Vinco
Ventures, Inc. and Subsidiaries
CONSOLIDATED
BALANCE SHEETS
The
accompanying notes are an integral part of these condensed consolidated financial statements.
Vinco
Ventures, Inc. and Subsidiaries
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
The
accompanying notes are an integral part of these condensed consolidated financial statements.
Vinco
Ventures, Inc. and Subsidiaries
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
|
|
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.
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.
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.
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.
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
was
not 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.
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:
Schedule of Disaggregation of Revenue
|
|
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
|
|
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:
Schedule of Revenue by Geographical Areas
|
|
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
|
|
|
0*
|
%
|
|
|
17
|
%
|
|
|
0*
|
%
|
|
|
10
|
%
|
*
|
Region
did not represent greater than 10% of total net revenue.
|
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.
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
|
|
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:
Summary of 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:
Summary of Preliminary Purchase Price Allocation of Fair Values of the Assets Acquired and Liabilities Assumed
|
|
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.
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:
Summary of Aggregate Purchase
Price Consideration Paid
|
|
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.
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.
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:
Schedule of Variable Interest Entities
|
|
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
|
|
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
|
)
|
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.
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.
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:
Schedule of Short-Term Investments
|
|
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:
Schedule of Property and Equipment
|
|
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:
Schedule of Loan Receivable
|
|
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)
|
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.
|
|
(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.
|
|
(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.
Note
9 — Intangible assets, net
As
of September 30, 2021, intangible assets consisted of the following:
Schedule
of Intangible Assets
|
|
|
|
|
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:
Schedule
of Intangibles Assets Future Amortization Expenses
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:
Schedule of Long-term Debt
|
|
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
|
|
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.
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.
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.
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:
Schedule
of Related Party Notes Payable
|
|
Original Principal
|
|
|
Additional Principal
|
|
|
Carrying Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,260,843
|
|
|
$
|
132,562
|
|
|
$
|
1,128,281
|
|
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.
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.
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:
Schedule of Maturities of Long-term Debt
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.
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:
Schedule of Warrants Issued to Purchase Common Stock
|
|
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:
Schedule of Warrant 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.
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.
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:
Schedule of Share-based Compensation, Stock Options, Activity
|
|
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
|
|
|
|
2.9
|
|
|
|
-
|
|
Exercisable, September 30, 2021
|
|
|
80,000
|
|
|
$
|
7.01
|
|
|
|
2.9
|
|
|
|
-
|
|
As
of September 30, 2021, there were no unvested options to purchase shares of the Company’s common stock and there was no unrecognized
equity-based compensation expense that the Company expected to recognize over a remaining weighted-average period.
Other
Stock Awards
The
Company issued 2,891,227
shares of common stock to employees for services
valued at $7,590,664
for the nine months ended September 30, 2021.
The
Company issued 1,891,272
shares of common stock to vendors for services
valued at $4,213,602
for the nine months ended September 30, 2021.
From
time to time, the Company grants shares of common stock to consultants and non-employee vendors for services performed. The awards are
valued at the market value of the underlying common stock at the date of grant and vest based on the terms of the contract which is usually
upon grant.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
14 — Stockholders’ Equity (continued)
BHP
Capital NY Inc. Private Placement – July 2021
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,
Vinco
and the Purchaser also entered into a Registration Rights Agreement, dated as of July 23, 2021, whereby Vinco agree to prepare and file,
within 40 days of the closing, with the SEC a registration statement covering the resale of all Purchased Shares and Warrant Shares issued
and sold to the Purchaser pursuant to the Purchase Agreement. In the event that such registration statement is not filed within 40 days
of the closing, or if such registration statement does not become effective within 80 days of its filing, Vinco shall issue an additional
50,360 shares of Common Stock and warrants to purchase an additional 50,360 shares of Common Stock to the Purchaser.
BHP
Capital NY Inc. Private Placement – January 2021
On
January 28, 2021 (the “Effective Date”), the Company consummated the closing of a private placement offering (the “Offering”)
whereby pursuant to the Securities Purchase Agreement (the “SPA”) entered into by the Company on January 28, 2021 with BHP
Capital NY Inc (the “Investor”), the Company issued 1,500,000 shares of restricted common stock and a five (5) year warrant
(the “Warrant”) to purchase shares of the Company’s common stock, par value $0.001 per share (“Common Stock”).
Pursuant
to the SPA, the Investor received a Warrant in an amount equal to 100% of the shares of Common Stock issued to the Investor under the
SPA. The Warrant contains an exercise price of $2.20 per share. In connection with the closing of the Offering, the Warrant was issued
to purchase an aggregate of 1,500,000 shares of Common Stock (the “Warrant Shares”).
The
Company also entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”). The Registration
Rights Agreement provides that the Company shall (i) file with the Securities and Exchange Commission (the “Commission”)
a Registration Statement by 30 days following the Closing Date to register the Conversion Shares and Warrant Shares (the “Registration
Statement”); and (ii) use all commercially reasonable efforts to have the Registration Statement declared effective by the Commission
within 60 days following the Closing Date or at the earliest possible date, or 75 days following the Closing Date if the Registration
Statement receives comments from the Commission.
On
June 4, 2021, the Company entered into a warrant exercise agreement (the “Agreement”) with BHP Capital NY Inc. (“BHP”)
who agreed to exercise a portion of 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 Agreement. At the Closing (as defined in Section 2(b) of the 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 Agreement, (i) BHP shall pay to the Company an amount equal to
the exercise price in effect as of the date of such exercise multiplied by 1,500,000 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 BHP 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 upon the exercise of further shares pursuant to the January Warrants. During the nine months ended
September 30, 2021, the Investor exercised 1,500,000 warrants and received 1,500,000 incentive warrants.
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
15 — Discontinued Operations
Discontinued
operations are accounted for in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Section 360-10-35 Property, Plant and Equipment. In accordance with FASB ASC Section 360-10-35,
the net assets of discontinued operations are recorded on our consolidated balance sheets at carrying value. The results of operations
of discontinued operations are segregated from continuing operations and reported separately as discontinued operations in our consolidated
statements of loss and comprehensive loss.
On
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.
On
November 30, 2020, the Company (the “Seller”) and its wholly owned subsidiary, SRM Entertainment, LTD (“SRM”)
entered into a Stock Exchange Agreement (the “Exchange Agreement”) with Jupiter Wellness, Inc. (“Jupiter”)(the
“Buyer”). Under the terms of the Exchange Agreement, the Buyer agreed to purchase all outstanding shares of common stock
(the “Exchange Shares”) issued by SRM from the Seller. As consideration for the purchase of the Exchange Shares, the Buyer
agreed to exchange 200,000 shares of its restricted common stock (the “Consideration Shares”), symbol JUPW as listed on NASDAQ
Capital Markets. The Company made the decision to divest the amusement park business due to the slow re-openings of amusement parks around
the world and the investment that would have been needed to remain open and the investment required to relaunch as the amusement parks
begin to get back to full capacity.
The
following table presents the carrying values of the assets and liabilities of our discontinued operations at September 30, 2021 and December
31, 2020, respectively:
Schedule of Balance Sheets and Income Operations of Discontinued Operations
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
-
|
|
|
$
|
220,964
|
|
Inventory
|
|
|
-
|
|
|
|
559,737
|
|
Prepaid expenses and other current assets
|
|
|
-
|
|
|
|
261,980
|
|
Total current assets
|
|
|
-
|
|
|
|
1,042,680
|
|
Intangible assets, net
|
|
|
-
|
|
|
|
5,739,524
|
|
Total assets
|
|
$
|
-
|
|
|
$
|
6,782,204
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
-
|
|
|
$
|
487,454
|
|
Total current liabilities
|
|
$
|
-
|
|
|
$
|
487,454
|
|
The
following table presents the summary results of operations of our discontinued operations for the three and nine months ended September
30, 2021 and 2020, respectively:
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
For the Three Months
Ended September 30,
|
|
|
For the Nine Months
Ended September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Revenues, net
|
|
$
|
-
|
|
|
$
|
1,729,006
|
|
|
|
697,883
|
|
|
|
5,148,814
|
|
Cost of revenues
|
|
|
-
|
|
|
|
1,163,630
|
|
|
|
490,195
|
|
|
|
3,103,171
|
|
Gross profit
|
|
|
-
|
|
|
|
565,376
|
|
|
|
207,688
|
|
|
|
2,045,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
-
|
|
|
|
856,883
|
|
|
|
385,888
|
|
|
|
2,253,011
|
|
Operating income
|
|
|
-
|
|
|
|
(291,507
|
)
|
|
|
(178,200
|
)
|
|
|
(207,366
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on disposal
|
|
|
(153,320
|
)
|
|
|
-
|
|
|
|
(4,933,900
|
)
|
|
|
4,911,760
|
|
Total other (expense) income
|
|
|
(153,320
|
)
|
|
|
-
|
|
|
|
(4,933,900
|
)
|
|
|
4,911,760
|
|
(Loss) income before income taxes
|
|
|
(153,320
|
)
|
|
|
(291,507
|
)
|
|
|
(5,112,100
|
)
|
|
|
4,704,394
|
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net (loss) income
|
|
$
|
(153,320
|
)
|
|
$
|
(291,507
|
)
|
|
|
(5,112,100
|
)
|
|
|
4,704,394
|
|
Vinco
Ventures, Inc. and Subsidiaries
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
16 — Subsequent Events
On October 1, 2021, ZVV
and ZASH and AdRizer LLC (“AdRizer”) entered into a Letter of Intent (as amended, the “LOI”) for ZASH or ZVV
to acquire all the outstanding membership and other equity interests of AdRizer. The LOI has an exclusivity period ending on December
31, 2021. The parties are continuing their negotiations of the structure of the transaction and preparation of definitive
documentation for the acquisition. Pursuant to current discussions among the parties, ZVV is expected to acquire all the outstanding
membership/equity interests in AdRizer, either via merger, purchase of such membership/equity interests from the AdRizer members, or
other transaction structure, as mutually agreed, such
that AdRizer will continue as a wholly owned subsidiary of ZVV, for an aggregate purchase price of $108,000,000 payable
as follows: (i) $15,000,000 payable
in cash at closing, to be funded by Vinco Ventures as a capital contribution to ZVV, (ii) $10,000,000 in
cash to be funded by Vinco Ventures as a capital contribution to ZVV, which will be placed in escrow for a period of 12 months after
the closing to secure the indemnification obligations of the AdRizer members, and (iii) $83,000,000 in
common stock of ZASH or Vinco Ventures to be issued two years from (or otherwise locked up for two years from) the closing date,
subject to conditions to be agreed upon. The stock consideration value will be based on a mutually agreeable
valuation.
In addition, ZASH or
ZVV are expected to invest a minimum of $5,000,000
of cash in AdRizer for its post-closing working capital needs, to be funded $1,000,000 at
closing and $1,000,000
every 3 months thereafter.
On October 2, 2021, Vinco
Ventures, Inc.’s wholly owned subsidiary, Cryptyde, Inc., filed Articles of Organization with the State of Nevada to form CW Machines,
LLC. The formation of CW Machines, LLC is part of a joint venture with Wattum Management, Inc.
On
October 8, 2021, the Company issued 56,250
shares of common stock to a consultant for services performed in connection
with EVNT Platform, LLC.
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.
On October 14, 2021, the Company’s
wholly owned subsidiary, Cryptyde, Inc. (the “Lender”), entered into a Senior Secured Promissory Note (the
“Note”) with Wattum Management, Inc. (the “Borrower”) to loan funds in the principal amount of $4,000,000.
The Note bears interest at 5%
annually, to be amortized over 25
years and the Borrower shall pay the full amount of principal and interest in one balloon payment on October
12, 2026 (the “Maturity Date”). The Note is secured, through a Security Agreement, by all current and future
assets of the Borrower. The transaction closed on October 26, 2021.
On
October 19, 2021, the Company issued 6,672,710 shares of common stock to note holders, EVNT Platform, LLC preferred members, consultants
and employees and directors.
On
October 26, 2021, the Company issued 7,222,804 shares of common stock to warrant holders for the exercise of warrants.
On
October 27, 2021, the Company issued 1,007,194 shares of common stock to warrant holders for the exercise of warrants.
The
following events occurred on October 19, 2021:
Christopher
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.
Lisa
King has been appointed as the Company’s Chief Executive Officer and President, effective October 25, 2021. The Company and
Ms. King are entering into an employment agreement to be effective as of October 25, 2021.
Stephen
Garrow has been appointed as the Company’s Chief Operating Officer, effective October 25, 2021. The Company and Mr. Garrow are entering into an employment agreement to be effective as of October 25, 2021.
Philip Jones is expected
to be appointed as the Company’s Chief Financial Officer, effective on or about November 23, 2021. The Company and Mr. Jones plan
to enter into an employment agreement to be effective as of the date of Mr. Jones’ appointment as the Chief Financial Officer.
On November 1, 2021, the Company announced that
its wholly owned subsidiary, Cryptyde, Inc., had entered into a joint venture with Wattum Management, Inc. to launch a newly formed entity,
CW Machines, LLC, to sale turnkey BTC mining operations.
On November 8, 2021, Cryptyde, Inc. filed its
Form 10 registration statement with the United States Securities and Exchange Commission in connection with the planned spinoff of selected
subsidiaries, Cryptyde, Inc., Ferguson Containers, Inc., EVNT Platform, LLC and Cryptyde Shared Services, LLC.
On November 11, 2021, the Company and Hudson
Bay Master Fund Ltd (the “Holder”) entered into a Warrant Exercise Agreement (the “November WEA”), whereby,
the Company and the Holder agreed the Holder would exercise 2,438,700
July Warrants and 9,561,300
August Series A Warrants (collectively, the “Exercised Warrants”) representing the right to acquire shares (the
“Exercised Warrant Shares”) of Common Stock and the Company would issue additional warrants to purchase
shares of Common Stock at a per-share exercise price equal to $4.527
(the “November Warrants” and, together with the July Warrants and the August Series A Warrants, the
“Warrants”), and to amend the
September Warrant issued by the Company to the Holder pursuant to that certain Warrant Exercise Agreement dated as of
September 1, 2021 by and among the Company and the Holder (“September WEA”) and the July Notes.
The proceeds to the Company
from the exercise of the Exercised Warrants were approximately $31.86 million, before deducting certain expenses incurred by the Company
in connection with the November WEA and, including, but not limited to, expenses of the Holder’s legal counsel.
Subject to the satisfaction
(or waiver) of the conditions set forth in the November WEA, (i) the Holder shall pay to the Company an amount equal
to the Exercise Price multiplied by the applicable Exercised
Warrant Shares, (ii) the Company shall issue and deliver to the Holder the Exercised Warrant Shares of the
Exercised Warrants, and (iii) the Company shall issue and deliver to the Holder November Warrants to initially purchase an aggregate
number of shares equal to 125% of the number of Exercised Warrant Shares plus the number of any other shares issued to the Holder upon
the exercise of other outstanding warrants or the conversion of the Company’s outstanding convertible notes prior to December 31,
2021, which number of shares shall be subject to adjustments as set forth therein. Additionally, pursuant to the November
WEA, the “Minimum Cash” requirement contained in the July Note was amended to provide that the Minimum Cash
amount is not required at any time to exceed the Principal outstanding at such time.
Additionally, the
parties executed and delivered a Registration Rights Agreement (the “Registration Rights Agreement”), pursuant to which the
Company agreed to file an initial registration statement with respect to the shares of Common Stock underlying the Registrable Securities by January 15, 2022.
Pursuant
to the November WEA, by no later than one hundred twenty (120) calendar days after the Closing Date, the Company shall file with the Securities and Exchange Commission a definitive proxy statement for a special meeting
of the stockholders of Common Stock (the “Stockholder Meeting”), soliciting each such stockholder’s affirmative vote
at the Stockholder Meeting for approval of resolutions providing for (i) the issuance of all the shares of Common Stock issuable
pursuant to the November Warrants,
(ii) approving any voluntary adjustments that the Company may offer pursuant to the terms of any of the November Warrants, and (iii)
the increase in authorized number of shares of Common Stock of the Company to at least 300,000,000. The Stockholder Meeting shall be
promptly called and held not later than one hundred fifty (150) calendar days after the Closing Date (the “Stockholder Meeting
Deadline”). In the event Stockholder Approval is not obtained on or prior to the Stockholder Meeting
Deadline, the Holder can elect to, instead of receiving the November Warrant Shares, receive an aggregate cash payment from the Company
equal to such number of November Warrant Shares multiplied by $0.65 for each such November
Warrant Share.
On
November 11, 2021, the Company’s wholly owned subsidiary, Cryptyde, Inc. (“TYDE”), and Hudson Bay Master
Fund Ltd (the “Holder”) entered into an Amendment Agreement (the “Amendment
Agreement”) whereby the parties agreed that, subject to the satisfaction (or waiver) of the conditions set forth in the
Amendment Agreement: (i) the Holder shall amend its right to receive the Spin-off Distribution in the form of shares of TYDE’s
common stock (“TYDE Common Stock”) and to receive instead a warrant issued by TYDE to purchase TYDE Common Stock for
such number of shares of TYDE Common Stock that the Holder would have been entitled to receive in the Spin-off Distribution had the
Holder exercised all its Company Warrants on the record date for the Spin-off Distribution (the “TYDE Warrant”); and
(ii) contemporaneously with the entry into the Amendment Agreement, for TYDE and the Holder to enter into a registration rights
agreement (the “TYDE Registration Rights Agreement”) to provide for all Registrable Securities to be covered by a
registration statement filed and declared effective on or prior to the distribution date of the Spin-off Transactions. The Company
agreed to issue to the Holder the November Warrant pursuant to the terms and conditions set forth in the November WEA and (ii) TYDE
agreed to issue to the Holder the TYDE Warrant pursuant to the terms and conditions set forth in the Amendment
Agreement.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion of
our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related
notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission. In addition to
our historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect
our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form
10-Q, particularly in Part II, Item 1A, “Risk Factors.”
Overview
Vinco Ventures is Focused on Digital Media
and Content Technologies
Our Company was incorporated on July 18, 2017
in the State of Nevada under the name of Idea Lab X Products, Inc, On September 12, 2017, we filed an Amendment to our Articles of Incorporation
changing the name to Xspand Products Lab, Inc., and then on September 7, 2018 we filed an Amendment to our Articles of Incorporation
changing the name to Edison Nation, Inc. 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.
In connection with the recent acquisition of Lomotif Private Limited (“Lomotif”)
by ZVV Media Partners, LLC (“ZVV”), our joint venture with ZASH Global Media and Entertainment Corp., we are transitioning
from focusing on end-to-end consumer product innovation, development and commercialization to digital media and content technologies.
We currently operate in the following markets through our subsidiaries and consolidated variable interest entities:
Lomotif –
Lomotif is a video-sharing social networking platform that is democratizing video creation. Since the company
was co-founded by video enthusiast Paul Yang in 2014, Lomotif has been granted three technology patents focused on empowering
creators to share and watch short videos with ease through remix and collaboration. Yang’s bold vision is to build the world’s largest
video vocabulary to accelerate the world’s transition to video-first expression. Lomotif, available in the Apple and Google stores, is
a downloadable app that has grown worldwide as a grassroots social community with dedicated
users spanning from Asia to South America to the U.S.
Cryptyde – Cryptyde, Inc.
is focused on leveraging blockchain technologies to disrupt consumer facing industries. Rather than create a new industry, Cryptyde seeks
to alter an existing one allowing us to gain adoption and reach scale faster. With this focus, Cryptyde first entered the music streaming
industry with its launch of E-NFT.com; a streaming music NFT platform. With platform success Cryptyde has expanded into the crypto mining
ecosystem, leveraging its knowledge of blockchain technologies with the goal of bringing bitcoin mining to a price point for the everyday
consumer.
|
●
|
E-NFT.com - A new way for artists and content owners to distribute their
intellectual property. Cryptyde’s proprietary streaming process seeks to make NFT’s affordable by reducing mining fees with
the goal of enabling fans to engage with content in new ways with Cryptyde’s multi-media delivery system.
|
|
●
|
Full Scale AR / VR Bringing Digital to Life – Augmented and Virtual
Reality provide an in-depth full scale experience for the consumer. Whether experienced alone, or in conjunction with a real world physical
event AR/VR seeks to provide consumers with the ability to bring the metaverse to life. Whether by reliving a legendary performance or
experiencing a new one, Cryptyde’s AR/VR platforms plans to offer full scale, photo realistic experiences.
|
|
●
|
CW Machines LLC – CW Machines, Cryptyde’s consumer focused
bitcoin mining solution is focused on bringing bitcoin mining to the consumer level. By combining equipment sales, financing, co-location
and management services, CW Machines plans to provide everything needed from start to finish for a consumer packaged into a one stop,
one payment membership program.
|
Ferguson Containers –
Ferguson Containers, Inc. (“Ferguson”) manufactures and sells custom
packaging for virtually any product. In Ferguson’s experience, packaging has the capability to “tell” the products story,
generating increased product awareness, promote brand image, and drive unit growth. Ferguson’s senior management has more than 100
years of combined experience marketing, producing and delivering packaging materials. A hallmark of its operation is its quick production
cycle. Ferguson can often begin a production run within minutes of receipt of an order. Many of Ferguson’s products are manufactured
from 100% post-consumer recycled material. When production is complete, Ferguson typically ships the product using its own trucks rather
than relying on a common carrier. Ferguson does not have long-term agreements with its customers, and instead manufactures and sells its
packaging products subject to purchase orders from its customers. No assurances can be given that Ferguson’s customers will continue
to submit purchase orders for new products.
Edison Nation – Edison Nation, LLC matches
an innovator’s intellectual property with vertical product category leaders in a licensing structure whereby the innovator can
earn up to 50% of the contracted licensing fee. Product categories include kitchenware, small appliances, toys, pet care, baby products,
health & beauty aids, entertainment venue merchandise, and housewares.
Market
Strategy
Today’s consumers have shorter attention
spans and are unlikely to commit to lengthy content unless they are convinced of its value. The right piece of short-form content enables
brands to rapidly communicate key messages, improving the asset’s ability to capture the attention of target audiences. Short-form
content is also a ready-made resource for users who consume content on mobile devices. Additionally, video generates a much larger number
of shares than long-form content, text or image posts. By investing in Lomotif, a short-form video platform and related growth initiatives
and continuing to leverage our B.I.G. (Buy. Innovate. Grow.) strategy, we believe we can grow into a robust and disruptive media and
entertainment company worldwide, with tens of millions of users around the world that we expect will enable us to leverage our content
globally. Our ability to successfully implement our business plans including acquisition plans and achieving our growth strategy will depend
upon our ability to obtain financing at acceptable terms, attain a reasonable threshold of operating efficiencies and create and expand
revenue sources from the businesses, platforms and technologies we acquired and invested in.
Recently Completed and Pending Key Transactions
Cryptyde Spin-off
On November 8, 2021, our subsidiary Cryptyde,
Inc. (“Cryptyde”) filed a Form 10 registration statement with the Securities and Exchange Commission in connection with our
previously announced planned spin-off of Cryptyde. Cryptyde is focused on leveraging blockchain technology to disrupt consumer facing
industries. Current operations of Cryptyde include E-NFT.com, a streaming music NFT Platform, and CW Machines LLC, a crypto mining ecosystem
which seeks to leverage Cryptyde’s knowledge of blockchain technologies to bring bitcoin mining to a price point for the everyday
consumer. Cryptyde will also include our Ferguson Containers business. In connection with the spin-off, Cryptyde is expected to become
an independent, publicly traded company. The spin-off is expected to become effective in early 2022.
ZVV’s Acquisition of Lomotif Private
Limited
On July 25, 2021, ZVV completed the acquisition
of 80% of the outstanding capital stock on a fully diluted basis of Lomotif for a total purchase price of $109,765,000.
COVID-19
and Impact on Our Consumer Products Business
COVID-19
has caused and continues to cause significant loss of life and disruption to the global economy, including the curtailment of activities
by businesses and consumers in much of the world as governments and others seek to limit the spread of the disease, and through business
and transportation shutdowns and restrictions on people’s movement and congregation.
As
a result of the pandemic, we have experienced, and continue to experience, weakened demand for our historical products. Many of
our customers have been unable to sell our products in their stores due to government-mandated closures and have deferred or significantly
reduced orders for our products. We expect these trends to continue until such closures are significantly curtailed or lifted. In addition,
the pandemic has reduced foot traffic in the stores where our products are sold that remain open, and the global economic impact of the
pandemic has temporarily reduced consumer demand for our products as they focus on purchasing essential goods.
In
the United States and Asia, many of our key accounts remain closed or are operating at significantly reduced volumes. As a result, we
have made the strategic decision to expand our operations through our Edison Nation Medical (“Ed Med”) division. Through
Ed Med, the Company wholesales Personal Protective Equipment (“PPE”) products through an online portal for hospitals, government
agencies and distributors.
Given
these factors, the Company anticipates that the greatest impact from the COVID-19 pandemic in fiscal 2020 occurred in the first quarter
of 2020 resulting in a significant net sales decline as compared to the first quarter of 2019.
In
addition, certain of our suppliers and the manufacturers of certain of our products were adversely impacted by COVID-19. As a result,
we faced delays or difficulty sourcing products, which negatively affected our business and financial results. Even if we are able to
find alternate sources for such products, they may cost more and cause delays in our supply chain, which could adversely impact our profitability
and financial condition.
We
have taken actions to protect our employees in response to the pandemic, including closing our corporate offices and requiring our office
employees to work from home. At our distribution centers, certain practices are in effect to safeguard workers, including a staggered
work schedule, and we are continuing to monitor direction from local and national governments carefully. Additionally, our two retail
locations have been closed until further notice.
As
a result of the impact of COVID-19 on our financial results, and the anticipated future impact of the pandemic, we implemented cost control
measures and cash management actions during 2020, including:
●
Furloughing a significant portion of our employees in the first quarter of 2020;
●
Implementing 20% salary reductions across our executive team and other members of upper-level management in the first and second quarter
of 2020;
●
Executing reductions in operating expenses, planned inventory levels and non-product development capital expenditures throughout 2020;
and
●
Proactively managing working capital, including reducing incoming inventory to align with anticipated sales.
Recent Developments
The
following is a description of recent events regarding our warrant liabilities, important transactions and management transition, which
we believe are important to an understanding of our business, financial position and results of operations.
Warrant
Liabilities
On
January 25, 2021, 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 “Warrant”) to purchase shares of the Company’s common stock,
par value $0.001 per share (“Common Stock”). The Investor converted $11,000,000 of principal and $39,190 of interest into
5,519,595 of the Company’s common shares. 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”).
On
February 23, 2021, the Company consummated the closing of a private placement offering (the “Offering”) whereby pursuant
to the Securities Purchase Agreement (the “Purchase Agreement”) entered into by the Company on February 18, 2021 with
one accredited investor (the “Investor”), the Company issued a Senior Convertible Note for the purchase price of
$10,000,000 (the “Note”) and five (5) year warrants (the “Warrant”) to purchase shares of Common Stock.
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”).
Palladium
Capital Group, LLC. acted as placement agent for both Offerings. The Placement Agent received a Warrant granting the Holder the right
to purchase 480,000 and 1,650,346 shares, respectively, of Common Stock at an exercise price of $2.00 and $3.722, respectively,
with an expiration date of January 25, 2026 and February 23, 2026, respectively.
On
January 29, 2021, 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 Company issued 1,500,000 shares of restricted
common stock and a five (5) year warrant to purchase 1,500,000 shares of the Common Stock.
On
May 24, 2021, the Company entered into a warrant exercise agreement (the “May 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 $3.20
(the “Incentive Warrants”). Subject to the terms of May 2021 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 1.00-for-one basis for the additional exercise of each Existing Warrant.
On
June 4, 2021, the Company entered into a warrant exercise agreement (the “Agreement”) with BHP Capital NY Inc. (“BHP”)
who agreed to exercise a portion of 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”). Subject to the terms of Agreement, (i) BHP
shall pay to the Company an amount equal to the exercise price in effect as of the date of such exercise multiplied by 1,500,000 shares
and (ii) the Company shall issue and deliver Incentive Warrants to BHP 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 upon the exercise of further shares pursuant
to the January Warrants.
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”). Subject to the terms of June 2021 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.
The
warrants are subject to anti-dilution adjustments outlined in the Agreement. The warrants may require cash settlement under certain conditions,
such as a tender offer. The warrants were classified as a liability with an initial fair value at the time of issuance of $228,575,715
of which $208,855,715 was immediately expensed as a loss on issuance of warrants and $19,720,000 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. As of September 30, 2021, the fair value of the warrant liability was $139,695,115. For the three and nine months ended September
30, 2021, the Company recorded a loss of $208,855,715 and $75,156,534, respectively. The warrants are valued using the Black-Scholes
pricing model to calculate the fair value of the warrants.
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 $4.00 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 $4.00 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 is deferred and only due upon the closing of the merger (8% of the gross proceeds to the Company
plus an additional 1% of the gross proceeds to the Company for non-accountable expenses).
On August 18, 2021, the
Company entered into a warrant exercise agreement (the “Agreement”) with Hudson Bay Master Fund Ltd (the “Investor”)whereby
the Parties agreed that, subject to the satisfaction (or waiver) of the conditions set forth in Sections 4 and 5 of the Agreement: (i)
the Investor shall pay to the Company an amount equal to the Exercise Price (as defined in the Existing Warrants) in effect as of the
date of such exercise multiplied by the Existing Warrant Shares (as defined in the Agreement); (ii) the Company shall issue and deliver
to the Investor the Existing Warrant Shares as set forth in Section 1 of the Existing Warrants; (iii) the Company shall issue and deliver
to the Investor additional warrants to purchase an aggregate of 20,500,000 shares of Common Stock at an exercise price of $2.655 per
share, subject to adjustments provided therein (the “August Series A Warrants”); and (iv) the Company shall issue and deliver
to the Investor additional warrants to purchase an aggregate of 2,000,000 shares of Common Stock at an exercise price of $2.655 per share,
subject to adjustments provided therein (the “August Series B Warrants,” and together with the August Series A Warrants,
the “August Warrants”). The terms of the August Series A Warrants and the August Series B Warrants are substantially identical,
except that, upon stockholder approval, the August Series B Warrants will be subject to an Alternate Cashless Exercise, as defined therein.
In addition, pursuant
to the Agreement, the Parties also agreed, among other things, that (i) upon entering into the Agreement, the exercise price of the July
Warrants is reduced to $2.655 per share; and (ii) the definition of “Initial Exercisability Date” (as defined in the June
Incentive Warrant) is amended to mean August 18, 2021. The Parties to the Agreement acknowledge and agree that the transactions contemplated
by each of the Agreement and July SPA are and were permitted under each of the currently outstanding warrants and notes issued by the
Company to the Investor.
On September 1, 2021,
Vinco Ventures, Inc. (the “Company”) entered into a warrant exercise agreement (the “Agreement”) with Hudson
Bay Master Fund Ltd (the “Investor”) whereby the parties agreed that, subject to the satisfaction (or waiver) of the conditions
set forth in Sections 4 and 5 of the Agreement: (i) the Investor shall exercise warrants that were issued on May 24, 2021 and are currently
held by the Investor for 6,900,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”),
at the exercise price set on May 24, 2021; (ii) the Company shall issue and deliver to the Investor warrants to purchase an aggregate
of 20,000,000 shares of Common Stock at an exercise price of $9.00 per share, subject to adjustments provided therein (the “September
Series A Warrants”); and (iii) the Company shall issue and deliver to the Investor warrants to purchase an aggregate of 2,000,000
shares of Common Stock at an exercise price of $9.00 per share, subject to adjustments provided therein (the “September Series
B Warrants,” and together with the September Series A Warrants, the “September Warrants”). The terms of the September
Series A Warrants and the September Series B Warrants are substantially identical, except that, upon stockholder approval, the September
Series B Warrants will be subject to an Alternate Cashless Exercise, as defined therein.
At the Closing (as defined
in Section 2(b) of the Agreement), the parties executed and delivered a Registration Rights Agreement (the “Registration Rights
Agreement”), pursuant to which the Company agreed to file an initial registration statement with respect to the shares of Common
Stock underlying the September Warrants and certain other warrants and convertible notes previously issued by the Company by October
1, 2021.
On September 8, 2021,
the Investor entered into a Securities Purchase Agreement (the “SPA”) with Armistice Capital Master Fund Ltd. (the “Buyer”),
whereby the Investor sold 5,000,000 of the Series A Warrants to the Buyer. On September 8, 2021, the Investor entered into a Securities
Purchase Agreement (the “SPA”) with CVI Investments, Inc. (the “Buyer”), whereby the Investor sold 3,000,000
of the Series A Warrants to the Buyer.
Also see Note 16 –
Subsequent Events - in the consolidated financial statements included in this report.
EVNT
Platform, LLC Asset Contribution Agreement
On
April 17, 2021, the Company and EVNT Platform, LLC, a wholly owned subsidiary of the Company, entered into (and closed on) a certain
Asset Contribution Agreement (“Asset Contribution Agreement”) with Emmersive Entertainment, Inc., 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 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). 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. 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.
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.
Agreement
to Complete a Merger with Zash Global Media and Entertainment Corporation
On
January 20, 2021, the Company, and its newly formed wholly owned subsidiary, Vinco Acquisition Corporation (the “Merger Sub”),
entered into an Agreement to Complete a Plan of Merger (the “Agreement to Complete”) with ZASH Global Media and Entertainment
Corporation (“ZASH”).
The
Agreement contemplates a reverse triangular merger of Merger Sub with and into ZASH in a transaction intended to qualify as a tax-free
reorganization under Sections 368(a)(l)(A) and 368(a)(2)I of the Code. Under the terms of the Agreement to Complete, ZASH’s holders
of common stock, par value $0.001, shall receive shares of Common Stock of the Company in exchange for all issued and outstanding ZASH
shares of common stock. ZASH will then become an indirect wholly-owned subsidiary of the Company. In connection with the foregoing, the
Company engaged a third-party valuation firm to perform a valuation of ZASH and to issue a Transaction Fairness Opinion. The valuation
report will be relied upon to set the resulting post-closing ownership ratio. Upon completion of the closing, ZASH will be the controlling
entity.
The
certificate of incorporation of the Company will be amended and restated at and as of the Effective Time, in substantial conformance
with the certificate of incorporation of ZASH immediately prior to the closing, and the name of the Company will be changed to “ZASH
Global Media and Entertainment Corporation.” The bylaws of the Company will be amended and restated at and as of the Closing to
become the equivalent of the bylaws of ZASH immediately prior to the closing. At the closing, certain officers and directors of the Company
and the Merger Sub immediately prior to the Effective Time shall resign and the officers and directors of ZASH immediately prior to the
closing will be appointed as officers and directors of the Company and the surviving corporation, in each case until their respective
successors are duly elected or appointed and qualified; provided, however that the Company shall have the right to appoint two (2) person
to serve as a member of the Board of Directors of the surviving corporation and ZASH shall have the right to appoint three (3) persons
to serve as members of the Board of Directors of the surviving company.
On
March 30, 2021, the Company, Vinco Acquisition Corporation and ZASH entered into that certain First Amendment to Agreement to Complete
a Plan of Merger, which amends the Merger Agreement dated January 20, 2021 to extend the closing date of the merger to on or about May
28, 2021.
On
May 28, 2021, the Company, Vinco Acquisition Corporation and ZASH Global Media and Entertainment Corporation (“ZASH”) entered
into that certain Second Amendment to the Agreement (the “Second Amendment”) to define certain milestones with dates to be
completed to consummate the closing of the Lomotif Private Limited (“Lomotif”) acquisition and the ZASH merger; (i) the Company
and ZASH intend to acquire Lomotif through their joint venture, ZVV Media Partners, LLC (the “Joint Venture”); (ii) the Parties
have completed an Amended and Restated Limited Liability Company Agreement for the Joint Venture in preparation for the anticipated acquisition
of Lomotif through the Joint Venture; (iii) Gemini Valuation Services will complete and present an independent third-party valuation
on ZASH on or before June 11, 2021; (iv) sign the final Agreement and Plan of Merger and Reorganization on or before June 24, 2021; (v)
issue a formal proxy to shareholders for the approval of the ZASH merger with the Company on or before July 15, 2021; and (vi) extend
the closing date to August 31, 2021, but no later than the first business day following the satisfaction or waiver of all conditions
to the obligations of the Parties to consummate the transaction.
On
July 19, 2021, Zash Global Media and Entertainment Corp. (“Zash”), Lomotif Private Limited (“Lomotif”), the Lomotif
selling shareholders identified on the signature page to the Lomotif SPA and ZVV MEDIA PARTNERS, LLC (“ZVV”), entered into
that certain 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.
Contribution
Agreement with Zash Global Media and Entertainment Corporation
On
January 19, 2021, Vinco Ventures, Inc. (“Vinco Ventures”), ZVV Media Partners, LLC (the “Company”) and Zash Global
Media and Entertainment Corporation (“ZASH”) entered into a Contribution Agreement (the “Agreement”). Vinco Ventures
and ZASH desire to establish the newly formed Company in order to engage in the development and production of consumer facing content
and related activities.
Under
the terms of the Agreement, Vinco Ventures and ZASH shall contribute certain assets (the “Contributed Assets”) to the Company.
At Closing, Vinco Ventures and ZASH shall enter into a limited liability operating agreement of the Company and a content distribution
agreement with American Syndication Media Corporation (“ASMC”). The Company shall not assume any liabilities of either Vinco
Ventures or ZASH except those liabilities arising in or specifically relating to periods, events or occurrences happening with respect
to the Contributed Assets on or after the Closing Date. In consideration of the Contributed Assets, the Company shall issue to Vinco
Ventures and ZASH 5,000 Units. The transaction closed on January 19, 2021.
Closing
on the Sale of Assets of CBAV1, LLC
On
October 30, 2020, the Company received a letter of intent from a prospective purchaser dated October 22, 2020 setting forth the terms
of an offer to purchase Cloud b assets from CBAV1, LLC (“CBAV1”), the Company’s wholly owned subsidiary (the “LOI”).
The Cloud b assets include but are not limited to intellectual property, know how, brand names, trade names, patents, models, internet
websites, domains, social network assets, production facilities, including the molds of all products, and inventory (“Cloud b Assets”).
By
way of background, the Cloud b Assets were pledged as collateral (“Collateral”) to secure a promissory note from East West
Bank dated in or around May 25, 2011, along with amendments and modifications to the loan agreement (“Secured Note”). On
June 4, 2018, CBAV1 acquired the Secured Note in accordance with the Cloud B Assignment of Loan and Security Agreement from East West
Bank. On October 30, 2018, pursuant to the Stock Purchase Agreement, the Company became the beneficial owner of 72.16% of Cloud b, Inc.’s
shares of common stock. CBAV1 provided Notification of Disposition of Collateral (pursuant to its notice of default dated August 7, 2018
to Cloud b, Inc.) and scheduled a Public Sale of the Collateral to the highest qualified bidder for February 11, 2019 (“Public
Sale”). CBAV1 submitted the highest bid for the Collateral at the Public Sale and inured to the benefit of the Cloud b Assets.
On February 17, 2020, the Company entered into the Agreement for The Purchase and Sale of Common Stock of Cloud b, Inc. and pursuant
therewith, sold its ownership interest in Cloud b, Inc. to the buyer.
To
effectuate the sale of the Cloud b assets to the prospective purchaser, the Company has determined that it is in the best interests of
the company and its shareholders for CBAV1 and the prospective buyer to utilize the jurisdiction and protections of the bankruptcy court
to effectuate the sale of the Cloud b Assets free and clear of any obligations.
The
current assets of CBAV1 were estimated to be in excess of $2,000,000 and the current liabilities were estimated to be less than $100,000.
By
utilizing the jurisdiction of the bankruptcy court, the Cloud b Assets can be transferred to the prospective purchaser free and clear
of liens and obligations. Any unsecured creditors or minority shareholders of Cloud b, Inc. will have the opportunity to assert any claims
or actions within the sale proceeding under the jurisdiction of the bankruptcy court.
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
dry 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.
Stock
Exchange Agreement for Sale of SRM Entertainment, LTD
On
November 30, 2020, the Company (the “Seller”) and its wholly owned subsidiary, SRM Entertainment, LTD
(“SRM”) entered into a Stock Exchange Agreement (the “Exchange Agreement”) with Jupiter Wellness, Inc.
(“Jupiter”) (the “Buyer”). Under the terms of the Exchange Agreement, the Buyer agreed to purchase all
outstanding shares of common stock (the “Exchange Shares”) issued by SRM from the Seller. As consideration for the
purchase of the Exchange Shares, the Buyer agreed to exchange 200,000 shares of its restricted common stock (the
“Consideration Shares”), symbol JUPW as listed on NASDAQ Capital Markets.
Upon
closing, Jupiter delivered 150,000 of the Consideration Shares and held 50,000 of the Consideration Shares in escrow (“Escrow Shares”).
Jupiter shall release the Escrow Shares upon SRM generating $200,000 in cash receipts and revenue prior to January 15, 2021. As of the
date of the quarterly report, the Company has received all Exchange Shares.
As
a performance-based incentive, the Buyer shall pay to the Seller two percent (2%) of gross sales of Jupiter’s private label
sun care products if such gross sales are in excess of twelve million dollars ($12,000,000) earned during the 2021 calendar year.
At
Closing, the Company (as “Stockholder”) and Jupiter entered into a Leak Out Agreement, whereby the Company was limited in
the sales of the Consideration Shares upon the following terms: (i) As such time as the Stockholder is able to resell the Consideration
Shares in accordance with the provisions of Rule 144 of the Securities Act (the “Expiration of the Holding Period”), the
Stockholder agrees to limit the resales of such Shares in the public market as follows:
|
a.
|
No
shares in any one day more than ten percent (10%) of the average of the daily trading volume on all trading markets on which the
Consideration Shares are then quoted or listed for the five trading days preceding the sale of the Consideration Shares, and;
|
|
|
|
|
b.
|
Any
permitted resales by the Stockholder shall be at the then current bid price of the Common Stock.
|
Honey
Badger Media Purchase and Licensing Agreement
On
November 10, 2020, the Company, through its wholly owned subsidiary, Honey Badger Media, LLC, entered into a series of transactions with
Honey Badger Media, LLC, a Delaware limited liability company:
On
November 10, 2020, under the terms of the Asset Purchase Agreement (the “Agreement”), the Company (the “Buyer”)
agreed to purchase from Honey Badger Media, LLC (the “Seller”) all of the Seller’s rights, title and interest in and
to the Internet Websites, Domain Names, and all of the respective content (the “Domains”), and any other rights associated
with the domains, including, without limitation, any intellectual property rights, all related Domains, logos, customer lists and agreements,
email lists, passwords, usernames and trade names; and all of the related social media accounts including but not limited to, Instagram,
Twitter, Facebook, Instagram, and Pinterest at closing (collectively the “Purchased Assets”). In consideration for
the sale of the Purchased Assets, the Buyer agreed to pay the Seller the amount of Three Hundred Thousand Dollars (US $300,000).
On
November 10, 2020, under the terms of the Platform License Agreement (the “License Agreement”), Honey Badger Media, LLC (the
“Licensor”) granted the Company (the “Licensee”) a perpetual, exclusive, worldwide license (the “License”)
to implement and commercialize the assets connected with the Platform, including, but not limited to, the right to use all of Licensor’s
intellectual property rights comprising the Platform, owned by or licensed to Licensor that are utilized as part of the Platform (“Licensed
Related Assets”). In consideration for the License, the Licensee agreed to pay to
the Licensor a fee equal to thirty percent (30%) of the Net Profits generated from Licensee’s clients through the Platform and
Licensed Related Assets and the Licensee’s parent company agreed to issue the Licensor 750,000 shares of common stock.
Acquisition
of HMNRTH, LLC Assets
On
March 11, 2020, the Company and its wholly owned subsidiary, Scalematix, LLC (together the “Buyer”), entered into an Asset
Purchase Agreement (the “Agreement”) with HMNRTH, LLC (the “Seller”) and TCBM Holdings, LLC (the “Owner”)
(together Seller and Owner the “Selling Parties”) for the purchase of certain assets in the health wellness industry and
related consumer products industry. Under the terms of the Agreement, Buyer is to remit $70,850 via wire transfer at Closing and shall
issue to a representative of the Selling Parties Two Hundred Thirty-Eight Thousand Seven Hundred and Fifty (238,750) shares of restricted
common stock. The shares were issued on March 16, 2020 and valued at $477,500.
Global
Clean Solutions Agreement and Plan of Share Exchange
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 Supplies, 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.
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.
Acquisition
of TBD Safety, LLC
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. See Note 3 — Acquisitions and Divestitures for further information.
Edison
Nation Medical Operations
Edison
Nation Holdings, LLC formed Edison Nation Medical (“EN Medical”) in May of 2012 as a partnership with Carolinas Healthcare
Systems (now called Atrium). Atrium is the 2nd largest healthcare system in the US. Carolina Health (Atrium) looked to identify
a way to aggregate and commercialize the healthcare related innovations that were coming from their physicians, nurses, and patients,
and Edison Nation offered a platform to provide that function.
EN
Medical built out a separate platform, leveraging the Edison Nation model to look for ideas that improved patient care and lowered costs.
EN collected some great ideas, but the market shifted and EN found that the licensing model was very difficult as big medical device
companies wanted to acquire companies with sales versus just buying IP and prototypes.
Today,
EN Medical operates an online portal granting hospitals, government agencies and distributors access to its catalog of medical supplies
and hand sanitizers.
Executive
Compensation 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. The Base
Salary shall be payable in accordance with the Company’s normal payroll procedures in effect from time to time. The Base Salary
due of shares, shall be payable within the first 30 days of the year. On each anniversary of the Agreement, the base salary will increase
no less than $15,000 (“minimum”). For 2021, the Executive shall receive a cash bonus in the amount equal to 30% of the annual
Base Salary, and an award of 200% shares of the Company’s common stock, which shall vest in their entirety on issuance (the “Principal
Market”), which shall be received by the Executive no later than the first 30 days of the current fiscal year. The Executive shall
be entitled to 150,000 shares of the Company’s common stock, due immediately upon an increase of 2.5 times the Enterprise Value
on a 5-day closing average from the effectiveness of the Agreement. For clarification, the Enterprise Value as of the Company at the
effective date was $25,042,464. 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. The Base Salary
shall be payable in accordance with the Company’s normal payroll procedures in effect from time to time. The Base Salary due of
shares, shall be payable within the first 30 days of the year. On each anniversary of the Agreement, the base salary will increase no
less than $15,000 (“minimum”). For 2021, Executive shall receive a cash bonus in the amount equal to 30% of the annual Base
Salary, and an award of 200% shares of the Company’s common stock, which shall vest in their entirety on issuance (the “Principal
Market”), which shall be received by the Executive no later than the first 30 days of the current fiscal year. Upon the execution
of this agreement, the Executive is entitled to a one-time past performance bonus for the work completed in fiscal years 2018, 2019 and
2020 of 150,000 shares of the Company’s common stock, which shall vest in their entirety on issuance. The Executive shall be entitled
to 100,000 shares of the Company’s common stock, due immediately upon an increase of 2.5 times the Enterprise Value on a 5-day
closing average from the effectiveness of the Agreement. For clarification, the Enterprise Value as of the Company at the effective date
was $25,042,464. Mr. Vroman tendered his resignation as the Chief Financial 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. The Base
Salary shall be payable in accordance with the Company’s normal payroll procedures in effect from time to time. The Base Salary
due of shares, shall be payable within the first 30 days of the year. On each anniversary of the Agreement, the base salary will increase
no less than $15,000 (“minimum”). For 2021, the Executive shall receive a cash bonus in the amount equal to 30% of the annual
Base Salary, and an award of 200% shares of the Company’s common stock, which shall vest in their entirety on issuance (the “Principal
Market”), which shall be received by the Executive no later than the first 30 days of the current fiscal year. Upon the execution
of the Agreement, the Executive is entitled to a one-time signing bonus of 150,000 shares of the Company’s common stock, which
shall vest in their entirety on issuance. The Executive shall be entitled to 100,000 shares of the Company’s common stock, due
immediately upon an increase of 2.5 times the Enterprise Value on a 5-day closing average from the effectiveness of the Agreement. For
clarification, the Enterprise Value as of the Company at the effective date was $25,042,464. Mr. Mc Fadden tendered his resignation
as the Chief Strategy Officer of the Company on September 23, 2021 in order to accept the role
as President of the Company’s newly formed subsidiary, Cryptyde, Inc.
Critical
Accounting Policies and Significant Judgments and Estimates
Our
management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or
GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial
statements as well as the reported expenses during the reporting periods. The accounting estimates that require our most significant,
difficult and subjective judgments have an impact on revenue recognition, the determination of share-based compensation and financial
instruments. We evaluate our estimates and judgments on an ongoing basis. Actual results may differ materially from these estimates under
different assumptions or conditions.
Our
significant accounting policies are more fully described in Note 2 to our consolidated financial statements included elsewhere in this
Quarterly Report on Form 10-Q.
Components
of our Results of Operations
Revenues
We
sell consumer products across a variety of categories to retailers, distributors and manufacturers. We also sell consumer products directly
to consumers through e-commerce channels. In addition, we generate revenues form media properties through social media monetization.
Cost
of Revenues
Our
cost of revenues includes inventory costs, materials and supplies costs, internal labor costs and related benefits, subcontractor costs,
depreciation, overhead and shipping and handling costs.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses consist of selling, marketing, advertising, payroll, administrative, finance and professional expenses.
Rental
Income
We
earn rental income from a month-to-month lease on a portion of the building located in Washington, New Jersey that we previously owned
until August 2021.
Interest
Expense, Net
Interest
expense includes the cost of our borrowings under our debt arrangements.
Loss on Issuance of Warrants
Loss on issuance of warrants includes the fair
value of the warrants at issuance on the grant date.
Change in Fair Value of Warrant Liability
Change in fair value of the warrant liability
includes the change in the fair value of the warrants at the measurement date based on the Monte Carlo simulation method.
Change in Fair Value of Short-Term Investment
Change in fair value of the short-term investment
includes the change in the fair value of the underlying security at the measurement date.
Results
of Operations
Three
Months Ended September 30, 2021 versus Three Months Ended September 30, 2020
The
following table sets forth information comparing the components of net (loss) income for the three months ended September 30, 2021 and
2020:
|
|
Three Months Ended September 30,
|
|
|
Period over Period Change
|
|
|
|
2021
|
|
|
2020
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
|
|
$
|
2,231,986
|
|
|
$
|
2,522,141
|
|
|
$
|
(290,155
|
)
|
|
|
-11.50
|
%
|
Cost of revenues
|
|
|
1,531,840
|
|
|
|
1,505,234
|
|
|
|
26,606
|
|
|
|
1.77
|
%
|
Gross profit
|
|
|
700,146
|
|
|
|
1,016,907
|
|
|
|
(316,761
|
)
|
|
|
-31.15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
25,869,419
|
|
|
|
2,617,961
|
|
|
|
23,251,458
|
|
|
|
888.15
|
%
|
Operating (loss)
|
|
|
(25,169,273
|
)
|
|
|
(1,601,054
|
)
|
|
|
(23,568,219
|
)
|
|
|
1,472.04
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
|
17,136
|
|
|
|
25,704
|
|
|
|
(8,568
|
)
|
|
|
-33.33
|
%
|
Interest (expense)
|
|
|
(27,012,312
|
)
|
|
|
(1,004,627
|
)
|
|
|
(26,007,685
|
)
|
|
|
2,588.79
|
%
|
Loss on issuance of warrants
|
|
|
(206,948,147
|
)
|
|
|
-
|
|
|
|
(206,948,147
|
)
|
|
|
-100.00
|
%
|
Change in fair value of warrant liability
|
|
|
(287,117,556
|
)
|
|
|
-
|
|
|
|
(287,117,556
|
)
|
|
|
-100.00
|
%
|
Change in fair value of short-term investment
|
|
|
(614,000
|
)
|
|
|
-
|
|
|
|
(614,000
|
)
|
|
|
-100.00
|
%
|
Other
income
|
|
|
649,009
|
|
|
|
-
|
|
|
|
649,009
|
|
|
|
100.00
|
%
|
Total other (expense), net
|
|
|
(521,025,870
|
)
|
|
|
(978,923
|
)
|
|
|
(520,046,947
|
)
|
|
|
53,124.40
|
%
|
Loss before income taxes
|
|
|
(546,195,143
|
)
|
|
|
(2,579,977
|
)
|
|
|
(543,615,166
|
)
|
|
|
21,070.54
|
%
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
%
|
Net loss from continuing operations
|
|
|
(546,195,143
|
)
|
|
|
(2,579,977
|
)
|
|
|
(543,615,166
|
)
|
|
|
21,070.54
|
%
|
Net income attributable to noncontrolling interests
|
|
|
(3,885,333
|
)
|
|
|
(37,439
|
)
|
|
|
(3,847,894
|
)
|
|
|
10,277.77
|
%
|
Net loss from continuing operations attributable to Vinco Ventures, Inc.
|
|
|
(542,309,810
|
)
|
|
|
(2,542,538
|
)
|
|
|
(539,767,272
|
)
|
|
|
21,229.47
|
%
|
Net income (loss) from discontinued operations
|
|
|
(153,320
|
)
|
|
|
(291,506
|
)
|
|
|
138,186
|
|
|
|
-47.40
|
%
|
Net (loss) income attributable to Vinco Ventures, Inc.
|
|
$
|
(542,463,130
|
)
|
|
$
|
(2,834,044
|
)
|
|
$
|
(539,629,086
|
)
|
|
|
19,040.96
|
%
|
Revenue
For the three months ended September 30, 2021, revenues
decreased by $290,155 or 11.50%, as compared to the three months ended September 30, 2020. The decrease was primarily the
result of a decrease in revenues from the Edison Nation Medical division.
Cost
of Revenues
For the three months ended September 30, 2021, cost
of revenues increased by $26,606 or 1.77%, as compared to the three months ended September 30, 2020. The increase
was primarily attributable to the product mix of goods sold.
Gross
Profit
For the three months ended September 30, 2021, gross
profit decreased by $316,761, or 31.15%, as compared to the three months ended September 30, 2020. The decrease was primarily
a result of the decrease in revenues.
Operating
Expenses
Selling, general and administrative expenses were
$25,869,419 and $2,617,961 for the three months ended September 30, 2021 and 2020, respectively, representing an increase
of $23,251,458, or 888.15%. The increase was primarily the result of an increase in stock-based compensation of $5,636,405,
professional fees of $5,498,863, depreciation and amortization of $3,640,200 and payroll and related benefits of $1,058,786,
consulting and management fees of 5,036,418.
Rental
Income
Rental income was $17,136 and $25,704
for the three months ended September 30, 2021 and 2020, respectively.
Interest
expense
Interest expense was $27,012,312 for the three
months ended September 30, 2021 versus $1,004,627 in the previous three months ended September 30, 2020. The increase in interest
expense was related to the private placements completed in 2021 of $142,000,000 which included debt issuance costs related to original
issue discount, the issuance of warrants and beneficial conversion features that were amortized and included as part of interest expense.
Loss
on issuance of warrants and change in fair value of warrants
Loss on issuance of warrants was $206,948,147
and $0 for the three months ended September 30, 2021 and 2020, respectively. The issuance of warrants was related to the issuance
of warrants in connection with the three private placements completed in the second quarter of 2021. Change in fair value of warrants
was a loss of $287,117,556 and $0 for the three months ended September 30, 2021 and 2020, respectively. The change in fair value
of warrants was related to a reduction in the warrant liability due to a change in the underlying assumptions of the Monte-Carlo simulation
model, mostly related to a increase in the Company’s share price.
Income
tax expense
Income
tax expense was $0 and $0 for the three months ended September 30, 2021 and 2020, respectively.
Nine
Months Ended September 30, 2021 versus Nine Months Ended September 30, 2020
The
following table sets forth information comparing the components of net (loss) income for the nine months ended September 30, 2021 and
2020:
|
|
Nine Months Ended September 30,
|
|
|
Period over Period Change
|
|
|
|
2021
|
|
|
2020
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net
|
|
$
|
7,488,959
|
|
|
$
|
9,649,469
|
|
|
$
|
(2,160,510
|
)
|
|
|
-22.39
|
%
|
Cost of revenues
|
|
|
4,906,410
|
|
|
|
6,873,889
|
|
|
|
(1,967,479
|
)
|
|
|
-28.62
|
%
|
Gross profit
|
|
|
2,582,549
|
|
|
|
2,775,580
|
|
|
|
(193,031
|
)
|
|
|
-6.95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
43,471,951
|
|
|
|
8,185,477
|
|
|
|
35,286,474
|
|
|
|
431.09
|
%
|
Operating (loss)
|
|
|
(40,889,402
|
)
|
|
|
(5,409,897
|
)
|
|
|
(35,479,505
|
)
|
|
|
655.83
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
|
71,543
|
|
|
|
77,111
|
|
|
|
(5,568
|
)
|
|
|
-7.22
|
%
|
Interest (expense)
|
|
|
(42,422,726
|
)
|
|
|
(2,575,738
|
)
|
|
|
(39,846,988
|
)
|
|
|
1,547.01
|
%
|
Loss on issuance of warrants
|
|
|
(415,803,862
|
)
|
|
|
-
|
|
|
|
(415,803,862
|
)
|
|
|
-100.00
|
%
|
Change in fair value of warrant liability
|
|
|
(287,891,003
|
)
|
|
|
-
|
|
|
|
(287,891,003
|
)
|
|
|
-100.00
|
%
|
Change in fair value of short-term investment
|
|
|
(736,000
|
)
|
|
|
-
|
|
|
|
(736,000
|
)
|
|
|
-100.00
|
%
|
Loss on disposal of assets and interest in joint venture
|
|
|
(301,645
|
)
|
|
|
-
|
|
|
|
(301,645
|
)
|
|
|
-100.00
|
%
|
Other income
|
|
|
649,009
|
|
|
|
-
|
|
|
|
649,009
|
|
|
|
100.00
|
%
|
Total other (expense), net
|
|
|
(746,434,684
|
)
|
|
|
(2,498,627
|
)
|
|
|
(743,936,057
|
)
|
|
|
29,773.79
|
%
|
Loss before income taxes
|
|
|
(787,324,086
|
)
|
|
|
(7,908,524
|
)
|
|
|
(779,415,562
|
)
|
|
|
9,855.39
|
%
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
%
|
Net loss from continuing operations
|
|
|
(787,324,086
|
)
|
|
|
(7,908,524
|
)
|
|
|
(779,415,562
|
)
|
|
|
9,855.39
|
%
|
Net income attributable to noncontrolling interests
|
|
|
(3,834,756
|
)
|
|
|
(15,198
|
)
|
|
|
(3,819,558
|
)
|
|
|
25,131.98
|
%
|
Net loss from continuing operations attributable to Vinco Ventures, Inc.
|
|
|
(783,489,330
|
)
|
|
|
(7,893,326
|
)
|
|
|
(775, 596,004
|
)
|
|
|
9,825.97
|
%
|
Net income (loss) from discontinued operations attributable to Vinco Ventures, Inc.
|
|
|
(5,112,100
|
)
|
|
|
4,704,394
|
|
|
|
9,816,494
|
|
|
|
-208.67
|
%
|
Net (loss) income attributable to Vinco Ventures, Inc.
|
|
$
|
(788,601,430
|
)
|
|
$
|
(3,188,932
|
)
|
|
$
|
(785,412,498
|
)
|
|
|
24,629.33
|
%
|
Revenue
For the nine months ended September 30, 2021, revenues
decreased by $2,160,510 or 22.39%, as compared to the nine months ended September 30, 2020. The decrease was primarily
the result of a decrease in business operations from the Edison Nation Medical division.
Cost of Revenues
For the nine months ended September 30, 2021, cost
of revenues decreased by $1,967,479 or 28.62%, as compared to the nine months ended September 30, 2020. The decrease was
primarily attributable to the decrease in total consolidated revenues.
Gross Profit
For the nine months ended September 30, 2021, gross
profit decreased by $193,031, or 6.95%, as compared to the nine months ended September 30, 2020. The decrease was primarily
a result of lower margin revenues in 2021.
Operating Expenses
Selling, general and administrative expenses were
$43,471,951 and $8,185,477 for the nine months ended September 30, 2021 and 2020, respectively, representing an increase
of $35,286,474, or 431.09%. The increase was primarily the result of an increase in stock-based compensation of $14,051,747,
professional fees of $7,195,038, depreciation and amortization of $4,092,658 and payroll and related benefits of $1,200,169
and consulting and management fees of $5,022,071.
Rental Income
Rental income was $71,543 and $77,111
for the nine months ended September 30, 2021 and 2020, respectively.
Interest expense
Interest expense was $42,422,726 for the nine
months ended September 30, 2021 versus $2,575,737 in the previous nine months ended September 30, 2020. The increase in interest
expense was related to the private placements completed in 2021 of $142,000,000 which included debt issuance
costs related to original issue discount, the issuance of warrants and beneficial conversion features that were amortized and included
as part of interest expense.
Loss on issuance of warrants and change in fair
value of warrants
Loss on issuance of warrants was $415,803,862
and $0 for the nine months ended September 30, 2021 and 2020, respectively. The issuance of warrants was related to the issuance
of warrants in connection with the private placements completed in the first nine months of 2021. Change in fair value of warrants was
a loss of $287,891,003 and $0 for the nine months ended September 30, 2021 and 2020, respectively. The change in fair value of
warrants was related to a reduction in the warrant liability due to a change in the underlying assumptions of the Monte-Carlo simulation
model, mostly related to a increase in the Company’s share price.
Income tax expense
Income tax expense was $0 and $0 for the nine months
ended September 30, 2021 and 2020, respectively.
Non-GAAP Measures
EBITDA
and Adjusted EBITDA
The
Company defines EBITDA as net loss before interest, taxes and depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA,
further adjusted to eliminate the impact of certain non-recurring items and other items that we do not consider in our evaluation of
our ongoing operating performance from period to period. These items will include stock-based compensation, restructuring and severance
costs, transaction costs, acquisition costs, certain other non-recurring charges and gains that the Company does not believe reflects
the underlying business performance.
For
the three and nine months ended September 30, 2021 and 2020, EBITDA and Adjusted EBITDA consisted of the following:
|
|
Three Months
Ended September 30,
|
|
|
Nine Months
Ended September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Net income (loss) from continuing operations
|
|
$
|
(546,195,143
|
)
|
|
$
|
(2,579,977
|
)
|
|
$
|
(787,324,086
|
)
|
|
$
|
(7,908,524
|
)
|
Net income (loss) from discontinued operations
|
|
|
(153,320
|
)
|
|
|
(291,506
|
)
|
|
|
(5,112,100
|
)
|
|
|
4,704,394
|
|
Interest expense, net
|
|
|
27,012,312
|
|
|
|
1,004,624
|
|
|
|
42,422,726
|
|
|
|
2,575,735
|
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
3,940,473
|
|
|
|
326,437
|
|
|
|
5,022,096
|
|
|
|
938,843
|
|
EBITDA
|
|
|
(515,395,678
|
)
|
|
|
(1,540,422
|
)
|
|
|
(744,991,364
|
)
|
|
|
310,448
|
|
Stock-based compensation
|
|
|
6,813,000
|
|
|
|
1,176,595
|
|
|
|
16,816,769
|
|
|
|
2,765,022
|
|
Loss on issuance of warrant liability
|
|
|
206,948,147
|
|
|
|
-
|
|
|
|
415,803,862
|
|
|
|
-
|
|
Change in fair value of warrant liability
|
|
|
287,117,556
|
|
|
|
-
|
|
|
|
287,891,003
|
|
|
|
-
|
|
Restructuring and severance costs
|
|
|
-
|
|
|
|
168,074
|
|
|
|
-
|
|
|
|
599,219
|
|
Transaction and acquisition costs
|
|
|
4,936,933
|
|
|
|
-
|
|
|
|
6,365,258
|
|
|
|
82,736
|
|
Other non-recurring costs
|
|
|
-
|
|
|
|
13,109
|
|
|
|
-
|
|
|
|
53,969
|
|
Loss (gain) on divestiture
|
|
|
-
|
|
|
|
-
|
|
|
|
4,130,580
|
|
|
|
(4,911,760
|
)
|
Adjusted EBITDA (1)
|
|
$
|
(9,580,042
|
)
|
|
$
|
(182,644
|
)
|
|
$
|
(13,983,892
|
)
|
|
$
|
(1,100,366
|
)
|
EBITDA
and Adjusted EBITDA is a financial measure that is not calculated in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”). Management believes that because Adjusted EBITDA excludes (a) certain non-cash expenses
(such as depreciation, amortization and stock-based compensation) and (b) expenses that are not reflective of the Company’s core
operating results over time (such as restructuring costs, litigation or dispute settlement charges or gains, and transaction-related
costs), this measure provides investors with additional useful information to measure the Company’s financial performance, particularly
with respect to changes in performance from period to period. The Company’s management uses EBITDA and Adjusted EBITDA (a) as a
measure of operating performance, (b) for planning and forecasting in future periods, and (c) in communications with the Company’s
board of directors concerning the Company’s financial performance. The Company’s presentation of EBITDA and Adjusted EBITDA
are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation and should
not be used by investors as a substitute or alternative to net income or any measure of financial performance calculated and presented
in accordance with U.S. GAAP. Instead, management believes EBITDA and Adjusted EBITDA should be used to supplement the Company’s
financial measures derived in accordance with U.S. GAAP to provide a more complete understanding of the trends affecting the business.
Although
Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations
as an analytical tool, and investors should not consider it in isolation or as a substitute for, or more meaningful than, amounts determined
in accordance with U.S. GAAP. Some of the limitations to using non-GAAP measures as an analytical tool are (a) they do not reflect the
Company’s interest income and expense, or the requirements necessary to service interest or principal payments on the Company’s
debt, (b) they do not reflect future requirements for capital expenditures or contractual commitments, and (c) although depreciation
and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future,
and non-GAAP measures do not reflect any cash requirements for such replacements.
Liquidity
and Capital Resources
For the nine months ended September 30, 2021, our
operations lost approximately $42,214,710, 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.
We
received proceeds of $45,959,160 from sales 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 the foreseeable future.
Cash
Flows
During
the nine months ended September 30, 2021 and 2020, our sources and uses of cash were as follows:
Cash
Flows from Operating Activities
Net cash used in operating activities for the
nine months ended September 30, 2021 was $21,796,639 which included net loss from continuing operations of $787,324,086
that included $1,622,027 of cash used by changes in operating assets and liabilities, stock-based compensation of $16,829,359,
loss on issuance of warrants of $415,803,862, change in fair value of warrant liability of $287,891,003, depreciation and
amortization of $5,013,543, amortization of financing costs of $42,324,603, loss on disposal of $4,130,580, gain
on debt extinguishment of $852,352 and amortization of right of use assets of $80,333. Net cash used in operating activities for
the nine months ended September 30, 2020 was $3,311,310, which included a net loss from continuing operations of $7,908,524 and net
income from discontinued operations of $4,704,394. The net loss included $1,140,875 of cash used by changes in operating assets and
liabilities and a gain on disposal of $4,911,760 which was offset by stock-based compensation of $2,765,022 and amortization of debt
issuance costs of $2,015,422.
Cash Flows from Investing Activities
Net cash used in investing activities was $108,662,799
and $193,249 for the nine months ended September 30, 2021 and 2020, respectively. Net cash used in investing activities was
largely attributable to the Company’s joint venture, ZVV Media Partners, LLC, acquiring an 80.0% interest in Lomotif Private
Limited of $90,761,200 and funding of loans receivable $18,150,000 offset by the receipt of funds of $2,529,565 related
to the sale of the assets of CBAV 1, LLC.
Cash Flows from Financing Activities
Net cash provided by financing activities for the
nine months ended September 30, 2021 totaled $280,147,361 which related to borrowings under convertible notes of $122,000,000
and proceeds from the exercise of warrants of $167,961,099. Net cash provided by financing activities for the nine months
ended September 30, 2020 totaled $3,476,624 which related mostly to borrowings under convertible notes payable and borrowings
under notes payable.
Off-Balance
Sheet Arrangements
We
did not have, during the periods presented, and we do not currently have, any relationships with any organizations or financial partnerships,
such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance
sheet arrangements or other contractually narrow or limited purposes.