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spk01: Good day, ladies and gentlemen, and welcome to the Vinco Ventures second quarter 2021 earnings conference call. At this time, it is my pleasure to turn the floor over to your host, Vinco Ventures CEO, Mr. Chris Ferguson. Sir, the floor is yours.
spk04: Thank you, operator, and welcome. I'm Chris Ferguson, CEO of Vinco Ventures, and with me on the call today is Brian McFadden, Chief Strategy Officer, and Brett Broman, Chief Financial Officer, to review the second quarter 2021 results as well as provide a business update. During this call, management will make forward-looking statements. Forward-looking statements include but are not limited to statements regarding expectations, intentions, and strategies regarding the future. Forward-looking statements are based on management's current expectations and assumptions and are subject to known and unknown risks. uncertainty, and other factors that could cause actual results to differ materially from the projected results. Given these uncertainties, listeners are cautioned not to place undue reliance on any forward-looking statements contained in this conference call. Please refer to the cautionary text regarding forward-looking statements contained in the earnings release, which also applies to the content of this call. Additional risk disclosures can be found in the company's filings with the Securities and Exchange Commission. On today's call, management will make comments on certain GAAP-based and non-GAAP pro forma financial information. For further information regarding the company's historical financial performance, we refer you to our filings with the SEC, including our Form 10Q filed on August 23rd, 2021. We may have taken the long way to get here. but we have officially arrived at the starting line of an exciting opportunity with Lomotif and our partners at SAS Global Media and Entertainment. I would like to say a special thanks to Paul Yang, the founder and CEO of Lomotif, who set out with a vision for his business and exceeded expectations at every level. We are truly thrilled to have Paul as a partner and excited to execute on his vision for the future of Lomotif. Through our subsidiary, ZVV Media Partners LLC, the company and Zash own an 80% equity interest in Low Motif Private Limited, a social media music and dance platform that competes with TikTok and Kaisho. Upon closing the transaction with Low Motif, we also completed a licensing agreement with Universal Music that provides access to a music library with some of the world's top artists. The growth of the Low Motif user base has been impressive. The current sensor tower data indicates the monthly active user base for low motif to be 30 million users. One of the fastest growing markets for low motif is India, a country where TikTok is banned. We will continue our efforts to grow India as well as North America with unique programming such as you've been scouted. I encourage all our shareholders to download the app and see the unique elements that low motif has launched. As I mentioned earlier, This is only the beginning of what you will see from the company and our plans for expanding Lomotif. The power of a monthly active user base of 30 million users can be illustrated in a variety of ways. A recent example is how Lomotif assisted our e-NFT platform with its first launch of the Tory Lanez album, When It's Dark. Our Chief Strategy Officer, Brian McFadden, will give an overview of our platform and the upcoming spinoff of EVMT Platform LLC. We are delighted that Brian has accepted the role of CEO for the new company. And with that, I will turn it over to Brian.
spk03: Thanks, Chris. The addition of the immersive team to Vinco has been exciting. With the recent launch of the e-nft.com platform, we are poised to disrupt the music industry by providing a cost-effective distribution solution to artists of all genres and audience sizes. From the A-listers we're currently engaging to the independents making music in their houses, e-nft.com will empower the content creator and ensure that they retain both the intellectual and monetary rights of their work. Additionally, our expanding SaaS model has led us into discussions with leading global record companies, providing additional revenue streams as we scale. Our initial product launch on the platform was pushed through Le Motif with great success. The first album to launch, Tory Lanez, When to Start, opened to a complete sellout of one million copies within the first official launch minute. This makes Tory the first artist to go platinum on the blockchain. Building on this initial launch, we will continue to add artists of all sizes to the platform and focus on driving user adoption. With the continued disruption of the music industry, the Vinco Ventures board has determined that the shareholders are best served with diversified holdings. To this benefit, we are in process of moving Immersive Entertainment into a newly formed publicly traded company focused on disruptive blockchain technology. The target date of record for the new company is estimated to be in September, and we look forward to having this deal closed during Q4 2021. Thanks, Brian.
spk04: After completing the acquisition of 80% of Lomotif, the company has a cash position of more than $80 million as of today. Our financing partners, hold approximately 44 million registered warrants that, if and when exercised, would provide the company with additional funds of approximately 141 million. We would like to thank our financing partners for the trust they have placed in our team and will continue to seek to drive value for our shareholders. With that, I will turn it over to our CFO, Brett Broman.
spk02: Thanks, Chris, and good evening, everyone. Before moving into our second quarter results, I would like to highlight a few significant events, some of which were covered by Chris and Brian, that are expected to have an impact on our results going forward. During the second quarter of 2021, we disposed of the assets of one of our large legacy brands, CloudBee. We received gross proceeds of $2.5 million and are reinvesting the capital received from the sale to facilitate the future growth of our other businesses. The results of those operations as well as the results of SRM Entertainment have been presented as discontinued operations and are no longer included in our continuing operations for both 2021 and 2020. We raised an additional $80 million in the second quarter net of fees paid to placement agents through the exercise of warrants by holders. In connection with those exercises, we issued additional inducement warrants to purchase common stock shares of $45.7 million in the second quarter. which could generate approximately $149.1 million in proceeds if exercised by the holders. This has the potential for additional liquidity, allowing us access to additional capital to invest in our future growth. The warrants have a cash settlement feature that requires the warrants to be classified as a liability on our balance sheet. The company acquired the Immersive Entertainment Platform in April 2021 and announced the planned spin-out of the company as its own standalone publicly traded entity. The resulting immersive entertainment public company will be led by current Finco Ventures Chief Strategy Officer Brian McFadden. As mentioned previously, in July 2021, our joint venture ZVV Media Partners acquired an 80% interest in Le Motif using the proceeds from the debt raise of $100 million. These two events occurred subsequent to the quarter and are not included in our consolidated balance sheets and consolidated statements of operation. I will now move on to our second quarter results. Please note that I will be referring to certain non-GAAP financial measures, such as adjusted EBITDA, which we believe may be important to investors to assess our operating performance. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our quarterly and annual filings. In addition, I will be discussing our results as it relates to our continuing operations. The discontinued operations are presented separately in the consolidated statement of operations for both years presented. In the second quarter, our revenues totaled $2.7 million for the three months ended June 30th, 2021 versus $5.2 million for the same period in the prior year, which is a decrease of 48% versus a year ago. The decrease in revenues is mainly attributed to the decrease in revenues of personal protective equipment in the Edison Nation Medical Division. The revenues do not include any revenues from SRM Entertainment or CloudBee branded products as mentioned previously. Second quarter gross margin was 36.1% versus 22.6% a year ago. The lower margins in the prior period are due to revenues in the prior year from the lower margin personal protective equipment in the Edison Nation Medical Division. SG&A in the quarter came in at 5.9 million, an increase of approximately 3.6 million versus the prior year. This was primarily the result of non-cash stock-based compensation increase of 1 million professional fees of $0.9 million, payroll and related benefits of $0.7 million, and depreciation and amortization of $0.4 million. The increase in payroll and related benefits is due to the hiring of new employees related to our acquisition. We expect to make additional investments to grow our business going forward, including investing capital to build out our media platform and NFT platform for users, while also improving our advertising platform. As a result, we plan to continue growing our talent base in the second half of 2021, in addition to making targeted investments in media content and marketing to support the growth of our community and advertisers. We will continue to be focused on scaling our business efficiently to drive operating leverage. We view the recent investments that we have made and that we will make in the future as a key part of our growth and the path toward profitability and positive free cash flow. From an earnings perspective, basic and diluted net loss per share was a loss of $5.13 per share. The net loss from continuing operations was $178.9 million. The net loss included a loss of $170.9 million related to the issuance and revaluation of warrant liabilities during the second quarter. Our adjusted EBITDA was a loss of approximately $3.3 million for the three months ended June 30th, 2021. Included in adjusted EBITDA is add-backs for stock-based compensation, losses on the issuance and revaluation of warrant liabilities, certain deal-related costs, and gains and losses on divestitures. Moving over to the balance sheet, we ended the second quarter with $74.8 million of cash and cash equivalents. Total debt net of unamortized discounts of $6.8 million was $5.6 million, and the warrant liability was $139.7 million as of June 30th. We will continue to monitor our cash balances and outstanding debt as the year progresses. At this time, we believe we have sufficient liquidity to allow us to focus on scaling our newest endeavors, Le Motif and Immersive, and to drive the company toward profitability and positive free cash flow into the future. With that, I would now like to turn the call back over to Chris to close out.
spk04: Thanks, Brett. We look forward to what the future holds for the combined entity of Vinco, Le Motif, and Zash. To address the questions that we received at investors at vincoventures.com, the common theme is what are the next steps in the closing of disaster transaction? To answer that, we must next move to the shareholder vote and the proxy, which we anticipate the record date being September 14th, 2021. We thank everybody for their time today and look forward to the bright future ahead.
spk01: Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time and have a great day.
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