Quarterly report pursuant to Section 13 or 15(d)

Basis of Presentation and Nature of Operations

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Basis of Presentation and Nature of Operations
3 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation and Nature of Operations

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, 2020 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, 2020 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, 2019. 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, 2019, 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, 2020, Edison Nation, Inc. had six wholly-owned subsidiaries: S.R.M. Entertainment Limited (“SRM”), Scalematix, LLC (“Scalematix”), Ferguson Containers, Inc. (“Fergco”), CBAV1, LLC (“CB1”), Pirasta, LLC (“Pirasta”) and Edison Nation Holdings, LLC. Edison Nation, Inc. owns 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.

 

Liquidity

 

For the three months ended March 31, 2020, our operations lost approximately $2,900,000, of which approximately $2,284,000 was non-cash and approximately $366,000 was related to transaction costs and other non-recurring items

 

At March 31, 2020, we had total current assets of approximately $4,907,818 and current liabilities of approximately $8,899,487 resulting in negative working capital of approximately $3,991,669, of which $1,118,751 was related party notes payable and $530,815 was included in accrued expenses for unissued shares. At March 31, 2020, we had total assets of $23,199,868 and total liabilities of $11,970,547 resulting in stockholders’ equity of $11,229,321.

 

The foregoing factors raise substantial doubt about the Company’s ability to continue as a going concern for at least the next twelve months from the date of issuance of these condensed financial statements. 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 condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The following is additional information on our operating losses and working capital:

 

The Company’s operating loss for the three months ended March 31, 2020 included $2,284,269 related to depreciation, amortization (including amortization for financing costs and right of use asset) and stock-based compensation. In addition, approximately $365,732 was related to transaction costs, restructuring charges and other non-recurring and redundant costs which are being removed or reduced.

 

Management has considered possible mitigating factors within our management plans 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 for at least the next twelve months from the date these condensed financial statements are available:

 

  Subsequent to March 31, 2020, the Company raised $1,089,853 through loan agreements.
     
  Raise further capital through the sale of addition equity.
     
  Borrow money under debt securities.
     
  The deferral of payments to related party debt holders for both principal of $1,118,751 and related interest expense.
     
  Annual cost saving initiatives related to synergies and the elimination of redundant costs of approximately $1,500,000.
     
  Possible sale of certain brands to other manufacturers.
     
  Edison Nation Medical’s procurement of Personal Protective Equipment (“PPE”) and subsequent sale to governmental agencies, educational facilities, medical facilities and distributors.
     
  Entry into joint ventures or total/partial acquisitions of operational entities to expand the sale of PPE through Edison Nation Medical

 

Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings.