcasing select Vocal creators and stories; a partnership with UK-based publisher, Unbound, for the publication of books featuring stories sourced from Vocal; the formation of a new graphic novel development arm which in Fall 2022 will release its first title, Steam Wars , created by artist and independent filmmaker Larry Blamire. ● OG Gallery: The OG Collection is an extensive library of original artwork and imagery from the archives of some of the most iconic magazines of the 20th century. OG Gallery is an exploratory initiative aimed at identifying opportunities to propel the OG Collection into a new technological sphere: the NFT marketplace. Application of First-Party Data Creatd’s shared business intelligence and marketing teams identify and target individual creators, communities, and brands, utilizing empirical data harnessed from the Vocal technology platform. The team’s ability to apply its proprietary first-party data works to reduce acquisition costs for new creators and to help provide brands with conversions and an ideal targeted audience. In this way, our ability to apply first-party data is one of the value-drivers for the Company across its four business pillars. The internal teams work across the Company’s portfolio of technology product and service revenue lines. Creatd uses its first party data to improve the Vocal platform. Specifically, data helps understand the behaviors and attributes that are common among the creators, brands, and audiences within the platform’s ecosystem. Pairing first-party Vocal data with third-party data from distribution platforms such as Instagram, Tiktok, Twitter, and Snapchat provide a more granular profile of creators, brands, and audiences. It is through generating this valuable first-party data that the Company can continually enrich and refine its targeting capabilities for branded content marketing and creator acquisition, and specifically, to reduce creator acquisition costs (CAC) and subscriber acquisition costs (SAC). Competitive Advantage The idea for Vocal came as a response to what Creatd’s founders recognized as systemic flaws inherent to the digital media industry and its operational infrastructures. The depreciating value of digital media business models built on legacy technology platforms that did not efficiently access and apply data, created a unique opportunity for the development of a new type of creator-centric platform. Key to building a platform that could appeal to a global community was utilizing that data to create a win-win proposition for all constituents including creators, audiences and the brands that want to access them. The proprietary nature of Creatd’s technology and its process give the company a competitive advantage in acquiring undervalued technology assets that can be rapidly assimilated into the greater collective, thus exponentially driving future EBITDA. Creatd’s founders built the Vocal platform upon the general thesis that a closed and safe ecosystem utilizing first-party data to increase efficiencies could create a sustainable and defensible business model. Vocal was strategically developed to provide value for content creators, readers, and brands, and to serve as a home for the ever-increasing amount of digital content being produced and the libraries of digital assets lying dormant. 51 Acquisition Strategy Creatd’s hybrid finance and design culture is key to its acquisition strategy. Acquisition targets are companies that meet a set of opportunistic or financial standards or that are part of specific digital environments. Transactions are mainly accretive and targets can seamlessly integrate into Creatd’s existing revenue lines. Creatd will continue to make strategic acquisitions when presented with opportunities that are in the interest of long term shareholder value. Recent Developments Securities Purchase Agreement On September 15, 2022, the Company, entered into a securities purchase agreement (the “Purchase Agreement”) with five accredited investors resulting in the raise of $800,000 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell in a registered direct offering (the “Offering”) an aggregate of 4,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). In a concurrent private placement, the Company issued to such investors warrants to purchase up to 4,000,000 shares of Common Stock, representing 100% of the shares of common stock purchased in the Offering (the “Warrants”). The Warrants and the shares of common stock issuable upon the exercise of the Warrants (the “Warrant Shares”) are not being registered under the Securities Act of 1933, as amended (the “Securities Act”). The Company received gross proceeds from the Offering of approximately $800,000, before deducting Offering expenses, used for general corporate purposes, including working capital. The shares of Common Stock were offered and sold by the Company pursuant to a prospectus supplement, which will be filed with the Securities and Exchange Commission (the “Commission”), in connection with a takedown from the Company’s effective shelf registration statement on Form S-3, which was filed with the Commission on November 25, 2020 and subsequently declared effective on April 23, 2021 (File No. 333-250982) (the “Shelf Registration Statement”). 52 The Warrants are immediately exercisable for a term of five years until September 15, 2027. The Warrants are exercisable at an exercise price of $0.20, subject to adjustment upon certain events. The Warrants provide for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock. The shares underlying the Warrants are to be registered within 10 trading days of the date of the Purchase Agreement. The representations and warranties contained in the Purchase Agreement were made by the parties to, and solely for the benefit of, the other in the context of all of the terms and conditions of the Purchase Agreement and in the context of the specific relationship between the parties. The provisions of the Purchase Agreement, including the representations and warranties contained therein, are not for the benefit of any party other than the parties to the Purchase Agreement. The Purchase Agreement is not intended for investors and the public to obtain factual information about the current state of affairs of the parties. Restructuring Agreement On September 15, 2022, in connection with the Offering, the Company entered into an agreement with the holders (the “Holders”) of certain of the Company’s previously issued securities (the “Restructuring Agreement”). The Restructuring Agreement, among other things, modified certain provisions of the following securities of the Company: (i) Original Issue Discount Senior Convertible Debentures Issued on May 31, 2022 (the “May 2022 Debentures”); (ii) Original Issue Discount Senior Convertible Debentures Issued on July 25, 2022 (the “July 2022 Debentures” and, together with the May 2022 Debentures, the “Debentures”); (iii) Common Stock Purchase Warrants issued on February 28, 2022 (the “February 2022 Warrants”); (iv) Common Stock Purchase Warrants issued on March 9, 2022 (the “March 2022 Warrants”); (v) Series C Common Stock Purchase Warrants issued on May 31, 2022 (the “Series C Warrants”); (vi) Series D Common Stock Purchase Warrants issued on May 31, 2022 (the “Series D Warrants”); (vii) Series E Common Stock Purchase Warrants issued on July 25, 2022 (the “Series E Warrants”); (viii) Series F Common Stock Purchase Warrants issued on July 25, 2022 (the “Series F Warrants” and, together with the February 2022 Warrants, the March 2022 Warrants, Series C Warrants, Series D Warrants and Series E Warrants, the “Restructured Warrants”); Pursuant to the Restructuring Agreement, the Company and the Holders agreed to, among other things, to (i) reduce the conversion price of the Debentures down to $0.20, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock; (ii) reduce the exercise price of the Restructured Warrants down to $0.20, subject to adjustment for subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock; (iii) extend the maturity dates for the Debentures to March 31, 2023; (iv) permit the Company’s contemplated rights offering to proceed, provided that the per share offering price in the rights offering is not less than $0.20; and (v) require that the Company’s cash burn rate not exceed $600,000 per month; provided, however, that with the prior written consent of a majority in interest of the Holders, such permitted monthly burn rate can be increased by $150,000, provided such additional amount is used for marketing purposes. 53 Additionally, in connection with the Restructuring Agreement, (i) the Company entered into a Registration Rights Agreement (“Registration Rights Agreement”), providing for the filing of a registration statement covering the Restructured Warrants and shares underlying the Warrants by not later than 10 trading days after the date of the Registration Rights Agreement or the earliest practical date on which the Company is permitted by Commission guidance to file such registration statement; (ii) the Company and its subsidiaries entered into a Security Agreement (the “Security Agreement”), whereby the Company granted a first priority security interest in all of their respective assets to the Holders and (iii) the subsidiaries of the Company delivered a guarantee (the “Guarantee”) in favor of the Holders whereby each such subsidiary guaranteed the full payment and performance of all obligations of the Company pursuant to the Debentures. Each of our directors and officers have entered into lock-up agreements (the “Lock-up Agreements”) in favor of the Holders, whereby they have agreed not to offer, sell, agree to sell, directly or indirectly, or otherwise dispose of any shares of Common Stock or any securities convertible into or exchangeable for shares of Common Stock without the prior written consent of the Holders for a period of 180 days after the date of the Restructuring Agreement. The Lock-up Agreements provide limited exceptions and their restrictions may be waived at any time by the Holders. Quotation on OTCQB On September 7, 2022, The Nasdaq Capital Market (“Nasdaq”) suspended the trading of the Company’s common stock and warrants. Nasdaq filed a Form 25 with the SEC on October 26, 2022 effecting the delisting of the Company’s securities from Nasdaq. Our common stock is quoted on the OTCQB Marketplace operated by OTC Markets Group Inc. (“OTCQB”) under the symbol “CRTD.” Results of Operations Liquidity and Capital Resources The following table summarizes total current assets, liabilities and working capital at September 30, 2022 compared to December 31, 2021: September 30, 2022 December 31, 2021 Increase / (Decrease) Current Assets $ 1,680,594 $ 4,475,242 $ (2,794,648 ) Current Liabilities $ 15,172,939 $ 5,421,015 $ 9,751,924 Working Capital (Deficit) $ (13,492,345 ) $ (945,773 ) $ (12,546,572 ) At September 30, 2022, the Company had a working capital deficit of $13,492,345 as compared to a working capital deficit of $945,773 at December 31, 2021, an increase in working capital deficit of $12,546,572. The increase is primarily attributable to the decrease in cash, accounts receivable, and prepaids and other current assets, as well as an increase in accounts payable, notes payable and deferred revenue. 54 Net Cash Net cash used in operating activities for the nine months ended September 30, 2022, and 2021, was $13,857,189 and $15,617,065, respectively. The net loss for the nine months ended September 30, 2022, and 2021 was $25,112,331 and $24,942,247, respectively. The decrease in net cash used in operating activities reflects the decrease in net cash used in operating activities reflects a decrease in cash paid for marketing expenditures, research and development, legal fees, and accounting & audit fees. This was offset by an increase in rent and lease expenses and payroll expense. Net cash used in investing activities for the nine months ended September 30, 2022, and 2021, was $494,192 and $1,325,155, respectively. This is primarily attributable to cash paid for property and equipment along with the cash paid for minority and majority investment in business. Net cash provided by financing activities for the nine months ended September 30, 2022, and 2021 was $11,061,905 and $10,560,265, respectively. During the nine months ended September 30, 2022, the Company’s operations were predominantly financed by net proceeds from the issuance of common stock with warrants and from the issuance of notes. Similarly, the Company’s financing activity for the nine months ended September 30, 2021, generated $5,472,068 from the exercise of warrants, the proceeds from loans and notes of $3,931,720, and proceeds from the issuance of stock and warrants, which were partially offset by the repayment of notes and loans of $1,345,723. Summary of Statements of Operations for the Three Months Ended September 30, 2022, and 2021: Three Months Ended September 30, 2022 2021 Revenue $ 1,022,851 $ 1,179,620 Cost of revenue $ 1,404,562 $ 1,418,213 Operating expenses $ (5,595,108 ) $ (6,672,381 ) Loss from operations $ (5,976,819 ) $ (6,910,974 ) Other expenses $ (3,549,526 ) $ (2,809,147 ) Net loss $ (9,526,345 ) $ (9,736,534 ) Loss per common share - basic and diluted $ (0.45 ) $ (0.71 ) 55 Revenue Revenue totaled $1,022,851 for the three months ended September 30, 2022, a decrease of $156,769 as compared to $1,179,620 for the comparable three months ended September 30, 2021. Management attributes this decrease to the significant headwinds that have interrupted year-over-year growth due to supply-line disruptions and an overall decline in consumer spending. Cost of Revenue Cost of revenue for the three months ended September 30, 2022, were $1,404,562, relatively flat as compared to $1,418,213 for the three months ended September 30, 2021. Going forward, the Company expects the gross margin to continue to improve over time as it continues to consolidate operations across its portfolio of e-commerce brands. Operating Expenses Operating expenses for the three months ended September 30, 2022, were $5,595,108 as compared to $6,672,381 for the three months ended September 30, 2021. The 16% decrease of $1,077,273 in operating expenses is primarily attributable to a cost cutting program implemented by the Company to dramatically reduce expenses, including significant decreases to marketing and research and development expenditures. This program began in September of 2022, and its primary impact will be recognized in Q4 of 2022, including the impact of a significant reduction in headcount. Additionally, the company’s non-cash charges totaled $626,568, a $1,135,880 decrease from third quarter 2021. This decrease primarily represents stock-based compensation to employees and consultants during the quarter. These decreases were offset by an increase in general and administrative expenses, as well as approximately $257,117 in one-time non-cash expenses related to the impairment of intangible assets and goodwill, as well as a one-time cash expense of $475,000 expense related to a member of management’s severance package. Loss from Operations Loss from operations for the three months ended September 30, 2022, was $5,976,819 as compared to $6,910,974 for the three months ended September 30, 2021. The $934,155 decrease in the loss from operations this quarter primarily reflects the Company’s decreased operating expenses, offset by the decrease in revenues. 56 Other Expenses Other expenses for the three months ended September 30, 2022, were $3,549,526 as compared to $2,809,147 for the three months ended September 30, 2021. The decrease in third quarter 2022 other income was predominantly due to the increase from loss on extinguishment of debt and interest expense. This was offset by a decrease in change in derivative liability and accretion of debt discount and issuance cost. Net Loss Net loss for the three months ended September 30, 2022, was $9,526,345, as compared to a net loss of $9,797,011 for the three months ended September 30, 2021. Net loss attributable to common shareholders for the three months ended September 30, 2022, was $9,448,271, or loss per share of $0.45, as compared to a net loss attributable to common shareholders of $9,797,011, or loss per share of $0.71, for the three months ended September 30, 2021. Summary of Statements of Operations for the Nine Months Ended September 30, 2022, and 2021: Nine Months Ended September 30, 2022 2021 Revenue $ 3,997,490 $ 2,894,390 Cost of revenue $ 4,771,151 $ 4,160,743 Operating expenses $ (20,205,866 ) $ (19,971,413 ) Loss from operations $ (20,979,527 ) $ (21,237,766 ) Other expenses $ (4,132,804 ) $ (3,688,068 ) Net loss $ (25,112,331 ) $ (24,942,247 ) Loss per common share - basic and diluted $ (1.23 ) $ (2.20 ) Revenue Revenue totaled $3,997,490 for the nine months ended September 30, 2022, as compared to $2,894,390 for the comparable nine months ended September 30, 2021, an increase of $1,103,100. The 38% year-over-year increase in revenue is primarily attributable to growth within the Company’s consumer product portfolio. Cost of Revenue Cost of revenue for the nine months ended September 30, 2022, were $4,771,151 as compared to $4,160,743 for the nine months ended September 30, 2021. The increase of $610,408 in cost of revenue is primarily related to an increase in product-related cost of goods sold as the consumer products group expanded its operations. The Company expects the gross margin to continue to improve over time as it continues to grow a self-sustaining, organically driven revenue model across its business segments. 57 Operating Expenses Operating expenses for the nine months ended September 30, 2022, were $20,205,866 as compared to $19,971,413 for the nine months ended September 30, 2021. The decrease of $234,453 in operating expenses is mainly related to a 50% decrease in marketing spend and a 32% decrease in stock-based compensation. This increase was partially offset by an increase in general and administrative expenses. The Company expects expenditures to decrease further due to the austerity measures put into place in late Q3 2022. Loss from Operations Loss from operations for the nine months ended September 30, 2022, was $20,979,527 as compared to $21,237,766 for the nine months ended September 30, 2021. The $ 258,239 increase in the loss from operations primarily reflects the Company’s increased revenues within its consumer products group coupled with lowered operating expenses. Other Expenses Other expenses for the nine months ended September 30, 2022, were $4,132,804 as compared to $3,688,068 for the nine months ended September 30, 2021. The increase in other income was predominantly due to the increase from loss on extinguishment of debt and interest expense. This was offset by a decrease in change in derivative liability and accretion of debt discount and issuance cost. Net Loss Net loss for the nine months ended September 30, 2022, was $25,112,331, as compared to a net loss of $24,942,247 for the nine months ended September 30, 2021. Net loss attributable to common shareholders for the nine months ended September 30, 2022, was $24,130,227, or loss per share of $1.23, as compared to a net loss attributable to common shareholders of $25,413,042, or loss per share of $2.20, for the nine months ended September 30, 2021. Off-Balance Sheet Arrangements As of September 30, 2022, we had no off-balance sheet arrangements. 58 Significant Accounting Policies Our significant accounting policies are described in Note 2 of the Financial Statements. If we complete an acquisition, we will be required to make estimates and assumptions typical of other companies. For example, we will be required to make critical accounting estimates related to valuation and accounting for business combinations. The estimates will require us to rely upon assumptions that were highly uncertain at the time the accounting estimates are made, and changes in them are reasonably likely to occur from period to period. Changes in estimates used in these and other items could have a material impact on our financial statements in the future. Our estimates will be based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differ significantly from our estimates. For detailed information regarding our critical accounting policies and estimates, see our financial statements and notes thereto included in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to our critical accounting policies and estimates from those disclosed in our most recent Annual Report on Form 10-K. Item 3. Quantitative and Qualitative Disclosures About Market Risk. There have been no material changes in our exposures to market risk since December 31, 2021. For details on the Company’s interest rate, foreign currency exchange, and credit risks, see “Item 7A. Quantitative and Qualitative Information About Market Risks” in our 2021 Annual Report. Item 4. Controls and Procedures. Disclosure Controls and Procedures The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are not effective. Changes in Internal Control Over Financial Reporting There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. However, throughout 2021 and into 2022, the Company continues the complete review of all of its financial procedures and controls and is continuing the process of updating and optimizing its infrastructure around these controls. Over the past year, the Company has hired additional finance and accounting personnel, significantly improving the segregation of duties within that department and providing additional bandwidth for management to focus on improving controls and procedures. This review is ongoing, and the Company believes that this process will continue to positively affect our internal control over financial reporting in the future. 59 PART II - OTHER INFORMATION Item 1. Legal Proceedings. From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. On 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 Anti-cybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. § 1125(d), or otherwise under the Lanham Act, 15 U.S.C. § 1051 et seq. Creatd claims trademark rights and certain other rights with respect to the term and the domain name VOCL.COM. Monster seeks a determination by the Court that Monster’s registration and/or use of VOCL.COM is not, and has not been in violation of the ACPA, and that Plaintiffs’ use of VOCL.COM constitutes neither a violation of the ACPA nor trademark infringement or dilution under the Lanham Act. Creatd believes the lawsuit lacks merit and will vigorously challenge the action. At this time, we are unable to estimate potential damage exposure, if any, related to the litigation. A complaint against the Company, dated September 21, 2022, has been filed in the Supreme Court of the State of New York, New York County, by Lind Global Macro Fund LP and Lind Global Fund II LP, making certain claims alleging breach of contract related to two Securities Purchase Agreements executed on May 31, 2022, seeking damages in excess of $920,000. No response to the Complaint has been filed at this time. The Company has not yet submitted a response to the Complaint or had the opportunity to conduct discovery as to the allegations. The Company will file an initial response on or before November 18, 2022. Given the premature nature of this case, it is still too early for the Company to make an assessment as to liability. Item 1A. Risk Factors. As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. During the three months ended September 30, 2022, we issued securities that were not registered under the Securities Act and were not previously disclosed in a Current Report on Form 8-K or Quarterly Report on Form 10-Q as listed below. All of the securities discussed in this Item 2 were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act. Consultant Shares During the three months ended September 30, 2022, the Company issued 157,260 shares of Common Stock to consultants and employees. Acquisition of Orbit, LLC On August 1, 2022, the Company issued 57,576 shares in relation to its purchase of 51% of the issued and outstanding membership interests of Orbit Media LLC. 60 Item 3. Defaults Upon Senior Securities. On September 2, 2022, the Company went into default on the notes issued in relation to the May 2022 Convertible Note Offering. As part of the default terms the Company owes 110% of the principal outstanding and the notes accrue interest at a rate of 18%. On September 15, 2022, the Company and six out of eight lenders May 2022 Investors agreed to forgive default interest and extend the maturity date to March 31, 2023 for a reduced conversion price of $0.20 for the convertible notes and warrants. As of September 30, 2022, the Company is in default on $900,000 of principal of these notes. Item 4. Mine Safety Disclosures. Not applicable. Item 5. Other Information. Common Stock Purchase Agreement, Securities Purchase Agreement and Promissory Note On October 20, 2022, Creatd, Inc. a Nevada corporation (the “Company”), entered into a Common Stock Purchase Agreement (the “Investment Agreement”) with an otherwise unaffiliated third party (the “Investor”). Pursuant to the terms of the Investment Agreement, for a period of thirty-six (36) months commencing on the trading day immediately following date of effectiveness of the Registration Statement (as defined below), the Investor purchase up to $15,000,000 of the Company’s common stock, par value $0.001 per share (the “Shares”), pursuant to Drawdown Notices (as defined below), covering the Registrable Securities (as defined below). The purchase price of the Shares under the Investment Agreement is equal to 82% of the lowest volume weighted average price (VWAP) during the last ten trading days after the Company delivers to the Investor a Put notice (a “Drawdown Notice”) in writing requiring Investor to purchase shares of the Company, subject to the terms of the Investment Agreement. On October 20, 2022, the Company also entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Investor, pursuant to which the Company issued to the Investor on that date a Promissory Note (the “Note”) in the principal amount of $300,000 in exchange for a purchase price of $255,000, which the Investor funded on October 20,2022. The proceeds of the Note will be used by the Company for general working capital purposes. The Note bears interest at the rate of 10% per annum. Starting on the fifth month anniversary of the funding of the Note, and for the next six months thereafter, the Company will make seven equal monthly payments of $47,142.85 to the Investor. On October 20, 2022, in connection with the entry by the Company and the Investor into the economic agreements, ( i.e. , the Investment Agreement, the Purchase Agreement, and the Note and the funding thereof), the Company issued 800,000 shares of its common stock to the Investor. Resignation of Chief Executive Officer and Director On August 9, 2022, Laurie Weisberg, the Company’s Chief Executive Officer and a member of the Board, notified the Company of her intention to resign from the positions of Chief Executive Officer, director, and any other positions held with the Company or any of its subsidiaries, regardless of whether Ms. Weisberg had been appointed . Such resignations are to become effective on a date to be determined following further discussion with the Board, but in no event later than August 31, 2022. Appointment of Chief Executive Officer Effective upon Ms. Weisberg’s resignation as Chief Executive Officer, Jeremy Frommer, currently the Company’s Executive Chairman, will be appointed as Chief Executive Officer, pursuant to the Board’s approval. Jeremy Frommer Mr. Frommer was appointed Executive Chairman in February 2022 and has been a member of our board of directors since February 2016. Previously, he served as our Chief Executive Officer from February 2016 to August 2021, and Co-Chief Executive Officer from August 2021 to February 2022. Mr. Frommer has over 20 years of experience in the financial technology industry. Previously, Mr. Frommer held key leadership roles in the investment banking and trading divisions of large financial institutions. From 2009 to 2012, Mr. Frommer was briefly retired until beginning concept formation for Jerrick Ventures which he officially founded in 2013. From 2007 to 2009, Mr. Frommer was Managing Director of Global Prime Services at RBC Capital Markets, the investment banking arm of the Royal Bank of Canada, the largest financial institution in Canada, after the sale of Carlin Financial Group, a professional trading firm. From 2004 to 2007, Mr. Frommer was the Chief Executive Officer of Carlin Financial Group after the sale of NextGen Trading, a software development company focused on building equity trading platforms. From 2002 to 2004, Mr. Frommer was Founder and Chief Executive Officer of NextGen Trading. From 2000 to 2002, he was Managing Director of Merger Arbitrage Trading at Bank of America, a financial services firm. Mr. Frommer was also a director of LionEye Capital, a hedge fund from June 2012 to June 2014. He holds a B.A. from the University of Albany. We believe Mr. Frommer is qualified to serve on our board of directors due to his financial and leadership experience. Appointment of Director Effective upon Ms. Weisberg’s resignation as a director, Justin Maury, currently the Company’s President and Chief Operating Officer, will be appointed to the Board, pursuant to the Board’s approval. 61 Justin Maury Mr. Maury has served as our President since January 2019 and was appointed Chief Operating Officer in August 2021. A full-stack designer and product developer by training, Mr. Maury partnered with Jeremy Frommer and founded the Company in 2013, having brought with him 10 years of experience in the creative industry. Since joining Creatd in 2013, Mr. Maury has been an instrumental force in the Company’s business and revenue expansion, and has overseen the Company’s product development since inception, including overseeing the design, development, launch, and ongoing growth of the Company’s flagship product, Vocal, the innovative creator that, under Mr. Maury’s leadership, has grown to a community of over 1.5 million users with a total audience reach of over 175 million. As a director, we believe Mr. Maury will add considerable value, including through by providing a unique perspective into Creatd’s product performance and evolution and by providing invaluable direct input to help guide the Company’s ongoing refinement of its technology roadmap and maturation of its business model. Item 6. Exhibits. Exhibit No. Description 4.1 Form of Original Issue Discount Senior Convertible Debenture (incorporated by reference to Exhibit 4.1 to the Company’s current report on Form 8-K filed with the Commission on July 29, 2022) 4.2 Form of Series E Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.2 to the Company’s current report on Form 8-K filed with the Commission on July 29, 2022) 4.3 Form of Series F Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.3 to the Company’s current report on Form 8-K filed with the Commission on July 29, 2022) 4.4 Original Issue Discount Senior Convertible Debentures Issued on May 31, 2022 (incorporated by reference to Exhibit 4.1 to the Company’s current report on Form 8-K filed with the Commission on September 19, 2022) 4.5 Common Stock Purchase Warrants issued on February 28, 2022 (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed with the Commission on September 19, 2022) 4.6 Common Stock Purchase Warrants issued on March 9, 2022 (incorporated by reference to Exhibit 4.1 to the Company’s current report on Form 8-K filed with the Commission on September 19, 2022) 4.7 Series C Common Stock Purchase Warrant issued on May 31, 2022 (incorporated by reference to Exhibit 4.2 to the Company’s current report on Form 8-K filed with the Commission on September 19, 2022) 4.8 Series D Common Stock Purchase Warrant issued on May 31, 2022 (incorporated by reference to Exhibit 4.3 to the Company’s current report on Form 8-K filed with the Commission on September 19, 2022) 10.1 Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed with the Commission on July 29, 2022) 10.2 Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed with the Commission on July 29, 2022) 10.3 Form of Guaranty (incorporated by reference to Exhibit 10.3 to the Company’s current report on Form 8-K filed with the Commission on July 29, 2022) 10.4 Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed with the Commission on September 19, 2022) 62 10.5 Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed with the Commission on September 19, 2022) 10.6 Form of Restructuring Agreement (incorporated by reference to Exhibit 10.3 to the Company’s current report on Form 8-K filed with the Commission on September 19, 2022) 10.7 Form of Security Agreement (incorporated by reference to Exhibit 10.4 to the Company’s current report on Form 8-K filed with the Commission on September 19, 2022) 10.8 Form of Subsidiary Guarantee (incorporated by reference to Exhibit 10.5 to the Company’s current report on Form 8-K filed with the Commission on September 19, 2022) 10.9 Form of Lock-up Agreement (incorporated by reference to Exhibit 10.6 to the Company’s current report on Form 8-K filed with the Commission on September 19, 2022) 31.1* Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a), As adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a), As adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, As adopted Pursuant to Section 906 of the Sarbanes-Oxley Act 2002 32.2* Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, As adopted Pursuant to Section 906 of the Sarbanes-Oxley Act 2002 101.INS* Inline XBRL Instance Document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document. 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). * Filed herewith # This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act. 63 SIGNATURES Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CREATD, INC. Date: November 16, 2022 By: /s/ Jeremy Frommer Name: Jeremy Frommer Title: Chief Executive Officer (Principal Executive Officer) Date: November 16, 2022 By: /s/ Chelsea Pullano Name: Chelsea Pullano Title: Chief Financial Officer (Principal Financial and Accounting Officer) 64