Quarterly report pursuant to Section 13 or 15(d)

Variable Interest Entities

Variable Interest Entities
9 Months Ended
Sep. 30, 2022
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.


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 a portion of the economics of these VIEs. The Company is the primary beneficiary of the VIE entities. The assets of the VIEs can be used to settle obligations of the consolidated entities. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets.


The following table presents the carrying values of the assets and liabilities of entities that are VIEs and consolidated by the Company as of September 30, 2022 and December 31, 2021:


    September 30, 2022     December 31, 2021  
Current assets:                
Cash and cash equivalents   $ 1,799,152     $ 1,856,017  
Accounts receivable, net     -       -  
Prepaid expenses and other current assets     1,860,867       2,388,893  
Due from related party, current     -       15,997,803  
Loan held-for-investment, related parties, current, net of allowance for loan losses of $7,701,250 and $0, respectively     -       -  
Total current assets     3,660,019       20,242,713  
Due from related party, non-current, net of allowance for losses of $15,100,584 and $0, respectively     25,001       -  
Loan interest receivable, non-current, net of allowance for loan losses of $335,673 and $0, respectively     38,260       -  
Loan held-for-investment     750,000       3,100,000  
Loan held-for-investment, related parties     -       11,500,000  
Investment in subsidiary     110,509,500       -  
Total other assets     111,322,761       14,600,000  
Property and equipment, net     399,798       147,519  
Intangible assets, net     2,970,427       28,150,048  
Goodwill     40,124,491       116,188,021  
Cost method Investments     1,000,000       1,000,000  
Right of use assets, net     45,000       -  
Total assets   $ 159,522,496     $ 180,328,301  
Liabilities and stockholders’ equity                
Current liabilities:                
Accounts payable   $ 1,910,250     $ 686,674  
Accrued expenses and other current liabilities     2,523,283       1,672,492  
Operating lease liabilities     44,131       -  
Total current liabilities     4,477,663       2,359,166  
Intercompany     65,966,770       -  
Notes payable     6,000,000       2,650,000  
Due to related party     -       315,666  
Total liabilities   $ 76,444,433     $ 5,324,832  


The following table presents the operations of entities that are VIEs and consolidated by the Company as of September 30, 2022 and 2021:


    2022     2021     2022     2021  
    For the Three Months     For the Nine Months  
    Ended September 30,     Ended September 30,  
    2022     2021     2022     2021  
Revenues, net   $ -     $ -     $ -     $ 307,339  
Cost of revenues     -       -       -       93,685  
Gross Profit     -       -       -       213,654  
Operating expenses:                                
Selling, general and administrative     105,639,946       11,761,747       138,747,755       11,866,488  
Operating (Loss) income     (105,639,946 )     (11,761,747 )     (138,747,755 )     (11,652,834 )
Other (Expense) Income                                
Interest expense     (29,669 )     (155,476 )     (42,784 )     (163,236 )
Other income     175,529       98,333       527,493       98,353  
Loan loss expense     (8,036,923 )     -       (8,036,923 )     -  
Total Other Expense     7,891,063       57,123       7,552,214       64,883  
Loss Before Income Taxes     (113,531,009 )     (11,818,870 )     (146,299,968 )     (11,717,717 )
Income tax expense     -       -       -       -  
Net (Loss) Income   $ (113,531,009 )   $ (11,818,870 )   $ (146,299,968 )   $ (11,717,717 )



As of September 30, 2022, the Company had no unconsolidated VIEs. The Company has consolidated Magnifi U, ZVV, and Lomotif for which the Company has determined it holds a variable interest. ZVV currently owns an 80% equity interest in Lomotif, a Singapore-based video-sharing and live streaming social networking platform that is committed to democratizing video creation and increasing user reach through content development, live streaming and cross-platform engagement initiatives. Lomotif owns 100% of Lomotif, Inc. Magnifi U is a free, immersive, online personal and professional development platform that helps people align with their purpose.


Magnifi U Inc.


On May 19, 2021, the Audit Committee approved the Company entering into a secured loan to Magnifi U for up to $2.75 million, with $750,000 to be loaned immediately. In addition to the $750,000 loan payment, $1,168,073 related to employee payroll was paid between December 31, 2021 and September 30, 2022 bringing total cash advances to $1,918,073.


On October 12, 2021, ZVV Media loaned $1,500,000 to Magnifi U, which is eliminated in consolidation as a VIE. The interest rate on the note is 3% per annum. The maturity date of the loan is October 12, 2023. The purpose of the loan is to engage in the platform creation and distribution of digital media content. Our director, Vinco employee, and member of the board of managers of ZVV, Lisa King, is the founder of Magnifi U and serves as its chief executive officer. ZASH has an 8% ownership interest in Magnifi U resulting from its equity investment of $2,411,140 in Magnifi U, with an obligation to fund a total of $5,000,000 for a total of 15% equity.


On December 30, 2021 the Vinco Ventures, Inc. Board of Directors unanimously approved Vinco Ventures, Inc. to hire all then-current employees of Magnifi U, as part of the strategic investment in the platform.


As a result of the Board of Directors approval to hire all then-current employees of Magnifi U, and subsequent onboarding of Magnifi U employees in January 2022, the Company reconsidered the relationship as prescribed in ASC 810-10-35-4. The Company concluded consolidation was appropriate.


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; and (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.


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.