Annual report pursuant to Section 13 and 15(d)

Variable Interest Entities

v3.22.1
Variable Interest Entities
12 Months Ended
Dec. 31, 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 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 December 31, 2021 and 2020:

Schedule of Variable Interest Entities 

    2021     2020  
             
Assets                
Current assets:                
Cash and cash equivalents   $ 1,856,017     $ 10,481  
Accounts receivable, net     -       94,195  
Inventory     -       240,158  
Prepaid expenses and other current assets     2,388,893       -  
Due from related party     15,997,803       -  
Total current assets     20,242,713       344,834  
Property and equipment, net     147,519       -  
Loans held-for investment     3,100,000       -  
Loans held-for-investment – related parties     11,500,000       -  
Intangible assets, net     28,150,048       -  
Goodwill     116,188,021       -  
Cost method investment     1,000,000       -  
Total assets   $ 180,328,301     $ 344,834  
                 
Liabilities                
Current liabilities:                
Accounts payable   $ 686,674     $ 217,558  
Accrued expenses and other current liabilities     1,672,492       113,576  
Line of credit     -       1,133,652  
Notes payable, current     2,650,000       150,000  
Due to related party     315,666       315,666  
Total liabilities     5,324,832       1,930,452  

 

The following table presents the operations of entities that are VIEs and consolidated by the Company for the years ending December 31, 2021 and 2020:

 

    2021     2020  
Revenues, net   $ 307,339     $ 1,571,017  
Cost of revenues     93,685       2,092,167  
Gross profit     213,654       (521,150 )
                 
Operating expenses:                
Selling, general and administrative     14,494,091       413,217  
Operating income     (14,280,437 )     (934,367 )
                 
Other (expense) income:                
Other income, net     364,046       (174,396 )
Total other (expense) income     (13,916,391 )     (174,396 )
Loss before income taxes     (13,916,391 )     (47,578 )
Income tax expense     -       -  
Net (loss) income   $ (13,916,391 )   $ (1,108,763 )

 

At December 31, 2021 and December 31, 2020, there were no unconsolidated VIEs for which the Company 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; (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. (See Note 3 – Acquisitions and Divestitures).

 

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.

 

Global Clean Solutions, LLC

 

On May 20, 2020, Vinco Ventures 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” 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. There currently are no outstanding awards remaining to be vested.

 

Amended Limited Liability Company Agreement

 

On May 20, 2020, 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%. In September 2021, the company entered into a settlement agreement whereby they acquired the 25% owned by PPE thereby resulting in Vinco Ventures, Inc. owning 75%.

 

Secured Line of Credit Agreement

 

On May 20, 2020, the Company as the 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 “PPE Note”) to PPE. The PPE 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 Company paid the balance in full.

 

Security Agreement

 

On May 20, 2020, the Company (as the guarantor entered into a Security Agreement (the “Security Agreement”) with Global as the 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 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.