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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2021

 

or

 

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

 

For the transition period from ________ to ________

 

Commission file number: 001-38448

 

 

VINCO VENTURES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

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

 

(866) 900-0992

(Registrant’s Telephone Number, Including Area Code)

 

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

Yes ☐ No

 

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

Yes ☐ No

 

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

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer Smaller Reporting Company
  Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

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

☐ Yes ☒ No

 

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

 

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

 

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

 

 

 

 

 

 

VINCO VENTURES, INC.

 

TABLE OF CONTENTS

 

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

 

2
 

 

USE OF MARKET AND INDUSTRY DATA

 

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

 

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

 

OTHER PERTINENT INFORMATION

 

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

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

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

 

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

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

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

 

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

 

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

 

3
 

 

PART I

 

INDEX TO FINANCIAL STATEMENTS

 

 

Page

Number

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

 

4
 

 

Vinco Ventures, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

 

  

September 30,

2021

  

December 31,

2020

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

100,000,000

    

-

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

154,962,061

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

336,914,684

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

3,040,564

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

15,357

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

37,427,946

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

166,061

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

2,500,000

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

508,913,890

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

617,952,342

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

(194,190,965

)   15,416,598 
Noncontrolling interests   

22,191,759

    (1,893,897)
Total stockholders’ equity   

(171,999,206

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

 

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

 

5
 

 

Vinco Ventures, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

                     
  

For the Three Months

Ended September 30,

  

For the Nine Months

Ended September 30,

 
  

2021

(Unaudited)

  

2020

(Unaudited)

  

2021

(Unaudited)

  

2020

(Unaudited)

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

43,471,951

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

(546,195,143

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

 

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

 

6
 

 

Vinco Ventures, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

 

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

10,556,436

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

Balance, January 1, 2020 

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

Issuance of common stock to note holders 

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

 

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

1,007,194

    

1,007

    

2,798,993

    -    -    

2,800,000

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

248,366,633

 
Issuance of common stock – acquisitions   -    -    

2,750,000

    

2,750

    

8,879,750

    -    -    

8,882,500

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

 

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

 

7
 

 

Vinco Ventures, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

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

(379,333

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

280,147,631

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

149,688,193

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

149,937,549

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

976,282

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

699,000

 

 

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

 

8
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 — Basis of Presentation and Nature of Operations

 

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

 

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

 

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

 

Vinco Ventures is focused on digital media and content technologies.

 

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

 

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

 

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

 

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

 

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

 

Liquidity

 

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

 

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

 

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

 

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

 

9
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 2 — Summary of Significant Accounting Policies

 

Principles of Consolidation

 

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

 

Reclassifications

 

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

 

Use of Estimates

 

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

 

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

 

Discontinued Operations

 

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

 

Cash and Cash Equivalents, and Restricted Cash

 

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

 

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

 

10
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

The Company has cash on deposit in several financial institutions which, at times, may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced losses in such accounts and periodically evaluates the creditworthiness of its financial institutions. The Company reduces its credit risk by placing its cash and cash equivalents with major financial institutions. The Company had approximately $149,937,549 of cash and cash equivalents at September 30, 2021 of which none was held in foreign bank accounts and $147,451,668 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.

 

11
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

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

 

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

 

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

 

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

 

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

 

Disaggregation of Revenue

 

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

 

  

For the Three Months

Ended September 30,

  

For the Nine Months

Ended September 30,

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

1,042,898

    -    

1,042,898

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

 

12
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

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

 

 Schedule of Revenue from External Customers

  

For the Three Months

Ended September 30,

  

For the Nine Months

Ended September 30,

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

 

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

 

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

 

   

For the Three Months

Ended September 30,

   

For the Nine Months

Ended September 30,

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

 

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

 

13
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

Fair Value of Financial Instruments

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 Schedule of Fair Value of Financial Assets and Liabilities

  

Fair Value Measurements as of

September 30, 2021

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

 

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

 

  

Fair Value Measurements as of

December 31, 2020

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

 

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

 

 Schedule of Reconciliation of Liabilities Measured at Fair Value

  

Warrant

Liability

(Level 3)

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

 

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

 

Warrant Accounting

 

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

 

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

 

Sequencing Policy

 

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

 

14
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

Foreign Currency Translation

 

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

 

Net Earnings or Loss per Share

 

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

 

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

 

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

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

 

15
 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

Subsequent Events

 

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

 

Segment Reporting

 

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

 

Note 3 — Acquisitions and Divestitures

 

Acquisitions

 

Lomotif Acquisition 

 

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

 

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

 

The following table summarizes the aggregate purchase price consideration paid:

 

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

 

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

 

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

 

 

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

 

TBD Safety, LLC Acquisition

 

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

 

16

 

 

Asset Acquisitions

 

Emmersive Entertainment Asset Contribution

 

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

 

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

 

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

 

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

 

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

 

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

 

The following table summarizes the