Quarterly report pursuant to Section 13 or 15(d)

Basis of Presentation and Nature of Operations

v3.19.1
Basis of Presentation and Nature of Operations
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]
Note 1 — Basis of Presentation and Nature of Operations
 
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2019 and the results of operations, changes in stockholders’ equity, and cash flows for the periods presented. The results of operations for the three ended March 31, 2019 are not necessarily indicative of the operating results for the full fiscal year for any future period.
 
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The Company’s accounting policies are described in the Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2018, and updated, as necessary, in this Quarterly Report on Form 10-Q.
 
As used herein, the terms the “Company,” “Edison Nation” “we,” “us,” “our” and similar refer to Edison Nation, Inc., a Nevada corporation incorporated on July 18, 2017 under the laws of the State of Nevada as Idea Lab X Products, Inc. and also formerly known as Xspand Products Lab, Inc. prior to its name change on September 12, 2018, 
and/or its wholly-owned and majority-owned operating subsidiaries, and/or where applicable, its management.
 
Edison Nation is a vertically-integrated, end-to-end, consumer product research & development, manufacturing, sales and fulfillment company. The Company’s proprietary web-enabled platform provides a low risk, high reward platform and process to connect innovators of new product ideas with potential licensees.
 
As of March 31, 2019, Edison Nation, Inc. had five wholly-owned subsidiaries: S.R.M. Entertainment Limited (“SRM”), Ferguson Containers, Inc. (“Fergco”), CBAV1, LLC (“CB1”), Pirasta, LLC and Edison Nation Holdings, LLC. Edison Nation, Inc. owns 72.15% of Cloud B, Inc. and 50% of Best Party Concepts, LLC. Edison Nation Holdings, LLC is the single member of Edison Nation, LLC and Everyday Edisons, LLC. Edison Nation, LLC is the single member of Safe TV Shop, LLC. Cloud B, Inc. owns 100% of Cloud B UK and Cloud B Australia.
 
Liquidity
 
For the three months ended March 31, 2019, our operations lost approximately 
$1,300,000 of which approximately $700,000 was non-cash and approximately $400,000 was related to transaction costs and other non-recurring items.
 
At March 31, 2019, we had total current assets of approximately
$6,200,000
and current liabilities of approximately
$10,800,000
resulting in negative working capital of approximately
$4,600,000, of which approximately $3,800,000 related to unsecured trade payables assumed in our Cloud B acquisition. In February 2019, our consolidating subsidiary, CBAV1, LLC,
foreclosed on the promissory note it held that was secured by Cloud B, Inc.’s assets making any payments of suchCloud B trade payables unlikely. At March 31, 2019, we had total assets of approximately
$30,300,000
and total liabilities of approximately
$15,400,000
resulting in stockholders’ equity of approximately
$14,900,000.
 
The foregoing factors raised concerns about the Company’s 
ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company’s ability to attract significant new sources of capital, attain a reasonable threshold of operating efficiencies and achieve profitable operations from the sale of its products. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
 
Management has considered possible mitigating factors within our management plan on our ability to continue for at least a year from the date these financial statements are filed. The following items are management plans to alleviate any going concern issues:
 
 
Raise further capital through the sale of 
additional 
equity;
 
 
Borrow money under debt securities;
 
 
The deferral of payments to related party debt holders for both principal
of approximately
 
$1,000,000
and related interest expense;
 
 
Cost saving initiatives related to synergies and the elimination of redundant costs of approximately $500,000
; and
 
 
Possible sale of certain brands to other manufacturers.