Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 14, 2019 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | EDISON NATION, INC. | |
Entity Central Index Key | 0001717556 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Trading Symbol | EDNT | |
Entity Interactive Data Current | Yes | |
Entity Common Stock, Shares Outstanding | 6,048,835 | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Small Business | true | |
Entity Shell Company | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
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 | 0 |
Intangible assets, net | 11,873,337 | 12,687,731 |
Goodwill | 9,736,510 | 9,736,510 |
Total assets | 28,633,331 | 28,888,588 |
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 | 0 |
Income tax payable | 0 | 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 - 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 | 0 |
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 |
Long-term Debt [Member] | ||
Current liabilities: | ||
Current portion of long-term debt | $ 1,270,243 | $ 313,572 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Debt Issuance Costs, Net | $ 19,466 | $ 31,145 |
Debt Instrument, Unamortized Discount | $ 439,819 | $ 466,667 |
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 250,000,000 | 250,000,000 |
Common Stock, Shares, Issued | 6,033,835 | 5,654,830 |
Common Stock, Shares, Outstanding | 6,033,835 | 5,654,830 |
Long-term Debt [Member] | ||
Debt Issuance Costs, Net | $ 153,793 | $ 0 |
Debt Issuance Costs, Current, Net | 153,793 | 0 |
Convertible Notes Payable [Member] | ||
Debt Issuance Costs, Net | 439,818 | $ 466,667 |
Debt Instrument, Unamortized Discount | $ 78,800 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
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 | 0 | (732,600) | 0 | (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 | 0 | 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) | 0 | (31,858) | 0 |
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) | $ (1.11) |
Weighted average number of common shares outstanding - basic and diluted | 5,834,167 | 4,560,607 | 5,733,379 | 3,577,942 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Noncontrolling Interest [Member] | Total |
Balance at Dec. 31, 2017 | $ 3,000 | $ 0 | $ (235,630) | $ 0 | $ (232,630) |
Balance (in shares) at Dec. 31, 2017 | 3,000,000 | ||||
Sale of common stock - investors in the IPO | $ 1,313 | 5,357,257 | 0 | 0 | 5,358,570 |
Sale of common stock - investors in the IPO (in shares) | 1,312,520 | ||||
Issuance of common stock to note holders | $ 33 | 167,467 | 0 | 0 | 167,500 |
Issuance of common stock to note holders (in shares) | 33,500 | ||||
Issuance of common stock to employees | $ 62 | 309,438 | 0 | 0 | 309,500 |
Issuance of common stock to employees (in shares) | 61,900 | ||||
Issuance of common stock to vendors for services | $ 75 | 374,925 | 0 | 0 | 375,000 |
Issuance of common stock to vendors for services (in shares) | 75,000 | ||||
Issuance of common stock to satisfy indebtedness related to acquisition of Edison Nation, Holdings, LLC | $ 557 | 3,759,760 | 0 | 0 | 3,760,317 |
Issuance of common stock to satisfy indebtedness related to acquisition of Edison Nation Holdings, LLC (in shares) | 557,084 | ||||
Beneficial conversion option on indebtedness related to acquisition of Edison Nation Holdings, LLC | $ 0 | 500,000 | 0 | 0 | 500,000 |
Stock-based compensation | 0 | 1,982,076 | 0 | 0 | 1,982,076 |
Net loss | 0 | 0 | (3,983,272) | 0 | (3,983,272) |
Balance at Sep. 30, 2018 | $ 5,040 | 12,450,923 | (4,218,902) | 0 | 8,237,061 |
Balance (in shares) at Sep. 30, 2018 | 5,040,004 | ||||
Balance at Jun. 30, 2018 | $ 4,369 | 7,551,951 | (2,539,596) | 0 | 5,016,724 |
Balance (in shares) at Jun. 30, 2018 | 4,368,930 | ||||
Sale of common stock - investors in the IPO | $ 18 | (18) | 0 | 0 | 0 |
Sale of common stock - investors in the IPO (in shares) | 18,290 | ||||
Issuance of common stock to note holders | $ 20 | (20) | 0 | 0 | 0 |
Issuance of common stock to note holders (in shares) | 20,000 | ||||
Issuance of common stock to employees | $ 1 | 3,499 | 0 | 0 | 3,500 |
Issuance of common stock to employees (in shares) | 700 | ||||
Issuance of common stock to vendors for services | $ 75 | 374,925 | 0 | 0 | 375,000 |
Issuance of common stock to vendors for services (in shares) | 75,000 | ||||
Issuance of common stock to satisfy indebtedness related to acquisition of Edison Nation, Holdings, LLC | $ 557 | 3,759,760 | 0 | 0 | 3,760,317 |
Issuance of common stock to satisfy indebtedness related to acquisition of Edison Nation Holdings, LLC (in shares) | 557,084 | ||||
Beneficial conversion option on indebtedness related to acquisition of Edison Nation Holdings, LLC | $ 0 | 500,000 | 0 | 0 | 500,000 |
Stock-based compensation | 0 | 260,826 | 0 | 0 | 260,826 |
Net loss | 0 | 0 | (1,679,306) | 0 | (1,679,306) |
Balance at Sep. 30, 2018 | $ 5,040 | 12,450,923 | (4,218,902) | 0 | 8,237,061 |
Balance (in shares) at Sep. 30, 2018 | 5,040,004 | ||||
Balance at Dec. 31, 2018 | $ 5,655 | 20,548,164 | (5,565,756) | 951,576 | 15,939,639 |
Balance (in shares) at Dec. 31, 2018 | 5,654,830 | ||||
Issuance of common stock to note holders | $ 251 | 309,529 | 0 | 0 | 309,780 |
Issuance of common stock to note holders (in shares) | 251,004 | ||||
Issuance of common stock to employees | $ 3 | 8,847 | 0 | 0 | 8,850 |
Issuance of common stock to employees (in shares) | 3,000 | ||||
Issuance of common stock to vendors for services | $ 125 | 394,000 | 0 | 0 | 394,125 |
Issuance of common stock to vendors for services (in shares) | 125,000 | ||||
Stock-based compensation | $ 0 | 187,740 | 0 | 0 | 187,740 |
Net loss | 0 | 0 | (5,752,808) | (31,858) | (5,784,666) |
Balance at Sep. 30, 2019 | $ 6,034 | 21,448,280 | (11,318,564) | 919,718 | 11,055,468 |
Balance (in shares) at Sep. 30, 2019 | 6,033,835 | ||||
Balance at Jun. 30, 2019 | $ 5,738 | 21,136,912 | (8,736,463) | 968,821 | 13,375,008 |
Balance (in shares) at Jun. 30, 2019 | 5,737,830 | ||||
Issuance of common stock to note holders | $ 201 | 136,279 | 0 | 0 | 136,480 |
Issuance of common stock to note holders (in shares) | 201,005 | ||||
Issuance of common stock to employees | $ 3 | 8,847 | 0 | 0 | 8,850 |
Issuance of common stock to employees (in shares) | 3,000 | ||||
Issuance of common stock to vendors for services | $ 92 | 252,908 | 0 | 0 | 253,000 |
Issuance of common stock to vendors for services (in shares) | 92,000 | ||||
Stock-based compensation | $ 0 | (86,666) | 0 | 0 | (86,666) |
Net loss | 0 | 0 | (2,582,101) | (49,103) | (2,631,204) |
Balance at Sep. 30, 2019 | $ 6,034 | $ 21,448,280 | $ (11,318,564) | $ 919,718 | $ 11,055,468 |
Balance (in shares) at Sep. 30, 2019 | 6,033,835 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 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) | 0 |
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 | 0 |
Change in fair value of put option contract | 0 | 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) | 0 |
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 | 0 | (881,318) |
Purchase of loan held for investment | 0 | (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 | 0 |
Borrowings under convertible notes payable | 1,111,111 | 0 |
Borrowings under notes payable | 1,670,000 | 718,559 |
Repayments under lines of credit | (340,766) | 0 |
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 | 0 | 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 |
Cash paid during the period for: Income taxes | 0 | 0 |
Noncash investing and financing activity: | ||
Shares issued to note holders | 309,780 | 167,500 |
Shares issued for the acquisition | 0 | 3,760,317 |
Shares reserved in exchange for the cancellation of certain non-voting membership interests related to acquisition of Edison Nation Holdings, LLC | 0 | 6,682,500 |
Borrowings under note payable for the purchase of property and equipment | 0 | 73,559 |
Issuance of 4%, 5 year senior convertible notes for the acquisition of Edison Nation Holdings, LLC | $ 0 | $ 1,428,161 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - Senior Convertible Notes [Member] | 9 Months Ended |
Sep. 30, 2019 | |
Debt Instrument, Interest Rate, Stated Percentage | 4.00% |
Debt Instrument, Term | 5 years |
Basis of Presentation and Natur
Basis of Presentation and Nature of Operations | 9 Months Ended |
Sep. 30, 2019 | |
Basis of Presentation and Nature of Operations | |
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 September 30, 2019 and the results of operations, changes in stockholders’ equity, and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the operating results for the full fiscal year or 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. Edison Nation is a vertically-integrated, end-to-end, consumer product research and 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 September 30, 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 (“EN”). Edison Nation, Inc. owns 72.15% of Cloud B, Inc. (“Cloud B”), 50% of Best Party Concepts, LLC and 50% of Ed Roses, LLC. EN 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 owns 100% of Cloud B Limited (UK) and Cloud B Pty (Australia). On August 23, 2019, the Company formed Ed Roses, LLC, a 50% joint venture with 4Keeps Roses, Inc., to distribute preserved roses, flowers and associated gift products. Liquidity For the three and nine months ended September 30, 2019, our operations lost $2,307,736 and $4,912,541, respectively. At September 30, 2019, we had total current assets of approximately $5,200,000 and current liabilities of approximately $12,000,000 resulting in negative working capital of approximately $6,800,000. At September 30, 2019, we had total assets of approximately $28,600,000 and total liabilities of approximately $17,600,000 resulting in stockholders’ equity of approximately $11,000,000. The foregoing factors raised initial 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.The following is additional information on our operating losses and working capital: The Company’s operating loss for the three and nine months ended September 30, 2019 included $486,546 and $1,828,604 related to depreciation, amortization and stock-based compensation. In addition, approximately $100,000 and $1,200,000, respectively, was related to transaction costs, restructuring charges and other non-recurring and redundant costs which are being removed or reduced. The negative working capital includes approximately $3,800,000 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. CB1 owns the senior secured position on the promissory note to Cloud B. in the amount of $2,270,000. In February 2019, CB1, pursuant to an Article 9 foreclosure action, perfected its secured UCC interest in all the assets of Cloud B 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, SRM 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, or net of $4,700,000, has been eliminated in consolidation, are not expected to be satisfied due to the foreclosure. On October 2, 2019, the Company entered into a Share Purchase Agreement (the “PIPE Purchase Agreement”) with certain accredited investors (collectively, the “Investors”) for the private placement of 1,175,000 shares of the Company’s common stock, $0.001 par value per share, at a purchase price of $2.00 per share (the “PIPE Transaction”). In a series of three closings conducted in October 2019, the Company received net proceeds of $2,039,303 which consisted of $2,350,000 of gross proceeds offset by $310,697 of fees to placement agent and their lawyers. Alexander Capital, LP (“Alexander Capital”), a FINRA registered broker dealer, acted as placement agent with respect to the PIPE Transaction. In connection with the PIPE Transaction, Alexander Capital received a commission of $141,000, a debt restructuring fee of $64,208, a debt conversion fee of 15,889, a placement fee of $33,600 and warrants to purchase 70,500 shares of the Company’s common stock, at an exercise price of $2.50 per share (the “Placement Agent Warrants”). In connection with the PIPE transaction, the convertible notes entered into on May 13, 2019 were also converted at $2.00 per share into 560,185 shares of the Company's common stock. 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: · Cloud B liabilities are unlikely to be paid due to CB1 holding the senior secured position and its rights under the foreclosure to the remaining assets of the entity to satisfy the outstanding obligation. · 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, of which approximately $153,000 impacted the three months ended September 30, 2019; and · Possible sale of certain brands to other manufacturers. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 2 — Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Edison Nation, Inc. and its wholly-owned and majority owned subsidiaries. All intercompany balances and transactions have been eliminated. Use of Estimates Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial statements. The Company’s significant estimates used in these financial statements include, but are not limited to, accounts receivable reserves, the valuation allowance related to the Company’s deferred tax assets, the recoverability and useful lives of long-lived assets, debt conversion features, stock-based compensation, certain assumptions related to the valuation of the reserved shares and the assets acquired and liabilities assumed related to the Company’s acquisitions. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates. Reclassifications Certain reclassifications have been made to prior year amounts to conform to current year presentation. Cash and Cash Equivalents The Company has cash on deposit in several financial institutions which, at times, may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced losses in such accounts and periodically evaluates the creditworthiness of its financial institutions. The Company reduces its credit risk by placing its cash and cash equivalents with major financial institutions. The Company had approximately $627,000 uninsured cash at September 30, 2019 of which approximately $198,000 was held in foreign bank accounts not covered by FDIC insurance limits as of September 30, 2019. Accounts Receivable As of September 30, 2019, the following customers represented more than 10% of total accounts receivable: September 30, 2019 Customer A 15 % Inventory Inventory is recorded at the lower of cost or net realizable value on a first-in, first-out basis. The Company reduces the carrying value of inventories for those items that are potentially excess, obsolete, or slow moving based on changes in customer demand, technology developments, or other economic factors. Revenue Recognition Generally, the Company considers all revenues as arising from contracts with customers. Revenue is recognized based on the five step process outlined in the Accounting Standards Codification (“ASC”) 606: Step 1 – Identify the Contract with the Customer – A contract exists when (a) the parties to the contract have approved the contract and are committed to perform their respective obligations, (b) the entity can identify each party’s rights regarding the goods or services to be transferred, (c) the entity can identify the payment terms for the goods or services to be transferred, (d) the contract has commercial substance and it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. Step 2 – Identify Performance Obligations in the Contract – Upon execution of a contract, the Company identifies as performance obligations each promise to transfer to the customer either (a) goods or services that are distinct, or (b) a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. To the extent a contract includes multiple promised goods or services, the Company must apply judgement to determine whether the goods or services are capable of being distinct within the context of the contract. If these criteria are not met, the goods or services are accounted for as a combined performance obligation. Step 3 – Determine the Transaction Price – When (or as) a performance obligation is satisfied, the Company shall recognize as revenue the amount of the transaction price that is allocated to the performance obligation. The contract terms are used to determine the transaction price. Generally, all contracts include fixed consideration. If a contract did include variable consideration, the Company would determine the amount of variable consideration that should be included in the transaction price based on expected value method. Variable consideration would be included in the transaction price, if in the Company’s judgement, it is probable that a significant future reversal of cumulative revenue under the contract would not occur. Step 4 – Allocate the Transaction Price – After the transaction price has been determined, the next step is to allocate the transaction price to each performance obligation in the contract. If the contract only has one performance obligation, the entire transaction price will be applied to that obligation. If the contract has multiple performance obligations, the transaction price is allocated to the performance obligations based on the relative standalone selling price (SSP) at contract inception. Step 5 – Satisfaction of the Performance Obligations (and Recognize Revenue) – Revenue is recognized when (or as) goods or services are transferred to a customer. The Company satisfies each of its performance obligations by transferring control of the promised good or service underlying that performance obligation to the customer. Control is the ability to direct the use of, and obtain substantially all of the remaining benefits from an asset. It includes the ability to prevent other entities from directing the use of, and obtaining the benefits from an asset. Indicators that control has passed to the customer include: a present obligation to pay; physical possession of the asset; legal title; risks and rewards of ownership; and acceptance of the asset(s). Performance obligations can be satisfied at a point in time or over time. Substantially all of the Company’s revenues continue to be recognized when control of the goods are transferred to the customer, which is upon shipment of the finished goods to the customer. All sales have fixed pricing and there are currently no material variable components included in the Company’s revenue. Additionally, the Company will issue credits for defective merchandise, historically these credits for defective merchandise have not been material. Based on the Company’s analysis of the new revenue standards, revenue recognition from the sale of finished goods to customers, which represents substantially all of the Company’s revenues, was not impacted by the adoption of the new revenue standards. Disaggregation of Revenue The Company’s primary revenue streams include the sale and/or licensing of consumer goods and packaging materials. The Company’s licensing business is not material and has not been separately disaggregated for segment purposes. The disaggregated Company’s revenues for the three and nine months ended September 30, 2019 and 2018 were as follows: For the Three Months Ended For the Nine Months September 30, Ended September 30, 2019 2018 2019 2018 Revenues: Product sales $ 3,499,116 $ 4,858,055 $ 14,982,117 $ 12,676,582 Service 19,442 — 67,753 — Licensing 14,087 82,133 189,564 82,133 Total revenues, net $ 3,532,645 $ 4,940,188 $ 15,239,434 $ 12,758,715 For the three and nine months ended September 30, 2019 and 2018, the following customer represented more than 10% of total net revenues: For the Three Months Ended For the Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Customer : Customer A 11 % 23 % 22 % 10 % Customer B * * * 17 % * Customer did not represent greater than 10% of total net revenue. For the three and nine months ended September 30, 2019 and 2018, the following geographical regions represented more than 10% of total net revenues: For the Three Months Ended For the Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Region: North America 86 % 84 % 78 % 81 % Asia-Pacific * 11 % * 15 % Europe * * 15 % * * Fair Value of Financial Instruments The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 — quoted prices in active markets for identical assets or liabilities Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions) The carrying amounts of the Company’s financial instruments, such as cash, accounts receivable, accounts payable, accrued expenses and other current liabilities approximate fair values due to the short-term nature of these instruments. The carrying amount of the Company’s notes payable approximates fair value because the effective yields on these obligations, which include contractual interest rates, taken together with other features such as concurrent issuance of warrants, are comparable to rates of returns for instruments of similar credit risk. The loan held for investment was acquired at fair value, which resulted in a discount. As of September 30, 2019, the book value and estimated fair value of the Company’s level 3 instruments was as follows: September 30, 2019 Estimated Book Value Fair Value Contingent consideration $ (520,000) $ (520,000) The following changes in level 3 instruments for the three months ended September 30, 2019 are presented below: Contingent Consideration - Earnout Balance, July 1, 2019 $ (520,000) Change in fair value — Balance, September 30, 2019 $ (520,000) The following changes in level 3 instruments for the nine months ended September 30, 2019 are presented below: Contingent Consideration – Earnout Balance, December 31, 2018 $ (520,000) Change in fair value — Balance, September 30, 2019 $ (520,000) There were no changes to the underlying assumptions used in determining the fair value of the contingent consideration liability for the three and nine months ended September 30, 2019. There was no contingent consideration as of September 30, 2018. Foreign Currency Translation The Company uses the United States dollar as its functional and reporting currency since the majority of the Company’s revenues, expenses, assets and liabilities are in the United States. Assets and liabilities in foreign currencies are translated using the exchange rate at the balance sheet date, while revenue and expense accounts are translated at the average exchange rates prevailing during the year. Equity accounts are translated at historical exchange rates. Gains and losses from foreign currency transactions and translation for the three and nine months ended September 30, 2019 and 2018 and the cumulative translation gains and losses as of September 30, 2019 and December 31, 2018 were not material. Net Earnings or Loss per Share Basic net loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number vested of common shares, plus the net impact of common shares (computed using the treasury stock method), if dilutive, resulting from the exercise of dilutive securities. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of September 30, 2018, there were no common stock equivalents outstanding. As of September 30, 2019, the Company excluded the common stock equivalents summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive. September 30, 2019 Selling Agent Warrants 89,992 Shares reserved in exchange for the cancellation of certain non-voting membership interest in Edison Nation Holdings, LLC 990,000 Options 290,000 Convertible shares under notes payable 285,632 Total 1,655,624 Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update No. 2016‑02 (ASU 2016‑02) which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. This accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. Additionally, this accounting guidance requires a modified retrospective transition approach for all leases existing at, or entered into after the date of initial application, with an option to use certain transition relief. In July 2018, the FASB issued a practical expedient that would allow entities the option to apply the provisions of the new lease guidance at the effective date of adoption without adjusting the comparative periods presented. The Company has elected the “package of practical expedients” and as a result is not required to reassess its prior accounting conclusions about lease identification, lease classification and initial direct costs for lease contracts that exist as of the transition date. However, the Company has not elected the use of hindsight for determining the reasonably certain lease term. The new lease standard also provides practical expedients and policy elections for an entity’s ongoing accounting. The Company has elected the practical expedient to not separate lease and non-lease components for all of its leases. The Company has elected the short-term lease recognition exemption, which results in no recognition of right-of-use assets and lease liabilities for existing short-term leases at transition. Upon adoption on January 1, 2019, the Company recognized right of use assets for operating leases and operating lease liabilities that have not previously been recorded. The lease liability for operating leases is based on the net present value of future minimum lease payments. The right of use asset for operating leases is based on the lease liability. The Company did not have any deferred rent or material prepaid rent. The cumulative effect of initially applying the new lease accounting standard as of January 1, 2019 is as follows: Cumulative January 1, January 1, Effect 2019, as 2019 Adjustment adjusted Assets: Right of use assets – operating leases $ — $ 943,997 $ 943,997 Liabilities: Current portion of operating lease liabilities $ — $ 261,866 $ 261,866 Operating lease liabilities, net of current portion $ — $ 682,131 $ 682,131 The adoption of the standard did not result in any material changes to the recognition of operating lease expenses in the Company’s consolidated statements of operations. In June 2018, the FASB issued an amendment to the accounting guidance related to accounting for employee share-based payments which clarifies that an entity should recognize excess tax benefits in the period in which the amount of the deduction is determined. This amendment is effective for annual periods beginning after December 15, 2018. We have adopted this accounting guidance effective January 1, 2019, with no impact on our financial statements as there were no excess tax benefits to be recognized due to our net operating losses. In August 2018, the FASB issued new accounting guidance that addresses the accounting for implementation costs associated with a hosted service. The guidance provides that implementation costs be evaluated for capitalization using the same criteria as that used for internal-use software development costs, with amortization expense being recorded in the same income statement expense line as the hosted service costs and over the expected term of the hosting arrangement. This guidance is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The guidance will be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We have not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will have on our financial statements. In August 2018, the FASB issued new accounting guidance that eliminates, adds and modifies certain disclosure requirements for fair value measurements. Among the changes, an entity will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018‑13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted. Since this accounting guidance only revises disclosure requirements, it will not have a material impact on the Company’s consolidated financial statements. In October 2018, the FASB issued new accounting guidance for Variable Interest Entities, which requires indirect interests held through related parties in common control arrangements be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The guidance is effective for the Company’s interim and annual reporting periods during the year ending December 31, 2020. Early adoption is permitted. The Company currently does not believe that the adoption of this accounting guidance will have a material impact on its consolidated financial statements and related disclosures. Subsequent Events The Company has evaluated subsequent events through the date which the financial statements were issued. Based upon such evaluation, except for items described in Note 8 and Note 10, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements. Segment Reporting The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the Chairman and Chief Executive Officer (“CEO”) of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company deploys resources on a consolidated level to all brands of the Company and therefore the Company only identifies one reportable operating segment with multiple product offerings. |
Acquisition
Acquisition | 9 Months Ended |
Sep. 30, 2019 | |
Acquisition | |
Acquisition | Note 3 — Acquisition On September 4, 2018, the Company completed the acquisition of all of the voting membership interest of Edison Nation Holdings, LLC (“EN”) for a total purchase price of $12,820,978 comprising of (i) $950,000 cash, (ii) the assumption of the remaining balance of the senior convertible debt through the issuance to the holders of 4%, 5‑year senior convertible notes (the “New Convertible Notes”), in the aggregate principal and interest amount of the sum of $1,428,161, less debt discount of $500,000 for the approximate fair value of the conversion feature, which are convertible into approximately 285,632 shares of the Company’s common stock, at the option of the holder of such New Convertible Notes (subject to certain adjustments as provided in the Membership Interest Purchase Agreement (the “Purchase Agreement”) among the Company and EN and EN’s members dated June 29, 2018 and the terms of the New Convertible Notes), (iii) the reservation of 990,000 shares of the Company’s common stock that may be issued in exchange for the redemption of certain non-voting membership interests of EN that will be created specifically in connection with the transaction contemplated by the Purchase Agreement (which exchange obligations may be instead satisfied in cash instead of shares of common stock, in the Company’s sole discretion), and (iv) the issuance of 557,084 shares or $3,760,317 of the Company’s common stock in full satisfaction of the indebtedness represented by promissory notes payable by EN to Venture Six, LLC and Wesley Jones. On October 29, 2018, the Company completed the acquisition of 72.15% of the outstanding capital stock of Cloud B in exchange for 489,293 shares of restricted common stock of the Company. In addition, the Company entered into an Earn Out Agreement with a majority of the stockholders of Cloud B (the “Cloud B Sellers”), whereby, beginning in 2019, the Company will pay the Cloud B Sellers an annual amount equal to 8% multiplied by the annual gross sales of Cloud B, as reduced by the total gross sales generated by Cloud B in 2018. The Earn Out Agreement expires on December 31, 2021. On December 31, 2018, the Company completed the acquisition of all of the voting membership interest of Pirasta, LLC from NL Penn Capital, LP in exchange for the satisfaction of $470,000 due from related party. Accordingly, the consolidated financial statements of the Company reflect the accounting of the combined acquired subsidiary at historical carrying values, except that equity reflects a distribution for the excess of consideration paid over the net carrying amount of assets. On December 31, 2018, the Company completed the acquisition of 50% of the voting membership interest of Best Party Concepts, LLC from NL Penn Capital, LP in exchange for the satisfaction of $500,000 due from related party. Accordingly, the consolidated financial statements of the Company reflect the accounting of the combined acquired subsidiary at historical carrying values, except that equity reflects a distribution for the excess of consideration paid over the net carrying amount of assets. NL Penn Capital, LP is owned by Christopher B. Ferguson, our Chairman and Chief Executive Officer. The following represents the pro forma consolidated income statement as if the acquisitions had been included in the consolidated results of the Company for the three and nine months ended September 30, 2018: Three Months Nine Months Ended September 30, Ended September 30, 2018 2018 Revenues, net $ 6,547,012 $ 16,740,554 Cost of revenues 4,426,614 10,989,040 Gross profit 2,120,398 5,741,514 Operating expenses: Selling, general and administrative 3,810,146 10,227,429 Operating loss (1,689,748) (4,475,915) Other (expense) income: Other (expense) income 88,910 (330,162) Loss before income taxes (1,600,838) (4,806,077) Income tax expense 182,669 327,042 Net loss $ (1,783,507) $ (5,133,119) Net loss attributable to noncontrolling interests (89,527) (370,417) Net loss attributable to Edison Nation, Inc. $ (1,693,979) $ (4,762,701) Net loss per share - basic and diluted $ (0.31) $ (0.98) Weighted average number of common shares outstanding – basic and diluted 5,471,921 4,835,681 |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2019 | |
Inventory | |
Inventory | Note 4 — Inventory As of September 30, 2019 and December 31, 2018, inventory consisted of the following: September 30, December 31, 2019 2018 Raw materials $ 46,884 $ 48,576 Finished goods 1,059,193 875,131 Total inventory $ 1,106,077 $ 923,707 |
Intangible assets, net
Intangible assets, net | 9 Months Ended |
Sep. 30, 2019 | |
Intangible assets, net | |
Intangible assets, net | Note 5 — Intangible assets, net As of September 30, 2019, intangible assets consisted of the following: Gross Carrying Accumulated Net Carrying Amount Amortization Amount Finite lived intangible assets: Customer relationships 15 years 14.8 years $ 4,270,000 $ 268,389 $ 4,001,611 Developed technology 7 years 6.7 years $ 3,800,000 561,905 3,238,095 Membership network 7 years 6.7 years $ 1,740,000 269,286 1,470,714 Non-compete agreements 2 years 1.7 years $ 50,000 27,083 22,917 Total finite lived intangible assets $ 9,860,000 $ 1,126,663 $ 8,733,337 Indefinite lived intangible assets: Trademarks and tradenames Indefinite $ 3,140,000 $ — $ 3,140,000 Total indefinite lived intangible assets $ 3,140,000 $ — $ 3,140,000 Total intangible assets 13,000,000 $ 1,126,663 $ 11,873,337 As of December 31, 2018, intangible assets consisted of the following: Gross Carrying Accumulated Net Carrying Amount Amortization Amount Finite lived intangible assets: Customer relationships 15 years 14.8 years $ 4,270,000 $ 61,555 $ 4,208,445 Developed technology 7 years 6.7 years $ 3,800,000 159,524 3,640,476 Membership network 7 years 6.7 years $ 1,740,000 82,857 1,657,143 Non-compete agreements 2 years 1.7 years $ 50,000 8,333 41,667 Total finite lived intangible assets $ 9,860,000 $ 312,269 $ 9,547,731 Indefinite lived intangible assets: Trademarks and tradenames Indefinite $ 3,140,000 $ — $ 3,140,000 Total indefinite lived intangible assets $ 3,140,000 $ — $ 3,140,000 Total intangible assets 13,000,000 $ 312,269 $ 12,687,731 The estimated future amortization of intangibles subject to amortization at September 30, 2019 was as follows: For the Years Ended December 31, Amount 2019 (excluding the nine months ended September 30, 2019) $ 275,274 2020 1,092,762 2021 1,076,095 2022 1,076,095 2023 1,076,095 Thereafter 4,137,016 $ 8,733,337 Amortization expense for the three months ended September 30, 2019 and 2018 was $275,274 and $0, respectively. Amortization expense for the nine months ended September 30, 2019 and 2018 was $814,394 and $0, respectively. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2019 | |
Debt | |
Debt | Note 6 — Debt As of September 30, 2019 and December 31, 2018, debt consisted of the following: September 30, December 31, 2019 2018 Line of credit: Asset backed line of credit $ 471,553 $ 561,804 Debt issuance costs (19,466) (30,000) Total line of credit 452,087 531,804 Senior convertible notes payable: Senior convertible notes payable 2,539,273 1,428,161 Debt issuance costs (439,818) (466,667) Total long-term senior convertible notes payable 2,099,455 961,494 Less: current portion of long-term notes payable — — Noncurrent portion of long-term convertible notes payable 2,099,455 961,494 Notes payable: Notes payable 1,470,137 370,250 Debt issuance costs (153,793) — Total long-term debt 1,316,344 370,250 Less: current portion of long-term debt (1,270,243) (313,572) Noncurrent portion of long-term debt 46,101 56,678 Notes payable – related parties: Notes payable 3,381,579 3,464,191 Less: current portion of long-term debt – related parties (1,039,330) (932,701) Noncurrent portion of long-term debt – related parties $ 2,342,249 $ 2,531,490 Convertible Notes On March 6, 2019, Edison Nation entered into a securities purchase agreement (the “FirstFire SPA”) with an accredited investor (the “Investor”) pursuant to which the Investor purchased a 2% unsecured, senior convertible promissory note (the “FirstFire Note”) from the Company. The FirstFire Note was in the amount of $560,000 with an original issue discount of $60,000. The Company issued 15,000 shares of its common stock valued at $74,100 based on the share price on the date of issuance to the Investor as additional consideration for the purchase of the FirstFire Note. The Under the terms of the FirstFire SPA, the Investor will have “piggyback” registration rights in the event the Company files a Form S‑1 or Form S‑3 within six months from March 6, 2019, as well as a pro rata right of first refusal in respect of participation in any debt or equity financings undertaken by the Company during the 18 months following March 6, 2019. The Company is also subject to certain customary negative covenants under the FirstFire SPA, including but not limited to, the requirement to maintain its corporate existence and assets subject to certain exceptions, and to not to make any offers or sales of any security under circumstances that would have the effect of establishing rights or otherwise benefitting other investors in a manner more favorable in any material respect than those rights and benefits established in favor of the Investor under the terms of the FirstFire SPA and the FirstFire Note. The maturity date of the FirstFire Note is six months from March 6, 2019. All principal amounts and the interest thereon are convertible into shares of the Company’s common stock only in the event that an event of default occurs. The FirstFire note was paid in full in May 2019. On May 13, 2019, the Company entered into a series of 2% senior secured, senior convertible promissory notes of $1,111,111 with an original issue discount of $111,111. The Company issued 20,000 shares of its common stock to the note holders as additional consideration for the purchase of the notes in July 2019. The Company accrued $78,800 as a debt discount as of September 30, 2019 related to the value of the shares to be issued. The notes are convertible upon default and mature on November 13, 2019. Under the terms of the notes, the note holders will have “piggyback” registration rights. Alexander Capital placed the notes and received warrants to purchase 24,366 shares of the Company’s common stock, at an exercise price of $2.85 per share. The notes were converted into 560,185 shares of common stock in October 2019 at $2.00 per share. Receivables Financing In April 2019, we entered into a receivables financing arrangement for certain receivables of the Company. The agreement allows for borrowings up to 80% of the outstanding receivable based on the credit quality of the customer. The fee is between 1% and 2% of the total invoices financed. Notes Payable On May 16, 2019, the Company entered into a non-interest bearing promissory note of $300,000, with an original issue discount of $50,000. The Company issued 20,000 shares of its common stock to the note holder as additional consideration for the purchase of the note. The Company recorded $62,000 as a debt discount as of September 30, 2019 related to the value of the shares issued. The note matures on November 16, 2019. On June 11, 2019, the Company entered into 1.5% promissory note of $250,000. The interest and principal is due upon 30 days’ notice from the Lender, which cannot be issued before August 11, 2019. The Lender has not exercised their option for repayment yet. On August 26, 2019, the Company entered into a securities purchase agreement with Labrys Fund, LP (the “Investor”) pursuant to which the Investor purchased a 12% Convertible Promissory Note (the “Note”) from the Company. Unless there is a specific Event of Default (as such term is defined in the Note) or the Note remains unpaid by the Maturity Date, then the Investor shall not have the ability to convert the principal and interest under the Notes into shares of the Company’s common stock. The Company agreed to issue and sell to the Investor the Note, in the principal amount of $560,000, with an original issue discount in the amount of $60,000. The Note is due and payable February 26, 2020 (the “Maturity Date”). Additionally, the Company issued 181,005 shares of Common Stock to the Investor as a commitment fee, of which 153,005 shares of Common Stock must be returned to the Company in the event the Note is fully paid and satisfied prior to the Maturity Date. The scheduled maturities of the debt for the next five years as of December 31, 2018, are as follows: For the Years Ended December 31, Amount 2019 $ 2,175,092 2020 828,426 2021 871,916 2022 218,266 2023 1,229,569 Thereafter 2,539,273 7,862,542 Less: debt discount (613,077) $ 7,249,465 For the three and nine months ended September 30, 2019, interest expense was $349,172 and $875,036, of which $78,475 and $238,111 was related party interest expense, respectively. For the three and nine months ended September 30, 2018, interest expense was $42,130 and $407,267, of which $42,714 and $145,656 was related party interest expense, respectively. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions | |
Related Party Transactions | Note 7 — Related Party Transactions NL Penn Capital, LP and SRM Entertainment Group LLC On December 31, 2018, the Company completed the acquisition of all of the voting membership interest of Pirasta, LLC from NL Penn Capital, LP in exchange for the satisfaction of $470,000 due from related party. Accordingly, the consolidated financial statements of the Company reflect the accounting of the combined acquired subsidiary at historical carrying values, except that equity reflects a distribution for the excess of consideration paid over the net carrying amount of assets. On December 31, 2018, the Company completed the acquisition of 50% of the voting membership interest of Best Party Concepts, LLC from NL Penn Capital, LP in exchange for the satisfaction of $500,000 due from related party. Accordingly, the consolidated financial statements of the Company reflect the accounting of the combined acquired subsidiary at historical carrying values, except that equity reflects a distribution for the excess of consideration paid over the net carrying amount of assets. As of September 30, 2019 and December 31, 2018, the net amounts due to related parties consists of net amounts due to SRM Entertainment Group LLC (“SRM LLC”) and NL Penn Capital, LP, which are both majority owned by Chris Ferguson, our Chairman and Chief Executive Officer. The amount due to related parties is related to the acquisitions of Pirasta, LLC and Best Party Concepts, LLC offset by operating expenses that were paid by SRM and Edison Nation on behalf of SRM LLC and NL Penn Capital, LP. As of September 30, 2019 and December 31, 2018, the net amount due to related parties was $22,896 and $140,682, respectively. Such amounts are due currently. Service Agreement On August 1, 2018, the Company entered into a one-year letter agreement with Enventys Partners, LLC, a North Carolina limited liability company (“Enventys”), whereby Enventys agreed to provide services to the Company as an independent contractor in the areas of product development and crowdfunding campaign marketing. During the term of the Enventys Agreement, the Company shall pay Enventys a fixed fee of $15,000 per month for product development assistance, including design research, mechanical engineering and quality control planning. Depending on the success of each campaign, the Company may also pay Enventys a commission of up to ten percent of the total funds raised in the applicable campaign. Louis Foreman, who is a member of the Company’s board of directors, is also the Chief Executive Officer and the largest equity holder of Enventys. We incurred fees of approximately $22,000 and $97,500 related to the services performed by Enventys for the three and months ended September 30, 2019, respectively. During 2019, the Company and Enventys agreed to the cancellation of the agreement. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 8 — Commitments and Contingencies Operating Leases The Company has entered into non-cancellable operating leases for office, warehouse, and distribution facilities, with original lease periods expiring through 2021. In addition to minimum rent, certain of the leases require payment of real estate taxes, insurance, common area maintenance charges, and other executory costs. Differences between rent expense and rent paid are recognized as adjustments to operating lease right-of-use assets on the consolidated balance sheets. As of September 30, 2019, the Company has operating lease liabilities of $827,617 and right of use assets for operating leases of $810,017. During the three and nine months ended September 30, 2019, operating cash outflows relating to operating lease liabilities was $78,303 and $225,249, respectively, and the expense for right of use assets for operating leases was $75,414 and $217,189 , respectively. As of September 30, 2019, the Company’s operating leases had a weighted-average remaining term of 3.3 years and weighted-average discount rate of 4.5%. Excluded from the measurement of operating lease liabilities and operating lease right-of-use assets were certain office, warehouse and distribution contracts that either qualify for the short-term lease recognition exception. On August 8, 2016, SRM entered into a lease for office space in Kowloon, Hong Kong. On August 8, 2018, SRM extended its lease for office space in Kowloon, Hong Kong so that the lease will now expire on August 7, 2020. Monthly lease payments are approximately $6,400 for a total of approximately $154,000 for the total term of the lease. On July 1, 2019, the Company entered into a lease for office space in Bethlehem, Pennsylvania. Monthly lease payments are $2,415 for a total of approximately $89,000 for the total term of the lease. Total rent expense for the three and nine months ended September 30, 2019 was $128,256 and $410,759, respectively. Total rent expense for the three and nine months ended September 30, 2018 was $65,244 and $211,780, respectively. Rent expense is included in general and administrative expense on the Company’s condensed consolidated statements of operations. The following is a reconciliation of future undiscounted cash flows to the operating liabilities, and the related right of use assets, included in our Condensed Consolidated Balance Sheets as of September 30, 2019: September 30, 2019 2019 (excluding the nine months ended September 30, 2019) 82,230 2020 315,660 2021 267,249 2022 96,288 2023 78,648 2024 and thereafter 52,430 Total future lease payments 892,505 Less: imputed interest (64,888) Present value of future operating lease payments 827,617 Less: current portion of operating lease liabilities (292,800) Operating lease liabilities, net of current portion 534,817 Right of use assets – operating leases, net 810,017 Rental Income Fergco leases a portion of the building located in Washington, New Jersey that it owns under a month to month lease. Rental income related to the leased space for both the three months ended September 30, 2019 and 2018 was $25,704, respectively. Rental income related to the leased space for both the nine months ended September 30, 2019 and 2018 was $77,111, respectively. Rental income is included in other income on the consolidated statements of operations. Legal Contingencies The Company is involved in claims and litigation in the ordinary course of business, some of which seek monetary damages, including claims for punitive damages, which are not covered by insurance. For certain pending matters, accruals have not been established because such matters have not progressed sufficiently through discovery, and/or development of important factual information and legal information is insufficient to enable the Company to estimate a range of possible loss, if any. An adverse determination in one or more of these pending matters could have an adverse effect on the Company’s consolidated financial position, results of operations or cash flows. We are, and may in the future become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business. On July 15, 2019, the Company received correspondence from the staff of the Arkansas Securities Commissioner in connection with the state’s notice filing requirements for offerings exempt under Tier 2 of Regulation A, Section 18(b)(3) of the Security Act, such as the Company’s Form 1-A. The Company has resolved the matter with the Arkansas Securities Department for $1,100. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2019 | |
Stockholders' Equity | |
Stockholders' Equity | Note 9 — Stockholders’ Equity Stock-Based Compensation On September 6, 2018, the Company’s board of directors approved an amendment and restatement of the Company’s omnibus incentive plan solely to reflect the Company’s name change to Edison Nation, Inc. Thus, the Edison Nation, Inc. Omnibus Incentive Plan (the “Plan”) which remains effective as of February 9, 2018, provides for the issuance of up to 1,764,705 shares of common stock to help align the interests of management and our stockholders and reward our executive officers for improved Company performance. Stock incentive awards under the Plan can be in the form of stock options, restricted stock units, performance awards and restricted stock that are made to employees, directors and service providers. Awards are subject to forfeiture until vesting conditions have been satisfied under the terms of the award. The exercise price of stock options are equal to the fair market value of the underlying Company common stock on the date of grant. The following table represents total stock compensation expense by award type related to stock performance awards, restricted stock units, stock options and awards made to non-employees, for the three and nine months ended September 30, 2019 and 2018: For the Three Months Ended For the Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Stock option awards $ 15,535 $ 260,826 $ 160,140 $ 260,826 Non-employee awards 151,750 375,000 615,050 2,096,250 Restricted stock unit awards 8,850 3,500 8,850 309,500 Phantom stock awards (8,038) — 92,545 — $ 168,097 $ 639,326 $ 876,585 $ 2,666,576 The stock-based compensation is included in selling, general and administrative expense for the three and nine months ended September 30, 2019 and 2018, respectively. Stock option awards The following table summarizes stock option award activity for the nine months ended September 30, 2019: Weighted Remaining Average Contractual Exercise Life in Aggregate Shares Price Years Intrinsic Value Balance, January 1, 2019 290,000 $ 5.55 4.2 — Granted — — — — Forfeited — — Balance, September 30, 2019 290,000 $ 5.55 — Exercisable, September 30, 2019 263,333 $ 5.41 — As of September 30, 2019, there was 26,667 unvested options to purchase shares of the Company’s common stock or $62,139 of total unrecognized equity-based compensation expense that the Company expected to recognize over a remaining weighted-average period of 1 year. Non-employee awards From time to time, the Company grants shares of common stock to consultants and non-employee vendors for services performed. The awards are valued at the market value of the underlying common stock at the date of grant and vest based on the terms of the contract which is usually upon grant. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events | |
Subsequent Events | Note 10 — Subsequent Events On October 2, 2019, Edison Nation, Inc. (the “Company”) entered into a Share Purchase Agreement (the “PIPE Purchase Agreement”) with certain accredited investors (collectively, the “Investors”) for the private placement of 1,175,000 shares of the Company’s common stock, $0.001 par value per share, at a purchase price of $2.00 per share (the “PIPE Transaction”). The PIPE Purchase Agreement contains certain closing conditions relating to the sale of securities, representations and warranties by the Company and the Investors, as well as covenants of the Company and the Investors (including indemnification from the Company in the event of breaches of its representations and warranties), all of which the Company believes are customary for transactions of this type. In a series of three closings conducted in October 2019, the Company received net proceeds of $2,039,303 which consisted of $2,350,000 of gross proceeds offset by $310,697 of fees to placement agent and their lawyers. Alexander Capital, LP (“Alexander Capital”), a FINRA registered broker dealer, acted as placement agent with respect to the PIPE Transaction. In connection with the PIPE Transaction, Alexander Capital received a commission of $141,000, a debt restructuring fee of $64,208, a debt conversion fee of 15,889, a placement fee of $33,600 and warrants to purchase 70,500 shares of the Company’s common stock, at an exercise price of $2.50 per share (the “Placement Agent Warrants”). In connection with the PIPE Purchase Agreement, the Company entered into Registration Rights Agreements with each of the Investors (the “Registration Rights Agreement”), pursuant to which the Company is required to prepare and file a registration statement (the “Registration Statement”) with the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended, covering the resale of the shares of common stock issued to the Investors under the PIPE Purchase Agreement, as well as the Placement Agent Warrants. The Company will be required to have such Registration Statement declared effective by the SEC within 90 calendar days (or 120 calendar days in the event of a “full review” by the SEC) following the applicable closing date of the PIPE Transaction. If the registration statement is not filed or declared effective within the timeframe set forth in the Registration Rights Agreements, the Company is obligated to pay the Investors an amount equal to 1% of the total purchase price of the common stock per month (up to a maximum of 8% in the aggregate) until such failure is cured. The Registration Rights Agreement also contains mutual indemnifications by the Company and each Investor, which the Company believes are customary for transactions of this type. In connection with the PIPE transaction, the convertible notes entered into on May 13, 2019 were also converted at $2.00 per share into 560,185 shares of the Company’s common stock. On November 6, 2019, the Company acquired the assets of Uber Mom, LLC for $52,352, which was the approximate value of Uber Mom, LLC inventory, and 22,500 shares of our common stock. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Summary of Significant Accounting Policies | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Edison Nation, Inc. and its wholly-owned and majority owned subsidiaries. All intercompany balances and transactions have been eliminated. |
Use of Estimates | Use of Estimates Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial statements. The Company’s significant estimates used in these financial statements include, but are not limited to, accounts receivable reserves, the valuation allowance related to the Company’s deferred tax assets, the recoverability and useful lives of long-lived assets, debt conversion features, stock-based compensation, certain assumptions related to the valuation of the reserved shares and the assets acquired and liabilities assumed related to the Company’s acquisitions. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates. |
Reclassifications | Reclassifications Certain reclassifications have been made to prior year amounts to conform to current year presentation. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company has cash on deposit in several financial institutions which, at times, may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced losses in such accounts and periodically evaluates the creditworthiness of its financial institutions. The Company reduces its credit risk by placing its cash and cash equivalents with major financial institutions. The Company had approximately $627,000 uninsured cash at September 30, 2019 of which approximately $198,000 was held in foreign bank accounts not covered by FDIC insurance limits as of September 30, 2019. |
Accounts Receivable | Accounts Receivable As of September 30, 2019, the following customers represented more than 10% of total accounts receivable: September 30, 2019 Customer A 15 % |
Inventory | Inventory Inventory is recorded at the lower of cost or net realizable value on a first-in, first-out basis. The Company reduces the carrying value of inventories for those items that are potentially excess, obsolete, or slow moving based on changes in customer demand, technology developments, or other economic factors. |
Revenue Recognition | Revenue Recognition Generally, the Company considers all revenues as arising from contracts with customers. Revenue is recognized based on the five step process outlined in the Accounting Standards Codification (“ASC”) 606: Step 1 – Identify the Contract with the Customer – A contract exists when (a) the parties to the contract have approved the contract and are committed to perform their respective obligations, (b) the entity can identify each party’s rights regarding the goods or services to be transferred, (c) the entity can identify the payment terms for the goods or services to be transferred, (d) the contract has commercial substance and it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. Step 2 – Identify Performance Obligations in the Contract – Upon execution of a contract, the Company identifies as performance obligations each promise to transfer to the customer either (a) goods or services that are distinct, or (b) a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. To the extent a contract includes multiple promised goods or services, the Company must apply judgement to determine whether the goods or services are capable of being distinct within the context of the contract. If these criteria are not met, the goods or services are accounted for as a combined performance obligation. Step 3 – Determine the Transaction Price – When (or as) a performance obligation is satisfied, the Company shall recognize as revenue the amount of the transaction price that is allocated to the performance obligation. The contract terms are used to determine the transaction price. Generally, all contracts include fixed consideration. If a contract did include variable consideration, the Company would determine the amount of variable consideration that should be included in the transaction price based on expected value method. Variable consideration would be included in the transaction price, if in the Company’s judgement, it is probable that a significant future reversal of cumulative revenue under the contract would not occur. Step 4 – Allocate the Transaction Price – After the transaction price has been determined, the next step is to allocate the transaction price to each performance obligation in the contract. If the contract only has one performance obligation, the entire transaction price will be applied to that obligation. If the contract has multiple performance obligations, the transaction price is allocated to the performance obligations based on the relative standalone selling price (SSP) at contract inception. Step 5 – Satisfaction of the Performance Obligations (and Recognize Revenue) – Revenue is recognized when (or as) goods or services are transferred to a customer. The Company satisfies each of its performance obligations by transferring control of the promised good or service underlying that performance obligation to the customer. Control is the ability to direct the use of, and obtain substantially all of the remaining benefits from an asset. It includes the ability to prevent other entities from directing the use of, and obtaining the benefits from an asset. Indicators that control has passed to the customer include: a present obligation to pay; physical possession of the asset; legal title; risks and rewards of ownership; and acceptance of the asset(s). Performance obligations can be satisfied at a point in time or over time. Substantially all of the Company’s revenues continue to be recognized when control of the goods are transferred to the customer, which is upon shipment of the finished goods to the customer. All sales have fixed pricing and there are currently no material variable components included in the Company’s revenue. Additionally, the Company will issue credits for defective merchandise, historically these credits for defective merchandise have not been material. Based on the Company’s analysis of the new revenue standards, revenue recognition from the sale of finished goods to customers, which represents substantially all of the Company’s revenues, was not impacted by the adoption of the new revenue standards. Disaggregation of Revenue The Company’s primary revenue streams include the sale and/or licensing of consumer goods and packaging materials. The Company’s licensing business is not material and has not been separately disaggregated for segment purposes. The disaggregated Company’s revenues for the three and nine months ended September 30, 2019 and 2018 were as follows: For the Three Months Ended For the Nine Months September 30, Ended September 30, 2019 2018 2019 2018 Revenues: Product sales $ 3,499,116 $ 4,858,055 $ 14,982,117 $ 12,676,582 Service 19,442 — 67,753 — Licensing 14,087 82,133 189,564 82,133 Total revenues, net $ 3,532,645 $ 4,940,188 $ 15,239,434 $ 12,758,715 For the three and nine months ended September 30, 2019 and 2018, the following customer represented more than 10% of total net revenues: For the Three Months Ended For the Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Customer : Customer A 11 % 23 % 22 % 10 % Customer B * * * 17 % * Customer did not represent greater than 10% of total net revenue. For the three and nine months ended September 30, 2019 and 2018, the following geographical regions represented more than 10% of total net revenues: For the Three Months Ended For the Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Region: North America 86 % 84 % 78 % 81 % Asia-Pacific * 11 % * 15 % Europe * * 15 % * * |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 — quoted prices in active markets for identical assets or liabilities Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions) The carrying amounts of the Company’s financial instruments, such as cash, accounts receivable, accounts payable, accrued expenses and other current liabilities approximate fair values due to the short-term nature of these instruments. The carrying amount of the Company’s notes payable approximates fair value because the effective yields on these obligations, which include contractual interest rates, taken together with other features such as concurrent issuance of warrants, are comparable to rates of returns for instruments of similar credit risk. The loan held for investment was acquired at fair value, which resulted in a discount. As of September 30, 2019, the book value and estimated fair value of the Company’s level 3 instruments was as follows: September 30, 2019 Estimated Book Value Fair Value Contingent consideration $ (520,000) $ (520,000) The following changes in level 3 instruments for the three months ended September 30, 2019 are presented below: Contingent Consideration - Earnout Balance, July 1, 2019 $ (520,000) Change in fair value — Balance, September 30, 2019 $ (520,000) The following changes in level 3 instruments for the nine months ended September 30, 2019 are presented below: Contingent Consideration – Earnout Balance, December 31, 2018 $ (520,000) Change in fair value — Balance, September 30, 2019 $ (520,000) There were no changes to the underlying assumptions used in determining the fair value of the contingent consideration liability for the three and nine months ended September 30, 2019. There was no contingent consideration as of September 30, 2018. |
Foreign Currency Translation | Foreign Currency Translation The Company uses the United States dollar as its functional and reporting currency since the majority of the Company’s revenues, expenses, assets and liabilities are in the United States. Assets and liabilities in foreign currencies are translated using the exchange rate at the balance sheet date, while revenue and expense accounts are translated at the average exchange rates prevailing during the year. Equity accounts are translated at historical exchange rates. Gains and losses from foreign currency transactions and translation for the three and nine months ended September 30, 2019 and 2018 and the cumulative translation gains and losses as of September 30, 2019 and December 31, 2018 were not material. |
Net Earnings or Loss per Share | Net Earnings or Loss per Share Basic net loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number vested of common shares, plus the net impact of common shares (computed using the treasury stock method), if dilutive, resulting from the exercise of dilutive securities. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of September 30, 2018, there were no common stock equivalents outstanding. As of September 30, 2019, the Company excluded the common stock equivalents summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive. September 30, 2019 Selling Agent Warrants 89,992 Shares reserved in exchange for the cancellation of certain non-voting membership interest in Edison Nation Holdings, LLC 990,000 Options 290,000 Convertible shares under notes payable 285,632 Total 1,655,624 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update No. 2016‑02 (ASU 2016‑02) which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. This accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. Additionally, this accounting guidance requires a modified retrospective transition approach for all leases existing at, or entered into after the date of initial application, with an option to use certain transition relief. In July 2018, the FASB issued a practical expedient that would allow entities the option to apply the provisions of the new lease guidance at the effective date of adoption without adjusting the comparative periods presented. The Company has elected the “package of practical expedients” and as a result is not required to reassess its prior accounting conclusions about lease identification, lease classification and initial direct costs for lease contracts that exist as of the transition date. However, the Company has not elected the use of hindsight for determining the reasonably certain lease term. The new lease standard also provides practical expedients and policy elections for an entity’s ongoing accounting. The Company has elected the practical expedient to not separate lease and non-lease components for all of its leases. The Company has elected the short-term lease recognition exemption, which results in no recognition of right-of-use assets and lease liabilities for existing short-term leases at transition. Upon adoption on January 1, 2019, the Company recognized right of use assets for operating leases and operating lease liabilities that have not previously been recorded. The lease liability for operating leases is based on the net present value of future minimum lease payments. The right of use asset for operating leases is based on the lease liability. The Company did not have any deferred rent or material prepaid rent. The cumulative effect of initially applying the new lease accounting standard as of January 1, 2019 is as follows: Cumulative January 1, January 1, Effect 2019, as 2019 Adjustment adjusted Assets: Right of use assets – operating leases $ — $ 943,997 $ 943,997 Liabilities: Current portion of operating lease liabilities $ — $ 261,866 $ 261,866 Operating lease liabilities, net of current portion $ — $ 682,131 $ 682,131 The adoption of the standard did not result in any material changes to the recognition of operating lease expenses in the Company’s consolidated statements of operations. In June 2018, the FASB issued an amendment to the accounting guidance related to accounting for employee share-based payments which clarifies that an entity should recognize excess tax benefits in the period in which the amount of the deduction is determined. This amendment is effective for annual periods beginning after December 15, 2018. We have adopted this accounting guidance effective January 1, 2019, with no impact on our financial statements as there were no excess tax benefits to be recognized due to our net operating losses. In August 2018, the FASB issued new accounting guidance that addresses the accounting for implementation costs associated with a hosted service. The guidance provides that implementation costs be evaluated for capitalization using the same criteria as that used for internal-use software development costs, with amortization expense being recorded in the same income statement expense line as the hosted service costs and over the expected term of the hosting arrangement. This guidance is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The guidance will be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We have not yet adopted this accounting guidance and are currently evaluating the effect this accounting guidance will have on our financial statements. In August 2018, the FASB issued new accounting guidance that eliminates, adds and modifies certain disclosure requirements for fair value measurements. Among the changes, an entity will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018‑13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted. Since this accounting guidance only revises disclosure requirements, it will not have a material impact on the Company’s consolidated financial statements. In October 2018, the FASB issued new accounting guidance for Variable Interest Entities, which requires indirect interests held through related parties in common control arrangements be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The guidance is effective for the Company’s interim and annual reporting periods during the year ending December 31, 2020. Early adoption is permitted. The Company currently does not believe that the adoption of this accounting guidance will have a material impact on its consolidated financial statements and related disclosures. |
Subsequent Events | Subsequent Events The Company has evaluated subsequent events through the date which the financial statements were issued. Based upon such evaluation, except for items described in Note 8 and Note 10, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements. |
Segment Reporting | Segment Reporting The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the Chairman and Chief Executive Officer (“CEO”) of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company deploys resources on a consolidated level to all brands of the Company and therefore the Company only identifies one reportable operating segment with multiple product offerings. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Summary of Significant Accounting Policies | |
Schedule of Accounts Receivable | As of September 30, 2019, the following customers represented more than 10% of total accounts receivable: September 30, 2019 Customer A 15 % For the three and nine months ended September 30, 2019 and 2018, the following customer represented more than 10% of total net revenues: For the Three Months Ended For the Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Customer : Customer A 11 % 23 % 22 % 10 % Customer B * * * 17 % * Customer did not represent greater than 10% of total net revenue. |
Schedule of Disaggregation of Revenue | The Company’s primary revenue streams include the sale and/or licensing of consumer goods and packaging materials. The Company’s licensing business is not material and has not been separately disaggregated for segment purposes. The disaggregated Company’s revenues for the three and nine months ended September 30, 2019 and 2018 were as follows: For the Three Months Ended For the Nine Months September 30, Ended September 30, 2019 2018 2019 2018 Revenues: Product sales $ 3,499,116 $ 4,858,055 $ 14,982,117 $ 12,676,582 Service 19,442 — 67,753 — Licensing 14,087 82,133 189,564 82,133 Total revenues, net $ 3,532,645 $ 4,940,188 $ 15,239,434 $ 12,758,715 |
Schedule of Disaggregation of net revenues | For the three and nine months ended September 30, 2019 and 2018, the following geographical regions represented more than 10% of total net revenues: For the Three Months Ended For the Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Region: North America 86 % 84 % 78 % 81 % Asia-Pacific * 11 % * 15 % Europe * * 15 % * * |
Schedule of Book Value and Estimated Fair | As of September 30, 2019, the book value and estimated fair value of the Company’s level 3 instruments was as follows: September 30, 2019 Estimated Book Value Fair Value Contingent consideration $ (520,000) $ (520,000) |
Schedule of Fair Value of Financial Level 3 Instruments | The following changes in level 3 instruments for the three months ended September 30, 2019 are presented below: Contingent Consideration - Earnout Balance, July 1, 2019 $ (520,000) Change in fair value — Balance, September 30, 2019 $ (520,000) The following changes in level 3 instruments for the nine months ended September 30, 2019 are presented below: Contingent Consideration – Earnout Balance, December 31, 2018 $ (520,000) Change in fair value — Balance, September 30, 2019 $ (520,000) |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | September 30, 2019 Selling Agent Warrants 89,992 Shares reserved in exchange for the cancellation of certain non-voting membership interest in Edison Nation Holdings, LLC 990,000 Options 290,000 Convertible shares under notes payable 285,632 Total 1,655,624 |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The cumulative effect of initially applying the new lease accounting standard as of January 1, 2019 is as follows: Cumulative January 1, January 1, Effect 2019, as 2019 Adjustment adjusted Assets: Right of use assets – operating leases $ — $ 943,997 $ 943,997 Liabilities: Current portion of operating lease liabilities $ — $ 261,866 $ 261,866 Operating lease liabilities, net of current portion $ — $ 682,131 $ 682,131 |
Acquisition (Tables)
Acquisition (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Acquisition | |
Schedule of consolidated income statement | The following represents the pro forma consolidated income statement as if the acquisitions had been included in the consolidated results of the Company for the three and nine months ended September 30, 2018: Three Months Nine Months Ended September 30, Ended September 30, 2018 2018 Revenues, net $ 6,547,012 $ 16,740,554 Cost of revenues 4,426,614 10,989,040 Gross profit 2,120,398 5,741,514 Operating expenses: Selling, general and administrative 3,810,146 10,227,429 Operating loss (1,689,748) (4,475,915) Other (expense) income: Other (expense) income 88,910 (330,162) Loss before income taxes (1,600,838) (4,806,077) Income tax expense 182,669 327,042 Net loss $ (1,783,507) $ (5,133,119) Net loss attributable to noncontrolling interests (89,527) (370,417) Net loss attributable to Edison Nation, Inc. $ (1,693,979) $ (4,762,701) Net loss per share - basic and diluted $ (0.31) $ (0.98) Weighted average number of common shares outstanding – basic and diluted 5,471,921 4,835,681 |
Inventory (Tables)
Inventory (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Inventory | |
Schedule of Inventory | As of September 30, 2019 and December 31, 2018, inventory consisted of the following: September 30, December 31, 2019 2018 Raw materials $ 46,884 $ 48,576 Finished goods 1,059,193 875,131 Total inventory $ 1,106,077 $ 923,707 |
Intangible assets, net (Tables)
Intangible assets, net (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Intangible assets, net | |
Schedule of intangible assets | As of September 30, 2019, intangible assets consisted of the following: Gross Carrying Accumulated Net Carrying Amount Amortization Amount Finite lived intangible assets: Customer relationships 15 years 14.8 years $ 4,270,000 $ 268,389 $ 4,001,611 Developed technology 7 years 6.7 years $ 3,800,000 561,905 3,238,095 Membership network 7 years 6.7 years $ 1,740,000 269,286 1,470,714 Non-compete agreements 2 years 1.7 years $ 50,000 27,083 22,917 Total finite lived intangible assets $ 9,860,000 $ 1,126,663 $ 8,733,337 Indefinite lived intangible assets: Trademarks and tradenames Indefinite $ 3,140,000 $ — $ 3,140,000 Total indefinite lived intangible assets $ 3,140,000 $ — $ 3,140,000 Total intangible assets 13,000,000 $ 1,126,663 $ 11,873,337 As of December 31, 2018, intangible assets consisted of the following: Gross Carrying Accumulated Net Carrying Amount Amortization Amount Finite lived intangible assets: Customer relationships 15 years 14.8 years $ 4,270,000 $ 61,555 $ 4,208,445 Developed technology 7 years 6.7 years $ 3,800,000 159,524 3,640,476 Membership network 7 years 6.7 years $ 1,740,000 82,857 1,657,143 Non-compete agreements 2 years 1.7 years $ 50,000 8,333 41,667 Total finite lived intangible assets $ 9,860,000 $ 312,269 $ 9,547,731 Indefinite lived intangible assets: Trademarks and tradenames Indefinite $ 3,140,000 $ — $ 3,140,000 Total indefinite lived intangible assets $ 3,140,000 $ — $ 3,140,000 Total intangible assets 13,000,000 $ 312,269 $ 12,687,731 |
Schedule of future amortization | The estimated future amortization of intangibles subject to amortization at September 30, 2019 was as follows: For the Years Ended December 31, Amount 2019 (excluding the nine months ended September 30, 2019) $ 275,274 2020 1,092,762 2021 1,076,095 2022 1,076,095 2023 1,076,095 Thereafter 4,137,016 $ 8,733,337 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt | |
Schedule of debt | As of September 30, 2019 and December 31, 2018, debt consisted of the following: September 30, December 31, 2019 2018 Line of credit: Asset backed line of credit $ 471,553 $ 561,804 Debt issuance costs (19,466) (30,000) Total line of credit 452,087 531,804 Senior convertible notes payable: Senior convertible notes payable 2,539,273 1,428,161 Debt issuance costs (439,818) (466,667) Total long-term senior convertible notes payable 2,099,455 961,494 Less: current portion of long-term notes payable — — Noncurrent portion of long-term convertible notes payable 2,099,455 961,494 Notes payable: Notes payable 1,470,137 370,250 Debt issuance costs (153,793) — Total long-term debt 1,316,344 370,250 Less: current portion of long-term debt (1,270,243) (313,572) Noncurrent portion of long-term debt 46,101 56,678 Notes payable – related parties: Notes payable 3,381,579 3,464,191 Less: current portion of long-term debt – related parties (1,039,330) (932,701) Noncurrent portion of long-term debt – related parties $ 2,342,249 $ 2,531,490 |
Schedule of maturities of the debt | The scheduled maturities of the debt for the next five years as of December 31, 2018, are as follows: For the Years Ended December 31, Amount 2019 $ 2,175,092 2020 828,426 2021 871,916 2022 218,266 2023 1,229,569 Thereafter 2,539,273 7,862,542 Less: debt discount (613,077) $ 7,249,465 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies | |
Schedule of Future Minimum Rental Payments for Operating Leases | The following is a reconciliation of future undiscounted cash flows to the operating liabilities, and the related right of use assets, included in our Condensed Consolidated Balance Sheets as of September 30, 2019: September 30, 2019 2019 (excluding the nine months ended September 30, 2019) 82,230 2020 315,660 2021 267,249 2022 96,288 2023 78,648 2024 and thereafter 52,430 Total future lease payments 892,505 Less: imputed interest (64,888) Present value of future operating lease payments 827,617 Less: current portion of operating lease liabilities (292,800) Operating lease liabilities, net of current portion 534,817 Right of use assets – operating leases, net 810,017 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Stockholders' Equity | |
Schedule of stock compensation expense by award type | The following table represents total stock compensation expense by award type related to stock performance awards, restricted stock units, stock options and awards made to non-employees, for the three and nine months ended September 30, 2019 and 2018: For the Three Months Ended For the Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Stock option awards $ 15,535 $ 260,826 $ 160,140 $ 260,826 Non-employee awards 151,750 375,000 615,050 2,096,250 Restricted stock unit awards 8,850 3,500 8,850 309,500 Phantom stock awards (8,038) — 92,545 — $ 168,097 $ 639,326 $ 876,585 $ 2,666,576 |
Schedule of stock option award activity | The following table summarizes stock option award activity for the nine months ended September 30, 2019: Weighted Remaining Average Contractual Exercise Life in Aggregate Shares Price Years Intrinsic Value Balance, January 1, 2019 290,000 $ 5.55 4.2 — Granted — — — — Forfeited — — Balance, September 30, 2019 290,000 $ 5.55 — Exercisable, September 30, 2019 263,333 $ 5.41 — |
Basis of Presentation and Nat_2
Basis of Presentation and Nature of Operations (Details) - USD ($) | Oct. 02, 2019 | May 13, 2019 | Oct. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Aug. 26, 2019 | Jun. 30, 2019 | Mar. 06, 2019 | Feb. 28, 2019 | Dec. 31, 2018 | Oct. 29, 2018 | Jun. 30, 2018 | Dec. 31, 2017 |
Working Capital | $ (6,800,000) | $ (6,800,000) | |||||||||||||
Assets, Current | 5,238,617 | 5,238,617 | $ 5,465,484 | ||||||||||||
Operating Income (Loss) | (2,307,736) | $ (762,467) | (4,912,541) | $ (2,608,330) | |||||||||||
Liabilities, Current | 12,034,900 | 12,034,900 | 8,878,936 | ||||||||||||
Assets | 28,633,331 | 28,633,331 | 28,888,588 | ||||||||||||
Liabilities | 17,577,863 | 17,577,863 | 12,948,949 | ||||||||||||
Debt Instrument, Face Amount | 1,000,000 | 1,000,000 | $ 560,000 | $ 560,000 | |||||||||||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | 11,055,468 | 8,237,061 | 11,055,468 | 8,237,061 | $ 13,375,008 | $ 15,939,639 | $ 5,016,724 | $ (232,630) | |||||||
Redundant costs | 153,000 | 500,000 | |||||||||||||
Allocated Share-based Compensation Expense | $ 168,097 | $ 639,326 | 876,585 | 2,666,576 | |||||||||||
Trade Payables Unsecured | $ 1,700,000 | ||||||||||||||
Total liabilities in consolidation | 6,400,000 | ||||||||||||||
Liabilities to be eliminated due to foreclosure | 1,700,000 | ||||||||||||||
Net liabilities in consolidation | 4,700,000 | ||||||||||||||
Proceeds from issuance of common stock | $ 0 | $ 5,358,570 | |||||||||||||
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||
CBAV1, LLC [Member] | |||||||||||||||
Promissory Notes Payable | $ 2,270,000 | $ 2,270,000 | |||||||||||||
Best Party Concepts [Member] | |||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | 50.00% | |||||||||||||
Cloud B UK [Member] | |||||||||||||||
Equity Method Investment, Ownership Percentage | 100.00% | 100.00% | |||||||||||||
Cloud B, Inc. [Member] | |||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 72.15% | 72.15% | 72.15% | ||||||||||||
Interest, Income Taxes, Depreciation And Amortization | $ 486,546 | ||||||||||||||
Allocated Share-based Compensation Expense | 1,828,604 | ||||||||||||||
Restructuring and Related Cost, Incurred Cost | 100,000 | ||||||||||||||
Other Non Recurring and Redundant Costs | 1,200,000 | ||||||||||||||
Trade Payables Unsecured | $ 3,800,000 | 3,800,000 | |||||||||||||
Notes Payable | $ 900,000 | $ 900,000 | |||||||||||||
Ed Roses [Member] | |||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | 50.00% | |||||||||||||
Convertible Notes Payable [Member] | |||||||||||||||
Debt Instrument, Face Amount | $ 1,111,111 | ||||||||||||||
Debt Conversion, Converted Instrument, Shares Issued | 560,185 | ||||||||||||||
Convertible Notes Payable [Member] | Alexander Capital, LP | |||||||||||||||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 24,366 | ||||||||||||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 2.85 | ||||||||||||||
Private Placement [Member] | |||||||||||||||
Debt Instrument, Convertible, Conversion Price | $ 2 | ||||||||||||||
Debt Conversion, Converted Instrument, Shares Issued | 560,185 | ||||||||||||||
Subsequent Event [Member] | Convertible Notes Payable [Member] | |||||||||||||||
Sale of Stock, Consideration Received on Transaction | $ 2,039,303 | ||||||||||||||
Sale of Stock, Consideration Received Per Transaction | 2,350,000 | ||||||||||||||
Payments For Placement Agent And Lawyers Fees | 310,697 | ||||||||||||||
Payments For Placement Agent Commission | 141,000 | ||||||||||||||
Payments For Placement Agent Debt Restructuring Fee | 64,208 | ||||||||||||||
Payments For Placement Agent Debt Conversion Fee | 15,889 | ||||||||||||||
Payments For Placement Agent Fees | 33,600 | ||||||||||||||
Subsequent Event [Member] | Convertible Notes Payable [Member] | Alexander Capital, LP | |||||||||||||||
Payments For Placement Agent Commission | 141,000 | ||||||||||||||
Payments For Placement Agent Debt Restructuring Fee | 64,208 | ||||||||||||||
Payments For Placement Agent Debt Conversion Fee | 15,889 | ||||||||||||||
Payments For Placement Agent Fees | $ 33,600 | ||||||||||||||
Debt Conversion, Converted Instrument, Shares Issued | 560,185 | ||||||||||||||
Subsequent Event [Member] | Private Placement [Member] | |||||||||||||||
Stock Issued During Period, Shares, New Issues | 1,175,000 | ||||||||||||||
Common Stock, Par or Stated Value Per Share | $ 0.001 | ||||||||||||||
Share Price | $ 2 | ||||||||||||||
Subsequent Event [Member] | Placement Agent Warrants [Member] | |||||||||||||||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 70,500 | ||||||||||||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 2.50 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Customer represented more than 10% of total net revenues (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Apr. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Concentration Risk, Percentage | 80.00% | ||||
Sales Revenue, Net [Member] | |||||
Concentration Risk, Percentage | 10.00% | 10.00% | |||
Accounts Receivable [Member] | |||||
Concentration Risk, Percentage | 10.00% | ||||
Customer A [Member] | Sales Revenue, Net [Member] | |||||
Concentration Risk, Percentage | 11.00% | 23.00% | 22.00% | 10.00% | |
Customer A [Member] | Accounts Receivable [Member] | |||||
Concentration Risk, Percentage | 15.00% | ||||
Customer B [Member] | Sales Revenue, Net [Member] | |||||
Concentration Risk, Percentage | 17.00% |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenue from Contract with Customer, Including Assessed Tax | $ 3,532,645 | $ 4,940,188 | $ 15,239,434 | $ 12,758,715 |
Product sales [Member] | ||||
Revenue from Contract with Customer, Including Assessed Tax | 3,499,116 | 4,858,055 | 14,982,117 | 12,676,582 |
Service [Member] | ||||
Revenue from Contract with Customer, Including Assessed Tax | 19,442 | 67,753 | ||
Licensing [Member] | ||||
Revenue from Contract with Customer, Including Assessed Tax | $ 14,087 | $ 82,133 | $ 189,564 | $ 82,133 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Geographical regions (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Apr. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Concentration Risk, Percentage | 80.00% | ||||
North America [Member] | |||||
Concentration Risk, Percentage | 86.00% | 84.00% | 78.00% | 81.00% | |
Asia-Pacific [Member] | |||||
Concentration Risk, Percentage | 11.00% | 15.00% | |||
Europe [Member] | |||||
Concentration Risk, Percentage | 15.00% |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Book value and estimated fair value (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Contingent consideration | $ (520,000) | $ (520,000) |
Book Value | ||
Contingent consideration | (520,000) | |
Estimated Fair Value | ||
Contingent consideration | $ (520,000) |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Changes in level 3 instruments (Details) - Fair Value, Measurements, Recurring [Member] - Fair Value, Inputs, Level 3 [Member] - Contingent consideration [Member] - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Balance, Beginning | $ (520,000) | $ (520,000) |
Change in fair value | 0 | 0 |
Balance, Ending | $ (520,000) | $ (520,000) |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Excluded common stock equivalents (Details) | 9 Months Ended |
Sep. 30, 2019shares | |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1,655,624 |
Edison Nation Holdings LLC [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 990,000 |
Selling Agent Warrants [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 89,992 |
Options [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 290,000 |
Convertible shares under notes payable [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 285,632 |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Cumulative effect of initially applying the new lease accounting standard (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2019 | Jan. 01, 2019 | Dec. 31, 2018 | |
Assets: | |||
Right of use assets - operating leases | $ 810,017 | $ 0 | $ 0 |
Liabilities: | |||
Current portion of operating lease liabilities | 292,800 | 0 | 0 |
Operating lease liabilities, net of current portion | $ 534,817 | 0 | $ 0 |
Lease, Practical Expedients, Package [true false] | true | ||
Lease, Practical Expedient, Use of Hindsight [true false] | false | ||
Lease, Practical Expedient, Lessor Single Lease Component [true false] | true | ||
Accounting Standards Update 2016-02 [Member] | |||
Assets: | |||
Right of use assets - operating leases | 943,997 | ||
Liabilities: | |||
Current portion of operating lease liabilities | 261,866 | ||
Operating lease liabilities, net of current portion | 682,131 | ||
Restatement Adjustment [Member] | |||
Assets: | |||
Right of use assets - operating leases | 943,997 | ||
Liabilities: | |||
Current portion of operating lease liabilities | 261,866 | ||
Operating lease liabilities, net of current portion | $ 682,131 |
Summary of Significant Accou_11
Summary of Significant Accounting Policies (Details) | 1 Months Ended | 6 Months Ended | 9 Months Ended | ||
Apr. 30, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | Sep. 30, 2019USD ($)segment | Sep. 30, 2018 | |
Cash, Uninsured Amount | $ 627,000 | ||||
Concentration Risk, Percentage | 80.00% | ||||
Cash, FDIC Insured Amount | $ 198,000 | ||||
Number of reportable segment | segment | 1 | ||||
Geographic Concentration Risk [Member] | |||||
Concentration Risk, Percentage | 10.00% | 10.00% | |||
Sales Revenue, Net [Member] | |||||
Concentration Risk, Percentage | 10.00% | 10.00% | |||
Accounts Receivable [Member] | |||||
Concentration Risk, Percentage | 10.00% |
Acquisition - Pro forma consoli
Acquisition - Pro forma consolidated income statement (Details) - Edison Nation Holdings LLC [Member] - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2018 | Sep. 30, 2018 | |
Business Acquisition [Line Items] | ||
Revenues, net | $ 6,547,012 | $ 16,740,554 |
Cost of revenues | 4,426,614 | 10,989,040 |
Gross profit | 2,120,398 | 5,741,514 |
Selling, general and administrative | 3,810,146 | 10,227,429 |
Operating loss | (1,689,748) | (4,475,915) |
Other (expense) income: | ||
Other (expense) income | 88,910 | (330,162) |
Loss before income taxes | (1,600,838) | (4,806,077) |
Income tax expense | 182,669 | 327,042 |
Net loss | (1,783,507) | (5,133,119) |
Net loss attributable to noncontrolling interests | (89,527) | (370,417) |
Net loss attributable to Edison Nation, Inc. | $ (1,693,979) | $ (4,762,701) |
Net loss per share - basic and diluted | $ (0.31) | $ (0.98) |
Weighted average number of common shares outstanding - basic and diluted | 5,471,921 | 4,835,681 |
Acquisition - Additional inform
Acquisition - Additional information (Details) | Sep. 04, 2018USD ($)shares | Oct. 29, 2018shares | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Dec. 31, 2018USD ($) | Aug. 26, 2019USD ($) | Mar. 06, 2019USD ($) |
Business Acquisition [Line Items] | |||||||||
Payments to Acquire Businesses, Net of Cash Acquired | $ 0 | $ 881,318 | |||||||
Revenues | $ 3,532,645 | $ 4,940,188 | 15,239,434 | 12,758,715 | |||||
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | (2,631,204) | $ (1,679,306) | (5,784,666) | $ (3,983,272) | |||||
Debt Instrument, Unamortized Discount | $ 500,000 | $ 439,819 | $ 439,819 | $ 466,667 | $ 60,000 | $ 60,000 | |||
Percentage Of Consideration To Be Paid on Total Sales | 8.00% | ||||||||
Edison Nation Holdings LLC [Member] | |||||||||
Business Acquisition [Line Items] | |||||||||
Business Combination, Consideration Transferred | 12,820,978 | ||||||||
Payments to Acquire Businesses, Net of Cash Acquired | $ 950,000 | ||||||||
Debt Instrument, Interest Rate, Stated Percentage | 4.00% | ||||||||
Debt Instrument, Term | 5 years | ||||||||
Convertible Debt | $ 1,428,161 | ||||||||
Debt Instrument, Convertible, Number of Equity Instruments | 285,632 | ||||||||
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares | shares | 990,000 | ||||||||
Debt Conversion, Converted Instrument, Shares Issued | shares | 557,084 | ||||||||
Debt Conversion, Converted Instrument, Amount | $ 3,760,317 | ||||||||
Cloud B, Inc. [Member] | |||||||||
Business Acquisition [Line Items] | |||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 72.15% | 72.15% | 72.15% | ||||||
Business Acquisition Number of Shares Acquired | shares | 489,293 | ||||||||
Pirasta, LLC [Member] | |||||||||
Business Acquisition [Line Items] | |||||||||
Business Combination, Consideration Transferred | 470,000 | ||||||||
Business Combination Settlement of related party | 470,000 | ||||||||
Best Party Concepts llc [Member] | |||||||||
Business Acquisition [Line Items] | |||||||||
Business Combination, Consideration Transferred | $ 500,000 | ||||||||
Business Combination Settlement of related party | $ 500,000 | $ 500,000 | |||||||
Equity Method Investment, Ownership Percentage | 50.00% | 50.00% |
Inventory (Details)
Inventory (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Inventory | ||
Raw materials | $ 46,884 | $ 48,576 |
Finished goods | 1,059,193 | 875,131 |
Total inventory | $ 1,106,077 | $ 923,707 |
Intangible assets, net (Details
Intangible assets, net (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Gross Carrying Amount | $ 13,000,000 | $ 13,000,000 |
Net Amount | 8,733,337 | |
Indefinite-lived Intangible Assets (Excluding Goodwill) [Abstract] | ||
Indefinite Lived Intangible Assets Accumulated Amortization | 1,126,663 | 312,269 |
Intangible Assets, Net (Excluding Goodwill) | $ 11,873,337 | $ 12,687,731 |
Customer relationships [Member] | ||
Useful Life | 15 years | 15 years |
Weighted Average Remaining Life | 14 years 9 months 18 days | 14 years 9 months 18 days |
Gross Carrying Amount | $ 4,270,000 | $ 4,270,000 |
Accumulated Amortization | 268,389 | 61,555 |
Net Amount | $ 4,001,611 | $ 4,208,445 |
Developed technology [Member] | ||
Useful Life | 7 years | 7 years |
Weighted Average Remaining Life | 6 years 8 months 12 days | 6 years 8 months 12 days |
Gross Carrying Amount | $ 3,800,000 | $ 3,800,000 |
Accumulated Amortization | 561,905 | 159,524 |
Net Amount | $ 3,238,095 | $ 3,640,476 |
Membership Network [Member] | ||
Useful Life | 7 years | 7 years |
Weighted Average Remaining Life | 6 years 8 months 12 days | 6 years 8 months 12 days |
Gross Carrying Amount | $ 1,740,000 | $ 1,740,000 |
Accumulated Amortization | 269,286 | 82,857 |
Net Amount | $ 1,470,714 | $ 1,657,143 |
Non-compete agreements [Member] | ||
Useful Life | 2 years | 2 years |
Weighted Average Remaining Life | 1 year 8 months 12 days | 1 year 8 months 12 days |
Gross Carrying Amount | $ 50,000 | $ 50,000 |
Accumulated Amortization | 27,083 | 8,333 |
Net Amount | 22,917 | 41,667 |
Finite-Lived Intangible Assets [Member] | ||
Gross Carrying Amount | 9,860,000 | 9,860,000 |
Accumulated Amortization | 1,126,663 | 312,269 |
Net Amount | 8,733,337 | 9,547,731 |
Trademarks and Trade Names [Member] | ||
Gross Carrying Amount | 3,140,000 | 3,140,000 |
Indefinite-lived Intangible Assets (Excluding Goodwill) [Abstract] | ||
Indefinite Lived Intangible Assets Accumulated Amortization | 0 | 0 |
Intangible Assets, Net (Excluding Goodwill) | 3,140,000 | 3,140,000 |
Indefinite-lived Intangible Assets [Member] | ||
Gross Carrying Amount | 3,140,000 | 3,140,000 |
Indefinite-lived Intangible Assets (Excluding Goodwill) [Abstract] | ||
Indefinite Lived Intangible Assets Accumulated Amortization | 0 | 0 |
Intangible Assets, Net (Excluding Goodwill) | $ 3,140,000 | $ 3,140,000 |
Intangible assets, net - Estima
Intangible assets, net - Estimated future amortization of intangibles (Details) | Sep. 30, 2019USD ($) |
Intangible assets, net | |
2019 (excluding the nine months ended September 30, 2019) | $ 275,274 |
2020 | 1,092,762 |
2021 | 1,076,095 |
2022 | 1,076,095 |
2023 | 1,076,095 |
Thereafter | 4,137,016 |
Finite-Lived Intangible Assets, Net | $ 8,733,337 |
Intangible assets, net - Additi
Intangible assets, net - Additional information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Intangible assets, net | ||||
Amortization of Intangible Assets | $ 275,274 | $ 0 | $ 814,394 | $ 0 |
Debt (Details)
Debt (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Line of credit: | ||
Asset backed line of credit | $ 471,553 | $ 561,804 |
Debt issuance costs | (19,466) | (30,000) |
Total line of credit | 452,087 | 531,804 |
Senior convertible notes payable: | ||
Debt issuance costs | (19,466) | (31,145) |
Notes payable: | ||
Debt issuance costs | (19,466) | (31,145) |
Long-term debt | 7,249,465 | |
Notes payable - related parties: | ||
Notes payable | 3,381,579 | 3,464,191 |
Less: current portion of long-term debt - related parties | (1,039,330) | (932,701) |
Noncurrent portion of long-term debt - related parties | 2,342,249 | 2,531,490 |
Long-term Debt [Member] | ||
Senior convertible notes payable: | ||
Debt issuance costs | (153,793) | 0 |
Notes payable: | ||
Notes payable | 1,470,137 | 370,250 |
Debt issuance costs | (153,793) | 0 |
Long-term debt | 1,316,344 | 370,250 |
Less: current portion of long-term debt | (1,270,243) | (313,572) |
Noncurrent portion of long-term debt | 46,101 | 56,678 |
Convertible Notes Payable [Member] | ||
Senior convertible notes payable: | ||
Senior convertible notes payable | 2,099,455 | 961,494 |
Senior convertible notes payable | 2,539,273 | 1,428,161 |
Debt issuance costs | (439,818) | (466,667) |
Total long-term senior convertible notes payable | 2,099,455 | 961,494 |
Less: current portion of long-term notes payable | 0 | |
Noncurrent portion of long-term convertible notes payable | 2,099,455 | 961,494 |
Notes payable: | ||
Debt issuance costs | $ (439,818) | $ (466,667) |
Debt - Scheduled maturities of
Debt - Scheduled maturities of the debt (Details) | Dec. 31, 2018USD ($) |
Debt | |
2019 | $ 2,175,092 |
2020 | 828,426 |
2021 | 871,916 |
2022 | 218,266 |
2023 | 1,229,569 |
Thereafter | 2,539,273 |
Long-term Debt, Gross | 7,862,542 |
Less: debt discount | (613,077) |
Long-term debt | $ 7,249,465 |
Debt - Additional information (
Debt - Additional information (Details) - USD ($) | Aug. 26, 2019 | Jul. 15, 2019 | Jun. 11, 2019 | May 13, 2019 | Mar. 06, 2019 | Oct. 31, 2019 | Apr. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | May 16, 2019 | Dec. 31, 2018 | Sep. 04, 2018 |
Interest Expense | $ 349,172 | $ 42,130 | $ 875,036 | $ 407,267 | ||||||||||
Interest Expense, Related Party | 78,475 | $ 42,714 | 238,111 | $ 145,656 | ||||||||||
Debt Instrument, Face Amount | $ 560,000 | $ 560,000 | 1,000,000 | 1,000,000 | ||||||||||
Debt Instrument, Unamortized Discount | $ 60,000 | $ 60,000 | $ 439,819 | $ 439,819 | $ 466,667 | $ 500,000 | ||||||||
Common Stock, Shares, Issued | 181,005 | 15,000 | 6,033,835 | 6,033,835 | 5,654,830 | |||||||||
Line of Credit Facility, Commitment Fee Amount | $ 153,005 | |||||||||||||
Percentage of senior convertible note | 12.00% | 2.00% | ||||||||||||
Common Stock, Value, Issued | $ 74,100 | $ 6,034 | $ 6,034 | $ 5,655 | ||||||||||
Concentration Risk, Percentage | 80.00% | |||||||||||||
Minimum [Member] | ||||||||||||||
Percentage of borrowing fee | 1.00% | |||||||||||||
Maximum [Member] | ||||||||||||||
Percentage of borrowing fee | 2.00% | |||||||||||||
Arkansas Securities Department [Member] | ||||||||||||||
Legal Fees | $ 1,100 | |||||||||||||
Convertible Notes Payable [Member] | ||||||||||||||
Debt Instrument, Face Amount | $ 1,111,111 | |||||||||||||
Debt Instrument, Unamortized Discount | $ 111,111 | 78,800 | 78,800 | |||||||||||
Common Stock, Shares, Issued | 20,000 | |||||||||||||
Percentage of senior convertible note | 2.00% | |||||||||||||
Conversion of convertible notes payable, conversion price | $ 2 | |||||||||||||
Conversion of convertible notes payable, shares issued | 560,185 | |||||||||||||
Convertible Notes Payable [Member] | Alexander Capital, LP | ||||||||||||||
Warrants to purchase shares of common stock | 24,366 | |||||||||||||
Exercise price of warrants | $ 2.85 | |||||||||||||
Convertible Notes Payable [Member] | Subsequent Event [Member] | Alexander Capital, LP | ||||||||||||||
Conversion of convertible notes payable, conversion price | $ 2 | |||||||||||||
Conversion of convertible notes payable, shares issued | 560,185 | |||||||||||||
Notes Payable | ||||||||||||||
Debt Instrument, Face Amount | $ 300,000 | |||||||||||||
Debt Instrument, Unamortized Discount | $ 62,000 | $ 62,000 | $ 50,000 | |||||||||||
Common Stock, Shares, Issued | 20,000 | |||||||||||||
1.5% Notes Payable | ||||||||||||||
Debt Instrument, Face Amount | $ 250,000 | |||||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 1.50% | |||||||||||||
Interest and principal due term | 30 days |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | Aug. 01, 2019 | Sep. 30, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Due to Related Parties, Current | $ 22,896 | $ 22,896 | $ 140,682 | |
Related Party Transaction, Amounts of Transaction | $ 15,000 | |||
Best Party Concepts llc [Member] | ||||
Due from Related Parties, Current | $ 500,000 | |||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | |||
SRM entertainment llc [Member] | ||||
Due to Related Parties, Current | 22,896 | 22,896 | $ 140,682 | |
Enventys Partners LLC [Member] | ||||
Related Party Transaction, Amounts of Transaction | $ 22,000 | $ 97,500 | ||
NL Penn Capital, L.P [Member] | ||||
Due from Related Parties, Current | $ 470,000 |
Commitments and Contingencies -
Commitments and Contingencies - Reconciliation of future undiscounted cash flows to the operating liabilities (Details) - USD ($) | Sep. 30, 2019 | Jan. 01, 2019 | Dec. 31, 2018 | Aug. 08, 2016 |
Commitments and Contingencies | ||||
2019 (excluding the nine months ended September 30, 2019) | $ 82,230 | |||
2020 | 315,660 | |||
2021 | 267,249 | |||
2022 | 96,288 | |||
2023 | 78,648 | |||
2024 and thereafter | 52,430 | |||
Total future lease payments | 892,505 | $ 154,000 | ||
Less: imputed interest | (64,888) | |||
Present value of future operating lease payments | 827,617 | |||
Less: current portion of operating lease liabilities | (292,800) | $ 0 | $ 0 | |
Operating lease liabilities, net of current portion | 534,817 | 0 | 0 | |
Right of use assets - operating leases, net | $ 810,017 | $ 0 | $ 0 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) - USD ($) | Jul. 01, 2019 | Aug. 08, 2016 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Jan. 01, 2019 | Dec. 31, 2018 |
Monthly Operating Lease Expenses | $ 6,400 | |||||||
Operating Leases, Rent Expense, Net | $ 128,256 | $ 65,244 | $ 410,759 | $ 211,780 | ||||
Operating Leases, Future Minimum Payments Due | $ 154,000 | 892,505 | 892,505 | |||||
Operating Leases, Rent Expense, Sublease Rentals | 25,704 | $ 25,704 | 77,111 | $ 77,111 | ||||
Operating Lease, Payments | 78,303 | 225,249 | ||||||
Operating Lease, Right-of-Use Asset | $ 810,017 | $ 810,017 | $ 0 | $ 0 | ||||
Operating Lease, Weighted Average Discount Rate, Percent | 4.50% | 4.50% | ||||||
Operating Lease, Weighted Average Remaining Lease Term | 3 years 3 months 18 days | 3 years 3 months 18 days | ||||||
Operating Lease, Liability | $ 827,617 | $ 827,617 | ||||||
Operating Lease, Cost | $ 75,414 | $ 217,189 | ||||||
Bethlehem, Pennsylvania [Member] | ||||||||
Operating Leases, Future Minimum Payments Due | $ 89,000 | |||||||
Operating Leases, Rent Expense, Minimum Rentals | $ 2,415 |
Stockholders' Equity - Stock Co
Stockholders' Equity - Stock Compensation Expense (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated Share-based Compensation Expense | $ 168,097 | $ 639,326 | $ 876,585 | $ 2,666,576 |
Stock option awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated Share-based Compensation Expense | 15,535 | 260,826 | 160,140 | 260,826 |
Non-employee awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated Share-based Compensation Expense | 151,750 | 375,000 | 615,050 | 2,096,250 |
Restricted stock unit awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated Share-based Compensation Expense | 8,850 | $ 3,500 | 8,850 | $ 309,500 |
Phantom stock awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Allocated Share-based Compensation Expense | $ (8,038) | $ 92,545 |
Stockholders' Equity - Stock op
Stockholders' Equity - Stock option award activity (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Stockholders' Equity | ||
Shares, Balance, January 1, 2019 | 290,000 | |
Shares, Granted | 0 | |
Shares, Balance, September 30, 2019 | 290,000 | 290,000 |
Shares, Exercisable, September 30, 2019 | 263,333 | |
Weighted Average Exercise Price, Balance, January 1, 2019 | $ 5.55 | |
Weighted Average Exercise Price, Granted | 0 | |
Weighted Average Exercise Price, Balance, September 30, 2019 | 5.55 | $ 5.55 |
Weighted Average Exercise Price, Exercisable, September 30, 2019 | $ 5.41 | |
Remaining Contractual Life in Years, Granted | 0 years | |
Remaining Contractual Life in Years, Balance | 3 years 6 months | 4 years 2 months 12 days |
Remaining Contractual Life in Years, Exercisable, September 30, 2019 | 3 years 6 months | |
Aggregate Intrinsic Value, Balance, January 1, 2019 | $ 0 | |
Aggregate Intrinsic Value, Granted | $ 0 | |
Aggregate Intrinsic Value, Balance, September 30, 2019 | $ 0 | $ 0 |
Aggregate Intrinsic Value, Exercisable, September 30, 2019 | $ 0 |
Stockholders' Equity - Addition
Stockholders' Equity - Additional information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 06, 2018 | |
Stockholders' Equity | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 1,764,705 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares | 26,667 | 26,667 | |||
Allocated Share-based Compensation Expense | $ 168,097 | $ 639,326 | $ 876,585 | $ 2,666,576 | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options | $ 62,139 | $ 62,139 | |||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 1 year |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | Nov. 06, 2019 | Oct. 02, 2019 | May 13, 2019 | Oct. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Subsequent Event [Line Items] | ||||||
Common stock, par value | $ 0.001 | $ 0.001 | ||||
Private Placement [Member] | ||||||
Subsequent Event [Line Items] | ||||||
Conversion of convertible notes payable, shares issued | 560,185 | |||||
Convertible Notes Payable [Member] | ||||||
Subsequent Event [Line Items] | ||||||
Conversion of convertible notes payable, conversion price | $ 2 | |||||
Conversion of convertible notes payable, shares issued | 560,185 | |||||
Convertible Notes Payable [Member] | Alexander Capital, LP | ||||||
Subsequent Event [Line Items] | ||||||
Warrants to purchase shares of common stock | 24,366 | |||||
Exercise price of warrants | $ 2.85 | |||||
Subsequent Event [Member] | ||||||
Subsequent Event [Line Items] | ||||||
Percentage the entity is obligated to pay on total purchase price per month | 1.00% | |||||
Maximum percentage the entity is obligated to pay on total purchase price in aggregate | 8.00% | |||||
Subsequent Event [Member] | Edison Nation, Inc | ||||||
Subsequent Event [Line Items] | ||||||
Shares acquired | 22,500 | |||||
Subsequent Event [Member] | Uber Mom, LLC | ||||||
Subsequent Event [Line Items] | ||||||
Asset acquired | $ 52,352 | |||||
Subsequent Event [Member] | Private Placement [Member] | ||||||
Subsequent Event [Line Items] | ||||||
Number of shares issued | 1,175,000 | |||||
Common stock, par value | $ 0.001 | |||||
Purchase price per share | $ 2 | |||||
Subsequent Event [Member] | Placement Agent Warrants [Member] | ||||||
Subsequent Event [Line Items] | ||||||
Warrants to purchase shares of common stock | 70,500 | |||||
Exercise price of warrants | $ 2.50 | |||||
Subsequent Event [Member] | Convertible Notes Payable [Member] | ||||||
Subsequent Event [Line Items] | ||||||
Net proceeds from the PIPE transaction | $ 2,039,303 | |||||
Gross proceeds from the PIPE transaction | 2,350,000 | |||||
Placement agent and their lawyer's fees | 310,697 | |||||
Placement agent debt restructuring fee | 64,208 | |||||
Placement agent commission | 141,000 | |||||
Placement agent debt conversion fee | 15,889 | |||||
Placement agent fees | 33,600 | |||||
Subsequent Event [Member] | Convertible Notes Payable [Member] | Alexander Capital, LP | ||||||
Subsequent Event [Line Items] | ||||||
Placement agent debt restructuring fee | 64,208 | |||||
Placement agent commission | 141,000 | |||||
Placement agent debt conversion fee | 15,889 | |||||
Placement agent fees | $ 33,600 | |||||
Conversion of convertible notes payable, conversion price | $ 2 | |||||
Conversion of convertible notes payable, shares issued | 560,185 |