Quarterly report pursuant to Section 13 or 15(d)

Variable Interest Entities

v3.21.2
Variable Interest Entities
9 Months Ended
Sep. 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.

 

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

 

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

2,650,000

      -  

Total liabilities

  $

5,368,844

    $

1,930,452

 

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 4 — Variable Interest Entities — (Continued)

 

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

 

    2021     2020     2021     2020  
   

For the Three Months

Ended September 30,

   

For the Nine Months

Ended September 30,

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

 

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

 

ZVV Media Partners, LLC and Lomotif Private Limited

 

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

 

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

 

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

 

Global Clean Solutions, LLC

 

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

 

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

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 4 — Variable Interest Entities — (Continued)

 

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

 

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

 

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

 

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

 

 

Vinco Ventures, Inc. and Subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS