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As Filed with the Securities and Exchange Commission on August 12, 2022

 

Registration No.     

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form S-1

UNDER

THE SECURITIES ACT OF 1933

 

 

CRYPTYDE, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware   7379   87-2755739
(State or other jurisdiction of incorporation or organization)   (Primary Standard Industrial Classification Code Number)  

(I.R.S. Employer

Identification No.)

 

200 9th Avenue North, Suite 220

Safety Harbor, Florida 34695

(866) 980-2818

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Brian McFadden

Chief Executive Officer

Cryptyde, Inc.

200 9th Avenue North, Suite 220

Safety Harbor, Florida 34695

(866) 980-2818

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Rick A. Werner, Esq.

Bruce Newsome, Esq.

Haynes and Boone, LLP

30 Rockefeller Plaza, 26th Floor

New York, New York 10112

(212) 659-7300

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement is declared effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b–2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer
Non-accelerated filer   Smaller reporting company
      Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission acting pursuant to said Section 8(a) may determine.

 

 

 

 
 

 

The information in this prospectus is not complete and may be changed. The selling stockholder named in this prospectus may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion, dated August 12, 2022

 

PROSPECTUS

 

 

Cryptyde, Inc.

71,276,725 Shares of Common Stock

 

 

This prospectus relates to the resale by the selling stockholder named in this prospectus from time to time of up to 71,276,725 shares of our common stock, par value $0.001 per share. These 71,276,725 shares of common stock consist of:

 

15,050,315 shares of common stock (the “Additional January 2022 Note Shares”) issuable upon the conversion of the note (the “January 2022 Note”) that was issued pursuant to the securities purchase agreement (“January 2022 Purchase Agreement”), as amended by the amendment agreement (the “2022 Amendment Agreement”) between us and Hudson Bay Master Fund, Ltd. (“Hudson Bay”). The Additional January 2022 Note Shares being registered are in addition to those 3,333,333 shares issuable upon conversion of the January 2022 Note and previously registered on Form S-1, Registration No. 333-264777 (as amended, the “June 2022 S-1”) prior to the amendment of the January 2022 Note and the registration rights of Hudson Bay, which now require the registration of the Additional January 2022 Note Shares.
   
56,226,410 shares of common stock (the “Additional January 2022 Warrant Shares”) issuable upon the exercise of the warrant (the “January 2022 Warrant”) that was issued pursuant to the January 2022 Purchase Agreement. The Additional January 2022 Warrant Shares being registered are in addition to those 6,666,666 shares issuable upon exercise of the January 2022 Warrant and previously registered on the June 2022 S-1 prior to an adjustment to the number of shares common stock issuable upon the exercise of the January 2022 Warrant and the amendment of the registration rights of Hudson Bay, which now require the registration of the Additional January 2022 Warrant Shares.

 

The January 2022 Note and January 2022 Warrant were issued in reliance upon the exemption from the registration requirements in Section 4(a)(2) of the Securities Act. We are registering the Additional January 2022 Note Shares and Additional January 2022 Warrant Shares issuable upon the conversion or exercise, as applicable, of the January 2022 Note and January 2022 Warrant, respectively, to allow the selling stockholder named herein to, from time to time, offer and sell or otherwise dispose of the shares of our common stock covered by this prospectus.

 

Our registration of the shares of common stock covered by this prospectus does not mean that the selling stockholder will offer or sell any of such shares of common stock. The selling stockholder named in this prospectus, or their donees, pledgees, transferees or other successors-in-interest, may resell the shares of common stock covered by this prospectus through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. For additional information on the possible methods of sale that may be used by the selling stockholder, you should refer to the section of this prospectus entitled “Plan of Distribution.”

 

We will not receive any of the proceeds from the sale of common stock by the selling stockholder. However, we will receive proceeds from the exercise of the January 2022 Warrant if the January 2022 Warrant is exercised for cash.

 

Any shares of common stock subject to resale hereunder will have been issued by us and acquired by the selling stockholder prior to any resale of such shares pursuant to this prospectus.

 

No underwriter or other person has been engaged to facilitate the sale of the common stock in this offering. We will bear all costs, expenses and fees in connection with the registration of the common stock. The selling stockholder will bear all commissions and discounts, if any, attributable to their respective sales of our common stock.

 

Our common stock is currently listed on the Nasdaq Capital Market under the symbol “TYDE.” On August 11, 2022, the last reported sale price of our common stock was $1.12.

 

Investment in our common stock involves risk. See “Risk Factors” contained in this prospectus, in our periodic reports filed from time to time with the Securities and Exchange Commission, which are incorporated by reference in this prospectus and in any applicable prospectus supplement. You should carefully read this prospectus and the documents we incorporate by reference, before you invest in our common stock.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or the accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is August    , 2022.

 

 
 

 

TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS 1
PROSPECTUS SUMMARY 2
THE OFFERING 4
RISK FACTORS 5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 22
USE OF PROCEEDS 22
SELLING STOCKHOLDER 22
DESCRIPTION OF SECURITIES BEING REGISTERED 25
PLAN OF DISTRIBUTION 25
LEGAL MATTERS 27
EXPERTS 27
THE SEPARATION 28
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS 30
NOTES TO PRO FORMA FINANCIAL STATEMENTS 36
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 38
BUSINESS 46
MANAGEMENT 52
EXECUTIVE AND DIRECTOR COMPENSATION 59
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 61
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 62
WHERE YOU CAN FIND MORE INFORMATION 64

 

i
 

 

ABOUT THIS PROSPECTUS

 

This prospectus is part of the registration statement that we filed with the Securities and Exchange Commission pursuant to which the selling stockholder named herein may, from time to time, offer and sell or otherwise dispose of the shares of our common stock covered by this prospectus. As permitted by the rules and regulations of the Securities and Exchange Commission, the registration statement filed by us includes additional information not contained in this prospectus.

 

This prospectus and the documents incorporated by reference into this prospectus include important information about us, the securities being offered and other information you should know before investing in our securities. You should not assume that the information contained in this prospectus is accurate on any date subsequent to the date set forth on the front cover of this prospectus or that any information we incorporate by reference is correct on any date subsequent to the date of the document incorporated by reference, even though this prospectus is delivered or shares of common stock are sold or otherwise disposed of on a later date. It is important for you to read and consider all information contained in this prospectus, including the documents incorporated by reference therein, in making your investment decision. You should also read and consider the information in the documents to which we have referred you under “Where You Can Find More Information” in this prospectus.

 

You should rely only on this prospectus and the information incorporated or deemed to be incorporated by reference in this prospectus. We have not, and the selling stockholder has not, authorized anyone to give any information or to make any representation to you other than those contained or incorporated by reference in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.

 

We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference in this prospectus were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.

 

Unless otherwise indicated, information contained or incorporated by reference in this prospectus concerning our industry, including our general expectations and market opportunity, is based on information from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. In addition, assumptions and estimates of our and our industry’s future performance are necessarily uncertain due to a variety of factors, including those described in “Risk Factors” beginning on page 5 of this prospectus. These and other factors could cause our future performance to differ materially from our assumptions and estimates.

 

1
 

 

 

PROSPECTUS SUMMARY

 

This summary provides an overview of selected information contained elsewhere in this prospectus and does not contain all of the information you should consider before investing in our securities. You should carefully read the prospectus, the information incorporated by reference and the registration statement of which this prospectus is a part in their entirety before investing in our securities, including the information discussed under “Risk Factors” in this prospectus and the documents incorporated by reference and our financial statements and related notes that are incorporated by reference in this prospectus. In this prospectus, unless the context indicates otherwise, “Cryptyde,” “Tyde,” the “Company,” the “registrant,” “we,” “us,” “our,” or “ours” refer to Cryptyde, Inc. and its consolidated subsidiaries.

 

Overview

 

We are a comprised of three main businesses, our Web3 Business, our Bitcoin Mining Services Business and our Packaging Business (collectively, the “Cryptyde Businesses”). Our Web3 Business plans to use decentralized blockchain technology in established consumer facing industries such as video games, music, and art. Our Bitcoin Mining Services Business is focused on bringing Bitcoin mining to the consumer level by offering Bitcoin mining equipment and co-location services. Our Packaging Business manufactures and sells custom packaging for a wide variety of products and through packaging helps customers generate brand awareness and promote brand image. Our Web3 Business expects to launch its first product in 2022, our Bitcoin Mining Services Business began making sales in the first quarter of 2022, and our Packaging Business has been in operation for over 50 years.

 

On June 29, 2022, the Company separated from its former parent company, Vinco Ventures Inc. (“Vinco”). As previously announced, we concluded a spin-off from Vinco (the “Separation”) and continue operating our Web3 Business, our Bitcoin Mining Services Business and our Packaging Business. The Separation occurred concurrently with the distribution (the “Distribution”) of our common stock to stockholders of Vinco as of May 18, 2022 (the “Record Date”) at a ratio of one share of our common stock for every ten shares of Vinco common stock held by the Vinco stockholders. Following the Separation, we are an independent, publicly traded company, and Vinco retains no ownership interest in our Company.

 

In connection with the Separation, we entered into a Separation and Distribution Agreement and other agreements with Vinco to effect the Separation and provide a framework for our relationship with Vinco after the Separation. These agreements provide for the allocation between us and our subsidiaries, on the one hand, and Vinco and its subsidiaries, on the other hand, of the assets, liabilities, legal entities, and obligations associated with the Cryptyde Businesses, on the one hand, and Vinco’s other current businesses, on the other hand, and govern the relationship between our Company and our subsidiaries, on the one hand, and Vinco and its subsidiaries, on the other hand, following the Separation. In addition to the Separation and Distribution Agreement, the other principal agreements entered into with Vinco include a Tax Matters Agreement and certain commercial agreements.

 

For more information regarding risks associated with the Separation, see “Risk Factors.”

 

 

2
 

 

 

Recent Financings

 

On January 26, 2022, the Company entered into the January 2022 Purchase Agreement with Hudson Bay for the issuance and sale of the January 2022 Note with an initial principal amount of $33,333,333 at a conversion price of $10.00 per share (“January 2022 Note Shares”), and the January 2022 Warrant to purchase up to 3,333,333 shares of our common stock with an initial exercise price of $10.00 per share (the “January 2022 Warrant Shares”), for consideration of $30,000,000 (the “January 2022 Offering”). The January 2022 Offering closed on May 5, 2022.

 

In connection with the January 2022 Offering, Cryptyde also entered into a registration rights agreement (the “Registration Rights Agreement”) with the same investor. This registration statement is being filed in accordance with the Registration Rights Agreement. In accordance with the Registration Rights Agreement, prior to amendment by the 2022 Amendment Agreement, Cryptyde filed the June 2022 S-1, which included all of the common stock underlying the January 2022 Note (3,333,333 shares of common stock at such time), and 200% of the common stock underlying the January 2022 Warrant (6,666,666 shares of common stock at such time).

 

In connection with the January 2022 Offering, Cryptyde, and its subsidiaries, as applicable, entered into guarantee agreements, a pledge agreement (the “Pledge Agreement”), a control agreement and all financing statements, security agreements, pledges, assignments, opinions of counsel, and other documents requested by the collateral agent in the January 2022 Offering.

 

On July 28, 2022, the Company entered into the 2022 Amendment Agreement with Hudson Bay to amend the January 2022 Purchase Agreement, the January 2022 Note and the Registration Rights Agreement.

 

Pursuant to the 2022 Amendment Agreement, the Company released an aggregate of $29,000,000 (the “Released Funds”) from the restricted funds account maintained in accordance with the January 2022 Purchase Agreement (the “Restricted Funds Account”) and, going forward, must deposit 50% of any Warrant Exercise Cash (as defined in the 2022 Amendment Agreement) into the Restricted Funds Account. As required by the 2022 Amendment Agreement, the Company used $22,000,000 of the Released Funds to repurchase from Hudson Bay $22,000,000 of the principal of the January 2022 Note. Pursuant to the 2022 Amendment Agreement, the conversion price of the balance of the January 2022 Note that remains was voluntarily adjusted to $1.06 (the “Adjustment”) and in accordance with the terms of the January 2022 Warrant, the exercise price of the warrant was adjusted to $1.06 as a result of the Adjustment. The 2022 Amendment Agreement also amended the Registration Rights Agreement to require the Company to register (i) the number of shares of common stock equal to 200% of the shares issuable upon conversion of the January 2022 Note and (ii) the number of shares of common stock equal to 200% of the shares issuable upon exercise of the January 2022 Warrant, assuming all cash has been released from the Restricted Funds Account and the number of shares of common stock issuable upon exercise of the January 2022 Warrant has been adjusted in accordance with Section 3(c) of the January 2022 Warrant.

 

As a result of the Adjustment, the Company is required to register 15,050,315 Additional January 2022 Note Shares and 56,226,410 Additional January 2022 Warrant Shares, in addition to those shares of common stock registered by the Company in the June 2022 S-1.

 

On January 26, 2022, the Company entered into a securities purchase agreement (the “Equity Private Placement”) with an accredited investor (the “Equity Investor”) for the issuance of 1,500,000 shares of Cryptyde’s common stock, and warrants (the “Equity Investor Warrants”) to purchase up to 1,500,000 shares of Common Stock with an exercise price of $8.00 per share of common stock. The Equity Private Placement closed on May 20, 2022. In accordance with the provisions of the Equity Private Placement, the Company registered the shares of common stock underlying the Equity Investor Warrants in the June 2022 S-1. In connection with the closing of the Equity Private Placement, the Company issued warrants exercisable into 240,000 shares of the Company’s common stock at an exercise price of $8.00 per share to Palladium Capital Group, LLC (“Palladium”) in connection with their role as placement agent. The Company registered the shares underlying the warrants issued to Palladium in the June 2022 S-1. In connection with the Adjustment, under the terms of the Equity Investor Warrants and the warrants issued to Palladium, the exercise price of such warrants have been reduced to match the conversion price of $1.06 applicable to the January 2022 Note.

 

On November 11, 2021, the Company entered into an amendment agreement (the “2021 Amendment Agreement”) by and among Vinco, Hudson Bay and the Company. In connection with the 2021 Amendment Agreement on May 18, 2022, the Company issued to Hudson Bay warrants exercisable into 8,652,419 shares of the Company’s common stock with an exercise price of $0.001 per share.

 

On May 18, 2022, in connection with its spin-off and based upon Vinco warrants exercisable into Vinco common stock, the Company issued to Palladium, CVI Investments, Inc. and Armistice Capital Master Fund Ltd. warrants exercisable into 767,774, 500,000 and 300,000 shares, respectively, of the Company’s common stock at an exercise price of $0.001 per share.

 

Copies of each of the January 2022 Purchase Agreement, Registration Rights Agreement, form of Pledge Agreement, 2022 Amendment Agreement, Equity Private Placement, form of Equity Investor Warrant, Hudson Bay Master Fund Ltd. Warrants dated May 18, 2022, Palladium Capital Group, LLC Warrants dated May 18, 2022, CVI Investments, Inc. Warrants dated May 18, 2022, Armistice Capital Master Fund Ltd Warrants dated May 18, 2022, and BHP Capital NY, Inc. Warrants dated May 20, 2022 are attached to the registration statement of which this prospectus forms a part as Exhibits 10.10, 10.11, 10.14, 10.15, 10.16, 10.17, 10.19, 10.20, 10.21, 10.22 and 10.23, respectively.

 

Corporate Information

 

Cryptyde, Inc., was incorporated in the State of Nevada on September 21, 2021, and is currently listed on the Nasdaq Capital Market under the trading symbol to “TYDEV.” Upon completion of the Separation, our common stock will be listed on the Nasdaq Capital Market under the symbol “TYDE.” On March 9, 2022, we changed our state of domicile to the State of Delaware. Our principal executive office is located at 200 9th Avenue North, Suite 220, Safety Harbor, Florida 34695, and our telephone number is (866) 980-2818. Our website is www.cryptyde.com, and the information included in, or linked to our website is not part of this prospectus. We have included our website address in this prospectus solely as a textual reference.

 

 

3
 

 

THE OFFERING

 

Common Stock to be Offered by

the Selling Stockholder

  Up to 71,276,725 shares of our common stock, which are comprised of 15,050,315 Additional January 2022 Note Shares and 56,226,410 Additional January 2022 Warrant Shares.
     
Use of Proceeds   All shares of our common stock offered by this prospectus are being registered for the account of the selling stockholder and we will not receive any proceeds from the sale of these shares. However, we will receive proceeds from the exercise of the January 2022 Warrants if the January 2022 Warrants are exercised for cash. We intend to use those proceeds, if any, for general corporate purposes. See “Use of Proceeds” beginning on page 22 of this prospectus for additional information.
     
Plan of Distribution  

The selling stockholder named in this prospectus, or its pledgees, donees, transferees, distributees, beneficiaries or other successors-in-interest, may offer or sell the shares of common stock from time to time through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. The selling stockholder may also resell the shares of common stock to or through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions.

 

See “Plan of Distribution” beginning on page 25 of this prospectus for additional information on the methods of sale that may be used by the selling stockholder.

     
Nasdaq Capital Market Symbol   Our common stock is currently listed on the Nasdaq Capital Market under the symbol “TYDE.”
     
Risk Factors   Investing in our common stock involves significant risks. See “Risk Factors” beginning on page 5 of this prospectus and the documents incorporated by reference in this prospectus.

 

4
 

 

RISK FACTORS

 

An investment in our securities involves certain risks. Before deciding to invest in our common stock, you should consider carefully the following discussion of risks and uncertainties affecting us and our securities, together with other information in this prospectus. Our business, business prospects, financial condition or results of operations could be seriously harmed as a result of these risks. This could cause the trading price of our common stock to decline, resulting in a loss of all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may materially and adversely affect our business, financial condition and results of operations. Please also read carefully the section below entitled “Special Note Regarding Forward-Looking Statements.”

 

Summary of our Risk Factors

 

Risks Related to Our Business Generally

 

  We are a recently formed entity, led by management that has limited experience operating a public company, with little track record and limited historical financial information available;
  We are operating in highly competitive industries that could be affected by a decline in discretionary consumer spending or general economic conditions;
  We must retain our key management personnel;
  We may not be able to raise adequate capital to fund our business, and our ability to raise capital may be negatively affected by the COVID-19 pandemic. We are also subject to the expenses of operating a public company;
  We face cyber security risks and our insurance coverage may not be adequate to cover losses from both cyber security and other losses; and
  COVID-19 or another pandemic may negatively impact our ability to operate the Cryptyde Businesses Risks.

 

Related to Our Web 3 Business

 

  We need to innovate and provide Web3 products and services that are attractive to our users;
  The success of our Web3 Business is substantially dependent on the entertainment professionals we partner with and consumer tastes and preferences for Web3 products;
  If the crypto assets we create are determined to be a “security,” we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties;
  Our Web3 Business intends to rely on the Ethereum blockchain, which we have no control over; and
  We are subject to current and future legislation and rulemaking regarding digital assets that may result in extraordinary, non-recurring expenses.

 

Risks Related to Our Bitcoin Mining Services Business

 

  Bitcoin mining is capital intensive and if our customers have a decline in discretionary spending, or the price of Bitcoin goes down, they may not engage in Bitcoin mining or buy our products; and
  We are subject to shifting public and governmental positions on digital asset mining activity could reduce our revenue and profitability.

 

Risks Related to Our Packaging Business

 

  We are subject to the costs and availability of raw materials, and we rely on a limited number of third-party suppliers of raw materials; and
  We may be affected by interruptions in the transportation of the materials we require to produce packaging.

 

Risks Related to Our Securities

 

  We do not expect to issue dividends;
  An active trading market for our securities may never develop, and the price of our securities may be volatile; and
  We may issue shares of preferred or common stock in the future, which could dilute your percentage ownership of the Company.

 

Risks Related to the Separation

 

  We may not realize the anticipated benefits from the Separation, and the Separation could harm our business;
  We may have indemnification liabilities to Vinco under the Separation and Distribution Agreement; and
  The combined post-Separation value of Vinco and Cryptyde shares may not equal or exceed the pre-Separation value of Vinco shares.

 

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Risks Related to Our Business Generally

 

We are a recently formed entity with little track record and limited historical financial information available.

 

Cryptyde, Inc. was formed on September 21, 2021, in the State of Nevada and converted to a Delaware corporation on March 9, 2022. Our Packaging Business was formed in 1966, however the rest of our businesses were recently started. Because we are in the early stages of executing our business strategy, we cannot provide assurance that, or when, we will be profitable. We will need to make significant investments to develop and operate the Company and expect to incur significant expenses in connection with operating components, including costs for developing technology, talent fees, marketing, and salaries. We expect to incur significant capital, operational and marketing expenses for a few years in connection with our strategy and growth plan. Any failure to achieve or sustain profitability may have a material adverse impact on the value of the shares of our common stock.

 

We must retain our key management personnel.

 

We aim to recruit the most qualified candidates and strive for a diverse and well-balanced workforce. While we expect to reward and support employees through competitive pay, benefits, and perquisite programs that allow employees to thrive, due to our size we may not be able to provide compensation equal to our more established competitors and may not be able to attract qualified management personnel. If we are unable to retain the key management personnel at our Company, the underlying business could suffer.

 

We could be adversely affected by declines in discretionary consumer spending, consumer confidence and general and regional economic conditions.

 

Our success depends to a significant extent on discretionary consumer spending, which is heavily influenced by general economic conditions and the availability of discretionary income. We believe the markets that all of the Cryptyde Businesses depend on are heavily reliant on discretionary consumer spending. The current economic environment as a result of COVID-19, coupled with high volatility and uncertainty as to the future global economic landscape, may have an adverse effect on consumers’ discretionary income and consumer confidence. Future volatile, negative, or uncertain economic conditions and recessionary periods or periods of significant inflation may adversely impact consumer spending on our products and services, which would materially adversely affect our business, financial condition and results of operations. Such effects can be especially pronounced during periods of economic contraction or slow economic growth.

 

The Company will operate in highly competitive industries and our revenues, profits or market share could be harmed if we are unable to compete effectively.

 

Each of the Cryptyde Businesses will face competition from existing competitors. Our competitors in the Web3 business will depend on what Web3 products we develop or acquire. We expect competition for Freespace, our video game we are developing and expect to launch in 2022, to include Decentraland, Sandbox and Fluf World. With respect to our Bitcoin Mining Services Business, our competitors include Compass Mining, Miners Dep and Alliance. With respect to the Packaging Business, our competitors include Sutherland Packaging, Acme Corrugated Box Company, and Trenton Corrugated Products, Inc.

  

Competition in each of these areas may increase as a result of technological developments, changes in consumer preferences, economic conditions, changes in market structure, and other factors. Increased competition may divert consumers from our products, which could reduce our revenue or increase our marketing costs. Our competitors may have substantially greater financial resources than we do, and they may be able to adapt more quickly to changes in consumer preferences or devote greater resources to promotion of their offerings and services or to development or acquisition of offerings and services that are perceived to be of a higher quality or value than our offerings and services. As a result, we may not be able to compete successfully against such competitors.

 

We may not be able to fund capital expenditures and investment in projects and offerings.

 

A principal competitive factor for a large portion of the Cryptyde Businesses is the originality and perceived quality of our products and offerings. We will need to make continued capital investments to adapt to constantly changing consumer preferences. Our ability to fund capital expenditures will depend on our ability to generate sufficient cash flow from operations and to raise capital from third parties. We cannot assure you that our operations will be able to generate sufficient cash flow to fund such costs, or that we will be able to obtain sufficient financing on adequate terms, or at all, which could cause us to delay or abandon certain projects or plans.

 

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Continuing general market uncertainties resulting from the COVID-19 Pandemic may affect our ability to raise capital.

 

Since the outset of the COVID-19 pandemic, the United States and worldwide national securities markets have undergone unprecedented stress due to the uncertainties of the COVID-19 pandemic and the resulting reactions and outcomes of government, business, and the general population. These uncertainties have resulted in declines in many market sectors. As a result, until the pandemic has stabilized, the markets may not be available to the Company for purposes of raising required capital. Should we not be able to obtain financing when required, in the amounts necessary to execute on our plans in full, or on terms which are economically feasible we may be unable to sustain the necessary capital to pursue our strategic plan and may have to reduce the planned future growth and/or scope of our operations.

 

A deterioration in the domestic and international economic environment, whether by way of current inflationary conditions or potential recessionary conditions, could adversely affect our operating results, cash flow and financial condition.

 

Current inflationary conditions in the United States and other parts of the world have increased some of our costs, including our cost of materials and labor. While we thus far have been largely successful in mitigating the impact of current inflationary conditions, we may need to increase our own prices on goods and services sufficiently to offset cost increases, we may not be able to maintain acceptable operating margins and achieve profitability. Additionally, competitors operating in regions with less inflationary pressure may be able to compete more effectively which could further impact our ability to increases prices and/or result in lost sales. 

 

Recessionary economic conditions could lower discretionary spending of our consumers, which could result in a loss of sales. Recessionary economic conditions may cause difficulty in collecting accounts receivable and reduce the availability of credit and spending power for our customers, both of which may negatively impact our business.

 

Geopolitical risks, such as those associated with Russia’s invasion of Ukraine, could result in a decline in the outlook for the U.S. and global economies.

 

The uncertain nature, magnitude, and duration of hostilities stemming from Russia’s recent military invasion of Ukraine, including the potential effects of sanctions and retaliatory cyber-attacks on the world economy and markets, have contributed to increased market volatility and uncertainty, and such geopolitical risks could have an adverse impact on macroeconomic factors which affect our businesses, as well as our access to capital.

 

Cyber security risks and the failure to maintain the integrity of internal, partner, and consumer data could result in damages to our reputation, the disruption of operations and/or subject us to costs, fines or lawsuits.

 

We have and will continue to collect and retain large volumes of internal, partner and consumer data, including credit card numbers and other personally identifiable information, for business purposes, including for transactional or target marketing and promotional purposes, and our various information technology systems enter, process, summarize and report such data. We also maintain personally identifiable information about our employees. Additionally, our Web 3 Business is predominately digital in nature and relies heavily on our ability to maintain the integrity of our computer systems. The integrity and protection of our customer, employee, and company data is critical to our business and our customers and employees are likely to have a high expectation that we will adequately protect their personal information. The regulatory environment, as well as the requirements imposed on us by the credit card industry, governing information, security and privacy laws is increasingly demanding and continues to evolve. Maintaining compliance with applicable security and privacy regulations may increase our operating costs and/or adversely impact our ability to market our products and services.

 

We also rely on accounting, financial and operational management information technology systems to conduct our operations. If these information technology systems suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, our business, financial condition and results of operations could be materially adversely affected.

 

We may face various security threats, including cyber security attacks on our data (including our vendors’ and customers’ data) and/or information technology infrastructure. Although we utilize various procedures and controls to monitor and mitigate these threats, there can be no assurance that these procedures and controls will be sufficient to prevent penetrations or disruptions to our systems. Furthermore, a penetrated or compromised data system or the intentional, inadvertent or negligent release or disclosure of data could result in theft, loss, fraudulent or unlawful use of customer, employee, or company data which could harm our reputation or result in remedial and other costs, fines or lawsuits and require significant management attention and resources to be spent. In addition, our insurance coverage and indemnification arrangements that we enter into, if any, may not be adequate to cover all the costs related to cyber security attacks or disruptions resulting from such events.

 

Our insurance coverage may not be adequate to cover all possible losses that we could suffer and our insurance costs may increase.

 

We seek to maintain comprehensive insurance coverage at commercially reasonable rates. There can be no assurance that our insurance will be sufficient to cover the full extent of all losses or liabilities for which we are insured, and we cannot guarantee that we will be able to obtain insurance policies on favorable terms, or at all.

 

7

 

 

COVID-19 or another pandemic may negatively impact our ability to operate the Cryptyde Businesses which could decrease or eliminate the value of our common stock.

 

COVID-19 has resulted in significant uncertainty in many areas of our businesses. We do not know how long these conditions will last. This uncertainty may negatively impact our operations. We may experience labor shortages, particularly in our Packaging Business, if our employees are unable or unwilling to come to work. If our suppliers cannot deliver the supplies we need to operate our business or if we are unable to ship our products due to trucking or rail shipping disruptions, we may be forced to suspend operations or reduce production. If we are unable to operate the Packaging Business at or near its historical rate, it may result in unfavorable operating results. Any shut down of operations or reduction in production, especially for an extended period of time, could reduce the value of our common stock.

 

Our management has limited experience in operating a public company.

 

Our executive officers have limited experience in the management of a publicly traded company. Our management team may not successfully or effectively manage its transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to the management and growth of our business. We may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the U.S. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the U.S. may require costs greater than expected. It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.

 

The requirements of being a public company may strain our resources and distract management.

 

We incur significant costs associated with our public company reporting requirements and costs associated with applicable corporate governance requirements. These applicable rules and regulations are expected to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly than those for privately owned companies that are not registrants with the SEC. Compliance with these rules and regulations may divert management’s attention from other business concerns.

 

Our business plan may require additional liquidity and capital resources that might not be available on terms that are favorable to us, or at all.

 

We currently obtain a portion of the capital required for the development and operations of the Company from various forms of public and private financing. We may require additional capital and/or cash flow from future operations to fund the Company, our debt service obligations and our ongoing business. There is no assurance that we will be able to raise sufficient additional capital or generate sufficient future cash flow from our future operations to fund our ongoing business. If the amount of capital we are able to raise, together with any income from future operations, is not sufficient to satisfy our liquidity and capital needs, including funding our current debt obligations, we may be required to abandon or alter our plans for the Company. The Company may also have to raise additional capital through the equity market, which could result in substantial dilution to existing stockholders.

 

Our ability to obtain necessary financing may be impaired by factors such as the health of and access to capital markets, our limited track record and the limited historical financial information available, or the substantial doubt about our ability to continue as a going concern. Any additional capital raised through the sale of additional shares of our capital stock, convertible debt or other equity may dilute the ownership percentage of our stockholders.

 

Risks Related to Our Web3 Business

 

If we do not innovate and provide Web3 based products and services that are attractive to our users, our business could be harmed.

 

Our success depends on our continued innovation to provide products and services that are attractive to potential users and customers. As a result, we must invest significant resources in research and development to first create then improve the attractiveness and comprehensiveness of our products and services and effectively incorporate new Web3 technologies into them. If we are unable to provide products and services that users and customers want to use, then users may become dissatisfied and use competitors’ products and services. If we are unable to continue offering innovative products and services, we may be unable to attract users, which could harm our business, results of operations and financial condition.

 

8

 

 

The success of our Web3 Business is substantially dependent upon the continued success of the entertainment professionals we partner with and our ability to continue to secure favorable contracts with and maintain a good working relationship with these individuals.

 

Our Web3 business includes partnerships with entertainment professionals to help them use Web3 technology to distribute, manage, and receive payment for their art, music, or other content. Our ability to secure partnerships, and maintain a good working relationship, with artists, celebrities, athletes, and other public figures - through agreements, alliances, opportunities and otherwise – is of critical importance to our long-term success.

 

A particular crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset we develop in our Web3 Business as not a security, we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial condition.

 

The SEC and its staff have taken the position that certain crypto assets fall within the definition of a “security” under the U.S. federal securities laws. The legal test for determining whether any given crypto asset is a security is a highly complex, fact-driven analysis that evolves over time, and the outcome is difficult to predict. The SEC generally does not provide advance guidance or confirmation on the status of any particular crypto asset as a security. Furthermore, the SEC’s views in this area have evolved over time and it is difficult to predict the direction or timing of any continuing evolution. It is also possible that a change in the governing administration or the appointment of new SEC commissioners could substantially impact the views of the SEC and its staff. For example, Chair Gary Gensler recently remarked on the need for further regulatory oversight on crypto assets, crypto trading, and lending platforms by the SEC. Public statements by senior officials at the SEC indicate that the SEC does not intend to take the position that Bitcoin or Ethereum are securities (in their current form). Bitcoin and Ethereum are the only crypto assets as to which senior officials at the SEC have publicly expressed such a view. Moreover, such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court and cannot be generalized to any other crypto asset. With respect to all other crypto assets, there is currently no certainty under the applicable legal test that such assets are not securities, notwithstanding the conclusions we may draw based on our assessment regarding the likelihood that a particular crypto asset could be deemed a “security” under applicable laws. Similarly, though the SEC’s Strategic Hub for Innovation and Financial Technology published a framework for analyzing whether any given crypto asset is a security in April 2019, this framework is also not a rule, regulation, or statement of the SEC and is not binding on the SEC.

 

Several foreign jurisdictions have taken a broad-based approach to classifying crypto assets as “securities,” while other foreign jurisdictions, such as Switzerland, Malta, and Singapore, have adopted a narrower approach. As a result, certain crypto assets may be deemed to be a “security” under the laws of some jurisdictions but not others. Various foreign jurisdictions may, in the future, adopt additional laws, regulations, or directives that affect the characterization of crypto assets as “securities.”

 

The classification of a crypto asset as a security under applicable law has wide-ranging implications for the regulatory obligations that flow from the offer, sale, trading, and clearing of such assets. For example, a crypto asset that is a security in the United States may generally only be offered or sold in the United States pursuant to a registration statement filed with the SEC or in an offering that qualifies for an exemption from registration. Persons that effect transactions in crypto assets that are securities in the United States may be subject to registration with the SEC as a “broker” or “dealer.” Platforms that bring together purchasers and sellers to trade crypto assets that are securities in the United States are generally subject to registration as national securities exchanges, or must qualify for an exemption, such as by being operated by a registered broker-dealer as an ATS in compliance with rules for ATSs. Persons facilitating clearing and settlement of securities may be subject to registration with the SEC as a clearing agency. Foreign jurisdictions may have similar licensing, registration, and qualification requirements.

 

9

 

 

We analyze each crypto asset we develop under our Web3 Business to determine its likeliness to be deemed to be a “security” under applicable laws. Regardless of our conclusions, we could be subject to legal or regulatory action in the event the SEC, a foreign regulatory authority, or a court were to determine that a crypto asset we developed under our Web3 Business is a security under applicable laws. Because our Web3 platforms will not be registered or licensed with the SEC or foreign authorities as a broker-dealer, national securities exchange, or ATS (or foreign equivalents), and we do not seek to register or rely on an exemption from such registration or license to facilitate the offer and sale of crypto assets on our Web3 platforms, we will only develop and distributed digital assets for which we determine there are reasonably strong arguments to conclude that the crypto asset is not a security. We recognize that the application of securities laws to the specific facts and circumstances of crypto assets may be complex and subject to change, and that a listing determination does not guarantee any conclusion under the U.S. federal securities laws.

 

There can be no assurances that we will properly characterize any given crypto asset we develop under our Web3 Business as a security or non-security for purposes of determining whether we will distribute it on a Web3 platform. If the SEC, foreign regulatory authority, or a court were to determine that a crypto asset offered, sold, or traded on one of our future Web3 platform is a security, we would not be able to offer the Web3 product associated with the crypto asset until we are able to do so in a compliant manner. A determination by the SEC, a foreign regulatory authority, or a court that an asset that we support in the future for trading on our platform constitutes a security may also result in us determining that it is advisable to remove assets from our platform that have similar characteristics to the asset that was determined to be a security. In addition, we could be subject to judicial or administrative sanctions for failing to offer or sell the crypto asset in compliance with the registration requirements, or for acting as a broker, dealer, or national securities exchange without appropriate registration. Such an action could result in injunctions, cease and desist orders, as well as civil monetary penalties, fines, and disgorgement, criminal liability, and reputational harm.

 

Our Web3 Business intends to rely on the Ethereum blockchain, which we have no control over.

 

Our Web3 Business intends to operate on the Ethereum blockchain. Like other blockchains, Ethereum blockchain relies on a network of computers to run certain software programs to solve complex transactions in competition with other mining operations and to process transactions. We have no control over these networks, which subjects us to certain risks. For example, to the extent that any miners cease to record transactions in solved blocks, such transactions will not be recorded on the Ethereum blockchain. Currently, there are no known incentives for miners to elect to exclude the recording of transactions in solved blocks; however, to the extent that any such incentives arise (e.g., a collective movement among miners or one or more mining pools forcing Ethereum users to pay transaction fees as a substitute for or in addition to the award of new Ethereum upon the solving of a block), actions of miners solving a significant number of blocks could delay the recording and confirmation of transactions on the Ethereum blockchain. Such delay could harm our business, results of operations, and financial condition.

 

Incidents or adverse publicity concerning the Company or our public-figure partners could harm our reputation as well as negatively impact our revenues and profitability.

 

Our reputation is an important factor in the success of our Web3 Business. Our ability to attract and retain both partners and customers depends, in part, upon the external perceptions of our Company, the brands and individuals we are associated with, and our corporate and management integrity. If market recognition or the perception of the Company diminishes, there may be a material adverse effect on our revenues, profits, and cash flow. In addition, changing public perception of the brand and public figures we partner with could negatively impact our business and results of operations.

 

Changes in consumer tastes and preferences for Web3 products could reduce demand for our offerings and products and adversely affect the profitability of our Web3 Business.

 

The success of our Web3 Business depends on our ability to consistently provide, maintain and innovate Web3 products that meet changing consumer preferences. Our success depends in part on the continued and increasing popularity of Web3 products and on our ability to successfully predict and adapt to tastes and preferences of this consumer group. If our Web3 products do not achieve sufficient consumer acceptance or if consumer preferences change or consumers are drawn to other products, our business, financial condition, or results of operations could be materially adversely affected.

 

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Blockchain technology may expose us to specially designated nationals or blocked persons or cause it to violate provisions of law.

 

We are subject to the rules enforced by OFAC, including regarding sanctions and requirements not to conduct business with persons named on its specially designated nationals list. However, because of the pseudonymous nature of blockchain transactions, we may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s specially designated nationals list, which may expose us to regulatory sanctions and adversely affect our business, financial condition, and results of operations.

 

Current and future legislation and rulemaking regarding digital assets may result in extraordinary, non-recurring expenses and could have a material adverse effect on our business, financial condition and results of operations.

 

Current and future legislation and rulemaking by the Commodity Futures Trading Commission (the “CFTC”) and SEC or other regulators, including interpretations released by a regulatory authority, may impact the manner in which digital assets are treated. For example, digital assets derivatives are not excluded from the definition of “commodity future” by the CFTC. Furthermore, according to the CFTC, digital assets fall within the definition of a commodity under the Commodities Exchange Act (the “CEA”) and as a result, we may be required to register and comply with additional regulations under the CEA, including additional periodic reporting and disclosure standards and requirements. We may also be required to register as a commodity pool operator and to register as a commodity pool with the CFTC through the National Futures Association. If we are required to register with the CFTC or another governmental or self-regulatory authority, we may seek to cease certain of our operations to avoid the registration requirement. Modifying our business to avoid a registration requirement with the CFTC or another governmental or self-regulatory authority may have a material adverse effect on our business, financial condition, and results of operations.

 

Risks Related to Our Bitcoin Mining Services Business

 

The business of the end users of our Bitcoin mining equipment is capital intensive and declines in discretionary income could limit the market for our Bitcoin mining equipment, which could have a material adverse effect on our business, financial condition, and results of operations.

 

Our Bitcoin Mining equipment is intended to lower the costs of constructing, developing, operating and maintaining digital asset mining and hosting facilities. However, users of our Bitcoin mining equipment may still face substantial costs associated with electricity usage, equipment replacement and upgrading, and other factors. A decline in discretionary income could prevent our intended end users from engaging in Bitcoin mining, and in turn from purchasing our Bitcoin mining equipment.

 

If future prices of Bitcoin are not sufficiently high, our business, results of operations, and financial condition could be materially and adversely affected, which may have a negative impact on the trading price of our securities.

 

Our Bitcoin mining equipment allows users to engage in Bitcoin mining. If future prices of Bitcoin are not sufficiently high to cause our target customers to engage in Bitcoin mining and in turn purchase our products and services, our sales of Bitcoin mining equipment may be affected and our business, results of operations, and financial condition could be materially and adversely affected.

 

Our business is heavily impacted by social, political, economic and other events and circumstances in the United States and abroad. Shifting positions on digital asset mining activity could reduce our revenue and profitability.

 

Our business is heavily impacted by social, political, economic, and other events and circumstances in the United States and abroad. These events and circumstances are largely outside of our influence and control. For example, we believe that historically China was a location of significant digital asset mining at low electric power rates. Recently, China and other foreign governments have taken action to prohibit or significantly restrict digital asset mining. Should China or other countries that currently restrict digital asset mining eliminate such restrictions or actually seek to enhance such mining activity, the demand for our Bitcoin mining equipment may be lowered, which would likely reduce the revenue and profitability of our Bitcoin Mining Services Business.

 

11

 

 

We are subject to risks associated with our customers’ need for significant electric power and the limited availability of power resources, which could have a material adverse effect on our business, financial condition and results of operations.

 

Our customers using our Bitcoin mining equipment require a significant amount of electric power. Energy costs and availability are vulnerable to seasonality, with increased costs primarily in the summer months and risks of outages and power grid damage as a result of inclement weather, animal incursion, sabotage, and other events out of our control. Although we aim to offer energy efficient Bitcoin mining equipment, there can be no assurance that there will be sufficient energy availability to meet the needs of our Bitcoin mining equipment customers.

 

Governments and government regulators, at the federal, state, and local levels, may potentially restrict the ability of electricity suppliers to provide electricity to users of our Bitcoin mining equipment, which could have a material adverse effect on our business, financial condition and results of operations.

 

Governments or government regulators, at the federal, state, and local levels, may potentially restrict electricity suppliers from providing electricity to Bitcoin mining hosting facilities, including facilities used by our Bitcoin mining equipment target customers and facilities offered as part of our co-location services. For example, on May 14, 2018, the Chelan County Public Utility District in Washington approved a three-month extension of a moratorium on the approval of electric service for new digital asset transaction operators in Chelan County. In March 2018, the City of Plattsburgh, New York, placed an 18-month moratorium on transaction processing to preserve natural resources, the health of its residents and the “character and direction” of the city after residents complained about significantly higher electricity bills. In the event government regulators issue moratoriums or impose bans or restrictions involving transaction processing in jurisdictions in which our target Bitcoin mining equipment customers operate, the sales of our Bitcoin mining equipment may be negatively impacted and could have a material adverse effect our business, financial condition, and results of operations.

 

Risks Related to Our Packaging Business

 

An increase in the cost or a reduction in the availability of wood fiber, other raw materials, energy and transportation may have an adverse effect on our profitability and results of operations.

 

Wood fiber, including old corrugated containers (“OCC”) is the principal raw material in many parts of the paper and packaging industry, including the corrugated cardboard on which our Packaging Business relies. Wood fiber is a commodity, and prices historically have been cyclical and have varied on a regional basis. Environmental litigation and regulatory developments have caused, and may cause in the future, significant reductions in the amount of timber available for commercial harvest in the United States. In addition, future domestic or foreign legislation and litigation concerning the use of timberlands, the protection of endangered species, the promotion of forest health and the response to and prevention of catastrophic wildfires could also affect timber supplies. Availability of harvested timber may further be limited by fire, insect infestation, disease, ice storms, windstorms, flooding and other causes, thereby reducing supply and increasing prices. Demand for OCC, especially from China, could result in shortages or spikes in the cost of OCC.

 

Industry supply of commodity paper and wood products is also subject to fluctuation, as changing industry conditions can influence producers to idle or permanently close individual machines or entire mills. Oversupply in these markets can also result from producers introducing new capacity in response to favorable short-term pricing trends. Industry supply of commodity papers and wood products is also influenced by overseas production capacity, which has grown in recent years and is expected to continue to grow. Wood fiber pricing is subject to regional market influences, and the cost of wood fiber may increase in particular regions due to market shifts in those regions. In addition, the ability to obtain wood fiber from foreign countries may be impacted by economic, legal and political conditions in those countries as well as transportation difficulties.

 

Energy is a significant input cost for the paper and packaging industry. Increases in energy prices can be expected to adversely impact businesses.

 

Because we rely on a supply of corrugated sheets of cardboard to produce packaging, these uncertainties in the supply and cost of raw materials used to produce paper product could affect the availability of the corrugated sheets of cardboard we rely on. Increases in costs may need to be passed on to our customers, and ultimately may negatively affect our business.

 

12

 

 

Disruptions in transportation could adversely affect our supply of raw materials and could have an adverse effect on our results of operations, profitability, and liquidity.

 

Since we receive our supply of raw material from suppliers that use third-party shippers that rely on truck, rail, and other forms of transportation, the reduced availability of those modes of transportation could limit our ability to promptly produce products for our customers, which could have an adverse effect on our operations, financial condition, and liquidity. In addition, the increased cost of transportation of raw material from our suppliers may reduce our profitability if we are not able to recover those costs through price increases for our products.

 

Paper and packaging companies face strong competition.

 

We face competition from numerous competitors, domestic as well as foreign. Some of our competitors are larger, more vertically integrated companies that have greater financial and other resources, greater manufacturing economies of scale, greater energy self-sufficiency, and/or lower operating costs.

 

Certain paper and wood products are vulnerable to long-term declines in demand due to competing technologies or materials.

 

Companies in the paper and packaging industry are subject to possible declines in demand for their products as the use of alternative materials and technologies grows and the prices of such alternatives become more competitive. Any substantial shift in demand from wood and paper products to competing technologies or materials could result in a material decrease in sales of our products and could adversely affect our results of operations, cash flows, and financial position. We cannot ensure that any efforts we might undertake to adapt our product offerings to such changes would be successful or sufficient.

 

Because we service customers in a variety of industries, we may be particularly impacted by general economic downturns.

 

Our Packaging Business provides packaging for third-party customers in a variety of industries, including pharmaceutical and e-commerce companies. Certain of our Packaging Business customers provide goods that are discretionary items for consumers. Therefore, their business, and in turn our Packaging Business, depends on the strength of the retail, commercial, and industrial sectors of the economy in various parts of the world, and trends therein. During a downturn in the economy, consumer purchases of discretionary items are affected, which could materially lower our customers’ demand for our packaging products, and negatively affect our profitability and financial condition.

 

We incur significant expenses to maintain our manufacturing equipment and any interruption in the operations of our facilities may harm our operating performance.

 

We regularly incur significant expenses to maintain our manufacturing equipment and facilities. The machines and equipment that we use to produce our products are complex, interdependent, and have many parts. We must perform routine maintenance on our equipment and will have to periodically replace a variety of parts.

 

Disruptions to our Packaging Business could occur due to any number of circumstances, including prolonged power outages, mechanical or process failures, shortages of raw materials, natural catastrophes, disruptions in the availability of transportation, labor disputes, terrorism, changes in or non-compliance with environmental or safety laws, and the lack of availability of services from any of our facilities’ key suppliers. Any facility shutdowns may be followed by prolonged startup periods, regardless of the reason for the shutdown. Any prolonged disruption in operations at any of our facilities could cause significant lost production, which would have a material adverse effect on our results of operations.

 

We rely on a limited number of third-party suppliers for certain raw materials required for the production of our products.

 

Our dependence on a limited number of third-party suppliers, and the challenges we may face in obtaining adequate supplies of raw materials, involve several risks, including limited control over pricing, availability, quality and delivery schedules. We cannot be certain that our current suppliers will continue to provide us with the quantities of these raw materials that we require or will continue to satisfy our anticipated specifications and quality requirements. Any supply interruption in limited raw materials could materially harm our ability to manufacture our products until a new source of supply, if any, could be identified and qualified. Although we believe there are other suppliers of these raw materials, we may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could interrupt production of our products, which would have a material adverse effect on our business.

 

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Risks Related to Our Securities

 

We currently do not intend to pay dividends on our common stock. Consequently, our stockholders’ ability to achieve a return on their investment will depend on appreciation in the price of our common stock.

 

We do not expect to pay cash dividends on our common stock. Any future dividend payments are within the absolute discretion of our board of directors and will depend on, among other things, our results of operations, working capital requirements, capital expenditure requirements, financial condition, level of indebtedness, contractual restrictions with respect to payment of dividends, business opportunities, anticipated cash needs, provisions of applicable law and other factors that our board of directors may deem relevant.

 

 

As a result of being a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting in order to comply with Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

 

As a result of being a public company we are subject to SEC reporting and other regulatory requirements. We will incur expenses and diversion of our management’s time in its efforts to comply with Section 404 of the Sarbanes-Oxley Act regarding internal controls over financial reporting. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm when required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retrospective changes to our consolidated financial statements or identify other areas for further attention or improvement. If we are unable to assert that our internal controls over financial reporting are effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC.

 

One of our companies, Ferguson Containers, has material weaknesses in its controls over financial reporting, which could negatively impact investor confidence in the accuracy and completeness of our financial reports, and cause the price of our common stock to decline.

 

For Ferguson Containers’s fiscal years ended December 31, 2019, 2020, and 2021, respectively, Ferguson Containers had the following material weakness in internal controls over financial reporting:

 

Primarily due to the small size of Ferguson Containers, it does not maintain sufficient segregation of duties to ensure the processing, review and authorization of all transactions including non-routine transactions.
   
Ferguson Containers’s processes lacked timely and complete reviews and analysis of information used to prepare its financial statements and disclosures in accordance with accounting principles generally accepted in the United States of America.

 

The material weaknesses of Ferguson Containers’s internal control over financial reporting could negatively impact investor confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline.

 

An active, liquid trading market for our common stock may not develop, which may limit your ability to sell your shares.

 

Although our common stock is listed on the Nasdaq under the trading symbol “TYDE,” an active trading market for our common stock may never develop or be sustained. A public trading market having the desirable characteristics of depth, liquidity and orderliness depends upon the existence of willing buyers and sellers at any given time, such existence being dependent upon the individual decisions of buyers and sellers over which neither we nor any market maker has control. The failure of an active and liquid trading market to develop and continue would likely have a material adverse effect on the value of our common stock, and you may not be able to sell your shares of our common stock.  

 

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We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.

 

Our Certificate of Incorporation authorizes us to issue one or more series of preferred stock. Our board of directors has the authority to determine the preferences, limitations and relative rights of the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium to the market price, and materially adversely affect the market price and the voting and other rights of the holders of our common stock.

 

The trading price of our securities will likely be, and continue to be, volatile and you could lose all or part of your investment.

 

The trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control, including but not limited to our general business condition, the release of our financial reports and general economic conditions and forecasts. Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general, and Nasdaq, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future. Any of these factors could have a material adverse effect on our stockholders’ investment in our securities, and our securities may trade at prices significantly below the price they paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.

 

Anti-takeover provisions contained in our Certificate of Incorporation and Bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

 

Cryptyde’s Certificate of Incorporation, Bylaws, and Delaware law contain, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with Cryptyde’s board of directors rather than to attempt a hostile takeover. These provisions are expected to include, among others:

 

  rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;
     
  the right of Cryptyde’s board of directors to issue preferred stock without stockholder approval;
     
  the ability of Cryptyde’s directors, and not stockholders, to fill vacancies (including those resulting from an enlargement of the board of directors) on Cryptyde’s board of directors;
     
  the division of Cryptyde’s board of directors into three classes of directors, with each class serving a staggered term; and
     
  a provision that directors serving on a classified board may be removed by stockholders only for cause.

 

In addition Cryptyde is subject to Section 203 of the Delaware General Corporation Law (the “DGCL”). Section 203 provides that, subject to limited exceptions, persons that (without prior board approval) acquire, or are affiliated with a person that acquires, more than 15 percent of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or its affiliate becomes the holder of more than 15 percent of the corporation’s outstanding voting stock.

 

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Cryptyde believes these provisions will protect its stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with Cryptyde’s board of directors and by providing Cryptyde’s board of directors with more time to assess any acquisition proposal. These provisions are not intended to make Cryptyde immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that Cryptyde’s board of directors determines is not in the best interests of Cryptyde and its stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

 

In addition, an acquisition or further issuance of Cryptyde’s stock could trigger the application of Section 355(e) of the Code. For a discussion of Section 355(e), see the section entitled “Material United States Federal Income Tax Consequences of the Distribution”.

 

These anti-takeover provisions may also limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock. For a discussion of the anti-takeover provisions, See “Description of Capital Stock – Anti-Takeover Provisions.”

 

Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

 

Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the (i) Court of Chancery (the “Chancery Court”) of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (A) any derivative action or proceeding brought on behalf of Cryptyde, (B) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder, employee or agent of Cryptyde to Cryptyde or Cryptyde’s stockholders, (C) any action asserting a claim against the Cryptyde or any director, officer, stockholder, employee or agent of the Cryptyde arising out of or relating to any provision of the DGCL, Cryptyde’s Certificate of Incorporation or Cryptyde’s Bylaws, or (D) any action asserting a claim against the Corporation or any director, officer, stockholder, employee or agent of Cryptyde governed by the internal affairs doctrine of the State of Delaware. Notwithstanding the foregoing, in the event that the Chancery Court lacks subject matter jurisdiction over any such action or proceeding, including in the event claims are brought under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the sole and exclusive forum for such action or proceeding shall be another state or federal court located within the State of Delaware.

 

The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find the choice of forum provision contained in the proposed charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.

 

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

 

The trading market for our securities will depend in part on the research and reports that securities or industry analysts publish about us or our business. If only a limited number of securities or industry analysts commence coverage of our Company, the trading price for our securities would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our securities could decrease, which might cause our stock price and trading volume to decline.

 

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We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and we are taking advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

 

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and are taking advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company, which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

 

We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of the Company’s initial public offering, (b) in which we have total annual revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.

 

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of any fiscal year for so long as either (1) the market value of our shares of common stock held by non-affiliates did not equal or exceed $250 million as of the prior June 30, or (2) our annual revenues did not equal or exceed $100 million during such completed fiscal year and the market value of our shares of common stock held by non-affiliates did not equal or exceed $700 million as of the prior December 31.

 

Because we subject the above listed reduced reporting requirements, investors may not be able to compare us to other companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

 

Your percentage ownership in our company may be diluted in the future.

 

In the future, your percentage ownership in our company may be diluted because of equity issuances for warrant exercises, acquisitions, strategic investments, capital market transactions, or otherwise, including equity compensation awards that we grant to our directors, officers and employees. Our Compensation Committee can be expected to grant additional equity compensation awards to our employees after the Separation. These awards would have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock. From time to time, we may issue additional equity compensation awards to our employees under our employee benefits plans.

 

In addition, our Certificate of Incorporation authorizes our board of directors to create and issue, without the approval of our stockholders, one or more series of preferred stock having such powers, preferences, and rights, if any, and such qualifications, limitations, and restrictions, if any, as established by our board of directors. The terms of one or more series of preferred stock that is so created and issued by our board of directors may dilute the voting power or reduce the value of our common stock. For example, our board of directors could create and issue one or more series of preferred stock having the right to elect one or more of our directors (in all events or on the happening of specified events) and/or the right to veto specified transactions. Similarly, the repurchase or redemption rights or dividend, distribution, or liquidation rights of a series of preferred stock created and issued by our board of directors could affect the residual value of the common stock. See “Description of Capital Stock—Preferred Stock.”

 

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Our common stock will be subordinate to all of our future indebtedness and any series of preferred stock, and effectively subordinated to all indebtedness and preferred equity claims against our subsidiaries.

 

Shares of our common stock will rank junior to all of our future indebtedness and other liabilities. Additionally, holders of our common stock may become subject to the prior dividend and liquidation rights of holders of any series of preferred stock that our board of directors may designate and issue without any action on the part of the holders of our common stock. Furthermore, our right to participate in a distribution of assets upon any of our subsidiaries’ liquidation or reorganization is subject to the prior claims of that subsidiary’s creditors.

 

Investors are subject to litigation risk and their respective investments in the shares of our common stock may be lost as a result of our legal liabilities or the legal liabilities of our affiliates.

 

We or our affiliates may from time to time be subject to claims by third parties and may be plaintiffs or defendants in civil proceedings. There can be no assurance that claims will not be brought in the future if we cannot generate the revenue that we forecast or raise sufficient capital to pay our liabilities. The expense of prosecuting claims, for which there is no guarantee of success, and/or the expense of defending against claims by third parties and paying any amounts pursuant to settlements or judgments, would generally be borne by the Company and could result in the reduction or complete loss of all of the assets of the Company, and investors in our common stock could lose all or a part of their investment.

 

Risks Related to the Separation

 

We may not realize the anticipated benefits from the Separation, and the Separation could harm our business.

 

We may not be able to achieve the full strategic and financial benefits expected to result from the Separation and such benefits may be delayed or not occur at all. The Separation was designed to enhance strategic and management focus, provide a distinct corporate identity, and allow us to efficiently allocate resources and deploy capital. We may not achieve these and other anticipated benefits for a variety of reasons, including the following:

 

  matters subsequent to, but related to, the Separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our business;
     
  following the Separation, we may be more susceptible to economic downturns and other adverse events than if we were still a part of Vinco;
     
  following the Separation, our business is less diversified than Vinco’s business prior to the Separation;
     
  following the Separation, our business has experienced a loss of scale and access to certain financial, managerial, and professional resources as well as product and brand power influence and recognition with some customers from which we have benefited in the past; and
     
  actions related to the Separation could disrupt our operations in the future.

 

If we fail to achieve some or all of the benefits expected to result from the Separation, or if such benefits are delayed, our business could be harmed.

 

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We have little history operating as an independent company, and our historical financial information is not necessarily representative of the results that we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.

 

Our historical financial information included in this prospectus has been derived from Vinco’s consolidated financial statements and accounting records and is not necessarily indicative of our future operating results, financial condition, or cash flows, nor do they reflect what our operating results, financial condition, or cash flows would have been as an independent public company during the periods presented. In particular, the historical financial information included in this prospectus is not necessarily indicative of our future operating results, financial condition, or cash flows primarily because of the following factors:

 

  prior to the Separation, our business was operated by Vinco as part of its broader corporate organization rather than as an independent company, and Vinco or one of its affiliates provided support for various corporate functions for us, such as information technology, medical insurance, procurement, logistics, marketing, human resources, compliance, legal, finance, and internal audit;
     
  our historical financial results reflect the direct, indirect, and allocated costs for such services historically provided by Vinco, and these costs may significantly differ from the comparable expenses we would have incurred as an independent company;
     
  our working capital requirements and capital expenditures historically have been satisfied as part of Vinco’s corporate-wide cash management and centralized funding programs, and our cost of debt and other capital may significantly differ from that which is reflected in our historical combined financial statements;
     
  the historical financial information may not fully reflect the costs associated with the Separation, including the costs related to being an independent company;
     
  our historical financial information does not reflect our obligations under the various transitional and other agreements entered into with Vinco in connection with the Separation, though costs under such agreements are expected to be broadly similar to what was charged to the business in the past; and.
     
  our business previously was integrated with that of Vinco, and we historically have benefitted from Vinco’s size and scale in costs, employees, and vendor and customer relationships and the costs we will incur as an independent company may significantly exceed comparable costs we would have incurred as part of Vinco and some of our customer relationships may be weakened or lost.  

 

We based the pro forma adjustments included in this prospectus on available information and assumptions that we believe are reasonable and factually supportable. Actual results, however, may vary. In addition, our unaudited pro forma financial information included in this prospectus may not give effect to various ongoing additional costs that we may incur in connection with being an independent public company. Accordingly, our unaudited pro forma combined financial statements do not reflect what our operating results, financial condition, or cash flows would have been as an independent public company and are not necessarily indicative of our future financial condition or future operating results.

 

See “Unaudited Pro Forma Combined Financial Statements” and the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

 

Potential indemnification liabilities to Vinco pursuant to the Separation and Distribution Agreement could materially and adversely affect our financial condition, results of operations, and cash flows.

 

The Separation and Distribution agreement, among other things, provides for indemnification obligations designed to make Cryptyde financially responsible for certain liabilities that may exist relating to its business activities. If Cryptyde is required to indemnify Vinco under the circumstances set forth in the Separation and Distribution Agreement, Cryptyde may be subject to substantial liabilities.

 

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Cryptyde may be subject to certain contingent liabilities of Vinco following the Separation.

 

After the Separation, there is now the possibility that certain liabilities of Vinco could become Cryptyde’s obligations. For example, under the Code and the related rules and regulations, each corporation that was a member of the Vinco United States consolidated group during a taxable period or portion of a taxable period ending on or before the effective time of the Distribution is jointly and severally liable for the United States federal income tax liability of the entire Vinco United States consolidated group for that taxable period. Consequently, if Vinco is unable to pay the consolidated United States federal income tax liability for a prior period, Cryptyde could be required to pay the entire amount of such tax which could be substantial and in excess of the amount allocated to it under the Tax Matters Agreement between it and Vinco Other provisions of federal law establish similar liability for other matters, including laws governing tax-qualified pension plans as well as other contingent liabilities.

 

In connection with the Separation, Vinco will indemnify Cryptyde for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure Cryptyde against the full amount of such liabilities, or that Vinco’s ability to satisfy its indemnification obligation will not be impaired in the future.

 

Vinco agreed to indemnify Cryptyde for certain pre-spin-off liabilities. However, third parties could also seek to hold Cryptyde responsible for liabilities that Vinco has agreed to retain, and there can be no assurance that the indemnity from Vinco will be sufficient to protect Cryptyde against the full amount of such liabilities, or that Vinco will be able to fully satisfy its indemnification obligations. In addition, Vinco’s insurers may attempt to deny coverage to Cryptyde for liabilities associated with certain occurrences of indemnified liabilities prior to the Separation.

 

Following the Separation, now that we only have limited access to the insurance policies maintained by Vinco for events occurring prior to the Separation, Vinco’s insurers may deny or attempt to deny coverage to us under such policies, there can be no assurance that we will be able to obtain insurance coverage following the Separation on terms that justify its purchase, and any such insurance may not be adequate to offset costs associated with certain events.

 

In connection with the Separation, we entered into agreements with Vinco to address various matters associated with the Separation, including insurance coverage. The Separation and Distribution Agreement provides that following the Separation, we no longer have insurance coverage under Vinco insurance policies in connection with events occurring before, as of, or after the Separation, other than coverage for (i) events occurring prior to the Separation and covered by occurrence-based policies of Vinco as in effect as of the Separation and (ii) events or acts occurring prior to the Separation and covered by claims-made policies of Vinco for which a claim was received prior to the Separation. However, now that the Separation has concluded, Vinco’s insurers may deny or attempt to deny coverage to us for losses associated with occurrences or claims made prior to the Separation. Accordingly, we may be required to temporarily or permanently bear the costs of such lost coverage. In addition, we now have to maintain our own insurance policies following the Separation. Although we have had insurance policies in place since the date of the Separation that cover certain, but not all, hazards that could arise from our operations, we can provide no assurance that we will be able to maintain such coverage, that the cost of such coverage will be similar to that incurred by Vinco, or that such coverage will be adequate to protect us from costs incurred with certain events. The occurrence of an event that is not insured or not fully insured could have a material adverse effect on our business, operating results, and financial condition. See “The Separation—Agreements with Vinco.”

 

Following the Separation, some of our directors and officers may now have actual or potential conflicts of interest because of their equity ownership in Vinco.

 

Because of their former positions with Vinco, following the Separation, some of our directors and executive officers may own shares of Vinco common stock, and the individual holdings may be significant for some of these individuals compared to their total assets. This ownership may create, or may create the appearance of, conflicts of interest when these directors and officers are faced with decisions that could have different implications for Vinco or us. For example, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between Vinco and us regarding the terms of the agreements governing the Separation and the relationship thereafter between the companies.

 

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We potentially could have received better terms from unaffiliated third parties than the terms we received in our agreements with Vinco.

 

The agreements we entered into with Vinco in connection with the Separation were negotiated while we were still part of Vinco’s business. See “The Separation—Agreements with Vinco.” The terms of the agreements negotiated in the context of the Separation relate to, among other things, the allocation of assets, intellectual property, liabilities, rights, and other obligations between Vinco and us as well as services to be provided to us by Vinco on an interim basis. Arm’s-length negotiations between Vinco and an unaffiliated third-party in another form of transaction, such as a buyer in a sale of a business transaction, may have resulted in more favorable terms to the unaffiliated third-party.

 

We are subject to significant restrictions on our actions following the Separation in order to avoid triggering significant tax-related liabilities.

 

The Tax Matters Agreement generally prohibits us from taking certain actions that could cause the Transfer and the Distribution to fail to qualify as tax-free transactions, including the following:

 

  during the two-year period following the Distribution Date (or otherwise pursuant to a “plan” within the meaning of Section 355(e) of the Code), we may not cause or permit certain business combinations or transactions to occur;
     
  during the two-year period following the Distribution Date, we may not discontinue the active conduct of our business (within the meaning of Section 355(b)(2) of the Code);
     
  during the two-year period following the Distribution Date, we may not liquidate or merge, consolidate, or amalgamate with any other person;
     
  during the two-year period following the Distribution Date, we may not sell or otherwise dispose of more than 30% of our consolidated gross assets;
     
  during the two-year period following the Distribution Date, we may not purchase any of our common stock, other than pursuant to certain open market repurchases of less than 20% of our common stock (in the aggregate);
     
  during the two-year period following the Distribution Date, we may not amend our Certificate of Incorporation (or other organizational documents) or take any other action affecting the voting rights of our common stock; and
     
  more generally, we may not take any action that could reasonably be expected to cause the Transfer and the Distribution to fail to qualify as tax-free transactions for U.S. federal income tax purposes.

 

Due to these restrictions and indemnification obligations under the Tax Matters Agreement, we may be limited in our ability to pursue strategic transactions, equity or convertible debt financings, or other transactions that may otherwise be in our best interests. In addition, our potential indemnity obligation to Vinco might discourage, delay, or prevent a change of control that our stockholders may consider favorable.

 

Our accounting and other management systems and resources may not be robust enough to meet the financial reporting and other requirements to which we will be subject following the Separation.

 

Prior to the Separation, our financial results were included within the consolidated results of Vinco, and we were not directly subject to reporting and other requirements of the Exchange Act. These and other obligations will place significant demands on our management, administrative, and operational resources, including accounting and information technology resources. To comply with these requirements, we anticipate that we will need to duplicate information technology infrastructure; implement additional financial and management controls, reporting systems, and procedures; and hire additional accounting, finance, tax, treasury, and information technology staff. If we are unable to do this in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to independent public companies could be impaired and our business could be harmed.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus and the information incorporated by reference in this prospectus contain “forward-looking statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment and regulation. Our use of the words “may,” “will,” “would,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “seeks,” “intends,” “evaluates,” “pursues,” “anticipates,” “continues,” “designs,” “impacts,” “forecasts,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal” or the negative of those words or other similar expressions is intended to identify forward-looking statements that represent our current judgment about possible future events. Forward-looking statements should not be read as a guarantee of future performance or results and will probably not be accurate indications of when such performance or results will be achieved. All statements included or incorporated by reference in this prospectus, and in related comments by our management, other than statements of historical facts, including without limitation, statements about future events or financial performance, are forward-looking statements that involve certain risks and uncertainties.

 

These statements are based on certain assumptions and analyses made in light of our experience and perception of historical trends, current conditions and expected future developments as well as other factors that we believe are appropriate in the circumstances. While these statements represent our judgment on what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of any events or financial results. Whether actual future results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties, including the risks and uncertainties discussed in this prospectus, any prospectus supplement and the documents incorporated by reference under the captions “Risk Factors” and “Special Note Regarding Forward-Looking Statements” and elsewhere in those documents.

 

Consequently, all of the forward-looking statements made in this prospectus as well as all of the forward-looking statements incorporated by reference to our filings under the Exchange Act, are qualified by these cautionary statements and there can be no assurance that the actual results or developments that we anticipate will be realized or, even if realized, that they will have the expected consequences to or effects on us and our subsidiaries or our businesses or operations. We caution investors not to place undue reliance on forward-looking statements. We undertake no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events, or other such factors that affect the subject of these statements, except where we are expressly required to do so by law.

 

USE OF PROCEEDS

 

All shares of our common stock offered by this prospectus are being registered for the accounts of the selling stockholder and we will not receive any proceeds from the sale of these shares. However, we will receive proceeds from the exercise of the January 2022 Warrants if the January 2022 Warrants are exercised for cash. We intend to use those proceeds, if any, for general corporate purposes.

 

SELLING STOCKHOLDER

 

January 2022 Note, January 2022 Warrant and 2022 Amendment Agreement

 

On January 26, 2022, we entered into the January 2022 Purchase Agreement with Hudson Bay for the issuance and sale in the January 2022 Offering of the January 2022 Note, originally convertible into 3,333,333 January 2022 Note Shares and the January 2022 Warrant, originally exercisable into 3,333,333 January 2022 Warrant Shares. We received total consideration of $30,000,000 in the January 2022 Offering. The January 2022 Note was originally convertible at a conversion price of $10.00 per share, is immediately convertible and has a term of exercise equal to three years from the date of issuance. The exercise price of the January 2022 Warrant was originally $10.00 per share. The exercise price of the January 2022 Warrant adjusts down to match the issuance price of common stock issued by the Company at a lower price than the exercise price of the January 2022 Warrant, or match the exercise or conversion price of convertible securities issued by the Company.

 

A holder of the January 2022 Note or the January 2022 Warrant may not convert its January 2022 Note or January 2022 Warrant, as applicable, to the extent that the holder, together with its affiliates, would beneficially own more than 9.99% of our outstanding shares of common stock immediately after conversion or exercise, as applicable, except that the holder may decrease or, upon at least 61 days’ prior notice from the holder to us, increase the beneficial ownership limitation of the number of shares of common stock outstanding immediately after giving effect to the conversion or exercise, as applicable.

 

On July 28, 2022, the Company entered into the 2022 Amendment Agreement with Hudson Bay to amend the January 2022 Purchase Agreement, the January 2022 Note and the Registration Rights Agreement.

 

Pursuant to the 2022 Amendment Agreement, the Company released an aggregate of $29,000,000 of Released Funds from the Restricted Funds Account and, going forward, must deposit 50% of any Warrant Exercise Cash (as defined in the 2022 Amendment Agreement) into the Restricted Funds Account. The Company used $22,000,000 of the Released Funds to repurchase from Hudson Bay $22,000,000 of the principal of the January 2022 Note. Pursuant to the Amendment Agreement, the conversion price of the balance of the January 2022 Note that remains was voluntarily adjusted to $1.06 (the “Adjustment”) and in accordance with the terms of the January 2022 Warrant, the exercise price of the warrant was adjusted to $1.06 as a result of the Adjustment. The Amendment Agreement also amended the Registration Rights Agreement to require the Company to register (i) the number of shares of common stock equal to 200% of the shares issuable upon conversion of the January 2022 Note and (ii) the number of shares of common stock equal to 200% of the shares issuable upon exercise of the January 2022 Warrant, assuming all cash has been released from the Restricted Funds Account and the number of shares of common stock issuable upon exercise of the January 2022 Warrant has been adjusted in accordance with Section 3(c) of the January 2022 Warrant.

 

As a result of the Adjustment, the Company is required to register 15,050,315 Additional January 2022 Note Shares and 56,226,410 Additional January 2022 Warrant Shares, in addition to those shares of common stock registered by the Company in the June 2022 S-1.

 

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Information About Selling Stockholder Offering

 

The shares of common stock being offered by the selling stockholder are Additional January 2022 Note Shares and Additional January 2022 Warrant Shares. For additional information regarding the issuance of the January 2022 Note and January 2022 Warrant, see “January 2022 Note, January 2022 Warrant and 2022 Amendment Agreement” above.

 

Except for the ownership of the January 2022 Note, the January 2022 Warrants, Warrants issued pursuant to the 2021 Amendment Agreement, and its involvement with us with respect to the 2022 Amendment Agreement, Hudson Bay has not had any material relationship with us within the past three years.

 

In addition, in the past three years, Vinco has entered into three private placements with Hudson Bay. In July 2021, Vinco issued a convertible note for the purchase price of $100,000,000 and five-year warrants to purchase shares of common stock. In February 2021, Vinco issued a convertible note for the purchase price of $10,000,000 and five-year warrants to purchase shares of common stock. In January 2021, Vinco issued a convertible note for a purchase price of $12,000,000 and a five-year warrants to purchase shares of common stock.

 

The table below lists the selling stockholder and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder) of the shares of common stock held by the selling stockholder. The second column lists the number of shares of common stock beneficially owned by the selling stockholder, based on their ownership of shares of common stock, notes and warrants, as of August 11, 2022, assuming conversion of the January 2022 Note and January 2022 Warrant held by the selling stockholder on that date but not taking account of any limitations on conversion or exercise set forth therein.

 

The third column lists the shares of common stock being offered by this prospectus by the selling stockholder and does not take in account any limitations on conversion or exercise of the January 2022 Note or January 2022 Warrant.

 

In accordance with the terms of the Registration Rights Agreement with Hudson Bay, as amended by the 2022 Amendment Agreement, this prospectus generally covers the resale of 200% of the maximum number of shares of common stock issued or issuable pursuant to the January 2022 Note and January 2022 Warrant. Because the conversion price of the January 2022 Note, including payment of interest on the notes through the maturity date of the notes, determined as if the outstanding notes were converted in full (without regard to any limitations on conversion contained therein solely for the purpose of such calculation) at a conversion price calculated immediately preceding the date this registration statement was initially filed with the SEC and January 2022 Warrant, may be adjusted, the number of shares that will actually be issued may be more or less than the number of shares being offered by this prospectus. Additionally, in accordance with the terms of the Registration Rights Agreement, as amended by the 2022 Amendment Agreement, the maximum number of shares of common stock that may be sold pursuant to this prospectus includes shares of common stock that may become issuable upon adjustment of the conversion and exercise price of the January 2022 Note and January 2022 Warrant. The fourth column assumes the sale of all of the shares offered by Hudson Bay pursuant to this prospectus. Under the terms of the January 2022 Note, Hudson Bay may not convert the January 2022 Note to the extent (but only to the extent) that Hudson Bay or any of its affiliates would beneficially own a number of shares of our common stock which would exceed 9.99% of the outstanding shares of the Company. The number of shares in the second column does not reflect these limitations. Hudson Bay may sell all, some or none of their shares in this offering.

 

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Name of Selling Stockholder   Number of Shares of Common Stock Owned Prior to Offering     Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus     Number of Shares of Common Stock Owned After Offering     Percentage of Common Stock Owned After Offering(1)  
Hudson Bay Master Fund Ltd (2)     12,525,157 (3)(4)     71,276,725 (5)     0       0 %

 

(1) The beneficial ownership percentages set forth in the table below are based on approximately 31,267,585 shares of Cryptyde common stock issued and outstanding as of the date of this prospectus. All shares reported are shares of the Company’s Common Stock.
   
(2) Hudson Bay Capital Management LP is the investment manager of Hudson Bay. Sander Gerber is the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management LP, and Sander Gerber has sole voting and investment power over these securities. Each of Hudson Bay and Sander Gerber disclaims beneficial ownership over these securities. The selling stockholder’s address is c/o Hudson Bay Capital Management LP, 28 Havemeyer Place, 2nd Place, Greenwich, CT 06830. All shares reported are shares of the Company’s Common Stock.
   
(3) Includes 9,191,824 shares of common stock issuable upon conversion of the January 2022 Note, as amended by the 2022 Amendment Agreement and 3,333,333 shares of Common Stock issuable upon exercise of the January 2022 Warrant.
   
(4) Pursuant to the terms of the notes and warrants in footnote (3) above, Hudson Bay may not convert such notes or exercise such warrants to the extent (but only to the extent) Hudson Bay or any of its affiliates would beneficially own upon such conversion or exercise a number of shares of the Company’s common stock which would exceed 9.99% of the outstanding shares of common stock of the Company. The number of shares and percentage do not reflect this limitation. All shares reported are shares of the Company’s Common Stock.
   
(5) Includes 15,050,315 Additional January 2022 Note Shares and 56,226,410 Additional January 2022 Warrant Shares. All shares reported are shares of the Company’s Common Stock.

 

Unless the context otherwise requires, as used in this prospectus, “selling stockholder” includes the selling stockholder listed above and donees, pledgees, transferees or other successors-in-interest selling shares received after the date of this prospectus from the selling stockholder as a gift, pledge or other non-sale related transfer.

 

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DESCRIPTION OF SECURITIES TO BE REGISTERED

 

Common Stock

 

Authorization. We have 250,000,000 shares of common stock, par value $0.001 per share, authorized.

 

Voting Rights. Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Our stockholders do not have cumulative voting rights. Because of this, the holders of a majority of the common stock entitled to vote in any election of directors will be able elect all of the directors standing for election.

 

Dividend Rights. Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of our common stock will be entitled to receive ratably those dividends, if any, as may be declared from time to time by the board of directors out of legally available funds.

 

Liquidation. In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then-outstanding preferred stock.

 

Rights and Preferences. Holders of common stock have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock that we may designate in the future.

 

January 2022 Note

 

We currently have the January 2022 Note outstanding. The principal amount of the January 2022 Note is $11,333,333 and is convertible into shares of Cryptyde common stock at a conversion price of $1.06 per share following the Adjustment, subject to adjustment for stock splits, combinations or similar events. The January 2022 Note is immediately convertible.

 

The entire outstanding principal balance and any outstanding fees or interest are due and payable in full on May 5, 2025. The January 2022 Note does not bear interest, provided, however, that the January 2022 Note will bear interest at 18% per annum upon the occurrence of an event of default.

 

A holder of the January 2022 Note may not convert its January 2022 Note to the extent that the holder, together with its affiliates, would beneficially own more than 9.99% of our outstanding shares of common stock immediately after conversion, except that the holder may decrease or, upon at least 61 days’ prior notice from the holder to us, increase the beneficial ownership limitation of the number of shares of common stock outstanding immediately after giving effect to the conversion.

 

January 2022 Warrants

 

The January 2022 Warrant to purchase up to 3,333,333 January 2022 Warrant Shares is currently outstanding. The exercise price of the January 2022 Warrants is $1.06 per share, after adjusting down in accordance with the terms of the January 2022 Warrant to match the conversion price of the January 2022 Note after the Adjustment. The January 2022 Warrants are exercisable from their issuance date through May 16, 2027.

 

A holder of the January 2022 Warrants may not exercise its January 2022 Warrants to the extent that the holder, together with its affiliates, would beneficially own more than 9.99% of our outstanding shares of common stock immediately after exercise, except that the holder may decrease or, upon at least 61 days’ prior notice from the holder to us, increase the beneficial ownership limitation of the number of shares of common stock outstanding immediately after giving effect to the exercise.

 

The exercise price of the January 2022 Warrant is also subject to anti-dilution adjustment which, in the event that Cryptyde issues or is deemed to have issued certain securities at a price lower than the then applicable exercise price, immediately reduces the exercise price of the January 2022 Warrant to equal the price at which Cryptyde issues or is deemed to have issued its common stock. The anti-dilution adjustment of the January 2022 Warrant also provides that upon the release of all the cash held in the Restricted Funds Account, the number of shares of common stock issuable upon exercise of the January 2022 Warrant will be adjusted to such amount equal to the aggregate exercise price of the January 2022 Warrant prior to any anti-dilution adjustment, divided by the exercise price per share of the January 2022 Warrant after anti-dilution adjustments. The Registration Rights Agreement, as amended by the 2022 Amendment Agreement, requires Cryptyde to register the number of shares of common stock in this registration statement issuable upon exercise of the January 2022 Warrant as though all the cash held in the Restricted Funds Account has been released and the anti-dilution adjustment has occurred. Accordingly, we are registering the 56,226,410 Additional January 2022 Warrant Shares to account for the additional shares of our common stock issuable upon conversion of the January 2022 Warrant after its exercise price was adjusted to $1.06 in accordance with its terms and as a result of the Adjustment.

 

PLAN OF DISTRIBUTION

 

We are registering the Additional January 2022 Note Shares and Additional January 2022 Warrant Shares issuable upon the conversion or exercise, as applicable, of the January 2022 Note and January 2022 Warrant, respectively, to allow the selling stockholder named herein to, from time to time, offer and sell or otherwise dispose of the shares of our common stock covered by this prospectus.

 

We are registering the shares of common stock issuable upon conversion of the January 2022 Note to permit the resale of these shares of common stock by the selling stockholder from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholder of the shares of common stock. However, we will receive proceeds from the exercise of the January 2022 Warrant if the January 2022 Warrant is exercised for cash. We will bear all fees and expenses incident to our obligation to register the shares of common stock.

 

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The selling stockholder may sell all or a portion of the shares of common stock held by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholder will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions, pursuant to one or more of the following methods:

 

  on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
     
  in the over-the-counter market;
     
  in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
     
  through the writing or settlement of options, whether such options are listed on an options exchange or otherwise;
     
  ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
     
  block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
     
  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
     
  an exchange distribution in accordance with the rules of the applicable exchange;
     
  privately negotiated transactions;
     
  short sales made after the date the Registration Statement is declared effective by the SEC;
     
  broker-dealers may agree with a selling security holder to sell a specified number of such shares at a stipulated price per share;
     
  a combination of any such methods of sale; and
     
  any other method permitted pursuant to applicable law.

 

The selling stockholder may also sell shares of common stock under Rule 144 promulgated under the Securities Act, if available, rather than under this prospectus. In addition, the selling stockholder may transfer the shares of common stock by other means not described in this prospectus. If the selling stockholder effects such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholder or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholder may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholder may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

 

The selling stockholder may pledge or grant a security interest in some or all of the notes, warrants or shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as a selling stockholder under this prospectus. The selling stockholder also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 

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To the extent required by the Securities Act and the rules and regulations thereunder, the selling stockholder and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholder and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.

 

Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

 

There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.

 

The selling stockholder and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholder and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

 

We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $50,000 in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, a selling stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling stockholder against liabilities, including some liabilities under the Securities Act in accordance with the registration rights agreements or the selling stockholder will be entitled to contribution. We may be indemnified by the selling stockholder against civil liabilities, including liabilities under the Securities Act that may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related registration rights agreements or we may be entitled to contribution.

 

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.

 

LEGAL MATTERS

 

The validity of the securities offered by this prospectus will be passed upon by Haynes and Boone, LLP, New York, New York.

 

EXPERTS

 

The financial statements of (i) Ferguson Containers as of December 31, 2021 and for the year ended December 31, 2021 included in the registration statement which this prospectus forms a part, and (ii) Cryptyde, Inc. as of December 31, 2021 and for the period from September 21, 2021 (inception) through December 31, 2021 have been audited by Morison Cogen LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

 

The financial statements of Ferguson Containers as of December 31, 2020 and for the year ended December 31, 2020 included in the registration statement which this prospectus forms a part, have been audited by Marcum LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

 

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THE SEPARATION

 

General

 

Prior to the Separation, we were a wholly owned subsidiary of Vinco. As described in this section, “The Separation”, we have separated from Vinco and have become a separate company traded on the Nasdaq. The effective date of the Separation was June 29, 2022.

 

Vinco has distributed 100% of the shares of our common stock held by Vinco to holders of shares of Vinco common stock, subject to certain conditions. The distribution of our common stock took place on June 29, 2022 (the “Distribution Date”). On the Distribution Date, each holder of Vinco common stock received one share of Cryptyde common stock for every ten shares of Vinco common stock held at the close of business on the Record Date.

 

Agreements with VINCO

 

In connection with the Separation, we entered into a Separation and Distribution Agreement and other agreements with Vinco to effect the Separation and provide a framework for our relationship with Vinco after the Separation. These agreements provide for the allocation between us and our subsidiaries, on the one hand, and Vinco and its subsidiaries, on the other hand, of the assets, liabilities, legal entities, and obligations associated with the Spin-Off Businesses, on the one hand, and the other current Vinco businesses, on the other hand, and govern the relationship between our company and our subsidiaries, on the one hand, and Vinco and its subsidiaries, on the other hand, subsequent to the Separation.

 

The Separation and Distribution Agreement contains many of the key provisions related to our Separation from Vinco and the Distribution of our shares of common stock to Vinco stockholders.

 

The forms of the principal agreements described below have been filed as exhibits to the registration statement of which this prospectus forms a part. The following descriptions of these agreements are summaries of the material terms of these agreements.

 

Separation and Distribution Agreement

 

The Separation and Distribution Agreement governs the overall terms of the Separation. Generally, the Separation and Distribution Agreement includes Vinco’s and our agreements relating to the internal restructuring steps taken to complete the Separation, including the assets, legal entities, and rights transferred, liabilities assumed, and related matters.

 

Subject to the receipt of required governmental and other consents and approvals and the satisfaction of other closing conditions, in order to accomplish the Separation, the Separation and Distribution Agreement provides, as applicable, for Vinco and us to transfer specified assets between the companies that operate the Cryptyde Businesses, on the one hand, and Vinco’s other current businesses, on the other hand, after the Distribution Date. The determination of the assets transferred between the companies has been made by Vinco in its sole discretion. The Separation and Distribution Agreement requires Vinco and us to use reasonable efforts to obtain consents, approvals, and amendments required to assign the assets, legal entities, and liabilities that are transferred pursuant to the Separation and Distribution Agreement.

 

Unless otherwise provided in the Separation and Distribution Agreement or any of the related ancillary agreements, all assets have been transferred on an “as is, where is” basis. Generally, if the transfer of any assets or any claim or right or benefit arising thereunder required a consent that was not obtained before the Distribution, or if the transfer or assignment of any such asset or such claim or right or benefit arising thereunder was ineffective or adversely affected the rights of the transferor thereunder so that the intended transferee did not in fact receive all such rights, the party retaining any asset that otherwise would have been transferred now holds such asset in trust for the use and benefit of the party entitled thereto and retains such liability for the account of the party by whom such liability is to be assumed, and has taken such other action as has been reasonably requested by the party to which such asset was to be transferred, or by whom such liability was to be assumed, as the case may be, in order to place such party, insofar as reasonably possible, in the same position as would have existed had such asset or liability been transferred prior to the consummation of the Distribution.

 

In addition, Vinco was given the right to determine the date and terms of the Separation and was given the right, at any time until completion of the Distribution, to determine to abandon or modify the Distribution and to terminate the Separation and Distribution Agreement.

 

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In addition, the Separation and Distribution Agreement governs the treatment of indemnification, insurance, and litigation responsibility and management of the Spin-Off Businesses, on the one hand, and Vinco’s other current businesses, on the other hand, after the Distribution Date. Generally, the Separation and Distribution Agreement provides for uncapped cross-indemnities primarily designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of Vinco’s other current businesses with Vinco, in either case after applicable insurance coverage (which generally are occurrence policies) intended to cover such obligations and liabilities and whether incurred prior to, on, or after the Distribution Date. We and Vinco have each agreed to indemnify the other for any liabilities caused by a material misstatement or omission in materials supplied by one of us to the other regarding the business, operations, financial results, stockholder communications, risks, management, management compensation levels, and stock ownership of the applicable company. The Separation and Distribution Agreement also establishes procedures for handling claims subject to indemnification and related matters.

 

Tax Matters Agreement

 

In connection with the Separation, we and Vinco entered into a Tax Matters Agreement that contains certain tax matters arrangements (the “Tax Matters Agreement”) and governs the parties’ respective rights, responsibilities, and obligations with respect to taxes, including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of the failure of the Transfer and the Distribution to qualify for tax-free treatment for U.S. federal income tax purposes. The Tax Matters Agreement also sets forth the respective obligations of the parties with respect to the filing of tax returns, the administration of tax contests, and assistance and cooperation on tax matters.

 

In general, the Tax Matters Agreement governs the rights and obligations that we and VINCO have after the Separation with respect to taxes for both pre-closing and post-closing periods. Under the Tax Matters Agreement, we generally are responsible for (i) any of our taxes for all periods prior to and after the Distribution and (ii) any taxes of Vinco for periods prior to the Distribution to the extent attributable to the Cryptyde Businesses. Vinco generally is responsible for any of the taxes of Vinco other than taxes for which we are responsible.

 

The Tax Matters Agreement further provides as follows:

 

  We will generally indemnify Vinco against taxes arising in the ordinary course of business for which we are responsible under the Tax Matters Agreement; and
     
  VINCO will indemnify us against any taxes of VINCO other than taxes for which we are responsible.

 

In addition to the indemnification obligations described above, the indemnifying party generally is required to indemnify the indemnified party against any interest, penalties, additions to tax, losses, assessments, settlements, or judgments arising out of or incident to the event giving rise to the indemnification obligation, along with costs incurred in any related contest or proceeding.

 

The Tax Matters Agreement also generally prohibits us and our affiliates from taking certain actions that could cause the Transfer and the Distribution to fail to qualify for their intended tax treatment, including the following:

 

  during the two-year period following the Distribution Date (or otherwise pursuant to a “plan” within the meaning of Section 355(e) of the Code), we may not cause or permit certain business combinations or transactions to occur;
     
  during the two-year period following the Distribution Date, we may not discontinue the active conduct of our business (within the meaning of Section 355(b)(2) of the Code);
     
  during the two-year period following the Distribution Date, we may not liquidate or merge, consolidate, or amalgamate with any other person;

 

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  during the two-year period following the Distribution Date, we may not sell or otherwise dispose of more than 30% of our consolidated gross assets;
     
  during the two-year period following the Distribution Date, we may not purchase any of our common stock, other than pursuant to certain open market repurchases of less than 20% of our common stock (in the aggregate);
     
  during the two-year period following the Distribution Date, we may not amend our Certificate of Incorporation (or other organizational documents) or take any other action affecting the voting rights of our common stock; and
     
  more generally, we may not take any action that could reasonably be expected to cause the Transfer and the Distribution and to fail to qualify as tax-free transactions for U.S. federal income tax purposes.

 

In the event that the Transfer and the Distribution fail to qualify for their intended tax treatment, in whole or in part, and Vinco is subject to tax as a result of such failure, the Tax Matters Agreement will determine whether Vinco must be indemnified for any such tax by us.

 

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 

The unaudited pro forma consolidated balance sheets as of March 31, 2022 and the related unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2022 and the year ended December 31, 2021, are presented as if the separation of our business (the “Separation”) from Vinco Ventures, Inc., our former parent company, had occurred on January 1, 2020.

 

The financial statements of the Company, which includes Ferguson Containers, Cryptyde, Inc., Cryptyde Shared Services, LLC, CW Machines, LLC, and BlockHiro, LLC, have been adjusted in the unaudited pro forma condensed combined financial statements to give effect to events that are directly attributable to the acquisition, are factually supportable and are expected to have a continuing impact on the combined company. The unaudited pro forma condensed combined financial statements have been presented for informational purposes only. The unaudited pro forma condensed combined financial statements are not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial statements do not purport to project the future financial position or operating results of the combined company.

 

The unaudited pro forma condensed combined financial statements should be read in conjunction with the audited financial statements of Ferguson Containers for the years ended December 31, 2021 and 2020, and audited financial statements of Cryptyde, Inc. for the period from September 21, 2021 (inception) through December 31, 2021. The unaudited pro forma condensed combined financial statements do not reflect any cost savings from operating synergies or revenue enhancements that the combined company may achieve as a result of the acquisition and the effects of the foregoing items could, individually or in the aggregate, materially impact the unaudited pro forma condensed combined financial statements.

 

30
 

 

CRYPTYDE, INC., AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

March 31, 2022

 

    Ferguson Containers     Cryptyde, Inc.     Cryptyde Shared Services, LLC     CW Machines, LLC.     BlockHiro, LLC     Pro Forma Adjustments     Combined Cryptyde, Inc.  
                                           
Assets                                                        
Current assets:                                                        
Cash and cash equivalents   $ 966,071     $ 46,859     $          -     $ 5     $           -     $ 37,600,000 (1)   $ 38,612,935  
Accounts receivable     969,806       -       -       -       -       -       969,806  
Inventory     82,635       -       -       -       -       -       82,635  
Prepaid expenses and other current assets     81,910       258,518       -       7,527,164       -       -       7,867,592  
Total current assets     2,100,422       305,377       -       7,527,169       -       37,600,000       47,532,968  
Property and equipment, net     955,173               -       -       -       -       955,173  
Intangible assets, net     -       -       -       -       -       -       -  
Loan held for investment     -       4,000,000       -       -       -       -       4,000,000  
Due from Former Parent     418,004       -       -       -               (418,004 )(2)     -  
Total assets   $ 3,473,599     $ 4,305,377     $ -     $ 7,527,169     $       $ 37,181,996     $ 52,488,141  
                      -       -                          
Liabilities and stockholders’ equity                                                        
Current liabilities:                                                        
Accounts payable   $ 74,092     $ 2,500     $ -     $ 96,040     $ -     $ -     $ 172,632  
Accrued expenses and other current liabilities     22,107       67,045       -       7,493,608       -       -       7,582,760  
Customer deposits     -       -       -       -       -       -       -  
Income tax payable     130,000       -       -       -       -       -       130,000  
Current portion of notes payable     -       -       -       -       -       -       -  
Total current liabilities     226,199       69,545       -       7,589,648       -       -       7,885,392  
                      -       -                          
Notes payable, net of debt issuance costs of $5,733,333, net of current portion     -       -       -       -       -       27,600,000 (3)     27,600,000  
Deferred tax liabilities     82,104       -       -       -       -       -       82,104  
Due to Former Parent     -       5,845,259       -       459,182               (6,304,441 )(2)     -  
Total liabilities   $ 308,303     $ 5,914,804     $ -     $ 8,048,830     $       $ 21,295,559     $ 35,567,496  
Stockholders’ equity                                                        
Common stock, no par value, 400 shares authorized as of December 31, 2021   $ 50,000     $ -     $ -     $ -     $ -     $ (29,695 )(4)   $ 20,305  
Additional paid-in-capital     -       -       -       -       -       15,916,132 (3)(4)     15,916,132  
Retained earnings (accumulated deficit)     3,115,296       (1,609,427 )     -       (521,661 )     -               984,208  
Total stockholders’ equity     3,165,296       (1,609,427 )     -       (521,661 )     -       15,886,437       16,920,645  
Total liabilities and stockholders’ equity   $ 3,473,599     $ 4,305,377     $ -     $ 7,527,169     $ -     $ 37,181,996     $ 52,488,141  

 

The accompanying notes are an integral part of these financial statements.

 

31
 

 

CRYPTYDE, INC., AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

December 31, 2021

 

    Ferguson Containers     Cryptyde, Inc.     Cryptyde Shared Services, LLC     CW Machines, LLC.     BlockHiro, LLC     Pro Forma Adjustments     Combined Cryptyde, Inc.  
                                           
Assets                                                        
Current assets:                                                        
Cash and cash equivalents   $ 844,619     $ 66,485     $ -     $ 90     $ -     $ 37,600,000 (1)   $ 38,511,194  
Accounts receivable     867,027       -       -       -       -       -       867,027  
Inventory     110,664       -       -       -       -       -       110,664  
Prepaid expenses and other current assets     48,343       33,395       -       6,999,955       -       -       7,081,693  
Total current assets     1,870,653       99,880       -       7,000,045       -       37,600,000       46,570,578  
Property and equipment, net     1,007,770       -       -       -       -       -       1,007,770  
Intangible assets, net     -       -       -       -       -       -       -  
Loan held for investment     -       4,000,000       -       -       -       -       4,000,000  
Due from Former Parent     418,004       -       -       -               (418,004 )(2)     -  
Total assets   $ 3,296,427     $ 4,099,880     $ -     $ -     $       $ 37,181,996     $ 51,578,348  
                      -       -                          
Liabilities and stockholders’ equity                                                        
Current liabilities:                                                        
Accounts payable   $ 44,547     $ 120     $ -     $ 98,547     $ -     $ -     $ 143,214  
Accrued expenses and other current liabilities     7,551       27,960       -       -       -       -       35,511  
Customer deposits     -       -       -       6,999,980       -       -       6,999,980  
Income tax payable     319,997       -       -       -       -       -       319,997  
Current portion of notes payable     15,530       -       -       -       -       -       15,530  
Total current liabilities     387,625       28,080       -       7,098,527       -       -       7,514,232  
                      -       -                          
Notes payable, net of debt issuance costs of $5,733,333, net of current portion     12,114       -       -       -       -       27,600,000 (3)     27,612,114  
Deferred tax liabilities     82,104       -       -       -       -       -       82,104  
Due to Former Parent     -       4,452,053       -       164,498               (4,616,551 )(2)     -  
Total liabilities   $ 481,843     $ 4,480,133     $ -     $ 7,263,025     $       $ 25,983,449     $ 35,208,450  
Stockholders’ equity                                                        
Common stock, no par value, 400 shares authorized as of December 31, 2021   $ 50,000     $ -     $ -     $ -     $ -     $ (29,625 )(4)   $ 20,305  
Additional paid-in-capital     -       -       -       -       -       14,228,642 (3)(4)     14,228,242  
Retained earnings (accumulated deficit)     2,764,584       (380,253 )     -       (262,980 )     -               2,121,351  
Total stockholders’ equity     2,814,584       (380,253 )     -       (262,980 )     -       14,198,547       16,369,898  
Total liabilities and stockholders’ equity   $ 3,296,427     $ 4,099,880     $ -     $ 7,000,045     $ -     $ 39,581,996     $ 51,578,348  

 

The accompanying notes are an integral part of these financial statements.

 

32
 

 

CRYPTYDE, INC., AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2022

 

    Ferguson Containers     Cryptyde, Inc.     Cryptyde Shared Services, LLC     CW Machines, LLC.     BlockHiro, LLC     Pro Forma Adjustments     Cryptyde, Inc.  
Revenues, net   $ 2,113,305     $ -     $ -     $ 1,606,342     $ -     $ -     $ 3,719,647  
Cost of revenues     1,601,542       -       -       1,572,841       -       -       3,174,383  
Gross profit     511,763       -       -       33,501               -       545,264  
                                                         
Operating expenses:                                                        
Selling, general and administrative     350,919       1,278,694       -       292,182       -       160,000 (13)     2,081,795  
Operating income     160,844       (1,278,694 )     -       (258,182 )     -       (160,000 )     (1,536,531 )
                                                         
Other (expense) income:                                                        
Rental income     -       -       -       -       -       -       -  
Interest income (expense)     (129 )     49,519       -       -       -       -       49,390  
Other income     -       -       -       -       -       -       -  
Total other income, net     (129 )     49,519       -       -       -       -       49,390  
Income (loss) before income taxes     160,715       (1,229,175 )     -       (258,681 )     -       (160,000 )     (1,487,141 )
Income tax expense     (189,997 )     -       -       -       -       189,997 (14)     -  
Net income (loss)   $ 350,712     $ (1,229,175 )   $ -     $ (258,681 )   $ -       (349,997 )   $ (1,487,141 )
Net income (loss) per share:                                                        
Net income (loss) per share – basic     876.78       (122.92 )                                     (0.07 )
Net income (loss) per share – diluted     876.78       (122.92 )                                     (0.04 )
Weighted average number of common shares outstanding – basic     400       10,000                                       20,305,259  
Weighted average number of common shares outstanding – diluted     400       10,000                                       39,225,452  

 

The accompanying notes are an integral part of these financial statements

 

33
 

 

CRYPTYDE, INC., AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS

For the Year Ended December 31, 2021

 

    Ferguson Containers     Cryptyde, Inc.     Cryptyde Shared Services, LLC     CW Machines, LLC.     BlockHiro, LLC     Pro Forma Adjustments     Cryptyde, Inc.  
Revenues, net   $ 7,874,285     $ -     $ -     $ -     $ -     $ -     $ 7,874,285  
Cost of revenues     5,682,117       -       -       -       -       -       5,682,117  
Gross profit     2,192,168       -       -       -               -       2,192,168  
                                                         
Operating expenses:                                                        
Selling, general and administrative     1,946,832       413,648       -       262,980       -       770,000 (5)(6)     3,393,460  
Operating income     245,336       (413,648 )     -       (262,980 )     -       (770,000 )     (1,201,292 )
                                                         
Other (expense) income:                                                        
Rental income     71,543       -       -       -       -       (71,543 )(7)     -  
Interest income (expense)     (44,816 )     33,395       -       -       -       -       (11,421 )
Other income     481,090       -       -       -       -       (475,419 )(7)     5,671  
Total other income, net     507,817       33,395       -       -       -       (546,962 )     (5,750 )
Income (loss) before income taxes     753,153       (380,253 )     -       (262,980 )     -       (1,316,962 )     (1,207,042 )
Income tax expense     210,000       -       -       -       -       (210,000 )(8)     -  
Net income (loss)   $ 543,153     $ (380,253 )   $ -     $ (262,980 )   $ -       (1,106,562 )   $ (1,207,042 )
Net income (loss) per share:                                                        
Net income (loss) per share – basic     1,357.88       (38.03 )                                     (0.06 )
Net income (loss) per share – diluted     1,357.88       (38.03 )                                     (0.03 )
Weighted average number of common shares outstanding – basic     400       10,000                                       20,305,259  
Weighted average number of common shares outstanding – diluted     400       10,000                                       39,225,452  

 

The accompanying notes are an integral part of these financial statements

 

34
 

 

CRYPTYDE, INC., AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS

For the Year Ended December 31, 2020

 

    Ferguson Containers     Cryptyde, Inc.     Cryptyde Shared Services, LLC     CW Machines, LLC.     BlockHiro, LLC     Pro Forma Adjustments     Cryptyde, Inc.  
Revenues, net   $ 6,719,894     $ -     $ -     $ -     $       $ -     $ 6,719,894  
Cost of revenues     4,691,451       -       -       -               -       4,691,451  
Gross profit     2,028,443       -       -       -               -       2,028,443  
                                                         
Operating expenses:                                                        
Selling, general and administrative     1,759,117       -       -       -               560,000 (9)(10)     2,319,117  
Operating income (loss)     269,326       -       -       -               (560,000 )     (290,674 )
                                                         
Other (expense) income:                                                        
Rental income     102,815       -       -       -               (102,815 )     -  
Interest expense     (112,295