Creatd, Inc. (CRTD) Earnings Call Transcript & Summary

Thank you for joining us today. The 2022 Annual Meeting of Stockholders for Creatd, Inc. will begin momentarily. I would first like to introduce Creatd CFO, Chelsea Pullano, who is acting as the Corporate Secretary for today's meeting.

Good afternoon. I'm Chelsea Pullano, Creatd Chief Financial Officer. Thank you to all who have joined us today. We will begin today with some brief remarks from Jeremy Frommer, Creatd's Founder, Chairman and CEO, who's presiding over today's meeting. But before introducing Jeremy, I need to start off by taking care of a few technical matters to make sure that we are conducting a duly authorized meeting. First, I call your attention to the rules of conduct set forth for this meeting. They are available to each shareholder and outline in the proxy materials. Please be advised as well that the company has designated Angela Lamb to serve as the Inspector of Election. The oath signed by the Inspector of Election will be filed with the minutes of the meeting. Finally, if there are any stockholders present who have not yet voted on the proposals under consideration today or would like to change their proxy vote, please do so now by following the instructions on your screen and using the control number that was provided to you. Following Jeremy's remarks, we will give you a few moments to submit your ballots at which point, polls will be closed. And with that, I'd like to introduce Jeremy Frommer, our company's Founder, CEO and Chairman.

[Audio Gap] today's shareholder meeting. From September to December 2022, in less than a 4-month period, we eliminated a significant portion of our operating expenses, reduced debt and raised capital. We are stronger today than we were on September 2 when I was notified that Creatd would be delisted from the NASDAQ. My attorney's words hurt like a pain that you don't want to get up from, but then you visualize all the carnage that comes along with you giving up. You dig so deep, you didn't know that you had that depth. You bury any emotional obstacles and 0 in on one singular idea; survival. You cauterize the wound and move on as fast as you can. There are too many people depending on you, investors, employees, vendors, clients, friends and family. In today's market environment, a CEO has no choice but to fight on a battlefront that was never intended to be their field of glory. The vast majority of CEOs in publicly traded companies are literally at war with the very same people they need to work with. And they are not armed with the right tools to win. This race against time to reach profitability has become a noose around the neck of entrepreneurs who in the last decade, attempted to access the public markets to build the company. Look at the charts. They speak for theirselves. Data doesn't lie. The public markets, particularly the OTC and small cap NASDAQ and the over 20,000 stocks that trade there were established to facilitate the American entrepreneurial dream. But that is not what it is morphed into. Today, as CEO of a publicly traded company requires an amazing team to run the day-to-day operations so that they can actually fight market headwinds and investigate technicals of the day-to-day movements of their stock. And while there are opportunities in this process to uncover nefarious enemies, it turns out the true problem is far more systemic. Up until a decade ago, this systemic risk remained largely at the fringe and I would even venture to assume that the larger institutions were aware of the problems but lacked also the tools to combat them. In an age of technology, when demand began overwhelming supply, the machines that provide liquidity to the capital markets did not adapt to the monumental increase in demand for small cap and micro-cap stocks. Without adjustment to the fundamental mechanism that fills electronic orders in the 21st century, the machines were driven to create a supply to balance demand without recognition from a risk perspective it posed the following threat. Generally speaking, when stocks with micro to small market caps experienced an increase in demand from retail investors. It has the effect of abnormally expanding the shareholder base far above its authorized shares. A company can literally wind up with short positions in their underlying stock that far exceed the availability of the float. All of this is possible because the market making book and stock loan desks are just one of many businesses that answer up to institutional central books. Think of the central book as the reconciliation point of all outstanding positions from all business divisions and portfolios associated with or in the institution. The central book includes things such as equity positions from convertible bond desks, retail desks, proprietary merger arbitrage books, let alone index arbitrage. It includes any portfolio it is responsible for, and there are many. The central book reports net positions to regulators and SROs, a self-regulated organization. If the central book reports to regulators that it believes it can obtain a bona-fide borrow on its short positions, then the regulators, or SROs, can and often do take the institution at its word. Bear in mind how the ultimate report goes up to the regulator. It is a macro report, meaning the regulator sees billions and billions of shares summarize such that they understand as a broad nature where the institution is on a net basis and from a risk perspective, meaning they see how many shares are short in totality. And does the institution believe it has a bona-fide borrow for what it states that totality is. It would require many people investigating on a much deeper level should they want to verify the full truth of that macro statement. And even then, this investigation is often only a sampling of transactions. This sampling authenticates the belief that the institution has a bona-fide borrow. There are occasions that require the regulators to dig deeper and go through every individual position, but that is very rare. At the root of all of this is a lack of transparency and a reliance on legacy platforms that actually no longer guarantee the safety of the retail investor. It took nearly a decade to see an increase in demand that has now led to short conditions in the markets that could potentially have a contagion effect that ultimately finds its way into the mid-cap and large-cap space. This would create the need for a reassessment of valuations within the stock market as a whole, given what has been the creation of a synthetic depression of valuations. This synthetic depression should not have occurred under normal market trading circumstances. Algorithms should not have continued to fill retail orders irrespective of locates. The regulators who, for the most part, do want fair and equitable market conditions are not unilaterally equipped to solve such a complex problem. To fix the problem would require an enormously expensive technology overhaul across the system, which could have a dramatic impact on liquidity in the market and create a systemic short squeeze that could damage the integrity of the financial institutions, diminish the wealth of the hedge fund elites and actually benefit the everyday retail investor. It took us as a company the last 6 months to simply gain our footing and for me to find my voice. It does no good for me to review the machinations of arbitrary numbers like $1 or net equity of $4 million or other regulatory rules around shelves and baby shelves, et cetera, et cetera, that feel like moving goalposts to all executives and leadership teams. The system is set up to disadvantaged companies looking for financing by giving lenders the road map for the destruction of shareholder value. Algorithms do not care what a company does, they do not care how many employees you have, algorithms were built for one purpose; to make money for financial institutions by figuring out how to approach trading on a purely statistical basis and exploit an arbitrage. As such, shorts driven by algorithms, let alone the various players behind them, do not benefit the market as the idea of shorting was originally intended to do. In fact, it has demonstrably shown that it has the opposite effect. Simply put, algorithms are taught to smell blood in the water, how is that good for any market. I heard rumors of systemic risks to the market years ago, but I did not believe it until I experienced it firsthand. To be clear, the risks posed to the market are akin to the opposite of a flash crash. They could inflict damage on institutions that are short biased that seem too big to fail. The financial sector is at a turning point, and so is our company Creatd. To that end, I want to reassure all of you that we will continue to work tirelessly to ensure that our stock is fairly traded. This battle is fought on multiple fronts, including the media, the political landscape and within the regulatory environment. We are a technology company, one that has a tremendous understanding of the power of data and more importantly, how to apply it to achieve maximum gain. We will use our data. We will use our strength to identify and reach those who have the ability to affect real change. Our team is determined to complete the spinoff of its subsidiary media asset OG Collection, Inc. to Creatd shareholders in Q1 2023. Personally, I am excited to see Creatd list on an alternative blockchain exchange as early as January. We are continuing dialogue with GTII Global Technologies industry group as well as other interested parties. While we have created a lean operating machine, we have miles to go before we sleep and many battles to win along the way. The next year of Creatd will be one of continued reduction in operational expenses and the stabilization of revenues while we continue to face down whatever headwinds come our way. Finally, the next year of Creatd will be defined by uplisting our company to a national exchange and generating long-term value for our shareholders. I would like to thank you all for listening today and look forward to taking your questions on Twitter and through other social media channels.

Thank you, Jeremy. At this time, we will pause briefly to give you a final chance to submit your ballots at which point the polls will close and preliminary results will be tabulated. Final results will be reported in a Form 8-K to be filed within 4 business days. [Voting]

Online voting is now closed. Before we report on the results, as Corporate Secretary of the meeting, I will now report as to the delivery of the notice of the annual meeting, proxy statement and proxy card and the annual report. An affidavit has been filed by our stock transfer agent stating that the notice of the annual meeting has been furnished to all shareholders of record as of November 18, 2022, which is the date fixed by the Board of Directors as the record date of this meeting. The affidavit of mailing will be filed with the minutes of the meeting and the list of stockholders of record is available for inspection. I will now ask the Inspector of Election to report as to the existence of a quorum.

Represented at this meeting, either present or by proxy, are holders of 21,317,237 shares of common stock of a total number of 30,192,227 shares issued and outstanding and entitled to vote at the meeting. There is, therefore, a quorum present at the meeting and the meeting is competent to transact business.

Thank you. We will now proceed to the voting results. The first proposal was for the election of directors of the company to serve until the next annual meeting or until their successors are elected and have qualified. The Inspector of Election will now report the results.

The voting results for the election of each of the 4 nominees listed in the proxy statement were as follows: in the election of Jeremy Frommer as Director, 12,996,539 shares were voted in favor and 2,598,991 shares were withheld. In the election of Peter Majar as Director, 13,149,069 shares were voted in favor and 2,446,461 shares were withheld. In the election of Erica Wagner as Director, 13,154,993 shares were voted in favor and 2,440,537 shares were withheld. In the election of Justin Maury as Director, 12,921,218 shares were voted in favor and 2,674,312 shares were withheld.

The reported results indicate that Jeremy Frommer, Peter Majar, Erica Wagner and Justin Maury have been duly elected to serve as directors of the company until the next annual meeting or until their respective successors have been duly elected and qualified. The second proposal was for the approval of an amendment to the company's articles of incorporation to increase the number of common stock authorized to 1.5 billion. At this time, the Inspector of Election will report the results.

The voting results for the proposed amendment to increase the company's authorized common shares to 1.5 billion were as follows: 15,490,469 shares of common stock have been voted in favor of approval of the amendment, 5,468,835 shares of common stock have been voted against approval and 357,929 shares of common stock have abstained from voting on this proposal.

The results reported by the inspector of election indicate that the second proposal has been approved. The third proposal was for the approval of an amendment to the company's articles of incorporation to effect a reverse stock split. The Inspector of Election will now report the results.