Quarterly report pursuant to Section 13 or 15(d)

Variable Interest Entities

v3.21.2
Variable Interest Entities
6 Months Ended
Jun. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Variable Interest Entities

Note 4 — Variable Interest Entities

 

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

 

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

 

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

 

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

 

    June 30, 2021     December 31, 2020  
             
Assets                
Current assets:                
Cash and cash equivalents   $ 3,845     $ 10,481  
Accounts receivable, net     -       94,195  
Inventory     -       240,158  
Prepaid expenses and other current assets     -       -  
Total current assets     3,845       344,834  
Property and equipment, net     -       -  
Total assets   $ 3,845     $ 344,834  
                 
Liabilities and stockholders’ equity                
Current liabilities:                
Accounts payable   $ 29,164     $ 217,558  
Accrued expenses and other current liabilities     43,473       113,576  
Line of credit, net of debt issuance costs of $0 and $15,573, respectively     1,133,652       1,133,652  
Notes payable, current     -       150,000  
Due to related party     315,666       315,666  
Total current liabilities     1,521,955       1,930,452  

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

Note 4 — Variable Interest Entities — (Continued)

 

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

 

                 
   

For the Three Months

Ended June 30,

   

For the Six Months

Ended June 30,

 
    2021     2020     2021     2020  
Revenues, net   $ 92,945     $ 1,051,945     $ 307,339     $ 1,274,477  
Cost of revenues     9,530       789,000       93,685       994,923  
Gross profit     83,415       262,945       213,654       279,554  
                                 
Operating expenses:                                
Selling, general and administrative     4,320       136,648       104,741       203,562  
Operating income     79,095       126,297       108,913       75,992  
                                 
Other (expense) income:                                
Interest expense     (34,010 )     (21,331     (7,760 )     (56,956
Total other (expense) income     (34,010 )     (21,331     (7,760 )     (56,956
Loss before income taxes     45,085       104,966       101,153       19,036  
Income tax expense     -       -       -       -  
Net income   $ 45,085     $ 104,966     $ 101,153     $ 19,036  

 

At June 30, 2021, the Company had one unconsolidated VIE, ZVV Media Partners, LLC (“ZVV”), for which the Company held a variable interest.

 

Global Clean Solutions, LLC

 

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

 

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

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

Note 4 — Variable Interest Entities — (Continued)

 

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

 

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

 

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

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS