Edison Nation, Inc. Reports Financial Results for the Third Quarter and Nine Months Ended September 30, 2019

Nine Months Revenues Up 19% Year-over-Year to $15.2 million

Initiates 2020 Revenue Guidance of $34 million.

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

Ended September 30,

 

Nine Months

Ended September 30,

 

 

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,

2019

(Unaudited)

 

 

December 31,

2018

 

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

Ended September 30,

 

 

For the Nine Months

Ended September 30,

 

 

 

 

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

 

 

Contacts

Investor Relations:

Aimee Carroll, Edison Nation, Inc.

215-543-3973

Email: investors@edisonnation.com

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