Vinco Ventures, Inc. - Annual Report: 2021 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2021

or

For the transition period from _____to _____

Commission file number: 001-38448

VINCO VENTURES, INC.

(Exact Name of Registrant as Specified in Its Charter)

(866) 900-0992

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

The aggregate market value on June 30, 2021 (the last business day of the Company’s most recently completed second quarter) of the voting common stock held by non-affiliates of the registrant, computed by reference to the closing price of the stock on that date, was approximately $217,370,092. The registrant does not have non-voting common stock outstanding.

As of April 14, 2022, there were 188,052,593 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

VINCO VENTURES, INC.

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND SUMMARY RISK FACTORS

This Annual Report on Form 10-K for the period ended December 31, 2021 (the “Annual Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to future events including, without limitation, the terms, timing and closing of our proposed acquisitions or our future financial performance. We have attempted to identify forward-looking statements by using terminology such as “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Annual Report is filed, and we do not intend to update any of the forward-looking statements after the date this Annual Report is filed to confirm these statements to actual results, unless required by law.

You should not place undue reliance on forward looking statements. The cautionary statements set forth in this Annual Report identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:

Specifically, our investment in Lomotif and related growth initiatives may fail to deliver our expected benefits, for reasons relating to including, but not limited to, our and Lomotif’s capital requirements and whether we will be able to raise capital as needed; our ability to successfully develop the business and revenue models for Lomotif’s social media platform,; whether Lomotif can retain its existing users and attract new users to its platform; whether Lomotif can attract and maintain relationships with influencers, artists, and other content creators or publishers who will provide compelling content to the platform; our ability to integrate the operations of Lomotif within the Vinco Ventures conglomerate and create synergies between Lomotif and other businesses and assets we have acquired or plan to acquire in the media and entertainment industry including AdRizer; the ability of Lomotif’s platform and associated products and services to compete effectively; Lomotif’s ability to retain reliable developers, vendors and suppliers to support its operations; failure of third parties to promote Lomotif’s platform and associated products and services effectively or at all; breaches of network and data security measures; a disruption or failure of networks and information systems; Lomotif’s ability to protect its patents and other intellectual property and operate its businesses without infringing upon the intellectual property rights of others; changes in local, state, federal and international laws and regulations that will adversely affect Lomotif’s business; risk of attempts at unauthorized or improper use of the platform and damages to Lomotif’s reputations resulted therefrom; the inability to maintain or rebuild the value of the Lomotif brands; the inability to successfully respond to rapid changes in technologies and user tastes and preferences and remain competitive; the impact of any legal proceedings or governmental action against Lomotif; and whether Lomotif will continue to receive the services of key management and retain qualified personnel. These and other factors discussed above could cause results to differ materially from those expressed in the estimates made by any independent parties and by us.

USE OF MARKET AND INDUSTRY DATA

This Annual Report includes market and industry data that we have obtained from third-party sources, including industry publications, as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which we operate (including our management’s estimates and assumptions relating to such industries based on that knowledge). Management has developed its knowledge of such industries through its experience and participation in these industries. While our management believes the third-party sources referred to in this Annual Report are reliable, neither we nor our management have independently verified any of the data from such sources referred to in this Annual Report or ascertained the underlying economic assumptions relied upon by such sources. Furthermore, internally prepared and third-party market prospective information, in particular, are estimates only and there will usually be differences between the prospective and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. Also, references in this Annual Report to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report, survey or article is not incorporated by reference in this Annual Report.

TRADEMARKS, SERVICE MARKS AND TRADE NAMES

Solely for convenience, we refer to trademarks in this Annual Report without the ® or the ™ or symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our own trademarks. Other service marks, trademarks and trade names referred to in this Annual Report, if any, are the property of their respective owners, although for presentational convenience we may not use the ® or the ™ symbols to identify such trademarks.

OTHER PERTINENT INFORMATION

Unless the context otherwise indicates, when used in this Annual Report, the terms “Vinco Ventures,” “Vinco” “we,” “us,” “our,” the “Company” and similar terms refer to Vinco Ventures, Inc., a Nevada corporation formerly known as Edison Nation, Inc., Xspand Products Lab, Inc. and Idea Lab Products, Inc., and all of our consolidated subsidiaries and variable interest entities.

PART I

ITEM 1. BUSINESS

Vinco Ventures: Focused on Digital Media and Content Technologies

Vinco Ventures, formerly known as Edison Nation, Inc., Xspand Products Lab, Inc. and Idea Lab Products, Inc., is a Nevada corporation incorporated on July 18, 2017. In connection with the acquisition of an 80% equity interest in Lomotif by ZVV, our joint venture with ZASH in 2021, and our recent acquisition of AdRizer, we are transitioning from focusing on innovation, development and commercialization of end-to-end consumer products to innovation, development and commercialization of digital media and content technologies. We currently operate the platforms and businesses described below through our significant subsidiaries and consolidated variable interest entities:

Lomotif and the Lomotif App - ZVV currently owns an 80% equity interest in Lomotif, a Singapore-based video-sharing social networking platform that is committed to democratizing video creation. The Lomotif app allows its users to create their own music videos by selecting pictures and videos from the camera, mixing them up with music and automatically transforming clips into music videos. Lomotif users can watch videos of other creators on the Lomotif platform and share their videos on the Lomotif platform or on various third-party social media platforms such as TikTok, Instagram, YouTube and Twitch. The Lomotif platform offers LoMoTV, a digital entertainment and lifestyle content network offering original programming.

The Lomotif app is available in the Apple and Google stores and is as a grassroots social community with dedicated users spanning from Asia, South America to the United States. As of the date of this Annual Report, Lomotif has not generated significant revenue and we are developing means to monetize the content creation and streaming capabilities of the Lomotif platform including our plan to leverage the AdRizer technologies to enable advertisers to more effectively engage with the Lomotif platform, content and its users.

AdRizer and the Cortex Platform – Our wholly-owned subsidiary AdRizer provides technology solutions to automate the use of artificial intelligence for digital advertising analytics and programmatic media buying through its core platform, Cortex. Cortex provides real-time analytics for marketing spend and revenue optimization and delivers ad-campaign creation, optimalization and monetization at scale. Cortex integrates with various traffic partners, including Google, MSN, Instagram, Facebook, Twitter, and others, and is able to deliver real-time attribution against a wide range of advertiser and publisher metrics such as revenue by source, author, article, and conversion event. AdRizer targets advertisers, advertising agencies, publishers and other advertising technology companies as its audience for the Cortex platform offerings.

AdRizer generates revenue from the Cortex platform through two major sources: (1) the traffic acquisition of digital advertising spaces to advertisers from multiple digital advertising technologies, and (2) developing marketing campaigns and strategies for some of the top direct-to-customers (“DTC”) companies. We believe that AdRizer’s Cortex platform will allow small- to medium-sized enterprises with an efficient and effective end-to-end, fully integrated platform that allows its users to control their marketing and branding campaigns in real-time. We also expect to integrate AdRizer’s technologies with the Lomotif platform and content and the Honey Badger digital commerce company.

E-NFT.com – Our wholly-owned subsidiary EVNT Platform LLC, dba Emmersive Entertainment (“EVNT”) offers a platform for artists and content owners to distribute their intellectual property. EVNT’s proprietary streaming process seeks to make NFT’s affordable by seeking to reduce mining fees with the goal of enabling fans to engage with content in new ways with EVNT’s multi-media delivery system. EVNT generates revenue from the development of custom, digital artwork and digital music that is sold in the form of non-fungible tokens through a third-party marketplace.

Honey Badger - Our wholly-owned subsidiary Honey Badger offers a full-service digital commerce strategies which is focused on brand specific messaging and designing comprehensive digital campaigns from creation to monetization for celebrities and influencers. As a digital commerce company, Honey Badger leverages millions plus followers in the network to grow advertiser-based revenue as well as Vinco’s brands and holdings. Honey Badger generates revenue from providing digital marketing services for brands and influencers.

Edison Nation – Led by our wholly-owned subsidiary Edison Nation, LLC, (‘Edison Nation”) we provide a platform to match an innovator’s intellectual property with vertical consumer product category leaders in a licensing structure whereby the innovator can earn up to 50% of the contracted licensing fee. Product categories include kitchenware, small appliances, toys, pet care, baby products, health & beauty aids, entertainment venue merchandise, and housewares. We also have a number of internally developed brands (“EN Brands”) which act as a launchpad for new innovative items that have matriculated through the innovation portal. These EN Brands include Cloud B, Pirasta, Uber Mom, Lily and Grey, Trillion Trees, and Barkley Lane. Additionally, we offer a partnership model for entrepreneurs and businesses that are seeking to elevate their existing brands. Recent partnerships for Vinco Ventures include 4Keeps Roses and Mother K. Within the partnership model, the Company seeks to identify new lines of distribution and provide innovation through development of new items that enhance the brand’s overall image and consumer adoption. Edison Nation generates revenue primarily from the sale of personal protective equipment, consumer products and licensing of products for intellectual property owners.

Cryptyde – Our wholly-owned subsidiary Crytypde, Inc. plans to offer three initial business lines, Web3 (decentralized internet) products, Bitcoin mining services, and consumer packaging operated by Ferguson Containers, Incl (“Ferguson”). Through its Web3 products business line, Cryptyde will seek to acquire and build brands that use decentralized blockchain technologies in a variety of consumer-facing industries, such as music, movies, digital art, ticketing and event services, and gaming. Cryptyde’s Bitcoin mining services will aim to make Bitcoin mining accessible to consumers previously priced out of the area. Ferguson manufactures and sells custom packaging for a variety of products and is expected to offer revenue streams for the spun-off business.

Corporate Strategy

We are transitioning from focusing on innovation, development and commercialization of end-to-end consumer products to innovation, development and commercialization of digital media and content technologies. Today’s consumers have shorter attention spans and are unlikely to commit to lengthy content unless they are convinced of its value. The right piece of short-form content enables brands to rapidly communicate key messages, improving the asset’s ability to capture the attention of target audiences. Short-form content is also a ready-made resource for users who consume content on mobile devices. Additionally, video generates a much larger number of shares than long-form content, text or image posts. By investing in Lomotif, our short-form video sharing and social media platform, AdRizer and related growth initiatives, we are aiming to grow into an integrated robust social media, content development and digital advertising company, with millions of users around the world.

In February 2022 we acquired AdRizer. We expect to integrate AdRizer’s Cortex technologies with the Lomotif platform and content and Honey Badger and content to optimize revenue generation opportunities. We have also invested in activities to generate content for the Lomotif platform and to expand its user base and engagement such as launching LoMoTV, hosting and streaming concerts and celebrity events. We expect to further this effort by continuing to invest in acquisitions, joint ventures, and growing our own capacity to create and distribute content. For example, we expect that future joint ventures, licensing, loan financing or other arrangements with ZASH and PZAJ Holdings, LLC will generate entertainment content that we plan to distribute through the Lomotif platform, among other distribution channels.

In connection with our transition, we are also in the process of spinning off Cryptyde, which holds our packaging, Bitcoin mining services, and Web3 (decentralized internet) products businesses, in an effort to create value for our stockholders.

Recent and Ongoing Strategic Transactions

ZVV Media Partners, LLC- Investment in Lomotif

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 (iii) 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 on a fully diluted basis for a total purchase price of $109,765,000.

Acquisition of AdRizer

On October 1, 2021, ZVV and ZASH and AdRizer entered into a Letter of Intent (as amended, the “LOI”) for ZASH or ZVV to acquire all the outstanding equity interests of AdRizer.

On February 11, 2022, Vinco Ventures, ZASH and ZVV entered into an Assignment and Assumption Agreement, whereby ZASH and ZVV assigned to Vinco Ventures, and Vinco Ventures assumed, all of the rights and obligations of ZASH and ZVV under the LOI, in consideration of a cash payment by Vinco Ventures to ZASH of $6.75 million upon the closing of the acquisition.

On February 11, 2022, Vinco Ventures, AdRizer, the members of AdRizer and the holders of performance units (the “Performance Units”) of AdRizer under its phantom equity plan (collectively, the “Seller Members”), and Innovative Assets LLC, in its capacity as the sellers’ representative, entered into and consummated the transactions contemplated by a definitive Unit Purchase Agreement (the “AdRizer Purchase Agreement”), whereby the Company acquired all of the outstanding equity interests of AdRizer (the “Purchased Interests”) from the Seller Members and canceled the Performance Units, resulting in AdRizer becoming a wholly-owned subsidiary of the Company. The purchase price payable to the Seller Members for the Purchased Interests and in consideration of the cancellation of the Performance Units consists of (i) $38 million in cash paid at closing, of which $10 million was deposited in an escrow account to secure the Seller Members’ indemnification obligations under the AdRizer Purchase Agreement, subject to customary post-closing adjustments for working capital and other items, and (ii) up to 10 million shares of the Company’s common stock to be issued on January 1, 2024 (the “Buyer Share Issuance Date”), determined by dividing $50 million by the volume weighted average price of the Company’s common stock reported by Bloomberg LP for the 20 trading days preceding such date, subject to a floor price of $5.00 and maximum price of $8.00 per share (the “Purchase Price Equity”). Pursuant to the AdRizer Purchase Agreement, the Company has agreed to file a resale registration statement on form S-1 or S-3 no later than 90 days prior to the Buyer Share Issuance Date if permitted by the SEC, and otherwise no later than 5 business days after the Buyer Share Issuance Date, to register the resale of the Purchase Price Equity and to use commercially reasonable efforts to cause the registration statement to become effective as soon as practicable after filing. In addition, the Company has agreed to furnish AdRizer with working capital in the amount of $1 million by each 3-month anniversary of the closing date until the Company has furnished AdRizer with a total of $5 million in working capital.

Upon the closing of the acquisition, AdRizer entered into a new employment agreement with its chief executive officer, Kenneth Bond. Certain Seller Members including those who are employees, officers, directors or managers of AdRizer and their affiliates also agreed to be bound by three-year post-closing non-competition and non-solicitation restrictive covenants pursuant to the Purchase Agreement.

Expected Spin-Off of Cryptyde, Inc.

On November 8, 2021, our subsidiary Cryptyde, Inc. (“Cryptyde”) initially filed, and on January 25, 2022 and March 18, 2022 amended, a Form 10 registration statement with the SEC in connection with our planned spin-off of Cryptyde, subject to certain conditions as described in the registration statement, including the effectiveness of the registration statement, receipt of an opinion of counsel to the effect that, among other things, the spin-off and related transactions should qualify as tax-free for United States federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code, and Nasdaq having approved the listing of Cryptyde’s common stock. Cryptyde holds our packaging, Bitcoin mining services, and Web3 (decentralized internet) products businesses. Upon completion of the spin-off, Cryptyde would become an independent, publicly traded company.

Our Markets and Competition

Our business is characterized by rapid change as well as new and disruptive technologies. We face formidable competition in every aspect of our business.

Lomotif’s video-sharing social networking platform seeks to compete in general with companies providing media creation, media sharing, discovery, and communication products and services to users online. Large established companies such as Alphabet (Google and YouTube), Meta (formerly known as Facebook), Apple, ByteDance (TikTok), Microsoft, Snap (Snapchat), Tencent (WeChat), and Twitter have significantly greater resources, user bases and reach. As a social media platform, Lomotif also seeks to compete with worldwide established video-sharing social platforms such as TikTok, Kuaishou, Snapchat and Instagram, all of which have significantly greater resources, user bases and reach. Lomotif’s large, established competitors generate significant revenue. Historically, Lomotif has not generated significant revenue. Lomotif seeks to attract, engage, and retain users and contributors, to attract and retain businesses that may use its services as those are developed, and to attract and retain developers to build compelling mobile and web applications that integrate with Lomotif’s products. In launching and increasing various streaming services, such as LoMoTV, Lomotif faces competition from traditional providers of entertainment video, including major broadcasters and cable network operators, as well as internet-based e-commerce or entertainment video providers which are increasing their streaming video offerings.

AdRizer competes in the digital marketing sector against privately-held companies and public companies such as AdMob, The Trade Desk, Inc., Perion Network ltd., and Cardlytics, Inc. (NasdaqGM: CDLX). Vinco Ventures is focused on deploying AdRizer’s technology to monetize the content creation and distribution capabilities of the Lomotif short form video app.Vinco Ventures’ strategy of integrating the AdRizer technology with Lomotif also includes integrating the full-service digital commerce company Honey Badger, a subsidiary of Vinco Ventures that focuses on brand specific messaging and designing comprehensive digital campaigns from creation to monetization. Broadly, AdRizer also competes with traditional advertising media such as direct mail, television, radio, cable, and print for a share of marketers’ total advertising budgets.

Our Streaming Music NFT Platform business seeks to compete in the music NFT marketplaces that include key players such as OpenSea, SuperRare and Rarible.

Through EVNT, our full-service content monetization platform business faces competition from multiple companies in the influencer and content marketing categories. Direct and indirect competitors in the influencer marketing space include Facebook, TikTok, YouTube, Linqia, and Upfluence. We also face competition in the creator economy from companies such as Fiverr and Upwork. In addition, there are many traditional advertising agencies, public relations firms, and niche consultancies that provide content development and conduct manual influencer outreach programs.

Our consumer products business led by Edison Nation seeks to compete with other online inventor platforms such as InventHelp, Quirky, Mako Design + Invent, Davison, and Invention City. Edison Nation also seeks to compete with large manufacturing companies that develop and commercialize their own products in categories in which Edison Nation currently participates. However, Edison Nation is also seeking to increase its “co-op-etition” footprint with companies that not only compete in product development but also have become active “cooperative” participants on the Edison Nation online innovation platform.

Cryptyde expects competition for Freespace, its video game that is developing and expects to launch in 2022, with companies including Decentraland, Sandbox and Fluf World. With respect to Cryptyde’s Bitcoin Mining Services Business, its competitors include Compass Mining, Miners Dep, and Alliance.

Competition could result in significant cost increases, price pressure, and reductions in our existing revenue streams and prevent us from establishing new revenue streams. In addition, as we continue our efforts to expand the scope of our products and services, we may compete with a greater number of other companies across an increasing range of different services. Many of our existing and future competitors have or will have significantly greater resources, brand recognition, technology advantages and expertise in the sectors in which we seek to compete. If we are not successful in attracting and retaining users, clients or consumers of our products and services relative to our competitors, our businesses, prospects, results of operations, and financial condition could be negatively affected.

Our Customers

We have generated our revenues for the years ended December 31, 2021 and 2020 primarily from sale of consumer products and packaging materials. Domestically, we sell our products to specialty retailers, mass-market retailers and e-commerce sites. Internationally, we sell our products directly to similar retailers and distributors. As of December 31, 2021, two customers represented 15% and 11% of our total accounts receivable.

We have also generated a small percentage of our revenues from the digital media businesses in 2021, including from our EVNT platform by turning art and intellectual property into augmented and physical reality asset for artists and content owners and through Honey Badger by providing digital marketing services for brands and influencers.

Historically, Lomotif has not generated significant revenue. With our investments in promoting and monetizing the Lomotif platform, including our acquisition of AdRizer and expected integration of the AdRizer technologies with the content creation and streaming capabilities of the Lomotif platform, we believe that the Lomotif platform, coupled with AdRizer’s programmatic advertising products and services, represent the greatest potential for our revenue growth in the future. We also believe that AdRizer’s programmatic advertising products and services will represent a significant portion or most of our revenues in 2022.

Intellectual Property

We believe that our intellectual property rights have significant value in the marketplace, and that in order to maintain a competitive advantage in the marketplace, that we must continue to develop and maintain the proprietary aspects of our technologies. We rely on a combination of trademark, trade secret, copyright and other intellectual property rights and measures to protect our intellectual property.

We seek protection on our products and technologies in as many countries as practical, through registered trademarks and copyrights to the extent that such protection is available, cost effective and valuable to our products and brands. We also rely on other forms of intellectual property rights and measures, including trade secrets and nondisclosure agreements, to maintain and protect proprietary aspects of our products and technologies. We require our employees and consultants to execute confidentiality agreements in connection with their employment or consulting relationships with us. We also require our employees and consultants to disclose and assign to us all inventions conceived during the term of their employment or engagement which relate to our business.

Although we believe we are sufficiently protected, the failure to obtain or the loss of some of these intellectual property rights could have an adverse effect on our business, financial condition and results of operations.

Seasonality

We do not experience significant seasonality other than our consumer products business and AdRizer’s programmatic advertising platform business.

Our consumer products business is highly seasonal with consumers making a large percentage of purchases during the traditional holiday season.

These seasonal purchasing patterns and requisite production lead times create risk to our business associated with the underproduction of popular consumer products and the overproduction of less popular consumer products that do not match consumer demand.

These factors increase the risk that the Company may not be able to meet demand for certain products at peak demand times or that our own inventory levels may be adversely impacted by the need to pre-build products before orders are placed. Additionally, as retailers manage their inventories, we may experience cyclical ordering patterns for products and product lines that may cause our sales to vary significantly from period to period.

E-commerce has partially reduced traditional seasonality to moderate seasonality. We intend to expand this flattening of traditional seasonality from e-commerce channels to our business as well, including through the continued emergence of crowd-funded “micro brands” that we believe will further delink demand for our products and services from historical demand fluctuation.

Advertising companies commonly experience seasonal fluctuations in revenue, as many marketers allocate the largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing. Historically, the fourth quarter has reflected AdRizer’s highest level of advertising activity for the year, and it generally expects the subsequent first quarter to reflect lower activity levels.

Government Regulations

We are subject to a variety of laws and regulations in the United States and abroad that involve matters important to our business, many of which are still evolving and being tested in courts, and could be interpreted in ways that could harm our business. These laws and regulations involve matters including privacy, data use, data protection and personal information, encryption, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, data localization and storage, data disclosure, digital assets, electronic contracts and other communications, competition, protection of minors, consumer protection, civil rights, telecommunications, product liability, e-commerce, taxation, economic or other trade controls including sanctions, anti-corruption and political law compliance, securities law compliance, and online payment services. In particular, we are subject to federal, state, and foreign laws regarding privacy and protection of people’s data. Foreign data protection, privacy, content, competition, consumer protection, and other laws and regulations can impose different obligations, or penalties or fines for non-compliance, or be more restrictive than those in the United States.

For additional information about government regulation applicable to our business, see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K.

Human Capital

As of December 31, 2021, we had 46 employees, 45 of whom were full-time employees and 1 was part-time. In addition, Lomotif, a subsidiary of ZVV, which the Company consolidates as a variable interest entity into this report, had 64 full -time employees as of December 31, 2021. None of our employees are represented by a union or parties to a collective bargaining agreement. We believe our employee relations to be in good standing.

Segment Information

We identify our reportable segments according to how the business activities are managed and evaluated, for which discrete financial information is available and is regularly reviewed by our Chief Operating Decision Maker (“CODM”), who is our Chief Executive Officer, to allocate resources and assess performance.

The CODM reviews financial performance and allocates resources at a consolidated level on a regular basis. We have determined that during the fiscal year ended December 31, 2021, we had one reportable segment consisting of multiple product offerings.

Corporate Information

Our principal executive offices are located at 6 North Main Street, Fairport, New York. Our telephone number is (866) 900-0992.

Available Information

Our website, www.vincoventures.com, provides access, without charge, to our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (“SEC”). The information provided on our website is not part of this Annual Report and is therefore not incorporated by reference unless such information is otherwise specifically referenced elsewhere in this Annual Report. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding our company that we file electronically with the SEC.

ITEM 1A. RISK FACTORS

RISK FACTORS

Certain factors may have a material adverse effect on our business, financial condition, and results of operations. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report, including our consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose part or all of your investment.

Summary Risk Factors

The following summarizes the risks and uncertainties that could materially adversely affect our business, financial condition, results of operation and stock price. You should read this summary together with the more detailed description of each risk factor contained below.

Risks Related to Our Company

Risks Related to Lomotif

Risks Related to AdRizer

Risks Associated with an Investment in our Common Stock

Risks Related to Our Company

We are transitioning from being focused on end-to-end consumer product innovation, development, and commercialization to being focused on digital media and content technologies innovation, development, and commercialization, and we may not be able to successfully implement our business plans or effectively manage our growth.

We were incorporated on July 18, 2017, and therefore, have a relatively limited operating history. Our traditional business was focused on end-to-end consumer product innovation, development, and commercialization. In recent years, we have transitioned to be focused on digital media and content technologies innovation, development, and commercialization. In this effort, we have acquired Honey Badger and AdRizer, invested in Lomotif through ZVV, our joint venture with ZASH, and intend to spin-off our packaging and blockchain related businesses which are not directly related to our current core business. We are still in the process of integrating our acquired or invested businesses and technologies and have a very limited history in operating our current business focused on digital media and content technologies upon which an evaluation of our business plans or performance can be made. Our business and prospects must be considered in the light of the potential problems, delays, uncertainties, and complications encountered in connection with developing new business and revenue generation models. The risks include, but are not limited to, the possibility that we will not be able to develop functional and scalable products and services, or that although functional and scalable, our products and services will not be economical to market; that our competitors market and provide superior or more effective products and services; that we are not able to upgrade and enhance our technologies to accommodate new needs and expand our offerings; or the failure to comply with the applicable laws and regulations for our products and services as we conduct our business and expand into new markets. Please also refer to our discussion under “Risks Related to Lomotif-” and “Risks Related to AdRizer” for additional risks specifically related to those businesses. There are no assurances that we can successfully address these challenges and if unsuccessful, we and our business, financial condition, and operating results could be materially and adversely affected.

We operate in highly competitive markets.

We are already operating in highly competitive markets and faced with significant cost and liability challenges as well as known and unknown uncertainties, and our future growth strategy will impose significant added responsibilities on management, including the need to identify, recruit, train, and integrate additional employees and the need to manage additional relationships with various business partners including but not limited to influencers, content contributors, suppliers, publishers, advertisers, and other third parties. In addition, pursuing rapid and significant growth may strain our administrative and operational infrastructure and require us to expand our financial, development, regulatory, IT, marketing, and sales capabilities or contract with third parties to provide these capabilities for us. Our ability to manage our business and growth, as well as function as a public company, will require us to continue to improve our operational, financial and management controls, and reporting systems and procedures. The time and resources required to optimize these systems is uncertain, and failure to complete optimization in a timely and efficient manner could adversely affect our operations.

Our growth strategy involves a diverse set of initiatives.

As we execute our growth strategy, we will need to allocate our resources among different initiatives. We cannot assure you that our allocation will ultimately reflect the most profitable application of our resources. For example, we may make product and investment decisions that may not prioritize short-term financial results if we believe that the decisions will improve our financial performance over the long term. These decisions may adversely affect our business and results of operations and may not produce the long-term benefits that we expect. If we are unable to execute our growth strategy successfully, including continuing to grow the user base of the Lomotif platform and developing means to monetize the platform or, if we are otherwise unable to manage our ongoing and future growth effectively, our business, financial condition, and results of operation could be materially adversely affected.

We have a history of losses and we may never achieve profitability.

For the year ended December 31, 2021, our operations lost $80,209,777 of which approximately $43,380,758 was non-cash stock-based compensation.

At December 31, 2021, we had total current assets of $219,741,467 and current liabilities of $70,089,546 resulting in working capital of $149,651,921. At December 31, 2021 we had restricted cash in the amount of $100,000,000, which may only be released upon conversion by the holder of its convertible notes. At December 31, 2021, we had total assets of $405,142,729 and total liabilities of $271,455,687 resulting in stockholders’ equity of $133,687,042. At December 31, 2021, we had a cash and cash equivalents, including restricted cash, of $187,612,176.

The Company received proceeds of $101,029,493 from the sale of our securities through warrant exercises subsequent to December 31, 2021. Almost all of our cash has come from notes and warrants sold to a single investor and if this investor ceases to be a source of funding, there is no assurance we can obtain an equivalent source of funding.

For the year ended December 31, 2020, our operations lost $7,563,625 of which $4,623,130 was non-cash and $1,131,975 related to restructuring, severance, transaction costs and non-recurring items. At December 31, 2020, we had total current assets of $5,342,183 and current liabilities of $11,285,663 resulting in negative working capital of $5,943,480. At December 31, 2020, we had total assets of $28,028,207 and total liabilities of $14,505,506 resulting in stockholders’ equity of $13,522,701.

We expect that we will have sufficient cash to meet our working capital needs and capital requirements for the next 12 months from the date of this filing. However, given the significant costs and all the risks, challenges, and uncertainties relating to the implementation of our business plans, there is no guarantee that our efforts to integrate our recently acquired or invested businesses and technologies and expand tools, technologies, offerings, markets, and partnerships in connection with our efforts to pursue our growth strategies will generate sufficient revenues to offset our initial and ongoing costs of such initiatives, or that we will be able to achieve operational profitability.

The loss of key personnel or the inability of replacements to quickly and successfully perform in their new roles could adversely affect our business.

We depend on the leadership and experience of our relatively small number of key executive management personnel, particularly our Chief Executive Officer and President, Lisa King, our Chief Operating Officer, Stephen Garrow, and our Chief Financial Officer, Philip Jones. ZVV, our joint venture with ZASH, has depended to a great extent on the leadership of one of its managers, Theodore Farnsworth, in the acquisition and development of our Lomotif and AdRizer business units. The loss of the services of any of these key executives or any of our significant personnel could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs, or at all. Furthermore, if we lose or terminate the services of one or more of our key employees and advisers, or if one or more of our current or former executives or key employees joins a competitor or otherwise competes with us, it could impair our business and our ability to successfully implement our business plan. Additionally, if we are unable to hire qualified replacements for our executive and other key positions in a timely fashion, our ability to execute our business plan would be harmed. Even if we can quickly hire qualified replacements, we would expect to experience operational disruptions and inefficiencies during any transition. We believe that our future success will depend on our continued ability to attract and retain highly skilled and qualified personnel. There is a high level of competition for experienced, successful personnel in our industry. Our inability to meet our executive staffing requirements in the future could impair our growth and harm our business.

The loss of key consultants or the inability of replacements to quickly and successfully perform in their new roles could adversely affect our business.

We depend on a variety of consultants to provide consulting services consisting of implementation of the Company’s business plan, investor relation services, introduction of potential investors, news distribution, marketing and sales. The loss of the services of any of these consultants could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs, or at all. Furthermore, if we lose or terminate the services of one or more of our consultants or if one or more of our consultants joins a competitor or otherwise competes with us, it could impair our business and our ability to successfully implement our business plan. Additionally, if we are unable to hire qualified replacements for our consultants in a timely fashion, our ability to execute our business plan would be harmed. Even if we can quickly hire qualified replacements, we would expect to experience operational disruptions and inefficiencies during any transition. We believe that our future success will depend on our continued ability to attract and retain highly skilled and qualified personnel. There is a high level of competition for experienced, successful personnel in our industry. Our inability to meet our staffing requirements in the future could impair our growth and harm our business.

Our financial statements may be materially affected if our estimates prove to be inaccurate as a result of our limited experience in making critical accounting estimates.

Financial statements prepared in accordance with GAAP require the use of estimates, judgments, and assumptions that affect the reported amounts. Actual results may differ materially from these estimates under different assumptions or conditions. These estimates, judgments, and assumptions are inherently uncertain, and, if they prove to be wrong, then we face the risk that charges to income will be required. In addition, because we have a limited operating history and limited experience in making these estimates, judgments, and assumptions, the risk of future charges to income may be greater than if we had more experience in these areas. Any such charges could significantly harm our business, financial condition, results of operations, and the price of our securities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical accounting policies — Use of estimates” for a discussion of the accounting estimates, judgments, and assumptions that we believe are the most critical to an understanding of our business, financial condition, and results of operations.

If we fail to comply with the rules and regulations under the Sarbanes-Oxley Act, our operating results, our ability to operate our business and investors’ views of us may be harmed.

We are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly and current reports, proxy statements, and other information. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. Our principal executive officer and principal financial officer are required to certify that our disclosure controls and procedures are effective in ensuring that material information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As of December 31, 2021, our Principal Executive Officer and Principal Financial and Accounting Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective to provide reasonable assurance that information that it is required to disclose in reports that we file with the SEC is recorded, processed, summarized, and reported within the time periods specified by the Exchange Act rules and regulations. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley Act could have a material adverse effect on our business. We could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price of our common stock. In addition, our efforts to comply with the rules and regulations under the Sarbanes-Oxley or new or changed laws, regulations, and standards may differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice. Regulatory authorities may investigate transactions disclosed in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and if legal proceedings are initiated against us, it may harm our business.

If we fail to manage our growth, our business and operating results could be harmed.

As we seek to advance our business plans including continuing to grow the user base of the Lomotif platform and developing means to monetize the platform, acquire and build Cryptyde’s brands that use decentralized blockchain technologies in a variety of consumer-facing industries; deploy AdRizer’s technology platform, and grow Honey Badger’s advertiser-based revenue, we will need to expand our financial, development, regulatory, IT, marketing, and sales capabilities or contract with third parties to provide these capabilities for us. We anticipate that a period of significant expansion may be required to integrate our recently acquired or invested businesses and technologies and to penetrate and service the markets for our existing and anticipated future products and services. This expansion will place a significant strain on our management, operational, and financial resources. To manage the expected growth of our operations and personnel, we must establish appropriate and scalable operational and financial systems, procedures, and controls and establish a qualified finance, administrative, and operations staff. As a public company, we will need to maintain internal controls to comply with government-mandated regulations. Our management may be unable to hire, train, retain, motivate, and manage the necessary personnel or to identify, manage, and exploit potential strategic relationships and market opportunities. Our failure to manage growth effectively could have a material and adverse effect on our business, results of operations, and financial condition.

Our growth strategy includes pursuing opportunistic acquisitions of additional brands, technologies and other assets, and we may not find suitable acquisition candidates or successfully operate or integrate any business that we may acquire.

As part of our strategy, we intend to opportunistically acquire or invest in businesses and technologies that we expect to complement our existing resources and capabilities and advance our growth strategy. Although we believe that opportunities for other, future acquisitions may be available from time to time, competition for acquisition candidates may exist or increase in the future. Consequently, there may be fewer acquisition opportunities available to us as well as higher acquisition prices. There can be no assurance that we will be able to identify, acquire, manage, or successfully integrate additional companies, brands, technologies or other assets without substantial costs, delays, or operational or financial problems. In the event we are able to acquire additional companies, brands, technologies or other assets, the integration and operation of such acquisitions in addition to the on-going integration and operation of the Company may place significant demands on our management, which could adversely affect our ability to manage our business. We may be required to obtain additional financing to fund future acquisitions. There can be no assurance that we will be able to obtain additional financing on acceptable terms or at all.

We may not realize the anticipated benefits of acquisitions or investments in joint ventures, or those benefits may be delayed or reduced in their realization.

Acquisitions and investments have been a component of our growth and the development of our business, and that is likely to continue in the future. We believe acquisitions can accelerate our development of revenue generation models and products and services desired by the market and allow us to build additional capabilities and competencies around our existing businesses. In reviewing potential acquisitions or investments, we target brands, technologies, assets or companies that we believe offer attractive products or offerings, the ability for us to leverage our offerings, opportunities to drive our technologies, brands, competencies, or other synergies.

The combination of two independent businesses is a complex, costly, and time-consuming process that will require significant management attention and resources. The integration process may disrupt the businesses and, if implemented ineffectively, would limit the expected benefits of the acquisition. The failure to meet the challenges involved in integrating businesses and realizing the anticipated benefits could cause an interruption of, or a loss of momentum in, our activities and could adversely affect our results of operations. The overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer and other business relationships, and diversion of management’s attention. The difficulties of combining the operations of the companies include, among others:

We cannot be certain that the products, technologies and offerings of companies we may acquire, or acquire an interest in, will achieve or maintain popularity with customers in the future or that any such acquired companies or investments will allow us to more effectively market our products and services, develop our competencies, or to grow our business. In some cases, we expect that the integration of the companies that we may acquire into our operations will create production, marketing and other operating, revenue or cost synergies which will produce greater revenue growth and profitability and, where applicable, cost savings, operating efficiencies and other advantages. However, we cannot be certain that these synergies, efficiencies and cost savings will be realized. Even if achieved, these benefits may be delayed or reduced in their realization. In other cases, we may acquire or invest in companies that we believe have strong and creative management, in which case we may plan to operate them more autonomously rather than fully integrating them into our operations. We cannot be certain that the key talented individuals at these companies would continue to work for us after the acquisition or that they would develop popular and profitable products, technologies or services in the future. We cannot guarantee that any acquisition or investment we may make will be successful or beneficial, and acquisitions can consume significant amounts of management attention and other resources, which may negatively impact other aspects of our business.

We may not achieve some or all of the expected benefits of the spin-off of Cryptyde, and the spin-off of Cryptyde may adversely affect our business.

We may not be able to achieve some or all of the strategic, financial, operational, marketing or other benefits expected to result from the spin-off of Cryptyde, or such benefits may be delayed or not occur at all. The spin-off of Cryptyde is expected to provide the following benefits, among others:

We may not achieve these and other anticipated benefits for a variety of reasons, including, among others:

We cannot predict with certainty when the benefits expected from the spin-off of Cryptyde will occur or the extent to which they will be achieved. If we fail to achieve some or all of the benefits expected to result from the spin-off, or if such benefits are delayed, our business, financial condition and results of operations could be adversely affected.

Shares eligible for future sale may have adverse effects on our share price.

Sales of substantial amounts of shares or the perception that such sales could occur may adversely affect the prevailing market price for our shares. We may issue additional shares in subsequent public offerings or private placements to make new investments or for other purposes. We are not required to offer any such shares to existing shareholders on a preemptive basis. Therefore, it may not be possible for existing shareholders to participate in such future share issuances, which may dilute the existing shareholders’ interests in us.

Future sales of additional shares of our common stock or securities convertible into shares of our common stock may dilute our shareholders’ ownership in us and may adversely affect us or the trading price of our common stock.

We are generally not restricted from issuing additional shares of our common stock up to the authorized number of shares set forth in our charter. We may issue additional shares of our common stock or securities convertible into our common stock in the future pursuant to current or future employee stock incentive plans, employee stock grants, or in connection with future acquisitions or financings. We cannot predict the size of any such future issuances or the effect, if any, that any such future issuances will have on the trading price of our common stock. Any such future issuances of shares of our common stock or securities convertible into common stock may have a dilutive effect on the holders of our common stock and could have a material negative effect on the trading price of our common stock.

We may not be able to attain stockholder approval on the proposals set forth in our proxy statement to be filed with the SEC, which could have a negative impact on our ability to secure future financing.

The proposals set forth in our proxy statement are subject to shareholder approval. If we do not obtain shareholder approval for the increase of our authorized shares of common stock to allow us to issue additional equity securities for financing purposes and equity incentives for employee retention, we will have limited financing alternatives available to us and may not have adequate shares available to incentivize our employees, and this will therefore increase the cost of capital and could adversely affect our ability to attract and retain talent, which could reduce shareholder returns.

We may require additional financing to sustain or grow our operations and such additional capital may not be available to us, or only available to us on unfavorable terms.

Our growth will be dependent on our ability to access additional equity and debt capital. Historically, we have primarily relied upon convertible debt financings and equity financings to fund our operations. To the extent that revenues generated by our ongoing operations are insufficient to fund future requirements, we may need to raise additional funds through debt or equity financings or curtail our growth. Almost all of our cash has come from notes and warrants sold to a single investor and if this investor ceases to be a source of funding, there is no assurance we can obtain an equivalent source of funding. We cannot be sure that we will be able to raise equity or debt financing on terms favorable to us and our stockholders in the amounts that we require, or at all. Our inability in the future to obtain additional equity or debt capital on acceptable terms, or at all, could adversely impact our ability to execute our business strategy, which could adversely affect our growth prospects and future stockholder returns.

In addition, the terms of a capital raising transaction could require us to agree to stringent financial and operating covenants and to grant security interests on our assets to lenders or holders of our debt securities that could limit our flexibility in operating our business or our ability to pay dividends on our common stock and could make it more difficult for us to obtain capital in the future. Issuance of additional shares of our common stock in future financings directly or upon conversion, exchange or exercise of equity or debt securities will also result in dilution of our stockholders.

We have debt financing arrangements, which could have a material adverse effect on our financial health and our ability to obtain financing in the future and may impair our ability to react quickly to changes in our business.

Our exposure to debt financing could limit our ability to satisfy our obligations, limit our ability to operate our business, and impair our competitive position. For example, it could:

We may also incur additional indebtedness in the future, which could materially increase the impact of these risks on our financial condition and results of operations. Payments on our debt will depend on our ability to generate cash or secure additional financing in the future. This ability, to an extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors beyond our control. If our business does not generate sufficient cash flow from operations and sufficient future financing is not available to us, we may not be able to repay our debt, operate our business or fund our other liquidity needs. If we cannot meet or refinance our obligations when they become due, we may be required to attempt to raise capital, reduce expenditures, or take other actions which we may be unable to successfully complete or, even if successful, could have a material adverse effect on us. If such sources of capital are not available or not available on sufficiently favorable terms, we may seek other avenues to fund the business, including seeking to sell assets of all or a portion of our operations. If we decide to raise capital in the equity markets or take other actions, our stockholders could incur significant dilution or diminished valuations, or if we are unable to raise capital, our ability to effectively operate our business could be impaired. In addition, if we are successful in raising capital in the equity markets to repay our indebtedness or for any other purpose in the future, our stockholders could incur significant dilution.

Our obligations to the holders of our senior secured convertible notes are secured by a security interest in substantially all of our assets and a designated cash account, so if we default on those obligations, the note holders could foreclose on our assets.

Our obligations under the senior secured convertible notes that we issued in July 2021 and the transaction documents relating to those notes are secured by a security interest in substantially all of our and our subsidiaries’ assets. In addition, we are required to maintain a minimum cash balance of not less than $80,000,000 in a designated account subject to a deposit account control agreement in favor of the collateral agent. We may not use the cash in this account for operational purposes. As of April 14, 2022, these notes had a total principal of $113,000,000 outstanding, of which $33,000,000 will be due in July 2022, and the remaining $80,000,000 will be due in July 2023. As a result, if we default under our obligations under the notes or the transaction documents, the holders of the notes, acting through their appointed agent, could foreclose on their security interests and liquidate some or all of these assets, which would harm our business, financial condition and results of operations and could require us to curtail or cease operations.

The holders of our senior secured convertible notes have certain additional rights upon an event of default under the notes which could harm our business, financial condition and results of operations and could require us to curtail or cease our operations.

Under our senior secured convertible notes, the holders have certain rights upon an event of default. Such rights include (i) an increase in the interest rate to 18% per year thereafter; and (ii) the holders having the right to demand redemption of all or a portion of the notes. At any time after certain notice requirements for an event of default are triggered, a holder of the notes may require us to redeem all or any portion of the note by delivering written notice. Each portion of the note subject to redemption would be redeemed by us in cash by wire transfer of immediately available funds at a price equal to the greater of (i) the product of (A) the conversion amount to be redeemed multiplied by (B) the redemption premium (equal to 120%) and (ii) the product of (X) the conversion rate with respect to the conversion amount in effect at such time as the holder delivers an event of default redemption notice multiplied by (Y) the product of (1) the redemption premium (equal to 120%) multiplied by (2) the greatest closing sale price of the common stock on any trading day during the period commencing on the date immediately preceding the event of default and ending on the date we make the entire payment required to be made under the notes. We may not have sufficient funds to settle the redemption price and, as described above, this could trigger rights under the security interest granted to the holders and result in the foreclosure of their security interests and liquidation of some or all of our assets.

Our warrants contain provisions that require us to pay the warrant holder cash if we fail to receive stockholder approval for certain terms in the warrants required by the warrant holder.

The warrants we issued in November and December 2021 contain certain provisions which provide that we shall seek to obtain a stockholder approval to increase our authorized shares of common stock to at least 400,000,000 and to approve certain anti-dilution protection terms applicable to the warrants by June 4, 2022, or July 4, 2022 in the event that we receive comments from the SEC with respect to the preliminary proxy statement (the “Stockholder Vote Deadline”), and if we fail to receive such stockholder approval by the Stockholder Vote Deadline, we may be required to pay cash to the warrant holder pursuant to the alternate exercise mechanism under those warrants. If the alternate exercise mechanism is triggered, the warrant holder may deliver alternate exercise notices for us to pay cash amount equal to such number of warrant shares in such notice multiplied by $0.65 for the November warrants and $0.361 for the December warrants, subject to customary adjustments for stock dividends, stock splits, reclassifications and similar events related to the common stock.

We are increasingly dependent on information technology, and potential cyberattacks, security problems, or other disruption and expanding social media vehicles present new risks.

We rely on information technology networks and systems, including the internet, to process, transmit, and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, billing, and operating data. We may purchase some of our information technology from vendors, on whom our systems will depend, and we rely on commercially available systems, software, tools, and monitoring to provide security for processing, transmission, and storage of confidential operator and other customer information. We depend upon the secure transmission of this information over public networks. Our networks and storage applications could be subject to unauthorized access by hackers or others through cyberattacks, which are rapidly evolving and becoming increasingly sophisticated, or by other means, or may be breached due to operator error, malfeasance or other system disruptions. In some cases, it will be difficult to anticipate or immediately detect such incidents and the damage they cause. Any significant breakdown, invasion, destruction, interruption, or leakage of information from our systems could harm our reputation and business.

In addition, the use of social media could cause us to suffer brand damage or information leakage. Negative posts or comments about us on any social networking website could damage our or our brands’ reputations. Employees or others might disclose non-public sensitive information relating to our business through external media channels, including through the use of social media. The continuing evolution of social media will present us with new challenges and risks.

Our business is subject to complex and evolving U.S. and foreign laws and regulations including those relating to privacy, data use and data protection, content, competition, safety and consumer protection, e-commerce, digital assets and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our products and business practices, monetary penalties, increased cost of operations, or declines in customer engagement, or otherwise harm our business.

We are subject to a variety of laws and regulations in the United States and abroad that involve matters important to our business, many of which are still evolving and being tested in courts, and could be interpreted in ways that could harm our business. These laws and regulations involve matters including privacy, data use, data protection and personal information, encryption, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, data localization and storage, data disclosure, digital, electronic contracts and other communications, competition, protection of minors, consumer protection, civil rights, telecommunications, product liability, e-commerce, taxation, economic or other trade controls including sanctions, anti-corruption and political law compliance, securities law compliance, and online payment services. In particular, we are subject to federal, state, and foreign laws regarding privacy and protection of people’s data. Foreign data protection, privacy, content, competition, consumer protection, and other laws and regulations can impose different obligations, or penalties or fines for non-compliance, or be more restrictive than those in the United States. Any change in these laws or regulations, changes in their interpretation, or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us, or otherwise adversely affect our business.

For a further discussion of the regulatory risks faced by our various businesses, see “- Risks Related to Our Company - Our NFT platform may not be successful and may expose us to legal, regulatory, and other risks. Given the nascent and evolving nature of cryptocurrencies, NFTs, and our NFT platform, we may be unable to accurately anticipate or adequately address such risks or the potential impact of such risks. The occurrence of any such risks could materially and adversely affect our business, financial condition, results of operations, reputation, and prospects” “ – Risks Related to Lomotif- Lomotif’s business is subject to a variety of laws, regulations, rules, policies and other obligations, which most notably include those related to data privacy and protection. Any violation of the law or regulations governing Lomotif’s operations, including those related to losses or unauthorized access to or releases of confidential information or personal data could subject Lomotif to significant reputational, financial, legal and operational consequences” “– Risks Related to Lomotif - Lomotif faces risks and uncertainties arising from laws, regulations, rules and the political and economic climate in the jurisdictions across the globe within which it does business, including, without limitation, the United States, Brazil, India, Russia and Singapore” “- Risks Related to AdRizer - AdRizer’s business practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection” “ – Risks Related to AdRizer - Government regulation of the Internet, e-commerce and m-commerce is evolving, and unfavorable changes or failure by AdRizer to comply with these laws and regulations could substantially harm its business and results of operations.” Additionally, regarding the regulatory risks faced by the Cryptype businesses expected to be spun off, see relevant discussion under “Risk Factors” in the preliminary information statement filed as Exhibit 99.1 with the Amendment No. 2 to Form 10 filed with the SEC on March 18, 2022.

Our NFT platform may not be successful and may expose us to legal, regulatory, and other risks. Given the nascent and evolving nature of cryptocurrencies, NFTs, and our NFT platform, we may be unable to accurately anticipate or adequately address such risks or the potential impact of such risks. The occurrence of any such risks could materially and adversely affect our business, financial condition, results of operations, reputation, and prospects.

Our wholly-owned subsidiary EVNT, offers a platform for artists and content owners to distribute their intellectual property. Given the increased scrutiny of digital assets as well as cryptocurrencies for regulatory and anti-money laundering purposes, it is possible that the United States and other jurisdictions will engage in increased scrutiny and regulation of NFTs and our business. While NFTs and cryptocurrencies are similar in that both are based on blockchain technology, unlike cryptocurrency units, which are fungible, NFTs have unique identification codes and represent content on the blockchain. The record of ownership of the NFT, which establishes authenticity and may also carry other rights, cannot be duplicated. As NFTs are a relatively new and emerging type of digital asset, the regulatory, commercial, and legal framework governing NFTs (as well as cryptocurrencies) is likely to evolve both in the United States and internationally and implicates issues regarding a range of matters, including, but not limited to, intellectual property rights, privacy and cybersecurity, fraud, anti-money laundering, sanctions, and currency, commodity, and securities law implications.

For example, the public sale of securities may only be effected on securities exchanges that are registered with the SEC and pursuant to offerings registered with the SEC. There is regulatory uncertainty with respect to whether certain NFTs could be considered securities. If NFTs sold on our NFT marketplace were deemed to be securities, we would be in violation of securities laws for engaging in transactions regarding unregistered securities. Such a determination could lead to an enforcement action by the SEC and result in fines and other penalties and have a negative impact on our business.

As another example, NFTs raise various intellectual property law considerations, including adequacy and scope of assignment, licensing, transfer, copyright, and other right of use issues. The creator of an NFT will often have all rights to the content of the NFT and can determine what rights to assign to a buyer, such as the right to display, modify, or copy the content. To the extent we are directly or indirectly involved in a dispute between creators and buyers on our NFT platform, it could materially and adversely affect the success of our NFT platform and harm our business and reputation. NFTs, and our NFT platform, may also be an attractive target for cybersecurity attacks. For example, a perpetrator could seek to obtain the private key associated with a digital wallet holding an NFT to access and sell the NFT without valid authorization, and the owner of the NFT may have limited recourse due to the nature of blockchain transactions and of cybercrimes generally. NFT marketplaces, including our NFT platform, may also be vulnerable to attacks where an unauthorized party acquires the necessary credentials to access user accounts. The safeguards we have implemented or may implement in the future to protect against cybersecurity threats may be insufficient. If our NFT platform were to experience any cyberattacks, it could negatively impact our reputation and market acceptance of our platform.

NFTs, and our NFT platform, may also be subject to regulations of the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury and the Bank Secrecy Act. Further, the Office of Foreign Assets Controls (“OFAC”) has signaled sanctions could apply to digital transactions and has pursued enforcement actions involving cryptocurrencies and digital asset accounts. The nature of many NFT transactions also involve circumstances which present higher risks for potential violations, such as anonymity, subjective valuation, use of intermediaries, lack of transparency, and decentralization associated with blockchain technology. In addition, the Commodity Futures Trading Commission has stated that cryptocurrencies, with which NFTs have some similarities, fall within the definition of “commodities.” If NFTs were deemed to be a commodity, NFT transactions could be subject to prohibitions on deceptive and manipulative trading or restrictions on manner of trading (e.g., on a registered derivatives exchange), depending on how the transaction is conducted. Moreover, if NFTs were deemed to be a “security,” it could raise federal and state securities law implications, including exemption or registration requirements for marketplaces for NFT transactions, sellers of NFTs, and the NFT transactions themselves, as well as liability issues, such as insider trading or material omissions or misstatements, among others. NFT transactions may also be subject to laws governing virtual currency or money transmission. For example, New York has legislation regarding the operation of virtual currency businesses. NFT transactions also raise issues regarding compliance with laws of foreign jurisdictions, many of which present complex compliance issues and may conflict with one another. Our launch and operation of our NFT platform expose us to the foregoing risks, among others, any of which could materially and adversely affect the success of our NFT platform and harm our business, financial condition, results of operations, reputation, and prospects.

Certain U.S. jurisdictions including Washington and Puerto Rico are drafting regulations that would apply their sales tax on digital products to include NFTs and other states may act to adopt similar regulations.

As the market for NFTs is relatively nascent, it is difficult to predict how the legal and regulatory framework around NFTs will develop and how such developments will impact our business and our NFT platform. Further, market acceptance of NFTs is uncertain as buyers may be unfamiliar or uncomfortable with digital assets generally, how to transact in digital assets, or how to assess the value of NFTs. The launch of our NFT platform also subjects us to risks similar to those associated with any new platform offering, including, but not limited to, our ability to accurately anticipate market demand and acceptance, our ability to successfully launch our new NFT platform offerings, creator and buyer acceptance, technical issues with the operation of our new NFT platform, and legal and regulatory risks as discussed above. We believe these risks may be heightened with respect to our NFT platform, as NFTs are still considered a relatively novel concept. If we fail to accurately anticipate or manage the risks associated with our NFT platform or with our facilitation of cryptocurrency transactions, or if we directly or indirectly become subject to disputes, liability, or other legal or regulatory issues in connection with our NFT platform or cryptocurrency transactions, our NFT platform may not be successful and our business, financial condition, results of operations, reputation, and prospects could be materially harmed.

If we fail to protect our intellectual property rights, competitors may be able to use our technology, which could weaken our competitive position, reduce our net revenue, and increase our costs.

Our long-term success will depend to some degree on our ability to protect the proprietary technology that we have developed or may develop or acquire in the future. Patent applications can take many years to issue, and we can provide no assurance that any such patents would be issued. If we are denied any or all of these patents, we may not be able to successfully prevent our competitors from imitating our products or using some or all of the processes that are the subject of such patent applications. Such imitation may lead to increased competition within the finite market for products such as ours. Even if our pending patents were to be issued, our intellectual property rights may not be sufficiently comprehensive to prevent our competitors from developing similar competitive products. Although we may aggressively pursue anyone whom we reasonably believe is infringing upon our intellectual property rights, initiating and maintaining suits against third parties that may infringe upon our intellectual property rights will require substantial financial resources, especially given our lack of patent registrations and applications. We may not have the financial resources to bring such suits, and if we do bring such suits, we may not prevail. Regardless of our success in any such actions, we could incur significant expenses in connection with such suits.

Article XIII of our Articles of Incorporation, as amended and restated as of the date of this Annual Report (the “Articles of Incorporation”) designates the courts of the State of Nevada as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and therefore may limit our stockholders’ ability to choose a forum for disputes with us or our directors, officers, employees, or agents.

Article XIII of our Articles of Incorporation provides that, to the fullest extent permitted by law, and unless we consent to the selection of an alternative forum, the courts of the State of Nevada shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company, (b) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any director or officer of the Company to the Company or the Company’s stockholders, (c) any action or proceeding asserting a claim against the Company arising pursuant to claims under Title 7 of the Nevada Revised Statutes or our Articles of Incorporation or Bylaws, as amended or amended and restated as of the date of the Annual Report (the “Bylaws”), or (d) any action or proceeding asserting a claim against the Company governed by the internal affairs doctrine.

We believe the choice-of-forum provision in our Articles of Incorporation provide will help provide for the orderly, efficient, and cost-effective resolution of Nevada-law issues affecting us by designating courts located in the State of Nevada (our state of incorporation) as the exclusive forum for cases involving such issues. However, this provision may limit a stockholder’s ability to bring a claim in a judicial forum that it believes to be favorable for disputes with us or our directors, officers, employees, or agents, which may discourage such actions against us and our directors, officers, employees, and agents. If a court were to find the choice-of-forum provision in our Articles of Incorporation was broader than permitted under Nevada law and thus inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.

Third-party claims of infringement against us could adversely affect our ability to market our products and require us to redesign our products or seek licenses from third parties.

Given that we produce consumer products for licensed properties, we are susceptible to intellectual property lawsuits that could cause us to incur substantial costs, pay substantial damages, or prohibit us from distributing our products. Whether a product infringes a patent involves complex legal and factual issues, the determination of which is often uncertain. In addition, because patent applications can take many years to issue, there may be applications now pending of which we are unaware, which later may result in issued patents that our products may infringe. If any of our products infringe a valid patent, we could be prevented from distributing that product unless and until we can obtain a license or redesign it to avoid infringement. A license may not be available or may require us to pay substantial royalties. We also may not be successful in any attempt to redesign the product to avoid any infringement. Infringement and other intellectual property claims, with or without merit, can be expensive and time-consuming to litigate, and we may not have the financial and human resources to defend ourselves against any infringement suits that may be brought against us.

Our brands are important assets of our businesses and violation of our trademark rights by imitators, or the failure of our licensees or vendors to comply with our product quality, manufacturing requirements, marketing standards, and other requirements could negatively impact revenues and brand reputation.

Our trademarks have a reputation for quality and value and are important to our success and competitive position. Unauthorized use of our trademark rights may not only erode sales of our products, but may also cause significant damage to our brand name and reputation, interfere with our ability to effectively represent ourselves to our customers, contractors, suppliers, and/or licensees, and increase litigation costs. Similarly, failure by licensees or vendors to adhere to our standards of quality and other contractual requirements could result in loss of revenue, increased litigation, and/or damage to our reputation and business. There can be no assurance that our ongoing efforts to protect our brand and trademark rights and ensure compliance with our licensing and vendor agreements will prevent all violations.

We face substantial competition in the consumer products business, which could reduce our market share and negatively impact our net revenue.

There are a number of companies that manufacture and distribute consumer products similar to ours. Many of our anticipated competitors are significantly larger than we are and have considerably greater financial, technical, marketing, and other resources than we do. Some competitors may have a lower cost of funds and access to funding sources that are not available to us. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition, and results of operations.

We are dependent on a small number of key suppliers and customers for our consumer products business. Changes in our relationships with these parties or changes in the economic environments in which they operate could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our product sales revenues are concentrated with a small number of customers. We do not have long-term agreements with our customers, and instead develop our products on an item-by-item basis subject to purchase orders from customers. No assurances can be given that our customers will continue to submit purchase orders for new products.

To manufacture our products, we purchase components from independent suppliers or manufacturers, many of whom are located in Asia. An extended interruption in the supply of these products or suitable substitute inventory would disrupt our operations, which could have a material adverse effect on our business, financial condition, and results of operations.

The COVID-19 outbreak caused disruptions in our suppliers and manufacturers’ operations, which resulted in delays in the shipment of products to certain of our customers. See “- The effects of health pandemics, such as the ongoing global COVID-19 pandemic, have had, and could in the future have, an adverse impact on our business, financial condition and results of operations.”

Our operating results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control, which could cause fluctuations in the price of our securities.

We are subject to the following factors that may negatively affect our operating results:

As a result of our lack of any operating history and the nature of the markets in which we compete, it is difficult for us to forecast our revenues or earnings accurately. As a strategic response to changes in the competitive environment, we may from time to time make certain decisions concerning expenditures, pricing, service, or marketing that could have a material and adverse effect on our business, results of operations, and financial condition. Due to the foregoing factors, our quarterly revenues and operating results are difficult to forecast.

The Company’s results of operations could be negatively impacted by inflationary or deflationary economic conditions, which could affect the ability to obtain raw materials, component parts, freight, energy, labor, and sourced finished goods in a timely and cost-effective manner.

The Company’s products are manufactured using both ferrous and non-ferrous metals including, but not limited to, steel, zinc, copper, brass, aluminum, and nickel. Additionally, the Company uses other commodity-based materials for components and packaging including, but not limited to, plastics, resins, wood, and corrugated products. The Company’s cost base also reflects significant elements for freight, energy, and labor. The Company also sources certain finished goods directly from vendors. If the Company is unable to mitigate any inflationary increases through various customer pricing actions and cost reduction initiatives, its profitability may be adversely affected.

Conversely, in the event there is deflation, the Company may experience pressure from its customers to reduce prices, and there can be no assurance that the Company would be able to reduce its cost base (through negotiations with suppliers or other measures) to offset any such price concessions which could adversely impact results of operations and cash flows.

Further, as a result of inflationary or deflationary economic conditions, the Company believes it is possible that a limited number of suppliers may either cease operations or require additional financial assistance from the Company in order to fulfill their obligations. In a limited number of circumstances, the magnitude of the Company’s purchases of certain items is of such significance that a change in established supply relationships with suppliers or increase in the costs of purchased raw materials, component parts, or finished goods could result in manufacturing interruptions, delays, inefficiencies, or an inability to market products. Changes in value-added tax rebates, currently available to the Company or to its suppliers, could also increase the costs of the Company’s manufactured products, as well as purchased products and components, and could adversely affect the Company’s results.

In addition, many of the Company’s products incorporate battery technology. As other industries begin to adopt similar battery technology for use in their products, the increased demand could place capacity constraints on the Company’s supply chain. In addition, increased demand for battery technology may also increase the costs to the Company for both the battery cells as well as the underlying raw materials. If the Company is unable to mitigate any possible supply constraints or related increased costs, its profitably and financial results could be negatively impacted.

Low demand for new products and the inability to develop and introduce new products at favorable margins could adversely impact the Company’s performance and prospects for future growth.

The Company’s competitive advantage in its consumer products business is due in part to its ability to develop and introduce new products in a timely manner at favorable margins. The uncertainties associated with developing and introducing new products, such as market demand and costs of development and production, may impede the successful development and introduction of new products on a consistent basis. Introduction of new technology may result in higher costs to the Company than that of the technology replaced. That increase in costs, which may continue indefinitely or until increased demand and greater availability in the sources of the new technology drive down its cost, could adversely affect the Company’s results of operations. Market acceptance of the new products introduced in recent years and scheduled for introduction in future years may not meet sales expectations due to various factors, such as the failure to accurately predict market demand, end-user preferences, evolving industry standards, or the emergence of new or disruptive technologies. Moreover, the ultimate success and profitability of the new products may depend on the Company’s ability to resolve technical and technological challenges in a timely and cost-effective manner, and to achieve manufacturing efficiencies. The Company’s investments in productive capacity and commitments to fund advertising and product promotions in connection with these new products could erode profits if those expectations are not met.

Defects in our products could reduce our revenue, increase our costs, burden our engineering, and marketing resources, involve us in litigation and adversely affect us.

Our success in our consumer products business will depend on our ability to avoid, detect, and correct defects in our products. We may not be able to maintain products that are free from defects. Although we have taken steps to prevent defects, our products could suffer such defects. The occurrence of such defects or malfunctions could result in physical harm to the patrons of our customers and the subsequent termination of agreements, cancellation of orders, product returns, and diversion of our resources. Even if our customers do not suffer financial losses, customers may replace our products if they do not perform according to expectations. Any of these occurrences could also result in the loss of or delay in market acceptance of our products and/or loss of sales. In addition, the occurrence of defects in our products may give rise to claims for lost revenues and related litigation by our customers and may subject us to investigation or other disciplinary action by regulatory authorities that could include suspension or revocation of our ability to do business in certain jurisdictions.

Our products could be recalled.

The Consumer Product Safety Commission or other applicable regulatory bodies may require the recall, repair or replacement of our products if those products are found not to be in compliance with applicable standards or regulations. A recall could increase costs and adversely impact our reputation.

The effects of health pandemics, such as the ongoing global COVID-19 pandemic, have had, and could in the future have, an adverse impact on our business, financial condition and results of operations.

Our business and operations have been and could in the future be adversely affected by health pandemics, such as the global COVID-19 pandemic. The COVID-19 pandemic and efforts to control its spread have curtailed the movement of people, goods and services worldwide, including in the regions in which we and our customers, suppliers and manufacturers operate, and are significantly impacting economic activity and financial markets.

Our operations are subject to a range of external factors related to the COVID-19 pandemic that are not within our control. We have taken precautionary measures intended to minimize the risk of the spread of the virus to our employees, and the communities in which we operate. A wide range of governmental restrictions were previously, and may again be, imposed on our employees, customers, suppliers and manufacturers’ physical movement to limit the spread of COVID-19. There can be no assurance that precautionary measures, whether adopted by us or imposed by others, will be effective, and such measures could negatively affect our sales, marketing and customer service efforts, delay and lengthen our sales cycles, decrease our employees’, suppliers’ and manufacturers’ productivity, reduce our customers’ spending on our products, or create operational or other challenges, any of which could harm our business, results of operations and financial condition. For example, the COVID-19 outbreak caused disruptions in our manufacturers’ operations in Asia, which resulted in delays in the shipment of products to certain of our customers.

The economic uncertainty caused by the COVID-19 pandemic has made and may continue to make it difficult for us to forecast revenue and operating results and to make decisions regarding operational cost structures and investments. We have committed, and we plan to continue to commit, resources to grow our business, including to expand our employee base and technology development and secure alternative suppliers and manufacturers, and such investments may not yield anticipated returns, particularly if worldwide business activity continues to be impacted by the COVID-19 pandemic. The duration and extent of the impact from the COVID-19 pandemic depend on future developments that cannot be accurately predicted at this time, and if we are not able to respond to and manage the impact of such events effectively, our business may be harmed.

Risks Related to Lomotif

There is no guarantee that we may realize the expected benefits from our investments in ZVV, our joint venture with ZASH which owns an 80% interest in Lomotif, and may successfully integrate Lomotif with our other businesses including those we have acquired or intend to acquire to complement Lomotif’s business such as AdRizer and to further our plan to disrupt the media and entertainment industry.

Acquisitions have been and may continue to be an important component of our growth strategy as we transition to be focused on the development of digital media and content technologies; however, we will need to integrate these acquired businesses and assets successfully in order for our growth strategy to succeed and for us to become profitable. In July 2021, ZVV, a joint venture of Vinco Ventures and ZASH, completed the acquisition of 80% of the outstanding equity interest in Lomotif, which we believe was a key step taken to achieve our plan to build a media and entertainment company worldwide with users around the world that allows us to leverage our content globally. In addition, in February 2022, we completed an acquisition of AdRizer, a full-service tracking platform for advertisers seeking ROI optimization and digital analytics, which we believe can complement Lomotif’s business and help to monetize Lomotif’s platform. In reviewing potential acquisitions or investments, we target brands, assets or companies that we believe offer attractive products, technologies or offerings, the ability for us to leverage our offerings, opportunities to drive our brands, competencies, or other synergies. However, there is no guarantee that our acquisitions and investments, including our investments in ZVV and Lomotif, will be successful or beneficial as we expected, and such acquisitions and investments can consume significant amounts of management attention and other resources. Loss in our investments or failure to integrate our acquired businesses in a cost-efficient and effective manner may negatively impact our business, financial condition, operating results, and stock price.

To integrate Lomotif and other businesses we acquire or invest in in the media and digital entertainment industry (collectively, the “acquired businesses”), we will need to implement, and the management teams of the acquired businesses will need to adopt, our policies, procedures and best practices, and cooperate with each other in aspects of their operations. We may face difficulty with the integration of the acquired businesses, such as coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures. Our acquired businesses may not be profitable and not have sophisticated financial reporting systems in place, and we are relying on their adoption of our best practices to operate their businesses more efficiently to achieve and maintain profitability. However, we may fail in implementing our policies and procedures, or the policies and procedures may not be effective or provide the results we anticipate for a particular business. Further, we will be relying on these policies and procedures in preparing our financial and other reports as a public company, so any failure of acquired businesses to properly adopt these policies and procedures could impair our public reporting. Management of the acquired businesses may not have the operational or business expertise that we require to successfully implement our policies, procedures and best practices.

In addition, our growth strategy also includes the development of digital properties that we intend to integrate with Lomotif. This will require, among other things, the integration of the individual websites, platforms and databases of Lomotif with each other business that we develop or acquire. This will be a complex undertaking that may prove more difficult, expensive and time consuming than we expect. Even if we are able to achieve this integration, it may not achieve the benefits we anticipate. If we fail to do this properly and in a timely manner, it could harm our revenue and relationship with our users.

If we fail to successfully integrate Lomotif into our internal control over financial reporting, the integrity of our financial reporting could be compromised which could result in a material adverse effect on our reported financial results.

As a private company, Lomotif was not subject to the requirements of the Exchange Act, with respect to internal control over financial reporting. As of December 31, 2021, our Principal Executive Officer and Principal Financial and Accounting Officer have concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information that it is required to disclose in reports that we file with the SEC is recorded, processed, summarized, and reported within the time periods specified by the Exchange Act rules and regulations. See “—Risks Related to Our Company—If we fail to comply with the rules and regulations under the Sarbanes-Oxley Act, our operating results, our ability to operate our business and investors’ views of us may be harmed.” The integration of Lomotif into our internal control over financial reporting may require significant time and resources from our management and other personnel and may increase our compliance costs. If we fail to successfully integrate these operations, our internal control over financial reporting may not be effective. Failure to achieve and maintain an effective internal control environment could have a material adverse effect on our ability to accurately report our financial results and the market’s perception of our business and stock price.

As of December 31, 2021, Lomotif had not generated any significant revenues and is likely to continue to experience significant net losses for the foreseeable future. Lomotif has a limited operating history upon which investors can evaluate its future prospects, and our strategies and efforts to monetize the Lomotif platform and grow revenue may not succeed

As of December 31, 2021, Lomotif had not generated any significant revenues and had experienced significant net losses since inception and, given the significant operating and capital expenditures associated with its business plans, we anticipate it will continue to incur net losses and significant negative cash flows for the foreseeable future. If Lomotif ever does achieve profitability, of which no assurances can be given, Lomotif may be unable to sustain or increase such profitability. To achieve and sustain profitability, Lomotif will need to accomplish numerous objectives, including attracting and substantially increasing the number of users, content creators, influencers, and paying advertisers on its platform, securing tipping point scale of user adoption, developing sources of revenue and economies of scale. There is a significant risk that Lomotif will be unable to achieve these objectives, which would damage its business and could lead to the loss of our investment in Lomotif.

Lomotif does not have a history of significant revenue generation upon which an evaluation of its business plan or performance and prospects can be made. The business and prospects of Lomotif must be considered in the light of the potential problems, delays, uncertainties and complications encountered in connection with a new business in a market in which there are larger and more established competitors. The risks include, but are not limited to, our ability to: develop new sources of revenue using the Lomotif platform and content; monetize the Lomotif platform; attract new users and retain users; encourage purchases by advertisers; continue developing innovative products, services and technologies in response to user demand; increase brand awareness through marketing and promotional activities; react to changes in user access to and use of the internet; expand into new market segments; integrate new devices, platforms and operating systems; take advantage of any growth in the relevant markets; compete successfully for users, influencers, advertisers, publishers, and business partners with other video-sharing and streaming platforms; and protect Lomotif’s intellectual property and ensure compliance with applicable laws and regulations including those relating to data privacy. There are no assurances that Lomotif can successfully address these challenges and achieve its growth goals in a cost-effective manner.

It is difficult to accurately forecast future revenues of Lomotif as it is still developing its mobile user marketing, revenue generating services and business models. The current and future expense levels are based largely on estimates of planned operations and future revenues rather than experience. If Lomotif’s forecasts prove incorrect, our business, operating results, financial condition, and stock price may be materially and adversely affected. Any significant reduction in planned or actual revenues may immediately and adversely affect our business, financial condition, operating results, and stock price.

To continue to support the business objectives of Lomotif, Lomotif has an ongoing need for additional funding. As of December 31, 2021, we have provided ZVV with $125,000,000 in funding in the form of capital contributions and have advanced approximately $29,826,000 to ZVV for the purpose of funding Lomotif, including its promotional and marketing expenses. Of this aggregate amount, ZVV used$109,765,000 for the purchase of an 80% equity interest in Lomotif, and to fund loans of $18,950,000 to ZASH and PZAJ Holdings, LLC (“PZAJ”) primarily related to development and production costs of entertainment content that the Company plans to distribute through the Lomotif platform among other distribution channel. The source of such funding has been the sale of our convertible notes and warrants in numerous financing transactions and the release of funds to us from a control account upon the conversion of a portion of our warrants. We expect to continue funding ZVV, Lomotif and PZAJ with the proceeds of the financing transactions that we have already completed, and may in the future need to complete additional financing transactions for the purpose of funding ZVV, Lomotif and PZAJ. Such financing transactions have been and may in the future be dilutive to our stockholders.

Lomotif has incurred losses since its inception and has a present need for additional funding from us or ZVV. For the foreseeable future, we expect to fund ZVV for the purpose of funding Lomotif. A great portion of our prior funding to Lomotif and ZASH (through ZVV) has been spent for developing and acquiring a variety of content for Lomotif, LoMoTV and LoMo Records, and we expect there is an ongoing need for funding to support this operational objective to retain and increase Lomotif’s user base. The financing transactions that we have completed to date, involving the sale of our convertible notes and warrants, have been dilutive to our stockholders, and any future equity financing transactions that we may need to complete in order to raise additional funding to fund our growth objectives with respect to Lomotif and PZAJ, will be dilutive to our stockholders. In addition, to support Lomotif’s effort to monetize its platform, we acquired AdRizer and may decide to acquire or invest in other businesses, technologies, and assets, which we believe can complement Lomotif’s current business activities, both financially and strategically. We may need additional equity financing for future acquisitions or investments, or we may issue our securities as consideration for such acquisitions, each of which would further dilute our stockholders and may adversely affect our stock price. There are no assurances that we will be able to raise any additional needed capital on terms acceptable to us. If we are unable to obtain sufficient amounts of additional capital to fund our growth objectives with respect to Lomotif and PZAJ and any future acquisitions, we may be required to reduce the scope of our planned growth or otherwise alter our business objectives and operations, which could harm our business, financial condition, operating results, and stock price.

Lomotif’s business is highly competitive, and the industry is characterized by constant change. In order to compete Lomotif may need to rapidly evolve its business model and continuously innovate its technologies or to design features that meet the expectations of its users to retain and grow the number of users, advertisers and business partners on the platform.

Social platforms are characterized by constant change, including rapid technological evolution, continual shifts in customer demands and preferences, frequent introductions of new products and services and the constant emergence of new industry standards and practices. In addition, short videos and streaming, each as a content format, may be replaced by new content formats. Lomotif’s success will depend, in part, on its ability to respond to these changes in a cost-effective and timely manner; failure to do so may cause Lomotif’s user base to shrink and user engagement to decline, thereby materially and adversely affecting its results of operations. Lomotif began operations in 2015 and has continuously changed and upgraded the technology and features on which its platform relies. Lomotif recently launched LoMoTV and LoMo Records with ZASH to introduce new content and services to its platform, engage new segments of users, and develop potential new revenue sources.

Lomotif faces significant competition in the market of social platforms including companies operating worldwide established video-sharing social platforms such as TikTok, Kuaishou, Snapchat and Instagram. Some of its current and potential competitors have significantly greater resources and better competitive positions in certain markets than it does. These factors may allow its competitors to respond more effectively than Lomotif to new or emerging technologies and changes in market requirements. Lomotif’s competitors may develop products, features, or services that are similar to its or that can achieve greater market acceptance, may undertake more far-reaching and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies. In launching and increasing various streaming services, such as LoMoTV and LoMo Records, Lomotif also faces competition from traditional providers of entertainment video, including broadcasters and cable network operators, as well as internet-based e-commerce or entertainment video providers which are increasing their streaming video offerings. Several of these competitors have long operating histories, large customer bases, strong brand recognition, exclusive rights to certain content and significant financial, marketing and other resources. They may secure better terms from licensors and influencers, adopt more aggressive pricing and devote more resources to product development, technology, infrastructure, content acquisitions and marketing. As a result, Lomotif’s competitors may acquire and engage users at the expense of the growth or engagement of Lomotif’s user base, which may negatively affect its business and financial results.

We believe that Lomotif’s ability to compete effectively depends upon many factors both within and beyond our control, including:

If Lomotif is not able to effectively compete, its user base and level of user engagement may decrease, which could make it less attractive to influencers, publishers, advertisers, and business partners, and materially and adversely affect its business, revenue prospects and results of operations.

If Lomotif fails to retain its existing users, keep them engaged or acquire new users in a cost-efficient manner, its business, financial condition, results of operations and prospects may be materially and adversely affected. A majority of Lomotif’s current user base is not in the United States and it may not be able to gain a significant number of users in the United States as quickly or as cost effectively as it experienced with other jurisdictions, and will likely need to change or enhance its technology platform to accommodate a user base in the United States at scale.

The size of user base and the level of user engagement are critical to Lomotif’s success. Its expected monetization methods, including advertising, paid features, non-fungible tokens or functions, live streaming, e-commerce and online games, depend on its ability to significantly increase the size of its user base and user engagement. A majority of Lomotif’s current user base is not in the United States. While Lomotif is prioritizing the United States as a region to grow its user base, it may not be able to gain a significant number of users in the United States as quickly or cost effectively as it experienced with other jurisdictions and will likely need to change or enhance its technology platform to accommodate a user base in the United States at scale. If Lomotif fails to grow its user base in the United States or generally, either due to its failure to retain existing users or attract new users, or its users becoming less active, there may be less frequent access of users to its platform, less user engagement with any ads displayed on the platform, and less user spend with paid products or services offered by the platform. This could drive influencers and other content creators away from the Lomotif platform, discourage advertisers from purchasing advertisements on the platform, dissuade merchants from promoting products on the platform, and dissuade publishers and game developers from distributing their tv shows, music records, and games through the platform. As a result, Lomotif may not be able to generate the level of revenues expected, or suffer from decline in revenues. Lomotif may need to conduct more marketing and branding activities and incur additional selling and marketing expenses to retain existing users and attract new users, influencers, advertisers, merchants, game developers and publishers, which may reduce its profitability.

Growing Lomotif’s user base and maintaining a high level of user engagement require it to adequately and timely respond to changes in user preferences, attract and retain popular influencers and offer new features and contents. A number of factors could negatively affect user retention, growth and engagement, including if:

If Lomotif’s users, influencers, publishers and other content creators and licensors do not continue to contribute content or their contributions are not perceived as valuable to other users, Lomotif may experience a decline in user growth, retention, and engagement, which could result in the loss of advertisers and revenue.

Lomotif’s success depends on its ability to provide Lomotif users with engaging content, whether through its platform or the associated LoMoTV and LoMo Records, which in part depends on the content contributed by its users, influencers, publishers and other content creators and licensors. If its existing and target content contributors, including influencers, celebrities, artists, athletes, journalists, sports teams, media outlets and brands, publishers, and other users, are not interested in contributing, or do not continue to contribute engaging content to Lomotif, user growth, retention, and engagement may decline. That, in turn, may impair Lomotif’s ability to maintain good relationships with its advertisers and business partners or attract new advertisers and business partners, which may seriously harm its business.

Lomotif faces risks related to third parties on which it relies and with whom it does business. Changes to third-party operating systems, networks, mobile devices, third-party standards, mobile application distribution channels, targeting and measurement tools or third-party terms of service may negatively affect Lomotif’s business. In addition, Lomotif may fail to partner with third-party platforms that integrate with its platform or other products which could harm its business.

Lomotif’s current and expected operations are dependent on:

Lomotif relies on third parties to supply these services and provide revenue sources. It is important that Lomotif’s platform and related products and services work well across a range of mobile operating systems, complex networks and mobile devices that Lomotif does not control. The networks maintained and services provided by such third parties are vulnerable to damage or interruption, which could impact Lomotif’s results of operations. Any disruption or cancelation of service or partnership by Lomotif or by a third-party with Lomotif could affect user experience, drive users away and discourage advertisers and partners from working with Lomotif.

Furthermore, Lomotif expects to continue to devote significant resources to creating and supporting products and services across multiple platforms and devices. Lomotif may not be successful in maintaining and developing relationships with key participants in the mobile industry or in developing services that operate effectively with these operating systems, networks, devices and standards. Failing to attract and retain a substantial number of new device manufacturers, suppliers, distributors, developers and users, or failing to develop products and technologies that work well on new devices and platforms, could harm Lomotif’s business, financial condition, and operating results and ability to capture future business opportunities.

In addition, the conduct of third parties which provide infrastructure, services, content and collaboration opportunities to Lomotif may affect Lomotif’s business. We cannot be certain whether any such third party has or will infringe any other person’s legal rights or violate any regulatory requirements. While Lomotif is on watch for irregularities or non-compliance in the business practices of any parties with whom Lomotif pursues existing or future cooperation, we cannot assure you that any of these irregularities will be corrected in a prompt and proper manner or that they will not expose us or Lomotif to liability or reputational harm.

The long-term and largely fixed cost nature of certain contractual relationships and commitments Lomotif has or may need to enter into may limit Lomotif’s operating flexibility and could adversely affect its liquidity or results of operations.

In connection with licensing streaming content, Lomotif has and may need to enter into multi-year commitments with content providers. In addition, Lomotif has and may need to multi-year commitments for content that it produces, either directly or through third parties, including elements associated with these productions such as non-cancelable commitments under talent agreements. The payment terms of these agreements are typically not tied to member usage or the size of Lomotif’s user base (“fixed cost”) but may be determined by costs of production or tied to such factors as titles licensed or theatrical exhibition receipts.

Given the multiple-year duration and largely fixed cost nature of certain content commitments, if user acquisition and retention do not meet expectations, margins may be adversely impacted. Payment terms for certain content commitments, such as content LoMoTV or LoMo Records directly produces or will produce, may typically require more up-front cash payments than other content licenses or arrangements whereby Lomotif does not cashflow the production of such content. To the extent revenue growth does not meet expectations, Lomotif’s liquidity and results of operations could be adversely affected as a result of content commitments and accelerated payment requirements of certain agreements. In addition, the long-term and fixed cost nature of certain content commitments may limit flexibility in planning for, or reacting to changes in Lomotif’s business and the market segments in which Lomotif operates. If LoMoTV or LoMo Records licenses or produces content that is not favorably received by consumers in a territory, or is unable to be shown in a territory, the acquisition and retention of users may be adversely impacted and, given the long-term and fixed cost nature of certain of Lomotif’s content commitments, it may not be able to adjust its content offering quickly and its results of operation may be adversely impacted.

Lomotif relies on a combination of patent, trademark, trade secret, copyright, domain names, proprietary technologies and other intellectual property rights to protect its intellectual property. Lomotif’s patents may expire and may not be extended, Lomotif’s patent applications or patent rights may be contested, circumvented, invalidated, limited in scope or Lomotif may be subject to other forms of intellectual property infringement cases that result in liability and prevent Lomotif from continuing to use the intellectual property on which it currently relies. In particular, Lomotif may not be able to prevent others from developing and deploying competing technologies, which could have a material and adverse effect on its business, financial condition, results of operations and prospects.

Lomotif relies on patented technology for mixing and editing videos. Lomotif may not be able to prevent others from developing or exploiting competing technologies, which could have a material and adverse effect on its business operations, financial condition and results of operations. Lomotif’s patents registered in the United States are generally subject to finite and non-extendable terms. Currently, Lomotif also has patent applications pending in the United States and has filed a PCT application, but we cannot assure you that Lomotif will be granted patents pursuant to pending applications. Even if Lomotif’s patent applications succeed and Lomotif is issued patents in accordance with them, it is still uncertain whether these patents will be contested, circumvented or invalidated in the future.

The rights granted under any issued patents may not provide Lomotif with proprietary protection or competitive advantages. Further, the claims under any patents that issue from patent applications may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to Lomotif’s technology. It is also possible that the intellectual property rights of others will bar Lomotif from licensing or from exploiting any patents that issue from Lomotif’s pending applications. Numerous U.S. and patents issued in other regions and pending patent applications owned by others exist in the fields in which Lomotif has developed and is developing technology. These patents and patent applications might have priority over Lomotif’s patent applications and could subject its patent applications to invalidation or subject it to patent infringement lawsuits in its current and in any future jurisdictions into which Lomotif expands.

Finally, litigation may be necessary in the future to enforce Lomotif’s intellectual property rights and to protect its trade secrets or defend against claims of infringement by Lomotif. Such litigation could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of Lomotif’s available intellectual property or result in payment of substantial damages, penalties and fines or to the removal of relevant content from Lomotif’s website. It may also result in Lomotif’s need to seek license arrangements which may not be available on commercially reasonable terms. Further, efforts to enforce intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of Lomotif’s intellectual property rights, and if such defenses, counterclaims or countersuits are successful, Lomotif could lose valuable intellectual property rights. Lomotif’s inability to protect proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of management’s attention and resources, could delay further sales or the implementation of the Lomotif platform, impair the functionality of the platform, delay introductions of platform’s features, result in Lomotif substituting inferior or more costly technologies into platforms or damage Lomotif’s reputation.

Lomotif relies on a combination of patent, trademark, trade secret, copyright and other intellectual property rights and measures to protect its intellectual property and ensure strong branding with users, but trademarks registered, internet search engine keywords purchased and domain names which are already registered by third parties that are similar to Lomotif’s trademarks, brands or websites or third-party misappropriation of Lomotif’s data and copying of Lomotif’s platform could cause confusion for users, divert users from Lomotif’s products and services or harm Lomotif’s reputation and brand image.

Competitors and other third parties may register trademarks or purchase internet search engine keywords or domain names that are similar to Lomotif’s in order to divert potential users from its platform to theirs. Preventing such unauthorized use is inherently difficult. If Lomotif is unable to prevent such unauthorized use, competitors and other third parties may continue to drive potential online customers away from Lomotif’s platform to competing, irrelevant or potentially offensive platforms, which could harm Lomotif’s reputation and cause Lomotif to lose revenues.

Third parties may misappropriate Lomotif’s data through scraping its platform or by other means and may aggregate the data on their own platforms. In addition, “copycat” or piracy-based platforms or apps may misappropriate data on Lomotif’s platform and attempt to imitate Lomotif’s brand or the functionality of Lomotif’s platform. Copied and pirated content may prove to be competitive with Lomotif’s content. If Lomotif becomes aware of such platforms, it may employ technological and legal measures in an attempt to halt their operations if these efforts are commercially reasonable.

Lomotif may not be able to detect all such actions in a timely manner and, even if Lomotif could, technological and legal measures when employed may be insufficient to stop their operations. In those cases, Lomotif’s available remedies may not be adequate to protect against such platforms. Regardless of whether Lomotif can successfully enforce Lomotif’s rights against these platforms, any measures that Lomotif may take could require significant financial or other resources from Lomotif or from us. Those platforms may also lure away some of Lomotif’s users or advertisers or reduce its market share, causing material and adverse effects to Lomotif’s business, financial condition, results of operations and prospects.

Any material disruption or breach of Lomotif’s information technology systems or those of third-party partners could materially damage user and business partner relationships, and could subject Lomotif to significant reputational, financial, legal and operational consequences.

Computer hackers, governments or cyber terrorists may attempt to penetrate Lomotif’s network security and Lomotif’s website. Unauthorized access to Lomotif’s proprietary business information or user data may be obtained through break-ins, sabotage, breach of Lomotif’s secure network by an unauthorized party, computer viruses, computer denial-of-service attacks, employee theft or misuse, breach of the security of the networks of Lomotif’s third-party providers or other misconduct. Despite the implementation of security measures, the servers of Lomotif’s computing providers and other systems, and other third parties on which Lomotif relies, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. In addition, the techniques used by computer programmers who may attempt to penetrate and sabotage Lomotif’s network security or website change frequently and may not be recognized until launched against a target, Lomotif may be unable to anticipate these techniques.

Any material disruption or slowdown of Lomotif’s systems or those of third parties on which Lomotif depends on, including a disruption or slowdown caused by Lomotif’s failure to successfully manage significant increases in user volume or successfully upgrade applicable systems, system failures, viruses, security breaches, or other causes, could harm Lomotif’s brand and reputation, and adversely affect its revenue prospectus or cause revenues to decline. To the extent that any disruption or security breach was to result in a loss of or damage to data or applications, or inappropriate disclosure of confidential or proprietary information, Lomotif could incur liability or reputational damage and the further development of products and services could be delayed. In addition, if changes in technology cause Lomotif’s information systems, or those of third parties on which Lomotif depends, to become obsolete, or if such information systems are inadequate to handle Lomotif’s growth, Lomotif could lose users and its business and operating results could be adversely affected.

Lomotif’s products and internal systems rely on software and hardware that is highly technical, and any errors, bugs, or vulnerabilities in these systems, or failures to address or mitigate technical limitations in Lomotif’s systems, could adversely affect its business.

Lomotif’s products, services and internal systems rely on software and hardware, including software and hardware developed or maintained internally or by third parties, that is highly technical and complex. In addition, Lomotif’s products and internal systems depend on the ability of such software and hardware to store, retrieve, process and manage large amounts of data. The software and hardware on which Lomotif relies has contained, and may in the future contain, errors, bugs or vulnerabilities, and Lomotif’s systems are subject to certain technical limitations that may compromise Lomotif’s ability to meet its objectives. Some errors, bugs, or vulnerabilities inherently may be difficult to detect and may only be discovered after the code has been released for external or internal use.

Errors, bugs, vulnerabilities, design defects, or technical limitations within the software and hardware on which Lomotif relies have in the past led to, and may in the future lead to, outcomes including a negative experience for users and advertisers who use Lomotif’s products and services, compromised ability of its products and services to perform in a manner consistent with Lomotif’s terms, contracts or policies, delayed product or service introductions or enhancements, targeting, measurement or billing errors, compromised ability to protect the data of Lomotif’s users or its intellectual property or other data, or reductions in its ability to provide some or all of its services. For example, Lomotif makes commitments to its users as to how their data will be used within and across Lomotif’s products, and its systems are subject to errors, bugs and technical limitations that may prevent it from fulfilling these commitments reliably. In addition, any errors, bugs, vulnerabilities or defects in Lomotif’s systems or the software and hardware on which Lomotif relies, failures to properly address or mitigate the technical limitations in Lomotif’s systems, or associated degradations or interruptions of service or failures to fulfill its commitments to its users, have in the past led to, and may in the future lead to, outcomes including damage to Lomotif’s reputation, loss of users, loss of advertisers, loss of revenue, regulatory inquiries, litigation, or liability for fines, damages, or other remedies, any of which could adversely affect its business and financial results.

Lomotif’s focus on user experience and acting for the long-term may conflict with the short-term operating results of its business, and also negatively impact Lomotif’s relationships with advertisers or other third parties.

Lomotif strives to focus on user experience and satisfaction, which Lomotif believes is essential to its success and serves the best, long-term interests of the business. Therefore, Lomotif has made, and may make in the future, significant investments or changes in strategy that it thinks will benefit its users, even if the decision negatively impacts its operating results in the short term. In addition, this focus on the user experience may also negatively impact relationships with advertisers or other third parties and may not result in the long-term benefits that Lomotif expects, in which case the success of its business and operating results could be harmed.

Spammers and malicious applications may affect user experience, which could reduce Lomotif’s ability to attract users and advertisers and materially and adversely affect its business, financial condition and results of operations.

Spammers may use Lomotif’s platforms to send targeted and untargeted spam messages to users, which may affect user experience. As a result, Lomotif’s users may use Lomotif’s products and services less or stop using them altogether. In spamming activities, spammers typically create multiple user accounts for the purpose of sending spam messages. Although Lomotif attempts to identify and delete accounts created for spamming purposes, it may not be able to effectively eliminate all spam messages from Lomotif’s platforms in a timely fashion. Any spamming activities could have a material and adverse effect on its business, financial condition and results of operations.

User misconduct and inappropriate content may adversely impact Lomotif’s brand image, business and results of operations, and Lomotif may be held liable for information or content displayed on, retrieved from or linked to its platform or website or distributed to its users. Social media platforms have received increased scrutiny from stakeholders in recent years. Lomotif may experience negative publicity involving Lomotif, its users, its content, its platform, its management, its business model or its industry in general.

Lomotif’s short video and streaming platform enables users to present and exchange information, interact with others and engage in various other online activities, many of which are conducted in real time. As it is difficult to control user behavior in real time, Lomotif’s platform may be misused by individuals or groups of individuals who engaged in, among other things, immoral, inappropriate, disrespectful, fraudulent or illegal activities. While Lomotif has developed its own technologies and is using technologies licensed from others as well as other measures to detect inappropriate content and activities, Lomotif cannot guarantee that it will be able to fully prevent inappropriate content from being posted on its platform or inappropriate activities from being carried out on Lomotif’s platform.

Moreover, as Lomotif has no control over the offline behavior of Lomotif’s users, to the extent that such behavior is associated with Lomotif’s platform, its ability to protect its brand image and reputation may be limited. Lomotif’s business and the public perception of its brand may be materially and adversely affected by misconduct conducted on or linked to Lomotif’s platform. It is possible that Lomotif’s users may engage in conversations or activities on its platform that may be deemed illegal under the laws and regulations of certain countries within which Lomotif operates.

If any of Lomotif’s users suffers or alleges to have suffered physical, financial or emotional harm arising from any contact initiated on Lomotif’s platform, Lomotif may face civil lawsuits or other proceedings initiated by the affected user, or governmental or regulatory actions. Defending such actions could be costly and involve significant time and attention of Lomotif’s management and other resources, which could materially and adversely affect its business, financial condition, results of operations and prospects. There can be no assurance that Lomotif can detect all illegal or inappropriate content displayed on, retrieved from or linked to its platform or website. If Lomotif is held liable for any of the aforementioned incidents in the future, its business, financial condition and results of operations may be materially and adversely affected.

Negative publicity involving Lomotif, its users, content, platform, management, business model or industry in general may materially and adversely harm Lomotif’s brand and, as a result, its business. We cannot assure you that Lomotif will be able to effectively manage negative publicity. We cannot guarantee that there will not be negative news in relation to Lomotif as well as its users and content on its platform. The dissemination of such news to the public may have an adverse effect on Lomotif’s reputation or brand image. Lomotif may have to incur significant expenses in order to remedy the effects of these negative reports, which may materially and adversely affect its results of operations.

If Lomotif is unable to attract, train and retain qualified personnel or if the efforts of Lomotif’s management and other key personnel do not continue as expected, its business may be materially and adversely affected.

Lomotif’s success depends largely upon the continued services of its key executives including its founder and Chief Executive Officer, Paul Yang. Lomotif’s future success also depends, to a significant extent, on its ability to attract, train and retain qualified personnel, particularly management, technical and marketing personnel with expertise in the internet industry; inability to do so may materially and adversely affect its business. Since the internet industry is characterized by high demand and intense competition for talent, we cannot assure you that Lomotif will be able to attract or retain qualified staff or other highly skilled employees. As Lomotif is relatively young, its ability to train and integrate new employees into its operations may not meet the growing demands of its business which may materially and adversely affect Lomotif’s ability to grow its business, which may affect its results of operations.

If Lomotif’s goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.

Goodwill is a significant asset on Lomotif’s balance sheet. Under U.S. generally accepted accounting principles, or GAAP, we review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. As of December 31, 2021, we had recorded a total of [$120,320,054] of goodwill and intangible assets, net related to our acquisition of Lomotif. An adverse change in market conditions, particularly if such change has the effect of changing one of our critical assumptions or estimates, could result in a change to the estimation of fair value that could result in an impairment charge to our goodwill or intangible assets.

Lomotif’s business is subject to a variety of laws, regulations, rules, policies and other obligations, which most notably include those related to data privacy and protection. Any violation of the law or regulations governing Lomotif’s operations, including those related to losses or unauthorized access to or releases of confidential information or personal data could subject Lomotif to significant reputational, financial, legal and operational consequences.

Lomotif’s business requires it to collect, use, store and otherwise process confidential information, including, among other things, personally identifiable information, or PII, with respect to users and employees. Lomotif is subject to laws, and regulations, and additional laws and regulations as Lomotif’s global expansion evolves, relating to the collection, use, retention, security, transfer or otherwise processing of PII. In many cases, these laws and regulations not only apply to third-party transactions, but also may restrict transfers of PII from Lomotif to us or from us or Lomotif to our subsidiaries. Several jurisdictions have passed laws in this area, and other jurisdictions are considering imposing additional and possibly more stringent restrictions. These laws continue to develop and may vary from jurisdiction to jurisdiction.

Complying with emerging and changing international requirements may cause Lomotif to incur substantial costs or require Lomotif to change its business practices. Non-compliance could result in significant penalties or legal liability as well as reputational harm. Data protection, privacy, and other laws and regulations, including those in Europe and the United States, may impose varying obligations. Regulatory authorities around the world are considering a number of legislative and regulatory proposals concerning data protection. In addition, the interpretation and application of consumer and data protection laws are often uncertain. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with Lomotif’s data practices. These legislative and regulatory proposals, if adopted, and such interpretations could, in addition to the possibility of fines and reputational harm, result in an order requiring Lomotif to change it data practices, which could have an adverse effect on its business and results of operations. Complying with these various laws could cause Lomotif to incur substantial costs or require Lomotif to change its business practices in a manner adverse to the business.

Although Lomotif’s operations in Europe are currently limited, recent legal developments have created compliance uncertainty regarding the processing of personal data that might nonetheless affect it. The General Data Protection Regulation, or GDPR, which came into application in the European Union, or EU, on May 25, 2018, applies to all of Lomotif’s activities conducted from an establishment in the EU or related to any products and services that Lomotif offers to EU users. The GDPR creates significant new requirements regarding the protection of personal data and significantly increases the financial penalties for noncompliance. Lomotif may be considered in violation of the GDPR and thus be required to adopt additional measures in the future. If Lomotif fails to comply with the requirements stipulated by the GDPR in a timely manner, or at all, Lomotif may be subject to significant penalties and fines, which may in turn adversely affect its business, reputation, financial condition and operating results. In addition to the new requirements imposed by the GDPR, the privacy requirements and expectations created in the EU by the GDPR are stricter than certain other regions. These requirements include rules restricting the flow of data across borders. These restrictions may cause companies to localize data and may otherwise impact the use of Lomotif’s services.

Additionally, California recently enacted legislation that has been dubbed the first “GDPR-like” law in the United States. Known as the California Consumer Privacy Act, or CCPA, it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA, which went into effect on January 1, 2020, requires covered companies to provide new disclosures to California consumers, and provides such consumers new ways to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase Lomotif’s compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase Lomotif’s potential liability and adversely affect its business.

Lomotif faces risks and uncertainties arising from laws, regulations, rules and the political and economic climate in the jurisdictions across the globe within which it does business, including, without limitation, the United States, Brazil, India, Russia and Singapore.

Failure to comply with such applicable laws, regulations and rules may subject Lomotif’s global operations to strict scrutiny by local authorities, which in turn may materially and adversely affect Lomotif’s globalized operations. As Lomotif expands operations in additional emerging markets and regions, Lomotif may have to adapt its business models or operations to the local markets due to various legal requirements and market conditions. Lomotif’s international operations and expansion efforts may result in increased costs and are subject to various risks, including difficulties in obtaining licenses, permits or other applicable governmental authorizations, content control from local authorities, uncertain enforcement of intellectual property rights, potential claims of intellectual property infringement, the complexity of compliance with laws and regulations and cultural differences.

Compliance with applicable laws, regulations and rules related to matters that are central to Lomotif’s business, including those related to streaming services, content restrictions, data privacy, virtual items, anti-corruption laws, anti-money laundering and the protection of minors, increase the costs and risk exposure of doing business in multiple jurisdictions across the globe. In some cases, compliance with the laws and regulations of one country could violate the laws and regulations of another country. As Lomotif’s globalized operations evolve, we cannot assure you that Lomotif will be able to fully comply with the legal requirements of each jurisdiction and successfully adapt its business models to local market conditions. Due to the complexity involved in Lomotif’s global business expansion, we cannot assure you that Lomotif is in compliance with all local laws or regulations, including license requirements, or that Lomotif’s licenses will be successfully renewed or expanded to cover all of its areas of operations.

Risk Related to AdRizer

There is no guarantee that we will realize the expected benefits from our acquisition of AdRizer or successfully integrate AdRizer with our other businesses or investments such as Lomotif and Honey Badger.

In February 2022, we completed the acquisition of AdRizer, a provider of technology solutions that automate the use of artificial intelligence for digital advertising analytics and programmatic media buying. We plan to integrate the AdRizer platform and Honey Badger with the Lomotif short form video app in an effort to monetize Lomotif’s content creation and streaming capabilities. There is no guarantee that our efforts to integrate these platforms will be successful or beneficial as we expect, and such integration efforts may consume significant amounts of management attention and other resources, which may negatively impact other aspects of our business. See “—Risks Related to Our Company—Our growth strategy includes pursuing opportunistic acquisitions of additional brands, and we may not find suitable acquisition candidates or successfully operate or integrate any business that we may acquire,” “—Risks Related to Our Company—We may not realize the anticipated benefits of acquisitions or investments in joint ventures, or those benefits may be delayed or reduced in their realization,” and “—Risks Related to Lomotif—There is no guarantee that we will realize the expected benefits from our investments in ZVV, our joint venture with ZASH which owns an 80% interest in Lomotif Private Ltd., or successfully integrate the Lomotif app with our other businesses such as AdRizer and Honey Badger or any businesses we may acquire in the future.”

If we fail to successfully integrate AdRizer into our internal control over financial reporting, the integrity of our financial reporting could be further compromised, which could have a material adverse effect on our reported financial results.

As a private company, AdRizer was not subject to the requirements of the Exchange Act, including those pertaining to internal control over financial reporting. The integration of AdRizer into our internal control over financial reporting may require significant time and resources from our management and other personnel and may increase our compliance costs. As of December 31, 2021, our Principal Executive Officer and Principal Financial and Accounting Officer have concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information that it is required to disclose in reports that we file with the SEC is recorded, processed, summarized, and reported within the time periods specified by the Exchange Act rules and regulations. See “—Risks Related to Our Company—If we fail to comply with the rules and regulations under the Sarbanes-Oxley Act, our operating results, our ability to operate our business and investors’ views of us may be harmed.” If we fail to successfully integrate AdRizer into our internal control over financial reporting, the integrity of our financing reporting could be further compromised. Failure to achieve and maintain an effective internal control environment could have a material adverse effect on our ability to accurately and timely report our financial results, the market’s perception of our business, our stock price and our ability to raise additional capital on acceptable terms or at all.

The digital advertising industry is intensely competitive, and if AdRizer does not effectively compete against current and future competitors, AdRizer’s and our business, results of operations, and financial condition could be harmed.

AdRizer operates in a highly competitive and rapidly changing industry that is subject to changing technology and customer demands and that includes many companies providing competing solutions. With the introduction of new technologies and the influx of new entrants into the market, we expect competition to persist and intensify in the future, which could harm AdRizer’s and our ability to increase revenue and profitability. New technologies and methods of buying advertising present a dynamic competitive challenge, as market participants offer multiple new products and services aimed at capturing advertising spend.

AdRizer competes with privately-held companies and with public companies such as AdMob, The Trade Desk, Inc., Perion Network Ltd., and Cardlytics, Inc., AdRizer’s current and potential competitors may have significantly more financial, technical, marketing and other resources than we have, allowing them to devote greater resources to the development, promotion, sale and support of their products and services. They may also have more extensive customer bases and broader supplier relationships than we have. As a result, these competitors may be better able to respond quickly to new technologies, develop deeper marketer relationships or offer services at lower prices. Increased competition may result in reduced pricing for AdRizer’s products and services, increased sales and marketing expense, longer sales cycles or a decrease of AdRizer’s market share, any of which could negatively affect AdRizer’s and our revenue, profitability and future operating results and ability to grow our business. These companies may also have greater brand recognition than we have, actively seek to serve AdRizer’s market, and have the power to significantly change the nature of the marketplace to their advantage. Some of AdRizer’s larger competitors may have substantially broader product and service offerings and may leverage their relationships based on other products and services or incorporate additional functionality into existing products and services to gain business in a manner that may discourage customers from using AdRizer’s products and services, including through selling at zero or negative margins or product bundling with other products and services which they provide at reduced prices. Customers may prefer to purchase advertising on their own or through another platform without using AdRizer’s buy-side products and services. Potential customers may also prefer to leverage larger sell-side platforms rather than a new platform regardless of product performance or features. These larger competitors often have broader product lines and market focus and may therefore not be as susceptible to downturns in a particular market. AdRizer may also experience negative market perception as a result of being a smaller company than its larger competitors.

AdRizer may also face competition from companies that we do not yet know about or do not yet exist. If existing or new companies develop, market or resell competitive high-value marketing products or services, acquire one of AdRizer’s existing competitors or form a strategic alliance with one of AdRizer’s competitors, AdRizer’s ability to compete effectively could be significantly compromised and our results of operations could be harmed.

High customer concentration exposes AdRizer to various risks faced by its major customers and may subject AdRizer to significant fluctuations or declines in revenues.

A limited number of AdRizer’s major customers have contributed a significant portion to its revenues in the past. AdRizer’s revenue from the top 5 largest customers accounted for approximately 90% and 91% of its total revenues in the fiscal years ended December 31, 2021 and 2020, respectively. Its revenue from its top ten largest customers accounted for approximately 96% and 96% of its total revenues in the fiscal years ended December 31, 2021 and 2020, respectively. Although AdRizer continually seeks to diversify its customer base, and we intend to integrate AdRizer with our other businesses including the Lomotif app to increase our total consolidated revenues, we cannot assure you that the proportion of our revenues contributed by these customers to AdRizer’s or our total revenues will decrease in the near future. Dependence on a limited number of customers exposes us to the risk of substantial losses resulting from the loss or financial impairment of any of those customers. Specifically, any one of the following events, among others, may cause material fluctuations or declines in AdRizer’s revenues and have a material and adverse effect on our business, financial condition, results of operations and prospects:

AdRizer often has long sales cycles, which can result in significant time between initial contact with a prospect and onboarding a customer, making it difficult to project when, if at all, it will obtain new customers and when it will generate revenue from those customers.

When purchasing AdRizer’s products and services, AdRizer’s customers and prospects are often faced with a significant commitment of capital, the need to integrate new software and/or hardware platforms and other changes in company-wide operational procedures, all of which result in cautious deliberation and evaluation by prospective customers, longer sales cycles and delays in completing transactions. Depending on the size of a prospective customer’s business and its needs, AdRizer’s sell-side sales cycle often has a duration of 3-to-6 months, while its buy-side business sales cycle often has a duration of 1-to-2 months. As part of AdRizer’s sales cycle, it may incur significant expenses before it generates any revenue from a prospective customer. We have no assurance that the substantial time and money spent on AdRizer’s sales efforts will generate significant revenue or increase profitability. If conditions in the marketplace, generally or with a specific prospective customer, change negatively, it is possible that AdRizer will be unable to recover any of these expenses. AdRizer’s sales efforts involve educating its customers about the use, technical capabilities and benefits of its platform, and working through technical connections and troubleshooting technical issues with prospective customers. Some of AdRizer’s customers undertake an evaluation process that frequently involves not only its platform but also the offerings of its competitors. As a result, it is difficult to predict when AdRizer will obtain new customers and begin generating revenue from these new customers. Even if AdRizer’s sales efforts result in obtaining a new customer, the customer controls when and to what extent it uses AdRizer’s platform and therefore the amount of revenue AdRizer generates, and it may not sufficiently justify the expenses incurred to acquire the customer and the related training support. As a result, AdRizer may not be able to add customers, generate additional revenue, as quickly as we may expect, which could harm AdRizer’s and our growth prospects.

AdRizer’s future success and revenue growth are greatly dependent on adding new customers, effectively educating and training its existing customers on how to make full use of its platform and increasing usage of its platform by its customers.

AdRizer’s future success will be greatly dependent on regularly adding new customers and increasing its customers’ usage of its platform. AdRizer’s contracts and relationships with customers generally do not include long-term or exclusive obligations requiring them to use AdRizer’s platform or maintain or increase their use of the platform. AdRizer’s agreements with its customers allow them to change the amount of spending on its platform or terminate its services with limited notice. AdRizer’s customers typically have relationships with different providers and there is limited cost to moving budgets to AdRizer’s competitors. AdRizer’s customers may also choose to decrease their overall advertising spend for any reason. Accordingly, AdRizer must continually work to win new customers and retain existing customers, increase their usage of its platform and capture a larger share of their advertising spend. AdRizer may not be successful in educating and training customers, particularly the newer customers, on how to use its platform, in order for its customers to get the most benefit from its platform and increase their usage. If these efforts are unsuccessful or customers decide not to continue to maintain or increase their usage of AdRizer’s platform for any other reason, or if AdRizer fails to attract new customers, its revenue could stagnate or decline, which would materially and adversely harm AdRizer’s and our business, results of operations, and financial condition. We cannot assure you that AdRizer’s customers will continue to use and increase their spend on AdRizer’s platform or that AdRizer will be able to attract a sufficient number of new customers to continue to grow AdRizer’s business and revenue. If customers representing a significant portion of AdRizer’s business decide to materially reduce their use of its platform or cease using the platform altogether, AdRizer’s revenue could be significantly reduced, which could have a material adverse effect on AdRizer’s and our business, operating results and financial condition. AdRizer may not be able to replace customers who decrease or cease their usage of its platform with new customers that will use its platform to the same extent.

AdRizer must provide value to both publishers and buyers of advertising without being perceived as favoring one over the other or being perceived as competing with them through AdRizer’s service offerings.

AdRizer provides a platform that intermediates between publishers seeking to sell advertising space and buyers seeking to purchase that space. If AdRizer were to be perceived as favoring one side of the transaction to the detriment of the other, or presenting a competitive challenge to their own businesses, demand for AdRizer’s platform from publishers or buyers could decrease and AdRizer’s business, results of operations and financial condition would be adversely affected.

AdRizer is subject to payment-related risks and, if its customers do not pay or dispute their invoices, AdRizer’s business, financial condition and operating results may be adversely affected.

AdRizer may be involved in disputes with agencies and their advertisers over the operation of its platform, the terms of AdRizer’s agreements or its billings for purchases made by them through AdRizer’s platform. If AdRizer is unable to collect or make adjustments to bills to customers, AdRizer could incur write-offs for bad debt, which could have a material adverse effect on its results of operations for the periods in which the write-offs occur. In the future, bad debt may exceed reserves for such contingencies and AdRizer’s bad debt exposure may increase over time. Any increase in write-offs for bad debt could have a materially negative effect on AdRizer’s business, financial condition and operating results. Even if AdRizer is not paid by its customers on time or at all, AdRizer is still obligated to pay for the advertising inventory it has purchased for the advertising campaign, and as a consequence, AdRizer’s results of operations and financial condition would be adversely impacted.

AdRizer and its customers set up campaigns on our platform using a number of available variables. While AdRizer’s platform includes several checks and balances, it is possible for human error to result in significant over-spending. AdRizer offers a number of protections such as daily or overall spending caps. However, despite these protections, the risk of overspend exists. For example, campaigns which last for a period of time can be set to pace evenly or as quickly as possible. If a customer with a high credit limit enters an incorrect daily cap with a campaign set to a rapid pace, it is possible for a campaign to accidently go significantly over budget. AdRizer’s potential liability for such errors may be higher when they occur in situations in which AdRizer is executing purchases on behalf of a customer rather than the customer using the self-service feature of AdRizer’s platform. While AdRizer’s customer contracts state that customers are responsible for media purchased through AdRizer’s platform, AdRizer is ultimately responsible for paying the inventory providers and it may be unable to collect when such errors occur.

The market for programmatic advertising campaigns is relatively new and evolving. If this market develops slower or differently than we expect, AdRizer’s and our business, growth prospects and results of operations would be adversely affected.

The substantial majority of AdRizer’s revenue has been derived from customers that programmatically purchase or sell advertising inventory through its platform. We expect that spending on programmatic ad buying and selling will continue to be AdRizer’s primary source of revenue for the foreseeable future, and that its revenue growth will largely depend on increasing spend through its platform. The market for programmatic ad buying is an emerging market, and AdRizer’s current and potential customers may not shift quickly enough to programmatic ad buying from other buying methods, reducing its growth potential. Because this industry is relatively new, AdRizer will encounter risks and difficulties frequently encountered by early-stage companies in similarly rapidly evolving industries, including the need to:

If the market for programmatic ad buying deteriorates or develops more slowly than we expect, it could reduce demand for AdRizer’s platform, and AdRizer’s and our business, growth prospects and financial condition would be adversely affected. In addition, revenue may not necessarily grow at the same rate as spend on AdRizer’s platform. Growth in spend may outpace growth in our revenue from AdRizer as the market for programmatic advertising matures due to a number of factors including quantity discounts and product, media, customer and channel mix shifts. A significant change in revenue as a percentage of spend could reflect an adverse change in AdRizer’s and our business and growth prospects. In addition, any such fluctuations, even if they reflect our strategic decisions, could cause our performance to fall below the expectations of securities analysts and investors, and adversely affect the price of our common stock.

Operational and performance issues with AdRizer’s platform, whether real or perceived, including a failure to respond to technological changes or to upgrade its technology systems, may adversely affect AdRizer’s and our business, operating results and financial condition.

AdRizer depends upon the sustained and uninterrupted performance of its Cortex technology platform to manage its advertising inventory supply; acquire advertising inventory for each campaign; collect, process and interpret data; and optimize campaign performance in real time and provide billing information to its financial systems. If AdRizer’s platform cannot scale to meet demand, if there are errors in its execution of any of these functions on its platform, or if AdRizer experiences outages, then its business may be harmed.

AdRizer’s Cortex technology platform is complex and multifaceted. Operational and performance issues could arise from the platform itself or from outside factors, such as cyberattacks or other third-party attacks. Errors, failures, vulnerabilities or bugs have been found in the past, and may be found in the future. AdRizer’s Cortex technology platform also relies on third-party technology and systems to perform properly. It is often used in connection with computing environments utilizing different operating systems, system management software, equipment and networking configurations, which may cause errors in, or failures of, AdRizer’s platform or such other computing environments. Operational and performance issues with AdRizer’s platform could include the failure of its user interface, outages, errors during upgrades or patches, discrepancies in costs billed versus costs paid, unanticipated volume overwhelming its databases, server failure or catastrophic events affecting one or more server facilities. While AdRizer has built redundancies in its systems, full redundancies do not exist. Some failures will shut AdRizer’s platform down completely, others only partially. AdRizer provides service-level agreements to some of its customers, and if its platform is not available for specified amounts of time or if there are failures in the interaction between AdRizer’s platform, partner platform and third-party technologies, AdRizer may be required to provide credits or other financial compensation to its customers.

As we grow AdRizer’s business, we expect to continue to invest in technology services and equipment. Without these improvements, AdRizer’s operations might suffer from unanticipated system disruptions, slow transaction processing, unreliable service levels, impaired quality or delays in reporting accurate information regarding transactions in its platform, any of which could negatively affect AdRizer’s reputation and ability to attract and retain customers. AdRizer faces intense competition in the marketplace and needs to keep up with rapidly changing technology, evolving industry standards and consumer needs, regulatory changes, and the frequent introduction of new solutions by its competitors. AdRizer’s future success will depend in part upon its ability to enhance its platform and to develop and introduce new features and solutions in a timely manner with competitive prices that also meet the evolving needs of existing and prospective customers. AdRizer may not be able to maintain its existing systems or replace or introduce new technologies and systems as quickly as we would like or in a cost-effective manner. In addition, the expansion and improvement of AdRizer’s systems and infrastructure may require us to commit substantial financial, operational and technical resources, with no assurance that AdRizer’s and our business will grow. If we fail to respond to technological change or to adequately maintain, expand, upgrade and develop AdRizer’s systems and infrastructure in a timely fashion, AdRizer’s and our growth prospects and results of operations could be adversely affected.

Operational and performance issues with AdRizer’s Cortex technology platform could also result in negative publicity, damage to its brand and reputation, loss of or delay in market acceptance of its platform, increased costs or loss of revenue, loss of the ability to access its platform, loss of competitive position or claims by customers for losses sustained by them. Alleviating problems resulting from such issues could require significant expenditures of capital and other resources and could cause interruptions, delays or the cessation of AdRizer’s business, any of which may adversely affect our operating results and financial condition.

Significant system disruptions, loss of data center capacity or interruption of telecommunication links could adversely affect AdRizer’s business and results of operations.

AdRizer’s Cortex technology platform is currently hosted and managed on Amazon Web Services and takes full advantage of open standards for processing, storage, security and big data technology. Significant system disruptions, loss of data center capacity or interruption of telecommunication links could adversely affect AdRizer’s and our business, results of operations and financial condition. AdRizer’s business is heavily dependent upon highly complex data processing capability. The ability of AdRizer’s Cortex technology platform hosts and managers to protect these data centers against damage or interruption from fire, flood, tornadoes, power loss, telecommunications or equipment failure or other disasters is beyond AdRizer’s control and is critical to AdRizer’s ability to succeed.

The reliability of AdRizer’s product solutions is dependent on data from third-parties and the integrity and quality of that data.

Much of the data that AdRizer uses is licensed from third-party data suppliers, and AdRizer is dependent upon its ability to obtain necessary data licenses on commercially reasonable terms. AdRizer could suffer material adverse consequences if AdRizer’s data suppliers were to withhold their data from AdRizer. For example, data suppliers could withhold their data from AdRizer if there is a competitive reason to do so; if AdRizer breaches its contract with a supplier; if they are acquired by one of AdRizer’s competitors; if legislation is passed restricting the use or dissemination of the data they provide; if judicial interpretations are issued restricting use of such data; or if AdRizer is unable to acquire commercially useful data from its suppliers due to privacy changes recently made by Apple and expected to be made by Google with respect to tracking user activity across apps and websites. Additionally, AdRizer could terminate relationships with AdRizer’s data suppliers if they fail to adhere to AdRizer’s data quality standards. If a substantial number of data suppliers were to withdraw or withhold their data from AdRizer, or if AdRizer severs ties with its data suppliers based on their inability to meet AdRizer’s data standards, AdRizer’s ability to provide products and services to its customers could be materially adversely impacted, which could result in decreased revenue.

The reliability of AdRizer’s solutions depends upon the integrity and quality of the data in AdRizer’s database. A failure in the integrity or a reduction in the quality of AdRizer’s data could cause a loss of customer confidence in AdRizer’s solutions, resulting in harm to the AdRizer brand, loss of revenue and exposure to legal claims. AdRizer may experience an increase in risks to the integrity of its database and quality of AdRizer’s data as AdRizer moves toward real-time, non-identifiable, consumer-powered data through its products. AdRizer must continue to invest in its database to improve and maintain the quality, timeliness and coverage of the data if AdRizer is to maintain its competitive position. Failure to do so could result in a material adverse effect on AdRizer’s and our business, growth and revenue prospects.

If the non-proprietary technology, software, products and services that AdRizer uses are unavailable, have future terms it cannot agree to, or do not perform as it expects, AdRizer’s and our business, results of operations and financial condition could be harmed.

AdRizer depends on various technology, software, products and services from third parties or available as open source, including for critical features and functionality of its platform and technology, payment processing, payroll and other professional services. Identifying, negotiating, complying with and integrating with third-party terms and technology are complex, costly and time-consuming matters. Failure by third-party providers to maintain, support or secure their technology either generally or for our accounts specifically, or downtime, errors or defects in their products or services, could materially and adversely impact AdRizer’s platform, its administrative obligations or other areas of its business. Having to replace any third-party providers or their technology, products or services could result in outages or difficulties in AdRizer’s ability to provide its services, which could have a material adverse effect on AdRizer’s and our business, results of operations and financial condition.

Third parties control AdRizer’s access to unique identifiers, and if the use of “third-party cookies” or other technology to uniquely identify devices is rejected by Internet users, restricted or otherwise subject to unfavorable regulation, blocked or limited by technical changes on end users’ devices and web browsers, or AdRizer’s and AdRizer’s customers’ ability to use data on AdRizer’s platform is otherwise restricted, AdRizer’s performance may decline and AdRizer may lose advertisers and revenue which could have an adverse effect on our business, operating results, and financial condition.

AdRizer’s ability to successfully leverage user data and generate revenue from opportunities to serve advertisements could be impacted by restrictions imposed by third parties, including restrictions on AdRizer’s ability to use or read cookies or device identifiers, track user activity across apps and websites or use real-time bidding networks or other bidding networks. For example, if publishers or supply-side platforms decide to limit the data that AdRizer receives in order to comply (in their view) with the opt-out of sale provisions of the California Consumer Privacy Act of 2018 (the “CCPA”) or a potential federal privacy law, or with opt-out of behavioral advertising provisions under the California Privacy Rights Act (the “CPRA”), Virginia Consumer Data Protection Act (the “VCDPA”) or Colorado Privacy Act, then AdRizer’s service may prove to be less valuable to AdRizer’s customers and AdRizer may find it more difficult to generate revenue. Third parties, such as Apple and Google, on whose operating systems AdRizer and its data suppliers have historically relied for data or opportunities to serve advertisements, have recently imposed or are expected to impose in the future privacy restrictions that will require AdRizer to develop new advertising strategies which its customers may not deem successful, which could have a material adverse effect on AdRizer’s revenue.

Historically, digital advertising has relied primarily on the ability to uniquely identify devices across websites and applications, and to collect data about user interactions with those devices for purposes such as serving relevant ads and measuring the effectiveness of ads. Devices are identified through unique identifiers stored in cookies, provided by device operating systems for advertising purposes, or generated based on statistical algorithms applied to information about a device, such as the IP address and device type. AdRizer uses device identifiers to record information such as when an Internet user views an ad, clicks on an ad, or visits one of AdRizer’s advertiser’s websites or applications. Historically, AdRizer has used device identifiers to help it achieve the advertisers’ campaign goals, including to limit the instances that an Internet user sees the same advertisement, report information to AdRizer’s advertisers regarding the performance of their advertising campaigns, and detect and prevent malicious behavior and invalid traffic throughout AdRizer’s network of inventory. Historically, AdRizer has also used data associated with device identifiers to help AdRizer’s customers decide whether to bid on, and how to price, an opportunity to place an advertisement in a specific location, at a given time, in front of a particular Internet user. Additionally, AdRizer’s customers historically have relied on device identifiers to add information they have collected or acquired about users into AdRizer’s platform. Without such data, AdRizer’s customers may not have sufficient insight into an Internet user’s activity, which may compromise their and AdRizer’s ability to determine which inventory to purchase for a specific campaign and may undermine the effectiveness of AdRizer’s platform or AdRizer’s ability to improve its platform and remain competitive.

Historically, digital advertising, including AdRizer’s platform, has made significant use of cookies to store device identifiers for the advertising activities described above. When AdRizer uses cookies, they are generally considered third-party cookies, which are cookies owned and used by parties other than the owners of the website visited by the Internet user. The most commonly used Internet browsers, including Chrome, Firefox, Internet Explorer and Safari, allow Internet users to modify their browser settings to prevent some or all cookies from being accepted by their browsers. Internet users can delete cookies from their computers at any time. Additionally, some browsers currently, or may in the future, block or limit some third-party cookies by default or may implement user control settings that algorithmically block or limit some cookies. Today, three major web browsers, Apple’s Safari, Mozilla’s Firefox and Microsoft’s Edge, block third-party cookies by default. Google’s Chrome has introduced new controls over third-party cookies and announced plans to deprecate support for third-party cookies and user agent strings entirely by late 2023. Some Internet users also download free or paid ad-blocking software that not only prevents third-party cookies from being stored on a user’s computer, but also blocks all interaction with a third-party ad server. In addition, Google has introduced ad-blocking software in its Chrome web browser that will block certain ads based on quality standards established under a multi-stakeholder coalition. If such a feature inadvertently or mistakenly blocks ads that are not within the established blocking standards, or if such capabilities become widely adopted and the advertising technology industry does not collaboratively develop alternative technologies, AdRizer’s business could be harmed. The Interactive Advertising Bureau and Digital Advertising Alliance have also developed frameworks that allow users to opt out of the “sale” of their personal information under the CCPA in ways that stop or severely limit the ability to show targeted ads.

Advertising shown on mobile applications can also be affected by blocking or restricting use of mobile device identifiers. Data regarding interactions between users and devices are tracked mostly through stable, pseudonymous advertising identifiers that are built into the device operating system with privacy controls that allow users to express a preference with respect to data collection for advertising, including to disable the identifier. These identifiers and privacy controls are defined by the developers of the platforms through which the applications are accessed and could be changed by the platforms in a way that may negatively impact AdRizer’s business. For example, Apple has shifted to require user opt-in before permitting access to Apple’s unique identifier, or IDFA. This shift from enabling user opt-out to an opt-in requirement has had, and will likely continue to have, a substantial impact on the mobile advertising ecosystem and could adversely impact AdRizer’s growth in this channel.

Some consumers also download free or paid “ad blocking” software on their computers or mobile devices, not only for privacy reasons, but also to counteract the adverse effect advertisements can have on the consumer experience, including increased load times, data consumption, and screen overcrowding. Ad-blocking technologies and other privacy controls may prevent some third-party cookies, or other tracking technologies, from being stored on a consumer’s computer or mobile device. If more consumers adopt these measures, AdRizer’s business, operating results, and financial condition could be adversely affected. Ad-blocking technologies could have an adverse effect on AdRizer’s business, operating results, and financial condition if they reduce the volume or effectiveness and value of advertising. In addition, some ad blocking technologies block only ads that are targeted through use of third-party data, while allowing ads based on first-party data (i.e., data owned by the publisher). These ad blockers could place AdRizer at a disadvantage because AdRizer relies on third-party data, while some large competitors have troves of first-party data they use to direct advertising. Other technologies allow ads that are deemed “acceptable,” which could be defined in ways that place AdRizer or AdRizer’s advertisers at a disadvantage, particularly if such technologies are controlled or influenced by AdRizer’s competitors. Even if ad blockers do not ultimately have an adverse effect on AdRizer’s business, investor concerns about ad blockers could cause our stock price and ability to raise additional capital on acceptable terms or at all to be adversely impacted.

In addition, in the EU, Directive 2002/58/EC (as amended by Directive 2009/136/EC), commonly referred to as the ePrivacy or Cookie Directive, directs EU member states to ensure that accessing information on an Internet user’s computer, such as through a cookie and other similar technologies, is allowed only if the Internet user has been informed about such access and given his or her consent. A ruling by the Court of Justice of the European Union clarified that such consent must be reflected by an affirmative act of the user, and European regulators are increasingly pressing for more robust forms of consent and bringing enforcement actions against major platforms, including Amazon, Facebook, and Google, concerning their cookie consent mechanisms. These developments may result in decreased reliance on implied consent mechanisms that have been used to meet requirements of the ePrivacy Directive in some markets. A replacement for the ePrivacy Directive is currently under discussion by EU member states to complement and bring electronic communication services in line with the General Data Protection Regulation (“GDPR”) and force a harmonized approach across EU member states. Like the GDPR, the proposed ePrivacy Regulation has extra-territorial application as it applies to businesses established outside the EU that provide publicly available electronic communications services to, or gather data from the devices of, users in the EU. Though still subject to debate, the proposed ePrivacy Regulation may further raise the bar for the use of cookies and the fines and penalties for breach may be significant. AdRizer may be required to, or otherwise may determine that it is advisable to, make significant changes in AdRizer’s business operations and product and services to obtain user opt-in for cookies and use of cookie data, or develop or obtain additional tools and technologies to compensate for a lack of cookie data.

As the collection and use of data for digital advertising has received media attention over the past several years, some government regulators, such as the U.S. Federal Trade Commission (“FTC”), and privacy advocates have suggested creating a “Do Not Track” standard that would allow Internet users to express a preference, independent of cookie settings in their browser, not to have their online browsing activities tracked. “Do Not Track” has seen renewed emphasis from proponents of the CCPA, and the final regulations address browser-based or similar “do not sell” signals. California’s CPRA and the Colorado Privacy Act similarly contemplate the use of technical opt outs for the sale and sharing of personal information for advertising purposes as well as to opt out of the use of sensitive information for advertising purposes and allows for rulemaking to develop these technical signals. To the extent a “Do Not Track,” “Do Not Sell,” or similar control is adopted by many Internet users or if a “Do Not Track” standard is imposed by other states or by federal or foreign legislation or is agreed upon by standard setting groups, AdRizer may have to change AdRizer’s business practices, AdRizer’s customers may reduce their use of its platform, and AdRizer’s business, financial condition, and results of operations could be adversely affected.

AdRizer’s business practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection.

Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of data that AdRizer collects. AdRizer strives to comply with all applicable laws, regulations, self-regulatory requirements and legal obligations relating to privacy, data protection and consumer protection, including those relating to the use of data for marketing purposes. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or AdRizer’s practices. We cannot assure you that AdRizer’s practices have complied, comply, or will comply fully with all such laws, regulations, requirements and obligations. Any failure, or perceived failure, by AdRizer to comply with federal, state or international laws or regulations, including laws and regulations regulating privacy, data security, marketing communications or consumer protection, or other policies, self-regulatory requirements or legal obligations could result in harm to AdRizer’s and our reputation, a loss in business, and proceedings or actions against AdRizer and us by governmental entities, consumers, retailers or others. AdRizer may also be contractually liable to indemnify and hold harmless other third parties from the costs or consequences of noncompliance with any laws, regulations, self-regulatory requirements or other legal obligations relating to privacy, data protection and consumer protection or any inadvertent or unauthorized use or disclosure of data that AdRizer stores or handles as part of operating the business. Any such proceeding or action, and any related indemnification obligation, could hurt AdRizer’s reputation, force us to incur significant expenses in defense of these proceedings, distract AdRizer’s and our management, increase our costs of doing business and cause consumers and retailers to decrease their use of AdRizer’s marketplace, and may result in the imposition of monetary liability. Furthermore, the costs of compliance with, and other burdens imposed by, the data and privacy laws, regulations, standards and policies that are applicable to the businesses of AdRizer’s customers may limit the use and adoption of, and reduce the overall demand for, AdRizer’s products and services.

A significant breach of the confidentiality of the information AdRizer holds or of the security of AdRizer or its customers’, suppliers’, or traffic partners’ computer systems could be detrimental to AdRizer’s and our business, reputation and results of operations. AdRizer’s business requires the storage, transmission and utilization of data. Although AdRizer has security and associated procedures, AdRizer’s databases may be subject to unauthorized access by third parties. Such third parties could attempt to gain entry to AdRizer’s systems for the purpose of stealing data or disrupting the systems, including through ransomware. We believe AdRizer has taken appropriate measures to protect its systems from intrusion, but we cannot be certain that advances in criminal capabilities, discovery of new vulnerabilities in AdRizer’s systems and attempts to exploit those vulnerabilities, physical system or facility break-ins and data thefts or other developments will not compromise or breach the technology protecting AdRizer’s systems and the information it possesses. Furthermore, AdRizer faces increasing cyber security risks as it receives and collects data from new sources, and as AdRizer and its customers continue to develop and operate in cloud-based information technology environments. In the event that AdRizer’s protection efforts are unsuccessful, and AdRizer experiences an unauthorized disclosure of confidential information or the security of such information or AdRizer’s systems are compromised, AdRizer and we could suffer substantial harm. Any breach could result in one or more third parties obtaining unauthorized access to AdRizer’s customers’ data or its data, including personally identifiable information, intellectual property and other confidential business information. Such a security breach could result in operational disruptions that impair AdRizer’s ability to meet its customers’ requirements, which could result in decreased revenues. Also, whether there is an actual or a perceived breach of AdRizer’s security, AdRizer’s reputation could suffer irreparable harm, causing AdRizer’s current and prospective customers to reject its products and services in the future and deterring data suppliers from supplying AdRizer data. Further, AdRizer and we could be forced to expend significant resources in response to a security breach, including repairing system damage, increasing cyber security protection costs by deploying additional personnel and protection technologies, increased cyber security insurance costs and litigating and resolving legal and regulatory claims, all of which could divert the attention of AdRizer’s and our management and key personnel away from the business operations. In any event, a significant security breach could materially harm AdRizer’s and our business, financial condition and operating results.

Government regulation of the Internet, e-commerce and m-commerce is evolving, and unfavorable changes or failure by AdRizer to comply with these laws and regulations could substantially harm its business and results of operations.

AdRizer is subject to general business regulations and laws as well as regulations and laws specifically governing the Internet, e-commerce and m-commerce in a number of jurisdictions around the world. Existing and future regulations and laws could impede the growth of the Internet, e-commerce, m-commerce or other online services. These regulations and laws may involve taxation, tariffs, privacy and data security, anti-spam, data protection, content, copyrights, distribution, electronic contracts, electronic communications and consumer protection. It is not clear how existing laws and regulations governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet as the vast majority of these laws and regulations were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet, e-commerce or m-commerce. It is possible that general business regulations and laws, or those specifically governing the Internet, e-commerce or m-commerce may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or AdRizer’s practices. We cannot assure you that AdRizer’s practices have complied, comply or will comply fully with all such laws and regulations. Any failure, or perceived failure, by AdRizer to comply with any of these laws or regulations could result in damage to AdRizer’s and our reputation, a loss in business, and proceedings or actions against AdRizer and us by governmental entities or others. Any such proceeding or action could hurt AdRizer’s and our reputation, force AdRizer and us to spend significant resources in defense of these proceedings, distract our management, increase AdRizer’s and our costs of doing business, and cause consumers and retailers to decrease their use of AdRizer’s marketplace, and may result in the imposition of monetary liability. AdRizer may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of noncompliance with any such laws or regulations. In addition, it is possible that governments of one or more countries may seek to censor content available on AdRizer’s websites and mobile applications or may even attempt to completely block access to AdRizer’s marketplace. Adverse legal or regulatory developments could substantially harm AdRizer’s business. In particular, in the event that AdRizer is restricted, in whole or in part, from operating in one or more jurisdictions, AdRizer’s ability to retain or increase AdRizer’s customer base may be adversely affected and AdRizer may not be able to maintain or grow its net revenues as anticipated.

If AdRizer fails to detect advertising fraud, it could harm its reputation and hurt its ability to execute its business plan.

As AdRizer is in the business of providing services to publishers, advertisers and agencies, AdRizer must deliver effective digital advertising campaigns. Despite AdRizer’s efforts to implement fraud protection techniques in AdRizer’s platforms, some of its advertising and agency campaigns may experience fraudulent and other invalid impressions, clicks or conversions that advertisers may perceive as undesirable, such as non-human traffic generated by computers, known as “bots”, designed to simulate human users and artificially inflate user traffic on websites. These activities could overstate the performance of any given digital advertising campaign and could harm AdRizer’s reputation. It may be difficult for AdRizer to detect fraudulent or malicious activity because AdRizer does not own content and relies in part on its digital media properties to control such activity. Industry self-regulatory bodies, the FTC and certain influential members of Congress have increased their scrutiny and awareness of, and have taken recent actions to address, advertising fraud and other malicious activity. If AdRizer fails to detect or prevent fraudulent or other malicious activity, the affected advertisers may experience or perceive a reduced return on their investment and AdRizer’s reputation may be harmed. High levels of fraudulent or malicious activity could lead to dissatisfaction with AdRizer’s products and services, refusals to pay, refund or future credit demands or withdrawal of future business.

AdRizer needs to protect its intellectual property or its operating results may suffer.

AdRizer’s ability to generate revenues is based substantially upon its proprietary intellectual property that it owns and protects through trade secrets and agreements with AdRizer’s employees to maintain ownership of any improvements to AdRizer’s intellectual property. AdRizer’s ability to generate revenues now and in the future is based upon maintaining a competitive technology advantage over AdRizer’s competition. AdRizer can provide no assurances that its Cortex technology platform will remain competitive, as many of AdRizer’s competitors have significantly more experience, more extensive infrastructure and are better capitalized than AdRizer.

Third parties may infringe AdRizer’s intellectual property and it may suffer competitive injury or expend significant resources enforcing its rights. As AdRizer’s business is focused on data-driven results and analytics, AdRizer relies heavily on proprietary information technology. AdRizer’s proprietary portfolio consists of various intellectual property including source code, trade secrets, and know-how. The extent to which such rights can be protected is substantially based on federal, state and common law rights as well as contractual restrictions. The steps AdRizer has taken to protect its intellectual property may not prevent the misappropriation of AdRizer’s proprietary information or deter independent development of similar technologies by others. If AdRizer does not enforce its intellectual property rights vigorously and successfully, AdRizer’s competitive position may suffer, which could harm its and our operating results.

AdRizer could incur substantial costs and disruption to its business as a result of any claim of infringement of another party’s intellectual property rights, which could harm AdRizer’s business and operating results.

Third parties may claim that one or more of AdRizer’s products or services infringe their intellectual property rights. Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming due to the complexity of AdRizer’s technology and the uncertainty of intellectual property litigation, which could divert the attention of our management and key personnel away from AdRizer’s business operations. A claim of intellectual property infringement could force AdRizer to enter into a costly or restrictive license agreement, which might not be available under acceptable terms or at all, or could subject AdRizer to significant damages or to an injunction against development and sale of certain of AdRizer’s products or services.

AdRizer’s failure to recruit or the loss of management and highly trained and qualified personnel could adversely affect its operations.

AdRizer’s future success depends in large part on its current senior management team including its chief executive officer Kenneth Bond and its ability to attract and retain other high-quality management and operating personnel. AdRizer’s senior management team’s in-depth knowledge of and deep relationships with the participants in AdRizer’s industry are extremely valuable to AdRizer. AdRizer’s business also requires skilled technical and marketing personnel, who are in high demand and are often subject to competing offers. AdRizer’s failure to recruit and retain qualified personnel could hinder AdRizer’s ability to successfully develop and operate its business, which could have a material adverse effect on our financial position and operating results.

The complexity of AdRizer’s data products, processing functionality, software systems and services require highly trained professionals to operate, maintain, improve and repair them. While AdRizer presently has a sophisticated, dedicated and experienced team who have a deep understanding of AdRizer’s business, some of whom have been with AdRizer for years, the labor market for these individuals has historically been, and is currently, very competitive due to the limited number of people available with the necessary technical skills and understanding, compensation strategies, general economic conditions and various other factors. As the business information and marketing industries continue to become more technologically advanced, AdRizer anticipates increased competition for qualified personnel. The loss of the services of highly trained personnel like AdRizer’s current team of associates, or the inability to recruit and retain additional, qualified associates, could have a material adverse effect on AdRizer’s business, financial position or operating results.

AdRizer’s revenue and operating results are highly dependent on the overall demand for advertising. Factors that affect the amount of advertising spending, such as economic downturns and seasonality, particularly in the second and third quarters of each fiscal year, can make it difficult to predict AdRizer’s revenue and could adversely affect its business.

AdRizer’s business depends on the overall demand for advertising and on the economic health of AdRizer’s current and prospective publishers and advertisers. If advertisers reduce their overall advertising spending, AdRizer’s revenue and results of operations are directly affected. Many advertisers devote a disproportionate amount of their advertising budgets to the third and fourth quarters of the calendar year to coincide with the annual holiday purchasing season, and buyers may spend more in the second and third quarters for seasonality and budget reasons. As a result, if any events occur to reduce the amount of advertising spending during the second, third or fourth quarters, or reduce the amount of inventory available to advertisers during that period, it could have a disproportionate adverse effect on AdRizer’s revenue and operating results for that fiscal year. Economic downturns or instability in political or market conditions generally may cause current or new advertisers to reduce their advertising budgets. Reductions in inventory due to loss of sellers would make AdRizer’s solution less robust and attractive to buyers. Adverse economic conditions and general uncertainty about economic recovery are likely to affect AdRizer’s business prospects. In particular, uncertainty regarding inflation, consumer demand and the ongoing impacts of COVID-19 on the economy in the United States may continue to cause general business conditions in the United States and elsewhere to deteriorate or become volatile, which could cause advertisers to delay, decrease or cancel purchases of AdRizer’s products and services, and expose AdRizer to increased credit risk on advertiser orders. Moreover, any changes in the favorable tax treatment of advertising expenses and the deductibility thereof would likely cause a reduction in advertising demand.

Any decrease in the use of the advertising channels that AdRizer is primarily dependent upon, failure to expand the use of emerging channels, or unexpected shifts in use among the channels in which AdRizer operates, could harm its growth prospects, business, operating results and financial condition.

AdRizer’s customers have historically used its platform to purchase mobile, display, and video advertising inventory from publishers. We expect that these will continue to be significant channels used by AdRizer’s customers for digital advertising in the future. We also believe that AdRizer’s revenue growth may depend on its ability to expand within mobile, video, and, in particular, connected television (“CTV”), and AdRizer has been, and is continuing to, enhance its presence in these channels. AdRizer may not be able to accurately predict changes in overall advertiser demand for the channels in which it operates and we cannot assure you that AdRizer’s investment in any channel or channels will benefit from or influence any changes in such demand. Any decrease in the use of mobile, display, and video advertising, whether due to customers losing confidence in the value or effectiveness of such channels, regulatory restrictions or other causes, or any inability to further penetrate CTV or enter new and emerging advertising channels, could adversely affect AdRizer’s business, operating results, and financial condition.

AdRizer’s success in the mobile channel depends upon its ability to provide advertising for mobile connected devices, the major operating systems or Internet browsers that run on them, and the thousands of applications that are downloaded onto them. The design of mobile devices, operating systems and browsers is controlled by third parties that may introduce new products or modify existing ones. In addition, cellular network carriers may affect AdRizer’s ability to access specified content on mobile devices. For example, Apple recently announced its intent to eliminate the Identifier for Advertisers from the iOS operating system, and Google has announced its intention to eliminate a similar tracking feature from the Android operating system in the future, which AdRizer, along with its competitors and other advertisers, historically have used to deliver targeted advertisements to consumers. While the effects of this development remain uncertain and have caused AdRizer to modify its advertising strategies, and would not prevent AdRizer from operating its bidding technology on Apple devices, it could reduce the value of the ad impressions it offers. If AdRizer cannot operate effectively with popular devices, operating systems, or Internet browsers, including Apple devices and the Apple iOS operating system and Google devices and the Android operating system, AdRizer’s business, operating results, and financial condition would be adversely affected. Even if AdRizer is successful in modifying its advertising strategies in response to such privacy changes by Apple and Google, investor concerns about such changes could cause our stock price and ability to raise additional capital on acceptable terms or at all to be adversely impacted.

Risks Associated with an Investment in our Common Stock

The market price of our shares may fluctuate significantly.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

Your investment may suffer a decline in value as a result of the volatility of our stock.

The closing market price for our common stock has varied between a high of $10.82 on September 9, 2021, and a low of $2.03 on April 19, 2021, in the twelve-month period ended April 4, 2022. During this time, the price per share of common stock has ranged from an intra-day low of $1.94 per share to an intra-day high of $12.49 per share. As a result of fluctuations in the price of our common stock, you may be unable to sell your shares at or above the price you paid for them. The market price of our common stock is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market, industry and other factors, including the other risk factors described in this section. The market price of our common stock may also be dependent upon the valuations and recommendations of the analysts who cover our business. If the results of our business do not meet these analysts’ forecasts, the expectations of investors or the financial guidance we provide to investors in any period, the market price of our common stock could decline.

In addition, the stock markets in general, and the markets for technology stocks in particular, have experienced significant volatility that has often been unrelated to the financial condition or results of operations of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock and, consequently, adversely affect the price at which you could sell the shares that you hold. In the past, following periods of volatility in the market or significant price declines, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market upon the expiration of any statutory holding period under Rule 144, or shares issued upon the exercise of outstanding options or warrants or upon the conversion of convertible notes, it could create a circumstance commonly referred to as an “overhang” and, in anticipation of which, the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

In general, a non-affiliated person who has held restricted shares for a period of six months, under Rule 144, may sell into the market our common stock all of their shares, subject to the Company being current in its periodic reports filed with the SEC.

Historically, we have raised capital through equity issuances, used our shares of common stock to satisfy our outstanding debt obligations, as equity compensation, and as consideration for acquisitions and we expect to continue to do so in the future. The number of new shares of our common stock issued in connection with raising capital, satisfying our outstanding debt obligations, or as consideration for acquisitions, could constitute a material portion of the then-outstanding shares of our common stock. As of April 14, 2022, there were 28,274,454 shares issuable upon conversion of a total outstanding principal of $112,990,000 under our senior secured convertible notes, 160,701,887 shares subject to outstanding warrants, up to 10,000,000 shares to be issued pursuant our unit purchase agreement to acquire AdRizer, 80,000 shares subject to outstanding options under the Company’s equity incentive plans, 4,000,000 issuable under contingent purchase agreement, and an additional 3,267,040 shares reserved for future issuance under the Company’s equity incentive plans, which will become, or have already become, eligible for sale in the public market to the extent permitted by any applicable vesting requirements, lock-up agreements, if any, Rule 144 under the Securities Act or in connection with their registration under the Securities Act. Sales or issuances of substantial amounts of our common stock in the public market, or the perception that these sales or issuances could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares.

If we take advantage of specified reduced disclosure requirements applicable to an “emerging growth company” under the JOBS Act, the information that we provide to stockholders may be different than they might receive from other public companies.

As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” under the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. The Company has elected not to use the extended transition period for complying with new or revised financial accounting standards but does still have reduced reporting requirements. These provisions include:

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenues, we have more than $700 million in market value of our stock held by non-affiliates, or we issue more than $1 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

The obligations associated with being a public company require significant resources and management attention, which may divert from our business operations.

We are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly and current reports, proxy statements, and other information. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. As a result, we incur significant legal, accounting and other expenses. Furthermore, the need to establish and maintain the corporate infrastructure demanded of a public company may divert management’s attention from implementing our growth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make, if necessary, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. In addition, we cannot predict or estimate the amount of additional costs we may incur in order to comply with these requirements. We anticipate that these costs could materially increase our selling, general and administrative expenses.

Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting. In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies. Additionally, in the event we are no longer a smaller reporting company, as defined under the Exchange Act, and we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, then we may not be able to obtain the independent registered public accountants’ certifications required by that act, which may preclude us from keeping our filings with the SEC current, and interfere with the ability of investors to trade our securities and our shares to continue to be listed on the Nasdaq Capital Market.

Some provisions of our Articles of Incorporation and Bylaws may deter takeover attempts, which may inhibit a takeover that stockholders consider favorable and limit the opportunity of our stockholders to sell their shares at a favorable price.

Under our Articles of Incorporation, our Board may issue additional shares of common or preferred stock. Our Board has the ability to authorize “blank check” preferred stock without future stockholder approval. This makes it possible for our Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us by means of a merger, tender offer, proxy contest or otherwise, including a transaction in which our stockholders would receive a premium over the market price for their shares and/or any other transaction that might otherwise be deemed to be in their best interests, and thereby protects the continuity of our management and limits an investor’s opportunity to profit by their investment in the Company. Specifically, if in the due exercise of its fiduciary obligations, the Board were to determine that a takeover proposal was not in our best interest, shares could be issued by our Board without stockholder approval in one or more transactions that might prevent or render more difficult or costly the completion of the takeover by:

Our indemnification of our officers and directors may cause us to use corporate resources to the detriment of our stockholders.

Our Articles of Incorporation require us to indemnify our directors and officers to the fullest extent permitted by Nevada law, including in circumstances in which indemnification is otherwise discretionary under Nevada law. Under Nevada law, we may indemnify our directors or officers or other persons who were, are or are threatened to be made a named defendant or respondent in a proceeding because the person is or was our director, officer, employee or agent, if we determine that the person:

These persons may be indemnified against expenses, including attorneys’ fees, judgments, fines, including excise taxes, and amounts paid in settlement, actually and reasonably incurred by the person in connection with the proceeding. If the person is found liable to the corporation, no indemnification will be made unless the court in which the action was brought determines that the person is fairly and reasonably entitled to indemnity in an amount that the court will establish.

Insofar as indemnification for liabilities under the Securities Act may be permitted to directors, officers or persons controlling us under the above provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future.

We currently intend to retain all of our future earnings to finance the growth and development of our business, and therefore, we do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We believe it is likely that our board of directors will continue to conclude, that it is in the best interests of the Company and its stockholders to retain all earnings (if any) for the development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price, and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on us. If no or too few securities or industry analysts commence coverage of us, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

We may be or may become the target of securities litigation, which is costly and time-consuming to defend.

Following periods of market volatility in the price of a company’s securities or the reporting of unfavorable news, security holders may institute class action litigation. If the market value of our securities experience adverse fluctuations and we become involved in this type of litigation, regardless of the outcome, we could incur substantial legal costs and our management’s attention could be diverted from the operation of our business, causing our business to suffer.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The following table summarizes pertinent details of our properties as of December 31, 2021:

We believe that our facilities are adequate for our needs for the foreseeable future and believe that we should be able to renew any of the above leases or secure similar property without an adverse impact on our operations.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company is party to legal actions that are routine and incidental to its business. However, based upon available information and in consultation with legal counsel, management does not expect the ultimate disposition of any or a combination of these actions to have a material adverse effect on the Company’s assets, business, cash flow, condition (financial or otherwise), liquidity, prospects and\or results of operations.

Oceanside Traders, LLC v. Cloud b, Inc. and Vinco Ventures, Inc. f/k/a Edison Nation, Inc.

On April 14, 2020, Oceanside Traders, LLC filed a complaint against Cloud B, Inc. and Vinco Ventures, Inc. with the Superior Court of Ocean County, State of New Jersey, alleging breach of contract and other claims resulting in total damages in the amount of $440,383, consisting of $141,007 for failure to pay plaintiff for goods sold, for $138,180 for overpayments and $161,196 for lost profits. On November 9, 2020, Plaintiff filed an amended complaint, adding other defendants, alleging breach of contract, breach of covenant of good faith and fair dealing, quasi-contract/unjust enrichment, conversion, fraud, negligent misrepresentation, fraudulent transfer, and piercing the corporate veil. On December 4, 2020, Vinco Ventures, Inc. filed its amended answer. On December 28, 2020, the other defendants filed a motion to dismiss on jurisdictional grounds which is currently pending before the court. On February 25, 2021, the Plaintiff and Defendants, Vinco Ventures, Inc. and Edison Nation, LLC, entered into a Settlement Agreement and General Release of All Claims, requiring dismissal of the litigation against the settling Defendants with prejudice. On February 24, 2021, the Company entered into a Settlement Agreement and General Release of All Claims (the “Settlement Agreement”) with Edison Nation, LLC, Pearl 33 Holdings, LLC and Christopher Ferguson (collectively, the “Settling Defendants”) and Oceanside Traders, LLC (the “Plaintiff”). Under the terms of the Settlement Agreement, the Settling Defendants agreed to pay the Plaintiff the sum of $150,000 within one business day of execution of the Settlement Agreement. In exchange, the Plaintiff agreed to dismiss the Amended Complaint in its entirety and with prejudice against the Settling Defendants. The Company made payment in the amount of $150,000 on February 25, 2021.

Rosenberg Fortuna & Laitman, LLP and Mark Principe v. Safe TV, LLC

On March 13, 2019, Rosenberg Fortuna & Laitman, LLP and Mark Principe filed a complaint against Safe TV Shop, LLC with the Supreme Court of the State of New York, County of Nassau alleging a breach of indemnification arising out of the use of a certain packaging material. On February 12, 2020, the parties entered a Stipulation and Settlement and Consent Agreement for a Consent Judgment in the amount of $50,000. Safe TV, LLC has no assets and there have been no operations by Safe TV, LLC since the date of acquisition by Vinco Ventures, Inc. On April 5, 2021, the Company, through Safe TV Shop, LLC, entered into a Settlement Agreement and Release of Claims (the “Settlement”). Under the terms of the Settlement, the Company was to make payment in the amount of $25,000 on or before April 9, 2021. The Company made the payment on April 8, 2021.

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.

In re CBAV1, LLC, Debtor, Chapter 11 Bankruptcy/In re Cloud b, Inc., Debtor Chapter 7 Bankruptcy

On October 30, 2020, CBAV1, LLC filed a voluntary petition under Chapter 11 of title 11 of the United States Code, as amended (the “Bankruptcy Code”). On October 30, 2020, Cloud b filed a voluntary petition under Chapter 7 of the Bankruptcy Code. On November 15, 2020, a prospective buyer entered into a non-binding letter of intent to purchase the CBAV1 Assets for $2,250,000. On December 18, 2020, CBAV1, LLC filed a motion to sell substantially of the CBAV1 Assets free and clear of all interests, liens, claims and encumbrances. On that same date, CBAV1, LLC also filed a motion to approve (i) certain procedures for the submission of bids in connection with the sale of substantially all of the assets, (ii) the break-up fee and expense reimbursement, (iii) scheduling an auction and (iv) scheduling a sale hearing. On January 21, 2021, the prospective buyer entered into an asset purchase agreement to buy the CBAV1 Assets for $2,250,000, on terms and conditions set forth therein. On March 12, 2021, the court approved the sale of the CBAV1 Assets to the winning bidder at the auction held on March 10, 2021 and March 11, 2021 for the total sum of $3,000,000 US, which includes a cash payment at closing scheduled for April 15, 2021 in the amount of $2,650,000 and additional payments in the amounts of $150,000 on April 15, 2022 and $200,000 on April 15, 2023.

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.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

On May 3, 2018, our common stock began trading on the Nasdaq under the symbol of “XSPL.” Our symbol was changed to “EDNT” on September 13, 2018 and subsequently changed to “BBIG” on November 12, 2020. Prior to May 3, 2018, there was no public market for our stock.

Holders of Record

The Company had approximately 303 holders of record of our common stock as of April 14, 2022.

Dividends

We have not historically declared dividends on our common stock, and we do not currently intend to pay dividends on our common stock. The declaration, amount and payment of any future dividends on shares of our common stock, if any, will be at the sole discretion of our board of directors.

Securities Authorized for Issuance under Equity Compensation Plans

Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities

Except as set forth below, during the period covered by this Annual Report, we have not sold any equity securities that were not registered under the Securities Act that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.

None

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report. This discussion and analysis contain forward-looking statements that are based upon current expectations and involve risks, assumptions and uncertainties.

Overview

Vinco Ventures, formerly known as Edison Nation, Inc., Xspand Products Lab, Inc. and Idea Lab Products, Inc., is a Nevada corporation incorporated on July 18, 2017. In connection with the acquisition of an 80% equity interest in Lomotif by ZVV, our joint venture with ZASH in 2021, and our recent acquisition of AdRizer, we are transitioning from focusing on innovation, development and commercialization of end-to-end consumer products to innovation, development and commercialization of digital media and content technologies. For a discussion of the platforms and businesses operated through our significant subsidiaries and consolidated variable interest entities, please see “Vinco Ventures: Focused on Digital Media and Content Technologies” under Item 1 Business of this Annual Report.

Significant Developments

For a discussion of completed and pending strategic transactions since the beginning of 2021, please see “Recent and Ongoing Strategic Transactions” under Item 1 Business of this Annual Report.

Covid-19 Pandemic

COVID-19 has caused and continues to cause significant loss of life and disruption to the global economy, including the curtailment of activities by businesses and consumers in much of the world as governments and others seek to limit the spread of the disease, and through business and transportation shutdowns and restrictions on people’s movement and congregation.

As a result of the pandemic, we have experienced, and continue to experience, weakened demand for our historical products. Many of our customers have been unable to sell our products in their stores due to government-mandated closures and have deferred or significantly reduced orders for our products. We expect these trends to continue until such closures are significantly curtailed or lifted. In addition, the pandemic has reduced foot traffic in the stores where our products are sold that remain open, and the global economic impact of the pandemic has temporarily reduced consumer demand for our products as they focus on purchasing essential goods.

In the United States and Asia, many of our key accounts remain closed or are operating at significantly reduced volumes. As a result, we have made the strategic decision to expand our operations through our Edison Nation Medical (“Ed Med”) division. Through Ed Med, the Company wholesales Personal Protective Equipment (“PPE”) products through an online portal for hospitals, government agencies and distributors.

Given these factors, the Company anticipates that the greatest impact from the COVID-19 pandemic was in 2020 and occurred in the first quarter of 2020 resulting in a significant net sales decline as compared to the first quarter of 2019.

In addition, certain of our suppliers and the manufacturers of certain of our products were adversely impacted by COVID-19. As a result, we faced delays or difficulty sourcing products, which negatively affected our business and financial results. Even if we are able to find alternate sources for such products, they may cost more and cause delays in our supply chain, which could adversely impact our profitability and financial condition.

We have taken actions to protect our employees in response to the pandemic, including closing our corporate offices and requiring our office employees to work from home. At our distribution centers, certain practices are in effect to safeguard workers, including a staggered work schedule, and we are continuing to monitor direction from local and national governments carefully. Additionally, our two retail locations have been closed until further notice.

As a result of the impact of COVID-19, and the unknown future impact of the pandemic, we implemented cost control measures and cash management actions during 2020, including:

● Furloughed a significant portion of our employees in the first quarter of 2020;

● Implemented a 20% salary reductions across our executive team and other members of upper-level management in the first and second quarter of 2020;

● Executed reductions in operating expenses, planned inventory levels and non-product development capital expenditures throughout 2020; and

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements as well as the reported expenses during the reporting periods. The accounting estimates that require our most significant, difficult and subjective judgments have an impact on revenue recognition, the determination of share-based compensation and financial instruments. We evaluate our estimates and judgments on an ongoing basis. Actual results may differ materially from these estimates under different assumptions or conditions.

Our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included elsewhere in this Annual Report.

Principles of Consolidation

The consolidated financial statements include the accounts of Vinco Ventures, Inc. and its wholly-owned, majority owned subsidiaries and consolidated variable interest entities. In July 2022, our joint venture with Zash, ZVV, acquired an 80% equity interest in Lomotif. We determined that in accordance with variable interest entity accounting, we would consolidate the results and position of ZVV into our consolidated financial statements.

Use of Estimates

Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial statements.

The Company’s significant estimates used in these financial statements include, but are not limited to, accounts receivable reserves, the valuation allowance related to the Company’s deferred tax assets, the recoverability and useful lives of long-lived assets, debt conversion features, stock-based compensation, certain assumptions related to the valuation of the reserved shares and the assets acquired and liabilities assumed related to the Company’s acquisitions. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.

Long-Lived Assets

We record intangible assets based on their fair value on the date of acquisition. Intangible assets include the cost of developed technology, customer relationships, trademarks and identifiable media and influencer platforms. Intangible assets are amortized utilizing the straight-line method over their remaining economic useful lives. A significant percentage of the Company’s’ long term assets are intangibles assets and therefore, estimates regarding the fair value of these assets have a material impact on our financial statements.

Goodwill

Goodwill is recorded for the difference between the fair value of the purchase consideration over the fair value of the net identifiable tangible and intangible assets acquired. We perform an impairment assessment of goodwill on an annual basis, or whenever impairment indicators exist. In the absence of any impairment indicators, goodwill is assessed for impairment during the fourth quarter of each fiscal year. Judgments regarding the existence of impairment indicators are based on market conditions and operational performance of the business.

We may assess our goodwill for impairment initially using a qualitative approach to determine whether it is more likely than not that the fair value of these assets is greater than their carrying value. When performing a qualitative test, we assess various factors including industry and market conditions, macroeconomic conditions and performance of our businesses. If the results of the qualitative assessment indicate that it is more likely than not that our goodwill and other indefinite-lived intangible assets are impaired, a quantitative impairment analysis would be performed to determine if impairment is required. We may also elect to perform a quantitative analysis of goodwill initially rather than using a qualitative approach.

The impairment testing for goodwill is performed at the reporting unit level. The valuation methods used in the quantitative fair value assessment, discounted cash flow and market multiples method, requires our management to make certain assumptions and estimates regarding certain industry trends and future profitability of our reporting units. If the fair value of a reporting unit exceeds the related carrying value, the reporting unit’s goodwill is considered not to be impaired and no further testing is performed. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recorded for the difference. The valuation of goodwill is affected by, among other things, our business plan for the future and estimated results of future operations. Future events could cause us to conclude that impairment indicators exist, and, therefore, that goodwill may be impaired. Goodwill is a significant percentage of the Company’s’ long term assets and therefore, estimates regarding the fair value of our goodwill have a material impact on our financial statements.

Warrant Accounting

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”.

The Company classifies a warrant to purchase shares of its common stock as a liability on its consolidated balance sheets as this warrant is a free-standing financial instrument that may require the Company to transfer consideration upon exercise Each warrant is initially recorded at fair value on date of grant using the Monte-Carlo simulation pricing model and net of issuance costs, and it is subsequently re-measured to fair value at each subsequent balance sheet date. Changes in fair value of the warrant are recognized as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrant. A significant percentage of the Company’s’ long term liabilities are warrant liability and therefore, estimates regarding the fair value of our goodwill have a material impact on our financial statements.

Results of Operations

Revenue

For the year ended December 31, 2021, revenues from continuing operations decreased by $2,224,000 or 18.5%, as compared to the year ended December 31, 2020. The decrease was due to the significant decrease in personal protection equipment sales experienced during 2021 as compared to 2020. The Company’s new line of business, including its Lomotif business line and related content creation and distribution, did not generate significant revenues during 2021 as those business lines concentrated on growing Lomotif’s user bases. In February, 2022, the Company acquired AdRizer, a digital advertising company, which is expected to be integrated into the Company’s media and entertainment platforms, including Lomotif, and to facilitate generating revenue for the Lomotif business lines. AdRizer is also generating revenue from its existing business.

Cost of Revenues

For the year ended December 31, 2021, cost of revenues decreased by $2,258,000 or 23.6%, as compared to the year ended December 31, 2020. The decrease was due to the significant decrease in personal protection equipment sales experienced during 2021 as compared to 2020.

Gross Profit

For the year ended December 31, 2021, gross profit increased by $33,000, or 1.3%, as compared to the year ended December 31, 2020. The increase reflected the impact of the Company replacing lost personal protection equipment sales with higher margin revenue from its Honey Badger and NFT business lines.

Operating Expenses

Selling, general and administrative costs

Selling, general and administrative costs (“SGA costs”) expenses increased significantly during 2021 as compared to 2020 due to a significant expansion of the Company’s activities requiring SGA costs as it transitioned into a digital media and entertainment company during 2021. Total operating expenses from continuing operations were $79,947,000 in 2021 as compared to $10,010,000 in 2020, an increase of $68,937,000. The largest increase was due to stock-based compensation, which increased $40,114,000, which represented 58.2% of the total year over year increase in SGA costs. The increase in stock-based compensation was primarily due to vesting of equity grants associated with the transition of the Company’s executive management teams during the fourth quarter of 2021, along with stock-based compensation due to stock options issued to Lomotif employees for shares of Lomotif, which is a VIE consolidated by the Company. The next largest increase in SGA costs between 2021 and 2020 was an increase of $10,660,000 in legal and professional fees, which were driven by professional fees associated with the acquisition of the Company’s share of Lomotif through ZVV, its joint venture with ZASH, along with increased audit and accounting costs, and legal and professional costs associated with the Company’s various new business lines and proposed spin-off of certain of its business lines. In addition, during 2021, the Company significantly increased its advertising, marketing and promotion cost as it worked to build the awareness of the Lomotif application in the United States and its other worldwide user bases, including India, Brazil and Nigeria. In addition, the Company’s compensation costs and general and administrative costs increased during 2021, driven by an increase in its employee headcount, primarily driven by the addition of Lomotif in July 2021.

Impairment

For the year ended December 31, 2021, there were impairment charges of $3,742,000 related to our annual impairment assessment of our consumer products business. The amount recognized for impairment is equal to the difference between the carrying value and the asset’s fair value. There were no impairment charges for the year ended December 31, 2020 related our consumer products business.

Other Income (Expense)

Rental Income

Rental income was $71,543 for the year ended December 31, 2021 versus $102,815 in the previous year ended December 31, 2020. The decrease was due to the sale of a rental property during the year.

Interest expense

Interest expense was approximately $72,784,000 for the year ended December 31, 2021 versus approximately $3,378,000 in the previous year ended December 31, 2020. The increase in interest expense was related to the amortization of financing fees of the convertible notes issued to Hudson Bay Master Fund Ltd. (“Hudson Bay”) during 2021.

Loss of issuances of warrants

The Company classifies a warrant to purchase shares of its common stock as a liability on its consolidated balance sheets as this warrant is a free-standing financial instrument that may require the Company to transfer consideration upon exercise. Each warrant is initially recorded at fair value on date of grant using the sing the Monte-Carlo simulation pricing model and subsequently re-measured to fair value at each subsequent balance sheet date. Changes in fair value of the warrant are recognized as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrant.

During 2021, loss on issuances of warrants was approximately $656,504,000 while the change in fair value of warrant liability was an increase of $94,818,000, for a net other expense of approximately $561,686,000 due to warrants recognized by the Company for the year ended December 31, 2021.

Change in fair value of short term investment

Change in fair value of short-term investment was $840,000 for the year ended December 31, 2021 versus $22,000 for the year ended December 31, 2020, representing a decrease $818,000 or 3718%.

Loss on Disposal of Assets and Interests in VIE’s

Loss on disposal of assets and interests in VIE was approximately $1,194,000. The loss related to the dissolution of Ed Roses, LLC and a change in ownership related to Global Clean Solutions, LLC from 50% to 75%.

Income tax (benefit) expense

In 2021 and 2020, the Company recognized an income tax expense of $190,000 and $19,000, respectively, which were primarily driven by state tax liabilities. In general, the Company has reserved against recognizing the income tax benefit generated by the net operating losses it generated in 2021 and 2020.

Income (Loss) from discontinued operations

Income (loss) from discontinued operations represents the operations of Cloud B. which was divested in 2021. Loss from discontinued operations increased to $5,112,000 in 2021, compared to a gain of $5,185,000 in 2020.

Net Loss

The Company incurred a net loss of $713,173,000 during 2021 as compared to a net loss of $5,153,000 during 2020, a 13738.8% increase. The increase in net loss was primarily triggered by the impact of the Company’s requirement to recognize the fair value of warrants that the Company issued and the change in fair values of exercised and outstanding warrants during 2021. The total impact of warrant accounting was a net other expense of $561,686,000. In addition, stock based compensation was $43,381,000 during 2021. Each of these expense elements are affected by the fair value of the Company’s stock which is the market price of the Company’s common stock as traded on the Nasdaq Capital Market. During 2021, the Company experienced a wide range of prices from a low of $1.24 and high of $10.82 per share, which can have a significant impact on the fair market value of the Company’s warrants and equity compensation instruments of their grant dates, vesting dates and exercise dates. In the aggregate, these two cost elements constituted 84.8% of the Company’s net loss during 2021. The remaining increase in net loss during 2021 was driven by the increased size of the Company due to ZVV’s acquisition of an 80% equity interest in Lomotif and its transition into a media and entertainment Company, which caused the Company to increase its headcount, its sales and marketing activities, and its legal and professional fees incurred in connection with its acquisitions, contracts and proposed spin-off activities.

Cash Flows

During the years ended December 31, 2021 and 2020, our sources and uses of cash were as follows:

Cash Flows from Operating Activities

Net cash used in operating activities from continuing operations for the year ended December 31, 2021 was $47,507,000, which included a net loss of $715,229,000 that included non-cash expense items which had a significant impact on the Company’s results. The use of cash for operations during 2021 reflected the costs incurred by the business, including the costs associated with the acquisition and subsequent operation and marketing and promotion of Lomotif, along with the large amount of professional fees incurred by the Company during the year. Net cash used in operating activities from continuing operations for the year ended December 31, 2020 was $2,439,000, which included a net loss of $6,307,000 that included $1,092,000 of cash provided by changes in operating assets and liabilities stock-based compensation of $3,242,000, depreciation and amortization of $1,354,000 and amortization of debt issuance costs of $2,358,000 offset by gains of divestitures of $4,912,000.

Cash Flows from Investing Activities

Net cash used in investing activities was $118,644,000 and $1,648,000 for the years ended December 31, 2021 and 2020, respectively. Cash used in investing activities in 2021 was attributable to ZVV’s acquisition of an 80% equity interest in Lomotif and to loans made by the Company to ZASH, and for investment purposes to PZAJ

Cash Flows from Financing Activities

Cash provided by financing activities for the year ended December 31, 2021 totaled $353,514,000, which related mostly to net proceeds from exercise of warrants and borrowings from convertible notes payable. Cash provided by financing activities for the year ended December 31, 2020 totaled $3,924,000, which related mostly to borrowings from notes payable.

Net Increase (Decrease) in Cash and Cash Equivalents

As a result of the cash activities described above, during 2021, the Company’s cash increased by $187,363,000 and as of December 31, 2021, the Company had $187,612,000 in cash and cash equivalents, which included $100,000,000 held in a restricted cash account.

Liquidity and Capital Resources

As discussed above, the Company incurred significant losses during 2021, and has a history of losses since inception. In 2021, a significant percentage of its loss was driven by non-cash expenses items. When looking at the Company’s use of cash for operations, the Company used approximately $43 million in cash for operations which more closely reflected the expected cash requirements for the current business of the operations. To fund its operations, the Company will need to utilize its unrestricted cash on hand until it begins to generate positive cash flows from operations. As of December 31, 2021, the Company had $87,612,000 of unrestricted cash on hand, which is expected to provide the Company sufficient cash resources needed to maintain its operations for at least the next 12 months. Furthermore, the Company may determine it is in the best interests of the Company to pursue additional investments, acquisitions, or funding of marketing and promotional efforts as the Company expands its presence and capabilities within the digital media marketplace. To do so, the Company may require additional cash resources. As an example, in February 2022, the Company completed an acquisition of AdRizer, a digital advertising Company, which included a cash payment of $38,000,000 from the Company’s unrestricted cash balance. To offset this expense, the Company generated approximately $79,182,000 in net new funding from the exercise of warrants during January and February of 2022. The Company expects that it will continue to have access to financing, if needed, to pursue additional investments and acquisitions while its builds the profitability of its business.

In addition, if the Company is unable to raise capital through the sale of additional equity or the exercise of outstanding warrants, the Company believes it can implement steps that would alleviate any going concern issues, including but not limited to the following steps:

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, any relationships with any organizations or financial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide this information.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Vinco Ventures, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Vinco Ventures, Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Assets and Liabilities Assumed in the Acquisitions of Lomotif Private Limited.(“Lomotif”), and Asset Acquisition of Emmersive Entertainment, Inc.(“Emmersive”)

Description of the Matter

During the year ended December 31, 2021, the Company completed the business acquisition of Lomotif Private Limited. for a net aggregate consideration of approximately $109.8 million and completed the asset acquisition of Emmersive Entertainment, Inc. for $7.6 million (based on the net fair values of shares reserved for future issuance and liabilities assumed).

Lomotif Private Limited.

As discussed in Note 3 to the consolidated financial statements, the Company completed the acquisition of Lomotif for $109.8 million on July 24, 2021. The Company accounted for this transaction under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated, to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets of $27.0 million and a noncontrolling interest of $27.4 million and resulting goodwill of $116.1 million. The Company, with the assistance of a third party valuation specialist, estimated the fair values of the identified intangible assets using the income approach. Such model requires significant assumptions. The Company estimated the fair value of the intangible assets using the income approach method (valuation method), which is a specific discounted cash flow method that required management to make significant estimates and assumptions related to future cash flows and the selection of implied rate of return and discount rates.

Emmersive Entertainment, Inc.

As discussed in Note 3 to the consolidated financial statements, the Company completed the asset acquisition of Emmersive for $7.6 million on April 17, 2021. The Company accounted for this transaction under the acquisition method of accounting for an asset purchase. As substantially all of the fair value of gross assets acquired being concentrated to a group of similar identifiable assets, coupled with limited inputs, processes and outputs, which did not meet the requirements to be considered a business acquisition. Accordingly, the purchase price was allocated, to the preferred shares reserved for future issuance of $7.4 million and assumed notes payable $0.2 million based on their respective fair values. The Company, with the assistance of a third party valuation specialist, estimated the fair value of the preferred shares reserved for future issuance using the a probability weighted expected return method, which is a form of the income approach that considers management’s estimates of the possible scenarios related to the achievement of the earnout along with the corresponding probability associated with each scenario.

How We Addressed the Matter in Our Audit

Auditing management’s assessment of fair value of the acquired assets and assumed liabilities is highly subjective and judgmental. Further changes in either the assumptions or method utilized may have a material impact on the fair value assigned to the acquired assets and liabilities assumed in the acquisitions. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our valuation specialists to evaluate the reasonableness of management’s key assumptions used in developing the fair value estimates, such as: (i) forecasted revenue growth rates (ii) future cash flows and (iii) weighted-average cost of capital (iv) discount rate and (v) probability weighted expected return method.

Our audit procedures included, amongst others:

Valuation of Warrant Liabilities

As discussed in Note 15 to the consolidated financial statements, the Company issued warrants (“2021 Warrants”) to purchase shares of the Company’s common stock related to multiple private placements. The 2021 Warrants did not meet the criteria to be equity-classified. The Company, with the assistance of a third party valuation specialist, estimated the fair values of the 2021 Warrants. Such valuation models require significant assumptions. The Company’s valuation specialist used a Geometric Brownian Motion based Monte Carlo simulation to project the underlying metric value to ultimately determine the fair value of the warrant liabilities. As of December 31, 2021, the fair value of the warrant liability was $198.6 million. The Monte-Carlo simulation pricing model fair valued the warrants utilizing assumptions of Dividend Yield, Expected Volatility, Risk-free Interest Rate and Fundamental Transaction Probabilities.

Our audit procedures over the warrant liabilities included, amongst others:

/s/ Marcum llp

Marcum llp

We have served as the Company’s auditor since 2017.

New York, NY

April 15, 2022

Vinco Ventures, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

Vinco Ventures, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS