NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
1 — Basis of Presentation and Nature of Operations
As
used herein, the terms the “Company,” “Vinco Ventures” “we,” “us,” “our”
and similar refer to Vinco Ventures, Inc. (f/k/a Edison Nation, Inc.), a Nevada corporation incorporated on July 18, 2017 under
the laws of the State of Nevada as Idea Lab X Products, Inc. and also formerly known as Xspand Products Lab, Inc. prior to its
name change on September 12, 2018, and/or its wholly-owned and majority-owned operating subsidiaries. On November 5, 2020, the
Company (the “Parent”) and its wholly owned subsidiary, Vinco Ventures, Inc. (the “Merger Sub”), entered
into an Agreement and Plan of Merger (the “Agreement”). Under the terms of the Agreement, the Merger Sub merged with
and into the Parent and the Parent became the surviving corporation of the Merger (the “Surviving Corporation”). The
name of the Surviving Corporation became Vinco Ventures, Inc. The transaction closed on November 10, 2020.
Vinco
Ventures is a vertically-integrated, end-to-end, consumer product research & development, manufacturing, sales and fulfillment
company. The Company’s proprietary web-enabled platform provides a low risk, high reward platform and process to connect
innovators of new product ideas with potential licensees.
As
of December 31, 2020, Vinco Ventures had six wholly-owned subsidiaries: TBD Safety, LLC (“TBD”), Scalematix, LLC (“Scalematix”),
Ferguson Containers, Inc. (“Fergco”), CBAV1, LLC (“CB1”), Pirasta, LLC (“Pirasta”) and Edison
Nation Holdings, LLC. Vinco Ventures owns 50% of Best Party Concepts, LLC, Ed Roses, LLC and Global Clean Solutions, LLC, all
of which are consolidated as VIE’s with noncontrolling interests. Edison Nation Holdings, LLC is the single member of Edison
Nation, LLC and Everyday Edisons, LLC. Edison Nation, LLC is the single member of Safe TV Shop, LLC.
Liquidity
For
the year ended December 31, 2020, our operations lost $7,902,347 of which approximately $4,623,130 was non-cash and approximately
$1,131,975 related to restructuring, severance, transaction costs and non-recurring items.
At
December 31, 2020, we had total current assets of $5,342,183 and current liabilities of $11,285,663 resulting in negative working
capital of $5,943,480. At December 31, 2020, we had total assets of $28,028,207 and total liabilities of $14,505,506 resulting
in stockholders’ equity of $13,522,701.
The
foregoing factors raise substantial doubt about the Company’s ability to continue as a going concern for at least the next
twelve months from the date of issuance of these financial statements. The ability to continue as a going concern is dependent
upon the Company’s ability to attract significant new sources of capital, attain a reasonable threshold of operating efficiencies
and achieve profitable operations from the sale of its products.
The
consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue
as a going concern.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
1 — Basis of Presentation and Nature of Operations – (Continued)
Subsequent
to December 31, 2020, the Company mitigated any substantial doubt about the Company’s ability to continue as a going concern
through the raise of additional funds of $25,300,000 through 3 separate private placements. The following are the amounts raised
under each private placement:
●
|
In
January 2021, the Company completed closing of a debt private placement offering of $12,000,000, receiving net proceeds of
$10,770,000.
|
|
|
●
|
In
January 2021, the Company completed closing of a equity private placement offering of $3,300,000, receiving net proceeds of
$3,255,000.
|
|
|
●
|
In
February 2021, the Company completed the closing of a debt private placement offering of $10,000,000, receiving net proceeds
of 8,950,000.
|
Our
operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital
expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our
ability to successfully commercialize our products and services, competing technological and market developments, and the need
to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product
and service offerings.
At
December 31, 2020, we had a cash and cash equivalents balance of $249,356. The Company believes through the subsequent capital
raise that the funds available to it are adequate to meet its working capital needs, debt service and capital requirements for
the next 12 months from the date of this filing.
Note
2 — Summary of Significant Accounting Policies
Principles
of Consolidation
The
consolidated financial statements include the accounts of Vinco Ventures, Inc. and its wholly-owned and majority owned subsidiaries.
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) and are presented in US dollars. All intercompany balances and transactions
have been eliminated.
Reclassifications
Certain
amounts previously presented in the consolidated financial statements have been reclassified to conform to the current year presentation.
Such reclassifications had no effect on the previously reported net loss, Stockholders’ equity or cash flows.
Use
of Estimates
Preparation
of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the
financial statements.
The
Company’s significant estimates used in these financial statements include, but are not limited to, accounts receivable
reserves, the valuation allowance related to the Company’s deferred tax assets, the recoverability and useful lives of long-lived
assets, debt conversion features, stock-based compensation, certain assumptions related to the valuation of the reserved shares
and the assets acquired and liabilities assumed related to the Company’s acquisitions. Certain of the Company’s estimates
could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably
possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ
from those estimates.
Discontinued
Operations
A
component of an entity that is disposed of by sale or abandonment is reported as discontinued operations if the transaction represents
a strategic shift that will have a major effect on an entity’s operations and financial results. The results of discontinued
operations are aggregated and presented separately in the Consolidated Statement of Operations. Assets and liabilities of the
discontinued operations are aggregated and reported separately as assets and liabilities of discontinued operations in the Consolidated
Balance Sheet, including the comparative prior year period. The Company’s cash flows are reflected as cash flows from discontinued
operations within the Company’s Consolidated Statements of Cash Flows for each period presented.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
2 — Summary of Significant Accounting Policies — (Continued)
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents
in the consolidated financial statements.
The
Company has cash on deposits in several financial institutions which, at times, may be in excess of Federal Deposit Insurance
Corporation (“FDIC”) insurance limits of $250,000. The Company has not experienced losses in such accounts and periodically
evaluates the creditworthiness of its financial institutions. The Company reduces its credit risk by placing its cash and cash
equivalents with major financial institutions. The Company did not have any cash and cash equivalents uninsured at December 31,
2020 not covered by FDIC insurance limits as of December 31, 2020.
Accounts
Receivable
Accounts
receivable are carried at their contractual amounts, less an estimate for uncollectible amounts. Management estimates the allowance
for bad debts based on existing economic conditions, historical experience, the financial conditions of the customers, and the
amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due
date. Past due accounts are generally written off against the allowance for bad debts only after all collection attempts have
been exhausted.
As
of December 31, 2020, the largest customer represented 18% of total accounts receivable.
Inventory
Inventory
is recorded at the lower of cost or net realizable value on a first-in, first-out basis. The Company reduces the carrying value
of inventories for those items that are potentially excess, obsolete, or slow moving based on changes in customer demand, technology
developments, or other economic factors.
Short-Term
Investments
Short-term
investments consisted of equity securities. The Company classified its investments as Trading securities. Accordingly, such investments
were reported at fair market value, with the resultant unrealized gains and losses reported as a component of the consolidated
statements of operations. Fair value for Trading securities was determined by reference to quoted market prices.
Property
and Equipment, Net
Property
and equipment are stated at cost, net of accumulated depreciation and amortization, which is recorded commencing at the in-service
date using the straight-line method over the estimated useful lives of the assets, as follows: 3 to 5 years for office equipment,
5 to 7 years for furniture and fixtures, 6 to 10 years for machinery and equipment, 10 to 15 years for building improvements,
5 years for software, 5 years for molds, 5 to 7 years for vehicles and 40 years for buildings.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
2 — Summary of Significant Accounting Policies — (Continued)
When
fixed assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in the statements of operations for the respective period. Minor additions and repairs are
expensed in the period incurred. Major additions and repairs which extend the useful life of existing assets are capitalized and
depreciated using the straight-line method over their remaining estimated useful lives.
Long-Lived
Assets
The
Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of the asset may not be recoverable. The Company assesses the recoverability of its long-lived assets using undiscounted cash
flows. If an asset is found to be impaired, the amount recognized for impairment is equal to the difference between the carrying
value and the asset’s fair value. The Company did not record any impairment charges related to long-lived assets during
the years ended December 31, 2020 and 2019.
Goodwill
and Intangible Assets
We
record intangible assets based on their fair value on the date of acquisition. Goodwill is recorded for the difference between
the fair value of the purchase consideration over the fair value of the net identifiable tangible and intangible assets acquired.
We perform an impairment assessment of goodwill on an annual basis, or whenever impairment indicators exist. In the absence of
any impairment indicators, goodwill is assessed for impairment during the fourth quarter of each fiscal year. Judgments regarding
the existence of impairment indicators are based on market conditions and operational performance of the business.
We
may assess our goodwill for impairment initially using a qualitative approach to determine whether it is more likely than not
that the fair value of these assets is greater than their carrying value. When performing a qualitative test, we assess various
factors including industry and market conditions, macroeconomic conditions and performance of our businesses. If the results of
the qualitative assessment indicate that it is more likely than not that our goodwill and other indefinite-lived intangible assets
are impaired, a quantitative impairment analysis would be performed to determine if impairment is required. We may also elect
to perform a quantitative analysis of goodwill initially rather than using a qualitative approach.
The
impairment testing for goodwill is performed at the reporting unit level. The valuation methods used in the quantitative fair
value assessment, discounted cash flow and market multiples method, requires our management to make certain assumptions and estimates
regarding certain industry trends and future profitability of our reporting units. If the fair value of a reporting unit exceeds
the related carrying value, the reporting unit’s goodwill is considered not to be impaired and no further testing is performed.
If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recorded for the difference. The valuation
of goodwill is affected by, among other things, our business plan for the future and estimated results of future operations. Future
events could cause us to conclude that impairment indicators exist, and, therefore, that goodwill may be impaired.
Intangible
assets include the cost of patents or patent rights (hereinafter, collectively “patents”) and trademarks. Patent and
trademark costs are amortized utilizing the straight-line method over their remaining economic useful lives. Costs incurred related
to patents prior to issuance are included in prepaid patent expense until the time the patent is issued and amortization begins
or until management determines it is no longer likely the patent will be issued and amounts are expensed. Vinco Ventures reviews
long-lived assets and intangible assets for potential impairment annually and when events or changes in circumstances indicate
the carrying amount of an asset may not be recoverable. In the event the expected undiscounted future cash flows resulting from
the use of the asset is less than the carrying amount of the asset, an impairment loss is recorded equal to the excess of the
asset’s carrying value over its fair value. If an asset is determined to be impaired, the loss is measured based on quoted
market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based
on various valuation techniques, including a discounted value of estimated future cash flows. In the event that management decides
to no longer allocate resources to a patent portfolio, an impairment loss equal to the remaining carrying value of the asset is
recorded.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
2 — Summary of Significant Accounting Policies — (Continued)
Revenue
Recognition
Generally,
the Company considers all revenues as arising from contracts with customers. Revenue is recognized based on the five-step process
outlined in the Accounting Standards Codification (“ASC”) 606:
Step
1 – Identify the Contract with the Customer – A contract exists when (a) the parties to the contract have approved
the contract and are committed to perform their respective obligations, (b) the entity can identify each party’s rights
regarding the goods or services to be transferred, (c) the entity can identify the payment terms for the goods or services to
be transferred, (d) the contract has commercial substance and it is probably that the entity will collect substantially all of
the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.
Step
2 – Identify Performance Obligations in the Contract – Upon execution of a contract, the Company identifies as performance
obligations each promise to transfer to the customer either (a) goods or services that are distinct, or (b) a series of distinct
goods or services that are substantially the same and have the same pattern of transfer to the customer. To the extent a contract
includes multiple promised goods or services, the Company must apply judgement to determine whether the goods or services are
capable of being distinct within the context of the contract. If these criteria are not met, the goods or services are accounted
for as a combined performance obligation.
Step
3 – Determine the Transaction Price – When (or as) a performance obligation is satisfied, the Company shall recognize
as revenue the amount of the transaction price that is allocated to the performance obligation. The contract terms are used to
determine the transaction price. Generally, all contracts include fixed consideration. If a contract did include variable consideration,
the Company would determine the amount of variable consideration that should be included in the transaction price based on expected
value method. Variable consideration would be included in the transaction price, if in the Company’s judgement, it is probable
that a significant future reversal of cumulative revenue under the contract would not occur.
Step
4 – Allocate the Transaction Price – After the transaction price has been determined, the next step is to allocate
the transaction price to each performance obligation in the contract. If the contract only has one performance obligation, the
entire transaction price will be applied to that obligation. If the contract has multiple performance obligations, the transaction
price is allocated to the performance obligations based on the relative standalone selling price (SSP) at contract inception.
Step
5 – Satisfaction of the Performance Obligations (and Recognize Revenue) – Revenue is recognized when (or as) goods
or services are transferred to a customer. The Company satisfies each of its performance obligations by transferring control of
the promised good or service underlying that performance obligation to the customer. Control is the ability to direct the use
of and obtain substantially all of the remaining benefits from an asset. It includes the ability to prevent other entities from
directing the use of and obtaining the benefits from an asset. Indicators that control has passed to the customer include: a present
obligation to pay; physical possession of the asset; legal title; risks and rewards of ownership; and acceptance of the asset(s).
Performance obligations can be satisfied at a point in time or over time.
Substantially
all of the Company’s revenues continue to be recognized when control of the goods are transferred to the customer, which
is upon shipment of the finished goods to the customer. All sales have fixed pricing and there are currently no material variable
components included in the Company’s revenue. Additionally, the Company will issue credits for defective merchandise, historically
these credits for defective merchandise have not been material. Based on the Company’s analysis of the new revenue standards,
revenue recognition from the sale of finished goods to customers, which represents substantially all of the Company’s revenues,
was not impacted by the adoption of the new revenue standards.
Disaggregation
of Revenue
The
Company’s primary revenue streams include the sale and/or licensing of consumer goods and packaging materials for innovative
products. The Company’s licensing business is not material and has not been separately disaggregated for segment purposes.
The disaggregated Company’s revenues for the years ended December 31, 2020 and 2019 was as follows:
|
|
For
the Years
Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Product
sales
|
|
$
|
15,522,649
|
|
|
$
|
12,078,798
|
|
Licensing
revenues
|
|
|
258,670
|
|
|
|
444,634
|
|
Total
revenues, net
|
|
$
|
15,781,319
|
|
|
$
|
12,523,432
|
|
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
2 — Summary of Significant Accounting Policies — (Continued)
For
the years ended December 31, 2020 and 2019, the following customers represented more than 10% of total net revenues:
|
|
For
the years ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Customer:
|
|
|
|
|
|
|
|
|
Customer
A
|
|
|
-
|
%
|
|
|
14
|
%
|
For
the years ended December 31, 2020 and 2019, the following geographical regions represented more than 10% of total net revenues:
|
|
For
the Years Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Region:
|
|
|
|
|
|
|
|
|
North
America
|
|
|
87
|
%
|
|
|
76
|
%
|
Asia-Pacific
|
|
|
2
|
%
|
|
|
9
|
%
|
Europe
|
|
|
11
|
%
|
|
|
15
|
%
|
Cost
of Revenues
Cost
of revenues includes freight charges, purchasing and receiving costs, depreciation and inspection costs.
Shipping
and Handling Costs
Shipping
and handling costs include inbound freight costs and the cost to ship product to the customer and are included in cost of sales.
Fair
Value of Financial Instruments
The
Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements
and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements.
ASC
820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may
be used to measure fair value:
Level
1 — quoted prices in active markets for identical assets or liabilities
Level
2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level
3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
The
carrying amounts of the Company’s financial instruments, such as cash, accounts receivable, accounts payable, accrued expenses
and other current liabilities approximate fair values due to the short-term nature of these instruments. The carrying amount of
the Company’s notes payable approximates fair value because the effective yields on these obligations, which include contractual
interest rates, taken together with other features such as concurrent issuance of warrants, are comparable to rates of returns
for instruments of similar credit risk. The loan held for investment was acquired at fair value, which resulted in a discount.
The
following fair value of the short-term investment held and the input level used to determine the fair value at December 31, 2020
is presented below:
|
|
Level
1
|
U.S. equity stock
|
|
$
|
1,018,000
|
|
There
were no short-term investments held at December 31, 2019.
U.S.
equity stocks represent investment in stocks of U.S. based companies. The valuation inputs for U.S. equity stocks are based on
the last published price reported on the major stock market on which the securities are traded and are primarily classified as
Level 1. Securities whose valuation inputs are not based on observable market information are classified as Level 3.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
2 — Summary of Significant Accounting Policies — (Continued)
The
following changes in level 3 instruments for the year ended December 31, 2020 are presented below:
|
|
Contingent
Consideration
Earnout
|
|
Balance,
January 1, 2019
|
|
$
|
(520,000
|
)
|
Change
in fair value of earnout
|
|
|
520,000
|
|
Balance,
December 31, 2019
|
|
|
-
|
|
TBD
Safety, LLC’s sellers earnout
|
|
|
(200,000
|
)
|
Balance,
December 31, 2020
|
|
$
|
(200,000
|
)
|
Income
Taxes
The
Company accounts for income taxes under the provisions of the Financial Accounting Standards Board (“FASB”) ASC Topic
740 “Income Taxes” (“ASC Topic 740”).
The
Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included
or excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the
difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary
differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse.
The
Company utilizes a recognition threshold and measurement process for financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return.
Management
has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated
financial statements as of December 31, 2020 and 2019. The Company does not expect any significant changes in its unrecognized
tax benefits within twelve months of the reporting date.
The
Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general
and administrative expenses in the statements of operations.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
2 — Summary of Significant Accounting Policies — (Continued)
Net
Earnings or Loss per Share
Basic
net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of vested common shares
outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average
number vested of common shares, plus the net impact of common shares (computed using the treasury stock method), if dilutive,
resulting from the exercise of dilutive securities. In periods when losses are reported, the weighted-average number of common
shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of December 31, 2020 and
2019, the Company excluded the common stock equivalents summarized below, which entitle the holders thereof to ultimately acquire
shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.
|
|
For
the Years
Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Selling
Agent Warrants
|
|
|
160,492
|
|
|
|
160,492
|
|
Shares
reserved in exchange for the cancellation of certain non-voting membership interest in Edison Nation Holdings, LLC
|
|
|
-
|
|
|
|
990,000
|
|
Options
|
|
|
80,000
|
|
|
|
80,000
|
|
Convertible
shares under notes payable
|
|
|
517,073
|
|
|
|
285,632
|
|
Warrants
for noteholders
|
|
|
625,000
|
|
|
|
50,000
|
|
Restricted
stock units
|
|
|
30,000
|
|
|
|
210,000
|
|
Series
B Convertible Stock
|
|
|
764,618
|
|
|
|
-
|
|
Shares
to be issued
|
|
|
1,071,483
|
|
|
|
412,500
|
|
Total
|
|
|
3,248,666
|
|
|
|
2,188,624
|
|
Deferred
Financing Costs
Deferred
financing costs include debt discounts and debt issuance costs related to a recognized debt liability and are presented in the
balance sheet as a direct deduction from the carrying value of the debt liability. Amortization of deferred financing costs are
included as a component of interest expense. Deferred financing costs are amortized using the straight-line method over the term
of the recognized debt liability which approximates the effective interest method.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
2 — Summary of Significant Accounting Policies — (Continued)
Recent
Accounting Pronouncements
In
January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04), “Simplifying the Test for Goodwill
Impairment”, which removes Step 2 from the goodwill impairment test. ASU 2017-04 requires that if a reporting unit’s
carrying value exceeds its fair value, an impairment charge would be recognized for the excess amount, not to exceed the carrying
amount of goodwill. ASU 2017-04 will be effective for interim and annual reporting periods beginning after December 15, 2019.
Early application is permitted after January 1, 2017. The Company early adopted ASU 2017-04 in the third quarter of 2018. The
Company recognized an impairment charge of $4,443,000 under the simplified test for goodwill impairment.
In
June 2018, the FASB issued an amendment to the accounting guidance related to accounting for employee share-based payments which
clarifies that an entity should recognize excess tax benefits in the period in which the amount of the deduction is determined.
This amendment is effective for annual periods beginning after December 15, 2018. The Company adopted this accounting guidance
in the first quarter of 2019 with no impact on our financial statements.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
2 — Summary of Significant Accounting Policies — (Continued)
In
August 2018, the FASB issued new accounting guidance that eliminates, adds and modifies certain disclosure requirements for fair
value measurements. Among the changes, an entity will no longer be required to disclose the amount of and reasons for transfers
between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used
to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 is effective for interim and annual
reporting periods beginning after December 15, 2019; early adoption is permitted. Since this accounting guidance only revises
disclosure requirements, the adoption of this standard did not have a material impact on the Company’s consolidated financial
statements.
In
October 2018, the FASB issued new accounting guidance for Variable Interest Entities, which requires indirect interests held through
related parties in common control arrangements be considered on a proportional basis for determining whether fees paid to decision
makers and service providers are variable interests. The guidance is effective for the Company’s interim and annual reporting
periods during the year ending December 31, 2020. Early adoption is permitted. The adoption of this accounting guidance did not
have a impact on its consolidated financial statements and related disclosures.
Subsequent
Events
The
Company has evaluated subsequent events through the date which the financial statements were issued. Based upon the evaluation,
except for items described in Note 18, the Company did not identify any recognized or non-recognized subsequent events that would
have required adjustment or disclosure in the financial statements.
Segment
Reporting
The
Company uses “the management approach” in determining reportable operating segments. The management approach considers
the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions
and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating
decision maker is the Chairman and Chief Executive Officer (“CEO”) of the Company, who reviews operating results to
make decisions about allocating resources and assessing performance for the entire Company. The Company deploys resources on a
consolidated level to all brands of the Company and therefore the Company only identifies one reportable operating segment with
multiple product offerings.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
3 — Acquisitions and Divestitures
Divestiture
of Subsidiary - Cloud B
On
February 17, 2020, the Company divested its Cloud B, Inc. subsidiary and entered into an Agreement for the Purchase and Sale of
Cloud B, Inc.(the “Purchase Agreement”), with Pearl 33 Holdings, LLC (the “Buyer”), pursuant to which
the Buyer purchased from the Company (and the Company sold and assigned) 80,065 shares of common stock of Cloud B (the “Cloud
B Shares”) for $1.00 and an indemnification agreement as described below, constituting a 72.15% ownership interest in Cloud
B, based on 110,964 shares of Cloud B’s common stock outstanding as of February 17, 2020. In accordance with the agreement,
all of the liabilities of Cloud B were assumed by Pearl 33.
On
February 17, 2020, as part of the sale of Cloud B, Inc., the Company entered into an indemnification agreement with Pearl 33 Holdings,
LLC in connection with the divestiture of Cloud B, Inc., whereby pursuant to such agreement the Company is limited to the issuance
of 150,000 shares of the Company’s common stock to the Buyer for indemnification of claims against Cloud B Inc. In addition,
the Company shall indemnify the Buyer for expenses (including attorneys’ fees and all other costs, expenses and obligations)
in connection with defending any Claim in connection with the Cloud B. The Company has recorded $405,000 related to the fair value
of the 150,000 shares of common stock which were issued to the Buyer on June 30, 2020.
The
table below shows the assets and liabilities that the Company was relieved of in the transaction:
|
|
February
17, 2020
|
|
Accounts
payable
|
|
|
4,005,605
|
|
Accrued
Expenses
|
|
|
370,289
|
|
Income
Tax Payable
|
|
|
14,473
|
|
Notes
Payable
|
|
|
900,000
|
|
Non-Controlling
Interest
|
|
|
26,393
|
|
Shares
to be issued to Buyer
|
|
|
(405,000
|
)
|
Gain
on divestiture
|
|
$
|
4,911,760
|
|
Divestiture
of Subsidiary- SRM Entertainment, LTD
On
November 30, 2020, the Company and its wholly owned subsidiary, SRM Entertainment, LTD entered into a Stock Exchange Agreement
with Jupiter Wellness, Inc. (“Jupiter”). Under the terms of the Exchange Agreement, Jupiter agreed to purchase all
outstanding shares of common stock (the “Exchange Shares”) issued by SRM from the Company. As consideration for the
purchase of the Exchange Shares, Jupiter issued the Company 200,000 shares of its restricted common stock, symbol JUPW as listed
on NASDAQ Capital Markets. Please see Note 18 — Discontinued Operations for further information.
Acquisitions
On
September 29, 2020, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with Graphene Holdings,
LLC, Mercury FundingCo, LLC, Ventus Capital, LLC and Jetco Holdings, LLC (together the “Sellers”) to acquire all outstanding
Membership Units (the “Units”) of TBD Safety, LLC (“TBD”). Collectively, the Sellers owned all outstanding
Units of TBD. Under the terms of the Agreement, the Company issued a total of Two Million Two Hundred Ten Thousand Three Hundred
Eighty-Two (2,210,382) shares of the Company’s common stock and a total of Seven Hundred Sixty-Four Thousand Six Hundred
Eighteen (764,618) shares of a newly designated Preferred Stock (the “Preferred”). In addition, the Company and Sellers
entered into a Registration Rights Agreement (the “Registration Rights Agreement”) in favor of the Sellers obligating
the Company to register such common stock and shares of common stock to be issued upon conversion of the Preferred within 120
days after the Closing. The Sellers also had an Earn Out Consideration, which provides that at such time as the assets purchased
in the Agreement achieve cumulative revenue of $10,000,000, the Sellers will earn a total of One Hundred Twenty-Five Thousand
(125,000) shares of common stock. The closing of the transaction occurred on October 16, 2020.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
3 — Acquisitions and Divestitures — (Continued)
Asset
Acquisition
On
March 11, 2020, the Company issued 238,750 shares of our common stock to acquire the assets of HMNRTH, LLC. On July 1, 2020, the
Company made payment in the amount of $70,850 to the principals of HMNRTH, LLC. The transaction was treated as an asset purchase
and not accounted for as a business combination due to the limited inputs, processes and outputs, which did not meet the requirements
to be a business.
On
November 6, 2019, the Company issued 45,000 shares of our common stock to acquire the assets of Uber Mom, LLC for $52,352, which
was the approximate value of Uber Mom, LLC’s inventory.
Joint
Venture
On
August 23, 2019, the Company formed Ed Roses, LLC, a 50% joint venture with 4Keeps Roses, Inc., to distribute preserved roses,
flowers and associated gift products. The operations are currently not material.
The
following table summarizes the preliminary purchase price allocation of fair values of the assets acquired and liabilities assumed
during 2019 at the date of acquisition:
|
|
Uber
Mom
|
|
Inventory
|
|
$
|
52,352
|
|
Goodwill
|
|
|
98,613
|
|
Total
assets acquired
|
|
$
|
150,965
|
|
The
following table summarizes the aggregate purchase price consideration paid for acquisitions during 2020:
|
|
TBD
Safety, LLC
|
|
Fair value of issued common shares
|
|
$
|
4,203,632
|
|
Fair value of issued preferred shares
|
|
|
764,618
|
|
Fair value of contingent consideration
|
|
|
200,000
|
|
Purchase consideration
|
|
$
|
5,168,250
|
|
The
following table summarizes the purchase price allocation of fair values of the assets acquired and liabilities assumed during
2020 at the date of acquisition:
|
|
TBD
Safety, LLC
|
|
Cash and cash equivalents
|
|
$
|
180,489
|
|
Accounts receivable
|
|
|
20,217
|
|
Inventory
|
|
|
492,793
|
|
Other current assets
|
|
|
346,095
|
|
Goodwill
|
|
|
591,729
|
|
Intangible assets
|
|
|
3,600,000
|
|
Total assets acquired
|
|
$
|
5,231,323
|
|
Notes payable
|
|
|
62,500
|
|
Current liabilities
|
|
|
573
|
|
Total liabilities
assumed
|
|
|
63,073
|
|
Total net assets acquired
|
|
|
5,168,250
|
|
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
3 — Acquisitions and Divestitures — (Continued)
The
following represents the unaudited pro forma consolidated income statement as if the acquisitions had been included in the consolidated
results of the Company for the entire years ending December 31, 2020:
|
|
Year
Ended December 31, 2020
|
|
|
Year
Ended December 31, 2019
|
|
|
|
|
|
|
|
|
Revenues,
net
|
|
$
|
16,801,734
|
|
|
$
|
13,197,684
|
|
Cost of revenues
|
|
|
11,994,549
|
|
|
|
8,095,723
|
|
Gross
profit
|
|
|
4,807,185
|
|
|
|
5,101,961
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Selling, general
and administrative
|
|
|
12,589,513
|
|
|
|
14,900,658
|
|
Impairment
|
|
|
-
|
|
|
|
4,443,000
|
|
Change
in fair value of earnout
|
|
|
-
|
|
|
|
(520,000
|
)
|
Operating loss
|
|
|
(7,782,328
|
)
|
|
|
(13,721,697
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
1,615,016
|
|
|
|
(1,189,966
|
)
|
Loss
before income taxes
|
|
|
(6,167,312
|
)
|
|
|
(14,911,663
|
)
|
Income tax expense
(benefit)
|
|
|
19,197
|
|
|
|
(22,373
|
)
|
Net
loss from continuing operations
|
|
$
|
(6,186,509
|
)
|
|
$
|
(14,889,290
|
)
|
The
following table summarizes the aggregate purchase price consideration paid for acquisitions during 2019:
|
|
Uber
Mom
|
|
Cash
paid
|
|
$
|
52,352
|
|
Fair
value of issued common shares
|
|
|
98,613
|
|
Purchase
consideration
|
|
$
|
150,965
|
|
The
Company believes that these combinations will further strengthen its future growth opportunities while also increasing product
diversification. The Company accounted for these acquisitions as a business combination under the acquisition method of accounting.
Note
4 — Variable Interest Entities
The
Company is involved in the formation of various entities considered to be Variable Interest Entities (“VIEs”). The
Company evaluates the consolidation of these entities as required pursuant to ASC Topic 810 relating to the consolidation of VIEs.
These VIEs are primarily partnerships formed to supply consumer goods to through various distribution and retail channels.
The
Company’s determination of whether it is the primary beneficiary of VIE is based in part on an assessment of whether or
not the Company and its related parties are exposed to the majority of the risks and rewards of the entity. Typically, the Company
is entitled to substantially all or portion of the economics of these VIEs. The Company is the primary beneficiary of the VIE
entities.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
4 — Variable Interest Entities — (Continued)
The
following table presents the carrying values of the assets and liabilities of entities that are VIEs and consolidated by the Company
at December 31, 2020:
|
|
For
the Twelve Months
Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
10,481
|
|
|
$
|
6,234
|
|
Accounts
receivable, net
|
|
|
94,195
|
|
|
|
21,697
|
|
Inventory
|
|
|
240,158
|
|
|
|
51,090
|
|
Prepaid
expenses and other current assets
|
|
|
-
|
|
|
|
379,561
|
|
Total
current assets
|
|
|
344,834
|
|
|
|
458,582
|
|
Property
and equipment, net
|
|
|
-
|
|
|
|
32,661
|
|
Total
assets
|
|
$
|
344,834
|
|
|
$
|
491,243
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
217,558
|
|
|
$
|
337,648
|
|
Accrued
expenses and other current liabilities
|
|
|
113,576
|
|
|
|
-
|
|
Line
of credit
|
|
|
1,133,652
|
|
|
|
-
|
|
Notes
payable, current
|
|
|
150,000
|
|
|
|
-
|
|
Due
to related party
|
|
|
315,666
|
|
|
|
315,666
|
|
Total
current liabilities
|
|
|
1,930,452
|
|
|
|
653,314
|
|
The
following table presents the operations of entities that are VIEs and consolidated by the Company at December 31, 2020:
|
|
For
the Twelve Months
Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Revenues,
net
|
|
$
|
1,571,017
|
|
|
$
|
352,523
|
|
Cost
of revenues
|
|
|
2,092,167
|
|
|
|
204,943
|
|
Gross
profit
|
|
|
(521,150
|
)
|
|
|
147,580
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
413,217
|
|
|
|
450,693
|
|
Operating
income
|
|
|
(934,367
|
)
|
|
|
(303,113
|
)
|
|
|
|
|
|
|
|
|
|
Other
(expense) income:
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(174,396
|
)
|
|
|
-
|
|
Total
other (expense) income
|
|
|
(174,396
|
)
|
|
|
-
|
|
Loss
before income taxes
|
|
|
(47,578
|
)
|
|
|
(303,113
|
)
|
Income
tax expense
|
|
|
-
|
|
|
|
-
|
|
Net
(loss) income
|
|
$
|
(1,108,763
|
)
|
|
$
|
(303,113
|
)
|
At
December 31, 2020 and December 31, 2019, there were no unconsolidated VIEs for which the Company holds a variable interest.
On
May 20, 2020 (the “Effective Date”), Edison Nation, Inc. (the “Company”) entered into an Agreement and
Plan of Share Exchange (the “Share Exchange Agreement”) with PPE Brickell Supplies, LLC, a Florida limited liability
company (“PPE”), and Graphene Holdings, LLC, a Wyoming limited liability company (“Graphene”, and together
with PPE, the “Sellers”), whereby the Company purchased 25 membership units of Global Clean Solutions, LLC, a Nevada
limited liability company (“Global”) from each of PPE and Graphene, for a total of fifty (50) units, representing
fifty percent (50%) of the issued and outstanding units of Global (the “Purchase Units”). The Company issued 250,000
shares of its restricted common stock, $0.001 par value per share (the “Common Stock”) to PPE, and 50,000 shares of
Common Stock to Graphene, in consideration for the Purchase Units. Global Clean Solutions, LLC is a VIE. The fair value of the
shares of $699,000 was treated as a distribution to the noncontrolling interest members.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
4 — Variable Interest Entities — (Continued)
Pursuant
to the terms of the Share Exchange Agreement, the Sellers may earn additional shares of Common Stock upon Global realizing the
following revenue targets: (i) In the event that Global’s total orders equal or exceed $1,000,000, Graphene shall receive
200,000 shares of Common Stock; (ii) In the event that Global’s total orders equal or exceed $10,000,000, PPE shall receive
100,000 shares of restricted Common Stock; and (iii) In the event that Global’s total orders equal or exceed $25,000,000,
Graphene shall receive 125,000 shares of restricted Common Stock. Additionally, the Company shall be entitled to appoint two managers
to the Board of Managers of Global. The fair value of the shares is expensed over the estimated vesting period and is adjusted
based on the number of shares that vest.
Amended
Limited Liability Company Agreement
On
the Effective Date, the Company entered into an Amended Limited Liability Company Agreement of Global (the “Amended LLC
Agreement”). The Amended LLC Agreement amends the original Limited Liability Company Agreement of Global, dated May 13,
2020. The Amended LLC defines the operating rules of Global and the ownership percentage of each member: Vinco Ventures, Inc.
50%, PPE 25% and Graphene 25%.
Secured
Line of Credit Agreement
On
the Effective Date, the Company (as “Guarantor”) entered into a Secured Line of Credit Agreement (the “Credit
Agreement”) with Global and PPE. Under the terms of the Credit Agreement, PPE is to make available to Global a revolving
credit loan in a principal aggregate amount at any one time not to exceed $2,500,000. Upon each drawdown of funds against the
credit line, Global shall issue a Promissory Note (the “Note”) to PPE. The Note shall accrue interest at 3% per annum
and have a maturity date of six (6) months. In the event of a default, any and all amounts due to PPE by Global, including principal
and accrued but unpaid interest, shall increase by forty (40%) percent and the interest shall increase to five (5%) percent (the
“Default Interest”).
Security
Agreement
On
the Effective Date, the Company (as “Guarantor”) entered into a Security Agreement (the “Security Agreement”)
with Global (as “Borrower”) and PPE as the secured party, whereby the Company placed 1,800,000 shares of Common Stock
(the “Reserve Shares”) in reserve with its transfer agent in the event of default under the Credit Agreement. In the
event of a default that is not cured by the defined cure period, the PPE may liquidate the Reserve Shares until the Global’s
principal, interest and associated expenses are recovered. The number of Reserve Shares may be increased through the issuance
of True-Up shares in the event the original number of Reserve Shares is insufficient.
Note
5 — Accounts Receivable
As
of December 31, 2020 and 2019, accounts receivable consisted of the following:
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Accounts receivable
|
|
$
|
1,781,448
|
|
|
$
|
2,185,859
|
|
Less: Allowance
for doubtful accounts
|
|
|
(178,321
|
)
|
|
|
(77,760
|
)
|
Total accounts
receivable, net
|
|
$
|
1,603,127
|
|
|
$
|
2,108,099
|
|
Note
6 — Inventory
As
of December 31, 2020 and 2019, inventory consisted of the following:
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Raw
materials
|
|
$
|
71,484
|
|
|
$
|
49,232
|
|
Finished
goods
|
|
|
1,761,668
|
|
|
|
1,319,993
|
|
Reserve
for obsolescence
|
|
|
(145,690
|
)
|
|
|
-
|
|
Total
inventory
|
|
$
|
1,687,462
|
|
|
$
|
1,369,225
|
|
Note
7 — Short-term investments
As
of December 31, 2020 and 2019, short-term investments consisted of the following:
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Jupiter Wellness, Inc. (JUPW)
|
|
$
|
1,040,000
|
|
|
$
|
-
|
|
Unrealized losses
|
|
|
(22,000
|
)
|
|
|
-
|
|
Total short-term
investments
|
|
$
|
1,018,000
|
|
|
$
|
-
|
|
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
8 — Prepaid expenses and other current assets
As
of December 31, 2020 and 2019, prepaid expenses and other current assets consisted of the following:
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Deposits
on inventory
|
|
$
|
678,531
|
|
|
$
|
680,792
|
|
Deposits
|
|
|
54,598
|
|
|
|
11,409
|
|
Prepaid
insurance
|
|
|
43,063
|
|
|
|
46,848
|
|
Other
|
|
|
7,866
|
|
|
|
41,056
|
|
Total
prepaid expenses and other current assets
|
|
$
|
784,238
|
|
|
$
|
917,433
|
|
Note
9 — Property and equipment, net
As
of December 31, 2020 and 2019, property and equipment consisted of the following:
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Land
|
|
$
|
79,100
|
|
|
$
|
79,100
|
|
Buildings – rental property
|
|
|
463,635
|
|
|
|
445,635
|
|
Building improvements
|
|
|
800,225
|
|
|
|
766,859
|
|
Equipment and machinery
|
|
|
4,122,917
|
|
|
|
3,917,080
|
|
Furniture and fixtures
|
|
|
368,137
|
|
|
|
387,836
|
|
Computer software
|
|
|
-
|
|
|
|
23,518
|
|
Molds
|
|
|
79,300
|
|
|
|
4,651,889
|
|
Vehicles
|
|
|
521,962
|
|
|
|
521,962
|
|
|
|
|
6,435,276
|
|
|
|
10,793,879
|
|
Less: accumulated
depreciation
|
|
|
(5,424,475
|
)
|
|
|
(9,861,911
|
)
|
Total property
and equipment, net
|
|
$
|
1,010,801
|
|
|
$
|
931,968
|
|
Depreciation
expense for the years ended December 31, 2020 and 2019 was $169,141 and $231,518, respectively.
Note
10 — Goodwill
The
changes in the carrying amount of goodwill for the year ended December 31, 2020 consisted of the following:
|
|
Total
|
|
Balance,
January 1, 2019
|
|
$
|
9,736,510
|
|
Acquisition
of Uber Mom
|
|
|
98,613
|
|
Impairment
|
|
|
(4,443,000
|
)
|
Balance,
December 31, 2019
|
|
|
5,392,123
|
|
Acquisition
of TBD Safety, LLC
|
|
|
591,729
|
|
Balance,
December 31, 2020
|
|
$
|
5,983,852
|
|
The
Company recorded an impairment charge of $0 and $4,443,000 for the years ended December 31, 2020 and 2019, respectively, related
to our annual impairment assessment. The impairment was a result of decreased profitability as compared to anticipated profitability
in our businesses acquired in 2018. The Company utilized the simplified test for goodwill impairment. The amount recognized for
impairment is equal to the difference between the carrying value and the asset’s fair value. The valuation methods used
in the quantitative fair value assessment was a discounted cash flow method and required management to make certain assumptions
and estimates regarding certain industry trends and future profitability of our reporting units.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
11 — Intangible assets, net
As
of December 31, 2020, intangible assets consisted of the following:
|
|
|
|
Weighted
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
|
|
Average
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
Life
|
|
Remaining
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
Finite
lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
relationships
|
|
15
years
|
|
12.8
years
|
|
$
|
4,270,000
|
|
|
$
|
624,223
|
|
|
$
|
3,645,777
|
|
Developed
technology
|
|
7
years
|
|
5.9
years
|
|
|
7,400,000
|
|
|
|
1,330,476
|
|
|
|
6,069,524
|
|
Membership
network
|
|
7
years
|
|
4.7
years
|
|
|
1,740,000
|
|
|
|
580,000
|
|
|
|
1,160,000
|
|
Digital
media
|
|
7
years
|
|
6.9
years
|
|
|
1,552,500
|
|
|
|
29,464
|
|
|
|
1,523,036
|
|
Total
finite lived intangible assets
|
|
|
|
|
|
$
|
14,962,500
|
|
|
$
|
2,564,163
|
|
|
$
|
12,398,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite
lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
and tradenames
|
|
Indefinite
|
|
|
|
$
|
3,140,000
|
|
|
$
|
-
|
|
|
$
|
3,140,000
|
|
Total
indefinite lived intangible assets
|
|
|
|
|
|
$
|
3,140,000
|
|
|
$
|
-
|
|
|
$
|
3,140,000
|
|
Total
intangible assets
|
|
|
|
|
|
$
|
18,102,500
|
|
|
$
|
2,564,163
|
|
|
$
|
15,538,337
|
|
As
of December 31, 2019, intangible assets consisted of the following:
|
|
|
|
Weighted
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
|
|
Average
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
Life
|
|
Remaining
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
Finite
lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
relationships
|
|
15
years
|
|
13.8
years
|
|
$
|
4,270,000
|
|
|
$
|
339,556
|
|
|
$
|
3,930,444
|
|
Developed
technology
|
|
7
years
|
|
5.7
years
|
|
|
3,800,000
|
|
|
|
697,619
|
|
|
|
3,102,381
|
|
Membership
network
|
|
7
years
|
|
5.7
years
|
|
|
1,740,000
|
|
|
|
331,429
|
|
|
|
1,408,571
|
|
Non-compete
agreements
|
|
2
years
|
|
.7
years
|
|
|
50,000
|
|
|
|
33,333
|
|
|
|
16,667
|
|
Total
finite lived intangible assets
|
|
|
|
|
|
$
|
9,860,000
|
|
|
$
|
1,401,937
|
|
|
$
|
8,458,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite
lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
and tradenames
|
|
Indefinite
|
|
|
|
$
|
3,140,000
|
|
|
$
|
-
|
|
|
$
|
3,140,000
|
|
Total
indefinite lived intangible assets
|
|
|
|
|
|
$
|
3,140,000
|
|
|
$
|
-
|
|
|
$
|
3,140,000
|
|
Total
intangible assets
|
|
|
|
|
|
$
|
13,000,000
|
|
|
$
|
1,401,937
|
|
|
$
|
11,598,063
|
|
Amortization
expense for the years ended December 31, 2020 and 2019 was $1,212,226 and $1,089,668, respectively.
The
estimated future amortization of intangibles subject to amortization at December 31, 2020 was as follows:
For
the Years Ended December 31,
|
|
Amount
|
|
2021
|
|
$
|
1,657,881
|
|
2022
|
|
|
1,657,881
|
|
2023
|
|
|
1,657,881
|
|
2024
|
|
|
1,657,881
|
|
2025
|
|
|
1,446,452
|
|
Thereafter
|
|
|
4,320,361
|
|
Total
|
|
$
|
12,398,337
|
|
Note
12 — Accrued expenses and other current liabilities
As
of December 31, 2020 and 2019, accrued expenses and other current liabilities consisted of the following:
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Accrued
taxes - other
|
|
$
|
211,421
|
|
|
$
|
261,396
|
|
Accrued
payroll and benefits
|
|
|
425,130
|
|
|
|
482,719
|
|
Accrued
professional fees
|
|
|
443,084
|
|
|
|
201,318
|
|
Customer
deposits
|
|
|
-
|
|
|
|
13,212
|
|
Accrued
interest
|
|
|
463,489
|
|
|
|
341,559
|
|
Accrued
legal contingencies
|
|
|
240,105
|
|
|
|
240,105
|
|
Earnout
|
|
|
200,000
|
|
|
|
-
|
|
Other
|
|
|
118,381
|
|
|
|
54,359
|
|
Total
accrued expenses and other current liabilities
|
|
$
|
2,101,610
|
|
|
$
|
1,594,668
|
|
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
13 — Debt
As
of December 31, 2020 and December 31, 2019, debt consisted of the following:
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Line
of credit:
|
|
|
|
|
|
|
|
|
Asset
backed line of credit
|
|
$
|
1,133,652
|
|
|
$
|
472,567
|
|
Receivables
financing
|
|
|
367,301
|
|
|
|
-
|
|
Debt
issuance costs
|
|
|
-
|
|
|
|
(15,573
|
)
|
Total
line of credit
|
|
|
1,500,953
|
|
|
|
456,995
|
|
|
|
|
|
|
|
|
|
|
Senior
convertible notes payable:
|
|
|
|
|
|
|
|
|
Senior
convertible notes payable
|
|
|
1,428,161
|
|
|
|
1,428,161
|
|
Convertible
notes payable
|
|
|
591,104
|
|
|
|
-
|
|
Debt
issuance costs
|
|
|
(280,511
|
)
|
|
|
(366,666
|
)
|
Total
long-term senior convertible notes payable
|
|
|
1,738,754
|
|
|
|
1,061,495
|
|
Less:
current portion of long-term notes payable
|
|
|
(577,260
|
)
|
|
|
-
|
|
Noncurrent
portion of long-term convertible notes payable
|
|
|
1,161,494
|
|
|
|
1,061,495
|
|
|
|
|
|
|
|
|
|
|
Notes
payable:
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
|
1,932,088
|
|
|
|
1,621,015
|
|
Debt
issuance costs
|
|
|
(34,997
|
)
|
|
|
(212,848
|
)
|
Total
long-term debt
|
|
|
1,897,091
|
|
|
|
1,408,167
|
|
Less:
current portion of long-term debt
|
|
|
(1,301,212
|
)
|
|
|
(1,365,675
|
)
|
Noncurrent
portion of long-term debt
|
|
|
595,879
|
|
|
|
42,492
|
|
|
|
|
|
|
|
|
|
|
Notes
payable – related parties:
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
|
2,827,512
|
|
|
|
3,282,021
|
|
Debt
issuance costs
|
|
|
(33,833
|
)
|
|
|
(1,686,352
|
)
|
Total
notes payable – related parties:
|
|
|
2,793,679
|
|
|
|
1,595,669
|
|
Less:
current portion of long-term debt – related parties
|
|
|
(1,389,922
|
)
|
|
|
-
|
|
Noncurrent
portion of long-term debt – related parties
|
|
$
|
1,403,757
|
|
|
$
|
1,595,669
|
|
Convertible
Notes Payable
On
January 23, 2020, the Company entered into a $1,100,000 loan agreement the (“Loan Agreement”) with Greentree Financial
Group, Inc. (the “Investor”), pursuant to which the Investor purchased a 10% Convertible Promissory Note (the “Note”)
from the Company, and the Company issued to the Investor a three-year warrant (the “Warrant”) to purchase 550,000
shares of the Company’s common stock, $0.001 per share (“Common Stock”). The Note is convertible at any time
at a price of $2.00 per share, subject to certain adjustments to the conversion price set forth in the Note. The Note reiterates
the registration rights set forth in the Loan Agreement and the Warrant. There is no prepayment penalty on the Note. The $1,100,000
of proceeds from the Note were used for general working capital purposes and for the repayment of debt. On January 24, 2020, the
Company used $588,366 of the proceeds from the Note to pay off in full the 12% Convertible Promissory Note held by Labrys Fund,
LP. Upon execution of the Loan Agreement, the Company issued to the Investor 100,000 shares of Common Stock (the “Origination
Shares”) as an origination fee, plus an additional 60,000 shares of Common Stock as consideration for advisory services.
Pursuant to the Loan Agreement, the Company agreed to issue and sell to the Investor the Note, in the principal amount of $1,100,000.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
13 — Debt — (Continued)
On
January 29, 2020, the Company and Greentree Financial Group, Inc. (the “Investor”), entered into an Amendment Agreement,
amending the January 22, 2020 Loan Agreement, the Note, and the Warrant to: (i) correct the effective date set forth in the Loan
Agreement, Note and Warrant to January 23, 2020 and the due date to October 23, 2020, (ii) clarify the terms of the registration
right provision in the Loan Agreement such that the Company was required to register a total of 1,500,000 shares of Common Stock,
which such amount of shares is the sum of 550,000 shares of Common Stock issuable upon conversion of the Note, 550,000 Warrant
Shares, the 100,000 Origination Shares, and 300,000 shares of Common Stock to account for changes to the conversion and/or exercise
price under the Note and Warrant, and (iii) to ensure that the total number of shares of Common Stock issued pursuant to the Loan
Agreement, the Note, and/or the Warrant, each as amended, does not exceed 17.99% of the Company’s issued and outstanding
Common Stock as of January 23, 2020. The Company recognized a beneficial conversion option of $586,785 related to the 550,000
shares of Common Stock issuable upon conversion of the Note, a debt discount of $296,891 based on the relative fair value related
to the 550,000 Warrant Shares, a debt discount of $201,324 based on the relative fair value related to the 160,000 Origination
and Advisory Shares. On July 23, 2020, the Company issued 320,000 shares of common stock valued at $1,158,400 to Greentree Financial
Group, Inc. to satisfy $360,000 principal and $131,889 interest and fees and on August 4, 2020, the Company issued 370,000 shares
of common stock valued at $1,394,900 to Greentree Financial Group, Inc. in satisfaction of $740,000 principal. The Note is paid
in full.
On
April 7, 2020, the Company entered into a Securities Purchase Agreement (the “Agreement”) with Jefferson Street Capital,
LLC (the “Investor”) wherein the Company issued the Investor a Convertible Promissory Note (the “Note”)
in the amount of $168,000 ($18,000 OID). The $150,000 of proceeds from the Note was used for general working capital purposes
The Note has a term of six (6) months, is due on October 7, 2020 and has a one-time interest charge of 2%. In addition, the Company
issued the Investor 10,700 shares of Common Stock (the “Origination Shares”) as an origination fee. The transaction
closed on April 9, 2020. The Investor shall have the right at any time to convert all or any part of the outstanding and unpaid
principal, interest, fees, or any other obligation owed pursuant to this Note into fully paid and non-assessable shares of Common
Stock at a conversion price equal to $2.05 per share. Upon an Event of Default, the Conversion Price shall equal the Alternate
Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by
the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The “Alternate Conversion Price” shall equal the
lesser of (i) 80% multiplied by the average of the three lowest daily volume weighted average prices (“VWAP”) during
the previous twenty (20) Trading Days (as defined below) before the Issue Date of this Note (representing a discount rate of 20%)
or (ii) 80% multiplied by the Market Price (as defined herein) (representing a discount rate of 20%). “Market Price”
means the average of the three lowest daily VWAPs for the Common Stock during the twenty (20) Trading Day period ending on the
latest complete Trading Day prior to the Conversion Date. On October 7, 2020, the Company and Investor entered into a Forbearance
Agreement (the “Forbearance Agreement”) against the Note issued by the Company to the Investor. Under the terms of
the Forbearance Agreement, the Investor has requested and the Company has agreed to temporarily forebear, until the earlier of
(i) December 9, 2020 or (ii) at such time as a default shall occur under and pursuant to the Purchase Agreement, the Note or the
Forbearance Agreement, from exercising its right to convert amounts due under the Note into Common Stock of the Company, in exchange
for a one time cash payment forbearance fee equal to $12,500 paid upon execution of the Forbearance Agreement. On December 29,
2020, the Company issued the Investor 41,730 shares of common stock in satisfaction of $45,000 principal. Please see Note
19 — Subsequent Events for further information.
On
April 7, 2020, the Company entered into a Securities Purchase Agreement (the “Agreement”) with BHP Capital NY Inc.
(the “Investor”) wherein the Company issued the Investor a Convertible Promissory Note (the “Note”) in
the amount of $168,000 ($18,000 OID). The $150,000 of proceeds from the Note will be used for general working capital purposes
The Note has a term of six (6) months, is due on October 7, 2020 and has a one-time interest charge of 2%. In addition, the Company
issued the Investor 10,700 shares of Common Stock (the “Origination Shares”) as an origination fee. The transaction
closed on April 9, 2020. The Investor shall have the right at any time to convert all or any part of the outstanding and unpaid
principal, interest, fees, or any other obligation owed pursuant to this Note into fully paid and non-assessable shares of Common
Stock at a conversion price equal to $2.05 per share. Upon an Event of Default, the Conversion Price shall equal the Alternate
Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by
the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The “Alternate Conversion Price” shall equal the
lesser of (i) 80% multiplied by the average of the three lowest daily volume weighted average prices (“VWAP”) during
the previous twenty (20) Trading Days (as defined below) before the Issue Date of this Note (representing a discount rate of 20%)
or (ii) 80% multiplied by the Market Price (as defined herein) (representing a discount rate of 20%). “Market Price”
means the average of the three lowest daily VWAPs for the Common Stock during the twenty (20) Trading Day period ending on the
latest complete Trading Day prior to the Conversion Date. The Note increased 130% due to the occurrence of the default but was
subsequently paid in full on February 26, 2021.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
13 — Debt — (Continued)
On
July 29, 2020, the Company entered into a Securities Purchase Agreement (the “Agreement”) with Jefferson Street Capital,
LLC (the “Investor”) wherein the Company issued the Investor a Convertible Promissory Note (the “Note”)
in the amount of $224,000 ($24,000 OID). The $200,000 of proceeds from the Note will be used for general working capital purposes
The Note has a term of six (6) months, is due on January 29, 2021 and has a one-time interest charge of 2%. In addition, the Company
issued the Investor 14,266 shares of Common Stock (the “Origination Shares”) as an origination fee. The transaction
closed on July 29, 2020. The Investor shall not have the right to convert the Note into shares prior to 180 calendar days from
the Issue Date. Provided that the Note remains unpaid, the Investor may elect to convert all or any part of the outstanding and
unpaid principal, interest, fees, or any other obligation owed pursuant to the Note into fully paid and non-assessable shares
of Common Stock at a conversion price equal to $2.05 per share after 180 calendar Days from the Issue Date. Upon an Event of Default,
the Conversion Price shall equal the Alternate Conversion Price (as defined herein) (subject to equitable adjustments for stock
splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any
subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).
The “Alternate Conversion Price” shall equal the lesser of (i) 80% multiplied by the average of the three lowest daily
volume weighted average prices (“VWAP”) during the previous twenty (20) Trading Days (as defined below) before the
Issue Date of this Note (representing a discount rate of 20%) or (ii) 80% multiplied by the Market Price (as defined herein) (representing
a discount rate of 20%). “Market Price” means the average of the three lowest daily VWAPs for the Common Stock during
the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. The note was paid in
full on the January 28, 2021.
32E
Financing
On
December 4, 2019, the Company agreed to issue and sell to 32 Entertainment LLC (“32E”) a 10% Senior Secured Note (the
“32E Note”), in the principal amount of $250,000. The maturity date of the 32E Note is December 4, 2020. In addition,
the Company issued to 32E 10,000 shares of common stock as an inducement to 32E to purchase the 32E Note. The fees were recorded
as a debt discount and amortized over the term of the note. The $250,000 of proceeds from the 32E Note was used for general working
capital needs of the Company and the repayment of debt related to Horberg Enterprises.
Pursuant
to the terms of the 32E Note, on December 4, 2019, the Company also issued 32E a Common Stock Purchase Warrant (the “32E
Warrant”) to purchase 50,000 shares of common stock at an exercise price of $1.50 per share. The 32E Warrant expires on
December 4, 2024. The 32E Warrant contains price protection provisions, as well as a provision allowing 32E to purchase the number
of shares that 32E could have acquired if it held the number of shares of common stock acquirable upon complete exercise of the
32E Warrant, in the event that the Company grants, issues or sells common stock, common stock equivalents, rights to purchase
common stock, warrants, securities or other property pro rate to holders of any class of the Company’s securities. If there
is no effective registration statement registering the resale of the shares of common stock underlying the 32E Warrant, then the
32E Warrant may be exercised, based on a cashless exercise formula. The 32E Warrant also contains a conversion limitation provision,
which prohibits 32E from exercising the 32E Warrant in an amount that would result in the beneficial ownership of greater than
4.9% of the total issued and outstanding shares of common stock, provided that (i) such exercise limitation may be waived by 32E
with 61 days prior notice, and (ii) 32E cannot waive the exercise limitation if conversion of the 32E Warrant would result in
32E having beneficial ownership of greater than 9.9% of the total issued and outstanding shares of common stock.
In
connection with the sale of the 32E Note, also on December 4, 2019, the Company entered into a registration rights agreement whereby
the Company agreed to register the 10,000 shares of common stock issued to 32E as an inducement on a registration statement on
Form S-1 with the SEC. The Company was required to have such registration statement declared effective by the SEC within 90 calendar
days (or 180 calendar days in the event of a “full review” by the SEC) following the earlier of 30 days from December
4, 2019 or the filing date of the registration statement on Form S-1, which such registration statement has not been filed or
timely declared effective. If the registration statement is not filed or declared effective within the timeframe set forth in
the registration rights agreement, the Company was supposed to be obligated to pay to 32E a monthly amount equal to 1% of the
total subscription amount paid by 32E until such failure is cured. The Company has not made any such payment 32E. The registration
rights agreement also contains mutual indemnifications by the Company and each investor, which the Company believes are customary
for transactions of this type.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
13 — Debt — (Continued)
On
May 19, 2020, the Company entered into an Amendment (the “Amendment”) to the 32E Note. Under the terms of the Amendment,
the Company issued to 32E an Amended Subordinate Secured Note (the “Replacement Note”) in the principal amount of
$200,000 that accrues interest at 16% annually and matures on May 21, 2021. On May 28, 2020, the Company paid $50,000 toward the
principal plus interest in the amount of $6,250 for a total of $56,250. 32E shall also receive 40,000 restricted stock units and
surrender the warrant issued to it in the December 4, 2019 financing transaction. The Company accounted for the Amendment as a
modification.
Promissory
Notes
On
January 2, 2020, the Company entered into that certain Loan Agreement with Tiburon Opportunity Fund (the “Lender”),
dated January 2, 2020 (the “Loan Agreement”). Pursuant to the terms of the Loan Agreement, the Lender agreed to loan
the Company $400,000. The Loan is interest bearing at the rate of 1.5% per month through the term of the Loan. Additionally, the
Loan Agreement provides that the Company shall pay the Lender the entire unpaid principal and all accrued interest upon thirty
days’ notice to the Company, but in any event, the notice shall not be sooner than June 1, 2020. On April 24, 2020, the
Company and Lender entered into a Debt Conversion Agreement whereby the Lender was given the right and elected to exercise that
right to convert principal and interest of $424,000 of funds loaned to the Company into shares of the Company’s common stock.
The fair value of the Company’s common stock was $2.08 on the date of conversion and the conversion price was $2.00 per
share for a total of 212,000 shares of restricted common stock issued by the Company.
On
January 2, 2020, Ed Roses, LLC (the “Partnership”) entered into a Loan Agreement (the “Agreement”) with
Sook Hyun Lee (the “Lender”). Under the terms of the Agreement, the Lender agreed to lend $150,000 to the Partnership
for general working capital. The Loan was due on April 15, 2020 (the “Maturity Date”) and accrues interest at 15%
per annum. The Agreement shall automatically renew at the Maturity date for successive 90-day periods unless written notice is
remitted by either party. On the Maturity date, the Partnership shall pay the Lender all unpaid principal and interest and a $30,000
commitment fee. The Lender shall have a collateral interest in the accounts receivable of the Partnership, including but not limited
to 7 Eleven receivables. As collateral, the Company, Inc. placed 75,000 shares of common stock in reserve.
On
January 10, 2020, the Company entered into a 5% Promissory Note Agreement with Equity Trust Company on behalf of Rawleigh Ralls
(“Ralls”) for an aggregate principal amount of $267,000 (the “Ralls Note”), pursuant to which Ralls purchased
the Ralls Note from the Company for $250,000 and an original issue discount of $17,000, and the Company issued to Ralls a warrant
(the “Ralls Warrant”) to purchase 125,000 shares of the Company’s common stock valued at $86,725 estimated using
the Black-Scholes option-valuation model. The proceeds from the Ralls Note will be used for general working capital needs of the
Company. The Company issued 33,000 incentive shares to Ralls valued at $79,860 based on the closing stock price on January 10,
2020. The fair value of the warrants and incentive shares have been recorded as debt discount. The original maturity date of the
Ralls Note was July 10, 2020. On July 14, 2020, the Company entered into an Amendment to Note Agreement and Common Stock Purchase
Warrant (the “Amendment”) with Equity Trust Company, a Custodian FBO: Rawleigh H. Ralls IRA. Under the terms of the
Amendment, the parties amended the terms of the January 10, 2020 Note Agreement (the “Agreement”) and Common Stock
Purchase Warrant (the “Warrant”) such that; (i) the maturity date of the Agreement was extended to January 10, 2021,
(ii) the Original Issue Discount (“OID”) shall be increased to $34,000, (iii) the Lender shall be issued 33,000 Additional
Incentive Shares and (iv) the Company shall prepare and file with the United States Securities and Exchange Commission a registration
statement on Form S-1 within 30 days of the Effective Date of the Amendment, that registers a total of 191,000 shares of Common
Stock, which such amount of shares is the sum of 125,000 Warrant Shares, the 33,000 Incentive Shares, and 33,000 Additional Incentive
Shares. The amendment was accounted for as an extinguishment with no gain or loss recognized. On July 14, 2020, the Company issued
the 33,000 Additional Incentive Shares valued at $124,740. The Company paid the Note in full on January 27, 2021.
On
January 15, 2020, the Company entered into a 5% Promissory Note Agreement with Paul J. Solit & Julie B. Solit (“Solits”)
for an aggregate principal amount of $107,000 (the “Solit Note”), pursuant to which the Solits purchased the Solit
Note from the Company for $100,000 and an original issue discount of $7,000, and the Company issued to the Solits a warrant (the
“Solit Warrant”) to purchase 50,000 shares of the Company’s common stock valued at $31,755 estimated using the
Black-Scholes option-valuation model. The proceeds from the Solit Note will be used for general working capital needs of the Company.
The Company issued 13,000 incentive shares to the Solits valued at $30,420 based on the closing stock price on January 15, 2020.
The fair value of the warrants and incentive shares have been recorded as debt discount. The original maturity date of the Solit
Note was July 15, 2020. On July 14, 2020, the Company entered into an Amendment to Note Agreement and Common Stock Purchase Warrant
(the “Amendment”) with Paul J. Solit and Julie B. Solit. Under the terms of the Amendment, the parties amended the
terms of the January 15, 2020 Note Agreement (the “Agreement”) and Common Stock Purchase Warrant (the “Warrant”)
such that; (i) the maturity date of the Agreement was extended to December 15, 2020, (ii) the Original Issue Discount (“OID”)
shall be increased to $14,000 and (iii) the Lender shall be issued 13,000 Additional Incentive Shares. On July 14, 2020, the Company
issued the 13,000 Additional Incentive Shares valued at $49,140. On December 15, 2020, the Company entered into a Second Amendment
to Note Agreement (the “Second Amendment”) with the Solits. Under the terms of the Second Amendment, the Company is
to issue the Solits 10,000 additional incentive shares and make payments of $10,000 per week beginning on January 18, 2021with
the remaining principal and interest payable on or before February 22, 2021. In the event the Company fails to make any of the
payments, the Company shall issue the Solits an additional 5,000 shares of restricted common stock. The amendment was accounted
for as a modification. The Company paid the Note in full on January 27, 2021.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
13 — Debt — (Continued)
On
January 17, 2020, the Company entered into a 5% Promissory Note Agreement with Richard O’Leary (“O’Leary”)
(“Lender”) for an aggregate principal amount of $53,500 (the “O’Leary Note”), pursuant to which
O’Leary purchased the O’Leary Note from the Company for $50,000 and an original issue discount of $3,500, and the
Company issued to O’Leary a warrant (the “O’Leary Warrant”) to purchase 25,000 shares of the Company’s
common stock valued at $16,797 estimated using the Black-Scholes option-valuation model. The proceeds from the O’Leary Note
will be used for general working capital needs of the Company. The Company issued 6,500 incentive shares to O’Leary valued
at $15,535 based on the closing stock price on January 17, 2020. The fair value of the warrants and incentive shares have been
recorded as debt discount. The original maturity date of the O’Leary Note was July 17, 2020. On July 14, 2020, the Company
entered into an Amendment to the O’Leary Note and O’Leary Warrant (the “Amendment”) with Richard O’Leary.
Under the terms of the Amendment, the parties amended the terms such that; (i) the maturity date of the O’Leary Note was
extended to January 17, 2021, (ii) the Original Issue Discount (“OID”) shall be increased to $7,000, (iii) the Lender
shall be issued 6,500 Additional Incentive Shares and (iv) the expiration date of the Warrant shall be extended to June 30, 2021.
On July 14, 2020, the Company issued the 6,500 Additional Incentive Shares valued at $24,570. The amendment was accounted for
as an extinguishment with no gain or loss recognized. The Company paid the Note in full on January 27, 2021.
On
March 6, 2019, Edison Nation, Inc. (the “Company”) entered into a securities purchase agreement (the “SPA”)
with an accredited investor (the “Investor”) pursuant to which the Investor purchased a 2% unsecured, senior convertible
promissory note (the “Note”) from the Company. The Note was in the amount of $560,000 with an original issue discount
of $60,000. The Company issued 15,000 shares of its common stock (“Common Stock”) valued at $74,100 based on the share
price on the date of issuance to the Investor as additional consideration for the purchase of the Note. The Under the terms of
the SPA, the Investor will have piggyback registration rights in the event the Company files a Form S-1 or Form S-3 within six
months from March 6, 2019, as well as a pro rata right of first refusal in respect of participation in any debt or equity financings
undertaken by the Company during the 18 months following March 6, 2019. The Company is also subject to certain customary negative
covenants under the SPA, including but not limited to, the requirement to maintain its corporate existence and assets subject
to certain exceptions, and to not to make any offers or sales of any security under circumstances that would have the effect of
establishing rights or otherwise benefitting other investors in a manner more favorable in any material respect than those rights
and benefits established in favor of the Investor under the terms of the SPA and the Note. The maturity date of the Note is six
months from March 6, 2019. All principal amounts and the interest thereon are convertible into shares Common Stock only in the
event that an Event of Default occurs. On January 24, 2020, the Company paid the Investor $588,366 to pay the Note in full.
Paycheck
Protection Program
On
April 15, 2020, Edison Nation, Inc. (the “Company”) entered into a loan agreement (“PPP Loan”) with First
Choice Bank under the Paycheck Protection Program (the “PPP”), which is part of the recently enacted Coronavirus Aid,
Relief, and Economic Security Act (“CARES Act”) administered by the United States Small Business Administration (“SBA”).
The Company received proceeds of $789,852 from the PPP Loan. In accordance with the requirements of the PPP, the Company intends
to use proceeds from the PPP Loan primarily for payroll costs, subject to thresholds, rent and utilities. The PPP Loan has a 1.00%
interest rate per annum and matures on April 15, 2022 and is subject to the terms and conditions applicable to loans administered
by the SBA under the PPP. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying
expenses as described in the CARES Act. The PPP Loan is included in notes payable on the consolidated balance sheet.
On
May 4, 2020, TBD Safety, LLC, the Company’s wholly owned subsidiary, entered into a loan agreement (“PPP Loan”)
with First Home Bank under the Paycheck Protection Program (the “PPP”), which is part of the recently enacted Coronavirus
Aid, Relief, and Economic Security Act (“CARES Act”) administered by the United States Small Business Administration
(“SBA”). The Company received proceeds of $62,500 from the PPP Loan. In accordance with the requirements of the PPP,
the Company intends to use proceeds from the PPP Loan primarily for payroll costs, subject to thresholds, rent and utilities.
The PPP Loan has a 1.00% interest rate per annum and matures on May 4, 2022 and is subject to the terms and conditions applicable
to loans administered by the SBA under the PPP. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if
they are used for qualifying expenses as described in the CARES Act. The PPP Loan is included in notes payable on the consolidated
balance sheet.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
13 — Debt — (Continued)
Receivables
Financing
On
February 21, 2020, the Company entered into a receivables financing arrangement for certain receivables of the Company not to
exceed $1,250,000 at any one time. The agreement allows for borrowings up to 85% of the outstanding receivable based on the credit
quality of the customer. The fee is between 1% and 2% of the total invoices financed. The balance at December 31, 2020 is $367,976.
On March 31, 2021, the Company fully paid off the remaining balance.
In
April 2019, the Company entered into a receivables financing arrangement for certain receivables of the Company. The agreement
allows for borrowings up to 80% of the outstanding receivable based on the credit quality of the customer. The fee is between
1% and 2% of the total invoices financed. The balance at December 31, 2020 is $0.
On
November 12, 2019, the Company entered into a Receivables Purchase Agreement with a financial institution (the “Receivables
Purchase Agreement”), whereby the Company agreed to the sale of $250,000 of receivables for $200,000. The proceeds were
used for general working capital. On August 12, 2020, the Company entered into an Amendment to the Purchase of Inventory and Repurchase
Agreement (the “Amendment”). Under the terms of the Amendment, (i) the repurchase date is extended to December 10,
2020; and (ii) the Company agreed to pay the Purchaser-Assignee a commitment fee of $13,053, and (iii) the Company agreed to pay
the Purchaser-Assignee 2% per month for extension periods commencing July 1, 2020 through December 10, 2020. The balance at December
31, 2020 is $128,077.
On
November 18, 2019, the Company entered into a Future Receivables Purchase Agreement with a financial institution (the “Future
Receivables Purchase Agreement”), whereby the Company agreed to the sale of $337,500 of receivables for $250,000. The proceeds
were used to fund our receivables for overseas distributors. Christopher B. Ferguson, our Chairman and Chief Executive Officer,
personally guaranteed the prompt and complete performance of the Company’s obligations under the Future Receivables Purchase
Agreement. The balance at December 31, 2020 is $0.
Line
of Credit
On
the Effective Date, the Company (as “Guarantor”) entered into a Secured Line of Credit Agreement (the “Credit
Agreement”) with Global and PPE. Under the terms of the Credit Agreement, PPE is to make available to Global a revolving
credit loan in a principal aggregate amount at any one time not to exceed $2,500,000. Upon each drawdown of funds against the
credit line, Global shall issue a Promissory Note (the “Note”) to PPE. The Note shall accrue interest at 3% per annum
and have a maturity date of six (6) months. In the event of a default, any and all amounts due to PPE by Global, including principal
and accrued but unpaid interest, shall increase by forty (40%) percent and the interest shall increase to five (5%) percent (the
“Default Interest”). The balance at December 31, 2020 is $1,133,652.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
13 — Debt — (Continued)
The
scheduled maturities of the debt for the next five years as of December 31, 2020, are as follows:
For
the Years Ended December 31,
|
|
Amount
|
|
2021
|
|
$
|
4,852,023
|
|
2022
|
|
|
1,987,520
|
|
2023
|
|
|
1,440,275
|
|
2024
|
|
|
-
|
|
2025
|
|
|
-
|
|
Thereafter
|
|
|
-
|
|
|
|
$
|
8,279,818
|
|
Less:
debt discount
|
|
|
(349,341
|
)
|
|
|
$
|
7,930,477
|
|
For
the year ended December 31, 2020, interest expense was $3,378,130 of which $314,415 was related party interest expense. For the
year ended December 31, 2019 interest expense was $1,298,168 of which $320,781 was related party interest expense.
Note
14 — Income Taxes
Vinco
Ventures, Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from Fergco,
Edison Nation Holdings, LLC, Edison Nation, LLC, Safe TV Shop, LLC, Everyday Edisons, LLC, Pirasta, LLC, Global Clean Solutions,
LLC, TBD Safety, LLC and Honey Badger Media, LLC based upon Vinco Ventures, Inc.’s economic interest in those entities.
Edison
Nation Holdings, LLC and its subsidiaries are disregarded limited liability corporation entities for income tax purposes. Accordingly,
EN was not subject to income taxes prior to the acquisition on September 4, 2018 and the results of operations were not material
therefore the tax provision related to the United States income is only for the post-acquisition period.
TBD
Safety, LLC is a disregarded limited liability corporation entity for income tax purposes. Accordingly, TBD was not subject to
income taxes prior to the acquisition on October 16, 2020 and the results of operations were not material therefore the tax provision
related to the United States income is only for the post-acquisition period.
Global
Clean Solutions, LLC and Honey Badger Media, LLC are disregarded limited liability corporation entities for income tax purposes.
Global Clean Solutions, LLC and Honey Badger Media, LLC were newly formed entities in 2020 and therefore were not subject to income
taxes prior to formation.
United
States and foreign components of income before income taxes were as follows:
|
|
For
the Years
Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
United
States
|
|
$
|
(6,287,903
|
)
|
|
$
|
(14,210,716
|
)
|
Foreign
|
|
|
-
|
|
|
|
-
|
|
Income
before income taxes
|
|
$
|
(6,287,903
|
)
|
|
$
|
(14,210,716
|
)
|
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
14 — Income Taxes — (Continued)
The
tax effects of temporary differences that give rise to deferred tax assets or liabilities are presented below:
|
|
For
the Years
Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
$
|
1,025,745
|
|
|
$
|
987,747
|
|
Operating
lease liabilities
|
|
|
32,653
|
|
|
|
158,430
|
|
Net
operating loss carryforwards
|
|
|
3,567,490
|
|
|
|
2,324,863
|
|
Less:
valuation allowance
|
|
|
(3,787,252
|
)
|
|
|
(2,424,196
|
)
|
Net
deferred tax assets
|
|
$
|
838,636
|
|
|
$
|
1,046,844
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
Right
of use assets
|
|
|
(32,137
|
)
|
|
|
(153,741
|
)
|
Goodwill
and intangible assets
|
|
|
(724,395
|
)
|
|
|
(811,000
|
)
|
Property
and equipment
|
|
$
|
(82,103
|
)
|
|
$
|
(82,103
|
)
|
Net
deferred tax liabilities
|
|
$
|
(838,636
|
)
|
|
$
|
(1,046,844
|
)
|
Net
deferred taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
As
of December 31, 2020 and 2019, the Company had $14,811,423 and $9,675,770 of federal net operating loss carryforwards and $12,911,504
and $7,532,274 of state net operating loss carryforwards for income tax purposes, respectively. In connection with the IPO the
Company does not believe the ownership change resulted in the loss of past net operating loss carryforwards. The above net operating
loss carryforwards may be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, and
similar state provisions if the Company experiences one or more ownership changes. The Company believes the goodwill acquired
in the Edison Nation Holdings acquisition is deductible for tax purposes. The Company evaluates its ability to realize deferred
tax assets on a quarterly basis and establishes a valuation allowance when it is more likely than not that all or a portion of
a deferred tax asset may not be realized. As of December 31, 2020 and 2019, the Company has recorded a net deferred tax asset
of $2,948,616 and $1,377,352, respectively. However, these net deferred tax assets will only be utilized to the extent the Company
generates sufficient taxable income. As of December 31, 2020 and 2019, the Company established a valuation allowance in the amount
of $3,787,252 and $2,424,196, respectively, against the net deferred tax asset as it is not more likely than not that it is realizable
based on current available evidence.
The
income tax provision (benefit) consists of the following:
|
|
For
the Years
Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
Foreign
|
|
|
-
|
|
|
|
-
|
|
State
and local
|
|
|
19,197
|
|
|
|
(22,373
|
)
|
Total current
|
|
$
|
19,197
|
|
|
$
|
(22,373
|
)
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(1,166,562
|
)
|
|
$
|
(896,468
|
)
|
Foreign
|
|
|
-
|
|
|
|
-
|
|
State and local
|
|
|
(196,494
|
)
|
|
|
(333,141
|
)
|
Less:
valuation allowance
|
|
|
1,363,056
|
|
|
|
1,229,609
|
|
Total deferred
|
|
$
|
-
|
|
|
$
|
-
|
|
Income tax provision
(benefit)
|
|
$
|
19,197
|
|
|
$
|
(22,373
|
)
|
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
14 — Income Taxes — (Continued)
A
reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
|
|
For
the Years
Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Tax
at federal statutory rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
Effect
of U.S. tax law change
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
U.S.
income subject to valuation allowance
|
|
|
-20.9
|
%
|
|
|
-14.6
|
%
|
State
and local income taxes
|
|
|
-0.3
|
%
|
|
|
0.2
|
%
|
Foreign
income not subject to U.S. federal tax
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Foreign
tax
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Nondeductible
expenses
|
|
|
-0.1
|
%
|
|
|
-6.5
|
%
|
Other
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Effective
income tax rate
|
|
|
-0.3
|
%
|
|
|
0.1
|
%
|
The
statutory federal income tax rate differs from the Company’s effective tax rate due to the valuation allowance related to
deferred tax assets.
Note
15 — Related Party Transactions
Forever
8 Fund, LLC
On
November 17, 2020, the Company, through its subsidiary, Edison Nation, LLC (the “Vendor”), entered into an Inventory
Management Agreement (the “Agreement”) with the Forever 8 Fund, LLC (“F8”), an entity which our President
holds a 45% ownership interest. Under the terms of the Agreement, F8 desires to maintain inventory of and sell to Vendor certain
Products pursuant to the terms and conditions set forth in the Agreement. As consideration for the inventory management services
provided under this Agreement, Vendor agrees to pay F8 a fee for each unit of each Product sold on a Platform determined in accordance
with the fee schedule set forth in the applicable Product Schedule (the “Fee Schedule”) based on the Age of Inventory
Sold set forth on the Fee Schedule (the “F8 Fees”). Prior to the signing of the agreement, F8 advanced the Vendor
$239,283 that was utilized to pay for deposits with the Vendors factories. This Agreement shall commence on the Effective Date
and shall continue in full force and effect until January 31, 2022 (the “Initial Term”), unless terminated earlier
as provided in this Agreement. The balance outstanding at December 31, 2020 is $155,768.
NL
Penn Capital, LP and SRM Entertainment Group LLC
As
of December 31, 2020 and December 31, 2019, due to related party consists of net amounts due to SRM Entertainment Group LLC (“SRM
LLC”) and NL Penn Capital, LP (“NL Penn”), the majority owner of both, which are owned by Chris Ferguson, our
Chairman and Chief Executive Officer. The amount due to NL Penn was assigned to TXC Services, LLC. The amount due to related parties
is related to the acquisitions of Pirasta, LLC and Best Party Concepts, LLC offset by operating expenses that were paid by SRM
and the Company on behalf of SRM LLC and NL Penn. As of December 31, 2020 and December 31, 2019, the net amount due to related
parties was $32,452 and $17,253, respectively. Such amounts are due currently. NL Penn and affiliated entities may lend additional
capital to the Company pursuant to terms and conditions similar to the current working capital lenders to the Company such as
Franklin Capital. In addition, the Company borrows working capital from Franklin Capital, and Mr. Ferguson is a personal guarantor
on the working capital facility provided to the Company by Franklin Capital. Please see Note 17 — Discontinued
Operations for further information.
Enventys
Partners, LLC
On
August 1, 2018, the Company entered into a one-year letter agreement with Enventys Partners, LLC, a North Carolina limited liability
company (“Enventys”), whereby Enventys agreed to provide services to the Company as an independent contractor in the
areas of product development and crowdfunding campaign marketing. During the term of the Enventys Agreement, the Company shall
pay Enventys a fixed fee of $15,000 per month for product development assistance, including design research, mechanical engineering
and quality control planning. Depending on the success of each campaign, the Company may also pay Enventys a commission of up
to ten percent of the total funds raised in the applicable campaign. Louis Foreman, who is a member of the Company’s board
of director, is also the Chief Executive Officer and the largest equity holder of Enventys. We incurred fees of approximately
$97,500 related to the services performed by Enventys for the year ended December 31, 2019. During 2019, the Company and Enventys
agreed to the cancellation of the agreement. The balance outstanding at December 31, 2020 is $105,424.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
16 — Commitments and Contingencies
Operating
Lease
The
Company has entered into non-cancellable operating leases for office, warehouse, and distribution facilities, with original lease
periods expiring through 2022. In addition to minimum rent, certain of the leases require payment of real estate taxes, insurance,
common area maintenance charges, and other executory costs. Differences between rent expense and rent paid are recognized as adjustments
to operating lease right-of-use assets on the consolidated balance sheets.
On
June 6, 2018, the Company’s wholly owned subsidiary, Best Party Concepts, LLC, entered into a lease for office space in
Newtown, PA, which expired on May 30, 2020.
On
August 1, 2020, the Company entered into a lease for warehouse space in Clearwater, Florida, which expires on July 31, 2022. Monthly
lease payments are approximately $5,994 for a total of approximately $137,836 for the total term of the lease.
On
July 1, 2019, the Company entered into a lease for office space in Bethlehem, Pennsylvania, which expires on July 31, 2022. Monthly
lease payments are $2,415 for a total of approximately $89,000 for the total term of the lease.
Total
rent expense for the years ended December 31, 2020 and 2019 was $368,029 and $451,711, respectively. Rent expense is included
in general and administrative expense on the consolidated statements of operations.
As
of December 31, 2020, the Company recorded operating lease liabilities of $155,490 and right of use assets for operating leases
of $153,034. During the year ended December 31, 2020 and 2019, operating cash outflows relating to operating lease liabilities
was $345,628 and $307,478, respectively, and the expense for right of use assets for operating leases was $261,815 and $295,106,
respectively, and a gain of $27,129 and $0 related to the termination of lease agreements in 2020. As of December 31, 2020, the
Company’s operating leases had a weighted-average remaining term of 1.6 years and weighted-average discount rate of 4.5%.
Excluded from the measurement of operating lease liabilities and operating lease right-of-use assets were certain office, warehouse
and distribution contracts that qualify for the short-term lease recognition exception.
The
following is a reconciliation of future undiscounted cash flows to the operating liabilities, and the related right of use assets,
included in our Consolidated Balance Sheets as of December 31, 2020:
|
|
December
31,
2020
|
|
2021
|
|
|
101,798
|
|
2022
|
|
|
59,596
|
|
2023
|
|
|
-
|
|
2024
|
|
|
-
|
|
2025
|
|
|
-
|
|
2026
and thereafter
|
|
|
-
|
|
Total
future lease payments
|
|
|
161,394
|
|
Less:
imputed interest
|
|
|
(5,904
|
)
|
Present
value of future operating lease payments
|
|
|
155,490
|
|
Less:
current portion of operating lease liabilities
|
|
|
(96,777
|
)
|
Operating
lease liabilities, net of current portion
|
|
|
58,713
|
|
Right
of use assets – operating leases, net
|
|
|
153,035
|
|
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
16 — Commitments and Contingencies — (Continued)
Rental
Income
Fergco
leases a portion of the building located in Washington, New Jersey that it owns under a month to month lease. Total rental income
related to the leased space for both the years ended December 31, 2020 and 2019 was $102,815 and $102,815, respectively, and is
included in other income on the consolidated statements of operations.
Legal
Contingencies
The
Company is involved in claims and litigation in the ordinary course of business, some of which seek monetary damages, including
claims for punitive damages, which are not covered by insurance. For certain pending matters, accruals have not been established
because such matters have not progressed sufficiently through discovery, and/or development of important factual information and
legal information is insufficient to enable the Company to estimate a range of possible loss, if any. An adverse determination
in one or more of these pending matters could have an adverse effect on the Company’s consolidated financial position, results
of operations or cash flows.
We
are, and may in the future become, subject to various legal proceedings and claims that arise in or outside the ordinary course
of business.
Oceanside
Traders, LLC v. Cloud b, Inc. and Vinco Ventures, Inc. f/k/a Edison Nation, Inc.
On
April 14, 2020, Oceanside Traders, LLC filed a complaint against Cloud B, Inc. and Vinco Ventures, Inc. with the Superior Court
of Ocean County, State of New Jersey, alleging breach of contract and other claims resulting in total damages in the amount of
$440,383, consisting of $141,007 for failure to pay plaintiff for goods sold, for $138,180 for overpayments and $161,196 for lost
profits. On November 9, 2020, Plaintiff filed an amended complaint, adding other defendants, alleging breach of contract, breach
of covenant of good faith and fair dealing, quasi-contract/unjust enrichment, conversion, fraud, negligent misrepresentation,
fraudulent transfer, and piercing the corporate veil. On December 4, 2020, Vinco Ventures, Inc. filed its amended answer. On December
28, 2020, the other defendants filed a motion to dismiss on jurisdictional grounds which is currently pending before the court.
On February 24, 2021, the Company entered into a Settlement Agreement and General Release of All Claims (the “Settlement
Agreement”) with Edison Nation, LLC, Pearl 33 Holdings, LLC and Christopher Ferguson (collectively, the “Settling
Defendants”) and Oceanside Traders, LLC (the “Plaintiff”). Under the terms of the Settlement Agreement, the
Settling Defendants agreed to pay the Plaintiff the sum of $150,000 within one business day of execution of the Settlement Agreement.
In exchange, the Plaintiff agreed to dismiss the Amended Complaint in its entirety and with prejudice against the Settling Defendants.
The Company made payment in the amount of $150,000 on February 25, 2021.
Rosenberg
Fortuna & Laitman, LLP and Mark Principe v. Safe TV, LLC
On
March 13, 2019, Rosenberg Fortuna & Laitman, LLP and Mark Principe filed a complaint against Safe TV Shop, LLC with the Supreme
Court of the State of New York, County of Nassau alleging a breach of indemnification arising out of the use of a certain packaging
material. On February 12, 2020, the parties entered a Stipulation and Settlement and Consent Agreement for a Consent Judgment
in the amount of $50,000. Safe TV, LLC has no assets and there have been no operations by Safe TV, LLC since the date of acquisition
by Vinco Ventures, Inc. On April 5, 2021, the Company, through Safe TV Shop, LLC, entered into a Settlement Agreement and Release
of Claims (the “Settlement”). Under the terms of the Settlement, the Company is to make payment in the amount of $25,000
on or before April9, 2021. The Company made payment in the amount of $25,000 on April 8, 2021.
Gerald
Whitt, et al. v. Vinco Ventures, CBAV1, LLC, et al.
On
October 27, 2020, Gerald Whitt, et al, the minority shareholders of Cloud b Inc. (“Whitt Plaintiffs”) filed a civil
complaint in the Superior Court of the State of California against Vinco Ventures, Inc., CBAV1, LLC and other parties, alleging
fraudulent concealment, breach of fiduciary duty, breach of contract, breach of confidence, intentional misrepresentation, negligent
misrepresentation, unfair business practices and civil conspiracy (the “Whitt Complaint”). The Whitt Plaintiffs
seek “in excess of $8,000,000” in damages. Defendants’ position is that the Whitt Complaint is frivolous and
the filing of same was an abuse of process. Defendants have not been served with the Whitt Complaint.
In
re CBAV1, LLC, Debtor, Chapter 11 Bankruptcy/In re Cloud b, Inc., Debtor Chapter 7 Bankruptcy
On
October 30, 2020, CBAV1, LLC filed a voluntary petition under Chapter 11 of title 11 of the United States Code, as amended (the
“Bankruptcy Code”). On October 30, 2020, Cloud b filed a voluntary petition under Chapter 7 of the Bankruptcy
Code. On November 15, 2020, a prospective buyer entered into a non-binding letter of intent to purchase the CBAV1 Assets for $2,250,000.
On December 18, 2020, CBAV1, LLC filed a motion to sell substantially of the CBAV1 Assets free and clear of all interests, liens,
claims and encumbrances. On that same date, CBAV1, LLC also filed a motion to approve (i) certain procedures for the submission
of bids in connection with the sale of substantially all of the assets, (ii) the break-up fee and expense reimbursement, (iii)
scheduling an auction and (iv) scheduling a sale hearing. On January 21, 2021, the prospective buyer entered into an asset purchase
agreement to buy the CBAV1 Assets for $2,250,000, on terms and conditions set forth therein. On March 18, 2021, the court entered
an order approving the sale of the CBAV1 Assets to the winning bidder at the auction for the total sum of $3,000,000 US, which
includes a cash payment at closing in the amount of $2,650,000 US and additional payments in the amounts of $150,000 US on April
15, 2022 and $200,000 US on April 15, 2023. The closing occurred on April 20, 2021.
Vinco
Ventures, Inc., et al. v. Milam Knecht & Warner, LLP, Michael D. Milam, Gerald Whitt, Alexander Whitt, et al.
On
December 31, 2020, Vinco Ventures, Inc., and other parties, filed a complaint against the Whitt Plaintiffs, and other parties,
with the United States District Court for Eastern District of Pennsylvania, alleging intentional misrepresentation, negligent
misrepresentation, negligence, conspiracy, unfair business practices, abuse of process, civil extortion, trade libel and defamation.
Defendants entered their appearances, Plaintiffs filed an amended complaint and Defendants filed motions to dismiss the complaint,
which are currently pending before the Court.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
17 — Stockholders’ Equity
Common
Stock
The
Company is authorized to issue 250,000,000 shares of common stock. As of December 31, 2020 and 2019,
there were 14,471,403 and 8,015,756 shares of common stock issued and outstanding, respectively.
Preferred
Stock
On
March 25, 2020, the Company filed a certificate of amendment to the Company’s articles of incorporation with the Secretary
of State of the State of Nevada in order to: (i) increase the number of shares of the Company’s authorized preferred stock,
par value $0.001 per share, from 0 shares to 30,000,000 shares of preferred stock; (ii) clarify the application of the forum selection
clause in the Company’s amended and restated articles of incorporation, specifically that such clause does not apply to
federal causes of actions arising under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended
(the “Exchange Act”); and (iii) include affirmative changes to correspond to the Company’s First Amended and
Restated Bylaws, confirming that the Company’s shareholders may vote by written consent.
On
October 16, 2020, the Company filed a Certificate of Designation (the “Designation”) with the Secretary of State of
Nevada, which designates 1,000,000 shares of the Company’s preferred stock, par value $0.001 per share, as Series B Convertible
Preferred Stock (“Series B”). Pursuant to the terms of the Designation, holders of the Series B shall be entitled
to dividends, a liquidation preference and shall have conversion rights. Each share of Series B shall be convertible into 1 share
of Common Stock, on or after the twelve-month anniversary of the Original Issue Date at the option of the Holder thereof,
for a total not to exceed 1,000,000 shares of Common Stock. The holders of the Series B shall have no voting rights. As of December
31, 2020 and 2019, there were 764,618 and 0 shares of preferred stock issued and outstanding, respectively.
Stock-Based
Compensation
On
September 6, 2018, the Company’s board of directors approved an amendment and restatement of the Company’s omnibus
incentive plan solely to reflect the Company’s name change to Edison Nation, Inc. Thus, the Edison Nation, Inc. Omnibus
Incentive Plan (the “Plan”) which remains effective as of February 9, 2018, provides for the issuance of up to 1,764,705
(287,659 remaining as of April 29, 2021) shares of common stock to help align the interests of management and our stockholders
and reward our executive officers for improved Company performance. Stock incentive awards under the Plan can be in the form of
stock options, restricted stock units, performance awards and restricted stock that are made to employees, directors and service
providers. Awards are subject to forfeiture until vesting conditions have been satisfied under the terms of the award. The exercise
price of stock options is equal to the fair market value of the underlying Company common stock on the date of grant.
On
July 15, 2020, the Company filed a Registration Statement on Form S-8 registering 1,764,705 (258,376 remaining as of April 29,
2021) shares of common stock to be issued as stock-based incentives under the Company’s Amended and Restated Vinco Ventures,
Inc. Omnibus Incentive Plan.
On
September 26, 2018, the Compensation Committee of the board of directors approved the terms of compensation to be paid to non-employee
directors for fiscal year 2018. Compensation for non-employee directors includes an annual retainer of $20,000, an annual committee
meeting fee of $5,000, if such director chairs a committee of the board of directors, and an award of options to purchase 20,000
shares of the Company’s common stock (the “Options”). The restricted stock underlying such Options were to vest
one year after the grant date. However, the Options were never granted. Accordingly, On November 15, 2019, in lieu of granting
the Options, the Company granted each member of the board of directors restricted stock units of 20,000 shares which vested immediately,
except for Toper Taylor who received 30,000 shares in November 2019, related to the share amounts due to him under the terms of
his agreement with us. In addition, the Company granted each non-employee director restricted stock units of 30,000 shares, which
vested on January 1, 2020.
|
|
For
the Twelve Months
Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Stock
option awards
|
|
$
|
46,605
|
|
|
$
|
175,675
|
|
Non-employee
awards
|
|
|
3,100,255
|
|
|
|
1,564,670
|
|
Restricted
stock unit awards
|
|
|
68,400
|
|
|
|
447,300
|
|
Phantom
stock awards
|
|
|
26,504
|
|
|
|
112,270
|
|
|
|
$
|
3,241,764
|
|
|
$
|
2,299,915
|
|
The
stock-based compensation is included in selling, general and administrative expense for the twelve months ended December 31, 2020
and 2019.
For
the years ended December 31, 2020 and, the Company recorded stock-based compensation expense of $3,241,764 and $2,299,915, respectively,
The
following table summarizes stock option award activity during 2020:
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Remaining
Contractual
Life
in
Years
|
|
|
Aggregate
Intrinsic
Value
|
|
Balance, January 1, 2019
|
|
|
290,000
|
|
|
$
|
5.55
|
|
|
|
4.2
|
|
|
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(210,000
|
)
|
|
|
5.00
|
|
|
|
-
|
|
|
|
-
|
|
Balance, December 31, 2019
|
|
|
80,000
|
|
|
$
|
7.01
|
|
|
|
2.7
|
|
|
|
-
|
|
Exercisable, December 31, 2019
|
|
|
53,333
|
|
|
|
7.01
|
|
|
|
3.7
|
|
|
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance, December 31, 2020
|
|
|
80,000
|
|
|
|
7.01
|
|
|
|
2.7
|
|
|
|
-
|
|
Exercisable, December 31, 2020
|
|
|
80,000
|
|
|
|
7.01
|
|
|
|
2.7
|
|
|
|
-
|
|
As
of December 31, 2020, there were 0 unvested options to purchase shares of the Company’s common stock and $0 of total unrecognized
equity-based compensation expense that the Company expected to recognize over a remaining weighted-average period of 1 year.
From
time to time, the Company grants shares of common stock to consultants and non-employee vendors for services performed. The awards
are valued at the market value of the underlying common stock at the date of grant and vest based on the terms of the contract
which is usually upon grant.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
17 — Stockholders’ Equity — (Continued)
Pipe
Financing
On
October 2, 2019, Edison Nation, Inc. (the “Company”) entered into a Share Purchase Agreement (the “PIPE Purchase
Agreement”) with certain accredited investors (collectively, the “Investors”) for the private placement of 1,175,000
shares of the Company’s common stock, $0.001 par value per share, at a purchase price of $2.00 per share (the “PIPE
Transaction”). The PIPE Purchase Agreement contained certain closing conditions relating to the sale of securities, representations
and warranties by the Company and the Investors, as well as covenants of the Company and the Investors (including indemnification
from the Company in the event of breaches of its representations and warranties), all of which the Company believes are customary
for transactions of this type.
In
a series of three closings conducted in October 2019, the Company received net proceeds of $2,039,303 which consisted of $2,350,000
of gross proceeds offset by $310,697 of fees to placement agent and their lawyers. Alexander Capital, LP (“Alexander Capital”),
a FINRA registered broker dealer, acted as placement agent with respect to the PIPE Transaction. In connection with the PIPE Transaction,
Alexander Capital received a commission of $141,000, a debt restructuring fee of $64,208, a debt conversion fee of 15,889, a placement
fee of $33,600 and warrants to purchase 70,500 shares of the Company’s common stock, at an exercise price of $2.50 per share
(the “Placement Agent Warrants”).
In
connection with the PIPE Purchase Agreement, the Company entered into Registration Rights Agreements with each of the Investors
(the “Registration Rights Agreement”), pursuant to which the Company is required to prepare and file a registration
statement (the “Registration Statement”) with the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended, covering the resale of the shares of common stock issued to the Investors under
the PIPE Purchase Agreement, as well as the Placement Agent Warrants. The Company will be required to have such Registration Statement
declared effective by the SEC within 90 calendar days (or 120 calendar days in the event of a “full review” by the
SEC) following the applicable closing date of the PIPE Transaction. The registration statement was not filed or declared effective
within the timeframe set forth in the Registration Rights Agreements, and the Company is obligated to pay the Investors an amount
equal to 1% of the total purchase price of the common stock per month (up to a maximum of 8% in the aggregate) until such failure
is cured. The Registration Rights Agreement also contains mutual indemnifications by the Company and each Investor, which the
Company believes are customary for transactions of this type.
In
connection with the PIPE transaction, the convertible notes entered into on May 13, 2019 were also converted at $2.00 per share
into 560,185 shares of the Company’s common stock.
In
addition, the Company issued warrants to the placement agent in the PIPE Financing of a value equal to six percent (6%) of the
aggregate number of PIPE Shares, whereby the exercise price is 125% of the price at which the shares were issued in such offering.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
18 — Discontinued Operations
Discontinued
operations are accounted for in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Section 360-10-35 Property, Plant and Equipment. In accordance with FASB ASC Section
360-10-35, the net assets of discontinued operations are recorded on our consolidated balance sheets at carrying value. The results
of operations of discontinued operations are segregated from continuing operations and reported separately as discontinued operations
in our consolidated statements of loss and comprehensive loss.
On
November 30, 2020, the Company (the “Seller”) and its wholly owned subsidiary, SRM Entertainment, LTD (“SRM”)
entered into a Stock Exchange Agreement (the “Exchange Agreement”) with Jupiter Wellness, Inc. (“Jupiter”)(the
“Buyer”). Under the terms of the Exchange Agreement, the Buyer agreed to purchase all outstanding shares of common
stock (the “Exchange Shares”) issued by SRM from the Seller. As consideration for the purchase of the Exchange Shares,
the Buyer agreed to exchange 200,000 shares of its restricted common stock (the “Consideration Shares”), symbol JUPW
as listed on NASDAQ Capital Markets. The Company made the decision to divest the amusement park business due to the slow re-openings
of amusement parks around the world and the investment that would have been needed to remain open and the investment required
to relaunch as the amusement parks begin to get back to full capacity.
The
following table presents the carrying values of the assets and liabilities of our discontinued operations at December 31, 2020
and 2019, respectively:
|
|
For
the Twelve Months
Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
43,405
|
|
|
$
|
178,485
|
|
Accounts
receivable, net
|
|
|
237,093
|
|
|
|
803,316
|
|
Inventory
|
|
|
77,710
|
|
|
|
126,739
|
|
Prepaid
expenses and other current assets
|
|
|
42,104
|
|
|
|
31,667
|
|
Income
tax receivable
|
|
|
120,211
|
|
|
|
147,889
|
|
Total
current assets
|
|
|
520,523
|
|
|
|
1,288,096
|
|
Property
and equipment, net
|
|
|
28,504
|
|
|
|
56,049
|
|
Total
assets
|
|
$
|
549,027
|
|
|
$
|
1,344,145
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
677,326
|
|
|
$
|
1,382,055
|
|
Accrued
expenses and other current liabilities
|
|
|
73,615
|
|
|
|
109,607
|
|
Line
of credit
|
|
|
-
|
|
|
|
-
|
|
Notes
payable, current
|
|
|
-
|
|
|
|
-
|
|
Due
to related party
|
|
|
-
|
|
|
|
-
|
|
Total
current liabilities
|
|
$
|
750,941
|
|
|
$
|
1,491,662
|
|
The
following table presents the summary results of operations of our discontinued operations for the years ended December 31, 2020
and 2019, respectively:
|
|
For
the Twelve Months
Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Revenues,
net
|
|
$
|
2,727,346
|
|
|
$
|
7,105,630
|
|
Cost
of revenues
|
|
|
2,145,989
|
|
|
|
5,289,781
|
|
Gross
profit
|
|
|
581,357
|
|
|
|
1,815,849
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
1,211,050
|
|
|
|
1,824,645
|
|
Operating
income
|
|
|
(629,693
|
)
|
|
|
(8,796
|
)
|
|
|
|
|
|
|
|
|
|
Other
(expense) income:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1
|
|
|
|
985
|
|
Total
other (expense) income
|
|
|
1
|
|
|
|
985
|
|
Loss
before income taxes
|
|
|
(629,692
|
)
|
|
|
(7,811
|
)
|
Income
tax expense
|
|
|
(12,940
|
)
|
|
|
(2,826
|
)
|
Net
(loss) income
|
|
$
|
(642,632
|
)
|
|
$
|
(10,637
|
)
|
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
19 — Subsequent Events
On
January 5, 2021, the Company issued 750,000 shares of common stock valued at $1,125,000 as per the terms of the Platform License
Agreement between the Company and Honey Badger Media, LLC dated November 10, 2020.
On
January 5, 2021, the Company issued 150,000 shares of common stock valued at $225,000 under the Company’s 2020 Omnibus Plan
to a consultant for services rendered on behalf of the Company.
On
January 10, 2021, the Company entered into a Second Amendment to Note Agreement (the “Amendment”) with Equity Trust
Company (the “Noteholder”). Under the terms of the Amendment, the Company is to issue the Noteholder 20,000 additional
incentive shares and make payments of $20,000 on January 22, 2021 and $20,000 on February 12, 2021 with the remaining principal
and interest payable on or before February 26, 2021. In the event the Company fails to make any of the payments, the Company shall
issue the Noteholder an additional 15,000 shares of restricted common stock. The Company paid the Note in full on January 27,
2021.
On
January 11, 2021, the Company issued 100,000 shares of common stock valued at $150,000 under the Company’s 2020 Omnibus
Plan to a consultant for services rendered on behalf of the Company.
On
January 19, 2021, the Company issued 200,000 shares of common stock valued at $300,000 for the partial exercise of the warrant
issued in connection with the Greentree financing.
On
January 10, 2021, the Company entered into a Second Amendment to Note Agreement (the “Amendment”) with Richard O’Leary
(the “Noteholder”). Under the terms of the Amendment, the Company is to issue the Noteholder 5,000 additional incentive
shares and make payments of $5,000 per week beginning on January 25, 2021with the remaining principal and interest payable on
or before February 26, 2021. In the event the Company fails to make any of the payments, the Company shall issue the Noteholder
an additional 5,000 shares of restricted common stock. The Company paid the Note in full on January 27, 2021.
On
January 20, 2021, we entered into an Agreement to Complete a Plan of Merger (the “Merger Agreement”) with ZASH Global
Media and Entertainment Corporation (“ZASH”) and Vinco Acquisition Corporation, a subsidiary of ours formed for the
sole purpose of the merger contemplated by the Merger Agreement (the Merger Sub”). The Merger Agreement contemplates a reverse
triangular merger of Merger Sub with and into ZASH in a transaction intended to qualify as a tax-free reorganization under Sections
368(a)(l)(A) and 368(a)(2)(E) of the Internal Revenue Code. Under the terms of the Merger Agreement, the holders of ZASH common
stock will receive shares of the Company’s common stock (the “Merger Shares”) in exchange for all of their issued
and outstanding ZASH shares of common stock. ZASH will then become an indirect wholly owned subsidiary of the Company. The merger
will represent a change of control transaction as upon the completion of the merger, the shareholders of ZASH will own a controlling
interest in the Company. The merger and the issuance of the Merger Shares are subject to adoption and approval by the holders
of a majority of the outstanding shares of the Company’s common stock.
In
connection with the merger, the certificate of incorporation of the Company will be amended and restated, and the name of the
Company will be changed to “ZASH Global Media and Entertainment Corporation.” The bylaws of the Company will also
be amended and restated to become the equivalent of the bylaws of ZASH immediately prior to the closing under the Merger Agreement
(the “Closing”). At the Closing, certain officers and directors of the Company immediately prior to the effective
time of the merger will resign and the officers and directors of ZASH immediately prior to the Closing will be appointed as officers
and directors of the Company and the surviving corporation in the merger, in each case until their respective successors are duly
elected or appointed and qualified; provided, however that the Company shall have the right to appoint two persons to serve as
members of the board of directors of the Company and ZASH will have the right to appoint three persons to serve as members of
the board of directors of the Company.
On
January 20, 2021, the Company issued 27,415 shares of common stock valued at $43,041 to Jefferson Street Capital, LLC in satisfaction
of its debt and accrued interest of the approximate same value against a note issued on April 7, 2020.
On
January 21, 2021, the Company issued 58,000 shares of common stock valued at $87,000 to a consultant for services rendered on
behalf of the Company.
On
January 21, 2021, the Company issued 350,000 shares of common stock valued at $525,000 for the partial exercise of the warrant
issued in connection with the Greentree financing.
On
January 22, 2021, the Company issued 51,129 shares of common stock valued at $76,694 for the exercise of the placement agent warrant
issued in connection with the Greentree financing.
On
January 22, 2021, the Company issued 67,744 shares of common stock valued at $101,616 for the exercise of the placement agent
warrant issued in connection with the Greentree financing.
On
January 22, 2021, the Company issued 20,358 shares of common stock valued at $30,537 for the exercise of the placement agent warrant
issued in connection with the Greentree financing.
On
January 22, 2021, the Company issued 20,358 shares of common stock valued at $30,537 for the exercise of the placement agent warrant
issued in connection with the Greentree financing.
On
January 22, 2021, the Company issued 50,000 shares of common stock valued at $100,000 for the exercise of a warrant.
On
January 25, 2021 (the “Effective Date”), Vinco Ventures Inc. (the “Company”) consummated the closing of
a private placement offering (the “Offering”) whereby pursuant to the Securities Purchase Agreement (the “Purchase
Agreement”) entered into by the Company on January 21, 2021 with one accredited investor (the “Investor”), the
Company issued a Senior Convertible Note for the purchase price of $12,000,000 (the “Note”) and a five (5) year warrant
(the “Warrant”) to purchase shares of the Company’s common stock, par value $0.001 per share (“Common
Stock”). The Note carries an interest rate of 6% per annum and matures on the 12-month anniversary of the Issuance Date
(as defined in the Note). The Note contains a voluntary conversion mechanism whereby the Noteholder may convert at any time after
the Issuance Date, in whole or in part, the outstanding balance of the Note into shares of the Common Stock at a conversion price
of $2.00 per share (the “Conversion Shares”). The Note shall be a senior obligation of the Company and its subsidiaries.
The Note contains customary events of default (each an “Event of Default”). If an Event of Default occurs, interest
under the Note will accrue at a rate of twelve percent (12%) per annum and the outstanding principal amount of the Note, plus
accrued but unpaid interest, liquidated damages and other amounts owing with respect to the Note will become, at the Note holder’s
election, immediately due and payable in cash. Upon completion of a Change of Control (as defined in the Note), the Note’s
holder may require the Company to purchase any outstanding portion of the Note in cash at a price in accordance with the terms
of the Note. Subsequent to the issuance of the Note, the Investor has converted $11,000,000 principal as of the date of this filing.
Pursuant
to the Purchase Agreement, the Investor received a Warrant in an amount equal to 250% of the shares of Common Stock initially
issuable to each Investor pursuant to the Investor’s Note. The Warrant contains an exercise price of $2.00 per share. In
connection with the closing of the Offering, the Warrant was issued to purchase an aggregate of 15,000,000 shares of Common Stock
(the “Warrant Shares”).
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
19 — Subsequent Events — (Continued)
The
Company also entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”).
The Registration Rights Agreement provides that the Company shall (i) file with the Securities and Exchange Commission (the “Commission”)
a Registration Statement by 30 days following the Closing Date to register the Conversion Shares and Warrant Shares (the “Registration
Statement”); and (ii) use all commercially reasonable efforts to have the Registration Statement declared effective by the
Commission within 60 days following the Closing Date or at the earliest possible date, or 75 days following the Closing Date if
the Registration Statement receives comments from the Commission.
Palladium
Capital Group, LLC (the “Placement Agent”) acted as placement agent for the Offering. The Placement Agent received
cash compensation of $1,080,000 (8% of the gross proceeds to the Company plus an additional 1% of the gross proceeds to the Company
for non-accountable expenses). The Placement Agent also received a Warrant in an amount equal to 8% of the shares of Common Stock
initially issuable to each Investor pursuant to the Investor’s Note.
On
January 29, 2021 (the “Effective Date”), the Company consummated the closing of a private placement offering of $3,300,000
(the “Offering”) whereby pursuant to the Securities Purchase Agreement (the “SPA”) entered into by the
Company on January 28, 2021 with BHP Capital NY Inc (the “Investor”), the Company issued 1,500,000 shares of restricted
common stock and a five (5) year warrant (the “Warrant”) to purchase shares of the Company’s common stock, par
value $0.001 per share (“Common Stock”).
Pursuant
to the SPA, the Investor received a Warrant in an amount equal to 100% of the shares of Common Stock issued to the Investor under
the SPA. The Warrant contains an exercise price of $2.20 per share. In connection with the closing of the Offering, the Warrant
was issued to purchase an aggregate of 1,500,000 shares of Common Stock (the “Warrant Shares”).
The
Company also entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”).
The Registration Rights Agreement provides that the Company shall (i) file with the Securities and Exchange Commission (the “Commission”)
a Registration Statement by 30 days following the Closing Date to register the Conversion Shares and Warrant Shares (the “Registration
Statement”); and (ii) use all commercially reasonable efforts to have the Registration Statement declared effective by the
Commission within 60 days following the Closing Date or at the earliest possible date, or 75 days following the Closing Date if
the Registration Statement receives comments from the Commission.
On
January 29, 2021, the Company issued 100,000 shares of common stock valued at $327,000 to a consultant for services rendered on
behalf of the Company.
On
February 1, 2021, the Company issued 27,415 shares of common stock valued at $87,454 to Jefferson Street Capital, LLC in satisfaction
of its debt and accrued interest of the approximate same value against a note issued on April 7, 2020.
On
February 2, 2021, the Company issued 100,000 shares of common stock valued at $319,000 for settlement of investment banking services.
On
February 2, 2021, the Company issued 209 shares of common stock for a cashless exercise
of a warrant.
On
February 2, 2021, the Company entered into an Employment Agreement (the “Agreement”) with Christopher Ferguson (the
“Executive”) for the role of Chief Executive Officer. The Agreement is effective as of November 12, 2020 (the “Effective
Date”) and has a term of three (3) years (the “Term”) from the Effective Date. Thereafter, the Agreement shall
automatically be renewed and the Term shall be extended for additional consecutive terms of 1 year (each a “Renewal Term”),
unless such renewal is objected to by either the Company or the Executive. The Executive’s initial annual base salary shall
be $200,000, less applicable withholdings (the “Base Salary”) and 120,000 common shares that shall vest in
their entirety on issuance. The Base Salary shall be payable in accordance with the Company’s normal payroll procedures
in effect from time to time. The Base Salary due of shares, shall be payable within the first 30 days of the year. On each anniversary
of the Agreement, the base salary will increase no less than $15,000 (“minimum”). For 2021, the Executive shall receive
a cash bonus in the amount equal to 30% of the annual Base Salary, and an award of 200% shares of the Company’s common stock,
which shall vest in their entirety on issuance (the “Principal Market”), which shall be received by the Executive
no later than the first 30 days of the current fiscal year. The Executive shall be entitled to 150,000 shares of the Company’s
common stock, due immediately upon an increase of 2.5 times the Enterprise Value on a 5-day closing average from the effectiveness
of the Agreement. For clarification, the Enterprise Value as of the Company at the effective date was $25,042,464.
On
February 2, 2021, the Company entered into an Employment Agreement (the “Agreement”) with Brett Vroman (the “Executive”)
for the role of Chief Financial Officer. The Agreement is effective as of November 12, 2020 (the “Effective Date”)
and has a term of three (3) years (the “Term”) from the Effective Date. Thereafter, the Agreement shall automatically
be renewed and the Term shall be extended for additional consecutive terms of 1 year (each a “Renewal Term”),
unless such renewal is objected to by either the Company or the Executive. The Executive’s initial annual base salary shall
be $200,000, less applicable withholdings (the “Base Salary”) and 120,000 common shares that shall vest in
their entirety on issuance. The Base Salary shall be payable in accordance with the Company’s normal payroll procedures
in effect from time to time. The Base Salary due of shares, shall be payable within the first 30 days of the year. On each anniversary
of the Agreement, the base salary will increase no less than $15,000 (“minimum”). For 2021, Executive shall receive
a cash bonus in the amount equal to 30% of the annual Base Salary, and an award of 200% shares of the Company’s common stock,
which shall vest in their entirety on issuance (the “Principal Market”), which shall be received by the Executive
no later than the first 30 days of the current fiscal year. Upon the execution of this agreement, the Executive is entitled to
a one-time past performance bonus for the work completed in fiscal years 2018, 2019 and 2020 of 150,000 shares of the Company’s
common stock, which shall vest in their entirety on issuance. The Executive shall be entitled to100,000 shares of the Company’s
common stock, due immediately upon an increase of 2.5 times the Enterprise Value on a 5-day closing average from the effectiveness
of the Agreement. For clarification, the Enterprise Value as of the Company at the effective date was $25,042,464.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
19 — Subsequent Events — (Continued)
On
February 2, 2021, the Company entered into an Employment Agreement (the “Agreement”) with Brian Mc Fadden (the “Executive”)
for the role of Chief Strategy Officer. The Agreement is effective as of November 12, 2020 (the “Effective Date”)
and has a term of three (3) years (the “Term”) from the Effective Date. Thereafter, the Agreement shall automatically
be renewed and the Term shall be extended for additional consecutive terms of 1 year (each a “Renewal Term”),
unless such renewal is objected to by either the Company or the Executive. The Executive’s initial annual base salary shall
be $200,000, less applicable withholdings (the “Base Salary”) and 120,000 common shares that shall vest in
their entirety on issuance. The Base Salary shall be payable in accordance with the Company’s normal payroll procedures
in effect from time to time. The Base Salary due of shares, shall be payable within the first 30 days of the year. On each anniversary
of the Agreement, the base salary will increase no less than $15,000 (“minimum”). For 2021, the Executive shall receive
a cash bonus in the amount equal to 30% of the annual Base Salary, and an award of 200% shares of the Company’s common stock,
which shall vest in their entirety on issuance (the “Principal Market”), which shall be received by the Executive
no later than the first 30 days of the current fiscal year. Upon the execution of the Agreement, the Executive is entitled to
a one-time signing bonus of 150,000 shares of the Company’s common stock, which shall vest in their entirety on issuance.
The Executive shall be entitled to100,000 shares of the Company’s common stock, due immediately upon an increase of 2.5
times the Enterprise Value on a 5-day closing average from the effectiveness of the Agreement. For clarification, the Enterprise
Value as of the Company at the effective date was $25,042,464.
On
February 2, 2021, the Company filed an Amendment to the Certificate of Designation (the “Amendment”) for the Company’s
Series B Convertible Preferred Stock (“Preferred Stock”). Under the Amendment, each
share of Preferred Stock shall entitle the holder thereof to vote on all matters voted on by the holders of Common Stock, voting
together as a single class with other shares entitled to vote at all meetings of the stockholders of the Corporation. With respect
to any such vote, each share of Preferred Stock shall entitle the holder thereof to cast the number of votes equal to the number
of whole shares of Common Stock into which such shares of Preferred Stock are then convertible (the “Conversion Shares”).
Such right may be exercised at any annual meeting or special meeting, or pursuant to any written consent of stockholders.
On
February 4, 2021, the Company issued 243,483 shares of common stock valued at $486,966 as true up shares in connection with the
Greentree financing.
On
February 4, 2021, the Company issued 25,000 shares of common stock valued at $40,750 as incentive shares for a Note Agreement
dated November 2, 2020.
On
February 4, 2021, the Company issued 25,000 shares of common stock valued at $31,250 to a consultant for services rendered on
behalf of the Company.
On
February 4, 2021, the Company issued 255,000 shares of common stock valued at $351,900 to certain employees for services rendered
on behalf of the Company.
On
February 4, 2021, the Company issued 210,000 shares of common stock valued at $287,700 to Directors of the Company’s Board
of Directors for services rendered.
On
February 4, 2021, the Company issued 150,000 shares of common stock valued at $205,500 to a consultant for services rendered on
behalf of the Company.
On
February 18, 2021, the Company issued 13,705 shares of common stock valued at $52,764 to certain employees for services rendered
on behalf of the Company.
On
February 18, 2021, the Company issued 25,000 shares of common stock valued at $50,000 for the exercise of a warrant.
On
February 19, 2021, the Company issued 25,000 shares of common stock valued at $99,750 for the extended use of a trademark.
On
February 23, 2021, the Company issued 25,000 shares of common stock valued at $68,500 for expenses related to a joint venture.
On
February 23, 2021, the Company issued 60,000 shares of common stock valued at $231,000 to the Company’s counsel for services
rendered on behalf of the Company.
On
February 23, 2021, the Company issued 450,000 shares of common stock valued at $792,000 to certain employees as per the terms
of their employment agreements.
On
February 23, 2021 (the “Effective Date”), Vinco Ventures, Inc. (the “Company”) consummated the closing
of a private placement offering (the “Offering”) whereby pursuant to the Securities Purchase Agreement (the “Purchase
Agreement”) entered into by the Company on February 18, 2021 with one accredited investor (the “Investor”),
the Company issued a Senior Convertible Note for the purchase price of $10,000,000 (the “Note”) and five (5) year
warrants (the “Warrant”) to purchase shares of the Company’s common stock, par value $0.001 per share (“Common
Stock”). The Note carries an interest rate of 6% per annum compounding monthly and matures on February 23, 2022. The Note
contains a voluntary conversion mechanism whereby the Noteholder may convert at any time after the Issuance Date, in whole or
in part, the outstanding principal and interest under the Note into shares of the Common Stock at a conversion price of $4.847
per share (the “Conversion Shares”). The Note shall be a senior unsecured obligation of the Company and its subsidiaries.
The Note contains customary events of default (each an “Event of Default”). If an Event of Default occurs, interest
under the Note will accrue at a rate of twelve percent (12%) per annum and the outstanding principal amount of the Note, plus
accrued but unpaid interest, liquidated damages and other amounts owing with respect to the Note will become, at the Note holder’s
election, immediately due and payable in cash. Upon completion of a Change of Control (as defined in the Note), the Note’s
holder may require the Company to purchase any outstanding portion of the Note in cash at a price in accordance with the terms
of the Note.
On
February 24, 2021, the Company entered into a Settlement Agreement and General Release of All Claims (the “Settlement Agreement”)
with Edison Nation, LLC, Pearl 33 Holdings, LLC and Christopher Ferguson (collectively, the “Settling Defendants”)
and Oceanside Traders, LLC (the “Plaintiff”). Under the terms of the Settlement Agreement, the Settling Defendants
agreed to pay the Plaintiff the sum of $150,000 within one business day of execution of the Settlement Agreement. In exchange,
the Plaintiff agreed to dismiss the Amended Complaint in its entirety and with prejudice against the Settling Defendants. The
Company made payment in the amount of $150,000 on February 25, 2021.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note
19 — Subsequent Events — (Continued)
On
March 2, 2021, the Company issued 1,505,502 shares of common stock valued at $3,011,004 to a noteholder for conversion against
a convertible note.
On
March 2, 2021, the Company issued 150,000 shares of common stock valued at $187,500 to a consultant for services rendered on behalf
of the Company.
On
March 2, 2021, the Company issued 16,667 shares of common stock valued at $20,000 to a director in satisfaction of compensation
due for services as a director.
On
March 2, 2021, the Company issued 79,167 shares of common stock valued at $95,000 to a director in satisfaction of compensation
due for services as a director.
On
March 2, 2021, the Company issued 83,333 shares of common stock valued at $100,000 to a director in satisfaction of compensation
due for services as a director.
On
March 2, 2021, the Company issued 75,000 shares of common stock valued at $90,000 to a director in satisfaction of compensation
due for services as a director.
On
March 2, 2021, the Company issued 5,000 shares of common stock valued at $7,850 to a noteholder as additional incentive shares
as per terms of an amendment.
On
March 2, 2021, the Company issued 20,000 shares of common stock valued at $26,600 to a noteholder as additional incentive shares
as per terms of an amendment.
On
March 2, 2021, the Company issued 10,000 shares of common stock valued at $13,900 to a noteholder as additional incentive shares
as per terms of an amendment.
On
March 2, 2021, the Company issued 30,000 shares of common stock valued at $40,800 to an employee for services rendered on behalf
of the Company.
On
March 2, 2021, the Company issued 50,000 shares of common stock valued at $68,000 to an employee for services rendered on behalf
of the Company.
On
March 10, 2021 and March 11, 2021, the Company’s Cloud B intellectual property was auctioned via a bankruptcy sale of CBAV
1, LLC. On March 12, 2021, the bankruptcy court approved the sale of the CBAV1, LLC Assets to the winning bidder at the auction
held for a total sum of $3,000,000, contingent upon a cash payment at closing which is anticipated on April 15, 2021 in the amount
of $2,650,000 and additional payments in the amount of $150,000 on April 15, 2022 and $200,000 on April 15, 2023. The winning
bidder, BTL Diffusion SARL (“BTL”), entered into a certain asset purchase agreement with CBAV1 and an asset purchase
agreement with Edison Nation, LLC (“Edison APA”). Both APAs were contingent upon a first closing which required, among
other things, BTL making a deposit in the amount of $700,000 to be held in escrow. On April 8, 2021, the first closing occurred
and those funds are held in escrow and the second closing is scheduled for April 15, 2021. A dry closing of the CBAV1-BTL Transaction
occurred on April 16, 2021, with the transfer of assets and release of funds to be completed on April 21, 2021 (“Final
Closing”). Contemporaneously with the Final Closing, a certain license agreement between CBAV1 and Edison Nation, LLC
(“Edison Nation”) terminated and any remaining operational assets of Edison Nation were transferred to BTL.
On
March 12, 2021 the Company issued 100,167 shares of common stock valued at $200,334 to a noteholder for conversion against a convertible
note.
On
March 18, 2021 the Company issued 150,425 shares of common stock valued at $300,850 to a noteholder for conversion against a convertible
note.
On
March 19, 2021 the Company issued 250,750 shares of common stock valued at $501,500 to a noteholder for conversion against a convertible
note.
On
March 19, 2021 the Company issued 501,750 shares of common stock valued at $1,003,500 to a noteholder for conversion against a
convertible note.
On
March 19, 2021 the Company issued 1,003,667 shares of common stock valued at $2,007,334 to a noteholder for conversion against
a convertible note.
On
March 19, 2021 the Company issued 1,003,667 shares of common stock valued at $2,007,334 to a noteholder for conversion against
a convertible note.
On
March 19, 2021 the Company issued 1,003,667 shares of common stock valued at $2,007,334 to a noteholder for conversion against
a convertible note.
On
March 26, 2021, the Company issued 96,000 shares of common stock valued at $192,000 upon partial exercise of a warrant issued
to a placement agent.
On
March 30, 2021, the Company through its subsidiaries, Edison Nation, LLC CBAV1, LLC and Ferguson Containers (collectively, the
“Obligors”), entered into a Termination Agreement (the “Agreement”) with CSNK Working Capital Finance
(D/B/A Bay View Funding)(the “Buyer”). Under the terms of the Agreement, the Obligor shall remit payment in the amount
of $14,135.05 to the Buyer as a Payout for early termination of the Factoring Agreement dated February 21, 2020.
On
March 30, 2021, the Company, Vinco Acquisition Corporation and ZASH entered into that certain First Amendment to Agreement to
Complete a Plan of Merger, which amends the Merger Agreement dated January 20, 2021 to extend the closing date of the merger to
on or about May 28, 2021.
On
March 31, 2021, the Company entered into three separate Consulting Agreements (the “Agreements”) with non-affiliated
consultants to provide consulting services consisting of implementation of the Company’s business plan, investor relation
services, introduction of potential investors, news distribution, markets and sales. Under the terms of the Agreements, each Consultant
shall receive 50,000 shares of common stock upon execution of the Agreement and shall receive an additional 50,000 shares of common
stock at the 60-day anniversary of each of the Agreements. The Agreements have a term of six (6) months.
On
April 5, 2021, the Company, through Safe TV Shop, LLC, entered into a Settlement Agreement and Release of Claims (the “Settlement”).
Under the terms of the Settlement, the Company is to make payment in the amount of $25,000 on or before April9, 2021. The Company
made the payment on April 8, 2021.
On
April 7, 2021, the Company issued 150,000 shares of common stock valued at $382,500 for consulting services as per the Consulting
Agreements entered into on March 31, 2021.
On
April 7, 2021, the Company issued 525,541 shares of common stock valued at $924,952 to an employee as per the terms of an employment
agreement.
On
April 7, 2021, the Company issued 475,451 shares of common stock valued at $836,794 to an employee as per the terms of an employment
agreement.
On
April 7, 2021, the Company issued 597,273 shares of common stock valued at $1,051,200 to an employee as per the terms of an employment
agreement.
22,281,666
Shares
PROSPECTUS
,
2021
Through
and including , 2021 (the 25th day
after the date of this offering), all dealers effecting transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or subscription.