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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2021

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

 

Commission file number: 001-38448

 

 

VINCO VENTURES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada   82-2199200
(State or Other Jurisdiction   (I.R.S. Employer
of Incorporation or Organization)   Identification No.)
     
6 North Main Street    
Fairport, NY   14450
(Address of Principal Executive Offices)   (Zip Code)

 

(866) 900-0992

(Registrant’s Telephone Number, Including Area Code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.001 par value per share   BBIG   Nasdaq

 

As of November 22, 2021, there were 137,083,339 shares of the registrant’s common stock outstanding.

 

 

 

 

 

 

VINCO VENTURES,INC.

 

TABLE OF CONTENTS

 

    Page Number
     
PART I 4
Item 1. Financial Statements (Unaudited) 4
  Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020 5
  Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (Unaudited) 6
  Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (Unaudited) 7
  Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (Unaudited) 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37
Item 3. Quantitative and Qualitative Disclosures About Market Risk 51
Item 4. Controls and Procedures 52
     
PART II   54
Item 1. Legal Proceedings 54
Item 1A. Risk Factors 54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 65
Item 3. Defaults Upon Senior Securities 68
Item 4. Mine Safety Disclosures 68
Item 5. Other Information 68
Item 6. Exhibits 68
     
  Signatures 73

 

2
 

 

USE OF MARKET AND INDUSTRY DATA

 

This Quarterly Report on Form 10-Q includes market and industry data that we have obtained from third-party sources, including industry publications, as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which we operate (including our management’s estimates and assumptions relating to such industries based on that knowledge). Management has developed its knowledge of such industries through its experience and participation in these industries. While our management believes the third-party sources referred to in this Quarterly Report on Form 10-Q are reliable, neither we nor our management have independently verified any of the data from such sources referred to in this Quarterly Report on Form 10-Q or ascertained the underlying economic assumptions relied upon by such sources. Furthermore, internally prepared and third-party market prospective information, in particular, are estimates only and there will usually be differences between the prospective and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. Also, references in this Quarterly Report on Form 10-Q to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report, survey or article is not incorporated by reference in this Quarterly Report on Form 10-Q.

 

Solely for convenience, we refer to trademarks in this Quarterly Report on Form 10-Q without the ® or the ™ or symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our own trademarks. Other service marks, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, if any, are the property of their respective owners, although for presentational convenience we may not use the ® or the ™ symbols to identify such trademarks.

 

OTHER PERTINENT INFORMATION

 

Unless the context otherwise indicates, when used in this Quarterly Report on Form 10-Q, the terms “Vinco Ventures” “we,” “us,” “our,” the “Company” and similar terms refer to Vinco Ventures, Inc., a Nevada corporation formerly known as Edison Nation, Inc., Xspand Products Lab, Inc. and Idea Lab Products, Inc., and all of our subsidiaries and affiliates.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q for the period ended September 30, 2021 (the “Quarterly Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to future events (including, without limitation, the terms, timing and closing of our proposed acquisitions or our future financial performance). We have attempted to identify forward-looking statements by using terminology such as “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Quarterly Report is filed, and we do not intend to update any of the forward-looking statements after the date this Quarterly Report is filed to confirm these statements to actual results, unless required by law.

 

You should not place undue reliance on forward looking statements. The cautionary statements set forth in this Quarterly Report identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:

 

  Our ability to effectively execute our business plans including our plan to disrupt the media and entertainment industry;
     
  Our ability to manage our expansion, growth and operating expenses;
     
  Our ability to protect our brands and reputation;
     
 

Our ability to obtain adequate financing to support our development plans;

     
  Our ability to repay our debts;
     
  Our ability to rely on third-party suppliers, content contributors, developers, and other business partners;
     
  Our ability to evaluate and measure our business, prospects and performance metrics;
     
  Our ability to compete and succeed in a highly competitive and evolving industry;
     
  Our ability to respond and adapt to changes in technology and customer behavior;
     
  Risks in connection with completed or potential acquisitions, dispositions and other strategic growth opportunities and initiatives;
     
  Risks related to the anticipated timing of the closing of any potential acquisitions;
     
  Risks related to the integration with regards to potential or completed acquisitions;
     
  Risks related to the integration with regards to potential or completed acquisitions and the achievement of our expected benefits with our acquisitions and investments, including, but not limited to, our investment in Lomotif Private Limited (“Lomotif”) through a joint venture of Vinco Ventures and ZASH Global Media and Entertainment Corporation (“ZASH”);
     
  Various risks related to health epidemics, pandemics and similar outbreaks, such as the coronavirus disease 2019 (“COVID-19”) pandemic, which may have material adverse effects on our business, financial position, results of operations and/or cash flows.

 

This Quarterly Report on Form 10-Q also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other industry data. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified the statistical and other industry data generated by independent parties and contained in this Quarterly Report and, accordingly, we cannot guarantee their accuracy or completeness, though we do generally believe the data to be reliable. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including, but not limited to, the possibility that we may fail to enhance our expertise and offerings in the media and entertainment industry; that existing and potential distribution partners and other business partners we rely on for our business may opt to work with, or favor the products and services of, competitors if our competitors offer more favorable products, services or pricing terms; that we may be unable to maintain or grow sources of revenue; that we may be unable to maintain or achieve profitability; that we may be unable to attract and retain key personnel; or that we may not be able to effectively manage, or to increase, our relationships with customers and users; that we may have unexpected increases in costs and expenses.

 

Specifically, our investment in Lomotif and related growth initiatives may fail to deliver our expected benefits, for reasons relating to including, but not limited to, our and Lomotif’s capital requirements and whether we will be able to raise capital as needed; our ability to successfully develop the business and revenue models for Lomotif’s social media platform, Lomo TV, and Lomo Records with ZASH; whether Lomotif can retain its existing users and attract new users to its platform; whether Lomotif can attract and maintain relationships with influencers, artists, and other content creators or publishers who will provide compelling content to the platform; our ability to integrate the operations of Lomotif within the Vinco Ventures conglomerate and create synergies between Lomotif and other businesses and assets we have acquired or plan to acquire in the media and entertainment industry; the ability of Lomotif’s platform and associated products and services to compete effectively; Lomotif’s ability to retain reliable developers, vendors and suppliers to support its operations; failure of third parties to promote Lomotif’s platform and associated products and services effectively or at all; breaches of network and data security measures; a disruption or failure of networks and information systems; Lomotif’s ability to protect its patents and other intellectual property and operate its businesses without infringing upon the intellectual property rights of others; changes in local, state, federal and international laws and regulations that will adversely affect Lomotif’s business; risk of attempts at unauthorized or improper use of the platform and damages to Lomotif’s reputations resulted therefrom; the inability to maintain or rebuild the value of the Lomotif brands; the inability to successfully respond to rapid changes in technologies and user tastes and preferences and remain competitive; the impact of any legal proceedings or governmental action against Lomotif; and whether Lomotif will continue to receive the services of key management and retain qualified personnel. These and other factors discussed above could cause results to differ materially from those expressed in the estimates made by any independent parties and by us.

 

3
 

 

PART I

 

INDEX TO FINANCIAL STATEMENTS

 

 

Page

Number

   
Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020 5
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (Unaudited) 6
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (Unaudited) 7
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (Unaudited) 8
Notes to Condensed Consolidated Financial Statements 9

 

4
 

 

Vinco Ventures, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

 

   

September 30,

2021

   

December 31,

2020

 
    (Unaudited)        
Assets                
Current assets:                
Cash and cash equivalents   $ 49,937,549     $ 249,356  
Restricted cash    

100,000,000

     

-

 
Short-term investments     282,000       1,018,000  
Accounts receivable, net     1,901,182       1,382,163  
Inventory     789,727       1,127,725  
Prepaid expenses and other current assets     3,855,618       522,259  
Loan held for investment     18,150,000       -  
Current assets of discontinued operations     -       1,042,680  
Total current assets     174,916,076       5,342,183  
Property and equipment, net     972,151       1,010,801  
Right of use assets, net     80,544       153,034  
Intangible assets, net    

154,962,061

      9,798,813  
Goodwill     5,983,852       5,983,852  
Non-current assets of discontinued operations     -       5,739,524  
Total assets   $

336,914,684

    $ 28,028,207  
                 
Liabilities and stockholders’ equity                
Current liabilities:                
Accounts payable   $ 5,587,010     $ 3,618,339  
Accrued expenses and other current liabilities    

3,040,564

      2,101,610  
Deferred revenues     64,243       152,040  
Current portion of operating leases liabilities     83,408       96,777  
Income tax payable     27,643       27,643  
Line of credit, net of debt issuance costs of $0 and $15,573, respectively     -       1,500,953  
Current portion of convertible notes payable, net of debt issuance costs of $91,518,515 and $0, respectively     28,481,485       577,260  
Current portion of notes payable, net of debt issuance costs of $0 and $212,848, respectively    

15,357

      1,301,212  
Current portion of notes payable – related parties     112,835       1,389,923  
Due to related party     15,401       32,452  
Current liabilities of discontinued operations     -       487,454  
Total current liabilities    

37,427,946

      11,285,663  
Operating leases liabilities –net of current portion     -       58,713  
Convertible notes payable – related parties, net of current portion, net of debt discount of $95,089 and $366,666, respectively     207,183       1,161,495  
Notes payable, net of current portion    

166,061

      595,879  
Notes payable – related parties, net of current portion    

2,500,000

      1,403,756  
Warrant liability     468,612,700       -  
                 
Total liabilities   $

508,913,890

    $ 14,505,506  
Commitments and Contingencies (Note 12)             -  
                 
Stockholders’ equity                
Preferred stock, $0.001 par value, 30,000,000 shares authorized as of September 30, 2021 and December 31, 2020, respectively   $ -     $ -  
Series B Preferred Stock, $0.001 par value, 1,000,000 shares authorized; 0 and 764,618 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively     -       765  
Common stock, $0.001 par value, 250,000,000 shares authorized 107,021,381 and 14,471,403 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively     107,021       14,471  
Additional paid-in-capital    

617,952,342

      39,050,260  
Accumulated deficit     (812,250,328 )     (23,648,898 )
Total stockholders’ (deficit) equity attributable to Vinco Ventures, Inc.    

(194,190,965

)     15,416,598  
Noncontrolling interests    

22,191,759

      (1,893,897 )
Total stockholders’ equity    

(171,999,206

)     13,522,701  
Total liabilities and stockholders’ equity   $ 336,914,684     $ 28,028,207  

 

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

 

5
 

 

Vinco Ventures, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

                                 
   

For the Three Months

Ended September 30,

   

For the Nine Months

Ended September 30,

 
   

2021

(Unaudited)

   

2020

(Unaudited)

   

2021

(Unaudited)

   

2020

(Unaudited)

 
Revenues, net   $ 2,231,986     $ 2,522,141     $ 7,488,959     $ 9,649,469  
Cost of revenues     1,531,840       1,505,234       4,906,410       6,873,889  
Gross profit     700,146       1,016,907       2,582,549       2,775,580  
                                 
Operating expenses:                                
Selling, general and administrative     25,869,419       2,617,961      

43,471,951

      8,185,477  
Operating loss     (25,169,273 )     (1,601,054 )     (40,889,402 )     (5,409,897 )
                                 
Other (expense) income:                                
Rental income     17,136       25,704       71,543       77,111  
Interest expense     (27,012,312 )     (1,004,627 )     (42,422,726 )     (2,575,738 )
Loss on issuance of warrants     (206,948,147 )     -       (415,803,862 )     -  
Change in fair value of warrant liability     (287,117,556 )     -       (287,891,003 )     -  
Change in fair value of short-term investment     (614,000 )     -       (736,000 )     -  
Loss on disposal of interest in joint venture     -       -       (301,645 )     -  
Other income     649,009       -       649,009       -  
Total other (expense) income     (521,025,870 )     (978,923 )     (746,434,684 )     2,498,627  
Loss before income taxes    

(546,195,143

)     (2,579,977 )     (787,324,086 )     (7,908,524 )
Income tax expense     -       -       -       -  
Net loss from continuing operations   $ (546,195,143 )   $ (2,579,977 )   $ (787,324,086 )   $ (7,908,524 )
Net loss attributable to noncontrolling interests     (3,885,333 )     (37,439 )     (3,834,756 )     (15,198 )
Net loss from continuing operations attributable to Vinco Ventures, Inc.     (542,309,810 )     (2,542,538 )     (783,489,330 )     (7,893,326 )
Net income (loss) from discontinued operations     (153,320 )     (291,506 )     (5,112,100 )     4,704,394  
Provision for income taxes for discontinued operations     -       -       -       -  
Net loss attributable to Vinco Ventures, Inc.   $ (542,463,130 )   $ (2,834,044 )   $ (788,601,430 )   $ (3,188,932 )
Net loss per share:                                
Net loss per share - basic   $ (7.59 )   $ (0.30 )   $ (18.63 )   $ (0.29 )
Net loss per share - diluted   $ (7.59 )   $ (0.30 )   $ (18.63 )   $ (0.29 )
Weighted average number of common shares outstanding – basic and diluted     71,516,431       9,324,023       42,326,468       10,853,242  

 

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

 

6
 

 

Vinco Ventures, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

 

                                                                 
    For the nine months ended September 30, 2021 and 2020:  
    Preferred stock     Common Stock     Additional
Paid-in
    Accumulated     Noncontrolling     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Capital     Deficit     Interest     Equity  
                                                 
Balance, January 1, 2021     764,618       765       14,471,403     $ 14,471     $ 39,050,260     $ (23,648,898 )   $ (1,893,897 )   $ 13,522,701  
Issuance of common stock to noteholders     -       -       303,483       304       422,368       -       -       422,672  
Issuance of common stock to investors     -       -       2,507,194       2,507       6,052,493       -       -       6,055,000  
Issuance of common stock to consultants     -       -       1,819,272       1,819       3,198,375       -       -       3,200,194  
Issuance of common stock to employees     -       -       2,891,227       2,891       3,289,299       -       -       3,292,190  
Issuance of common stock upon exercise of warrants     -       -       69,212,800       69,213       180,272,201       -       -       180,341,414  
Offering costs – exercise of warrants     -       -       -       -       (12,380,315 )     -       -       (12,380,315 )
Conversion under notes payable     -       -       11,551,384       11,551       32,418,206       -       -       32,429,757  
Exercise of warrant liabilities     -       -       -       -       338,020,680       -       -       338,020,680  
Stock-based compensation                     -       -       10,077,275       -       479,161      

10,556,436

 
Issuance of common stock – acquisitions     -       -       3,500,000       3,500       10,131,500       -       -       10,135,000  
Conversion of preferred stock to common     (764,618 )     (765 )     764,618       765       -       -       -       -  
Shares reserved for future issuance of common stock as consideration for the Emmersive asset acquisition     -       -       -       -       7,400,000       -       -       7,400,000  
Noncontrolling interest                                                     27,441,251       27,441,251  
Net loss     -       -       -       -       -       (788,601,430 )     (3,834,756 )     (792,436,186 )
Balance, September 30, 2021 (Unaudited)     -     $ -       107,021,381     $ 107,021     $ 617,952,342     $ (812,250,328 )   $ 22,191,759     $ (171,999,206 )
                                                                 

Balance, January 1, 2020 

    -       -       8,015,756     $ 8,016     $ 26,259,576     $ (18,495,462 )   $ (317,698 )   $ 7,454,432  

Issuance of common stock to note holders 

    -       -       1,202,666       1,202       2,291,662       -       -       2,292,864  
Return of common stock from noteholder held as collateral     -       -       (153,005 )     (153 )     153       -       -       -  
Issuance of common stock for divestiture     -       -       150,000       150       404,850       -       -       405,000  
Issuance of common stock to consultants     -       -       1,237,874       1,238       1,754,142       -       -       1,755,380  
Stock-based compensation     -       -       -       -       681,306       -       -       681,306  
Issuance of common stock to employees and directors     -       -       150,000       150       319,350       -       -       319,500  
Conversion option     -       -       990,000       990       (990 )     -       -       -  
Issuance of common stock for Global Clean Solutions, LLC acquisition     -       -       300,000       300       698,700       -       -       699,000  
Issuance of warrants- noteholders     -       -       -       -       1,018,953       -       -       1,018,953  
Divestiture of Cloud B     -       -       -       -       -       -       (26,392 )     (26,392 )
Distributions     -       -       -       -       -       -       (770,931 )     (770,931 )
Net loss     -       -       -       -       -       (3,188,932 )     (15,198 )     (3,204,130 )
Balance, September 30, 2020 (Unaudited)     -     $ -       11,893,291     $ 11,893     $ 33,427,702     $ (21,684,394 )   $ (1,130,219 )   $ 10,624,982  

 

    For the three months ended September 30, 2021 and 2020:  
    Preferred stock     Common Stock     Additional
Paid-in
    Accumulated     Noncontrolling     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Capital     Deficit     Interest     Equity  
                                                 
Balance, June 30, 2021 (Unaudited)     -       -       59,927,241     $ 59,927     $ 244,026,879     $ (269,787,198 )   $ (1,843,320 )   $ (27,543,712 )
Issuance of common stock to investors     -       -      

1,007,194

     

1,007

     

2,798,993

      -       -      

2,800,000

 
Issuance of common stock to consultants     -       -       425,000       425       1,163,434     -       -       1,163,859  
Issuance of common stock to employees     -       -       30,000       30       (30 )     -       -       -  
Issuance of common stock upon exercise of warrants     -       -       37,469,814       37,470       92,518,525       -       -       92,555,995  
Offering costs – exercise of warrants     -       -       -       -       (5,001,251 )     -       -       (5,001,251 )
Conversions under notes payable     -       -       5,412,132       5,412       20,175,838       -       -       20,181,250  
Conversion of preferred stock into common stock     -     -     -       -       -       -       -       -  
Exercise of warrant liabilities     -       -       -       -       248,366,633       -       -      

248,366,633

 
Issuance of common stock – acquisitions     -       -      

2,750,000

     

2,750

     

8,879,750

      -       -      

8,882,500

 
Stock-based compensation     -       -       -       -       5,023,571     -       479,161       5,502,732  
Noncontrolling interest     -       -       -       -       -       -       27,441,251       27,441,251  
Net loss     -       -       -       -       -       (542,463,130 )     (3,885,333 )     (546,348,463 )
Balance, September 30, 2021 (Unaudited)     -     $ -       107,021,381     $ 107,021     $ 617,952,342     $ (812,250,328 )   $ 22,191,759     $ (171,999,206 )
                                                                 
Balance, June 30, 2020 (Unaudited)     -     $ -       9,618,401     $ 9,618     $ 30,802,083     $ (18,850,350 )   $ (1,020,849 )   $ 10,940,502  
Issuance of common stock to note holders     -       -       763,266       763       1,502,087       -       -       1,502,850  
Issuance of common stock to employees     -       -       150,000       150       319,350       -       -       319,500  
Issuance of common stock to consultants     -       -       371,624       372       1,192,246       -       -       1,192,618  
Stock-based compensation     -       -       -       -       (387,074 )     -       -       (387,074 )
Issuance of common stock cancellation of non-voting membership interest in Edison Nation Holdings, LLC     -       -       990,000       990       (990 )     -       -       -  
Distributions     -       -       -       -       -       -       (71,931 )     (71,931 )
Net loss     -       -       -       -       -       (2,834,044 )     (37,439 )     (2,871,483 )
Balance, September 30, 2020 (Unaudited)     -       -       11,893,291       11,893       33,427,702       (21,684,394 )     (1,130,219 )     10,624,982  

 

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

 

7
 

 

Vinco Ventures, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

                 
    Nine Months Ended September 30,  
    2021
(Unaudited)
    2020
(Unaudited)
 
Cash Flow from Operating Activities                
Net loss from continuing operations attributable to Vinco Ventures, Inc.   $ (783,489,330 )   $ (7,893,326 )
Net income attributable to noncontrolling interests     (3,834,756 )     (15,198 )
Net loss from continuing operations     (787,324,086 )     (7,908,524 )
Adjustments to reconcile net (income) loss to net cash used in operating activities:                
Discontinued operations     (5,112,100 )     4,704,394  
Depreciation and amortization     5,013,544       938,844  
Amortization of financing costs     42,324,603       2,015,422  
Stock-based compensation     16,829,359       2,765,022  
Amortization of right of use asset     80,333       226,167  
Gain on debt extinguishment     (852,352 )     -  
Loss (gain) on divestiture     4,130,580       (4,911,760 )
Loss on disposal of joint venture     304,643       -  
Change in fair value of short-term investments     736,000       -  
Loss on issuance of warrants     415,803,862       -  
Change in fair value of warrant liability     287,891,003       -  
Changes in assets and liabilities:                
Accounts receivable     (591,061 )     (1,037,432 )
Inventory     232,213       (146,126 )
Prepaid expenses and other current assets     (2,835,791 )     (612,276 )
Accounts payable     2,027,185       (367,355 )
Accrued expenses and other current liabilities     (356,941 )     1,237,169  
Operating lease liabilities     (80,582 )     (219,608 )
Due from related party     (17,050 )     4,753  
Net cash used in operating activities     (21,796,639 )     (3,311,310 )
                 
Cash Flows from Investing Activities                
Purchase of property and equipment     (281,164 )     (193,429 )
Cash received from sale of assets of CBAV 1, LLC     2,529,565       -  
Acquisition, net of cash received     (90,761,200 )     -  
Funding of loan receivable     (20,150,000 )     -  
Net cash used in investing activities     (108,662,799 )     (193,429 )
                 
Cash Flows from Financing Activities                
Borrowings under line of credit     -     1,144,100  
Borrowings under convertible notes payable     122,000,000       1,660,000  
Borrowings under notes payable     73,000       1,739,852  
Repayments under lines of credit    

(379,333

)     -  
Repayments under notes payable     (1,143,318 )     (947,127 )
Repayments under convertible notes payable     (1,498,462 )     -  
Repayments under notes payable- related parties     (2,714,677 )     (14,508 )
Fees paid for financing costs     (10,205,678 )     (33,762 )
Distributions     -       (71,931 )
Net proceeds from issuance of common stock     6,055,000       -  
Net proceeds from exercise of warrants     167,961,099       -  
Net cash provided by financing activities    

280,147,631

      3,476,624  
Net increase (decrease) in cash and cash equivalents, and restricted cash    

149,688,193

      (28,115 )
Cash and cash equivalents, and restricted cash – beginning of period     249,356       412,719  
Cash and cash equivalents, and restricted cash - end of period   $

149,937,549

      384,604  
                 
Supplemental Disclosures of Cash Flow Information                
Cash paid during the period for:                
Interest   $

976,282

    $ 239,682  
Income taxes   $ -   $ 235,725  
Noncash investing and financing activity:                
Shares issued to note holders   $ 422,672     $ 2,292,864  
Shares issued to holder of line of credit   $ 1,178,750     $ -  
Shares issued for the divestiture of Cloud B, Inc.   $ -     $ 405,000  
Shares issued for the acquisition of Lomotif Private Limited   $ 10,135,000     $ -  
Conversions under notes payable   $ 31,251,007     $ 1,524,000  
Issuance of warrants to note holders   $ 102,938,515     $ 1,018,953  
Shares reserved for EVNT, LLC   $ 7,400,000     $ -  
Distribution for issuance of shares to noncontrolling interest members of Global Clean Solutions, LLC   $ -     $

699,000

 

 

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

 

8
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 — Basis of Presentation and Nature of Operations

 

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2021 and the results of operations, changes in stockholders’ equity, and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results for the full fiscal year for any future period.

 

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The Company’s accounting policies are described in the Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2020, and updated, as necessary, in this Quarterly Report on Form 10-Q.

 

As used herein, the terms the “Company,” “Vinco Ventures” “we,” “us,” “our” and similar refer to Vinco Ventures, Inc. (f/k/a Edison Nation, Inc.), a Nevada corporation incorporated on July 18, 2017 under the laws of the State of Nevada as Idea Lab X Products, Inc. and also formerly known as Xspand Products Lab, Inc. prior to its name change on September 12, 2018, and/or its wholly-owned and majority-owned operating subsidiaries. On November 5, 2020, the Company (the “Parent”) and its wholly owned subsidiary, Vinco Ventures, Inc. (the “Merger Sub”), entered into an Agreement and Plan of Merger (the “Agreement”). Under the terms of the Agreement, the Merger Sub merged with and into the Parent and the Parent became the surviving corporation of the Merger (the “Surviving Corporation”). The name of the Surviving Corporation became Vinco Ventures, Inc. The transaction closed on November 10, 2020.

 

Vinco Ventures is focused on digital media and content technologies.

 

As of September 30, 2021, Vinco Ventures wholly-owned subsidiaries included: Cryptyde, Inc. (“Cryptyde”), Cryptyde Shared Services, LLC (“Cryptyde Shared”), CW Machines, LLC (“CW”), TBD Safety, LLC (“TBD”), Vinco Ventures Shared Services LLC (“Vinco Shared”), Ferguson Containers, Inc. (“Fergco”), CBAV1, LLC (“CB1”), Pirasta, LLC (“Pirasta”), Honey Badger Media LLC (“Honey Badger”), EVNT Platform LLC (“Emmersive Entertainment”) and Edison Nation Holdings, LLC. Edison Nation Holdings, LLC is the single member of Edison Nation, LLC and Everyday Edisons, LLC. Edison Nation, LLC is the single member of Safe TV Shop, LLC. Vinco Ventures owns a 50% voting membership interest in ZVV Media Partners, LLC (“ZVV”), 50% of Best Party Concepts, LLC and 50% of Global Clean Solutions, LLC, all of which are consolidated as VIE’s with noncontrolling interests. ZVV owns 80% of Lomotif Private Limited (“Lomotif”). Lomotif owns 100% of Lomotif, Inc.

 

In April 2021, the Company agreed to unwind the joint venture of Ed Roses, LLC and recognized a loss of $301,645.

 

On September 12, 2021, the Company filed Articles of Incorporation with the State of Nevada for a new wholly owned subsidiary, Cryptyde, Inc.

 

On September 16, 2021, Cryptyde Shares Services, LLC was formed as a wholly-owned subsidiary of Ferguson Containers, Inc.

 

On September 16, 2021, EVNT Platform, LLC became a wholly-owned subsidiary of Ferguson Containers, Inc.

 

Liquidity

 

For the nine months ended September 30, 2021, our operations lost approximately $40,889,402, of which approximately $21,416,921 was non-cash and approximately $6,528,000 was related to transaction costs and other non-recurring items.

 

At September 30, 2021, we had total current assets of approximately $174,916,076 and current liabilities of approximately $37,427,946 resulting in working capital of approximately $137,488,130, of which $28,481,485 was convertible notes payable. At September 30, 2021, we had total assets of $336,914,684 and total liabilities of $508,913,890, of which 468,612,700 was related to the warrant liabilities, resulting in stockholders’ deficit of $171,999,206.

 

The Company received proceeds of $45,959,160 from sale of our securities subsequent to September 30, 2021.

 

Our principal sources of capital are our cash and cash equivalents, and cash generated from sale of our securities. Our principal uses of capital are operating expenses, including amounts required to fund working capital and capital expenditures, acquisition costs and capital contributions to our subsidiaries and consolidated variable interest entities. We currently anticipate that our available funds and cash flow from financing activities will be sufficient to meet our operational cash needs and fund our planned acquisitions and investments for at least the next twelve months.

 

9
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 2 — Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Vinco Ventures, Inc. and its wholly-owned, majority owned subsidiaries and consolidated variable interest entities. All intercompany balances and transactions have been eliminated.

 

Reclassifications

 

Certain amounts previously presented in the consolidated financial statements have been reclassified to conform to the current year presentation. Such reclassifications had no effect on the previously reported net loss, Stockholders’ equity or cash flows.

 

Use of Estimates

 

Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial statements.

 

The Company’s significant estimates used in these financial statements include, but are not limited to, accounts receivable reserves, the valuation allowance related to the Company’s deferred tax assets, the recoverability and useful lives of long-lived assets, debt conversion features, stock-based compensation, certain assumptions related to the valuation of the reserved shares and the assets acquired and liabilities assumed related to the Company’s acquisitions. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.

 

Discontinued Operations

 

A component of an entity that is disposed of by sale or abandonment is reported as discontinued operations if the transaction represents a strategic shift that will have a major effect on an entity’s operations and financial results. The results of discontinued operations are aggregated and presented separately in the Consolidated Statement of Operations. Assets and liabilities of the discontinued operations are aggregated and reported separately as assets and liabilities of discontinued operations in the Consolidated Balance Sheet, including the comparative prior year period. The Company’s cash flows are reflected as cash flows from discontinued operations within the Company’s Consolidated Statements of Cash Flows for each period presented.

 

Cash and Cash Equivalents, and Restricted Cash

 

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents in the consolidated financial statements.

 

Restricted cash includes cash held in a bank under a deposit account control agreement with Hudson Bay Master Fund.

 

10
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 2 — Summary of Significant Accounting Policies — (Continued)

 

The Company has cash on deposit in several financial institutions which, at times, may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced losses in such accounts and periodically evaluates the creditworthiness of its financial institutions. The Company reduces its credit risk by placing its cash and cash equivalents with major financial institutions. The Company had approximately $149,937,549 of cash and cash equivalents at September 30, 2021 of which none was held in foreign bank accounts and $147,451,668 wasnot covered by FDIC insurance limits as of September 30, 2021. The Company had $100,000,000 of cash at September 30, 2021 under a deposit account control agreement as collateral against the July 2021 Hudson Bay Financing (See Note 10 — Debt).

 

Accounts Receivable

 

Accounts receivable are carried at their contractual amounts, less an estimate for uncollectible amounts. Management estimates the allowance for bad debts based on existing economic conditions, historical experience, the financial conditions of the customers, and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for bad debts only after all collection attempts have been exhausted.

 

Two customers represented 34% and 14% of total accounts receivable, respectively as of September 30, 2021.

 

Inventory

 

Inventory is recorded at the lower of cost or net realizable value on a first-in, first-out basis. The Company reduces the carrying value of inventories for those items that are potentially excess, obsolete, or slow moving based on changes in customer demand, technology developments, or other economic factors.

 

Short-Term Investments

 

Short-term investments consisted of equity securities. The Company classified its investments as trading securities. Accordingly, such investments were reported at fair market value, with the resultant unrealized gains and losses reported as a component of the consolidated statements of operations. Fair value for trading securities was determined by reference to quoted market prices.

 

Property and Equipment, Net

 

Property and equipment are stated at cost, net of accumulated depreciation and amortization, which is recorded commencing at the in-service date using the straight-line method over the estimated useful lives of the assets, as follows: 3 to 5 years for office equipment, 5 to 7 years for furniture and fixtures, 6 to 10 years for machinery and equipment, 10 to 15 years for building improvements, 5 years for software,5 years for molds, 5 to 7 years for vehicles and 40 years for buildings.

 

Goodwill and Intangible Assets

 

We record intangible assets based on their fair value on the date of acquisition. Goodwill is recorded for the difference between the fair value of the purchase consideration over the fair value of the net identifiable tangible and intangible assets acquired. We perform an impairment assessment of goodwill on an annual basis, or whenever impairment indicators exist. In the absence of any impairment indicators, goodwill is assessed for impairment during the fourth quarter of each fiscal year. Judgments regarding the existence of impairment indicators are based on market conditions and operational performance of the business.

 

We may assess our goodwill for impairment initially using a qualitative approach to determine whether it is more likely than not that the fair value of these assets is greater than their carrying value. When performing a qualitative test, we assess various factors including industry and market conditions, macroeconomic conditions and performance of our businesses. If the results of the qualitative assessment indicate that it is more likely than not that our goodwill and other indefinite-lived intangible assets are impaired, a quantitative impairment analysis would be performed to determine if impairment is required. We may also elect to perform a quantitative analysis of goodwill initially rather than using a qualitative approach.

 

The impairment testing for goodwill is performed at the reporting unit level. The valuation methods used in the quantitative fair value assessment, discounted cash flow and market multiples method, requires our management to make certain assumptions and estimates regarding certain industry trends and future profitability of our reporting units. If the fair value of a reporting unit exceeds the related carrying value, the reporting unit’s goodwill is considered not to be impaired and no further testing is performed. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recorded for the difference. The valuation of goodwill is affected by, among other things, our business plan for the future and estimated results of future operations. Future events could cause us to conclude that impairment indicators exist, and, therefore, that goodwill may be impaired.

 

Intangible assets include the cost of developed technology, customer relationships, trademarks and identifiable media platforms. Intangible assets are amortized utilizing the straight-line method over their remaining economic useful lives. Vinco Ventures reviews long-lived assets and intangible assets for potential impairment annually and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss is recorded equal to the excess of the asset’s carrying value over its fair value. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. In the event that management decides to no longer allocate resources to a patent portfolio, an impairment loss equal to the remaining carrying value of the asset is recorded.

 

Revenue Recognition

 

Generally, the Company considers all revenues as arising from contracts with customers. Revenue is recognized based on the five-step process outlined in the Accounting Standards Codification (“ASC”) 606:

 

Step 1 – Identify the Contract with the Customer – A contract exists when (a) the parties to the contract have approved the contract and are committed to perform their respective obligations, (b) the entity can identify each party’s rights regarding the goods or services to be transferred, (c) the entity can identify the payment terms for the goods or services to be transferred, (d) the contract has commercial substance and it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

 

11
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 2 — Summary of Significant Accounting Policies — (Continued)

 

Step 2 – Identify Performance Obligations in the Contract – Upon execution of a contract, the Company identifies as performance obligations each promise to transfer to the customer either (a) goods or services that are distinct, or (b) a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. To the extent a contract includes multiple promised goods or services, the Company must apply judgement to determine whether the goods or services are capable of being distinct within the context of the contract. If these criteria are not met, the goods or services are accounted for as a combined performance obligation.

 

Step 3 – Determine the Transaction Price – When (or as) a performance obligation is satisfied, the Company shall recognize as revenue the amount of the transaction price that is allocated to the performance obligation. The contract terms are used to determine the transaction price. Generally, all contracts include fixed consideration. If a contract did include variable consideration, the Company would determine the amount of variable consideration that should be included in the transaction price based on expected value method. Variable consideration would be included in the transaction price, if in the Company’s judgement, it is probable that a significant future reversal of cumulative revenue under the contract would not occur.

 

Step 4 – Allocate the Transaction Price – After the transaction price has been determined, the next step is to allocate the transaction price to each performance obligation in the contract. If the contract only has one performance obligation, the entire transaction price will be applied to that obligation. If the contract has multiple performance obligations, the transaction price is allocated to the performance obligations based on the relative standalone selling price (SSP) at contract inception.

 

Step 5 – Satisfaction of the Performance Obligations (and Recognize Revenue) – Revenue is recognized when (or as) goods or services are transferred to a customer. The Company satisfies each of its performance obligations by transferring control of the promised good or service underlying that performance obligation to the customer. Control is the ability to direct the use of and obtain substantially all of the remaining benefits from an asset. It includes the ability to prevent other entities from directing the use of and obtaining the benefits from an asset. Indicators that control has passed to the customer include: a present obligation to pay; physical possession of the asset; legal title; risks and rewards of ownership; and acceptance of the asset(s). Performance obligations can be satisfied at a point in time or over time.

 

Substantially all of the Company’s revenues continue to be recognized when control of the goods or service is transferred to the customer, which is upon delivery of the goods or service to the customer. Goods include non-fungible tokens and revencues are recognized when the rights of the non-fungible token are transferred to the customer. All sales have fixed pricing and there are currently no material variable components included in the Company’s revenue. Additionally, the Company will issue credits for defective merchandise, historically these credits for defective merchandise have not been material.

 

Disaggregation of Revenue

 

The Company’s primary revenue streams include the sale and/or licensing of consumer goods and packaging materials for innovative products. The Company’s licensing business is not material and has not been separately disaggregated for segment purposes. The Company’s disaggregated revenues for the three and nine months ended September 30, 2021 and 2020 was as follows:

 

   

For the Three Months

Ended September 30,

   

For the Nine Months

Ended September 30,

 
    2021     2020     2021     2020  
Revenues:                        
Product sales   $ 1,123,966     $ 2,408,248     $ 6,303,646     $ 9,444,452  
Media platform sales    

1,042,898

      -      

1,042,898

      -  
Service     -       800       -       800  
Licensing     65,122       113,093       142,415       204,217  
Total revenues, net   $ 2,231,986     $ 2,522,141     $ 7,488,959     $ 9,649,469  

 

12
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 2 — Summary of Significant Accounting Policies — (Continued)

 

For the three and nine months ended September 30, 2021 and 2020, the following customer represented more than 10% of total net revenues:

 

 Schedule of Revenue from External Customers

   

For the Three Months

Ended September 30,

   

For the Nine Months

Ended September 30,

 
    2021     2020     2021     2020  
Customer:                        
Customer A     7 %     0*       10 %     0*  

 

* Customer did not represent greater than 10% of total net revenue.

 

For the three and nine months ended September 30, 2021 and 2020, the following geographical regions represented more than 10% of total net revenues:

 

   

For the Three Months

Ended September 30,

   

For the Nine Months

Ended September 30,

 
    2021     2020     2021     2020  
Region:                                
North America     100 %     79 %     100 %     89 %
Europe     * %     17 %     * %     10 %

 

* Region did not represent greater than 10% of total net revenue.

 

13
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 2 — Summary of Significant Accounting Policies — (Continued)

 

Fair Value of Financial Instruments

 

The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets or liabilities

 

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

 

The carrying amounts of the Company’s financial instruments, such as cash, accounts receivable and accounts payable, approximate fair values due to the short-term nature of these instruments. The carrying amount of the Company’s notes payable approximates fair value because the effective yields on these obligations, which include contractual interest rates, taken together with other features such as concurrent issuance of warrants, are comparable to rates of returns for instruments of similar credit risk. The loan held for investment was acquired at fair value, which resulted in a discount.

 

The following fair value of financial assets and liabilities and the input level used to determine the fair value at September 30, 2021 is presented below:

 

 Schedule of Fair Value of Financial Assets and Liabilities

   

Fair Value Measurements as of

September 30, 2021

 
    Level 1     Level 2     Level 3  
                   
Assets:                          
Short-term investments   $ 282,000     $ -     $ -  
                         
Liabilities:                        
Warrant liability     -       -       468,612,700  
Total     282,000       -       468,612,700  

 

The following fair value of financial assets and liabilities and the input level used to determine the fair value at December 31, 2020 is presented below:

 

   

Fair Value Measurements as of

December 31, 2020

 
    Level 1     Level 2     Level 3  
                   
Assets:                            
Short-term investments   $ 282,000     $ -     $ -  
Total     282,000       -       -  

 

The following table presents a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2021:

 

 Schedule of Reconciliation of Liabilities Measured at Fair Value

   

Warrant

Liability

(Level 3)

 
Balance, December 31, 2020   $ -  
Issuance of warrants     518,742,375  
Change in fair value     287,891,005  
Exercise of warrants     (338,020,680 )
Balance, September 30, 2021   $ 468,612,700  

 

U.S. equity stocks represent investment in stocks of U.S. based companies. The valuation inputs for U.S. equity stocks are based on the last published price reported on the major stock market on which the securities are traded and are primarily classified as Level 1. Securities whose valuation inputs are not based on observable market information are classified as Level 3.

 

Warrant Accounting

 

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”.

 

The Company classifies a warrant to purchase shares of its common stock as a liability on its consolidated balance sheets as this warrant is a free-standing financial instrument that may require the Company to transfer consideration upon exercise (See Note 11 — Warrant Liability for further information). Each warrant is initially recorded at fair value on date of grant using the Black-Scholes model and net of issuance costs, and it is subsequently re-measured to fair value at each subsequent balance sheet date. Changes in fair value of the warrant are recognized as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrant.

 

Sequencing Policy

 

Under ASC 815-40-35, the Company follows a sequencing policy whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuance of securities to the Company’s employees or directors are not subject to the sequencing policy.

 

14
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 2 — Summary of Significant Accounting Policies — (Continued)

 

Foreign Currency Translation

 

The Company uses the United States dollar as its functional and reporting currency since the majority of the Company’s revenues, expenses, assets and liabilities are in the United States. Assets and liabilities in foreign currencies are translated using the exchange rate at the balance sheet date, while revenue and expense accounts are translated at the average exchange rates prevailing during the year. Equity accounts are translated at historical exchange rates. Gains and losses from foreign currency transactions and translation for the three and nine months ended September 30, 2021 and 2020 and the cumulative translation gains and losses as of September 30, 2021 and December 31, 2020 were not material.

 

Net Earnings or Loss per Share

 

Basic net income (loss) per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number vested of common shares, plus the net impact of common shares (computed using the treasury stock method), if dilutive, resulting from the exercise of dilutive securities. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

 

As of September 30, 2021 and 2020, the Company excluded the common stock equivalents summarized below, which entitled the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.

 

Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share 

    September 30,     September 30,  
    2021     2020  
Selling Agent Warrants     -       160,492  
Shares reserved in exchange for the cancellation of certain non-voting membership interest in EVNT, LLC     1,000,000       -  
Placement Agent Warrants     6,291,604       -  
Options     80,000       80,000  
Convertible shares under notes payable     30,060,454       558,803  
Warrants for noteholders     86,529,254       625,000  
Warrants for investors     1,007,194       -  
Restricted stock units     -       120,000  
Series B Convertible Stock     -       -  
Shares to be issued     1,150,796       165,000  
Total   $ 126,119,302     $ 1,709,295  

 

15
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 2 — Summary of Significant Accounting Policies — (Continued)

 

Subsequent Events

 

The Company has evaluated subsequent events through the date which the financial statements were issued. Based upon such evaluation, except for items described in Note 15, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements.

 

Segment Reporting

 

The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the Chairman and Chief Executive Officer (“CEO”) of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company deploys resources on a consolidated level to all brands of the Company and therefore the Company only identifies one reportable operating segment with multiple product offerings.

 

Note 3 — Acquisitions and Divestitures

 

Acquisitions

 

Lomotif Acquisition 

 

On July 25, 2021, ZVV, a joint venture of the Company and ZASH Global Media and Entertainment Corporation (“ZASH”), completed the acquisition of 80% of the outstanding capital stock of Lomotif for a total purchase price of $109,765,000.

 

The activity of Lomotif is included in the Company’s consolidated statements of operations from the acquisition date to September 30, 2021 included selling, general and administrative expenses of $6,691,611 and a net loss of $6,747,008.

 

The following table summarizes the aggregate purchase price consideration paid:

 

    Lomotif  
Cash paid   $ 92,000,000  
Fair value of issued shares     8,882,500  
Issuance of debt selling shareholder*     8,000,000  
Fair value of conversion feature to selling shareholder*     882,500  
Purchase consideration   109,765,000  

 

* The full amount of $8,000,000 was converted into 2,750,000 shares of common stock of the Company on September 13, 2021.

 

The Company believes that this combination will strengthen its future growth opportunities in digital media and content technologies. The Company accounted for this acquisition as a business combination under the acquisition method of accounting. The following table summarizes the preliminary purchase price allocation of fair values of the assets acquired and liabilities assumed at the date of acquisition:

 

 

    Lomotif  
Cash and cash equivalents   $ 1,238,800  
Prepaid expenses and other current assets     247,458  
Property and equipment     91,007  
Intangible assets     143,237,848  
Total assets acquired     144,815,113  
         
Debt     5,567,794  
Accounts payable     706,531  
Accrued expenses and other liabilities     1,334,538  
Total liabilities assumed     7,608,863
Noncontrolling interest     (27,441,250 )
         
Total assets acquired, net     109,765,000  

 

TBD Safety, LLC Acquisition

 

On September 29, 2020, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with Graphene Holdings, LLC, Mercury FundingCo, LLC, Ventus Capital, LLC and Jetco Holdings, LLC (together the “Sellers”) to acquire all outstanding Membership Units (the “Units”) of TBD Safety, LLC (“TBD”). Collectively, the Sellers owned all outstanding Units of TBD. Under the terms of the Agreement, the Company issued a total of Two Million Two Hundred Ten Thousand Three Hundred Eighty-Two (2,210,382) shares of the Company’s common stock and a total of Seven Hundred Sixty-Four Thousand Six Hundred Eighteen (764,618) shares of a newly designated Preferred Stock (the “Preferred”). In addition, the Company and Sellers entered into a Registration Rights Agreement (the “Registration Rights Agreement”) in favor of the Sellers obligating the Company to register such common stock and shares of common stock to be issued upon conversion of the Preferred within 120 days after the Closing. The Sellers also had an Earn Out Consideration, which provides that at such time as the assets purchased in the Agreement achieve cumulative revenue of $10,000,000, the Sellers will earn a total of One Hundred Twenty-Five Thousand (125,000) shares of common stock. The closing of the transaction occurred on October 16, 2020.

 

16

 

 

Asset Acquisitions

 

Emmersive Entertainment Asset Contribution

 

On April 17, 2021, Vinco Ventures, Inc. (“Vinco”) and EVNT Platform, LLC, a wholly owned subsidiary of Vinco (“the Company” or “Buyer”), entered into (and closed on) a certain Asset Contribution Agreement (“Asset Contribution Agreement”) with Emmersive Entertainment, Inc. (“Emmersive” or “Seller”), pursuant to which Emmersive contributed/transferred to the Company the assets used for Emmersive’s business, which include digital assets, software and certain physical assets (the “Contributed Assets”) in consideration for, among other things, the Company assuming certain obligations of Emmersive, hiring certain employees, and issuing 1,000,000 preferred membership units (“Preferred Units”) in the Company to Emmersive and/or its shareholders (“Preferred Members”) pursuant to a First Amended and Restated Operating Agreement for the Company dated as of April 17, 2021(“Amended Operating Agreement”). Certain put rights are associated with Preferred Units, which if exercised by the Preferred Members, obligates Vinco to purchase the Preferred Units in exchange for 1,000,000 shares of Vinco Venture’s common stock (“Put Rights”). In addition, the Preferred Members have the opportunity to earn up to 4,000,000 Conditional Preferred Units if certain conditions are satisfied for each of the four earn out targets (“Earn-Out Targets”). The Earn-Out Targets are described below:

 

Earn-Out Target 1: In the event that the Company (1) develops a minimally viable product for the NFT Technology to validate the utility of the product/platform with features to attract and transact with customers and (2) is successful on-boarding a minimum of 10 approved influential celebrities on or before December 31, 2021, the Company shall issue to Emmersive and/or Emmersive’s Shareholders, 1,000,000 Conditional Preferred Units, with Put Rights.

 

Earn-Out Target 2: In the event that the Company generates a minimum of $7,000,000 in annualized booked revenues inclusive of revenues generated from the celebrities onboarded by the Company (collectively “Attributed Revenue”) in any three-calendar-month period ending on or before March 31, 2022 (i.e. more than $1,750,000 in Attributed Revenue in a period of three consecutive calendar months), the Company shall issue to Emmersive and/or Emmersive’s Shareholders 1,000,000 Conditional Preferred Units, with the Put Rights.

 

Earn-Out Target 3: In the event that the Company generates a minimum of $28,000,000 in annualized Attributed Revenues in any three-calendar-month period ending on or before December 31, 2022 (i.e. more than $7,000,000 in Attributed Revenue in a period of three consecutive calendar months), the Company shall issue to Emmersive and/or Emmersive’s Shareholders 1,000,000 Conditional Preferred Units, with Put Rights.

 

Earn Out Target 4: In the event that the Company generates a minimum of $62,000,000 in annualized Attributed Revenues in any three-calendar-month period ending on or before December 31, 2023 (i.e. more than $15,500,000 in Attributed Revenue in a period of three consecutive calendar months), the Company shall issue to Emmersive and/or Emmersive’s Shareholders 1,000,000 Conditional Preferred Units, with Put Rights.

 

On April 17, 2021, the transactions under both the Asset Contribution Agreement and Amended Operating Agreement closed. The Preferred Units and Conditional Preferred Units were valued at $2,100,00 and $5,300,000, respectively, and recorded as an intangible asset.

 

The following table summarizes the aggregate purchase price consideration paid for the acquisition of the asset:

 

    April 17, 2021  
       
Fair value of shares reserved for future issuance   $ 7,400,000  
Fair value of assumed notes payable     151,987  
Total     7,551,987  

 

Honey Badger Asset Acquisition and License Agreement

 

On November 10, 2020, the Company, through its wholly owned subsidiary, Honey Badger Media, LLC, entered into a series of transactions to acquire certain assets and license a platform with Honey Badger Media, LLC, a Delaware limited liability company, for $300,000 and 750,000 shares of common stock. The transaction was treated as an asset purchase and not accounted for as a business combination due to substantially all of the fair value of gross assets acquired were concentrated to a group of similar identifiable assets which was media licensing assets. In addition, there was limited inputs, processes and outputs, which did not meet the requirements to be a business. On January 5, 2021, the Company issued 750,000 shares of our common stock in connection with the asset acquisition.

 

HMNRTH Asset Acquisition

 

On March 11, 2020, the Company issued 238,750 shares of our common stock to acquire the assets of HMNRTH, LLC. On July 1, 2020, the Company made payment in the amount of $70,850 to the principals of HMNRTH, LLC. The transaction was treated as an asset purchase and not accounted for as a business combination due to the limited inputs, processes and outputs, which did not meet the requirements to be a business.

 

Divestitures

 

CBAV1, LLC Divestiture

 

On March 12, 2021, the bankruptcy court approved the sale of the CBAV1, LLC Assets to BTL Diffusion SARL, the winning bidder, at the auction held on March 10, 2021 and March 11, 2021 for a total sum of $3,000,000, which includes a cash payment at closing in the amount of $2,650,000, less certain closing costs and credits, and additional royalty payments in the amount of $150,000 on April 15, 2022 and in the amount of $200,000 on April 15, 2023 (“CBAV1-BTL Transaction”).

 

A first closing of the CBAV1-BTL Transaction occurred on April 16, 2021, with the transfer of assets and release of funds completed on April 21, 2021 (“Final Closing”). Contemporaneously with the Final Closing, a certain license agreement between CBAV1 and Edison Nation, LLC (“Edison Nation”) terminated and any remaining operational assets of Edison Nation were transferred to BTL.

 

17

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The table below shows the assets that the Company transferred to BTL and the components of the loss on discontinued operations:

 

 Schedule of Loss on Income Operations of Discontinued Operations

   

April 21,

2021

 
Cash received from buyer     2,529,565  
         
Accounts receivable     (293,005 )
Inventory     (665,522 )
Prepaid expenses     (160,666 )
Intangible assets     (5,540,952 )
Loss on divestiture     4,130,580  
Operating loss of discontinued operations     178,200  
Bankruptcy costs     803,320  
Loss on discontinued operations     5,112,100  

 

Cloud B, Inc. Divestiture

 

On February 17, 2020, the Company divested its Cloud B, Inc. subsidiary and entered into an Agreement for the Purchase and Sale of Cloud B, Inc.(the “Purchase Agreement”), with Pearl 33 Holdings, LLC (the “Buyer”), pursuant to which the Buyer purchased from the Company (and the Company sold and assigned) 80,065 shares of common stock of Cloud B (the “Cloud B Shares”) for $1.00 and an indemnification agreement as described below, constituting a 72.15% ownership interest in Cloud B, based on 110,964 shares of Cloud B’s common stock outstanding as of February 17, 2020. In accordance with the agreement, all of the liabilities of Cloud B were assumed by Pearl 33.

 

On February 17, 2020, as part of the sale of Cloud B, Inc., the Company entered into an indemnification agreement with Pearl 33 Holdings, LLC in connection with the divestiture of Cloud B, Inc., whereby pursuant to such agreement the Company is limited to the issuance of 150,000 shares of the Company’s common stock to the Buyer for indemnification of claims against Cloud B Inc. In addition, the Company shall indemnify the Buyer for expenses (including attorneys’ fees and all other costs, expenses and obligations) in connection with defending any Claim in connection with the Cloud B. The Company has recorded $405,000 related to the fair value of the 150,000 shares of common stock which will be issued to the Buyer.

 

The table below shows the assets and liabilities that the Company was relieved of in the transaction:

 

 Schedule of Business Combination of Assets and Liabilities

   

February 17,

2020

 
Accounts payable     4,005,605  
Accrued Expenses     370,289  
Income Tax Payable     14,473  
Notes Payable     900,000  
Non-Controlling Interest     26,393  
Shares to be issued to Buyer     (405,000 )
Gain on divestiture   $ 4,911,760  

 

See Note 15 — Discontinued Operations for further information.

 

SRM Entertainment, LTD Divestiture

 

On November 30, 2020, the Company and its wholly owned subsidiary, SRM Entertainment, LTD entered into a Stock Exchange Agreement with Jupiter Wellness, Inc. (“Jupiter”). Under the terms of the Exchange Agreement, Jupiter agreed to purchase all outstanding shares of common stock (the “Exchange Shares”) issued by SRM from the Company. As consideration for the purchase of the Exchange Shares, Jupiter issued the Company 200,000 shares of its restricted common stock, symbol JUPW as listed on NASDAQ Capital Markets. See Note 15 — Discontinued Operations for further information.

 

18

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 4 — Variable Interest Entities

 

The Company is involved in the formation of various entities considered to be Variable Interest Entities (“VIEs”). The Company evaluates the consolidation of these entities as required pursuant to ASC Topic 810 relating to the consolidation of VIEs. These VIEs are primarily partnerships formed to supply consumer goods to through various distribution and retail channels.

 

The Company’s determination of whether it is the primary beneficiary of VIE is based in part on an assessment of whether or not the Company and its related parties are exposed to the majority of the risks and rewards of the entity. Typically, the Company is entitled to substantially all or portion of the economics of these VIEs. The Company is the primary beneficiary of the VIE entities.

 

The following table presents the carrying values of the assets and liabilities of entities that are VIEs and consolidated by the Company at September 30, 2021:

 

    September 30, 2021     December 31, 2020  
             
Assets                
Current assets:                
Cash and cash equivalents   $ 8,931,879     $ 10,481  
Accounts receivable, net     -       94,195  
Inventory     -       240,158  
Loans receivable     17,050,000          
Intangible assets, net     -          
Prepaid expenses and other current assets     2,462,552       -  
Total current assets     28,444,431       344,834  
Property and equipment, net     135,108       -  
Intangible assets, net     139,932,672          
Total assets   $ 168,512,211     $ 344,834  
                 
Liabilities and stockholders’ equity                
Current liabilities:                
Accounts payable   $ 823,449     $ 217,558  
Accrued expenses and other current liabilities     1,579,729       113,576  
Lines of credit     -       1,133,652  
Notes payable, current     -       150,000  
Due to related party     315,666       315,666  
Total current liabilities     2,718,844       1,930,452  
Debt    

2,650,000

      -  

Total liabilities

  $

5,368,844

    $

1,930,452

 

 

19

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 4 — Variable Interest Entities — (Continued)

 

The following table presents the operations of entities that are VIEs and consolidated by the Company at September 30, 2021:

 

    2021     2020     2021     2020  
   

For the Three Months

Ended September 30,

   

For the Nine Months

Ended September 30,

 
    2021     2020     2021     2020  
Revenues, net   $ -     $ 184,715     $ 307,339     $ 1,459,192  
Cost of revenues     -       69,191       93,685       1,064,114  
Gross profit     -       115,524       213,654       395,078  
                                 
Operating expenses:                                
Selling, general and administrative     11,761,747       91,114       11,866,488       294,676  
Operating (loss) income     (11,761,747 )     24,410       (11,652,834 )     100,402  
                                 
Other (expense) income:                                
Interest expense     (155,476 )     (73,840 )     (163,236 )     (130,796 )
Other income     98,353               98,353          
Total other (expense) income     (57,123 )     (73,840 )     (64,883 )     (130,796 )
Loss before income taxes     (11,818,870 )     (49,430 )     (11,717,717 )     (30,394 )
Income tax expense     -       -       -       -  
Net loss   $ (11,818,870 )   $ (49,430 )   $ (11,717,717 )   $ (30,394 )

 

At September 30, 2021, the Company had no unconsolidated VIE’s. The Company has consolidated both ZVV and Lomotif, for which the Company has determined it holds a variable interest.

 

ZVV Media Partners, LLC and Lomotif Private Limited

 

On May 28, 2021, the Company, Vinco Acquisition Corporation and ZASH entered into that certain Second Amendment to their Agreement to Complete a Plan of Merger (the “Second Amendment”) to define certain milestones with dates to be completed to consummate the closing of the Lomotif acquisition and the ZASH merger.

 

On July 19, 2021, ZASH, Lomotif, the Lomotif selling shareholders identified on the signature page to the Lomotif SPA and ZVV, entered into a Deed of Variation and Supplement (the “Deed of Variation”) whereby, among other things, ZASH novated all of its rights and obligations under the Lomotif SPA to ZVV and ZVV assumed all of ZASH’s rights and obligations under the Lomotif SPA as if ZVV had been a party to the Lomotif SPA in place of ZASH. On July 23, 2021, ZVV closed on the transaction which resulted in ZVV acquiring an 80% interest in Lomotif.

 

On July 22, 2021, ZASH and the Company entered into a Second Amended and Restated Limited Liability Company Agreement of ZVV, pursuant to which ZASH and Vinco Ventures each own a 50% voting membership interest in ZVV, ZASH owns a 75% economic interest in ZVV after return of unreturned capital contributions and the Company owns a 25% economic interest in ZVV after return of unreturned capital contributions (See Note 3 – Acquisitions and Divestitures).

 

Global Clean Solutions, LLC

 

On May 20, 2020 (the “Effective Date”), the Company entered into an Agreement and Plan of Share Exchange (the “Share Exchange Agreement”) with PPE Brickell Supplies, LLC, a Florida limited liability company (“PPE”), and Graphene Holdings, LLC, a Wyoming limited liability company (“Graphene”, and together with PPE, the “Sellers”), whereby the Company purchased 25 membership units of Global Clean Solutions, LLC, a Nevada limited liability company (“Global”) from each of PPE and Graphene, for a total of fifty (50) units, representing fifty percent (50%) of the issued and outstanding units of Global (the “Purchase Units”). The Company issued 250,000 shares of its restricted common stock, $0.001 par value per share (the “Common Stock”) to PPE, and 50,000 shares of Common Stock to Graphene, in consideration for the Purchase Units. Global Clean Solutions, LLC is a VIE. The fair value of the shares of $699,000 was treated as a distribution to the noncontrolling interest members.

 

Pursuant to the terms of the Share Exchange Agreement, the Sellers may earn additional shares of Common Stock upon Global realizing the following revenue targets: (i) In the event that Global’s total orders equal or exceed $1,000,000, Graphene shall receive 200,000 shares of Common Stock; (ii) In the event that Global’s total orders equal or exceed $10,000,000, PPE shall receive 100,000 shares of restricted Common Stock; and (iii) In the event that Global’s total orders equal or exceed $25,000,000, Graphene shall receive 125,000 shares of restricted Common Stock. Additionally, the Company shall be entitled to appoint two managers to the Board of Managers of Global. The fair value of the shares is expensed over the estimated vesting period and is adjusted based on the number of shares that vest.

 

20

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 4 — Variable Interest Entities — (Continued)

 

On the Effective Date, the Company entered into an Amended Limited Liability Company Agreement of Global (the “Amended LLC Agreement”). The Amended LLC Agreement amends the original Limited Liability Company Agreement of Global, dated May 13, 2020. The Amended LLC defines the operating rules of Global and the ownership percentage of each member: Vinco Ventures, Inc. 50%, PPE 25% and Graphene 25%.

 

On the Effective Date, the Company (as “Guarantor”) entered into a Secured Line of Credit Agreement (the “Credit Agreement”) with Global and PPE. Under the terms of the Credit Agreement, PPE is to make available to Global a revolving credit loan in a principal aggregate amount at any one time not to exceed $2,500,000. Upon each drawdown of funds against the credit line, Global shall issue a Promissory Note (the “Note”) to PPE. The Note shall accrue interest at 3% per annum and have a maturity date of six (6) months. In the event of a default, any and all amounts due to PPE by Global, including principal and accrued but unpaid interest, shall increase by forty (40%) percent and the interest shall increase to five (5%) percent (the “Default Interest”).

 

On the Effective Date, the Company (as “Guarantor”) entered into a Security Agreement (the “Security Agreement”) with Global (as “Borrower”) and PPE as the secured party, whereby the Company placed 1,800,000 shares of Common Stock (the “Reserve Shares”) in reserve with its transfer agent in the event of default under the Credit Agreement. In the event of a default that is not cured by the defined cure period, the PPE may liquidate the Reserve Shares until the Global’s principal, interest and associated expenses are recovered. The number of Reserve Shares may be increased through the issuance of True-Up shares in the event the original number of Reserve Shares is insufficient.

 

In April 2021, the Company agreed to unwind the joint venture of Ed Roses, LLC and recognized a loss of $301,645.

 

21

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 5 — Short-Term Investments

 

As of September 30, 2021 and December 31, 2020, short-term investments consisted of the following:

 

    September 30,     December 31,  
    2021     2020  
Jupiter Wellness, Inc. (JUPW) (i)   $ 1,040,000     $ 1,040,000  
Unrealized losses     (758,000 )     (22,000 )
Total short-term investments   $ 282,000     $ 1,018,000  

 

  (i) On November 30, 2020, the Company and its wholly owned subsidiary, SRM Entertainment, LTD entered into a Stock Exchange Agreement with Jupiter Wellness, Inc. (“Jupiter”). Under the terms of the Exchange Agreement, Jupiter purchased all outstanding shares of common stock (the “Exchange Shares”) issued by SRM from the Company. As consideration for the purchase of the Exchange Shares, Jupiter issued the Company 200,000 shares of its restricted common stock, symbol JUPW as listed on NASDAQ Capital Markets. On September 30, 2021, the closing price of JUPW was $1.41 on the Nasdaq.

 

Note 6 — Property and Equipment, net

 

As of September 30, 2021 and December 31, 2020, property and equipment consisted of the following:

 

    September 30,     December 31,  
    2021     2020  
Land   $ -     $ 79,100  
Buildings – rental property     58,052       463,635  
Building improvements     818,986       800,225  
Equipment and machinery     4,286,256       4,122,917  
Furniture and fixtures     387,637       368,137  
Computer software     111,760       -  
Molds     79,300       79,300  
Vehicles     533,867       521,962  
Property, plant and Equipment, gross     6,275,858       6,435,276  
Less: accumulated depreciation     (5,303,707 )     (5,424,475 )
Total property and equipment, net   $ 972,151     $ 1,010,801  

 

Depreciation expense for the nine months ended September 30, 2021 and 2020 was $136,312 and $169,141, respectively.

 

Note 7 — Loan Receivable

 

As of September 30, 2021 and December 31, 2020, loan receivable consisted of the following:

 

    September 30,     December 31,  
    2021     2020  
Loans Receivable –Zash Global Media and Entertainment Corporation (i)   $ 15,000,000     $  -  
Loans Receivable – PZAJ Holdings, LLC (ii)     3,150,000        -  
Total loans receivable     18,150,000       -  

 

(i)

On January 29, 2021, the Company loaned $5,000,000 and $2,000,000 to ZASH. The interest rate on the note is 6% per annum. The maturity date of the loan is January 28, 2023. The purpose of the loan is to engage in the acquisition, development and production of consumer facing content and related activities.

 

On February 18, 2021, the Company loaned $5,000,000 to ZASH. The interest rate on the note is 3% per annum. The maturity date of the loan is August 17, 2023. The purpose of the loan is to engage in the acquisition, development and production of consumer facing content and related activities.

 

On June 9, 2021, the Company loaned $3,000,000 to ZASH. The interest rate on the note is 3% per annum. The maturity date of the loan is August 17, 2023. The purpose of the loan is to engage in the acquisition, development and production of consumer facing content and related activities.

  (i)
  (ii)

PZAJ Holdings, LLC (“PZAJ”) is an entertainment company dedicated to the acquisition, financing, development, production, and distribution of films and television projects. ZVV has partnered with PZAJ to co-develop certain film and television projects including but not limited to Preach, Camp Hideout, Camp Radio and Thrillusionist. The co-developed projects are intended to be licensed or sold to various media companies and or streamed on the recently announced LOMO TV.

 

On June 17, 2021, the Company loaned $950,000 to PZAJ. The interest rate on the note is 2% per annum. The maturity date of the loan is June 16, 2022. The purpose of the loan is to engage in the acquisition, development and production of consumer facing content and related activities.

 

On July 12, 2021, the Company loaned $150,000 to PZAJ. The interest rate on the note is 2% per annum. The maturity date of the loan is July 17, 2022. The purpose of the loan is to engage in the acquisition, development and production of consumer facing content and related activities.

 

On September 8, 2021, the Company loaned $2,050,000 to PZAJ. The interest rate on the note is 2% per annum. The maturity date of the loan is September 17, 2022. The purpose of the loan is to engage in the acquisition, development and production of consumer facing content and related activities.

 

  

Note 8 — Goodwill

 

For the nine months ended September 30, 2021, there was no change in the carrying amount of goodwill.

 

The Company utilized the simplified test for goodwill impairment. The amount recognized for impairment is equal to the difference between the carrying value and the asset’s fair value. The valuation methods used in the quantitative fair value assessment was a discounted cash flow method and required management to make certain assumptions and estimates regarding certain industry trends and future profitability of our reporting units.

 

22

 

 

Note 9 — Intangible assets, net

 

As of September 30, 2021, intangible assets consisted of the following:

 

        Weight                    
    Estimated     Average

    Gross           Net  
    Useful

    Useful     Carrying     Accumulated     Carrying  
    Life     Life     Amount     Amortization     Amount  
Finite lived intangible assets:          

                         
Customer relationships     15 years       11.9 years     $ 670,000     $ 137,722     $ 532,278  
Developed technology     7 years       6.8 years       156,172,041       5,314,266       150,857,775  
Membership network     7 years       3.9 years       1,740,000       766,429       973,571  
Digital media     7 years       6.1 years       1,552,500       194,063       1,358,437  
Total finite lived intangible assets                   $ 160,134,541     $ 6,412,480     $ 153,722,061  
                                         
Indefinite lived intangible assets:                                        
Trademarks and tradenames     Indefinite             $ 1,240,000     $ -     $ 1,240,000  
Total indefinite lived intangible assets                   $ 1,240,000     $ -     $ 1,240,000  
Total intangible assets                   $ 161,374,541     $ 6,412,480     $ 154,962,061  

 

The Company’s preliminary purchase price allocation for the Lomotif acquisition has allocated all of the proceeds in excess of the identifiable tangible assets to developed technology, a identifiable intangible assets (See Note 3 — Acquisitions and Divestitures).

 

As of December 31, 2020, intangible assets consisted of the following:

 

          Weighted                    
    Estimated     Average     Gross           Net  
    Useful     Useful     Carrying     Accumulated     Carrying  
    Life     Life     Amount     Amortization     Amount  
Finite lived intangible assets:                                        
Customer relationships     15 years       12.8 years     $ 4,270,000     $ 624,223     $ 3,645,777  
Developed technology     7 years       5.9 years       7,400,000       1,330,476       6,069,524  
Membership network     7 years       4.7 years       1,740,000       580,000       1,160,000  
Digital media     7 years       6.9 years       1,552,500       29,464       1,523,036  
Total finite lived intangible assets                   $ 14,962,500     $ 2,564,163     $ 12,398,337  
                                         
Indefinite lived intangible assets:                                        
Trademarks and tradenames     Indefinite             $ 3,140,000     $ -     $ 3,140,000  
Total indefinite lived intangible assets                   $ 3,140,000     $ -     $ 3,140,000  
Total intangible assets                   $ 18,102,500     $ 2,564,163     $ 15,538,337  

 

Amortization expense for the nine months ended September 30, 2021 and 2020 was $4,907,365 and $825,821, respectively.

 

The estimated future amortization of intangibles subject to amortization at December 31, 2020 was as follows:

 

For the Years Ended December 31,   Amount  
2021 (excludes amortization through September 30, 2021)   $ 5,586,844  
2022     22,347,373  
2023     22,347,373  
2024     22,347,373  
2025     22,135,945  
Thereafter   58,957,153  
Total   $

153,722,061

 

 

Note 10 — Debt

 

As of September 30, 2021 and December 31, 2020, debt consisted of the following:

 

    September 30,     December 31,  
    2021     2020  
Line of credit:                
Lines of credit   $ -     $ 1,133,652  
Receivable financing     -       367,301  
Total lines of credit     -       1,500,953  
                 
Senior convertible notes payable:                
Senior convertible notes payable– related parties     302,272       1,428,161  
Senior convertible notes payable     120,000,000       591,104  
Debt issuance costs     (91,613,604 )     (280,511 )
Total senior convertible notes payable     28,688,668       1,738,754  
Less: current portion of convertible notes payable     (28,481,485 )     (577,260 )
Convertible notes payable – related parties, net of current portion     207,183       1,161,494  
                 
Notes payable:                
Notes payable     181,419       1,932,088  
Debt issuance costs     -     (34,997 )
Total notes payable     181,419       1,897,091  
Less: current portion of notes payable     (15,357 )     (1,301,212 )
Notes payable , net of current portion     166,062       595,879  
                 
Notes payable – related parties:                
Notes payable     2,612,835       2,827,512  
Debt issuance costs    

-

    (33,833 )
Total notes payable – related parties:     2,612,835       2,793,679  
Less: current portion of notes payable – related parties     (112,835 )     (1,389,922 )
Notes payable – related parties, net of current portion   $ 2,500,000     $ 1,403,757  

 

23

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 10 — Debt — (Continued)

 

Convertible Notes Payable

 

Hudson Bay Financing – July 2021

 

On July 22, 2021 (the “Effective Date”), Vinco Ventures, Inc. (the “Company”) consummated the closing of a private placement offering (the “Offering”) whereby pursuant to the Securities Purchase Agreement (the “Purchase Agreement”) entered into by the Company on July 22, 2021 with Hudson Bay Master Fund Ltd (the “Investor”), the Company issued a Senior Secured Convertible Note in the amount of $120,000,000 for the purchase price of $100,000,000 (the “Note”) and five (5) year warrants (the “Warrant”) to purchase shares of the Company’s common stock, par value $0.001 per share (“Common Stock”).

 

The Note shall carry no interest unless and until an event of default shall occur and the Note matures on July 22, 2022. The Note contains a voluntary conversion mechanism whereby the Noteholder may convert at any time after the Initial Convertibility Date (as defined therein), in whole or in part, the outstanding principal and interest under the Note into shares of the Common Stock at a conversion price of $2.655 per share (the “Conversion Shares”). The Note is guaranteed by the Company’s subsidiaries and certain other guarantors and is a senior secured obligation of the Company and its subsidiaries. The Note contains customary events of default (each an “Event of Default”). If an Event of Default occurs, interest under the Note will accrue at a rate of eighteen percent (18%) per annum and the outstanding principal amount of the Note, plus accrued but unpaid interest, liquidated damages and other amounts owing with respect to the Note will become, at the Note holder’s election, immediately due and payable in cash. Upon completion of a Change of Control (as defined in the Note), the Note’s holder may require the Company to purchase any outstanding portion of the Note in cash at a price in accordance with the terms of the Note.

 

Pursuant to the Purchase Agreement, the Investor received a Warrant. The Warrant contains an exercise price of $2.655 per share, subject to adjustments as provided under the terms of the Warrant. In connection with the closing of the Offering, the Warrant was issued for an aggregate of 32,697,548 shares of Common Stock (the “Warrant Shares”).

 

The Company also entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”). The Registration Rights Agreement provides that the Company shall (i) file with the Securities and Exchange Commission (the “Commission”) a Registration Statement by 30 days following the Closing Date  of the Purchase Agreement to register the Conversion Shares and Warrant Shares (the “Registration Statement”); and (ii) use all commercially reasonable efforts to have the Registration Statement declared effective by the Commission within 60 days following the Closing Date or at the earliest possible date, or 75 days following the Closing Date if the Registration Statement receives comments from the Commission.

 

Palladium Capital Group, LLC. (the “Placement Agent”) acted as placement agent for the Offering. The Placement Agent received cash compensation of $1,000,000 plus a Note of $8,000,000 which was deferred (8% of the gross proceeds to the Company plus an additional 1% of the gross proceeds to the Company for non-accountable expenses). The Company has paid $4,000,000 of the remaining $8,000,000.

 

The conversion feature on the Note and the Warrants were approved by shareholders on October 14, 2021.

 

Hudson Bay Financing- February 2021

 

On February 23, 2021 (the “Effective Date”), the Company consummated the closing of a private placement offering (the “Offering”) whereby pursuant to the Securities Purchase Agreement (the “Purchase Agreement”) entered into by the Company on February 18, 2021 with one accredited investor (the “Investor”), the Company issued a Senior Convertible Note for the purchase price of $10,000,000 (the “Note”) and five (5) year warrants (the “February Warrants”) to purchase shares of the Company’s common stock, par value $0.001 per share (“Common Stock”). The Company issued the February Warrants to the Investor representing the right to acquire an aggregate of 18,568,188 shares of Common Stock. The February Warrants contain an exercise price of $3.722 per share.

 

The Note carries an interest rate of 6% per annum compounding monthly and matures on February 23, 2022. The Note contains a voluntary conversion mechanism whereby the Noteholder may convert at any time after the Issuance Date, in whole or in part, the outstanding principal and interest under the Note into shares of the Common Stock at a conversion price of $4.847 per share (the “Conversion Shares”). The Note shall be a senior unsecured obligation of the Company and its subsidiaries. The Note contains customary events of default (each an “Event of Default”). If an Event of Default occurs, interest under the Note will accrue at a rate of twelve percent (12%) per annum and the outstanding principal amount of the Note, plus accrued but unpaid interest, liquidated damages and other amounts owing with respect to the Note will become, at the Note holder’s election, immediately due and payable in cash. Upon completion of a Change of Control (as defined in the Note), the Note’s holder may require the Company to purchase any outstanding portion of the Note in cash at a price in accordance with the terms of the Note.

 

The Investor fully converted $10,000,000 of principal into 2,063,132 of the Company’s common shares and made a cash payment for the remaining accrued interest. The principal and interest is fully paid as of September 30, 2021.

 

24

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 10 — Debt — (Continued)

 

Pursuant to the Purchase Agreement, the Investor received a Warrant in an amount equal to 900% of the shares of Common Stock initially issuable to the Investor pursuant to the conversion terms of the Investor’s Note. The Warrant contains an exercise price of $3.722 per share, subject to adjustments as provided under the terms of the Warrant. In connection with the closing of the Offering, the Warrant was exercisable for an aggregate of 18,568,188 shares of Common Stock (the “Warrant Shares”). As of September 30, 2021, the Investor has exercised 13,968,188 warrants.

 

The Company also entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”). The Registration Rights Agreement provides that the Company shall (i) file with the Securities and Exchange Commission (the “Commission”) a Registration Statement by 30 days following the Closing Date of the Purchase Agreement to register the Conversion Shares and Warrant Shares (the “Registration Statement”); and (ii) use all commercially reasonable efforts to have the Registration Statement declared effective by the Commission within 60 days following the Closing Date or at the earliest possible date, or 75 days following the Closing Date if the Registration Statement receives comments from the Commission.

 

Palladium Capital Group, LLC. (the “Placement Agent”) acted as placement agent for the Offering. The Placement Agent received cash compensation of $900,000 (8% of the gross proceeds to the Company plus an additional 1% of the gross proceeds to the Company for non-accountable expenses). The Placement Agent also received a Warrant granting the Holder the right to purchase 1,650,346 shares of the Company’s common stock at an exercise price of $3.722 with an expiration date of February 23, 2026.

 

On June 4, 2021, the Company entered into a warrant exercise agreement (the “June 2021 Warrant Agreement”) with the Investor whereby the Company agreed to issue additional warrants, to purchase shares of Common Stock at a per-share exercise price equal to $3.30 (the “Incentive Warrants”, all pursuant to the terms and conditions set forth in the June 2021 Warrant Agreement. At the Closing (as defined in Section 2 of the June 2021 Agreement), the parties shall execute and deliver a registration rights agreement, (the “Registration Rights Agreement”), pursuant to which the Company will agree to register the shares of Common Stock underlying the Incentive Warrants.

 

Subject to the terms of June 2021 Warrant Agreement, the Company shall issue and deliver Incentive Warrants to the Investor to initially purchase zero shares of Common Stock, which number of shares shall be subject to adjustment, including the provision of Incentive Warrants on a 1.75-for-one basis for the additional exercise of each Existing Warrant on or prior to July 7, 2021. During the nine months ended September 30, 2021, the Investor exercised 15,898,188 warrants and received 27,821,829 incentive warrants.

 

The June 2021 Warrant Agreement includes customary representations, warranties and covenants, and customary conditions to closing, expense and reimbursement obligations and termination provisions.

 

Hudson Bay Financing- January 2021

 

On January 25, 2021 (the “Effective Date”), the Company consummated the closing of a private placement offering (the “Offering”) whereby pursuant to the Securities Purchase Agreement (the “Purchase Agreement”) entered into by the Company on January 21, 2021 with Hudson Bay Master Fund, Ltd (the “Investor”), the Company issued a Senior Convertible Note for the purchase price of $12,000,000 (the “Note”) and a five (5) year warrant (the “January Warrant”) to purchase shares of the Company’s common stock, par value $0.001 per share (“Common Stock”). The Company issued the January Warrants to the Investor representing the right to acquire an aggregate of 15,000,000 shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”). The January Warrants contain an exercise price of $2.00 per share.

 

The Note carries an interest rate of 6% per annum and matures on the 12-month anniversary of the Issuance Date (as defined in the Note). The Note contains a voluntary conversion mechanism whereby the Noteholder may convert at any time after the Issuance Date, in whole or in part, the outstanding balance of the Note into shares of the Common Stock at a conversion price of $2.00 per share (the “Conversion Shares”). The Note shall be a senior obligation of the Company and its subsidiaries. The Note contains customary events of default (each an “Event of Default”). If an Event of Default occurs, interest under the Note will accrue at a rate of twelve percent (12%) per annum and the outstanding principal amount of the Note, plus accrued but unpaid interest, liquidated damages and other amounts owing with respect to the Note will become, at the Note holder’s election, immediately due and payable in cash. Upon completion of a Change of Control (as defined in the Note), the Note’s holder may require the Company to purchase any outstanding portion of the Note in cash at a price in accordance with the terms of the Note.

 

The Investor fully converted $12,000,000 of principal and $41,690 of interest into 6,020,845 of the Company’s common shares. The principal and interest is fully paid as of September 30, 2021.

 

Pursuant to the Purchase Agreement, the Investor received a Warrant in an amount equal to 250% of the shares of Common Stock initially issuable to each Investor pursuant to the Investor’s Note. The Warrant contains an exercise price of $2.00 per share. In connection with the closing of the Offering, the Warrant was issued to purchase an aggregate of 15,000,000 shares of Common Stock (the “Warrant Shares”). As of September 30, 2021, the Investor has exercised 15,000,000 warrants.

 

The Company also entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”). The Registration Rights Agreement provides that the Company shall (i) file with the Securities and Exchange Commission (the “Commission”) a Registration Statement by 30 days following the Closing Date to register the Conversion Shares and Warrant Shares (the “Registration Statement”); and (ii) use all commercially reasonable efforts to have the Registration Statement declared effective by the Commission within 60 days following the Closing Date or at the earliest possible date, or 75 days following the Closing Date if the Registration Statement receives comments from the Commission.

 

Palladium Capital Group, LLC (the “Placement Agent”) acted as placement agent for the Offering. The Placement Agent received cash compensation of $1,080,000 (8% of the gross proceeds to the Company plus an additional 1% of the gross proceeds to the Company for non-accountable expenses). The Placement Agent also received a Warrant dated January 25, 2021 granting the Holder the right to purchase 480,000 shares of the Company’s common stock at an exercise price of $2.00 with an expiration date of January 25, 2026.

 

On May 24, 2021, the Company entered into a warrant exercise agreement (the “May 2021 Warrant Agreement”) with the Investor who agreed to exercise 2,870,000 shares of Common Stock underlying the January Warrants and the Company agreed to issue additional warrants, to purchase shares of Common Stock at a per-share exercise price equal to $3.20 (the “Incentive Warrants”, all pursuant to the terms and conditions set forth in the May 2021 Warrant Agreement. At the Closing (as defined in Section 2(b) of the May 2021 Warrant Agreement), the parties shall execute and deliver a registration rights agreement, (the “Registration Rights Agreement”), pursuant to which the Company will agree to register the shares of Common Stock underlying the Incentive Warrants. During the nine months ended September 30, 2021, the Investor exercised 13,070,000 warrants and received 13,070,000 incentive warrants.

 

Subject to the terms of May 2021 Warrant Agreement, (i) the Investor shall pay to the Company an amount equal to the exercise price of the January Warrants in effect as of the date of such exercise multiplied by 2,870,000 shares (as adjusted for any share split or similar transaction after the date hereof) (the “Exercised Warrant Shares”) and (ii) the Company shall issue and deliver Incentive Warrants to the Investor to initially purchase an aggregate number of shares equal to the number of Exercised Warrant Shares, which number of shares shall be subject to adjustment, including the provision of Incentive Warrants on a one-for-one basis for the additional exercise of each January Warrant on or prior to June 1, 2021.

 

The May 2021 Warrant Agreement includes customary representations, warranties and covenants, and customary conditions to closing, expense and reimbursement obligations and termination provisions.

 

Jefferson Street Capital Financing

 

On July 29, 2020, the Company entered into a Securities Purchase Agreement (the “Agreement”) with Jefferson Street Capital, LLC (the “Investor”) wherein the Company issued the Investor a Convertible Promissory Note (the “Note”) in the amount of $224,000 ($24,000 OID). The Note has a term of six (6) months, is due on January 29, 2021 and has a one-time interest charge of 2%. In addition, the Company issued the Investor 14,266 shares of Common Stock (the “Origination Shares”) as an origination fee. The transaction closed on July 29, 2020. On January 28, 2021, the Company paid all outstanding principal and interest in the amount of $260,233.

 

25

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 10 — Debt — (Continued)

 

On April 7, 2020, the Company entered into a Securities Purchase Agreement (the “Agreement”) with Jefferson Street Capital, LLC (the “Investor”) wherein the Company issued the Investor a Convertible Promissory Note (the “Note”) in the amount of $168,000 ($18,000 OID). The Note has a term of six (6) months, is due on October 7, 2020 and has a one-time interest charge of 2%. In addition, the Company issued the Investor 10,700 shares of Common Stock (the “Origination Shares”) as an origination fee. The transaction closed on April 9, 2020. On October 7, 2020, the Company and Investor entered into a Forbearance Agreement (the “Forbearance Agreement”). Under the terms of the Forbearance Agreement, the Company requested and the Investor agreed to temporarily forebear, until the earlier of (i) December 9, 2020 or (ii) at such time as a default shall occur under and pursuant to the Purchase Agreement, the Note or the Agreement, from exercising its right to convert amounts due under the Note into Common Stock of the Company, in exchange for a one-time cash payment forbearance fee equal to $12,500 paid upon execution of the Agreement. On December 23, 2020, the Investor submitted a Notice of Conversion for $45,000 in principal and $750 in fees. On December 29, 2020, the Company issued 41,730 shares to satisfy the conversion obligation. The Investor converted $54,830 of principal into 54,830 of the Company’s common shares. The Note was paid in full on February 1, 2021.

 

BHP Capital Financing

 

On April 7, 2020, the Company entered into a Securities Purchase Agreement (the “Agreement”) with BHP Capital NY Inc. (the “Investor”) wherein the Company issued the Investor a Convertible Promissory Note (the “Note”) in the amount of $168,000 ($18,000 OID). The Note has a term of six (6) months, is due on October 7, 2020 and has a one-time interest charge of 2%. In addition, the Company issued the Investor 10,700 shares of Common Stock (the “Origination Shares”) as an origination fee. The transaction closed on April 9, 2020. The note was paid in full on January 29, 2021.

 

26

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 10 — Debt — (Continued)

 

Notes Payable – Lomotif Private Limited

 

Lomotif Private Limited notes payable consist of the following obligations at September 30, 2021:

 

    Original Principal     Additional Principal     Carrying Value  
                   
  $     $     $  
Note issued on February 10,2021 with a maturity date on February 9, 2023 and an annual interest rate of 3%. The principal of the note had the option to automatically convert into common stock based on the valuation at the time of a qualified financing round with accrued interest being forgone or receive a payment equal to the sum of one and a half times (1.5x) the purchase amount. $ 100,000       50,000       150,000  
Total   $ 100,000     $ 50,000     $ 150,000  

 

Lomotif Private Limited notes payable – related parties consist of the following obligations at September 30, 2021:

 

    Original Principal     Unamortized Discount     Carrying Value  
                   
Note issued to Zash Global Media and Entertainment on February 23, 2021 with a maturity date on February 22, 2028 and an annual interest rate of 2%.   $ 1,500,000     $ -     $ 1,500,000  
Note issued to Zash Global Media and Entertainment on March 30, 2021 with a maturity date on March 28, 2028 and an annual interest rate of 2%.   $ 1,000,000       -       1,000,000  
Total   $ 2,500,000     $ -     $ 2,500,000  

 

32E Financing

 

On December 4, 2019, the Company agreed to issue and sell to 32 Entertainment LLC (“32E”) a 10% Senior Secured Note (the “32E Note”), in the principal amount of $250,000. The maturity date of the 32E Note is December 4, 2020. In addition, the Company issued to 32E 10,000 shares of common stock as an inducement to 32E to purchase the 32E Note. The fees were recorded as a debt discount and amortized over the term of the note. The $250,000 of proceeds from the 32E Note was used for general working capital needs of the Company and the repayment of debt related to Horberg Enterprises. On May 19, 2020, the Company entered into an Amendment (the “Amendment”) to the 32E Note. Under the terms of the Amendment, the Company issued to 32E an Amended Subordinate Secured Note (the “Replacement Note”) in the principal amount of $200,000 that accrued interest at 16% annually and matured on May 21, 2021. On May 28, 2020, the Company paid $50,000 toward the principal plus interest in the amount of $6,250 for a total of $56,250. 32E also received 40,000 restricted stock units and surrendered the warrant issued to it in the December 4, 2019 financing transaction. The note was paid in full on January 28, 2021.

 

Promissory Notes

 

On January 2, 2020, Ed Roses, LLC (the “Partnership”) entered into a Loan Agreement (the “Agreement”) with Sook Hyun Lee (the “Lender”). Under the terms of the Agreement, the Lender agreed to lend $150,000 to the Partnership for general working capital. The Loan is due on April 15, 2020 (the “Maturity Date”) and accrues interest at 15% per annum. The Agreement shall automatically renew at the Maturity date for successive 90-day periods unless written notice is remitted by either party. On the Maturity date, the Partnership shall pay the Lender all unpaid principal and interest and a $30,000 commitment fee. The Lender shall have a collateral interest in the accounts receivable of the Partnership, including but not limited to 7 Eleven receivables. As collateral, Edison Nation, Inc. placed 75,000 shares of common stock in reserve. The note was paid in full on March 11, 2021.

 

27

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 10 — Debt — (Continued)

 

On January 10, 2020, the Company entered into a 5% Promissory Note Agreement with Equity Trust Company on behalf of Rawleigh Ralls (“Ralls”) for an aggregate principal amount of $267,000 (the “Ralls Note”), pursuant to which Ralls purchased the Ralls Note from the Company for $250,000 and an original issue discount of $17,000, and the Company issued to Ralls a warrant (the “Ralls Warrant”) to purchase 125,000 shares of the Company’s common stock valued at $86,725 estimated using the Black-Scholes option-valuation model. The Company paid the Note in full on January 27, 2021.

 

On January 15, 2020, the Company entered into a 5% Promissory Note Agreement with Paul J. Solit & Julie B. Solit (“Solits”) for an aggregate principal amount of $107,000 (the “Solit Note”), pursuant to which the Solits purchased the Solit Note from the Company for $100,000 and an original issue discount of $7,000, and the Company issued to the Solits a warrant (the “Solit Warrant”) to purchase 50,000 shares of the Company’s common stock valued at $31,755 estimated using the Black-Scholes option-valuation model. The Company paid the Note in full on January 27, 2021. The Solit Warrant was exercised on January 22, 2021.

 

On January 17, 2020, the Company entered into a 5% Promissory Note Agreement with Richard O’Leary (“O’Leary”) (“Lender”) for an aggregate principal amount of $53,500 (the “O’Leary Note”), pursuant to which O’Leary purchased the O’Leary Note from the Company for $50,000 and an original issue discount of $3,500, and the Company issued to O’Leary a warrant (the “O’Leary Warrant”) to purchase 25,000 shares of the Company’s common stock valued at $16,797 estimated using the Black-Scholes option-valuation model. The Company paid the Note in full on January 27, 2021. The O’Leary Warrant was exercised on February 18, 2021.

 

28

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 10 — Debt — (Continued)

 

Paycheck Protection Program

 

On April 15, 2020, the Company entered into a loan agreement (the “First Choice PPP Loan”) with First Choice Bank under the Paycheck Protection Program (the “PPP”), which was part of the Coronavirus Aid, Relief, and Economic Security Act administered by the United States Small Business Administration (“SBA”). The Company received proceeds of $789,852 from the First Choice PPP Loan. On May 4, 2021, the First Choice PPP loan was forgiven and the carrying value of $789,852 was recorded as a gain on extinguishment as part of interest expense. In accordance with the requirements of the PPP, the Company used the proceeds from the First Choice PPP Loan primarily for payroll costs, subject to thresholds, rent and utilities. The First Choice PPP Loan had a 1.00% interest rate per annum and a maturity date of April 15, 2022 and was subject to the terms and conditions applicable to loans administered by the SBA under the PPP. The First Choice PPP Loan is included in notes payable on the consolidated balance sheet.

 

On May 4, 2020, TBD Safety, LLC, the Company’s wholly owned subsidiary, entered into a loan agreement (the “First Home PPP Loan”) with First Home Bank under the PPP. The Company received proceeds of $62,500 from the First Home PPP Loan. On April 16, 2021, the First Home PPP Loan was forgiven and the carrying value of $62,500 was recorded as a gain on extinguishment as part of interest expense. In accordance with the requirements of the PPP, the Company used the proceeds from the First Home PPP Loan primarily for payroll costs, subject to thresholds, rent and utilities. The First Home PPP Loan had a 1.00% interest rate per annum and a maturity date of May 4, 2022 and was subject to the terms and conditions applicable to loans administered by the SBA under the PPP. The First Home PPP Loan is included in notes payable on the consolidated balance sheet. 

 

Receivables Financing

 

On February 21, 2020, the Company entered into a receivables financing arrangement for certain receivables of the Company not to exceed $1,250,000 at any one time. The agreement allows for borrowings up to 85% of the outstanding receivable based on the credit quality of the customer. The fee is between 1% and 2% of the total invoices financed.

 

On November 12, 2019, the Company entered into a Receivables Purchase Agreement with a financial institution (the “Receivables Purchase Agreement”), whereby the Company agreed to the sale of $250,000 of receivables for $200,000. The proceeds were used for general working capital. The note was paid in full on February 1, 2021.

 

In April 2019, we entered into a receivables financing arrangement for certain receivables of the Company. The agreement allows for borrowings up to 80% of the outstanding receivable based on the credit quality of the customer. The fee is between 1% and 2% of the total invoices financed. The receivables financing arrangement was paid in full and terminated on March 30, 2021.

 

Line of Credit

 

On the Effective Date, the Company (as “Guarantor”) entered into a Secured Line of Credit Agreement (the “Credit Agreement”) with Global and PPE. Under the terms of the Credit Agreement, PPE is to make available to Global a revolving credit loan in a principal aggregate amount at any one time not to exceed $2,500,000. Upon each drawdown of funds against the credit line, Global shall issue a Promissory Note (the “Note”) to PPE. The Note shall accrue interest at 3% per annum and have a maturity date of six (6) months. In the event of a default, any and all amounts due to PPE by Global, including principal and accrued but unpaid interest, shall increase by forty (40%) percent and the interest shall increase to five (5%) percent (the “Default Interest”). The outstanding principal and interest was fully settled and paid as of September 30, 2021 for 575,000 shares of common stock.

 

The scheduled maturities of the debt for the next five years as of September 30, 2021, are as follows:

 

For the Years Ended December 31,   Amount  
2021 (excluding the nine months ended September 30, 2021)     116,610  
2022     122,665,530  
2023     314,386  
2024     -  
2025     -  
Thereafter     -  
 Long-term Debt, Gross    

123,096,526

 
Less: debt discount     (91,613,605 )
Long-term Debt   $ 31,482,921  

 

For the three and nine months ended September 30, 2021, interest expense was $27,012,312 and $42,422,726, respectively, of which $617,314 and $340,231 was related party interest expense. For the three and nine months ended September 30, 2020, interest expense was $847,154 and $1,571,111, respectively of which $75,692 and $152,326 were related party interest expense.

 

29

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 11 — Warrant Liability

 

For the nine months ended September 30, 2021, the Company issued warrants to purchase shares of the Company’s common stock related to multiple private placements. The warrants are as follows:

 

   

Warrant

Shares

   

Exercise

Price

 
Hudson Bay Warrant; June 4, 2021     20,270,406     $ 3.300  
Palladium Capital Warrant; June 4, 2021     115,800     $ 3.300  
Hudson Bay Warrant; July 22, 2021     32,697,548     $ 2.655  
Hudson Bay Series A Warrant; August 19, 2021     9,561,300     $ 2.655  
Hudson Bay Series B Warrant; August 19, 2021*     2,000,000     $ 2.655  
Palladium Capital Group Series A Warrant; August 19, 2021     1,640,000     $ 3.200  
Palladium Capital Group Series B Warrant; August 19, 2021*     160,000     $ 2.655  
Hudson Bay Series A Warrant; September 1, 2021**    

12,000,000

    $

9.000

 
Armistice Capital Series A Warrant; September 1, 2021**    

5,000,000

    $

9.000

 
CVI Investments Series A Warrant; September 1, 2021**     3,000,000     $ 9.000  
Hudson Bay Series B Warrant; September 1, 2021*     2,000,000     $ 9.000  
Palladium Capital Group Series A Warrant; September 1, 2021     1,600,000     $ 2.655  
Palladium Capital Group Series B Warrant; September 1, 2021*     160,000     $ 9.000  
Palladium Capital Group Warrant; July 22, 2021     2,615,804     $ 2.655  
BHP Capital Warrant; July 23, 2021     1,007,194     $ 2.780  

 

* The Series B Warrant has effective exercise price of $0.00 as alternative cashless feature allowing for issuance of shares of common stock at 1:1 ratio of warrant shares.
** On September 8, 2021 and September 14, 2021, Hudson Bay sold 5,000,000 and 3,000,000 of their September 1, 2021 Series A Warrants warrant shares to Armistice Capital Master Fund Ltd. And CVI Investments, Inc., respectively.

 

The warrants are subject to anti-dilution adjustments outlined in the Agreement. The warrants issued in the first quarter were classified as a liability with an initial fair value of $94,876,534, of which $75,156,534 was immediately expensed and $19,720,000 was recorded as a deferred debt discount. The warrants issued in the second quarter were classified as a liability with an initial fair value of $133,699,181 which was immediately expensed. The warrants issued in the third quarter were classified as a liability with an initial fair value of $290,166,663, of which $206,948,147 was immediately expensed and $83,218,516 was recorded as a deferred debt discount. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. The change in fair value of the warrant liability for the three and nine months ended September 30, 2021 was a loss of $287,117,556 and $287,891,003 respectively. As of September 30, 2021, the fair value of the warrant liability was $468,612,700.

 

The warrants were valued using the Monte-Carlo simulation pricing model to calculate the September 30, 2021 fair value of the warrants with the following assumptions:

 

   

Dividend

Yield

    Expected Volatility     Risk-free Interest Rate    

Expected

Life

 
Hudson Bay Warrant; June 4, 2021     0.00 %     131.75 %     0.28 %     2.5 years  
Palladium Capital Warrant; June 4, 2021     0.00 %     131.75 %     0.28 %     2.5 years  
Hudson Bay Warrant; July 22, 2021     0.00 %     131.75 %     0.28 %     2.5 years  
Hudson Bay Series A Warrant; August 19, 2021     0.00 %     131.75 %     0.28 %     2.5 years  
Hudson Bay Series B Warrant; August 19, 2021     0.00 %     131.75 %     0.28 %     2.5 years  
Palladium Capital Group Series A Warrant; August 19, 2021     0.00 %     131.75 %     0.28 %     2.5 years  
Palladium Capital Group Series B Warrant; August 19, 2021     0.00 %     131.75 %     0.28 %     2.5 years  
Hudson Bay Series A Warrant; September 1, 2021     0.00 %     131.75 %     0.28 %     2.5 years  
Hudson Bay Series B Warrant; September 1, 2021     0.00 %     131.75 %     0.28 %     2.5 years  
Palladium Capital Group Series A Warrant; September 1, 2021     0.00 %    

131.75

%    

0.28

%    

2.5 years

 
Palladium Capital Group Series B Warrant; September 1, 2021     0.00 %    

131.75

%    

0.28

%    

2.5 years

 
Palladium Capital Group Warrant; July 22, 2021     0.00 %     131.75 %     0.28 %     2.5 years  
BHP Capital Warrant; July 23, 2021    

0.00

%    

131.75

%    

0.28

%     2.5 years  

 

Note 12 — Related Party Transactions

 

ZASH Global Media and Entertainment Corporation

 

As of September 30, 2021, Lomotif owed ZASH $2,500,000 in original principal amount under two promissory notes. See Note 10 – Debt for further information. In addition, ZASH was performing certain management functions on behalf of ZVV for which ZASH received $3,500,000 during the three and nine months ended September 30, 2021. Our Chairman and member of the board of managers of ZVV, Roderick Vanderbilt, founded ZASH, serves as the President of ZASH, and has a pre-existing personal and business relationship with the current controlling shareholder of ZASH, Theodore Farnsworth. Mr. Farnsworth is also a member of the board of managers of ZVV.

 

Magnifi U, Inc.

 

On October 12, 2021, ZVV entered into a promissory note (the “Magnifi U Note”) with Magnifi U, Inc. (“Magnifi U”), pursuant to which ZVV loaned Magnifi U $1,500,000. The Magnifi U Note bears interest at 3% annually and Magnifi U is obligated to pay the full amount of principal and interest in one balloon payment on October 12, 2023. Our Chief Executive Officer, President and director and member of the board of managers of ZVV, Lisa King, is the founder of Magnifi U and serves as its chief executive officer. ZASH has a 15% ownership interest in Magnifi U resulting from its equity investment of $5,000,000 in Magnifi U. Founded in August 2020, Magnifi U is a personalized and immersive online education platform whose goal is to help its users develop life skills, nurture strengths and live with purpose.

 

Forever 8 Fund, LLC

 

On November 17, 2020, the Company, through its subsidiary, Edison Nation, LLC (the “Vendor”), entered into an Inventory Management Agreement (the “Agreement”) with the Forever 8 Fund, LLC (“F8”), an entity which Christopher B. Ferguson, our former Chairman and Chief Executive Officer, holds a 45% ownership interest. Under the terms of the Agreement, F8 desires to maintain inventory of and sell to Vendor certain Products pursuant to the terms and conditions set forth in the Agreement. As consideration for the inventory management services provided under this Agreement, Vendor agrees to pay F8 a fee for each unit of each Product sold on a Platform determined in accordance with the fee schedule set forth in the applicable Product Schedule (the “Fee Schedule”) based on the Age of Inventory Sold set forth on the Fee Schedule (the “F8 Fees”). Prior to the signing of the agreement, F8 advanced the Vendor $239,283 that was utilized to pay for deposits with the Vendors factories. This Agreement shall commence on the Effective Date and shall continue in full force and effect until January 31, 2022 (the “Initial Term”), unless terminated earlier as provided in this Agreement. The balance outstanding at September 30, 2021 is $0.

 

NL Penn Capital, LP and SRM Entertainment Group LLC

 

As of September 30, 2021 and December 31, 2020, due to related party consists of net amounts due to SRM Entertainment Group LLC (“SRM LLC”) and NL Penn Capital, LP (“NL Penn”), the majority owner of both, which are owned by Chris Ferguson, our former Chairman and Chief Executive Officer. The amount due to NL Penn was assigned to TXC Services, LLC. The amount due to related parties is related to the acquisitions of Pirasta, LLC and Best Party Concepts, LLC offset by operating expenses that were paid by SRM and Edison Nation on behalf of SRM LLC and NL Penn. As of September 30, 2021 and December 31, 2020, the net amount due to related parties was $15,401 and $32,452, respectively. Such amounts are due currently. NL Penn and affiliated entities may lend additional capital to Edison Nation pursuant to terms and conditions similar to the current working capital lenders to Edison Nation such as Franklin Capital. In addition, Edison Nation borrows working capital from Franklin Capital, and Mr. Ferguson is a personal guarantor on the working capital facility provided to Edison Nation by Franklin Capital.

 

Note 13— Commitments and Contingencies

 

Employment Agreements

 

On February 2, 2021, the Company entered into an Employment Agreement (the “Agreement”) with Christopher Ferguson (the “Executive”) for the role of Chief Executive Officer. The Agreement is effective as of November 12, 2020 (the “Effective Date”) and has a term of three (3) years (the “Term”) from the Effective Date. Thereafter, the Agreement shall automatically be renewed and the Term shall be extended for additional consecutive terms of 1 year (each a “Renewal Term”), unless such renewal is objected to by either the Company or the Executive. The Executive’s initial annual base salary shall be $200,000, less applicable withholdings (the “Base Salary”) and 120,000 common shares that shall vest in their entirety on issuance. For 2021, the Executive shall receive a cash bonus in the amount equal to 30% of the annual Base Salary, and an award of 200% shares of the Company’s common stock, which shall vest in their entirety on issuance (the “Principal Market”), which shall be received by the Executive no later than the first 30 days of the current fiscal year. The Executive shall be entitled to 150,000 shares of the Company’s common stock, due immediately upon an increase of 2.5 times the Enterprise Value of the Company on a 5-day closing average from the effectiveness of the Agreement. For clarification, the Enterprise Value as of the Company at the effective date was $25,042,464. Mr. Ferguson tendered his resignation as (i) the Company’s Chief Executive Officer, effective October 25, 2021 and (ii) Chairman of the Board of Directors, effective October 19, 2021.

 

On February 2, 2021, the Company entered into an Employment Agreement (the “Agreement”) with Brett Vroman (the “Executive”) for the role of Chief Financial Officer. The Agreement is effective as of November 12, 2020 (the “Effective Date”) and has a term of three (3) years (the “Term”) from the Effective Date. Thereafter, the Agreement shall automatically be renewed and the Term shall be extended for additional consecutive terms of 1 year (each a “Renewal Term”), unless such renewal is objected to by either the Company or the Executive. The Executive’s initial annual base salary shall be $200,000, less applicable withholdings (the “Base Salary”) and 120,000 common shares that shall vest in their entirety on issuance. For 2021, Executive shall receive a cash bonus in the amount equal to 30% of the annual Base Salary, and an award of 200% shares of the Company’s common stock, which shall vest in their entirety on issuance (the “Principal Market”), which shall be received by the Executive no later than the first 30 days of the current fiscal year. Upon the execution of this agreement, the Executive is entitled to a one-time past performance bonus for the work completed in fiscal years 2018, 2019 and 2020 of 150,000 shares of the Company’s common stock, which shall vest in their entirety on issuance. The Executive shall be entitled to 100,000 shares of the Company’s common stock, due immediately upon an increase of 2.5 times the Enterprise Value of the Company on a 5-day closing average from the effectiveness of the Agreement. For clarification, the Enterprise Value as of the Company at the effective date was $25,042,464. Mr. Vroman initially tendered his resignation as an officer of the Company, effective November 4, 2021, and has accepted the position of Chief Financial Officer and Treasurer of Cryptyde, Inc., a wholly-owned subsidiary of the Company. However, on November 9, 2021, Mr. Vroman and the Company elected to retain Mr. Vroman as Chief Financial Officer of the Company until the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 is filed with the Securities and Exchange Commission on or before November 22, 2021.

 

On February 2, 2021, the Company entered into an Employment Agreement (the “Agreement”) with Brian Mc Fadden (the “Executive”) for the role of Chief Strategy Officer. The Agreement is effective as of November 12, 2020 (the “Effective Date”) and has a term of three (3) years (the “Term”) from the Effective Date. Thereafter, the Agreement shall automatically be renewed and the Term shall be extended for additional consecutive terms of 1 year (each a “Renewal Term”), unless such renewal is objected to by either the Company or the Executive. The Executive’s initial annual base salary shall be $200,000, less applicable withholdings (the “Base Salary”) and 120,000 common shares that shall vest in their entirety on issuance. For 2021, the Executive shall receive a cash bonus in the amount equal to 30% of the annual Base Salary, and an award of 200% shares of the Company’s common stock, which shall vest in their entirety on issuance (the “Principal Market”), which shall be received by the Executive no later than the first 30 days of the current fiscal year. Upon the execution of the Agreement, the Executive is entitled to a one-time signing bonus of 150,000 shares of the Company’s common stock, which shall vest in their entirety on issuance. The Executive shall be entitled to 100,000 shares of the Company’s common stock, due immediately upon an increase of 2.5 times the Enterprise Value of the Company on a 5-day closing average from the effectiveness of the Agreement. For clarification, the Enterprise Value as of the Company at the effective date was $25,042,464. On September 23, 2021, Brian McFadden submitted his resignation effective immediately as the Company’s Chief Strategy Officer in order to accept the role as President of the Company’s newly formed subsidiary, Cryptyde, Inc. The Company and Mr. McFadden shall enter into a new Employment Agreement on terms to be agreed upon within 30 days of his acceptance of the role as President of Cryptyde, Inc.

 

Operating Lease

 

The Company has entered into non-cancellable operating leases for office, warehouse, and distribution facilities, with original lease periods expiring through 2022. In addition to minimum rent, certain of the leases require payment of real estate taxes, insurance, common area maintenance charges, and other executory costs. Differences between rent expense and rent paid are recognized as adjustments to operating lease right-of-use assets on the consolidated balance sheets.

 

Total rent expense for the three and nine months ended September 30, 2021 was $163,911 and $223,188, respectively. Total rent expense for the three and nine months ended September 30, 2020 was $122,943 and $269,709, respectively. Rent expense is included in general and administrative expense on the consolidated statements of operations.

 

As of September 30, 2021, the Company had operating lease liabilities of $- and right of use assets for operating leases of $80,544. During the three and nine months ended September 30, 2021 and 2020, operating cash outflows relating to operating lease liabilities was $5,806 and $80,582, respectively, and the expense for right of use assets for operating leases was $24,163 and $72,490, respectively. As of September 30, 2021, the Company’s operating leases had a weighted-average remaining term of 0.9 years and weighted-average discount rate of 4.5%. Excluded from the measurement of operating lease liabilities and operating lease right-of-use assets were certain office, warehouse and distribution contracts that qualify for the short-term lease recognition exception.

 

30

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 13— Commitments and Contingencies — (Continued)

 

Rental Income

 

Fergco leases a portion of the building located in Washington, New Jersey that it owns under a month-to-month lease. Total rental income related to the leased space for both the three and nine months ended September 30, 2021 was $17,136 and $71,543, respectively, and is included in other income on the consolidated statements of operations. Total rental income related to the leased space for both the three and nine months ended September 30, 2020 was $25,704 and $77,111, respectively, and is included in other income on the consolidated statements of operations.

 

Legal Contingencies

 

The Company is involved in claims and litigation in the ordinary course of business, some of which seek monetary damages, including claims for punitive damages, which are not covered by insurance. For certain pending matters, accruals have not been established because such matters have not progressed sufficiently through discovery, and/or development of important factual information and legal information is insufficient to enable the Company to estimate a range of possible loss, if any. An adverse determination in one or more of these pending matters could have an adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

 

We are, and may in the future become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business.

 

Gerald Whitt, et al. v. Vinco Ventures, CBAV1, LLC, et al.

 

On October 27, 2020, Gerald Whitt, et al, the minority shareholders of Cloud b Inc. (“Whitt Plaintiffs”) filed a civil complaint in the Superior Court of the State of California against Vinco Ventures, Inc., CBAV1, LLC and other parties, alleging fraudulent concealment, breach of fiduciary duty, breach of contract, breach of confidence, intentional misrepresentation, negligent misrepresentation, unfair business practices and civil conspiracy (the “Whitt Complaint”). Defendants have not been served with the Whitt Complaint. On or about June 4, 2021, CBAV1 entered into a settlement agreement with the trustee for Cloud b, Inc., whereby all derivative claims on behalf of Cloud b, Inc. in the Whitt Complaint were released as to CBAV1 and its affiliates, shareholders, officers, directors, employees and other parties. There are a limited number of non-derivative claims against individuals that were not released that are not expected to have any impact on the Company.

 

Vinco Ventures, Inc., et al. v. Milam Knecht & Warner, LLP, Michael D. Milam, Gerald Whitt, Alexander Whitt, et al.

 

On December 31, 2020, Vinco Ventures, Inc., and other parties, filed a complaint against the Whitt Plaintiffs, and other parties, with the United States District Court for Eastern District of Pennsylvania, alleging intentional misrepresentation, negligent misrepresentation, negligence, conspiracy, unfair business practices, abuse of process, civil extortion, trade libel and defamation.  All claims were dismissed and/or settled except for two (2) claims (unfair business practices and defamation) against Gerald Whitt.

 

31

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 14 — Stockholders’ Equity

 

Common Stock

 

The Company is authorized to issue 250,000,000 shares of common stock. As of September 30, 2021 and December 31, 2020, there were 107,021,381 and 14,471,403 shares of common stock issued and outstanding, respectively.

 

On January 29, 2021 (the “Effective Date”), the Company consummated the closing of a private placement offering of $3,300,000 whereby pursuant to the Securities Purchase Agreement entered into by the Company on January 28, 2021 with BHP Capital NY Inc (the “Investor”), the Company issued 1,500,000 shares of restricted common stock and a five (5) year warrant to purchase shares of the Company’s common stock.

 

On July 23, 2021, Vinco entered into a Securities Purchase Agreement (the “Purchase Agreement”) with BHP Capital NY Inc. (the “Purchaser”) whereby Vinco agreed to (i) issue and sell to the Purchaser up to 1,007,194 shares of Vinco’s common stock, par value $0.001 per share (the “Purchased Shares”) at a purchase price of $2.78 per share and (ii) issue warrants (the “Warrants”) to purchase up to 1,007,194 shares of Vinco’s Common Stock (the “Warrant Shares”) with an exercise price of $2.78 per share, resulting in an aggregate of $2,800,000 of Purchased Shares and Warrants. The Warrants are immediately exercisable and have a term of exercise equal to three (3) years. In connection with the Purchase Agreement,

 

During the nine months ended September 30, 2021, warrant shares of 69,212,800 were exercised and the Company received net proceeds of $180,341,414.

 

Preferred Stock

 

On October 16, 2020, the Company filed a Certificate of Designation (the “Designation”) with the Secretary of State of Nevada, which designates 1,000,000 shares of the Company’s preferred stock, par value $0.001 per share, as Series B Convertible Preferred Stock (“Series B”). Pursuant to the terms of the Designation, holders of the Series B shall be entitled to dividends, a liquidation preference and shall have conversion rights. Each share of Series B shall be convertible into 1 share of Common Stock, on or after the twelve-month anniversary of the Original Issue Date at the option of the Holder thereof, for a total not to exceed 1,000,000 shares of Common Stock. The holders of the Series B shall have no voting rights.

 

On February 2, 2021, the Company filed an Amendment to the Certificate of Designation (the “Amendment”) for the Company’s Series B Convertible Preferred Stock (“Preferred Stock”). Under the Amendment, each share of Preferred Stock shall entitle the holder thereof to vote on all matters voted on by the holders of Common Stock, voting together as a single class with other shares entitled to vote at all meetings of the stockholders of the Corporation. With respect to any such vote, each share of Preferred Stock shall entitle the holder thereof to cast the number of votes equal to the number of whole shares of Common Stock into which such shares of Preferred Stock are then convertible (the “Conversion Shares”). Such right may be exercised at any annual meeting or special meeting, or pursuant to any written consent of stockholders.

 

On March 25, 2020, the Company filed a certificate of amendment to the Company’s articles of incorporation with the Secretary of State of the State of Nevada in order to: (i) increase the number of shares of the Company’s authorized preferred stock, par value $0.001 per share, from 0 shares to 30,000,000 shares of preferred stock; (ii) clarify the application of the forum selection clause in the Company’s amended and restated articles of incorporation, specifically that such clause does not apply to federal causes of actions arising under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and (iii) include affirmative changes to correspond to the Company’s First Amended and Restated Bylaws, confirming that the Company’s shareholders may vote by written consent.

 

On May 26, 2021, the Company issued 764,618 shares of common stock valued at $1,276,912 upon conversion of the Company’s Series B Preferred Stock.

 

The Company is authorized to issue 30,000,000 shares of preferred stock. As of September 30, 2021 and December 31, 2020, there were 0 and 764,618 shares of Series B Preferred Stock issued and outstanding, respectively.

 

Stock-Based Compensation

 

On September 4, 2021, the Company’s board of directors approved the Vinco Ventures, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the issuance of up to 9,000,000 (9,000,000 remaining as of November 19, 2021) shares of common stock to help align the interests of management and our shareholders and reward our executive officers for improved Company performance. Stock incentive awards under the Plan can be in the form of stock options, restricted stock units, performance awards and restricted stock that are made to employees, directors and service providers. Awards are subject to forfeiture until vesting conditions have been satisfied under the terms of the award. The exercise price of stock options is equal to the fair market value of the underlying Company common stock on the date of grant.

 

On July 15, 2020, the Company filed a Registration Statement on Form S-8 registering 1,764,705 (258,376 remaining as of November 19, 2021) shares of common stock to be issued as stock-based incentives under the Company’s Amended and Restated Vinco Ventures, Inc. Omnibus Incentive Plan.

 

On September 26, 2018, the Compensation Committee of the board of directors approved the terms of compensation to be paid to non-employee directors for fiscal year 2018. Compensation for non-employee directors includes an annual retainer of $20,000, an annual committee meeting fee of $5,000, if such director chairs a committee of the board of directors, and an award of options to purchase 20,000 shares of the Company’s common stock (the “Options”). The restricted stock underlying such Options were to vest one year after the grant date. However, the Options were never granted. Accordingly, On November 15, 2019, in lieu of granting the Options, the Company granted each member of the board of directors restricted stock units of 20,000 shares which vested immediately, except for Toper Taylor who received 30,000 shares in November 2019, related to the share amounts due to him under the terms of his agreement with us. In addition, the Company granted each non-employee director restricted stock units of 30,000 shares, which vested on January 1, 2020.

 

On September 6, 2018, the Company’s board of directors approved an amendment and restatement of the Company’s omnibus incentive plan solely to reflect the Company’s name change to Edison Nation, Inc. Thus, the Edison Nation, Inc. Omnibus Incentive Plan (the “Plan”) which remains effective as of February 9, 2018, provides for the issuance of up to 1,764,705 (17,220 remaining as of November 19, 2021) shares of common stock to help align the interests of management and our stockholders and reward our executive officers for improved Company performance. Stock incentive awards under the Plan can be in the form of stock options, restricted stock units, performance awards and restricted stock that are made to employees, directors and service providers. Awards are subject to forfeiture until vesting conditions have been satisfied under the terms of the award. The exercise price of stock options is equal to the fair market value of the underlying Company common stock on the date of grant.

 

The following table summarizes stock option awards outstanding at September 30, 2021:

 

    Shares    

Weighted

Average

Exercise

Price

   

Remaining

Contractual

Life in

Years

   

Aggregate

Intrinsic Value

 
Balance, December 31, 2020     80,000     $ 7.01       3.2            -  
Granted     -       -       -       -  
Balance, September 30, 2021     80,000     $ 7.01