Edison Nation, Inc. Reports Financial Results for the Second Quarter Ended June 30, 2020

Company Announces Record Quarterly Revenue

Bethlehem, P.A., Aug. 18, 2020 (GLOBE NEWSWIRE) -- Edison Nation, Inc. (NASDAQ:EDNT), a multifaceted ecosystem that fosters innovation and drives IP, media and consumer products, today announced results for the second quarter ended June 30, 2020.

Company Highlights

  • Company announces record quarterly revenue of $6.8 million.
  • Relaunch of Edison Nation Medial division (“EN Medical), distributing personal protective equipment (“PPE”) and ancillary medical supplies to hospitals, government agencies, educational facilities and distributors.
  • Formation of Global Clean Solutions (“Global”), producing proprietary sanitizer stands with subscription-based refills of our in-house sanitizer, Purple Mountain Clean. Global secured a three-year contract with an additional two-year option to supply a large municipality with its Purple Mountain Clean hand sanitizer.
  • EN Medical/Global revenue for the second quarter was $3.0M. Additionally, EN Medical has deferred revenue of $0.9M, which is net revenue based on fees for facilitating the shipment of goods and not the actual dollar value of the goods that were shipped to customers.
  • EN Medical purchase orders received in the second quarter that are pending shipment total $9.9M and the total open purchase orders for EN Medical as of today’s date are $44.4M.
  • Edison Nation product sales for its core operations were $3.8M for the second quarter including increased sales on marketplaces such as Amazon.
  • Beta version of ENovation ENgine, a SaaS platform to engage early stage businesses and entrepreneurs.
  • Expansion of Pressix licensing agreement, and licensing of Table-to-Go from Edison Nation community.
  • Return of Emmy-Award winning television show, Everyday Edisons, streaming on Crackle.

First Quarter 2020 Financial Summary

Revenue

  • Second quarter 2020 revenue increased to $6.8 million as compared to $5.9 million revenue in the second quarter of 2019, an increase of 15.28%. The increase in revenue was primarily the result of an increase in business and new customers under the Company’s Edison Nation Medical operations.
  • First six months revenue of $10.5 million was a decrease of $1.16 million as compared to revenue of $11.7 million for the first six months of 2019.

Net Loss

  • Net loss in the second quarter of 2020 was $1.6 million, or ($0.18) per basic and diluted share, compared to a net loss of $1.7 million, or ($0.30) per basic and diluted share in the second quarter of 2019.
  • Net loss for the first six months of 2020 was $.33 million, or ($0.04) per basic and diluted share, compared to a net loss of $3.1 million, or ($0.55) per basic and diluted share in the second quarter of 2019.

Adjusted EBITDA

  • Adjusted EBITDA, a non-GAAP measure, totaled a negative $0.006 million in the second quarter of 2020, compared to a positive $0.009 million in the second quarter of 2019.
  • Adjusted EBITDA, a non-GAAP measure, totaled negative $0.917 million in the first six months of 2020, compared to negative $0.193 million in the first six months of 2019.

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 June 30,
    Six Months
Ended June 30,
 
    2020     2019     2020     2019  
Net (loss)   $ (1,602,139 )   $ (1,775,065 )   $ (332,647 )   $ (3,153,462 )
                                 
Interest expense, net     841,529       401,170       1,571,111       525,864  
Income tax expense     -       51,005       -       74,200  
Depreciation and amortization     296,108       332,187       612,406       633,570  
EBITDA     (458,877 )     (990,703 )     1,850,870       (1,919,828 )
Stock-based compensation     268,916       346,071       1,588,427       708,490  
Restructuring and severance costs     189,009       134,597       431,145       170,982  
Transaction and acquisition costs     -       -       82,736       223,538  
Other non-recurring costs     -       519,191       40,860       623,365  
Gain on divestiture     -       -       (4,911,760 )     -  
Adjusted EBITDA (1)   $ (952   $ 9,156     $ (917,722 )   $ (193,453 )


  (1) On June 8, 2020 the Company entered into a binding memorandum of understating (the “Agreement”) with Office Mart, Inc. (the “Customer”) and Zaaz Medical, Inc. (the “Sourcing Partner”) (collectively “the Parties”) to deliver certain goods to a third party (the “Transaction”). The Company was responsible for bringing the parties together and satisfied its performance obligation under the agreement. On August 10, 2020, the Company entered into an amendment to the Agreement (the “Amendment”) related to the Transaction whereas the Company and the Customer agreed to the settlement of the fees earned related to the Transaction of $907,500 as of June 30, 2020. The Transaction was recorded in accounts receivable and deferred revenues as of June 30, 2020 on the balance sheet with no impact to the condensed consolidated statement of operations. The Company has elected to defer the revenues until cash collection, but had the Company recognized the revenues adjusted EBITDA would have been $906,548 and $(10,222) for the three and six months ended June 30, 2020, respectively.

Management Commentary

Chris Ferguson, Chief Executive, commented, “During a challenging time in the world, our team has performed above and beyond expectations in both the core product business and the relaunch of Edison Nation Medical. The third quarter of 2020 will be the first full fiscal quarter for the new EN Medical, and we are excited for the continued validation and expansion of the Edison Nation business model.” About Edison Nation, Inc.

Edison Nation, Inc. 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. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS

    June 30, 2020     December 31, 2019  
    (Unaudited)        
             
Assets                
Current assets:                
Cash and cash equivalents   $ 1,762,337     $ 412,719  
Accounts receivable, net     3,086,195       2,108,099  
Inventory     1,190,998       1,369,225  
Prepaid expenses and other current assets     1,884,542       917,433  
Income tax receivable     147,889       147,889  
Total current assets     8,071,961       4,955,365  
Property and equipment, net     932,027       931,968  
Right of use assets, net     578,280       732,100  
Intangible assets, net     11,047,515       11,598,063  
Goodwill     5,392,123       5,392,123  
Total assets   $ 26,021,906     $ 23,609,619  
                 
Liabilities and stockholders’ equity                
Current liabilities:                
Accounts payable   $ 3,047,197     $ 7,397,650  
Accrued expenses and other current liabilities     1,704,484       1,594,669  
Deferred revenues     1,061,989       159,591  
Current portion of operating leases liabilities     279,427       272,215  
Income tax payable     8,446       22,919  
Line of credit, net of debt issuance costs of $0 and $15,573, respectively     2,151,108       456,995  
Current portion of convertible notes payable, net of debt issuance costs of $535,235     900,765       -  
Current portion of notes payable, net of debt issuance costs of $86,349 and $212,848, respectively     970,710       1,365,675  
Current portion of notes payable – related parties     1,166,365       1,686,352  
Due to related party     26,784       17,253  
Total current liabilities     11,317,275       12,973,319  
Operating leases liabilities –net of current portion     326,482       482,212  
Convertible notes payable – related parties, net of current portion, net of debt discount of $316,667 and $366,666, respectively     1,111,495       1,061,495  
Notes payable, net of current portion     825,004       42,492  
Notes payable – related parties, net of current portion     1,501,148       1,595,669  
Total liabilities     15,081,404       16,155,187  
Commitments and Contingencies (Note 8)                
                 
Stockholders’ equity                
Preferred stock, $0.001 par value, 30,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively   $ -     $ -  
Common stock, $0.001 par value, 250,000,000 shares authorized; 9,618,401 and 8,015,756 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively     9,618       8,016  
Additional paid-in-capital     30,802,083       26,259,575  
Accumulated deficit     (18,850,350 )     (18,495,461 )
Total stockholders’ equity attributable to Edison Nation, Inc.     11,961,351       7,772,130  
Noncontrolling interests     (1,020,849 )     (317,698 )
Total stockholders’ equity     10,940,502       7,454,432  
Total liabilities and stockholders’ equity   $ 26,021,906     $ 23,609,619  

Edison Nation, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
 
    2020     2019     2020     2019  
Revenues, net   $ 6,880,026     $ 5,968,255     $ 10,547,136     $ 11,706,789  
Cost of revenues     4,889,784       3,924,252       7,308,196       7,869,810  
Gross profit     1,990,242       2,044,003       3,283,940       3,836,979  
                                 
Operating expenses:                                
Selling, general and administrative     2,770,930       3,392,596       6,963,643       6,441,784  
Operating loss     (780,688 )     (1,348,593 )     (3,724,703 )     (2,604,805 )
                                 
Other (expense) income:                                
Rental income     25,703       25,703       51,407       51,407  
Interest expense     (847,154 )     (401,170 )     (1,571,111 )     (525,864 )
Gain on divestiture     -       -       4,911,760       -  
Total other (expense) income     (821,451 )     (375,467 )     3,392,056       (474,457 )
Loss before income taxes     (1,602,139 )     (1,724,060 )     (332,647 )     (3,079,262 )
Income tax expense     -       51,005       -       74,200  
Net loss   $ (1,602,139 )   $ (1,775,065 )   $ (332,647 )   $ (3,153,462 )
Net income (loss) attributable to noncontrolling interests     22,241       (39,648 )     22,241       17,245  
Net loss attributable to Edison Nation, Inc.   $ (1,624,380 )   $ (1,735,417 )   $ (354,888 )   $ (3,170,707 )
Net loss per share:                                
Net loss per share – basic and diluted   $ (0.18 )   $ (0.30 )   $ (0.04 )   $ (0.55 )
Weighted average number of common shares outstanding – basic and diluted     8,920,554       5,702,693       8,551,012       5,682,150  

Edison Nation, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    Six Months Ended June 30,  
    2020     2019  
Cash Flow from Operating Activities                
Net loss attributable to Edison Nation, Inc.   $ (354,888 )   $ (3,170,707 )
Net income attributable to noncontrolling interests     22,241       17,245  
Net loss     (332,647 )     (3,153,462 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     612,406       633,570  
Amortization of financing costs     1,227,046       391,223  
Stock-based compensation     1,588,427       708,490  
Amortization of right of use asset     153,820       155,408  
Gain on divestiture     (4,911,760 )     -  
Changes in assets and liabilities:                
Accounts receivable     (978,097 )     (1,215,155 )
Inventory     178,227       (336,544 )
Prepaid expenses and other current assets     (967,109 )     (561,331 )
Accounts payable     (344,847 )     1,191,252  
Accrued expenses and other current liabilities     1,425,622       480,928  
Operating lease liabilities     (148,518 )     (144,132 )
Due from related party     9,532       (65,600 )
Net cash used in operating activities     (2,487,898 )     (1,915,353 )
                 
Cash Flows from Investing Activities                
Purchases of property and equipment     (61,917 )     (106,770 )
Net cash used in investing activities     (61,917 )     (106,770 )
                 
Cash Flows from Financing Activities                
Borrowings under lines of credit, net     1,678,540       240,000  
Borrowings under convertible notes payable     1,436,000       1,111,111  
Borrowings under notes payable     1,767,352       1,110,000  
Repayments under lines of credit     -       (31,542 )
Repayments under notes payable     (824,472 )     (566,710 )
Repayments under notes payable – related parties     (14,508 )     (40,997 )
Fees paid for financing costs     (143,479 )     (427,411 )
Net cash provided by financing activities     3,899,433       1,394,451  
Net increase (decrease) in cash and cash equivalents     1,349,618       (627,672 )
Cash and cash equivalents – beginning of period     412,719       2,052,731  
Cash and cash equivalents – end of period   $ 1,762,337       1,425,059  
                 
Supplemental Disclosures of Cash Flow Information                
Cash paid during the period for:                
Interest   $ 144,740     $ 74,908  
Income taxes   $ 235,725     $ -  
Noncash investing and financing activity:                
Shares issued to note holders   $ -     $ 173,300  
Conversion under notes payable   $ 424,000     $ -  

Investor Relations:

Aimee Carroll, Edison Nation, Inc.
Phone: (484) 893-0060
Email: investors@edisonnation.com


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Source: Edison Nation, Inc.