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spk02: Greetings, and welcome to Vinco Ventures' third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Greg McNiff, Investor Relations for Vinco Ventures. Please go ahead.
spk03: Good morning and welcome to Vinco Ventures' third quarter 2021 financial results conference call. I'm Greg McNiff, Investor Relations for Vinco Ventures. Also on the call today will be Lisa King, Vinco's Chief Executive Officer, and Philip Jones, Vinco's Incoming Chief Financial Officer. Today's call is being webcast live and will be archived on the Investor Relations section of Vinco's website at investors.vincoventures.com where our earnings press release is currently available. Certain matters we will be discussing today, including our growth strategies and expected growth opportunities and performance centered around the HomeMotive platform, as well as certain transactions we expect to complete to fuel our growth, are forward-looking statements. Such statements are subject to the risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties are discussed in our documents filed with the SEC, including our annual report on Form 10-K for the period ended December 31, 2020, filed on April 15, 2021, and quarterly reports on Form 10-Q filed thereafter, including our quarterly report for the quarter ended September 30, 2021, filed today. In addition to U.S. GAAP reporting, VNCO reports certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliation between these GAAP and non-GAAP measures are included in the tables found in today's press release. And with that, I'd like to turn the call over to Lisa.
spk01: Good morning, everyone, and thank you for joining today. We're pleased to report our third quarter results. Before I discuss some of the highlights of the quarter, I'd like to take a few moments to review the progress we made on our strategy of building a global media and content platform. During the quarter, along with our joint venture partner, Zash Global Media, we completed the acquisition of an 80% interest in Limotif, one of the global peer-play video-sharing social networking platforms. We believe Limotif is one of the fastest-growing video-sharing social networking platforms in its category over the last three years, with over 225 million installations of the Limotif app globally since its launch. Over 10 billion atomic clips of user-generated content have been used to create more than 750 million videos on the platform since its launch. We deem Limotif as the centerpiece of our strategy to become a pure play, media, and entertainment company. We intend to monetize the platform through our planned acquisition of AdRiser through VVV Media Partners LLC, our joint venture with Dash Global Media, the planned acquisition we announced in early October. AdRiser runs both real-time programmatic ad transactions and has direct agreements with agencies and advertisers on its own proprietary AI-focused platform. We believe AdRiser is positioned for rapid growth in digital advertising. and we expect its capabilities will enable us to monetize LaMotta's growing brand awareness through advertising and sponsorship. As the parties are still in negotiations to enter into a definitive agreement for the AdRiser acquisition, we'll share more about this strategy later as we progress with this transaction. In addition, we expect to build our unique media platform by working with our joint venture partner, Dash Global Media, to combine its content creation and distribution initiatives with Limotif's potential for a flywheel growth model, which we believe can drive significant revenue growth. We believe that Limotif and AdRiser will be complemented by our Honey Badger Media and Edison Nation brands, which will remain with Finco. Honey Badger is a digital commerce company that designs digital campaigns and leverages its network of millions of followers and an impressive catalog of celebrities and influencers to grow advertising revenue. Honey Badger brings a proprietary monetization process that converts traffic to dollars, employs content arbitrage to capitalize on network traffic, and leverages a powerful ad stack. Edison Nation allows inventors to create, distribute, market, and monetize their products through licensing agreements. What I've described above is the vision we have for the transformation of Vinco to a media and entertainment company. Finally, to complete our transformation, we announced the planned spinoff of our blockchain subsidiary, Cryptide, which is expected to be completed by early next year. To give you a sense of our operational progress, I'd like to briefly touch on some notable developments. Just last month, Limotif partnered with EDC Las Vegas to extend the Limotif brand in the U.S. through a three-day event that reached and engaged a large audience. Specifically, Limotif activated over 150 influencers, and the Lamotif brand received over 51 million views on TikTok and over 40 million Instagram story views. Not only did the scale exceed our expectations, but the cross-platform pollination with other social media suggests Lamotif is on its way to becoming a recognizable brand in the US. This made us believe that Lamotif has the potential of becoming a leading content platform. We also recently announced the launch of Lamotif India, a channel focused on local trends where subscribers can collaborate and engage with content creators. Initial feedback has been very positive. We're very excited about the potential of this market, and we expect to roll out more features soon. We're currently pursuing opportunities to expand the LeMotive brand in other markets, and we expect to be able to share more details of our progress on our next update. In summary, I'm encouraged by our execution in the third quarter. We believe our strategy to focus the company on the large and growing media and entertainment market, coupled with a robust social media platform, will position us well for long-term growth. With that, I'll now turn the call over to Phil to discuss our financial results in more detail. Phil?
spk04: Thank you, Lisa. I'm very excited to join the team, and I'd like to thank Brett Broman for ensuring a seamless transition as he will continue to consult for the company until the spinoff of Cryptide. where he is now also serving as CFO. Before I discuss the results of the third quarter, I'd like to highlight a few of the recent corporate developments since our last update. First and foremost, the completion of the acquisition of Le Motif in July through ZVV Media Partners, our joint venture with Zash Global Media, was a significant milestone for the company and the culmination of a lot of hard work by many. Thus, during the quarter, we began to consolidate the results of Le Motif through ZVV Media Partners, our consolidated variable interest entity. During the quarter, Le Motif continued to focus its efforts on expanding its brand and user base across its markets, and we are thrilled to have them in Vinco. Secondly, during the third quarter, we raised $193 million, of which $93 million was from common stock sales and issuances for the exercise of warrants, along with $100 million from the proceeds of a convertible note offering which were used to fund the cash component of the acquisition of our membership interest in ZVV Media Partners of $92 million. As of September 30th, we had approximately $150 million in cash, of which $100 million is restricted in a deposit account control agreement under the provisions of the convertible notes. During the quarter and subsequent to quarter end, we successfully raised significant capital through the exercise of issued warrants and believe that this source of capital provide the funding needed to continue to build out our business and help fund future potential acquisitions. As of today, we have approximately $165 million in cash, which includes $100 million in restricted cash. The biggest impact to our third quarter and nine-month results is the loss recognized on the issuance of warrants and the change in estimated fair value of outstanding warrants at the end of September. Specifically, as of September 30th, The company had warrants outstanding for the purchase of approximately 93 million shares of common stock, which, if fully exercised for cash, would raise approximately $377 million of funds for the company. Associated with these warrants is a $469 million warrant liability reported on the balance sheet as of September 30th, 2021. It is important to understand that this warrant liability is a non-cash liability that will change in value as the company's share price fluctuates and will eventually be eliminated due to either the exercise or expiration of the underlying warrant. However, our warrant liability and its impact on our financial results will be a significant element for the company during this stage of its evolution. So I wanted to highlight it here. As we saw in the third quarter, the total loss from warrant activity was $494 million, or 91% of our net loss for the quarter. After consideration for the impact of the warrant-related loss, the remaining results of operations reflect the early stage of the transition of Vinco to its media and content future. During the third quarter, the company continued to ramp its focus on implementing the steps necessary to build its internal resources and work with its legal teams and advisors to execute its capital raises, its business strategy, and the due diligence related to a number of potential acquisition transactions necessary to complete the continuing work with ZASH, and finally, the spin-out of our Cryptide business. Revenue for the quarter decreased 11.5 percent, which was mainly attributable to a revenue decrease in our Edison Nation medical division due to the reduction in demand for personal protective equipment. The company incurred operating expenses of $25.9 million during the third quarter of 2021, of which $6.2 million was stock-based compensation, $5.6 million was due to legal and professional fees related to the transactions, and a total of $11.3 million related to the operating expenses of ZVV, Media Partners, and Le Motif, respectively, since the close of the transaction on July 23rd. Operating expenses for the same period a year ago are not directly comparable, given the significant changes the business has undergone over the past year. As described earlier, our net loss was significantly impacted by the $494 million in losses related to the issuance and revaluation of the warrant liabilities during the quarter. Our net loss for the quarter was $542 million or $7.59 per share. On a non-GAAP basis, net loss for the quarter without the $494 million of losses due to the warrant activity was $48 million or $0.68 per share. Please refer to our press release announcing our third quarter results for the corresponding GAAP reconciliation. When looking at the cash flow statement, our use of cash highlights the significant impact of non-cash related expenses on our net income. For the nine months ended September 30th, our net use of cash for operations was approximately 19 million, of which 9.4 million was used during the third quarter. In addition, we provided loans to our joint venture Partner Zash, in anticipation of the business combination, totaling $18 million for the nine months ended September 30th, of which 13 months occurred during the third quarter. When viewed in this perspective, I believe that the company's current operations are commensurate with the cash and capital resources it has available to it. Moving to the balance sheet, the company, I believe, is in a strong position highlighted by its cash and restricted cash balances. The balance sheet also reflects the increase in assets as a result of a consolidation of Le Motif, most notably its intangible assets associated with the Le Motif application. As of September 30th, the company had 337 million assets as compared to 28 million at the beginning of the year. The liabilities section of the balance sheet reflects the increased working capital requirements related to the growth in the company's operations, along with the impact of the convertible note which is listed net of debt issuance cost, and finally, the aforementioned warrant liability of $468 million. Strongly encourage everyone to review our Form 10-Q filed yesterday with the SEC for further details on our results, along with other information important to understand the company. Lastly, I wanted to update everyone on the proposed spinoff of the Cryptide business. On November 8th, the preliminary Form 10 for the Cryptide spinoff was filed with the SEC. We currently expect that the distribution will occur in early 2022. Cryptide recently announced a new business arrangement, CW Machines, with Wattam, a global supplier of Bitcoin mining equipment and services. The joint effort will be focused on simplifying consumer ownership of mining equipment through the integration of smart contract technologies. And with that, I'd like to turn the call back to Lisa for closing remarks.
spk01: Thank you for joining us on the call today. We're excited about the growth opportunities ahead of us, and we appreciate your interest and support. We look forward to updating you on our progress next quarter.
spk02: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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