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

Thanks, everybody, for being here. I'm just going to take a few minutes, then I'm going to pretty much turn it over to you guys. Your questions are worth a lot more than my monologue. My career began at a firm called Kidder Peabody in 1990. I sat on what was called a distressed debt desk. Drexel Burnham, which is where a guy named Michael Milken had created the junk-bond industry now called the high-yield bond industry. Drexel had just gone up in flames. And the savings loan institutions that were built out of the '80s, they were on prior. And everyone I knew thought the market was ending. It wasn't really ending it was clear. The wreckage of that error became the raw material over the next 30 years. You had firms like Solomon Brothers and Kidder Peabody give way to Citadel and [ Randal's Bridgewater ]. And every one of those firms, they were born in distressed environments. They were built by people who understood that a debacle of value isn't necessarily a grave on. For some people, it's inventory. And that's kind of where the micro cap space is right now. There's thousands of subscale public companies real operators, tracked inside broken cap structures, the shells and zombies and dilution machines sitting shoulder to shoulder with good businesses. And nobody can really see through that noise. The space doesn't need more commentary, it actually means filters. It means fixers. It needs people who are willing to kind of do the slow ugly work of consolidation, balance sheet to vendor contracts. Transaction by transaction going through that and fixing broken structure. And the ability to do that type of thing at the scale, the microcap space has created in the last -- really in the last 5 to 10 years. So I've been in this space 10 years. The first 5 were very different than the latter 5. The space now reminds me of those distressed words that I was talking about earlier. And so why created, it's because we didn't just study the pathology I'm talking about. We blend. We traded under $1. We stand down multiple reverse splits that could have raised us. We thought short sellers failed to deliver -- we thought the birth of algos and the volatility that often destroys a stock if that volatility cannot be maintained but is manifested by the existence of the algos and the predatory paper -- the predatory paper that the algos exist that the algos understand exists, that's how all that works. Every mistake that this market can force on a company, we came to understand it, and we survived most of them. The survival isn't -- I always tell people it's not a scar. It's more -- so even like a badge, it's more like a credential. You can't really repair something that you haven't broken. So here's what created is becoming today. It's a cornerstone of the repair cycle that's in the space. It's a financial company and the old mold built out of distressed the way the great ones always are. We buy, we fix, we structure, we monetize, and we don't walk away when we build or turn around a company, we keep equity and we keep typically a long-term type service contract. So we keep equity and we keep current revenues, upside in revenues. That's upside in revenues on the same asset at the same time is a good way of describing our business model, our arbitrage. So one of those companies, FLYHT, we sold the majority of it earlier this year. We kept -- 20% to 25% of the fully undiluted share -- that fully diluted shares, we kept approximately 20% to 25%. But at the same time, we're still deeply involved in that company. And so as we develop technology with them and help them grow their business, which has multiple threads of opportunities for us, we're also maintaining that stake in what I believe -- I mean, people ask me all the time what I think FLYHT is worth. I can tell you that -- and again, I tell you this based on my own perception of value that FLYHT or VTAC should be worth $100 million when it comes out of the gate fully registered with all of its shares issued and outstanding. That number that exists now is not reflective of what that value truly is because those shares currently exist in a preferred form. And again, when you build companies, when you turn around companies like we do, you want to be able to continue to be involved in the process of their success. And that really is kind of the key to the future of how Creatd does business. Meanwhile, we're closing out the original arbitrages now that we have completed FLYHT. And those original arbitrages was vocal and the OG collection which now operates under a brand, Archived Gallery, which we'll talk about in the future, completing those original arbitrage is key to what we're focused on right now. Then on the vocal front, I mean, to me, vocal, if I look at sub-stack and I look at medium, and I now look at what are 2 years of auditable numbers for vocal and the fact that it has a pristine balance. We're in a great position now to realize the real value that I've always thought is inherent to it. And we also have the ability to recognize that because we have access to the capital needed because of the success we've had on previous transactions, we have access to the capital needed to overcome whatever exchange requirements exist or existed in the past that were a hindrance. Same with OG and with vocal. I mean, I've always been quite frank about my plan to spin off pieces of those to shareholders and new investors because that's the key to survival in the space. is transaction. It's a transaction-oriented space and to make the most money in the space, you want to be on the part of the space that's creating those transactions. And to do that in a public company like we have, that's the objective at the moment. So meanwhile, when closing out those arbitrages and we're in motion on multiple layers of transactions, different sector specialists particularly in the front on the AI front. I mean, I can't -- I'm not going to try to hike the AI thing too much because it's almost like it's hard to articulate the type of changes for our business that AI has presented. And a lot of pain that had to be absorbed to truly break from old ways of behavior to embracing new ones, particularly in a world in the microcap space where, I don't know, maybe for lack of a better statement, change is not welcome. People don't want to see change service providers. They want things to stay the same regulators want things to say the same. Bureaucrats, even the investors because they want their models to continue to work. But those days are slowly moving behind us, and a lot of that has to do with embracing technology and more importantly, embracing data. These days, vocal gets often between 35 million to 50 million visits in a month. Vocal has become in its newest version that was released. It's everything that we had dreamed of and none of that would have been possible without the FLYHT transaction because the flight transaction allowed us not to have to tap the capital markets, not to have to tap toxic paper, but to have generated more than enough cash to leverage all the other assets properly now. And so that's really where we're at I hope that gives you a good picture of it. And with that, I'm going to open it up to Q&A. We could talk about anything where we are with the uplisting process, where we are with transactions. And just, I guess, what's the way we're going to do this, we're going to thumb up people, if they have a question, they'll put a question in the channel. I'm not going to be able to -- there's no way I can see.

So that's the first -- we're waiting just to let you see.

Yes. I'd rather the personal engage. That's -- if [ Jim Sao ] actually wrote a question, I'd rather hear the question or unless Jim doesn't want to speak? Jim, do you want me to just read it? Maybe just -- one of the issues with the microcap market right now is that there is tremendous volume of sellers, mostly looking for liquidity in order to participate in the AI trades. Sure. Perhaps this has slowed down a bit in the past 2 to 3 months, but there's still a monthly net outflow from the microcap market. As we all know, stock prices drop when there are more sellers than buyers. It's pretty much saying that simple. What will Creatd be doing that is different from other microcap companies in order to try to swim against this strong outgoing tide. Well, as Jim knows, having been a long time investor and one of the investors who has consistently stood up and supported the company. It's all about math. I could make a mathematical argument to you that eventually, if you keep investing at the right proration, then and truly only a small percentage of investors, I think, get this. If you find a company that you like and you keep investing at the right proration, then -- in the end, there will reach a moment where I don't know if it's at the investor base is consolidated to a point where those investors have a more unified understanding that they have invested not in something that gives liquidity. I mean, I think that's the biggest issue is that the time horizon for any investment in microcap stock should be no different than a private equity. It's like a 5-year time horizon. And in crisis moments, it could be 7 years. And I think you see that in all these private equity credit shops restricting the kind of redemptions that they would normally be under. I mean we would see a collapse in certain private credit markets if they didn't do that. And so the way it created combating it is to, first and foremost, understand what is that shareholder base at the moment because, sure, there are sellers and then they're sellers. A certain amount of selling, okay, let's see. I'm with -- I'm just as excited to see at this moment where the selling stops or where it doesn't begin for instance, I guess I would take an approach to Jim's question and say any selling, buying or theorizing about the price of stock and what it means and how a CEO should react to it, while that stock trades on the OTCQB is literally a waste of time because the value of the stock is meaningless to any other thread other than those money flows. And so to play into that money flow narrative is to truly waste a lot of time and self-fulfilling destroy your company. Meaning the truth is everybody should do the opposite of playing into that narrative. And by doing the opposite, you focus on, first and foremost, a pristine balance sheet, no debt, no warrants, no preferreds, no structured products know anything -- or you might as well get the f*** out of the space because if all you're going to do is take on more of those kind of securities after you learn the lesson of the last 5 years. Some of that paper, I had to pay the price of , I'm still paying the price of. And so like what I'm going to do different is I'm never going to take paper from those kind of individuals that create these toxic e-locks and other exotic structures. I'm going to do deals that are reflective of what we do as a company and the implied multiple of revenues or other metrics that, that should imply -- and I have my own perception of what that value does. I've already articulated what I think it is for vocal. And then on the vocal trade, I expect that our company will take in a similar type of structure, the revenues may be a bit higher because I think on a pure valuation basis competitively to companies, again, that I hold it up to like substack like medium, I think that, that company will present the opportunity that differentiates further after flight what we do that's different than some of these pure-play narrative companies. Anyway, next question. Are there any other questions in the -- they are not.

People can feel free to raise their hands. We have a new one also from Jim.

I like to engage in a -- and Jim, I wish you would like to talk, given the volume of warrants that will still remain outstanding or perhaps they are not particularly toxic, as you mentioned -- shares that will get ever more than drop before you have effectively put a cap on the stock price is created. I mean, I guess, think about these kind of situations, as sure, you can argue that there's cap based on your perception of money flows and what there is to absorb and what the real implied value of stock on the New York Stock Exchange should be versus what it will be on the like -- I don't even know why I would talk about a cap because there's no sense in talking about anything until it's on a listed on a national exchange. Otherwise, it's all nonsense. So I mean, I think for me, I don't really think about artificial cap. I already told everybody publicly you can't have any warrants or debt on your books when you go to list up to the New York. And not getting up to the New York is like failure. We have to get up to the New York. I can question timing and make arguments on timing, but that's the mission. So you can -- if you don't believe in -- that we're getting up to the New York than most assuredly, you should figure out how to sell as much of your stock as you can right now. And sure, whatever price that creates because of money flows, which will sustain itself forever long the money flows take to shift the other way. And in the interim, I'll keep doing what we do. which is staying away from any type of financing that further hinder the balance sheet and getting us to a cap structure of all common stock that will be accepted by the exchange. And we're already a great way there. And that's why I think I answered some of those questions in the 14 questions. I don't know if everybody read them, but I would recommend reading the article that we published was the 14 questions that we received. It's in the chat. It's also on the vocal site and to see -- if you're on this call, you should probably follow what we publish on the vocal side. about the company. Any other questions? What's the next question? Q1 included approximately $11.3 million of stock-based compensation. How much of that amount was specifically tied to the CEO, Wait. -- this question was answered in our 14 questions. Yes. So again, I'm going to put a link to the article. That's the best way to get that question answered. Any other questions?

[indiscernible] uplifting to value the target for warrants.

First, I appreciate the question. I hope that there are more questions like that, direct questions. How often does an investor group get a chance literally to ask the CEO of direct question and get an answer in real time like this. So yes, I am. -- like one is targeting me. So here's what I am so you can have the same knowledge that I have. You can't go to the New York which is the exchange -- the preferential exchange that I would like to. I mean we've been up on the NASDAQ, and I can tell you that I have different perspectives on that, but I'd rather be up on the New York. So to better exchange in my opinion, to better exchange for what rate wants to be. There are certain companies that are better off on the NASDAQ. But for us, we're better off on the New York. In any event, to do that, you have to be registered with the SEC. And so to be registered with the SEC, you need to have a filed, which we have. And we're down to 1 comment, which I got back literally, we're down to 3 comments. Two of which are minor, one of which it's not that it's major. It's just that it takes a few days to write it up, get legal to sign off on it, get a auditor to sign off on it. do that all around first week in July, and it's hard enough. So figure that takes a week and then figure the SEC takes another week to review it. And at that point, we'll get approval. And once we're approved, I would probably put a timing of like 120 days of -- 120 days of back and forth with the exchanges. And hopefully, that puts us in a target range before the end of the year. Yes. Yes, I am feeling confident in my plus probabilities. Again, if you ask me to cuff it right now, I'd probably cut it like 70-30, 70-30. Meaning 70% probability, 30%. What that means really is it means that -- if you're in the CEO seat, it means you better have a plan for that 30%. You previously decried an unscrupulous accounting firm that delayed and at least temporarily damaged the firm has come to. Was there any legal action against that firm? Wow, good question the I did something that if I had to do again I wouldn't do, which is -- the firm that we -- I don't mind going to mention the name, the firm that reengaged as auditors that created this horrible cycle that we had to go and go through. It was not barges, the one that was like more infamously known but it happened at the same time. I don't know if that's coincidence or not. And that firm had their -- one of their senior partners barred from the industry and I guess, what one would consider a very rough audit by the PCB that must have scared a living should out of them. And ostensibly, in a moment like that, I don't know how an audit firm survives. But the path to getting an audit done with them became so impossible such that they were protecting their asks so that they couldn't be really sued and at the same time, never completing their job and pushing me into limbo. And that's something that I now after interviewing scores of CEOs and CFOs as I have over the last 3 or 4 years, that's something that I now understand is rampant in the space which is yet another component that needs to be addressed and fixed. And so when it came to settling. They had put me through such torture and my people through such torture my accounting people because we were basically put in a unwinnable game, until certain people started to practically break from it. And so I was faced with a horrible decision, either fight and really risk everything breaking apart or retreat, and I had to retreat. And now I know when people should and shouldn't retreat. And I didn't pursue legal action after because they claimed that the amount of work they were trying to get to do, which was, in my opinion, mostly concocted by just a and that must have been turn over every stone, even when stones don't need to be turned over. It's just like ask for silly things. And that's, by the way, a problem that, again, is infected the bureaucracy of audits and in particular, the PCOB standards of behavior. And so they claimed that their hours equal to, I don't know, some stupid number, hundreds of thousands dollars. And I said even pay you on going to sue you. And in the end, it was like many other types of battles you face. Did you -- did I want to fight them into eternity. Certainly, I never paid them the [ 250 ], they dropped that requirement, and they or whatever it was more, they dropped that because they knew they evolve. And so they settled quickly. And in the settlement, I said that I wouldn't disparage them. Interestingly, I then met with an attorney to understand what it is that I had said. And what I really said was that I wouldn't make up things, but I wouldn't tell facts -- and the facts are that I don't see how any firm could ever engage Turner Stone for anything. Any other questions? It's a fun memory you'll bring up. An Australian firm, think mill at one point claimed that they still own part of the code base of vocal. Was that claim resolved in full. So that claim never existed because the word code base doesn't really work here. So like if we were going to even use the word code base, we might say like vocal platform. And first of all, vocal is a subsidiary of Creatd's, we own 51% of it at this time. And Think mill owns equity in vocal as well. I don't have the exact numbers in front of me, but it's approximately like 5% is my recollection. And in the upcoming transaction, we expect zinc mill to be a partner in both advising and leveraging what we're hopefully going to build there. And I think mill is essential in the release of the newest version of vocal, which, again, you should, if you are on this call and you own the stock, you really should understand what Vocal is. So I think, Bill, there's no claim on platform or code. It's -- the platform is owned by the subsidiary and shareholders own the subsidiary, of which created as the largest by 51% of that. Those are all great questions. Where are you coming up with these questions? Are you just I hope these are not just like some very smart GPT bot. And I'm being -- someone's running a test on me. Our other CEOs looking to create it as an example of how to navigate the space. Yes. This is all -- like how many people are on the call at the moment. And and the call is being recorded, right? I'm glad that you asked the question. I mean, I speak with -- just I speak with CEOs of many of the stocks that trade in the microcap space, many of the investors. And when I say trade, they are the ones that everybody is talking about that we're trading 100,000 and then went to trading $5 million to $100 million even in some cases. And so I talked to all those CEOs. I actually would say that I have the unique look and blessing because of my capital markets experience in the institutional and because I kind of chose this path for myself, I have the unique ability unique, unique blessing and privilege to speak to just hundreds of really f****** great CEOs, COOs and CFOs. Now that's hundreds, tens of thousands, but I'm saying that I get to speak to the hundreds that I think are legit -- and that when I talk about the massive consolidation I expect in the microcap space, I mean these are the individuals that will lead that space. And I think I attended in my investor channel which again, if you're on this call and you're not in the investor channel the Slack channel, you're probably missing half the story. But I would say that they're not necessarily looking to us as much as actively participating in conversations around what transactions and what moves make sense even -- I mean, most recently, some of those discussions have been all around the notion of if you're going to be acquisition-oriented, like what are your boundaries? Are they vertical? Are they horizontal? Are they dimensional in nature? What are the things you have to look for what makes a good stock swap versus in exchange of a controlling interest, how should they be structured those things where should the money come from, it's just the list goes on and on of the type of conversations we have. So I don't know that they're necessarily looking to us. But I think we definitely represent a group that's at the tip of the spear that's carving out new territory in the space. Any other questions from anybody else or just the incredible questions that you were able to bang out the last 6. Nobody is using their GPT to create a quick question. How many of you -- thumbs up, how many of you use GPT? Can you tell me that, give me some information? How many of you actually use it? Any thumbs-up? One thumb up. So that's what thumb-up looks like on this. I believe that -- we are -- I was just having a conversation with a target, and then we'll end the call as having a conversation with the target and was explained to the target that I use the -- what I think is kind of like the best allayment can use some of the AI products prior to getting to the point where you're developing agents that are developing software that are thinking for you, et cetera. And that I find that if our targets are not embracing it the same way as we are that that's not going to wind up being a transaction that we can wrap our heads around -- and so that's how important the AI part of the future for us it is. And with that said, I want to thank everybody for joining the call and hearing what I have to say tonight. We'll keep you updated and please ask any of your questions in the Investor Slack channel. Thank you.