Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

v3.22.1
Commitments and Contingencies
12 Months Ended
Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 18 — Commitments and Contingencies

 

Employment Agreements

 

On February 2, 2021, the Company entered into an Employment Agreement with Christopher Ferguson for the role of Chief Executive Officer. The agreement is effective as of November 12, 2020 and has a term of three (3) years from the effective date. Thereafter, the agreement shall automatically be renewed and the term shall be extended for additional consecutive terms of 1 year, unless such renewal is objected to by either the Company or the executive. The executive’s initial annual base salary shall be $200,000, less applicable withholdings and 120,000 common shares that shall vest in their entirety on issuance. For 2021, the executive shall receive a cash bonus in the amount equal to 30% of the annual base salary, and an award of 200% shares of the Company’s common stock, which shall vest in their entirety on issuance, which shall be received by the executive no later than the first 30 days of the current fiscal year. The executive shall be entitled to 150,000 shares of the Company’s common stock, due immediately upon an increase of 2.5 times the enterprise value of the Company on a 5-day closing average from the effectiveness of the agreement. For clarification, the enterprise value as of the Company at the effective date was $25,042,464. Mr. Ferguson tendered his resignation as (i) the Company’s Chief Executive Officer, effective October 25, 2021 and (ii) Chairman of the Board of Directors, effective October 19, 2021.

 

On February 2, 2021, the Company entered into an Employment Agreement with Brett Vroman for the role of Chief Financial Officer. The agreement is effective as of November 12, 2020 and has a term of three (3) years from the effective date. Thereafter, the Agreement shall automatically be renewed and the term shall be extended for additional consecutive terms of 1 year, unless such renewal is objected to by either the Company or the executive. The Executive’s initial annual base salary shall be $200,000, less applicable withholdings and 120,000 common shares that shall vest in their entirety on issuance. For 2021, the executive shall receive a cash bonus in the amount equal to 30% of the annual base salary, and an award of 200% shares of the Company’s common stock, which shall vest in their entirety on issuance, which shall be received by the executive no later than the first 30 days of the current fiscal year. Upon the execution of this agreement, the executive is entitled to a one-time past performance bonus for the work completed in fiscal years 2018, 2019 and 2020 of 150,000 shares of the Company’s common stock, which shall vest in their entirety on issuance. The executive shall be entitled to 100,000 shares of the Company’s common stock, due immediately upon an increase of 2.5 times the enterprise value of the Company on a 5-day closing average from the effectiveness of the Agreement. For clarification, the enterprise value as of the Company at the effective date was $25,042,464. Mr. Vroman initially tendered his resignation as an officer of the Company, effective November 4, 2021, and has accepted the position of Chief Financial Officer and Treasurer of Cryptyde, Inc., a wholly-owned subsidiary of the Company. However, on November 9, 2021, Mr. Vroman and the Company elected to retain Mr. Vroman as Chief Financial Officer of the Company until the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 is filed with the Securities and Exchange Commission on or before November 22, 2021.

 

On February 2, 2021, the Company entered into an Employment Agreement with Brian Mc Fadden for the role of Chief Strategy Officer. The agreement is effective as of November 12, 2020 and has a term of three (3) years from the effective date. Thereafter, the agreement shall automatically be renewed and the term shall be extended for additional consecutive terms of 1 year, unless such renewal is objected to by either the Company or the executive. The executive’s initial annual base salary shall be $200,000, less applicable withholdings and 120,000 common shares that shall vest in their entirety on issuance. For 2021, the executive shall receive a cash bonus in the amount equal to 30% of the annual base salary, and an award of 200% shares of the Company’s common stock, which shall vest in their entirety on issuance, which shall be received by the executive no later than the first 30 days of the current fiscal year. Upon the execution of the agreement, the executive is entitled to a one-time signing bonus of 150,000 shares of the Company’s common stock, which shall vest in their entirety on issuance. The executive shall be entitled to 100,000 shares of the Company’s common stock, due immediately upon an increase of 2.5 times the enterprise value of the Company on a 5-day closing average from the effectiveness of the agreement. For clarification, the enterprise value as of the Company at the effective date was $25,042,464. On September 23, 2021, Brian McFadden submitted his resignation effective immediately as the Company’s Chief Strategy Officer in order to accept the role as President of the Company’s newly formed subsidiary, Cryptyde, Inc. The Company and Mr. McFadden shall enter into a new Employment Agreement on terms to be agreed upon within 30 days of his acceptance of the role as President of Cryptyde, Inc.

 

 

On October 19, 2021, the Company entered into and Employment Agreement with Philip Jones for the role of Chief Financial Officer. Mr. Jones’ Employment Agreements provides for a term of one (1) year. Thereafter, Mr. Jones’ Employment Agreement shall be extended for additional consecutive terms of one (1) year, unless such renewal is objected by either the Company or the executive. Mr. Jones’ initial annual base salary is $250,000 subject to applicable withholdings and an annual discretionary bonus of up to 30% of his base salary for the first year of employment. In addition, Mr. Jones was granted a bonus of $250,000 of which $100,000 was to be paid within the first month of employment and $150,000 to be paid upon the six-month anniversary of his employment. In addition, Mr. Jones is eligible for 300,000 restricted stock units, to be granted upon approval by the Company’s Compensation Committee in accordance with the provisions of the Company’s Employee Stock Ownership Plan. As of the date of this Annual Report, the restricted stock units have not been granted to Mr. Jones. In addition, in accordance with the Agreement, at any time, the Company may terminate Mr. Jones’ Employment Agreement without cause. In such case, the Company shall pay to Mr. Jones the balance of his compensation due through the terminate date. Mr. Jones shall be entitled to six (6) additional months of salary, provided that such termination constitutes a separation from service within the meaning of Section 409A of the Internal Revenue Code of 1986. Mr. Jones’ Employment Agreement also contains certain restrictive covenants, including indefinite confidentiality, a 12-month restriction from directly or indirectly owning or participating in a competitor of the Company (except as a passive investor holding 2% or less of the equity securities of a publicly traded company), and a 12-month restriction on solicitation of employees, customers, and suppliers of the Company.

 

Operating Lease

 

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 years ended December 31, 2021 and 2020 was $308,316 and $368,029, respectively. Rent expense is included in general and administrative expense on the consolidated statements of operations.

 

As of December 31, 2021, the Company had operating lease liabilities of $171,247 and right of use assets for operating leases of $168,914. During the years ended December 31, 2021 and 2020, operating cash outflows relating to operating lease liabilities was $121,058 and $345,628, respectively, and the expense for right of use assets for operating leases was $114,097 and $261,815, respectively. As of December 31, 2021, the Company’s operating leases had a weighted-average remaining term of 1.7 years and weighted-average discount rate of 4.5%. 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.

 

The following is a reconciliation of future undiscounted cash flows to the operating liabilities, and the related right of use assets, included in our Consolidated Balance Sheets as of December 31, 2021:

 

For the year ending December 31,   Amount  
2022     105,820  
2023     46,224  
2024     26,964  
2025     -  
2026     -  
Total future lease payments     179,008  
Less: imputed interest     (7,762 )
Present value of future operating lease payments     171,246  
Less: current portion of operating lease liabilities     (100,732 )
Operating lease liabilities, net of current portion     70,514  
Right of use assets – operating leases, net     168,914  

 

   

Rental Income

 

Ferguson leases a portion of the building located in Washington, New Jersey that it owns under a month to month lease. Total rental income related to the leased space for both the years ended December 31, 2021 and 2020 was $71,543 and $102,815, respectively, and is included in other income on the consolidated statements of operations. The Company sold the building in Washington, New Jersey in August 2021.

 

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.