PHILLIPSBURG, N.J.--(BUSINESS WIRE)--Edison Nation, Inc. (NASDAQ:EDNT), an inventor ecosystem driving IP, media and innovative consumer products, today announced results for the third quarter ended September 30, 2019.
Company Highlights
- Initiating 2020 revenue guidance of $34 million.
- Raised $2.4 million subsequent to quarter-end. In addition, the Company eliminated $1.1 million of convertible debt through the issuance of 560,185 shares of common stock. The current share count is now 7.8 million shares.
- Further balance sheet improvement anticipated by year-end 2019 with the removal of $5.6 million of liabilities related to the previously foreclosed entity, Cloud B, Inc., which is in the process of dissolution.
- 4Keeps Roses has shipped product to over 300 retail stores and has received orders from an additional 1,200 stores. We anticipate fulfilling these orders before Valentine’s Day 2020.
- Partnered with Über Momto scale the brand’s children’s essentials and keepsakes product line by cobranding with our popular children’s brand Cloud B. The collaboration was formed through Edison Nation’s Entrepreneur Partnership division.
- 129 Edison Nation SKUs currently listed on Amazon compared to 50 SKUs in 2018.
- Pirasta, has grown to become an Omni-channel brand with new customers Crate and Barrel, Land of Nod and Whole Foods.
- The award-winning “Everyday Edisons” show is being relaunched Feb 11, 2020, which is both Thomas Edison’s birthday and National Inventors Day, on a major video-streaming provider. The show will now feature three inventors presenting three unique products to a panel of industry respected judges each episode.
- Commenced the development of the subscription-based Everyday Edisons Academy e-learning and master class offering, which will work in tandem with the Edison Innovation Platform engine.
Third Quarter and Nine Months 2019 Financial Summary
Revenue
- Third quarter 2019 revenue decreased to $3.5 million, compared to $4.9 million in the third quarter of 2018. The decrease was primarily attributable to a $1.1mm shortfall in theme park product sales due to the following reasons: one of the Company China factories moved locations; Disney Hong Kong attendance has been impacted by the recent China protests, which have also disrupted the Company’s Hong Kong operations in general; customers slowed purchase orders due to the China tariffs and requests by customers to quote key items made in America.
- First nine months 2019 revenue of $15.2 million compared to $12.8 million in the first nine months of 2018. The increase is the result of Edison Nation product and licensing revenues and product revenues from the acquisition of Cloud B.
Net Loss
- Net loss in the third quarter of 2019 was $2.6 million, or ($0.44) per basic and diluted share, compared to a net loss of $1.7 million, or ($0.37) per basic and diluted share in the third quarter of 2018.
- Net loss for the first nine months of 2019 was $5.8 million, or ($1.00) per basic and diluted share, compared to a net loss of $4.0 million, or ($1.11) per basic and diluted share in the first nine months of 2018.
Adjusted EBITDA
- Adjusted EBITDA, a non-GAAP measure, totaled negative $1.3 million in the third quarter of 2019, compared to positive $0.04 million in the third quarter of 2018.
- Adjusted EBITDA, a non-GAAP measure, totaled negative $1.5 million in the first nine months of 2019, compared to positive $0.6 million in the first nine months of 2018.
See below, under the heading “Use of Non-GAAP Financial Information,” for a discussion of Adjusted EBITDA and a reconciliation of such measure to the most comparable measure calculated under U.S. generally accepted accounting principles (“GAAP”).
|
|
Three Months
|
|
Nine Months
|
||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||
Net (loss) income |
|
$ |
(2,631,204) |
|
$ |
(1,679,306) |
|
$ |
(5,784,666) |
|
$ |
(3,983,272) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
349,172 |
|
|
42,130 |
|
|
875,036 |
|
|
407,276 |
Income tax expense |
|
|
- |
|
|
167,813 |
|
|
74,200 |
|
|
312,186 |
Depreciation and amortization |
|
|
318,449 |
|
|
40,742 |
|
|
952,019 |
|
|
120,003 |
EBITDA |
|
|
(1,963,583) |
|
|
(1,428,621) |
|
|
(3,883,411) |
|
|
(3,143,816) |
Stock-based compensation |
|
|
168,097 |
|
|
639,326 |
|
|
876,585 |
|
|
2,666,576 |
Change in fair value of put option contract |
|
|
|
|
|
732,600 |
|
|
|
|
|
732,600 |
Restructuring and severance costs |
|
|
153,182 |
|
|
9,000 |
|
|
324,164 |
|
|
27,000 |
Transaction and acquisition costs |
|
|
224,370 |
|
|
84,980 |
|
|
447,908 |
|
|
239,682 |
Other non-recurring costs |
|
|
100,772 |
|
|
- |
|
|
724,137 |
|
|
42,686 |
Adjusted EBITDA |
|
$ |
(1,317,162) |
|
$ |
37,285 |
|
$ |
(1,510,617) |
|
$ |
564,728 |
Management Commentary
Chris Ferguson, Chief Executive, commented, “With the successful foundation-building 2019 year nearly behind us, Edison Nation is well-positioned for 2020 and is initiating revenue guidance of $34 million. We expect the proliferation of our proprietary Edison Nation Innovation Platform engine to drive our growth and create substantial IP asset value in combination with the relaunch of the “Everyday Edisons” TV show and the development of the Everyday Edisons Academy inventor-centric master class e-learning service, which will bring recurring subscription revenue. We are confident that our brands will gain momentum in 2020 and thrilled that each of the brands now has products in the market, including our joint venture with 4Keeps Roses, Cloud B brand, Lily & Gray, Pirasta, 911 Help Now, Goodie Gusher, Smarter Specs, EcoQuest and Trillion Trees.
About Edison Nation, Inc.
Edison Nation, Inc. (EDNT) is a multifaceted ecosystem which fosters innovation, driving IP, media and innovative consumer products. Edison Nation offers innovation sourcing, design, sales, fulfillment and shipping services. The Edison Nation Innovation Platform sources innovative ideas for internal launch or license to brand partners. Edison Nation hopes to leverage its television property “Everyday Edisons” to become the recognized leader in the innovator community.
For more information, please visit www.edisonnation.com.
Use of Non-GAAP Financial Information
EBITDA and Adjusted EBITDA is a financial measure that is not calculated in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management believes that because Adjusted EBITDA excludes (i) certain non-cash expenses (such as depreciation, amortization and stock-based compensation) and (ii) expenses that are not reflective of the Company’s core operating results over time (such as restructuring costs, litigation or dispute settlement charges or gains, and transaction-related costs), this measure provides investors with additional useful information to measure the Company’s financial performance, particularly with respect to changes in performance from period to period. Edison Nation management uses EBITDA and Adjusted EBITDA (a) as a measure of operating performance; (b) for planning and forecasting in future periods; and (c) in communications with the Company’s Board of Directors concerning Edison Nation’s financial performance. The Company’s presentation of EBITDA and Adjusted EBITDA are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation and should not be used by investors as a substitute or alternative to net income or any measure of financial performance calculated and presented in accordance with U.S. GAAP. Instead, management believes EBITDA and Adjusted EBITDA should be used to supplement the Company's financial measures derived in accordance with U.S. GAAP to provide a more complete understanding of the trends affecting the business.
Forward-Looking Statements
This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this press release regarding strategy, future operations and plans, including assumptions underlying such statements, are forward-looking statements, and should not be relied upon as representing the Company’s views as of any subsequent date. Such forward-looking statements are based on information available to the Company as of the date of this release and involve a number of risks and uncertainties, some beyond the Company’s control, that could cause actual results to differ materially from those anticipated by these forward-looking statements, including consumer, regulatory and other factors affecting demand for the Company’s products, any difficulty in marketing the Company’s products in global markets, competition in the market for consumer products and inability to raise capital to fund operations and service the Company’s debt. Additional information that could lead to material changes in the Company’s performance is contained in its filings with the SEC. The Company is under no obligation to, and expressly disclaims any responsibility to, update or alter forward-looking statements contained in this release, whether as a result of new information, future events or otherwise.
Edison Nation, Inc. (formerly known as Xspand Products Lab, Inc.) and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
|
|
September 30,
|
|
|
December 31,
|
|
||
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,214,303 |
|
|
$ |
2,052,731 |
|
Accounts receivable, net |
|
|
1,889,706 |
|
|
|
1,877,351 |
|
Inventory |
|
|
1,106,077 |
|
|
|
923,707 |
|
Prepaid expenses and other current assets |
|
|
996,968 |
|
|
|
611,695 |
|
Income tax receivable |
|
|
31,563 |
|
|
|
- |
|
Total current assets |
|
|
5,238,617 |
|
|
|
5,465,484 |
|
Property and equipment, net |
|
|
974,850 |
|
|
|
998,863 |
|
Right of use assets – operating leases, net |
|
|
810,017 |
|
|
|
- |
|
Intangible assets, net |
|
|
11,873,337 |
|
|
|
12,687,731 |
|
Goodwill |
|
|
9,736,510 |
|
|
|
9,736,510 |
|
Total assets |
|
$ |
28,633,331 |
|
|
$ |
28,888,588 |
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
6,932,584 |
|
|
$ |
5,519,159 |
|
Accrued expenses and other current liabilities |
|
|
1,849,003 |
|
|
|
1,135,551 |
|
Deferred revenues |
|
|
175,956 |
|
|
|
175,956 |
|
Current portion of operating lease liabilities |
|
|
292,800 |
|
|
|
- |
|
Income tax payable |
|
|
- |
|
|
|
129,511 |
|
Line of credit, net of debt issuance costs of $19,466 and $31,145, respectively |
|
|
452,087 |
|
|
|
531,804 |
|
Current portion of notes payable, net of debt issuance costs of $153,793 and $0, respectively |
|
|
1,270,243 |
|
|
|
313,572 |
|
Current portion of notes payable – related parties |
|
|
1,039,330 |
|
|
|
932,701 |
|
Due to related party |
|
|
22,896 |
|
|
|
140,682 |
|
Total current liabilities |
|
|
12,034,900 |
|
|
|
8,878,936 |
|
Contingent consideration |
|
|
520,000 |
|
|
|
520,000 |
|
Operating lease liabilities, net of current portion |
|
|
534,817 |
|
|
|
- |
|
Convertible notes payable – related parties, net of debt discount of $439,819 and $466,667 related to the conversion feature, respectively |
|
|
2,099,455 |
|
|
|
961,494 |
|
Notes payable, net of current portion |
|
|
46,101 |
|
|
|
56,688 |
|
Notes payable – related parties, net of current portion |
|
|
2,342,249 |
|
|
|
2,531,490 |
|
Deferred tax liability |
|
|
341 |
|
|
|
341 |
|
Total liabilities |
|
|
17,577,863 |
|
|
|
12,948,949 |
|
Commitments and contingencies (Note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 250,000,000 shares authorized; 6,033,835 and 5,654,830 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively |
|
|
6,034 |
|
|
|
5,655 |
|
Additional paid-in-capital |
|
|
21,448,280 |
|
|
|
20,548,164 |
|
Accumulated deficit |
|
|
(11,318,564 |
) |
|
|
(5,565,756 |
) |
Total stockholders’ equity attributable to Edison Nation, Inc. |
|
|
10,135,750 |
|
|
|
14,988,063 |
|
Noncontrolling interests |
|
|
919,718 |
|
|
|
951,576 |
|
Total stockholders’ equity |
|
|
11,055,468 |
|
|
|
15,939,639 |
|
Total liabilities and stockholders’ equity |
|
$ |
28,633,331 |
|
|
$ |
28,888,588 |
|
Edison Nation, Inc. (formerly known as Xspand Products Lab, Inc.) and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||||||||||||||
|
|
For the Three Months
|
|
|
For the Nine Months
|
|
||||||||||||||
|
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
||||
Revenues, net |
|
$ |
|
3,532,645 |
|
|
$ |
|
4,940,188 |
|
|
$ |
|
15,239,434 |
|
|
$ |
|
12,758,715 |
|
Cost of revenues |
|
|
2,544,058 |
|
|
|
3,637,000 |
|
|
|
10,413,868 |
|
|
|
9,090,215 |
|
||||
Gross profit |
|
|
988,587 |
|
|
|
1,303,188 |
|
|
|
4,825,566 |
|
|
|
3,668,500 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
3,296,323 |
|
|
|
2,065,655 |
|
|
|
9,738,107 |
|
|
|
6,276,830 |
|
||||
Operating loss |
|
|
(2,307,736 |
) |
|
|
(762,467 |
) |
|
|
(4,912,541 |
) |
|
|
(2,608,330 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rental income |
|
|
25,704 |
|
|
|
25,704 |
|
|
|
77,111 |
|
|
|
77,111 |
|
||||
Change in fair value of put option contract |
|
|
- |
|
|
|
(732,600 |
) |
|
|
- |
|
|
|
(732,600 |
) |
||||
Interest expense |
|
|
(349,172 |
) |
|
|
(42,130 |
) |
|
|
(875,036 |
) |
|
|
(407,267 |
) |
||||
Total other (expense) income |
|
|
(323,468 |
) |
|
|
(749,026 |
) |
|
|
(797,925 |
) |
|
|
(1,062,756 |
) |
||||
Loss before income taxes |
|
|
(2,631,204 |
) |
|
|
(1,511,493 |
) |
|
|
(5,710,466 |
) |
|
|
(3,671,086 |
) |
||||
Income tax expense |
|
|
- |
|
|
|
167,813 |
|
|
|
74,200 |
|
|
|
312,186 |
|
||||
Net loss |
|
$ |
|
(2,631,204 |
) |
|
$ |
|
(1,679,306 |
) |
|
$ |
|
(5,784,666 |
) |
|
$ |
|
(3,983,272 |
) |
Net loss attributable to noncontrolling interests |
|
|
(49,103 |
) |
|
|
- |
|
|
|
(31,858 |
) |
|
|
- |
|
||||
Net loss attributable to Edison Nation, Inc. |
|
$ |
|
(2,582,101 |
) |
|
$ |
|
(1,679,306 |
) |
|
$ |
|
(5,752,808 |
) |
|
$ |
|
(3,983,272 |
) |
Net loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
- basic and diluted |
|
$ |
|
(0.44 |
) |
|
$ |
|
(0.37 |
) |
|
$ |
|
(1.00 |
) |
|
$ |
|
(1.11 |
) |
Weighted average number of common shares outstanding – basic and diluted |
|
|
5,834,167 |
|
|
|
4,560,607 |
|
|
|
5,733,379 |
|
|
|
3,577,942 |
|
||||
Edison Nation, Inc. (formerly known as Xspand Products Lab, Inc.) and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||
|
|
Nine Months Ended September 30, |
|
|||||||
|
|
|
2019 |
|
|
|
2018 |
|
||
Cash Flow from Operating Activities |
|
|
|
|
|
|
|
|
||
Net loss attributable to Edison Nation, Inc. |
|
$ |
|
(5,752,808 |
) |
|
$ |
|
(3,983,272 |
) |
Net loss attributable to noncontrolling interests |
|
|
(31,858 |
) |
|
|
- |
|
||
Net loss |
|
|
(5,784,666 |
) |
|
|
(3,983,272 |
) |
||
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
952,019 |
|
|
|
120,004 |
|
||
Amortization of financing costs |
|
|
658,126 |
|
|
|
266,944 |
|
||
Stock-based compensation |
|
|
876,585 |
|
|
|
2,666,576 |
|
||
Amortization of right of use asset |
|
|
217,189 |
|
|
|
- |
|
||
Change in fair value of put option contract |
|
|
- |
|
|
|
732,600 |
|
||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
||
Accounts receivable |
|
|
(12,355 |
) |
|
|
(1,402,277 |
) |
||
Inventory |
|
|
(182,370 |
) |
|
|
39,974 |
|
||
Prepaid expenses and other current assets |
|
|
(667,836 |
) |
|
|
(1,011,586 |
) |
||
Accounts payable |
|
|
1,413,425 |
|
|
|
55,194 |
|
||
Accrued expenses and other current liabilities |
|
|
549,072 |
|
|
|
780,564 |
|
||
Repayment of operating lease liabilities |
|
|
(199,589 |
) |
|
|
- |
|
||
Due from related party |
|
|
(117,786 |
) |
|
|
(472,352 |
) |
||
Net cash used in operating activities |
|
|
(2,298,186 |
) |
|
|
(2,207,631 |
) |
||
|
|
|
|
|
|
|
|
|
||
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
(113,612 |
) |
|
|
(121,186 |
) |
||
Acquisition of Edison Nation Holdings, LLC and Subsidiaries, net of cash received |
|
|
- |
|
|
|
(881,318 |
) |
||
Purchase of loan held for investment |
|
|
- |
|
|
|
(500,000 |
) |
||
Net cash used in investing activities |
|
|
(113,612 |
) |
|
|
(1,502,504 |
) |
||
|
|
|
|
|
|
|
|
|
||
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
||
Borrowings under lines of credit |
|
|
249,370 |
|
|
|
- |
|
||
Borrowings under convertible notes payable |
|
|
1,111,111 |
|
|
|
- |
|
||
Borrowings under notes payable |
|
|
1,670,000 |
|
|
|
718,559 |
|
||
Repayments under lines of credit |
|
|
(340,766 |
) |
|
|
- |
|
||
Repayments under notes payable |
|
|
(570,587 |
) |
|
|
(645,000 |
) |
||
Repayments under notes payable – related parties |
|
|
(82,612 |
) |
|
|
(118,779 |
) |
||
Net proceeds from sale of common stock |
|
|
- |
|
|
|
5,358,570 |
|
||
Fees paid for financing costs |
|
|
(463,146 |
) |
|
|
(99,444 |
) |
||
Net cash provided by financing activities |
|
|
1,573,370 |
|
|
|
5,213,906 |
|
||
Net (decrease) increase in cash and cash equivalents |
|
|
(838,428 |
) |
|
|
1,503,771 |
|
||
Cash and cash equivalents - beginning of period |
|
|
2,052,731 |
|
|
|
557,268 |
|
||
Cash and cash equivalents - end of period |
|
$ |
|
1,214,303 |
|
|
|
2,061,039 |
|
|
|
|
|
|
|
|
|
|
|
||
Supplemental Disclosures of Cash Flow Information |
|
|
|
|
|
|
|
|
||
Cash paid during the period for: |
|
|
|
|
|
|
|
|
||
Interest |
|
$ |
|
145,324 |
|
|
$ |
|
93,044 |
|
Income taxes |
|
$ |
|
- |
|
|
$ |
|
- |
|
Noncash investing and financing activity: |
|
|
|
|
|
|
|
|
||
Shares issued to note holders |
|
$ |
|
309,780 |
|
|
$ |
|
167,500 |
|
Shares issued for the acquisition of Edison Nation Holdings, LLC |
|
|
- |
|
|
|
3,760,317 |
|
||
Shares reserved in exchange for the cancellation of certain non-voting membership interests related to acquisition of Edison Nation Holdings, LLC |
|
|
- |
|
|
|
6,682,500 |
|
||
Borrowings under note payable for the purchase of property and equipment |
|
|
- |
|
|
|
73,559 |
|
||
Issuance of 4%, 5 year senior convertible notes for the acquisition of Edison Nation Holdings, LLC |
|
|
- |
|
|
|
1,428,161 |
|
||
