Annual report pursuant to Section 13 and 15(d)

Acquisitions and Divestitures

v3.22.1
Acquisitions and Divestitures
12 Months Ended
Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract]  
Acquisitions and Divestitures

Note 3 — Acquisitions and Divestitures

 

Acquisitions

 

Lomotif Acquisition

 

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

 

The activity of Lomotif is included in the Company’s consolidated statements of operations from the acquisition date to December 31, 2021 included selling, general and administrative expenses of $9,665,021 and a net loss of $9,618,416.

 

The following table summarizes the aggregate purchase price consideration paid:

 Summary of the Aggregate Purchase Price Consideration Paid

    July 25, 2021  
Cash paid   $ 92,000,000  
Fair value of issued shares     8,882,500  
Issuance of debt to selling shareholder*     8,000,000  
Fair value of conversion feature to selling shareholder*     882,500  
Purchase consideration   $ 109,765,000  

 

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

 

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

 Summary of Preliminary Purchase Price Allocation of Fair Values of the Assets Acquired and Liabilities Assumed

 

    July 25, 2021  
Cash and cash equivalents   $ 1,238,800  
Prepaid expenses and other current assets     244,426  
Property and equipment     91,007  
Intangible assets     27,000,000  
Goodwill     116,188,021  
Total assets acquired     144,762,254  
         
Debt     4,650,000  
Accounts payable     918,665  
Accrued expenses and other liabilities     1,987,340  
Total liabilities assumed     7,556,004  
Noncontrolling interest     (27,441,250 )
         
Total assets acquired, net     109,765,000  

 

The goodwill is not expected to be tax deductible for income tax purposes.

 

  

Acquisitions – Graphene Holdings, LLC

 

On September 29, 2020, the Company entered into a Purchase and Sale Agreement with Graphene Holdings, LLC, Mercury Funding Co, LLC, Ventus Capital, LLC and Jetco Holdings, LLC to acquire all outstanding Membership Units (the “Units”) of TBD. Collectively, the sellers owned all outstanding Units of TBD. Under the terms of the agreement, the Company issued a total 2,210,382 shares of the Company’s common stock and a total of 764,618 shares of a newly designated Preferred Stock (the “Preferred”). In addition, the Company and the sellers entered into a Registration Rights Agreement in favor of the sellers obligating the Company to register such common stock and shares of common stock to be issued upon conversion of the Preferred within 120 days after the Closing. The sellers also had an Earn Out Consideration, which provided that at such time as the assets purchased in the agreement achieve cumulative revenue of $10,000,000, the sellers will earn a total of 125,000 shares of common stock. The closing of the transaction occurred on October 16, 2020. On December 15, 2021, the Company repurchased 600,000 shares of the Company’s common stock from certain sellers for $1,644,000. A portion of the issued shares represented more than 20% of the Company’s outstanding shares of Common Stock as of the October 16, 2020 closing date of the Acquisition (the “Percentage Threshold”). To enable the shares issued pursuant to the Agreement to be below the Percentage Threshold, on January 3, 2022, the Company and one of the LLCs (controlled by person who served as the Company’s Chief Strategy Officer from November 2020 until September 2021) entered into a Share Exchange Agreement (the “Exchange Agreement”). Pursuant to the Exchange Agreement, the parties agreed that they would return 600,000 shares of Common Stock to the Company after which the Company would cancel these 600,000 shares (the “Cancelled Shares”) in exchange for the payment of $1,644,000 for the Cancelled Shares.

 

The following table summarizes the aggregate purchase price consideration paid for acquisitions during 2020:

 Summary of the Aggregate Purchase Price Consideration Paid

    October 16, 2020  
Fair value of issued common shares   $ 4,203,632  
Fair value of issued preferred shares     764,618  
Fair value of contingent consideration     200,000  
Purchase consideration   $ 5,168,250  

 

The following table summarizes the purchase price allocation of fair values of the assets acquired and liabilities assumed during 2020 at the date of acquisition:

 Summary of Preliminary Purchase Price Allocation of Fair Values of the Assets Acquired and Liabilities Assumed

    October 16, 2020  
Cash and cash equivalents   $ 180,489  
Accounts receivable     20,217  
Inventory     492,793  
Other current assets     346,095  
Goodwill     591,729  
Intangible assets     3,600,000  
Total assets acquired   $ 5,231,323  
Notes payable     62,500  
Current liabilities     573  
Total liabilities assumed     63,073  
Total net assets acquired     5,168,250  

 

The goodwill is expected to be fully deductible for income tax purposes.

 

The Company recognized an impairment loss of $591,729 and $3,150,000 for the year ended December 31, 2021 related to the goodwill and intangible assets, respectively.

 

The following represents the unaudited pro forma consolidated income statement as if the acquisitions had been included in the consolidated results of the Company for the full years ending December 31, 2021 and 2020:

 

    2021     2020  
             
Revenues, net   $ 9,791,372     $ 12,016,305  
Cost of revenues     7,312,602       9,570,205  
Gross profit     2,478,770       2,446,100  
                 
Operating expenses:                
Selling, general and administrative     86,422,848       11,108,548  
Impairment     3,741,729       -  
Operating loss     (87,685,807 )     (8,662,448 )
                 
Other income (expense):                
Other income (expense)     (635,701,478 )     (3,297,316 )
Loss before income taxes     (723,387,285 )     (11,959,764 )
Income tax expense (benefit)     194,539       19,197  
Net loss from continuing operations     (723,581,824 )   $ (11,978,961 )

 

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.

 

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 1,000,00 shares of common stock in exchange for the Preferred Units.

 

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

 Summary of the Aggregate Purchase Price Consideration Paid

    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, the Company and Emmersive entered into a Termination and Release Agreement, terminating certain transaction documents dated April 17, 2021, and a Milestone Agreement for the earnout shares to be earned and any remaining consideration to be paid by Cryptyde, Inc. with an effective date of the agreements upon the spin-off being declared effective (“Effective Date”) Upon the spinoff, the agreements release the Company of the opportunity to earn the additional 4,000,000 shares of common stock of Vinco from the Asset Contribution Agreement. The contingent consideration to be paid by Cryptyde, Inc. upon the successful completion of the spin-off are described below:

 

Earned Shares: Issuance of 300,000 shares of common stock of Cryptyde, Inc. (“Cryptyde Shares”).

 

Milestone 1: In the event that the Company 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 thirty (30) after the Tranche 1 Milestone Date. In the event that the Company 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 the Company 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 the Company 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 Buyer 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 the Company 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 the Company 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 the Company does not satisfy Milestone Three for any reason, the Emmersive Parties shall have no rights to the Bonus Tranche.

 

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 1,000,00 shares of common stock in exchange for the Preferred Units.

 

Honey Badger Asset Acquisition and License Agreement

 

On November 10, 2020, the Company, through its wholly owned subsidiary, Honey Badger Media, LLC, entered into a series of transactions to acquire certain assets and to license a platform with Honey Badger Media, LLC, a Delaware limited liability company, for $300,000 of cash and 750,000 shares of common stock valued at $1,252,500. The transaction was treated as an asset purchase and not accounted for as a business combination due to substantially all of the fair value of gross assets acquired were concentrated to a group of similar identifiable assets which was media licensing assets. In addition, there was limited inputs, processes and outputs, which did not meet the requirements to be a business. On January 5, 2021, the Company issued 750,000 shares of our common stock in connection with the asset acquisition.

 

HMNRTH Asset Acquisition

 

On March 11, 2020, the Company issued 238,750 shares of our common stock to acquire the assets of HMNRTH, LLC. On July 1, 2020, the Company made payment in the amount of $70,850 to the principals of HMNRTH, LLC. The transaction was treated as an asset purchase and not accounted for as a business combination due to the limited inputs, processes and outputs, which did not meet the requirements to be a business.

 

 

Divestitures

 

CBAV1, LLC Divestiture

 

On March 12, 2021, the bankruptcy court approved the sale of the CBAV1, LLC Assets to BTL Diffusion SARL, the winning bidder, at the auction held on March 10, 2021 and March 11, 2021 for a total sum of $3,000,000, which includes a cash payment at closing in the amount of $2,650,000, less certain closing costs and credits, and additional royalty payments in the amount of $150,000 on April 15, 2022 and in the amount of $200,000 on April 15, 2023 (“CBAV1-BTL Transaction”).

 

A first closing of the CBAV1-BTL Transaction occurred on April 16, 2021, with the transfer of assets and release of funds completed on April 21, 2021 (“Final Closing”). Contemporaneously with the Final Closing, a certain license agreement between CBAV1 and Edison Nation, LLC (“Edison Nation”) terminated and any remaining operational assets of Edison Nation were transferred to BTL.

 

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

 Schedule of Loss on Income Operations of Discontinued Operations

   

April 21,

2021

 
Cash received from buyer     2,529,565  
         
Accounts receivable     (293,005 )
Inventory     (665,522 )
Prepaid expenses     (160,666 )
Intangible assets     (5,540,952 )
Loss on divestiture     4,130,580  
Operating loss of discontinued operations     178,200  
Bankruptcy costs     803,320  
Loss on discontinued operations     5,112,100  

 

 

Cloud B, Inc. Divestiture

 

On February 17, 2020, the Company divested its Cloud B, Inc. subsidiary and entered into an Agreement for the Purchase and Sale of Cloud B, Inc., with Pearl 33 Holdings, LLC as the buyer, pursuant to which the buyer purchased from the Company (and the Company sold and assigned) 80,065 shares of common stock of Cloud B (the “Cloud B Shares”) for $1.00 and an indemnification agreement as described below, constituting a 72.15% ownership interest in Cloud B, based on 110,964 shares of Cloud B’s common stock outstanding as of February 17, 2020. In accordance with the agreement, all of the liabilities of Cloud B were assumed by Pearl 33.

 

On February 17, 2020, as part of the sale of Cloud B, Inc., the Company entered into an indemnification agreement with Pearl 33 Holdings, LLC in connection with the divestiture of Cloud B, Inc., whereby pursuant to such agreement the Company is limited to the issuance of 150,000 shares of the Company’s common stock to the buyer for indemnification of claims against Cloud B Inc. In addition, the Company shall indemnify the buyer for expenses (including attorneys’ fees and all other costs, expenses and obligations) in connection with defending any Claim in connection with the Cloud B. The Company has recorded $405,000 related to the fair value of the 150,000 shares of common stock which will be issued to the buyer.

 

The table below shows the assets and liabilities that the Company was relieved of in the transaction:

 Schedule of Business Combination of Assets and Liabilities

   

February 17,

2020

 
Accounts payable     4,005,605  
Accrued Expenses     370,289  
Income Tax Payable     14,473  
Notes Payable     900,000  
Non-Controlling Interest     26,393  
Shares to be issued to Buyer     (405,000 )
Gain on divestiture   $ 4,911,760  

 

SRM Entertainment, LTD

 

On November 30, 2020, the Company and its wholly owned subsidiary, SRM Entertainment, LTD entered into a Stock Exchange Agreement with Jupiter Wellness, Inc. (“Jupiter”). Under the terms of the Exchange Agreement, Jupiter agreed to purchase all outstanding shares of common stock (the “Exchange Shares”) issued by SRM from the Company. As consideration for the purchase of the Exchange Shares, Jupiter issued the Company 200,000 shares of its restricted common stock, symbol JUPW as listed on NASDAQ Capital Markets. Please see Note 20 — Discontinued Operations for further information.

 

Cryptyde, Inc.

 

The Company plans to spin-off Cryptyde, Inc. and certain other subsidiaries of its operations. In connection with the Distribution, the Company’s stockholders will receive one (1) share of Cryptyde, Inc. common stock for every ten (10) shares of the Company common stock held as of the close of business on the record date. Following the Separation, the Company’s stockholders as of the close of business on the record date will own 100% of the outstanding shares of our common stock, Cryptyde, Inc. will be an independent, publicly traded company, and the Company will retain no ownership interest in Cryptyde, Inc.