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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 March 31, 2022

 

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   The Nasdaq Stock Market LLC

 

As of May 23, 2022, there were 210,590,593 shares of the registrant’s common stock outstanding.

 

 

 

 
 

 

VINCO VENTURES, INC.

 

TABLE OF CONTENTS

 

    Page Number
     
PART I 5
Item 1. Financial Statements (Unaudited) 5
  Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021 5
  Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (Unaudited) 6
  Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (Unaudited) 7
  Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (Unaudited) 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29
Item 3. Quantitative and Qualitative Disclosures About Market Risk 41
Item 4. Controls and Procedures 41
     
PART II 42
Item 1. Legal Proceedings 42
Item 1A. Risk Factors 42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 42
Item 3. Defaults Upon Senior Securities 42
Item 4. Mine Safety Disclosures 42
Item 5. Other Information 42
Item 6. Exhibits 42
     
  Signatures 43

 

2
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q for the period ended March 31, 2022 (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, our ability to raise capital, our operational and strategic initiatives 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 transitioning from being focused on end-to-end consumer product innovation, development, and commercialization to being focused on digital media, advertising and content technologies innovation, development, and commercialization;
  Our ability to manage our expansion, growth and operating expenses;
  Our ability to protect our brands, reputation and intellectual property rights;
  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 consumer behavior;
  Our dependence on information technology, and being subject to potential cyberattacks, security problems, network disruptions, and other incidents;
  Our ability to comply with complex and evolving laws and regulations including those relating to privacy, data use and data protection, content, competition, safety and consumer protection, e-commerce, digital assets and other matters, many of which are subject to change and uncertain interpretation;
  Our ability to enhance disclosure and financial reporting controls and procedures and remedy the existing weakness; 
  Risks in connection with completed or potential acquisitions, dispositions and other strategic growth opportunities and initiatives;
  Risks related to the completion of our planned spin-off of Cryptyde, Inc. (“Cryptyde”) and the achievement of our expected benefits to stockholders from this planned spin-off;
  Risks related to the integration of completed acquisitions and the achievement of our expected benefits from our acquisitions and investments, including, but not limited to, our investment in Lomotif Private Limited (“Lomotif”) through ZVV Media Partners, LLC (“ZVV”), our joint venture with ZASH Global Media and Entertainment Corporation (“ZASH”), and our acquisitions of AdRizer, LLC (“AdRizer”) and Honey Badger Media, LLC (“Honey Badger”);
  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;
  Other risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2021.

 

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; whether Lomotif can retain its existing users and attract new users to its platform; whether our cross-platform user engagement strategy will enhance our ability to monetize the Lomotif 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, including AdRizer; the ability of Lomotif’s platform and associated promotional activities to compete effectively for user engagement; 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 may adversely affect Lomotif’s business or prospects; risk of attempts at unauthorized or improper use of the platform and resulting damages to Lomotif’s reputation; the inability to maintain or increase 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.

 

In addition, AdRizer’s advertising business and our efforts to integrate AdRizer with our other businesses or investments such as Lomotif and Honey Badger are subject to risks including, but not limited to, AdRizer is faced with intensive competition in the digital advertising industry; high customer concentration, long sales cycles and payment-related risks may subject AdRizer to significant fluctuations or declines in revenues; the reliability of operational and performance issues with AdRizer’s platform, whether real or perceived, including a failure to respond to technological changes or to upgrade its technology systems, may adversely affect AdRizer’s business and operational results; AdRizer’s technology solutions are dependent on third parties including data hosting service, data providers and various technology, software, products and services from third parties or available as open source; AdRizer’s business practices are subject to governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection, and unfavorable changes or failure by AdRizer to comply with these laws and regulations could substantially harm its business; and to the extent the use of “third-party cookies” or other technology to uniquely identify devices is rejected by Internet users, restricted by government regulations, blocked or limited by technical changes on end users’ devices and web browsers, AdRizer’s performance may decline and AdRizer may lose advertisers.

 

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
 

 

USE OF MARKET AND INDUSTRY DATA

 

This Quarterly Report 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 are reliable, neither we nor our management have independently verified any of the data from such sources referred to in this Quarterly Report 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 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.

 

TRADEMARKS, SERVICE MARKS AND TRADE NAMES

 

Solely for convenience, we refer to trademarks in this Quarterly Report 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, 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, the terms “Vinco Ventures”, “Vinco”, “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 consolidated subsidiaries and variable interest entities.

 

4
 

 

PART I - FINANCIAL INFORMATION

 

Vinco Ventures, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   March 31, 2022   December 31, 2021 
         
Assets*          
Current assets:          
Cash and cash equivalents  $130,779,948   $87,612,176 
Restricted cash - short term   -    100,000,000 
Short-term investments   220,000    178,000 
Accounts receivable, net   9,117,096    1,124,421 
Inventory, net   447,636    475,666 
Prepaid expenses and other current assets   10,659,851    10,403,401 
Loans held-for-investment- current portion   11,600,000    3,950,000 
Due from related party   19,600,584    15,997,803 
Total current assets   182,425,115    219,741,467 
           
Restricted cash long-term   80,000,000    - 
Property and equipment, net   1,785,226    1,376,751 
Right of use assets, net   133,310    168,914 
Loan held-for-investment   750,000    250,000 
Loan held-for-investment - related parties   13,500,000    20,500,000 
Intangible assets, net   39,009,383    40,525,453 
Goodwill   180,419,932    121,580,144 
Cost method investments   1,000,000    1,000,000 
Other assets   1,655,742    - 
Total assets  $500,678,709   $405,142,729 
           
Liabilities and stockholders’ equity          
Current liabilities:          
Accounts payable  $11,554,079   $6,105,963 
Accrued expenses and other current liabilities   10,600,949    19,516,308 
           
Current portion of operating lease liabilities   77,231    100,733 
Current portion of convertible notes payable, net of debt issuance costs of $13,343,030 and $68,911,823, respectively   19,769,795    44,238,177 
Current portion of notes payable   -    15,530 
Current portion of notes payable - related parties   112,835    112,835 
Total current liabilities   42,114,889    70,089,546 
           
Operating lease liabilities, net of current portion   58,713    70,514 
Convertible notes payable - related parties, net of current portion   2,500,000    2,500,000 
Notes payable -related parties, net of current portion   108,923    121,037 
Convertible notes payable, net of current portion, net of debt issuance costs of $35,491,435 and $0, respectively.   44,399,079    - 
Derivative liability   429,167,462    198,566,170 
Deferred tax liability   108,420    108,420 
Deferred acquisition purchase price   23,250,000    - 
Total Liabilities  $541,707,486   $271,455,687 
          
Commitments and contingencies (Note 14)   -     
          
Stockholders’ equity (deficit)          
Common stock, $0.001 par value, 250,000,000 shares authorized; 188,052,593 and 150,118,024 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively  $188,053   $150,118 
Additional paid-in capital   1,053,407,146    850,096,635 
Accumulated deficit   (1,109,769,797)   (736,821,840)
Total stockholders’ equity (deficit) attributable to Vinco Ventures, Inc.   (56,174,598)   113,424,913 
Noncontrolling interest   15,145,821    20,262,129 
Total stockholders’ equity (deficit)   (41,028,777)   133,687,042 
Total liabilities and stockholders’ equity (deficit)  $500,678,709   $405,142,729 

 

* The assets of the variable interest entities (the “VIEs”) can be used to settle obligations of the consolidated entities. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets (Note 4).

  

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 March 31, 
   2022   2021 
Revenues        
Product sales  $3,757,552   $2,153,306 
Digital advertising and media sales   7,726,369    350,566 
Licensing revenues   50,898    61,290 
Total revenue, net   11,534,819    2,565,162 
           
Cost of revenues          
Packaging products   3,156,993    1,393,063 
Digital advertising and media sales   7,776,663    260,318 
Total costs of revenue   10,933,656    1,653,381 
Gross profit   601,163    911,781 
           
Operating expenses:          
Selling, general and administrative   26,798,107    11,660,880 
Total Operating Expenses   26,798,107    11,660,880 
Operating loss   (26,196,944)   (10,749,099)
           
Other income (expense):          
Interest income (expense)   (22,427,461)   (12,694,933)
Loss on issuance of warrants   (243,681,478)   (75,156,534)
Change in fair value of warrant liability   (86,948,858)   36,381,542 
Other income (loss)   149,594    (44,296)
Total other income (expense)   (352,908,203)   (51,514,221)
Loss before income taxes    (379,105,147)   (62,263,320)
Income tax expense   -    - 
Net loss  $(379,105,147)  $(62,263,320)
Net (loss) income attributable to noncontrolling interests  $(6,157,190)  $28,034 
Net loss attributable to Vinco Ventures, Inc. from continuing operations  $(372,947,957)  $(62,291,354)
Net Loss from discontinued operations   -    (178,200)
           
Net loss attributable to Vinco Ventures, Inc.   (372,947,957)   (62,469,554)
Net loss per share- basic and diluted          
Net loss per share- continuing operations  $(3.05)  $(3.27)
Net loss per share- discontinued operations  -   (0.01)
Net loss per share  $(3.05)  $(3.28)
Weighted Average Number of Common Shares Outstanding -basic and diluted   122,176,851   19,055,006

 

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

 

                       Retained         
   Preferred Stock   Common Stock   Additional Paid-in   Earnings
Accumulated
   Non-controlling   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 
Sale of common stock - investors   -    -    1,500,000    1,500    3,253,500    -    -    3,255,000 
Issuance of common stock - note holders   -    -    5,877,908    5,878    11,510,814    -    -    11,516,692 
Issuance of common stock - consultants   -    -    943,000    943    2,035,392    -    -    2,036,335 
Issuance of common stock - employees   -    -    1,262,872    1,263    3,290,927    -    -    3,292,190 
Issuance of common stock upon exercise of warrants   -    -    880,798    881    1,689,723    -    -    1,690,604 
Exercise of warrant liabilities   -    -    -    -    259,427    -    -    259,427 
Issuance of common stock for acquisition   -    -    750,000    750    1,251,750    -    -    1,252,500 
Share-based compensation             -    -    3,660,436    -    -    3,660,436 
Net income   -    -    -    -    -    (62,469,354)   28,034    (62,441,320)
Balance, March 31, 2021   764,618    765    25,685,981    25,686    66,002,229    (86,118,252)   (1,865,863)   (21,955,435)
                                         
Balance, January 1, 2022   -    -    150,118,024    150,118    850,096,635    (736,821,840)   20,262,129    133,687,042 
Issuance of common stock - exercise of warrants   -    -    36,934,569    36,895    110,992,598    -    -    111,029,493 
Conversions under notes payable             1,000,000    1,000    2,179,000              2,180,000 
Offering costs upon exercise of warrants   -    -    -    -    (9,992,654)   -    -    (9,992,654)
Issuance of common stock - consultants                  40    (40)             - 
Share-based compensation   -    -    -    -    102,563    -    1,040,882    1,143,445 
Exercise of warrant liabilities   -    -    -    -    100,029,044    -    -    100,029,044 
Net income   -    -    -    -    -    (372,947,957)   (6,157,190)   (379,105,147)
                                         
Balance, March 31, 2022   -   $-    188,052,593   $188,053   $1,053,407,146   $(1,109,769,797)  $15,145,821   $(41,028,777)

 

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

 

           
   For the Three Months Ended March 31, 
   2022   2021 
Cash Flow from Operating Activities          
Net loss attributable to Vinco Ventures, Inc.  $(372,947,957)  $(62,291,354)
Net (loss) income attributable to noncontrolling interest   (6,157,190)   28,034 
Net loss   (379,105,147)   (62,263,320)
Adjustments to reconcile net loss to net cash provided by operating activities:          
Discontinued operations   -    (178,200)
Amortization of financing costs   22,260,697    445,541 
Share-based compensation   1,143,445    12,418,930 
Depreciation and amortization   1,608,691    8,697,502 
Amortization of right of use asset   

35,604

    24,163 
Change in fair value of short-term investment   42,000    70,000 
Loss on issuance of warrants   243,681,478    75,156,534 
Change in fair value of warrant liability   86,948,858    (36,381,542)
Changes in assets and liabilities:          
Accounts receivable   (2,428,136)   (494,130)
Inventory   28,030    (215,717)
Prepaid expenses and other assets   (5,384,663)   139,635 
Accounts payable   (1,835,876)   (804,282)
Accrued expenses and other liabilities   (9,009,264)   (755,224)
           
Net Cash used in Operating Activities   (42,014,284)   (4,140,110)
           
Cash Flows from Investing Activities          
Issuance of loans held-for-investment-related parties   -    (5,000,000)
Issuance of loans held-for-investment   

(500,000

)   (7,000,000)
Purchases of property and equipment   (326,563)   (18,228)
Purchase of intangible assets   -    - 
Acquisition of business, net of cash acquired (Note 3)   (34,850,576)   - 
Net Cash used in Investing Activities   (35,677,139)   (12,018,228)
           
Cash Flows from Financing Activities          
Net repayments under line of credit   -    (379,333)
Net (repayments) borrowings under convertible notes payable   

(150,000

)   19,720,000 
Net borrowings under notes payable   -    73,000 
Net repayments under notes payable   (27,644)   (2,141,782)
Net repayments under notes payable - related parties   -    (659,999)
Fees paid for financing costs   -    (122,762)
Net proceeds from exercise of warrants   101,036,839    1,690,604 
Net proceeds from issuance of common stock   -    3,255,000 
           
Net Cash provided by Financing Activities   100,859,195    21,434,728 
Net Increase in Cash and Cash Equivalents   23,167,772    5,276,390 
Cash and Cash Equivalents - Beginning of Period   187,612,176    249,356 
Cash and Cash Equivalents - End of Period  $210,779,948   $5,525,746 
         
Supplemental Disclosures of Cash Flow Information:          
Cash paid during the year for:          
Interest  $414,297   $343,824 
Income taxes  $-   $(14,738)
Noncash investing and financing activity:          
Issuance of warrants to note holders  $243,681,478   $22,000,000 
Deferred acquisition costs  $23,250,000   $- 
Shares issued to note holders  $-   $422,672 
Conversions under notes payable  $-   $11,094,020 

 

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 and consolidated variable interest entities. 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 March 31, 2022 and the results of operations, changes in stockholders’ equity, and cash flows for the periods presented. The results of operations for the three months ended March 31, 2022 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, 2021. 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, 2021, and updated, as necessary, in this Quarterly Report.

 

As used herein, the terms the “Company,” “Vinco Ventures”, “Vinco” “we,” “us,” “our” and similar terms refer to Vinco Ventures, Inc., a Nevada corporation incorporated on July 18, 2017 and when appropriate, its wholly-owned and majority-owned operating subsidiaries and consolidated variable interest entities. The Company was formerly known as Edison Nation Inc., Xspand Products Lab, Inc. and Idea Lab Products, Inc. prior to its name change to “Vinco Ventures, Inc” on November 10, 2020.

 

Vinco Ventures is focused on digital media, advertising and content technologies.

 

As of March 31, 2022, Vinco Ventures wholly-owned subsidiaries included: AdRizer, LLC (“AdRizer”), Cryptyde, Inc. (“Cryptyde”), Cryptyde Shared Services, LLC, TBD Safety, LLC, Vinco Ventures Shared Services LLC, Ferguson Containers, Inc. (“Ferguson”), CBAV1, LLC, Pirasta, LLC (“Pirasta”), Honey Badger Media LLC (“Honey Badger”), EVNT Platform LLC dba Emmersive Entertainment (“EVNT”), BlockHiro, LLC 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 and a 25% economic interest after return of unreturned capital contributions in ZVV Media Partners, LLC (“ZVV”), 50% of Best Party Concepts, LLC and 75% of Global Clean Solutions, LLC, all of which are consolidated as variable interest entities (“VIEs”) with noncontrolling interests. ZVV owns 80% of the outstanding equity interests in Lomotif Private Limited (“Lomotif”). Lomotif owns 100% of Lomotif, Inc. Vinco Ventures owns a 51% voting membership interest in CW Machines, LLC (“CW Machines”), which is consolidated under the voting interest method.

 

9
 

 

Liquidity

 

For the three months ended March 31, 2022, our operations lost $378,400,000 of which $354,687,000 of expenses were non-cash and approximately $8,200,000 was related to transaction costs for our acquisition of AdRizer which closed in February 2022. The Company expects that its ability to generate advertising revenue from the use of its digital media, advertising and content assets will eventually offset its cash expense requirements, and that it has the financial resources to continue to invest in its growth initiatives in the near term, despite the fact that such expenses may be greater than the revenue generated by such assets in the near term.

 

As of March 31, 2022, we had total current assets of $182,425,000 and current liabilities of $42,115,000 resulting in working capital of $142,093,000 to meet our near term operating cash requirements. As of March 31, 2022, we had total assets of $500,679,000 and total liabilities of $541,707,000, of which $429,167,000 was related to our warrant liabilities, resulting in a stockholders’ deficit of $41,029,000.

 

Our principal sources of capital are our cash and cash equivalents, and cash generated from the sale of our securities. Our principal uses of capital are operating expenses, including amounts required to fund working capital and capital expenditures, acquisition costs, loans 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 from the issuance of the 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 subsidiaries, majority owned subsidiaries and consolidated variable interest entities. All intercompany balances and transactions have been eliminated.

 

Use of Estimates

 

Preparation of financial statements in conformity with 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.

 

10
 

 

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.

 

Significant Accounting Policies

 

Significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There have been no changes in such policies or the application of such policies during the three months ended March 31, 2022 except as follows with regard to revenue recognition in connection with AdRizer:

  

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.

 

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 judgment 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 judgment, 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.

 

Product

 

The Company’s product revenues are recognized when control of the goods are transferred to the customer, which is upon shipment of the finished goods to the customer. All sales have fixed pricing and there are currently no material variable components included in the Company’s revenue. Additionally, the Company will issue credits for defective merchandise, historically these credits for defective merchandise have not been material. Based on the Company’s analysis of the revenue standards, revenue recognition from the sale of finished goods to customers, which represents the majority of the Company’s revenues, was not impacted by the adoption of the new revenue standards

 

11
 

 

Digital media advertising and licensing

 

The Company’s digital media advertising revenues are generated primarily from the posting of original digital content through third-party online platforms which are then delivered to users of the online platform across the customer’s digital advertising platform and becomes monetizable to the Company, which the Company concludes is its performance obligation. The Company recognizes revenue when control of the services are transferred to customers and the transaction price is determined by the third-party online platform. Revenue from the digital media platform is primarily recognized based on impressions delivered to customers. An “impression” is delivered when an advertisement appears on pages viewed by users. Licensing revenues are derived from the sale of a licensee’s products that incorporates the Company’s intellectual property. Royalty revenues are recognized during the quarter in which the Company receives a report from the licensee detailing the shipment of products that incorporate the Company’s intellectual property, which receipt is in the quarter following the licensee’s sale of such products to its customers. Royalties are calculated as a percentage of the revenues received by the Company’s licensees on sales of products incorporating the Company’s intellectual property. For AdRizer, FASB ASC 606 requires an entity to determine whether it is a principal (recognizes revenue at the gross amount) or an agent (recognizes revenue at the net amount) for each promised good or service. Based on the FASB guidance, the Company has determined that AdRizer is the principal for each promised good or service, thus, revenue is recognized at the gross amount of the transactions. Revenue from traffic sales and traffic management services are generally recognized at the end of each month when the performance obligation is satisfied.

 

Note 3 — Acquisitions and Divestitures

 

Acquisitions

 

AdRizer, LLC

 

On February 11, 2022, the Company acquired all of the outstanding equity interests of AdRizer and cancelled all outstanding performance units under AdRizer’s phantom equity plan (“Performance Units”) pursuant to that certain Unit Purchase Agreement among the Company, AdRizer, the members of AdRizer and the holders of Performance Units of AdRizer (collectively, the “Seller Members”), and Innovative Assets LLC, in its capacity as the sellers’ representative (the “Unit Purchase Agreement”), resulting in AdRizer becoming a wholly-owned subsidiary of the Company. The purchase price paid and payable consists of (i) $38 million in cash paid at closing, of which $10 million was deposited in an escrow account to secure the Seller Members’ indemnification obligations under the Unit Purchase Agreement, subject to customary post-closing adjustments for working capital and other items, and (ii) up to 10 million shares of the Company’s common stock to be issued on January 1, 2024, determined by dividing $50 million by the volume weighted average price of the Company’s common stock reported by Bloomberg LP for the 20 trading days preceding such date, subject to a floor price of $5.00 and maximum price of $8.00 per share (the “Purchase Price Equity”). The Company estimated the fair value of the Purchase Price Equity to be issued was $23,250,000.

 

If a Company change of control transaction occurs on or prior to January 1, 2024, the issuance of the Purchase Price Equity may be accelerated to allow each Seller Member to participate in such transaction on the same terms as other common stockholders of the Company (the “Acceleration”), provided that, to the extent that the consideration to be paid to the common stockholders of the Company in such transaction does not consist entirely of cash or free-trading securities listed on a national stock exchange, (i) each Seller Member may elect the Acceleration except with respect to Purchase Price Equity issuable in respect of the Performance Units, and (b) if any Seller Member has not elected the Acceleration, to the extent permitted and with respect to the Performance Units, the Company shall (i) pay each such applicable Seller Member a cash amount equal to 50% of such Seller’s Member’s pro rata portion of the Purchase Price Equity (the “Forfeited Purchase Price Equity”) and (ii) issue such Seller Member’s pro rata portion of the Purchase Price Equity less the Forfeited Purchase Price Equity.

 

12
 

 

Upon the closing of the acquisition, AdRizer entered into a new employment agreement with its chief executive officer, Kenneth Bond. Certain Seller Members including those who are employees, officers, directors or managers of AdRizer and their affiliates also agreed to be bound by three-year post-closing non-competition and non-solicitation restrictive covenants pursuant to the Unit Purchase Agreement.

 

The Company has accounted for the AdRizer acquisition as a business combination under the acquisition method of accounting. The Company has classified the Purchase Price Equity as a deferred acquisition liability.

 

The purchase price allocation presented below is preliminary given the recent closing of the AdRizer acquisition. We are in the process of evaluating additional information necessary to finalize the valuation of assets acquired and liabilities assumed as of the acquisition date including, but not limited to, post-closing adjustments to the working capital acquired and identification and valuation of developed technology and intangible assets acquired, fair value of AdRizer’s investment in Mind Tank, LLC, as well as the fair value of the equity consideration transferred. The final fair value determination could result in material adjustments to the values presented in the preliminary purchase price allocation, including other intangible assets, goodwill and the related tax impact of such adjustments. We expect to finalize the purchase price allocation within the measurement period.

 

   AdRizer 
Cash paid  $

37,936,323

 
Fair value of deferred acquisition price   23,250,000 
Purchase consideration  $61,186,323 

 

   AdRizer 
Cash and cash equivalents  $3,085,747 
Accounts receivable   5,564,539 
Other current assets   822,311 
Property and equipment   191,654 
Intangible assets, including goodwill   58,864,751 
Total assets acquired   68,529,002 
      
Accounts payable and accrued expenses   7,342,678 
Total liabilities assumed   7,342,678 
   $61,186,323 

 

The Company recognized $8,216,000 of acquisition related costs, including $6,750,000 paid to ZASH for the assignment of ZASH’s rights under a letter of intent to acquire AdRizer (See Note 13- Related Party Transactions) that were expensed during the three months ended March 31, 2022. These costs are included in the consolidated statement of operations in the line item entitled “Selling, General and Administrative”.

 

13
 

 

The activity of AdRizer is included in the Company’s consolidated financial statements from the acquisition date to March 31, 2022. The amounts of revenue and earnings of AdRizer from the acquisition date of February 11, 2022 to March 31, 2022 are as follows:

      
Revenue  $7,653,085 
Net income   147,618 

 

The following represents the pro forma consolidated statement of operations as if AdRizer had been included in the consolidated results of operations of the Company for the three month period ended March 31, 2022 and 2021. The pro forma financial information is for illustrative purposes only, does not include the pro forma adjustments that would be required under Regulation S-X for pro forma financial information, is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisition had been completed on the dates indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma information is based upon currently available information and does not reflect any additional depreciation or amortization that would have been charged assuming fair value adjustments to developed technology and other intangible assets, together with the consequential tax effects, which have not yet been finalized.

 

         
   For the Three Months 
   Ended March 31, 
   2022   2021 
   (Unaudited)   (Unaudited) 
Revenues, net   14,732,998    11,767,354 
Net loss attributable to Vinco Ventures, Inc.   (372,965,693)   (62,374,954)

 

Asset Acquisitions

 

Emmersive Entertainment Asset Contribution

 

On April 17, 2021, Vinco and EVNT entered into (and closed on) a certain Asset Contribution Agreement (“Asset Contribution Agreement”) with Emmersive Entertainment, Inc. (“Emmersive”), 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. The Earn-out arrangement with the former sellers of Emmersive as described below provides extensions whereby the former sellers of Emmersive would still be eligible for the Earn-out Target 2.

 

14
 

 

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. On October 19, 2021, the Preferred Unit Holders were issued 1,000,000 shares of common stock of Vinco in exchange for the Preferred Units.

 

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

 

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

 

On February 25, 2022, Emmersive, certain former shareholders of Emmersive (collectively, the “Emmersive Parties”), the Company and EVNT entered into a Termination and Release Agreement, terminating certain transaction documents dated April 17, 2021, in connection with which the Emmersive Parties and Cryptyde also entered into a Milestone Agreement for the earnout shares to be earned and any remaining consideration to be paid by Cryptyde with an effective date of both the agreements upon the spin-off of Cryptyde being declared effective by the SEC (the “Effective Date”). Upon the Effective Date, the agreements will release the Company of the obligation to deliver the additional 4,000,000 earn-out shares provided under the Asset Contribution Agreement. The contingent consideration to be paid by Cryptyde upon the successful completion of the spin-off are described below:

 

Earned Shares: Issuance of 300,000 registered shares of common stock of Cryptyde (“Cryptyde Shares”) within 30 days after the effectiveness of our first registration statement following the spin-off.

 

Milestone 1: In the event that Cryptyde generates a minimum of $5,500,000 in annualized booked revenues from the operation of the Musician & Artist Platform (“Attributed Revenue”) ending eight (8) months following the Effective Date (“Tranche 1 Milestone Date”), the Emmersive Parties shall receive 100,000 restricted Cryptyde Shares (“Tranche One”) within 30 after the Tranche 1 Milestone Date. In the event that Cryptyde does not satisfy this milestone for any reason by the Tranche 1 Milestone Date, the Emmersive Parties shall have no rights to the additional Cryptyde Shares.

 

Milestone 2: After the Effective Date, in the event Cryptyde generates a minimum of $26,500,000 in annualized Attributed Revenues in any three-calendar month period ending on or before September 30, 2023, from the Musician & Artist Platform, the Emmersive Parties shall receive an additional 100,000 restricted Cryptyde Shares (“Tranche Two”). In the event Milestone Two is achieved, then Milestone One shall also be deemed to have been achieved. In the event that Cryptyde does not satisfy Milestone Two for any reason by September 30, 2023, the Emmersive Parties shall have no rights to Tranche Two.

 

Milestone 3: After the Effective Date in the event that Cryptyde generates a minimum of $60,000,000 in annualized Attributed Revenues in any three-calendar-month period ending on or before September 30, 2024, from the Musician & Artist Platform, Emmersive Parties shall receive an additional 100,000 restricted Cryptyde Shares (“Tranche Three”). In the event Milestone Three is achieved, then Milestones One and Two shall also be deemed to have been achieved. In the event that Cryptyde does not satisfy Milestone Three for any reason by September 30, 2024, time being of the essence, the Emmersive Parties shall have no rights to Tranche Three. In the event that Cryptyde satisfies Milestone Three in the time prescribed they shall have the right to receive an additional 100,000 restricted shares of Cryptyde Shares (“Bonus Tranche”). In the event that Cryptyde does not satisfy Milestone Three for any reason, the Emmersive Parties shall have no rights to the Bonus Tranche.

 

15
 

 

Divestitures

 

CBAV1, LLC Divestiture

 

On March 12, 2021, the bankruptcy court approved the sale of CBAV1, LLC’ assets used for its business of selling children’s products 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. Contemporaneously with the closing on April 21, 2021, a certain license agreement between CBAV1 and Edison Nation, LLC terminated and any remaining operational assets of Edison Nation were transferred to BTL.

 

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

 

Expected Spin-Off of Cryptyde, Inc.

 

On November 8, 2021, our subsidiary Cryptyde initially filed, and on January 25, 2022, March 18, 2022 and May 13, 2022 amended, a Form 10 registration statement with the SEC (the “Form 10”) in connection with our planned spin-off of Cryptyde, subject to certain conditions as described in the registration statement, including the effectiveness of the registration statement, receipt of an opinion of counsel to the effect that, among other things, the spin-off and related transactions should qualify as tax-free for United States federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code, and Nasdaq having approved the listing of Cryptyde’s common stock. Cryptyde holds our packaging, Bitcoin mining services, and Web3 (decentralized internet) products businesses.

 

On May 16, 2022, the Form 10 was declared effective. The record date for the spin-off is May 18, 2022 and the distribution date is scheduled for May 27, 2022. Upon completion of the spin-off, Cryptyde would become an independent, publicly traded company.

 

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.

 

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 a portion of the economics of these VIEs. The Company is the primary beneficiary of the VIE entities. The assets of the VIEs can be used to settle obligations of the consolidated entities. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets.

 

16
 

 

The following table presents the carrying values of the assets and liabilities of entities that are VIEs and consolidated by the Company as of March 31, 2022 and December 31, 2021:

 

     March 31, 2022  

 

December 31, 2021

 
   March 31, 2022  

December 31, 2021

 
         
Assets          
Current assets:          
Cash and cash equivalents  $6,183,563   $1,856,017 
Prepaid expenses and other current assets   1,824,684    2,388,893 
Other Investments   109,765,000    - 
Due from Related Party   11,400,584    15,997,803 
Loan Interest Receivable   366,355    - 
Total current assets   129,540,186    20,242,713 
Loan Held-for-Investment   3,100,000    3,100,000 
Loan Held-for-Investment, related parties   18,000,000    11,500,000 
Property and Equipment, net   189,028    147,519 
Intangible assets, net   27,047,962    28,150,048 
Goodwill   116,188,021    116,188,021 
Cost Method Investments   1,500,000    1,000,000 
Total assets  $295,565,197   $180,328,301 
           
Liabilities and stockholders’ equity          
Current liabilities:          
Accounts payable  $575,420   $686,674 
Accrued expenses and other current liabilities   1,597,397    1,672,492 
Total current liabilities   2,172,817    2,359,166 
Intercompany   44,681,303    - 
Notes Payable   4,563,879    2,650,000 
Total liabilities  $58,091,392   $5,324,832 

 

The following table presents the operations of entities that are VIEs and consolidated by the Company as of March 31, 2022 and 2021:

 

           
  

For the Three Months

Ended March 31,

 
   2022   2021 
Revenues, net  $-   $214,394 
Cost of revenues   -    84,155 
Gross profit   -    130,239 
           
Operating expenses:          
Selling, general and administrative   10,971,969    100,421 
Operating (loss) income   (10,971,969)   29,818 
           
Other (expense) income:          
Interest expense   (2,212)   26,250 
Other income   88,569      
Total other (expense) income   (86,357)   56,068 
Loss before income taxes   (10,885,612)   56,068 
Income tax expense   -    - 
Net loss  $(10,885,612)  $56,068 

 

17
 

 

As of March 31, 2022, the Company had no unconsolidated VIEs. 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 January 19, 2021, Vinco Ventures, ZASH and ZVV entered into a Contribution Agreement pursuant to which each of Vinco Ventures and Zash contributed to ZVV certain media and entertainment assets in order for ZVV to engage in the development and production of consumer facing content and related activities.

 

On or around February 23, 2021, ZASH entered into a Securities Purchase Agreement (the “Lomotif SPA”) with Lomotif and certain shareholders of Lomotif (the “Lomotif Selling Shareholders”) to acquire a controlling interest in Lomotif.

 

On July 19, 2021, ZASH, Lomotif, the Lomotif Selling Shareholders and ZVV entered into a Deed of Variation and Supplement 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.

 

On July 22, 2021, ZASH and Vinco Ventures entered into a Second Amended and Restated Limited Liability Company Agreement of ZVV, pursuant to which (i) ZASH and Vinco Ventures each acquired a 50% voting membership interest in ZVV; and (ii) ZASH acquired a 75% economic interest in ZVV after return of unreturned capital contributions and Vinco Ventures acquired a 25% economic interest in ZVV after return of unreturned capital contributions.

 

On July 25, 2021, ZVV completed the acquisition of an 80% equity ownership interest in Lomotif for a total purchase price of $109,765,000

 

Note 5 — Short-Term Investments

 

As of March 31, 2022 and December 31, 2021, short-term investments consisted of the following:

 

   March 31, 2022   December 31, 2021 
Jupiter Wellness, Inc. (JUPW)  $1,040,000   $1,040,000 
Unrealized losses   (820,000)   (862,000)
Total short-term investments  $220,000   $178,000 

 

Note 6 — Property and Equipment, net

 

As of March 31, 2022 and December 31, 2021, property and equipment consisted of the following:

 

   March 31, 2022   December 31, 2021 
Buildings – rental property  $-   $- 
Building improvements   800,746    800,746 
Equipment and machinery   4,821,194    4,779,685 
Furniture and fixtures   473,459    388,637 
Computer software   501,340    147,792 
Molds   79,300    79,300 
Vehicles   533,867    533,867 
Leasehold Improvements   415,864    - 
Property, plant and equipment, gross   7,625,770    6,730,027 
Less: accumulated depreciation   (5,840,544)   (5,353,276)
Total property and equipment, net  $1,785,226   $1,376,751 

 

Depreciation expense for the three months ended March 31, 2022 and 2021 was $74,139 and $32,812, respectively.

 

18
 

 

Note 7 —— Loans held for investment

 

As of March 31, 2022 and December 31, 2021, loans held-for-investment consisted of the following:

   March 31, 2022   December 31, 2021 
Loans held-for-investment:          
PZAJ Holdings, LLC (i)  $4,600,000   $3,950,000 
Carlin Haynes, LLC (ii)  $750,000   $250,000 
Total loans held-for-investment  $5,350,000   $4,200,000 

 

(i) PZAJ Holdings, LLC (“PZAJ”) is an entertainment content development company engaged in the acquisition, financing, development, production, and distribution of films and television projects. As of March 31, 2022, the Company has loaned $4,600,000 to PZAJ pursuant to multiple promissory notes (collectively, the “PZAJ Notes”) 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 or streamed on Lomotif.
(i) PZAJ Holdings, LLC (“PZAJ”) is an entertainment content development company engaged in the acquisition, financing, development, production, and distribution of films and television projects. As of March 31, 2022, the Company has loaned $4,600,000 to PZAJ pursuant to multiple promissory notes (collectively, the “PZAJ Notes”) 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 or streamed on Lomotif. The interest rate on the notes is 2% per annum. The loans are due at various times in 2022. The purpose of the loans is to engage in the acquisition, development and production of consumer facing content and related activities. The loans are nonrecourse loans and will be repaid with earned revenues for each project. As of March 12, 2022, PZAJ, its existing members and the Company entered into a Limited Liability Company Agreement of PZAJ, pursuant to which the loans extended by Vinco or on its behalf to PZAJ in the aggregate amount of $5,590,000 was converted into a capital contribution of Vinco into PZAJ and Vinco was admitted into PZAJ as a member owning a 51% membership interest.
   
 

The interest rate on the notes is 2% per annum. The loans are due at various times in 2022. The purpose of the loans is to engage in the acquisition, development and production of consumer facing content and related activities. The loans are nonrecourse loans and will be repaid with earned revenues for each project.

 

As of March 12, 2022, PZAJ, its existing members and the Company entered into a Limited Liability Company Agreement of PZAJ, pursuant to which the loans extended by Vinco or on its behalf to PZAJ in the aggregate amount of $5,590,000 was converted into a capital contribution of Vinco into PZAJ and Vinco was admitted into PZAJ as a member owning a 51% membership interest.

   
(ii) On August 5, 2021, the Company loaned $250,000 to Carlin Haynes, LLC, dba TMX. The interest rate on the note is 6% per annum. The maturity date of the loan is August 5, 2023. The purpose of the loan is to engage in the creation and distribution of digital media content. In the event that Carlin Haynes, LLC issues and sells units of preferred equity securities to one or more investors in an arm’s length transaction or series of related transactions with the principal purpose of raising capital that results in aggregate gross proceeds to Carlin Haynes, LLC of at least $1,000,000, excluding the amount represented by the conversion of any simple agreement for future equity or outstanding indebtedness, including all or a portion of the note issued to the Company (the “TMX Note”), in accordance with their respective terms and the TMX Note has not been paid in full, then the outstanding principal balance of the TMX Note and all accrued and unpaid interest thereon shall automatically convert in whole without any further action by the Company into the number of limited liability company membership units/interests of Carlin Haynes LLC equal to the outstanding principal balance of the TMX Note and all accrued and unpaid interest due on the TMX Note on the date of conversion, divided by 80% of the price per unit paid by the investors to purchase the new securities in the qualified financing.

 

As of March 31, 2022 and December 31, 2021, loans held-for-investment – related parties consisted of the following:

   March 31, 2022   December 31, 2021 
Loans held-for-investment – related parties:          
Zash Global Media and Entertainment Corporation (iii)   15,000,000    15,000,000 
Magnifi U (iv)   1,500,000    1,500,000 
Wattum Management (v)   4,000,000    4,000,000 
Total loans held-for-investment – related parties  $20,500,000   $20,500,000 

 

19
 

 

(iii)

ZASH Global Media and Entertainment Corporation is a media and entertainment company involved in the development of consumer facing content.

 

As of March 31, 2022, the Company has loaned $15,000,000 to ZASH under multiple financings. The interest rate on the notes is 6% per annum. The loans are due in 2023. The purpose of the loans is to engage in the acquisition, development and production of consumer facing content and related activities.

 

In the event that ZASH issues and sells preferred equity securities to one or more investors in an arm’s length transaction or series of related transactions with the principal purpose of raising capital that results in aggregate gross proceeds to ZASH of at least $1,000,000, excluding the amount represented by the conversion of any simple agreement for future equity or outstanding indebtedness, including all or a portion of the notes issued to the Company (the “ZASH Notes”), in accordance with their respective terms and the ZASH Notes have not been paid in full, then the outstanding principal balance of the ZASH Notes and all accrued and unpaid interest thereon shall automatically convert in whole without any further action by the Company into the number of preferred equity securities of ZASH equal to the outstanding principal balance of the ZASH Notes and all accrued and unpaid interest due on the ZASH Notes on the date of conversion, divided by 80% of the price per share paid by the investors to purchase the new securities in the qualified financing.

   
(iv) On October 12, 2021, the Company loaned $1,500,000 to Magnifi U. The interest rate on the note is 3% per annum. The maturity date of the loan is October 12, 2023. The purpose of the loan is to engage in the creation and distribution of digital media content.
   
(v) On October 14, 2021, the Company loaned $4,000,000 to Wattum Management, Inc. The interest rate on the note is 5% per annum. The maturity date of the loan is October 12, 2026. The purpose of the loan is to engage in the sale of crypto mining equipment.

 

Note 8 —Cost-method investments

 

As of March 31, 2022 and December 31, 2021, cost method investments consisted of the following:

 

   March 31,   December 31, 
   2022   2021 
Hyperreal Digital, Inc.  $1,000,000   $1,000,000 
Total cost-method investments  $1,000,000   $1,000,000 

 

Note 9 — 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.

 

20
 

 

The following fair value of financial assets and liabilities and the input level used to determine the fair value as of March 31, 2022 and December 31, 2021 is presented below:

 

  

Fair Value Measurements as of

March 31, 2022

 
   Level 1   Level 2   Level 3 
             
Assets:               
Short-term investments  $210,000   $-   $- 
                
Liabilities:               
Warrant liability   -    -    429,023,674 
Total   210,000    -    429,023,674 

 

  

Fair Value Measurements as of

December 31, 2021

 
   Level 1   Level 2   Level 3 
             
Assets:               
Short-term investments  $178,000   $-   $- 
                
Liabilities:               
Warrant liability   -    -    198,566,170 
Total   178,000    -    198,566,170 

 

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 three months ended March 31, 2022 and 2021, respectively:

 

   Warrant Liability 
     
Balance, January 1, 2022  $198,566,170 
Issuance of warrants   243,681,478 
Change in fair value of warrants   86,948,858
Exercise of warrants   (100,029,444)
Balance, March 31, 2022  $429,167,462 

 

   Warrant Liability 
     
Balance, January 1, 2021  $- 
Issuance of warrants   77,083,044 
Change in fair value of warrants   (18,627,843)
Exercise of warrants   (219,636)
Balance, March 31, 2021  $58,235,565 

 

21
 

 

Note 10 — Intangible assets, net

 

As of March 31, 2022, intangible assets consisted of the following:

 

      Remaining
Weighted
             
   Estimated
Useful
  Average
Useful
   Gross
Carrying
   Accumulated   Net
Carrying
 
   Life  Life   Amount   Amortization   Amount 
Finite lived intangible assets:                       
Customer relationships  15 years   11.4 years   $670,000   $160,056   $509,944 
Developed technology  7-10 years   6.8 years    37,251,987    4,707,579    32,544,408 
Membership network  7 years   3.4 years    1,740,000    890,714    849,286 
Digital media platform  7 years   5.6 years    1,552,500    304,955    1,247,545 
Influencer network  5 years   4.8 years    2,756,000    137,800    2,618,200 
Total finite lived intangible assets          $43,970,487   $6,201,104   $37,769,383 
                        
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          $45,210,487   $6,201,104   $39,009,383 

 

As of December 31, 2021, intangible assets consisted of the following:

 

      Remaining Weighted             
   Estimated
Useful
  Average
Useful
   Gross
Carrying
   Accumulated   Net
Carrying
 
   Life  Life   Amount   Amortization   Amount 
Finite lived intangible assets:                       
Customer relationships  15 years   11.7 years   $670,000   $148,889   $521,111 
Developed technology  7-10 years   7.0 years    37,251,987    3,458,065    33,793,922 
Membership network  7 years   3.7 years    1,740,000    828,571    911,429 
Digital media platform  7 years   5.9 years    1,552,500    249,509    1,302,991 
Influencer network  5 years   5.0 years    2,756,000    -    2,756,000 
Total finite lived intangible assets          $43,970,487   $4,685,034   $39,285,453 
                        
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          $45,210,487   $4,685,034   $40,525,453 

 

Amortization expense for the three months ended March 31, 2022 and 2021 was $1,516,070 and $412,730, respectively.

 

The estimated future amortization of intangibles subject to amortization as of March 31, 2022 was as follows:

 

For the Years Ended December 31,  Amount 
2022 (excludes amortization through March 31, 2022)  $4,548,210 
2023   6,064,280 
2024   6,064,280 
2025   5,852,851 
2026   5,429,994 
Thereafter   9,809,769 
Total  $37,769,383 

 

22
 

 

Note 11 — Debt

 

As of March, 31, 2022 and December 31, 2021, debt consisted of the following:

 

   March 31, 2022    December 31, 2021 
        
     -      27,644 
Notes payable – related parties    235,107      235,107 
Convertible notes payable    112,990,000      113,000,000 
Convertible notes payable of Lomotif Private Limited    -      150,000 
Convertible notes payable of Lomotif Private Limited – related parties    2,500,000      2,500,000 
Debt issuance costs    (48,834,475)     (68,925,172)
Total debt    66,890,632      46,987,579 

 

Convertible Notes Payable – Related Parties

ZASH – February and March 2021

On February 23, 2021, Lomotif Private Limited obtained a loan in the amount of $1,500,000 from ZASH pursuant to a loan agreement with ZASH with a maturity date on February 22, 2028 and an annual interest rate of 2%. Under the terms of the agreement, the loan is convertible at a 20% discount to a $150 million valuation of Lomotif Private Limited. On March 30, 2021, Lomotif Private Limited obtained a loan in the amount of $1,000,000 from ZASH pursuant to a loan agreement with ZASH with a maturity date on March 28, 2028 and an annual interest rate of 2%. Under the terms of the loan agreement, the loan is convertible at a 20% discount to a $150 million valuation of Lomotif Private Limited.

 

Convertible Notes Payable

 

Hudson Bay Financing – July 2021

 

On July 22, 2021 Vinco Ventures consummated a private placement offering (the “July 2021 Offering”) whereby pursuant to the Securities Purchase Agreement (the “July 2021 Purchase Agreement”) entered into by the Company on July 22, 2021 with Hudson Bay Master Fund Ltd as 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 “July 2021 Note”) and five (5) year warrants (the “July 2021 Warrant”) to purchase shares of the common stock of the Company (“Common Stock”). The Company placed $100,000,000 of cash into a restricted bank account under a deposit account control agreement as collateral for the July 2021 Note. The Company recorded a deferred discount of $120,000,000 which consisted of the $20,000,000 original issue discount, $9,300,000 of fees paid to placement agents and lawyers, and $90,700,000 related to the issuance of warrants.

 

The July 2021 Note carries no interest unless and until an event of default shall occur and the July 2021 Note matures on July 22, 2022. The July 2021 Note contains a voluntary conversion mechanism whereby the noteholder may convert at any time after the Initial Convertibility Date (as defined in the July 2021 Note), in whole or in part, the outstanding principal and interest under the July 2021 Note into shares of Common Stock of the Company at a conversion price of $4.00 per share. The July 2021 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 July 2021 Note contains customary events of default. If an event of default occurs, interest under the July 2021 Note will accrue at a rate of eighteen percent (18%) per annum and the outstanding principal amount of the July 2021 Note, plus accrued but unpaid interest, liquidated damages and other amounts owing with respect to the July 2021 Note will become, at the noteholder’s election, immediately due and payable in cash. Upon completion of a Change of Control (as defined in the July 2021 Note), the July 2021 Note holder may require the Company to purchase any outstanding portion of the July 2021 Note in cash at a price in accordance with the terms of the July 2021 Note.

 

Palladium Capital Group, LLC. acted as placement agent for the July 2021 Offering. The placement agent received $9,000,000 of which $1,000,000 was cash compensation and $8,000,000 was deferred cash compensation (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 deferred cash compensation and $4,000,000 remains outstanding as of March 31, 2022.

 

Pursuant to the July 2021 Purchase Agreement, the investor received the July 2021 Warrant. The July 2021 Warrant contained an exercise price of $2.655 per share, subject to adjustments as provided under the terms of the July 2021 Warrant. In connection with the closing of the July 2021 Offering, the July 2021 Warrant was issued for an aggregate of 32,697,548 shares of Common Stock. The conversion features on the July 2021 Note and the July 2021 Warrant were approved by the Company’s stockholders on October 14, 2021. On November 9, 2021 the investor converted $7,000,000 of principal under the July 2021 Note in exchange for 1,750,000 shares of Common Stock.

 

23
 

 

On March 9, 2022, the Company, Cryptyde and the noteholder of the July 2021 Note entered into an Amendment Agreement (the “Amendment Agreement”) whereby the parties agreed to, among other things: (i) amend certain provisions of the July 2021 Note to (a) convert $10,000 of the principal amount of the July 2021 Note at a conversion price of $0.01 into shares of Common Stock, (b) extend the maturity date under the July Note to July 22, 2023, (c) increase the interest rate on the July 2021 Note from zero percent (0%) to six percent (6.0%), (d) reduce the maximum cap of the minimum cash in the control account from $100,000,000 to $80,000,000, and (e) require the Company to redeem $33,000,000 of the principal of the July 2021 Note, together with accrued and unpaid interest and accrued and unpaid late charges on such principal and interest, on July 22, 2022; (ii) to extend certain dates relating to (x) the Company’s registration of certain securities under the Warrant Exercise Agreements dated September 1, 2021, November 11, 2021 and December 20, 2021 to April 30, 2022, (y) the Company’s filing of a proxy statement to April 30, 2022 and (z) the Company holding a stockholder meeting and obtaining a stockholder vote to June 4, 2022 or July 4, 2022 in the event that the Company receives comments from the SEC with respect to the proxy statement; and (iii) to waive any adjustments to convertible securities or options as a result of the Adjusted Conversion Price (as defined in the Amendment Agreement). The Company accounted for the amendment as a modification of debt and as a result, extended the amortization of the deferred financing fees of the original note over the remaining term of the amended agreement. In addition, the Company recorded additional deferred financing fees as a result of the issuance of 1,000,000 shares of common stock with a per share value of $2.18 in conjunction with the amendment.

 

On April 29, 2022, the Company, Cryptyde and the Holder entered into a Second Amendment Agreement (the “Second Amendment Agreement”) whereby the parties agreed to amend the First Amendment Agreement to replace the date of “April 30, 2022” in Section 7(m) of the First Amendment Agreement to “May 6, 2022.”

 

On May 6, 2022, the Company and the Holder entered into a Third Amendment Agreement (the “Third Amendment Agreement”) whereby the parties agreed to amend the Second Amendment Agreement to replace the date of “May 6, 2022” in Section 7(m) of the Second Amendment Agreement to “May 11, 2022.”

 

The scheduled maturities of the debt for the next five years as of March 31, 2022, are as follows:

 

For the Years Ended December 31,  Amount 
2022   33,112,835 
2023   86,612,272 
2024   - 
2025   - 
2026   - 
Long-term Debt, Gross   115,725,107 
Less: debt discount   (48,834,475)
Long-term Debt  $66,890,632 

 

Note 12 — Warrant Liability

 

For the three months ended March 31, 2022, the Company issued warrants to purchase shares of the Company’s common stock related to the Warrant Exercise Agreement dated December 20, 2021, with a warrant holder, in which the Company agreed to issue 2.25 warrants with an exercise price of $3.265 to the warrant holder for every warrant the warrant holder exercised from the period commencing December 20, 2021 and ending on February 28, 2022. In conjunction with this agreement, the warrant holder exercised 36,894,569 warrants in the first three months of 2022 which generated $111,029,493 in gross proceeds to the Company during the three months ended March 31, 2022. In conjunction with the agreement, the Company issued 83,012,781 warrants to the holder and 6,641,022 to the placement agent for the agreement. The warrants have an exercise price of $3.265, a five year term, and provide registration rights to the holder along with other terms that cause the warrants to be accounted for as a liability. The initial fair value of the warrants issued during the three months ended March 31, 2022 was $243,681,478.

 

24
 

 

The Company’s outstanding warrants set forth below were valued using the Monte-Carlo simulation pricing model to calculate the March 31, 2022 fair value of the warrants with the following assumptions:

  

Dividend

Yield

   Expected
Volatility
   Risk-free
Interest Rate
  

Expected

Life

Hudson Bay Warrant; June 4, 2021   0.00%   128.50%   2.43%  3.2 years
Hudson Bay Series A Warrant; September 1, 2021   0.00%   128.50%   2.43%  3.0 years
Palladium Capital Group Series A Warrant; September 1, 2021   0.00%   128.50%   2.43%  3.0 years
Hudson Bay Warrant; November 10, 2021   0.00%   128.50%   2.43%  3.9 years
Palladium Capital Warrant; November 10, 2021   0.00%   128.50%   2.43%  3.9 years
Hudson Bay Warrant; December 20, 2021   0.00%   128.50%   2.43%  3.9 years
Palladium Capital Warrant; December 20, 2021   0.00%   128.50%   2.43%  3.9 years

 

Note 13 — Related Party Transactions

 

ZASH Global Media and Entertainment Corporation

 

As of March 31, 2022, Lomotif owed ZASH $2,500,000 in original principal amount under two promissory notes. In addition, ZASH owed the Company $15,000,000 in original principal amount under six promissory notes. Our Chairman, Roderick Vanderbilt, co-founded ZASH and previously served as the President of ZASH, and has a pre-existing personal and business relationship with the current controlling shareholder of ZASH and ZVV manager, Theodore Farnsworth. On October 1, 2021, ZASH, ZVV, and AdRizer entered into a letter of intent (as amended, the “LOI”), which contemplated the acquisition by ZASH or ZVV of all of the outstanding equity interests of AdRizer. On February 11, 2022, the Company, ZASH and ZVV entered into an Assignment and Assumption Agreement whereby ZASH and ZVV assigned to the Company, and the Company assumed, all of the rights and obligations of ZASH and ZVV under the LOI, in consideration of a cash payment by the Company to ZASH of $6.75 million upon the closing of the acquisition, which occurred on February 11, 2022 (See Note 3- Acquisitions and Divestitures)

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.

Wattum Management Inc.

On October 12, 2021, Cryptyde entered into a promissory note (the “Wattum Note”) with Wattum Management, Inc. (“Wattum”), pursuant to which Cryptyde loaned Wattum $4,000,000. The Wattum Note bears interest at 5% annually. Wattum is a 49% owner of CW Machines.

Note 14— Commitments and Contingencies

 

Operating Leases

 

The Company has entered into non-cancellable operating leases for office, warehouse, and distribution facilities, with original lease periods expiring through 2024. 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 months ended March 31, 2022 and 2021 was $187,500 and $26,553, respectively. Rent expense is included in general and administrative expense on the consolidated statements of operations. As of March 31, 2022, the Company had operating lease liabilities of $135,944 and right of use assets for operating leases of $133,310. 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.

 

25
 

 

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.

 

Note 15 — Stockholders’ Equity

 

Common Stock

 

The Company is authorized to issue 250,000,000 shares of common stock. As of March 31, 2022 and December 31, 2021, there were 188,052,593 and 150,118,024 shares of common stock issued and outstanding, respectively.

During the three months ended March 31, 2022, warrant shares of 36,894,569 were exercised and the Company received proceeds of $111,029,493.

 

Preferred Stock

 

The Company does not currently have any shares of preferred stock authorized for issuance

 

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 (3,267,040 remaining as of March 31, 2022) 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 2021 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 Common Stock on the date of grant.

 

The following table summarizes stock option awards outstanding as of March 31, 2022:

 

   Shares  

Weighted

Average

Exercise

Price

  

Remaining

Contractual

Life in