Revenue and Gross Profit for the Second
Quarter of 2019 Increased 36.0% and 61.8%, respectively; Driven by
Successful Product Launches and Efficiencies Across
Platform
Edison Nation, Inc. (EDNT), an
inventor ecosystem driving IP, media and innovative consumer
products, today reported its financial results for the second
quarter ended June 30, 2019.
"During the first half of 2019, EDNT achieved significant
revenue growth of 49.7%, to $11.7 million, for the six months ended
June 30, 2019, driven by the continued success of our IP and the
scale of our consumer brands ,” said Chris Ferguson, Chief
Executive Officer of Edison Nation. "The company continues to
aggressively source innovative ideas via our proprietary Edison
Nation Innovation Platform, which selects the ‘best-of-the-best'
inventions utilizing proprietary algorithms, and brings them to
market quickly. EDNT’s intellectual property, media, and consumer
product launch engine will continue to drive growth in 2019 and
beyond. Simultaneously, we are leveraging our combined platform to
achieve significant operational and cost efficiencies”.
Financial Results for the Three Months Ended June 30,
2019
For the three months ended June 30, 2019, revenue increased
36.0% to $5.97 million, compared to $4.39 million in the same
period in 2018. The increase in revenue was primarily attributed to
successful product launches and scaling of EDNT’s acquired brands
throughout 2018.
Gross profit increased 61.8% to $2.04 million in the second
quarter of 2019, compared to $1.26 million in the second quarter of
2018. Gross profit margin was 34.2% in the second quarter of 2019,
compared to 28.8%, in the same period in 2018. The increase is
primarily a result of a favorable product mix of goods sold to
customers.
Operating expenses were $3.4 million in the second quarter of
2019, compared to $1.7 million in the same period in 2018. The
increase was primarily attributable to operating expenses incurred
related to EDNT’s acquisition of Edison Nation Holdings, LLC and
the transactions between EDNT’s subsidiaries, CBAV1, LLC and Cloud
B, Inc.
Adjusted EBITDA, a non-GAAP measure, totaled $0.01 million in
the second quarter of 2019, compared to $0.2 million in the second
quarter of 2018. The Company, having concluded the acquisition of
Edison Nation LLC in 2018, anticipates a reduction of expenses as
we continue to integrate the Company’s activities across the
organization. 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").
Net loss in the second quarter of 2019 was $1.8 million, or
($0.30) per basic and diluted share, compared to a net loss of $0.7
million, or ($0.18) per basic and diluted share in the same period
in 2018.
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Net (loss) income
$
(1,775,065
)
$
(726,661
)
$
(3,153,462
)
$
(2,303,966
)
Interest expense, net
401,170
277,602
525,864
365,137
Income tax expense
51,005
79,300
74,200
144,373
Depreciation and amortization
332,187
39,631
633,570
79,262
EBITDA
(990,703
)
(330,128
)
(1,919,828
)
(1,715,194
)
Stock-based compensation
346,071
306,000
708,490
2,027,250
Restructuring and severance costs
134,597
18,000
170,982
18,000
Transaction and acquisition costs
-
150,702
223,538
150,702
Other non-recurring costs
519,191
63,386
623,365
63,386
Adjusted EBITDA
$
9,156
$
207,960
$
(193,453
)
$
544,144
At June 30, 2019, we had total current assets of approximately
$6,700,000 and current liabilities of approximately $12,400,000
resulting in negative working capital of approximately $5,700,000.
The negative working capital includes approximately $3.8 million
related to unsecured trade payables in our Cloud B acquisition. In
addition, our outstanding balances under notes payable includes
$0.9 million related to Cloud B, Inc. CBAV1, LLC owns the senior
secured position on the promissory note to Cloud B, Inc. in the
amount of $2,270,000. In February 2019, CBAV1, LLC, pursuant to an
Article 9 foreclosure action, perfected its secured UCC interest in
all the assets of Cloud B, Inc. to partially satisfy the
outstanding balance on the note and thereby making any payments of
such Cloud B trade payables and notes unlikely in the future. In
addition, S.R.M Entertainment Limited, a wholly-owned subsidiary of
Edison Nation, Inc., was an unsecured creditor in the amount of
approximately $1,700,000 which is not included in the $3,800,000
but at this time remains unpaid. The total liabilities of
approximately $6,400,000, of which $1,700,000 has been eliminated
in consolidation, are not expected to be satisfied due to the
foreclosure. Prepaid and other assets increased $0.3 million to
$0.9 million. A substantial amount of the increase in prepaid
expenses and other current assets was for investment in new tooling
placed with new suppliers of the Company's products to optimize and
diversify manufacturing partners. Inventory increased $0.3 million,
primarily due to the Company's recently launched "911 Help Now"
product. Accounts receivable increased by $1.2 million. Cash and
cash equivalents, as of June 30, 2019, totaled $1.4 million, as
compared to $2.1 million at December 31, 2018. The decrease in cash
is reflective of daily working capital fluctuations and the
Company's investments in the working capital of companies acquired
in 2018. The cash balance at the end of the first quarter of 2019
was $0.7 million as compared to $1.4 million at the end of the
second quarter of 2019 which reflects an increase of $0.7
million.
Recent Operational Highlights:
- Edison’s Innovation Platform sources product ideas from an
organically grown community of 200,000+. Coming December 2019, a
mobile application will serve to facilitate further platform
engagement.
- Announced the return of Emmy award-winning TV show, "Everyday
Edison’s" with a February 11, 2020 premier – Thomas Edison’s
birthday - on a leading SVOD. This show is an inspirational reality
TV series produced under license by Edison Nation, which chronicles
the stories of first-time inventors as they launch their unique
products into the marketplace in conjunction with the Edison Nation
Online Innovation Platform. “Everyday Edisons” is produced by
six-time Emmy Award winning producer Michael Cable.
- Developed the Edison Academy, inventor centric master classes,
teaching the fundamentals of product development and inventing. The
Academy serves as a resource to provide ongoing value to the
organically grown Edison community of 200,000+, while captivating
prospective inventors previously disengaged from Edison Nation.
This initiative creates revenue opportunities in the form of
recurring monthly and annual subscription fees.
- Appointed Toper Taylor, a leading entrepreneur and pioneer in
the kids and family entertainment and consumer products industries,
to its Board of Directors. Taylor has previously served as
president of Nelvana, Cookie Jar, and Network of One. Edison Nation
is excited to welcome Mr. Taylor to the Board at a vital time as
they seek to expand their media related activities.
- Launched exclusive new products for its theme park and
entertainment customers, including Disney Parks and Resorts and
Universal Studios including; Avatar Light Up Wood Sprite and Star
Wars Baton and Shield Set for Disney Parks and Resorts; A Monsters
Inc. interactive flashlight for Tokyo Disney; and a Jimmy Fallon
microphone for Universal Resorts.
- Licensed Ezy Dose Medi-Spout pill assist cap to Apothecary
Products, a global leader in consumer wellness products. It is the
second product licensed by Apothecary Products from Edison Nation’s
innovator community in what is an enhanced effort to license Edison
community ideas to established brand partners.
- Expanded their Online Innovation Platform with the “Edison’s
Design Challenge” that will encourage members of the innovation
community to contribute to the design and innovation of products
already in Edison Nation’s product launch pipeline.
- Expanded the Edison Online Innovation Platform with its
Entrepreneur Partnership. The Entrepreneur Partnership is an
opportunity for brands to further leverage Edison Nation’s inventor
community and proprietary range of services to launch new products
or scale additional product line.
About Edison Nation, Inc.
Edison Nation, Inc. (EDNT), an
inventor ecosystem driving IP, media and innovative consumer
products. Edison offers innovation sourcing, design, sales,
fulfillment and shipping services. Edison Nation's model is to
source innovative ideas for internal launch or license to brand
partners. Throughout 2019 and beyond, Edison Nation looks to
establish prominence in the media space through its television show
“Everyday Edisons” and additional properties such as Edison
Academy. 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
June 30, 2019
(Unaudited)
December 31, 2018
Assets
Current assets:
Cash and cash equivalents
$
1,425,059
$
2,052,731
Accounts receivable, net
3,092,506
1,877,351
Inventory
1,260,251
923,707
Prepaid expenses and other current
assets
890,463
611,695
Income tax receivable
31,563
-
Total current assets
6,699,842
5,465,484
Property and equipment, net
1,011,183
998,863
Right of use assets – operating leases,
net
802,223
-
Intangible assets, net
12,148,611
12,687,731
Goodwill
9,736,510
9,736,510
Total assets
$
30,398,369
$
28,888,588
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
6,710,411
$
5,519,159
Accrued expenses and other current
liabilities
1,787,949
1,135,551
Deferred revenues
175,956
175,956
Current portion of operating lease
liabilities
199,690
-
Income tax payable
-
129,511
Line of credit, net of debt issuance costs
of $23,359 and $31,145, respectively
748,048
531,804
Current portion of convertible notes
payable, net of debt issuance costs of $192,607 and $0,
respectively
918,504
-
Current portion of notes payable, net of
debt issuance costs of $74,667 and $0, respectively
789,214
313,572
Current portion of notes payable – related
parties
1,016,917
932,701
Due to related party
75,082
140,682
Total current liabilities
12,421,771
8,878,936
Contingent consideration
520,000
520,000
Operating lease liabilities, net of
current portion
613,809
-
Convertible notes payable – related
parties, net of debt discount of $416,667 and $466,667 related to
the conversion feature, respectively
1,011,494
961,494
Notes payable, net of current portion
49,669
56,688
Notes payable – related parties, net of
current portion
2,406,277
2,531,490
Deferred tax liability
341
341
Total liabilities
17,023,361
12,948,949
Commitments and contingencies (Note 8)
Stockholders' equity
Common stock, $0.001 par value,
250,000,000 shares authorized; 5,737,830 and 5,654,830 shares
issued and outstanding as of June 30, 2019 and December 31, 2018,
respectively
5,738
5,655
Additional paid-in-capital
21,136,912
20,548,164
Accumulated deficit
(8,736,463
)
(5,565,756
)
Total stockholders’ equity attributable to
Edison Nation, Inc.
12,406,187
14,988,063
Noncontrolling interests
968,821
951,576
Total stockholders’ equity
13,375,008
15,939,639
Total liabilities and stockholders’
equity
$
30,398,369
$
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
June 30,
For the Six Months Ended June
30,
2019
2018
2019
2018
Revenues, net
$
5,968,255
$
4,387,197
$
11,706,789
$
7,818,527
Cost of revenues
3,924,252
3,124,221
7,869,810
5,453,215
Gross profit
2,044,003
1,262,976
3,836,979
2,365,312
Operating expenses:
Selling, general and administrative
3,392,596
1,658,438
6,441,784
4,211,175
Operating loss
(1,348,593
)
(395,462
)
(2,604,805
)
(1,845,863
)
Other (expense) income:
Rental income
25,703
25,703
51,407
51,407
Interest expense
(401,170
)
(277,602
)
(525,864
)
(365,137
)
Total other (expense) income
(375,467
)
(251,899
)
(474,457
)
(313,730
)
Loss before income taxes
(1,724,060
)
(647,361
)
(3,079,262
)
(2,159,593
)
Income tax expense
51,005
79,300
74,200
144,373
Net loss
$
(1,775,065
)
$
(726,661
)
$
(3,153,462
)
$
(2,303,966
)
Net (loss) income attributable to
noncontrolling interests
(39,648
)
-
17,245
-
Net loss attributable to Edison Nation,
Inc.
$
(1,735,417
)
$
(726,661
)
$
(3,170,707
)
$
(2,303,966
)
Net loss per share
- basic and diluted
$
(0.30
)
$
(0.18
)
$
(0.55
)
$
(0.66
)
Weighted average number of common shares
outstanding – basic and diluted
5,702,693
3,932,084
5,682,150
3,468,617
Edison Nation, Inc. (formerly
known as Xspand Products Lab, Inc.) and Subsidiaries
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Six Months Ended June
30,
2019
2018
Cash Flow from Operating
Activities
Net loss attributable to Edison Nation,
Inc.
$
(3,170,707
)
$
(2,303,966
)
Net income attributable to noncontrolling
interests
17,245
-
Net loss
(3,153,462
)
(2,303,966
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
633,570
79,262
Amortization of financing costs
391,223
266,944
Stock-based compensation
708,490
2,027,250
Amortization of right of use asset
155,408
-
Changes in assets and liabilities:
Accounts receivable
(1,215,155
)
(224,266
)
Inventory
(336,544
)
12,431
Prepaid expenses and other current
assets
(561,331
)
(1,118,270
)
Accounts payable
1,191,252
148,709
Accrued expenses and other current
liabilities
480,928
248,473
Repayment of operating lease
liabilities
(144,132
)
-
Due from related party
(65,600
)
(416,062
)
Net cash used in operating
activities
(1,915,353
)
(1,279,495
)
Cash Flows from Investing
Activities
Purchases of property and equipment
(106,770
)
(27,462
)
Purchase of loan held for investment
-
(500,000
)
Net cash used in investing
activities
(106,770
)
(527,462
)
Cash Flows from Financing
Activities
Borrowings under lines of credit
240,000
-
Borrowings under convertible notes
payable
1,111,111
-
Borrowings under notes payable
1,110,000
645,000
Repayments under lines of credit
(31,542
)
-
Repayments under notes payable
(566,710
)
(645,000
)
Repayments under notes payable – related
parties
(40,997
)
(78,593
)
Net proceeds from sale of common stock
-
5,358,570
Fees paid for financing costs
(427,411
)
(99,444
)
Net cash provided by financing
activities
1,394,451
5,180,533
Net (decrease) increase in cash and
cash equivalents
(627,672
)
3,373,576
Cash and cash equivalents - beginning
of period
2,052,731
557,268
Cash and cash equivalents - end of
period
$
1,425,059
3,930,844
Supplemental Disclosures of Cash Flow
Information
Cash paid during the period for:
Interest
$
74,908
$
34,757
Income taxes
$
-
$
-
Noncash investing and financing
activity:
Shares issued to note holders
$
173,300
$
67,500
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190815005335/en/
Investor Relations: Aimee Carroll Phone: 215-543-3973
Email: Investors@edisonnation.com
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