Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 14, 2018 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | EDISON NATION, INC. | |
Entity Central Index Key | 1,717,556 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Trading Symbol | EDNT | |
Entity Common Stock, Shares Outstanding | 5,052,104 | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Small Business | true |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 2,061,039 | $ 557,268 |
Accounts receivable, net | 2,832,513 | 1,430,236 |
Inventory | 200,087 | 240,061 |
Prepaid expenses and other current assets | 1,114,924 | 41,461 |
Loan held for investment | 500,000 | 0 |
Due from related party | 1,307,247 | 834,897 |
Total current assets | 8,015,810 | 3,103,923 |
Property and equipment, net | 969,671 | 966,904 |
Goodwill | 12,785,855 | 0 |
Patents | 53,822 | |
Total assets | 21,825,158 | 4,070,827 |
Current liabilities: | ||
Accounts payable | 1,323,402 | 1,135,039 |
Accrued expenses and other current liabilities | 935,946 | 137,709 |
Current portion of notes payable - related parties | 285,015 | 225,553 |
Total current liabilities | 2,544,363 | 1,498,301 |
Notes payable - related parties, non-current – net of debt discount | 3,520,867 | 2,770,947 |
Notes payable | 73,559 | 0 |
Derivative liability – put option contract | 7,415,100 | |
Deferred tax liability | 34,209 | 34,209 |
Total liabilities | 13,588,098 | 4,303,457 |
Commitments and contingencies (Note 10) | ||
Stockholders' equity (deficit) | ||
Common stock, $0.001 par value, 250,000,000 shares authorized; 5,040,004 and 3,000,000 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively | 5,040 | 3,000 |
Additional paid-in capital | 12,450,922 | 0 |
Accumulated deficit | (4,218,902) | (235,630) |
Total stockholders' equity (deficit) | 8,237,060 | (232,630) |
Total liabilities and stockholders' equity (deficit) | $ 21,825,158 | $ 4,070,827 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
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 | 5,040,004 | 3,000,000 |
Common Stock, Shares, Outstanding | 5,040,004 | 3,000,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenues, net | $ 4,940,188 | $ 3,174,722 | $ 12,758,715 | $ 11,571,468 |
Cost of revenues | 3,637,000 | 2,142,947 | 9,090,215 | 8,226,062 |
Gross profit | 1,303,188 | 1,031,775 | 3,668,500 | 3,345,406 |
Operating expenses: | ||||
Selling, general and administrative | 2,065,655 | 770,109 | 6,276,830 | 1,933,152 |
Operating (loss) income | (762,467) | 261,666 | (2,608,330) | 1,412,254 |
Other (expense) income: | ||||
Rental income | 25,704 | 25,704 | 77,111 | 77,111 |
Change in fair value of put option contract | (732,600) | 0 | (732,600) | 0 |
Interest (expense) income | (42,130) | 1,228 | (407,267) | 3,671 |
Total other (expense) income | (749,026) | 26,932 | (1,062,756) | 80,782 |
(Loss) income before income taxes | (1,511,493) | 288,598 | (3,671,086) | 1,493,036 |
Income tax expense (benefit) | 167,813 | (26,570) | 312,186 | 64,655 |
Net (loss) income | $ (1,679,306) | $ 315,168 | $ (3,983,272) | $ 1,428,381 |
Net (loss) income per share - basic and diluted | $ (0.37) | $ 0.11 | $ (1.11) | $ 0.48 |
Weighted average number of common shares outstanding – basic and diluted | 4,560,607 | 3,000,000 | 3,577,942 | 3,000,000 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - 9 months ended Sep. 30, 2018 - USD ($) | Total | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] |
Balance at Dec. 31, 2017 | $ (232,630) | $ 3,000 | $ 0 | $ (235,630) |
Balance (in shares) at Dec. 31, 2017 | 3,000,000 | |||
Sale of common stock – investors in the IPO, net of offering costs | 5,358,570 | $ 1,313 | 5,357,257 | |
Sale of common stock – investors in the IPO, net of offering costs (in shares) | 1,312,520 | |||
Issuance of common stock to employees | 309,500 | $ 62 | 309,438 | |
Issuance of common stock to employees (in shares) | 61,900 | |||
Issuance of common stock to note holders | 167,500 | $ 33 | 167,467 | |
Issuance of common stock to note holders (in shares) | 33,500 | |||
Issuance of common stock to vendors for services | 375,000 | $ 75 | 374,925 | |
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 | 3,760,317 | $ 557 | 3,759,760 | |
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 | 500,000 | 500,000 | ||
Stock-based compensation | 1,982,076 | 1,982,076 | ||
Net loss | (3,983,272) | (3,983,272) | ||
Balance at Sep. 30, 2018 | $ 8,237,060 | $ 5,040 | $ 12,450,923 | $ (4,218,902) |
Balance (in shares) at Sep. 30, 2018 | 5,040,004 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash Flow from Operating Activities | ||
Net (loss) income | $ (3,983,272) | $ 1,428,381 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
Depreciation and amortization | 120,004 | 157,765 |
Amortization of financing costs | 266,944 | 0 |
Stock-based compensation | 2,666,576 | 0 |
Change in fair value of put option contract | 732,600 | 0 |
Changes in assets and liabilities: | ||
Accounts receivable | (1,402,277) | (97,251) |
Inventory | 39,974 | 629 |
Prepaid expenses and other current assets | (1,011,586) | (59,508) |
Accounts payable | 55,194 | 331,745 |
Accrued expenses and other current liabilities | 780,564 | 35,645 |
Due from related party | (472,351) | (710,805) |
Net cash (used in) provided by operating activities | (2,207,630) | 1,086,601 |
Cash Flows from Investing Activities | ||
Purchases of property and equipment | (121,186) | (47,792) |
Acquisition of Edison Nation Holdings, LLC and Subsidiaries, net of cash received | (881,318) | |
Purchase of loan held for investment | (500,000) | 0 |
Net cash used in investing activities | (1,502,504) | (47,792) |
Cash Flows from Financing Activities | ||
Borrowings under notes payable | 718,559 | 0 |
Repayments under notes payable – related parties | (645,000) | 0 |
Repayments under notes payable | (118,779) | 0 |
Net proceeds from sale of common stock | 5,358,570 | 0 |
Fees paid for financing costs | (99,444) | 0 |
Dividends paid | 0 | (2,813,607) |
Net cash provided by (used in) financing activities | 5,213,906 | (2,813,607) |
Net increase in cash and cash equivalents | 1,503,771 | (1,774,798) |
Cash and cash equivalents - beginning of period | 557,268 | 2,534,753 |
Cash and cash equivalents - end of period | 2,061,039 | 759,955 |
Supplemental Disclosures of Cash Flow Information | ||
Cash paid during the period for: Interest | 93,044 | 0 |
Cash paid during the period for: Income taxes | 0 | 52,386 |
Shares issued to note holders | 167,500 | 0 |
Shares issued for the acquisition of Edison Nation Holdings, LLC | 3,760,317 | 0 |
Shares reserved in exchange for the cancellation of certain non-voting membership interests related to acquisition of Edison Nation Holdings, LLC | 6,682,500 | 0 |
Borrowings under note payable for the purchase of property and equipment | 73,559 | 0 |
Issuance of 4%, 5 year senior convertible notes for the acquisition of Edison Nation Holdings, LLC | $ 1,428,161 | $ 0 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - Senior Convertible Notes [Member] | 9 Months Ended |
Sep. 30, 2018 | |
Debt Instrument, Interest Rate, Stated Percentage | 4.00% |
Debt Instrument, Term | 5 years |
Business Organization and Natur
Business Organization and Nature of Operations | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | Note 1 — Business Organization and Nature of Operations As used herein, the terms the “Company,” “Edison Nation” “we,” “us,” “our” and similar refer to Edison Nation, Inc., a Nevada corporation formerly known as Xspand Products Lab, Inc. and Idea Lab Products, Inc., and/or its wholly-owned operating subsidiaries, and/or where applicable, its management. Edison Nation, Inc. was incorporated on July 18, 2017 under the laws of the State of Nevada as Idea Lab X Products, Inc. On October 26, 2017, Idea Lab X Products, Inc. changed its name to Xspand Products Lab, Inc. and on September 12, 2018 changed its name again to Edison Nation, Inc. As of September 30, 2018, Edison Nation had four wholly-owned subsidiaries: S.R.M. Entertainment Limited (“SRM”), Ferguson Containers, Inc. (“Fergco”), CBAV1, LLC (“CB”) and Edison Nation Holdings, LLC. Edison Nation Holdings, LLC is the single member of Edison Nation, LLC, Everyday Edisons, LLC, and Edison Nation Products, LLC. Edison Nation, LLC is the single member of Safe TV Shop, LLC. SRM was incorporated in Hong Kong on January 14, 1981 and primarily designs, manufactures and sells a broad variety of innovative toy products directly to retailers or direct to consumers via ecommerce in North America, Asia and Europe. Fergco was incorporated on September 14, 1966 under the laws of the State of New Jersey. Fergco primarily designs, manufactures and sells packaging and packaging materials for industrial and pharmaceutical companies in North America. Edison Nation Holdings, LLC and all of its subsidiaries (collectively “EN”) are North Carolina limited liability companies. EN generates revenues and related cash flows from the acquisition of intellectual property rights from private inventors and the commercialization of that intellectual property. In order to acquire intellectual property rights, EN operates a website where inventors submit their innovative product ideas. The intellectual property rights acquired through these various sources is then licensed to either manufactures or retailers. In certain instances, the Company develops the intellectual property into innovative products and in other cases the intellectual property is licensed “as is”. In certain other instances the Company develops the intellectual property into products for the Direct Response Television (DRTV) market. For these products, the Company develops and tests infomercials, and then, for those with positive test results, licenses the products to strategic partners in the DRTV industry. The inventors of the intellectual property are paid a percentage of the Company’s revenue from its commercialization. This percentage varies with the Company’s investment in the development of the intellectual property. On September 30, 2017, SRM and Fergco were acquired by the Company in exchange for an aggregate of 3,000,000 shares of the Company common stock and notes payable aggregating $2,996,500. This transaction between entities under common control resulted in a change in reporting entity and required retrospective combination of the entities for all periods presented, as if the combination had been in effect since the inception of common control. Accordingly, the condensed consolidated financial statements of the Company reflect the accounting of the combined acquired subsidiaries at historical carrying values, except that equity reflects the equity of the Company. On February 14, 2018, the Company effected a one-for-3.333333 reverse stock split of its issued and outstanding shares of common stock. All share information has been retroactively restated to reflect the aforementioned reverse stock split. CB was formed on May 14, 2018 under laws of the State of Nevada. CB was formed for the purpose of purchasing a promissory note from a bank, at a discount from face value, of a company in financial difficulty. CB currently has no operations and only holds the note as a loan held for investment. On September 4, 2018, Edison Nation Holdings, LLC and its wholly-owned subsidiaries were acquired by the Company. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies [Text Block] | Note 2 — Summary of Significant Accounting Policies Basis of Presentation 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 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, 2018 and the results of operations, changes in stockholders’ equity (deficit), and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the operating results for the full fiscal year for any future period. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. 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, 2017, and updated, as necessary, in this Quarterly Report on Form 10-Q. Principles of Consolidation The condensed consolidated financial statements include the accounts of Edison Nation, Inc. and its wholly-owned subsidiaries, SRM, Fergco, CB and EN. All intercompany transactions and balances have been eliminated in consolidation. 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, loan loss reserves, the valuation allowance related to the Company’s deferred tax assets and the recoverability and useful lives of long-lived assets. 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. 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. Loan Held for Investment Loan held for investment is reported on the balance sheet at the acquired cost which approximates the fair value, which resulted in a discount. The acquired loan had evidence of deterioration of credit quality and for which it was probable, at the time of our acquisition, that the Company would be unable to collect all contractually required payments. For these loans, the excess of the undiscounted contractual cash flows over the undiscounted cash flows estimated by us at the time of acquisition was not accreted into income (nonaccretable discount). The amount representing the excess of cash flows estimated by us at acquisition over the purchase price was accreted into purchase discount earned over the life of the applicable loans (accretable discount). The nonaccretable discount was not accreted into income. If cash flows could not be reasonably estimated for any loan, and collection was not probable, the cost recovery method of accounting was used. Under the cost recovery method, any amounts received were applied against the recorded amount of such loans. Subsequent to acquisition, if cash flow projections improved, and it was determined that the amount and timing of the cash flows related to the nonaccretable discount was reasonably estimable and collection was probable, the corresponding decrease in the nonaccretable discount was transferred to the accretable discount and was accreted into interest income over the remaining life of any such loan on the interest method. If cash flow projections deteriorated subsequent to acquisition, the decline was accounted for through the allowance for loan losses. Depending on the timing of an acquisition, the initial allocation of discount generally is made primarily to nonaccretable discount until the Company is able to assess any cash flows expected to be collected over the purchase price which are then transferred to accretable discount. Goodwill We record intangible assets based on their fair value on the date of acquisition. Goodwill is recorded for the difference between the fair value of the purchase consideration over the fair value of the net identifiable tangible and intangible assets acquired. We perform an impairment assessment of goodwill on an annual basis, or whenever impairment indicators exist. In the absence of any impairment indicators, goodwill is assessed for impairment during the fourth quarter of each fiscal year. Judgments regarding the existence of impairment indicators are based on market conditions and operational performance of the business. We may assess our goodwill for impairment initially using a qualitative approach to determine whether it is more likely than not that the fair value of these assets is greater than their carrying value. When performing a qualitative test, we assess various factors including industry and market conditions, macroeconomic conditions and performance of our businesses. If the results of the qualitative assessment indicate that it is more likely than not that our goodwill and other indefinite-lived intangible assets are impaired, a quantitative impairment analysis would be performed to determine if impairment is required. We may also elect to perform a quantitative analysis of goodwill initially rather than using a qualitative approach. The impairment testing for goodwill is performed at the reporting unit level. The valuation methods used in the quantitative fair value assessment, discounted cash flow and market multiples method, require our management to make certain assumptions and estimates regarding certain industry trends and future profitability of our reporting units. If the fair value of a reporting unit exceeds the related carrying value, the reporting unit's goodwill is considered not to be impaired and no further testing is performed. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recorded for the difference. The valuation of goodwill is affected by, among other things, our business plan for the future and estimated results of future operations. Future events could cause us to conclude that impairment indicators exist, and, therefore, that goodwill may be impaired. Intangible assets - patents Intangible assets include the cost of patents or patent rights (hereinafter, collectively “patents”) and trademarks. Patent and trademark costs are amortized utilizing the straight-line method over their remaining economic useful lives. Costs incurred related to patents prior to issuance are included in prepaid patent expense until the time the patent is issued and amortization begins or until management determines it is no longer likely the patent will be issued and amounts are expensed. Edison N ation reviews long-lived assets and intangible assets for potential impairment annually and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss is recorded equal to the excess of the asset’s carrying value over its fair value. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estima 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 probably 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 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 for innovative products (SRM and EN) and packaging materials to industrial and pharmaceutical companies (Fergco). 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, 2018 and 2017 was as follows: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 Revenues: Product sales $ 4,858,055 $ 3,174,722 $ 12,676,582 $ 11,571,468 Other revenues 82,133 - 82,133 - Total revenues $ 4,940,188 $ 3,174,722 $ 12,758,715 $ 11,571,468 For a presentation of the Company’s revenues disaggregated by segment, see Note 12, Segment Reporting. 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, 2018, follows: September 30, 2018 Book Value Estimated Fair Value Loan held for investment $ 500,000 $ 500,000 Derivative liability – put option contract $ (7,415,100 ) $ (7,415,100 ) Financial instruments for which fair value is disclosed but not required to be recognized in the balance sheet on a recurring basis consisted of the following: September 30, 2018 Total Level 1 Level 2 Level 3 Loan held for investment $ 500,000 - - $ 500,000 The following changes in level 3 instruments for the three months ended September 30, 2018 are presented below: Loan Held For Investment Derivative Liability – Put Option Contract Balance, July 1, 2018 $ 500,000 $ - Purchases - - Sales - (6,682,500 ) Change in fair value - (732,600 ) Balance, September 30, 2018 $ 500,000 $ (7,415,100 ) The following changes in level 3 instruments for the nine months ended September 30, 2018 are presented below: Loan Held For Investment Derivative Liability – Put Option Contract Balance, January 1, 2018 $ - $ - Purchases 500,000 - Sales - 6,682,500 ) Change in fair value - (732,600 ) Balance, September 30, 2018 $ 500,000 $ (7,415,100 ) 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 (HK dollars) 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, 2018 and 2017 and the cumulative translation gains and losses as of September 30, 2018 and December 31, 2017 were not material. Income Taxes The Company accounts for income taxes under the provisions of the Financial Accounting Standards Board (“FASB”) ASC Topic 740 “Income Taxes” (“ASC Topic 740”). The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included or excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. The Company utilizes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s condensed consolidated financial statements as of September 30, 2018 and December 31, 2017. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date. The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the statements of operations. On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was signed into law. This legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The TCJA permanently reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018. The staff of the SEC issued Staff Accounting Bulletin No. 118 to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA. Although the Company is unable to make a reasonable estimate on the full effect on our income taxes as of the date of this report, the Company remeasured its deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The remeasurement of the deferred tax assets and liabilities was offset by a change in the valuation allowance. The Company is still in the process of analyzing the impact to the Company of the TCJA. Where the Company has been able to make reasonable estimates of the effects related to which its analysis is not yet complete, the Company has recorded provisional amounts. The ultimate impact to the Company’s condensed consolidated financial statements of the TCJA may differ from the provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the TCJA. The accounting is expected to be complete when the Company’s 2017 U.S. corporate income tax return is filed in 2018. Net Earnings or Loss per Share Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of vested common shares outstanding during the period, adjusted to give effect to the 1-for-3.333333 reverse stock split, which was effected on February 14, 2018. 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, 2017, there were no common stock equivalents outstanding. As of September 30, 2018, 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, 2018 Selling Agent Warrants 65,626 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 1,631,258 Concentrations Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivables and revenues. The Company has cash on deposits 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 $1,352,000 uninsured at September 30, 2018. The Company held cash of approximately $360,000 in foreign bank accounts as of September 30, 2018. For the three and nine months ended September 30, 2018 and 2017, the following customers represented more than 10% of total net revenues: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 Customer A 23 % * 10 % * Customer B * 16 % 17 % 25 % * Customer did not represent greater than 10% of total net revenue. As of September 30, 2018, the following customers represented more than 10% of total accounts receivable: September 30, 2018 Customer A 29 % Customer B 12 % For the three and nine months ended September 30, 2018 and 2017, the following geographical regions represented more than 10% of total net revenues: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 North America 84 % 81 % 81 % 81 % Asia-Pacific 11 % 12 % 15 % 13 % Deferred Financing Costs Deferred financing costs include debt discounts and debt issuance costs related to a recognized debt liability and are presented in the balance sheet as a direct deduction from the carrying value of the debt liability. Amortization of deferred financing costs are included as a component of interest expense. Deferred financing costs are amortized using the straight-line method over the term of the recognized debt liability which approximates the effective interest method. Offering Costs Costs directly attributable to the Company’s Regulation A initial public offering (“IPO”) of equity securities were deferred prior to the completion of the IPO and charged against the gross proceeds of the offering as a reduction of additional paid-in capital at the time of the IPO. These costs included legal fees to draft the Company’s offering statement and provide counsel related to the IPO, fees incurred by the independent registered public accounting firm directly related to the IPO, fees incurred by financial reporting advisors directly related to the IPO, SEC filing, printing and distribution expenses, roadshow expenses and exchange listing fees. Derivative Financial Instruments Derivative financial instruments are recorded on the balance sheet as either an asset or a liability and measured at fair value. The derivatives does not qualify as a hedge and is not designated as a hedge. The change in the fair value of the derivative financial instrument is recognized in condensed consolidated statement of operations. Recent Accounting Pronouncements In January 2018, the FASB issued Accounting Standards Update No. 2017-01(“ASU 2017-01”), Business Combinations (Topic 805): Clarifying the Definition of a Business. The standard clarifies the definition of a business with the objective of providing guidance when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. For public companies, this standard was effective for annual reporting periods beginning after December 15, 2017. The Company adopted this standard in the first quarter of 2018 and the adoption did not have an impact on the Company’s results or consolidated financial statements. In February 2018, the FASB issued Accounting Standards Update No. 2018-02 (“ASU 2018-02”), Income Statement -Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The standard provides for a reclassification from accumulated other comprehensive earnings (“AOCE”) to retained earnings, of disproportionate income tax effects arising from the impact of the Tax Cuts and Jobs Act of 2017. For public companies, this standard is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company adopted ASU 2018-02 in the first quarter of 2018. The impact of the adoption resulted in a one-time reclassification in the amount of $21,503 from AOCE with a corresponding credit to retained earnings. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (ASC 230) – Classification of Certain Cash Receipts and Cash Payments. The new guidance is intended to reduce diversity in practice across all industries, in how certain transactions are classified in the statement of cash flows. ASU 2016-15 was effective for public companies for fiscal years beginning after December 15, 2017. The Company adopted this standard in 2018 and the adoption of this standard did not have an impact on the Company’s statement of cash flows for the nine-month periods ended September 30, 2018 and 2017. In October 2016, the FASB issued Accounting Standards Update No. 2016-16 (ASU 2016-16), Accounting for Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory. For public companies, this standard was effective for annual reporting periods beginning after December 15, 2017, and early adoption is permitted. The standard requires that the income tax impact of intra-entity sales and transfers of property, except for inventory, be recognized when the transfer occurs requiring any deferred taxes not yet recognized on intra-entity transfers to be recorded to retained earnings. The Company adopted this standard in the first quarter of 2018 and the adoption did not have an impact on the Company’s results or consolidated financial statements. In February 2016, the FASB issued accounting guidance 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. We have not yet adopted this standard and are currently evaluating the effect this standard will have on our financial statements. In May 2017, the FASB issued accounting guidance on determining which changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted, and is applied prospectively to changes in terms or conditions of awards occurring on or after the adoption date. We have adopted this accounting guidance effective January 1, 2018, with no impact on our financial statements as there were no changes to the terms or conditions of share-based payment awards. 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 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 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 ev |
Acquisition
Acquisition | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure Text Block Supplement [Abstract] | |
Business Acquisition, Integration, Restructuring and Other Related Costs [Text Block] | Note 3 — Acquisition On September 4, 2018, the Company completed the acquisition of all of the voting membership interest of Edison Nation Holdings, LLC for a total purchase price of $12,320,978 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, which are convertible into approximately 285,632 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 of the Company’s common stock in satisfaction of the indebtedness represented by promissory notes payable by EN to Venture Six, LLC and Wesley Jones with a total principal balance of $4,127,601.94 as of the date of the Purchase Agreement. The following table summarizes the aggregate purchase price consideration paid to acquire Edison Nation Holdings, LLC: September 4, 2018 Cash paid to members of Edison Nation Holdings, LLC $ 700,000 Repayment of debt and related obligations 250,000 Issuance of 4%, 5-year senior convertible notes to satisfy indebtedness and related obligations 1,428,161 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 6,682,500 Issuance of 557,084 shares of the Company’s common stock to satisfy indebtedness and related obligations 3,760,317 $ 12,820,978 The Company believes that this combination will further strengthen its future growth opportunities while also increasing product diversification. The Company accounted for this acquisition as a business combination under the acquisition method of accounting. The following table summarizes the preliminary purchase price allocation of fair values of the assets acquired and liabilities assumed at the date of acquisition: September 4, 2018 Cash and cash equivalents $ 68,682 Accounts receivable 15,259 Other current assets 40,204 Property and equipment 1,852 Patents 53,750 Goodwill 12,785,855 Total assets acquired 12,965,602 Accounts payable 75,711 Accrued expenses and other current liabilities 68,913 Total liabilities assumed 144,624 $ 12,820,978 The Company has preliminarily allocated the majority of the purchase price to goodwill due to the EN entities generating only minimal historical cash flows and therefore minimal identifiable intangible assets. The Company anticipates the goodwill will be tax deductible. EN's results of operations have been included in our consolidated financial statements beginning on September 4, 2018. EN’s contributed revenue of $78,488 and net income of $11,384 for the period from the date of acquisition through September 30, 2018. The following table summarizes the unaudited pro-forma consolidated results of operations for the three and nine months ended September 30, 2018 and September 30, 2017 as if the acquisition had occurred on January 1, 2017: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 Revenues, net $ 5,117,995 $ 3,487,352 $ 13,279,279 $ 12,445,560 Cost of revenues 3,637,000 2,233,907 9,116,670 8,375,279 Gross profit 1,480,995 1,253,445 4,162,609 4,070,281 Operating expenses: Selling, general and administrative 2,196,686 1,043,093 6,776,134 2,764,771 Operating (loss) income (715,691 ) 210,352 (2,613,525 ) 1,305,510 Other (expense) income: Rental income 25,704 25,704 77,111 77,111 Change in fair value of put option contract (732,600 ) - (732,600 ) - Interest (expense) income (42,128 ) 1,228 (407,260 ) 3,690 Total other (expense) income (749,024 ) 26,932 (1,062,749 ) 80,801 (Loss) income before income taxes (1,464,715 ) 237,284 (3,676,274 ) 1,386,311 Income tax expense (benefit) 167,813 (26,570 ) 312,186 64,655 Net (loss) income $ (1,632,528 ) $ 263,854 $ (3,988,460 ) $ 1,321,656 Net (loss) income per share - basic and diluted $ (0.33 ) $ 0.07 $ (0.96 ) $ 0.37 Weighted average number of common shares outstanding – basic and diluted 4,954,199 3,557,084 4,151,528 3,557,084 The unaudited pro-forma consolidated results above are based on the historical financial statements of the Company and EN and are not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at the beginning of Fiscal 2017 and are not indicative of the future operating results of the combined company. The financial information for EN prior to the acquisition has been included in the pro-forma results of operations on a calendar-year basis and includes certain adjustments to EN’s historical consolidated financial statements to align with U.S. GAAP and the Company's accounting policies. The pro-forma consolidated results of operations also include the effects of purchase accounting adjustments. The pro-forma consolidated financial statement also reflect the impact of debt repayment and borrowings made to finance the acquisition and exclude historical interest expense for EN. Transaction costs of $239,682 and $84,980 for the three and nine months ended December 30, 2017, which have been in the Company’s consolidated statements of operations, have been excluded from the above pro-forma consolidated results of operations due to their non-recurring nature. |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Inventory Disclosure [Text Block] | Note 4 — Inventory As of September 30, 2018 and December 31, 2017, inventory consisted of the following: September 30, December 31, 2018 2017 Raw materials $ 23,896 $ 30,410 Finished goods 176,191 209,651 Total inventory $ 200,087 $ 240,061 |
Prepaid expenses and other curr
Prepaid expenses and other current assets | 9 Months Ended |
Sep. 30, 2018 | |
Prepaid expenses and other current assets [Abstract] | |
Prepaid Expenses and Other Current Assets [Text Block] | Note 5 — Prepaid expenses and other current assets As of September 30, 2018 and December 31, 2017, prepaid expenses and other current assets consisted of the following: September 30, December 31, 2018 2017 Deposits for inventory $ 831,744 $ - Deposits 45,458 22,814 Retainers with consultants 158,500 Prepaid insurance 34,461 - Deposits 13,478 - Other 31,283 18,647 Total prepaid expenses and other current assets $ 1,114,924 $ 41,461 |
Loan held for investment
Loan held for investment | 9 Months Ended |
Sep. 30, 2018 | |
Loan held for investment [Abstract] | |
Loan Held for Investment [Text Block] | Note 6 — Loan held for investment On June 4, 2018, the Company purchased a promissory note for $500,000 from a bank at a discount from face value of a company in financial difficulty. As of September 30, 2018, the loan held-for-investment consisted of the following: September 30, 2018 Cloud b, Inc., Promissory note, past due, Wall Street Journal prime rate plus 3% interest $ 2,270,000 Non-accretable purchase discount (1,770,000 ) Total loan held-for-investment $ 500,000 The interest rate of the promissory note as of September 30, 2018 was 8% . |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Tax Disclosure [Text Block] | Note 7 — Income Taxes Fergco was a Subchapter S pass-through entity for income tax purposes prior to its acquisition by the Company on September 30, 2017. Accordingly, Fergco was not subject to income taxes prior to the acquisition and therefore the tax provision related to the United States income is only for the period from January 1, 2018 to September 30, 2018. The Company’s foreign entity is SRM, which is an entity subject to the Hong Kong, China tax regime. The Hong Kong tax returns remain subject to examination by local taxing authorities beginning with the tax year ended December 31, 2011. Edison Nation Holdings, LLC and its subsidiaries are limited liability corporation pass-through entities for income tax purposes prior to its acquisition by the Company on September 4, 2018. Accordingly, EN was not subject to income taxes prior to the acquisition and the results of operations were not material therefore the tax provision related to the United States income is only for the period from September 4, 2018 to September 30, 2018. The statutory federal income tax rate differs from the Company’s effective tax rate due to the valuation allowance related to nondeductible expenses partially offset by lower foreign income taxes in Hong Kong. |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable [Text Block] | Note 8 — Notes Payable The Company borrowed funds under two separate notes, aggregating $645,000, in February 2018 and March 2018. As of September 30, 2018, both holders of the notes were paid in full. In addition, the Company was required to issue 20,000 and 13,500 shares under the notes payable, respectively. The fair value of the shares to be issued was $167,500 which was recorded as a debt discount and fully amortized through interest expense. In May 2018, the Company issued 13,500 shares to the one note holder and 20,000 shares were still required to be issued as of September 30, 2018. On September 7, 2018, the Company borrowed 73,559 related to the purchase of a commercial delivery vehicle. The monthly payments under the note are $1,371 commencing on October 6, 2018 and maturing on September 6, 2023. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions Disclosure [Text Block] | Note 9 — Related Party Transactions As of September 30, 2018 and December 31, 2017, due from related party consists of amounts due from SRM Entertainment Group LLC (“SRM LLC”), which was the parent of SRM prior to its acquisition by the Company, related to operating expenses that were paid for on behalf of one related party to the other related party. As of September 30, 2018 and December 31, 2017, the net amount due from related parties was $1,307,247 and $834,897, respectively. Such amounts are due currently. In connection with the acquisition of SRM and Fergco, the Company issued two notes payable aggregating $2,996,500. One note was issued to NL Penn Capital, L.P, in relation to the acquisition of SRM in the amount of $2,120,000 and the other note was issued to the stockholders of Fergco in the amount of $876,500. The notes bear interest at a rate of six percent (6%) per annum and have an effective interest rate of six percent (6%) per annum. The Company is required to make monthly payments comprised of principal and interest beginning in January 2018 that are amortized over ten (10) years, with a balloon payment of all outstanding principal and interest due at the respective maturity dates ($677,698 due on December 1, 2020 and $1,249,043 due on December 1, 2022). In connection with the acquisition of EN, the Company issued five senior convertible notes payable aggregating $1,428,161. The notes have an effective interest rate of four percent (4%) per annum. The Company is required to make semi-annual interest payments on June 30th and December 31st of each year. The notes have an option to convert at a conversion price of $5.00. on September 4, 2023. Related party interest expense was $145,656 and $0 for the nine months ended September 30, 2018 and 2017, respectively. The scheduled maturities of the notes payable for the next five years as of September 30, 2018, are as follows: For the Years Ended December 31, Amount 2018 $ 106,770 2019 239,461 2020 254,230 2021 857,069 2022 1,420,190 Thereafter 1,428,162 4,305,882 Less: debt discount (500,000 ) $ 3,805,882 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies Disclosure [Text Block] | Note 10 — Commitments and Contingencies Operating Lease On August 8, 2016, SRM entered into a lease for office space in Kowloon, Hong Kong. On August 8, 2018, 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. The Company leases certain office space from an entity affiliated through common ownership under operating lease agreement. The operating lease requires base monthly payments of $3,333 plus the Company’s share of the facilities operating expenses as defined in the lease agreement through May 2017. The lease agreement contains four successive five year renewal options with 5% base rent escalations at the end of each extension period. Minimum annual rental commitments for operating leases of continuing operations having initial or remaining noncancellable lease terms in excess of one year are as follows: Total rent expense for the three months ended September 30, 2018 and 2017 was $65,244 and $83,218, respectively and total rent expense for the nine months ended September 30, 2018 and 2017 was $211,780 and $126,328, respectively. Rent expense is included in general and administrative expense on the condensed consolidated statements of operations. Rental Income Fergco leases a portion of the building located in Washington, New Jersey that it owns under a month to month lease. Total rental income related to the leased space for both the three months ended September 30, 2018 and 2017 was $25,704, respectively, and $77,111 for both the nine months ended September 30, 2018 and 2017, respectively and is included in other income on the condensed consolidated statements of operations. 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 Legal Contingencies As of September 30, 2018, we were not a party to any material legal proceedings. However, the Company may be 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. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Stockholders' Equity Note Disclosure [Text Block] | Note 11 — Stockholders’ Equity Common Stock The Company issued 1,312,520 shares of common stock related to the IPO, at a public offering price of $5.00 per share in August 2018. The Company received gross proceeds of $6,562,600 and net proceeds of $5,358,570 after deducting underwriter commissions and expenses of $714,802, legal fees of $157,358, escrow closing fees of $4,000 and other direct $1,204,030. 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 The fair value of the option grants was estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. 2018 Weighted average fair value of option granted $ 1.82 Risk-free interest rate 2.2 % Expected term in years 2.5 Volatility 50.0 % Dividend rate 0.0 % The following table summarizes stock option award activity during 2018: Shares Weighted Average Exercise Price Remaining Contractual Life in Years Aggregate Intrinsic Value Balance, January 1, 2018 - $ - - - Granted 290,000 5.55 4.5 - Balance, September 30, 2018 290,000 $ 5.55 4.5 561,300 The Company recorded stock-based compensation expense of $260,826 for the fair value of the options for the three and nine months ended September 30, 2018. No compensation expense was recorded for the three and nine months ended September 30, 2017. On February 28, 2018, the Company agreed to assume certain consulting agreements entered into by SRM LLC, which was the parent of SRM prior to its acquisition by the Company. Under these consulting agreements SRM LLC offered these consultants options to own stock if SRM LLC were ever sold for past considerations. As an accommodation to the Company, the principal stockholder of SRM satisfied these agreements on behalf of the Company, by transferring 344,250 of his shares to the consultants. In accordance with SEC Staff Accounting Bulletin (SAB) 79 amended by SAB 5T, “Accounting for Expenses or Liabilities Paid by Principal Stockholder,” the Company recorded stock-based compensation expense of $1,721,250 for the fair value of these shares for the nine months ended September 30, 2018. The Company issued 61,900 shares of common stock to employees in connection with the IPO. The Company recorded stock-based compensation expense of $309,500 for the fair value of the 61,900 shares of common stock issued to employees for services for the nine months ended September 30, 2018. The Company issued 75,000 shares of common stock to consultants in connection with the services provided. The Company recorded stock-based compensation expense of $375,000 for the fair value of the 75,000 shares of common stock issued to consultants for services for the nine months ended September 30, 2018. Selling Agent Agreement In connection with the IPO, the Company agreed to issue to the selling agent in the IPO, warrants to purchase a number of shares of the common stock equal to 5.0% of the total shares of common stock sold in any closing of the IPO, excluding shares purchased by investors sourced via alternative funding platforms (the “Selling Agent Warrants”). The Selling Agent Warrants are exercisable commencing on the qualification date of the IPO and have a term of 5 years. The Selling Agent Warrants are not redeemable by the Company. The exercise price for the Selling Agent Warrants is 20% greater than the IPO offering price, or $6.00 per share. On August 16, 2018, the Company issued 65,626 . |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Segment Reporting Disclosure [Text Block] | Note 12 — Segment Reporting The Company’s principal operating segments coincide with the types of products to be sold. The products from which revenues are derived are consistent with the reporting structure of the Company’s internal organization. The Company’s two reportable segments for the three and nine months ended September 30, 2018 and 2017 were the consumer goods segment (formerly the SRM segment) and the packaging materials segment (formerly the Fergco segment). The Company incurs operating expenses related to the corporate level and these costs are not allocated to the Company’s operating segments. CB does not have any reportable operations. The Company’s chief operating decision-maker has been identified as the Chairman and CEO, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Segment information is presented based upon the Company’s management organization structure as of September 30, 2018 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to the reportable segments disclosed. There are no inter-segment revenue transactions and, therefore, revenues are only to external customers. Segment operating profit is determined based upon internal performance measures used by the chief operating decision-maker. The Company derives the segment results from its internal management reporting system. The accounting policies the Company uses to derive reportable segment results are the same as those used for external reporting purposes. Management measures the performance of each reportable segment based upon several metrics, including net revenues, gross profit and operating loss. Management uses these results to evaluate the performance of, and to assign resources to, each of the reportable segments. The Company manages certain operating expenses separately at the corporate level and does not allocate such expenses to the segments. Segment income from operations excludes interest income/expense and other income or expenses and income taxes according to how a particular reportable segment’s management is measured. Management does not consider impairment charges, and unallocated costs in measuring the performance of the reportable segments. Segment information available with respect to these reportable business segments for the three and nine months ended September 30, 2018 and 2017 was as follows: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 Revenues: Packaging materials $ 1,567,723 $ 1,234,208 $ 4,593,051 $ 3,911,040 Consumer goods 3,372,465 1,940,514 8,165,664 7,660,428 Total segment and consolidated revenues $ 4,940,188 $ 3,174,722 $ 12,758,715 $ 11,571,468 Gross profit: Packaging materials $ 417,627 $ 487,227 $ 1,278,349 $ 1,192,668 Consumer goods 885,561 544,548 2,390,151 2,152,738 Total segment and consolidated gross profit $ 1,303,188 $ 1,031,775 $ 3,668,500 $ 3,345,406 Income (loss) from operations: Packaging materials $ 78,369 $ 202,699 $ 219,627 $ 136,961 Consumer goods 696,255 141,079 1,904,145 1,357,405 Corporate (1,537,091 ) (82,112 ) (4,732,102 ) (82,112 ) Total segment and consolidated (loss) income from operations $ (762,467 ) $ 261,666 $ (2,608,330 ) $ 1,412,254 Depreciation and amortization: Packaging materials $ 28,878 $ 36,202 $ 84,413 $ 104,374 Consumer goods 11,863 13,854 35,591 48,616 Total segment depreciation and amortization $ 40,741 $ 50,056 $ 120,004 $ 152,990 September 30, December 31, 2018 2017 Segment total assets: Packaging materials $ 2,435,580 $ 1,853,273 Consumer goods 17,584,758 2,217,296 Corporate 1,804,820 258 Total segment and consolidated assets $ 21,825,158 $ 4,070,827 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | Note 13 — Subsequent Events Cloud B Transaction On October 29, 2018, the Company entered into a Stock Purchase Agreement with a majority of the stockholders (the “Cloud B Sellers”) of Cloud B, Inc., a California corporation (“Cloud B”). Pursuant to the terms of such Stock Purchase Agreement, the Company purchased 72.15% of the outstanding capital stock of Cloud B for consideration of 489,293 shares of restricted common stock of the Company. In addition, the Company entered into an Earn Out Agreement with 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. The initial accounting for the acquisition, including the amounts of each major class of assets acquired and liabilities assumed has not been completed at this time and has not been disclosed in these condensed consolidated financial statements due to the timing of the closing of the transaction and the information is not readily available. In connection with the transaction the Company will no longer present multiple segments and this will be the last presentation of the packaging materials and consumer goods segment as all entities will operate cross functionally as one team to bring products to market. Operating Lease On October 1, 2018, the Company entered into a lease for office space in Winter Park, Florida which expires on September 30, 2020. Monthly lease payments are approximately $1,887 for a total of approximately $45,288 for the total term of the lease. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Accounting, Policy [Policy Text Block] | Basis of Presentation 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 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, 2018 and the results of operations, changes in stockholders’ equity (deficit), and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the operating results for the full fiscal year for any future period. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. 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, 2017, and updated, as necessary, in this Quarterly Report on Form 10-Q. |
Consolidation, Policy [Policy Text Block] | Principles of Consolidation The condensed consolidated financial statements include the accounts of Edison Nation, Inc. and its wholly-owned subsidiaries, SRM, Fergco, CB and EN. All intercompany transactions and balances have been eliminated in consolidation. |
Use of Estimates, Policy [Policy Text Block] | 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, loan loss reserves, the valuation allowance related to the Company’s deferred tax assets and the recoverability and useful lives of long-lived assets. 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. |
Inventory, Policy [Policy Text Block] | 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. |
Finance, Loan and Lease Receivables, Held-for-investment, Policy [Policy Text Block] | Loan Held for Investment Loan held for investment is reported on the balance sheet at the acquired cost which approximates the fair value, which resulted in a discount. The acquired loan had evidence of deterioration of credit quality and for which it was probable, at the time of our acquisition, that the Company would be unable to collect all contractually required payments. For these loans, the excess of the undiscounted contractual cash flows over the undiscounted cash flows estimated by us at the time of acquisition was not accreted into income (nonaccretable discount). The amount representing the excess of cash flows estimated by us at acquisition over the purchase price was accreted into purchase discount earned over the life of the applicable loans (accretable discount). The nonaccretable discount was not accreted into income. If cash flows could not be reasonably estimated for any loan, and collection was not probable, the cost recovery method of accounting was used. Under the cost recovery method, any amounts received were applied against the recorded amount of such loans. Subsequent to acquisition, if cash flow projections improved, and it was determined that the amount and timing of the cash flows related to the nonaccretable discount was reasonably estimable and collection was probable, the corresponding decrease in the nonaccretable discount was transferred to the accretable discount and was accreted into interest income over the remaining life of any such loan on the interest method. If cash flow projections deteriorated subsequent to acquisition, the decline was accounted for through the allowance for loan losses. Depending on the timing of an acquisition, the initial allocation of discount generally is made primarily to nonaccretable discount until the Company is able to assess any cash flows expected to be collected over the purchase price which are then transferred to accretable discount. |
Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block] | Goodwill We record intangible assets based on their fair value on the date of acquisition. Goodwill is recorded for the difference between the fair value of the purchase consideration over the fair value of the net identifiable tangible and intangible assets acquired. We perform an impairment assessment of goodwill on an annual basis, or whenever impairment indicators exist. In the absence of any impairment indicators, goodwill is assessed for impairment during the fourth quarter of each fiscal year. Judgments regarding the existence of impairment indicators are based on market conditions and operational performance of the business. We may assess our goodwill for impairment initially using a qualitative approach to determine whether it is more likely than not that the fair value of these assets is greater than their carrying value. When performing a qualitative test, we assess various factors including industry and market conditions, macroeconomic conditions and performance of our businesses. If the results of the qualitative assessment indicate that it is more likely than not that our goodwill and other indefinite-lived intangible assets are impaired, a quantitative impairment analysis would be performed to determine if impairment is required. We may also elect to perform a quantitative analysis of goodwill initially rather than using a qualitative approach. The impairment testing for goodwill is performed at the reporting unit level. The valuation methods used in the quantitative fair value assessment, discounted cash flow and market multiples method, require our management to make certain assumptions and estimates regarding certain industry trends and future profitability of our reporting units. If the fair value of a reporting unit exceeds the related carrying value, the reporting unit's goodwill is considered not to be impaired and no further testing is performed. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recorded for the difference. The valuation of goodwill is affected by, among other things, our business plan for the future and estimated results of future operations. Future events could cause us to conclude that impairment indicators exist, and, therefore, that goodwill may be impaired. |
Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block] | Intangible assets - patents Intangible assets include the cost of patents or patent rights (hereinafter, collectively “patents”) and trademarks. Patent and trademark costs are amortized utilizing the straight-line method over their remaining economic useful lives. Costs incurred related to patents prior to issuance are included in prepaid patent expense until the time the patent is issued and amortization begins or until management determines it is no longer likely the patent will be issued and amounts are expensed. Edison N ation reviews long-lived assets and intangible assets for potential impairment annually and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss is recorded equal to the excess of the asset’s carrying value over its fair value. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estima |
Revenue Recognition, Policy [Policy Text Block] | 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 probably 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 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 Policy [Policy Text Block] | Disaggregation of Revenue The Company’s primary revenue streams include the sale and/or licensing of consumer goods for innovative products (SRM and EN) and packaging materials to industrial and pharmaceutical companies (Fergco). 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, 2018 and 2017 was as follows: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 Revenues: Product sales $ 4,858,055 $ 3,174,722 $ 12,676,582 $ 11,571,468 Other revenues 82,133 - 82,133 - Total revenues $ 4,940,188 $ 3,174,722 $ 12,758,715 $ 11,571,468 For a presentation of the Company’s revenues disaggregated by segment, see Note 12, Segment Reporting. |
Fair Value Measurement, Policy [Policy Text Block] | 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, 2018, follows: September 30, 2018 Book Value Estimated Fair Value Loan held for investment $ 500,000 $ 500,000 Derivative liability – put option contract $ (7,415,100 ) $ (7,415,100 ) Financial instruments for which fair value is disclosed but not required to be recognized in the balance sheet on a recurring basis consisted of the following: September 30, 2018 Total Level 1 Level 2 Level 3 Loan held for investment $ 500,000 - - $ 500,000 The following changes in level 3 instruments for the three months ended September 30, 2018 are presented below: Loan Held For Investment Derivative Liability – Put Option Contract Balance, July 1, 2018 $ 500,000 $ - Purchases - - Sales - (6,682,500 ) Change in fair value - (732,600 ) Balance, September 30, 2018 $ 500,000 $ (7,415,100 ) The following changes in level 3 instruments for the nine months ended September 30, 2018 are presented below: Loan Held For Investment Derivative Liability – Put Option Contract Balance, January 1, 2018 $ - $ - Purchases 500,000 - Sales - 6,682,500 ) Change in fair value - (732,600 ) Balance, September 30, 2018 $ 500,000 $ (7,415,100 ) |
Foreign Currency Transactions and Translations Policy [Policy Text Block] | 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 (HK dollars) 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, 2018 and 2017 and the cumulative translation gains and losses as of September 30, 2018 and December 31, 2017 were not material. |
Income Tax, Policy [Policy Text Block] | Income Taxes The Company accounts for income taxes under the provisions of the Financial Accounting Standards Board (“FASB”) ASC Topic 740 “Income Taxes” (“ASC Topic 740”). The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included or excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. The Company utilizes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s condensed consolidated financial statements as of September 30, 2018 and December 31, 2017. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date. The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the statements of operations. On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was signed into law. This legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The TCJA permanently reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018. The staff of the SEC issued Staff Accounting Bulletin No. 118 to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA. Although the Company is unable to make a reasonable estimate on the full effect on our income taxes as of the date of this report, the Company remeasured its deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The remeasurement of the deferred tax assets and liabilities was offset by a change in the valuation allowance. The Company is still in the process of analyzing the impact to the Company of the TCJA. Where the Company has been able to make reasonable estimates of the effects related to which its analysis is not yet complete, the Company has recorded provisional amounts. The ultimate impact to the Company’s condensed consolidated financial statements of the TCJA may differ from the provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the TCJA. The accounting is expected to be complete when the Company’s 2017 U.S. corporate income tax return is filed in 2018. |
Earnings Per Share, Policy [Policy Text Block] | Net Earnings or Loss per Share Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of vested common shares outstanding during the period, adjusted to give effect to the 1-for-3.333333 reverse stock split, which was effected on February 14, 2018. 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, 2017, there were no common stock equivalents outstanding. As of September 30, 2018, 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, 2018 Selling Agent Warrants 65,626 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 1,631,258 |
Concentration Risk, Credit Risk, Policy [Policy Text Block] | Concentrations Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivables and revenues. The Company has cash on deposits 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 $1,352,000 uninsured at September 30, 2018. The Company held cash of approximately $360,000 in foreign bank accounts as of September 30, 2018. For the three and nine months ended September 30, 2018 and 2017, the following customers represented more than 10% of total net revenues: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 Customer A 23 % * 10 % * Customer B * 16 % 17 % 25 % * Customer did not represent greater than 10% of total net revenue. As of September 30, 2018, the following customers represented more than 10% of total accounts receivable: September 30, 2018 Customer A 29 % Customer B 12 % For the three and nine months ended September 30, 2018 and 2017, the following geographical regions represented more than 10% of total net revenues: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 North America 84 % 81 % 81 % 81 % Asia-Pacific 11 % 12 % 15 % 13 % |
Deferred Financing Costs [Policy Text Block] | Deferred Financing Costs Deferred financing costs include debt discounts and debt issuance costs related to a recognized debt liability and are presented in the balance sheet as a direct deduction from the carrying value of the debt liability. Amortization of deferred financing costs are included as a component of interest expense. Deferred financing costs are amortized using the straight-line method over the term of the recognized debt liability which approximates the effective interest method. |
Deferred Offering Costs [Policy Text Block] | Offering Costs Costs directly attributable to the Company’s Regulation A initial public offering (“IPO”) of equity securities were deferred prior to the completion of the IPO and charged against the gross proceeds of the offering as a reduction of additional paid-in capital at the time of the IPO. These costs included legal fees to draft the Company’s offering statement and provide counsel related to the IPO, fees incurred by the independent registered public accounting firm directly related to the IPO, fees incurred by financial reporting advisors directly related to the IPO, SEC filing, printing and distribution expenses, roadshow expenses and exchange listing fees. |
Derivatives, Policy [Policy Text Block] | Derivative Financial Instruments Derivative financial instruments are recorded on the balance sheet as either an asset or a liability and measured at fair value. The derivatives does not qualify as a hedge and is not designated as a hedge. The change in the fair value of the derivative financial instrument is recognized in condensed consolidated statement of operations. |
New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements In January 2018, the FASB issued Accounting Standards Update No. 2017-01(“ASU 2017-01”), Business Combinations (Topic 805): Clarifying the Definition of a Business. The standard clarifies the definition of a business with the objective of providing guidance when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. For public companies, this standard was effective for annual reporting periods beginning after December 15, 2017. The Company adopted this standard in the first quarter of 2018 and the adoption did not have an impact on the Company’s results or consolidated financial statements. In February 2018, the FASB issued Accounting Standards Update No. 2018-02 (“ASU 2018-02”), Income Statement -Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The standard provides for a reclassification from accumulated other comprehensive earnings (“AOCE”) to retained earnings, of disproportionate income tax effects arising from the impact of the Tax Cuts and Jobs Act of 2017. For public companies, this standard is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company adopted ASU 2018-02 in the first quarter of 2018. The impact of the adoption resulted in a one-time reclassification in the amount of $21,503 from AOCE with a corresponding credit to retained earnings. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (ASC 230) – Classification of Certain Cash Receipts and Cash Payments. The new guidance is intended to reduce diversity in practice across all industries, in how certain transactions are classified in the statement of cash flows. ASU 2016-15 was effective for public companies for fiscal years beginning after December 15, 2017. The Company adopted this standard in 2018 and the adoption of this standard did not have an impact on the Company’s statement of cash flows for the nine-month periods ended September 30, 2018 and 2017. In October 2016, the FASB issued Accounting Standards Update No. 2016-16 (ASU 2016-16), Accounting for Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory. For public companies, this standard was effective for annual reporting periods beginning after December 15, 2017, and early adoption is permitted. The standard requires that the income tax impact of intra-entity sales and transfers of property, except for inventory, be recognized when the transfer occurs requiring any deferred taxes not yet recognized on intra-entity transfers to be recorded to retained earnings. The Company adopted this standard in the first quarter of 2018 and the adoption did not have an impact on the Company’s results or consolidated financial statements. In February 2016, the FASB issued accounting guidance 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. We have not yet adopted this standard and are currently evaluating the effect this standard will have on our financial statements. In May 2017, the FASB issued accounting guidance on determining which changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted, and is applied prospectively to changes in terms or conditions of awards occurring on or after the adoption date. We have adopted this accounting guidance effective January 1, 2018, with no impact on our financial statements as there were no changes to the terms or conditions of share-based payment awards. 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 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 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, Policy [Policy Text Block] | Subsequent Events The Company has evaluated subsequent events through the date which the financial statements were issued. Based upon the evaluation, except for items described in Note 12, 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, Policy [Policy Text Block] | 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 classified the reportable operating segments into (i) design, manufacture and sale or licensing of a broad variety of innovative products sold directly to retailers or direct to consumers via ecommerce in North America, Asia and Europe by SRM and EN and (ii) the design, manufacture and sale of packaging and packaging materials to industrial and pharmaceutical companies in North America by Fergco. CB does not have any material operations. Therefore, as of September 30, 2018, CB is not classified in either of the Company’s operating segments. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Disaggregation of Revenue [Table Text Block] | The Company’s primary revenue streams include the sale and/or licensing of consumer goods for innovative products (SRM and EN) and packaging materials to industrial and pharmaceutical companies (Fergco). 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, 2018 and 2017 was as follows: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 Revenues: Product sales $ 4,858,055 $ 3,174,722 $ 12,676,582 $ 11,571,468 Other revenues 82,133 - 82,133 - Total revenues $ 4,940,188 $ 3,174,722 $ 12,758,715 $ 11,571,468 |
Fair Value, by Balance Sheet Grouping [Table Text Block] | As of September 30, 2018, follows: September 30, 2018 Book Value Estimated Fair Value Loan held for investment $ 500,000 $ 500,000 Derivative liability – put option contract $ (7,415,100 ) $ (7,415,100 ) |
Fair Value Measurements, Recurring and Nonrecurring [Table Text Block] | Financial instruments for which fair value is disclosed but not required to be recognized in the balance sheet on a recurring basis consisted of the following: September 30, 2018 Total Level 1 Level 2 Level 3 Loan held for investment $ 500,000 - - $ 500,000 |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block] | The following changes in level 3 instruments for the three months ended September 30, 2018 are presented below: Loan Held For Investment Derivative Liability – Put Option Contract Balance, July 1, 2018 $ 500,000 $ - Purchases - - Sales - (6,682,500 ) Change in fair value - (732,600 ) Balance, September 30, 2018 $ 500,000 $ (7,415,100 ) The following changes in level 3 instruments for the nine months ended September 30, 2018 are presented below: Loan Held For Investment Derivative Liability – Put Option Contract Balance, January 1, 2018 $ - $ - Purchases 500,000 - Sales - 6,682,500 ) Change in fair value - (732,600 ) Balance, September 30, 2018 $ 500,000 $ (7,415,100 ) |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] | September 30, 2018 Selling Agent Warrants 65,626 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 1,631,258 |
Schedules of Concentration of Risk, by Risk Factor [Table Text Block] | For the three and nine months ended September 30, 2018 and 2017, the following customers represented more than 10% of total net revenues: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 Customer A 23 % * 10 % * Customer B * 16 % 17 % 25 % * Customer did not represent greater than 10% of total net revenue. As of September 30, 2018, the following customers represented more than 10% of total accounts receivable: September 30, 2018 Customer A 29 % Customer B 12 % |
Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block] | For the three and nine months ended September 30, 2018 and 2017, the following geographical regions represented more than 10% of total net revenues: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 North America 84 % 81 % 81 % 81 % Asia-Pacific 11 % 12 % 15 % 13 % |
Acquisition (Tables)
Acquisition (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition [Table Text Block] | The following table summarizes the aggregate purchase price consideration paid to acquire Edison Nation Holdings, LLC: September 4, 2018 Cash paid to members of Edison Nation Holdings, LLC $ 700,000 Repayment of debt and related obligations 250,000 Issuance of 4%, 5-year senior convertible notes to satisfy indebtedness and related obligations 1,428,161 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 6,682,500 Issuance of 557,084 shares of the Company’s common stock to satisfy indebtedness and related obligations 3,760,317 $ 12,820,978 |
Business Combination, Separately Recognized Transactions [Table Text Block] | The following table summarizes the preliminary purchase price allocation of fair values of the assets acquired and liabilities assumed at the date of acquisition: September 4, 2018 Cash and cash equivalents $ 68,682 Accounts receivable 15,259 Other current assets 40,204 Property and equipment 1,852 Patents 53,750 Goodwill 12,785,855 Total assets acquired 12,965,602 Accounts payable 75,711 Accrued expenses and other current liabilities 68,913 Total liabilities assumed 144,624 $ 12,820,978 |
Business Acquisition, Pro Forma Information [Table Text Block] | The following table summarizes the unaudited pro-forma consolidated results of operations for the three and nine months ended September 30, 2018 and September 30, 2017 as if the acquisition had occurred on January 1, 2017: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 Revenues, net $ 5,117,995 $ 3,487,352 $ 13,279,279 $ 12,445,560 Cost of revenues 3,637,000 2,233,907 9,116,670 8,375,279 Gross profit 1,480,995 1,253,445 4,162,609 4,070,281 Operating expenses: Selling, general and administrative 2,196,686 1,043,093 6,776,134 2,764,771 Operating (loss) income (715,691 ) 210,352 (2,613,525 ) 1,305,510 Other (expense) income: Rental income 25,704 25,704 77,111 77,111 Change in fair value of put option contract (732,600 ) - (732,600 ) - Interest (expense) income (42,128 ) 1,228 (407,260 ) 3,690 Total other (expense) income (749,024 ) 26,932 (1,062,749 ) 80,801 (Loss) income before income taxes (1,464,715 ) 237,284 (3,676,274 ) 1,386,311 Income tax expense (benefit) 167,813 (26,570 ) 312,186 64,655 Net (loss) income $ (1,632,528 ) $ 263,854 $ (3,988,460 ) $ 1,321,656 Net (loss) income per share - basic and diluted $ (0.33 ) $ 0.07 $ (0.96 ) $ 0.37 Weighted average number of common shares outstanding – basic and diluted 4,954,199 3,557,084 4,151,528 3,557,084 |
Inventory (Tables)
Inventory (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory, Current [Table Text Block] | As of September 30, 2018 and December 31, 2017, inventory consisted of the following: September 30, December 31, 2018 2017 Raw materials $ 23,896 $ 30,410 Finished goods 176,191 209,651 Total inventory $ 200,087 $ 240,061 |
Prepaid expenses and other cu_2
Prepaid expenses and other current assets (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Prepaid expenses and other current assets [Abstract] | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Table Text Block] | As of September 30, 2018 and December 31, 2017, prepaid expenses and other current assets consisted of the following: September 30, December 31, 2018 2017 Deposits for inventory $ 831,744 $ - Deposits 45,458 22,814 Retainers with consultants 158,500 Prepaid insurance 34,461 - Deposits 13,478 - Other 31,283 18,647 Total prepaid expenses and other current assets $ 1,114,924 $ 41,461 |
Loan held for investment (Table
Loan held for investment (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Loan held for investment [Abstract] | |
Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block] | As of September 30, 2018, the loan held-for-investment consisted of the following: September 30, 2018 Cloud b, Inc., Promissory note, past due, Wall Street Journal prime rate plus 3% interest $ 2,270,000 Non-accretable purchase discount (1,770,000 ) Total loan held-for-investment $ 500,000 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
Schedule of Maturities of Long-term Debt [Table Text Block] | The scheduled maturities of the notes payable for the next five years as of September 30, 2018, are as follows: For the Years Ended December 31, Amount 2018 $ 106,770 2019 239,461 2020 254,230 2021 857,069 2022 1,420,190 Thereafter 1,428,162 4,305,882 Less: debt discount (500,000 ) $ 3,805,882 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] | The fair value of the option grants was estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. 2018 Weighted average fair value of option granted $ 1.82 Risk-free interest rate 2.2 % Expected term in years 2.5 Volatility 50.0 % Dividend rate 0.0 % |
Share-based Compensation, Stock Options, Activity [Table Text Block] | The following table summarizes stock option award activity during 2018: Shares Weighted Average Exercise Price Remaining Contractual Life in Years Aggregate Intrinsic Value Balance, January 1, 2018 - $ - - - Granted 290,000 5.55 4.5 - Balance, September 30, 2018 290,000 $ 5.55 4.5 561,300 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment [Table Text Block] | Segment information available with respect to these reportable business segments for the three and nine months ended September 30, 2018 and 2017 was as follows: For the Three Months Ended September 30, For the Nine months Ended September 30, 2018 2017 2018 2017 Revenues: Packaging materials $ 1,567,723 $ 1,234,208 $ 4,593,051 $ 3,911,040 Consumer goods 3,372,465 1,940,514 8,165,664 7,660,428 Total segment and consolidated revenues $ 4,940,188 $ 3,174,722 $ 12,758,715 $ 11,571,468 Gross profit: Packaging materials $ 417,627 $ 487,227 $ 1,278,349 $ 1,192,668 Consumer goods 885,561 544,548 2,390,151 2,152,738 Total segment and consolidated gross profit $ 1,303,188 $ 1,031,775 $ 3,668,500 $ 3,345,406 Income (loss) from operations: Packaging materials $ 78,369 $ 202,699 $ 219,627 $ 136,961 Consumer goods 696,255 141,079 1,904,145 1,357,405 Corporate (1,537,091 ) (82,112 ) (4,732,102 ) (82,112 ) Total segment and consolidated (loss) income from operations $ (762,467 ) $ 261,666 $ (2,608,330 ) $ 1,412,254 Depreciation and amortization: Packaging materials $ 28,878 $ 36,202 $ 84,413 $ 104,374 Consumer goods 11,863 13,854 35,591 48,616 Total segment depreciation and amortization $ 40,741 $ 50,056 $ 120,004 $ 152,990 September 30, December 31, 2018 2017 Segment total assets: Packaging materials $ 2,435,580 $ 1,853,273 Consumer goods 17,584,758 2,217,296 Corporate 1,804,820 258 Total segment and consolidated assets $ 21,825,158 $ 4,070,827 |
Business Organization and Nat_2
Business Organization and Nature of Operations (Details Textual) - USD ($) | 1 Months Ended | 9 Months Ended | |
Feb. 14, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | |
Stockholders' Equity, Reverse Stock Split | 1-for-3.333333 | 1-for-3.333333 | |
SRM and Fergco Acquisition [Member] | |||
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares | 3,000,000 | ||
Business Combination, Consideration Transferred, Notes Payable Issued | $ 2,996,500 | $ 2,996,500 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue from Contract with Customer, Including Assessed Tax | $ 4,940,188 | $ 3,174,722 | $ 12,758,715 | $ 11,571,468 |
Product sales [Member] | ||||
Revenue from Contract with Customer, Including Assessed Tax | 4,858,055 | 3,174,722 | 12,676,582 | 11,571,468 |
Other revenues [Member] | ||||
Revenue from Contract with Customer, Including Assessed Tax | $ 82,133 | $ 0 | $ 82,133 | $ 0 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 |
Loan held for investment | $ 500,000 | |
Derivative liability – put option contract | (7,415,100) | $ 0 |
Book Value | ||
Loan held for investment | 500,000 | |
Derivative liability – put option contract | $ (7,415,100) |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details 2) | Sep. 30, 2018USD ($) |
Loans Receivable, Fair Value Disclosure | $ 500,000 |
Fair Value, Inputs, Level 1 [Member] | |
Loans Receivable, Fair Value Disclosure | 0 |
Fair Value, Inputs, Level 2 [Member] | |
Loans Receivable, Fair Value Disclosure | 0 |
Fair Value, Inputs, Level 3 [Member] | |
Loans Receivable, Fair Value Disclosure | $ 500,000 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies (Details 3) - Fair Value, Measurements, Recurring [Member] - Fair Value, Inputs, Level 3 [Member] - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2018 | Sep. 30, 2018 | |
Loan Held For Investment [Member] | ||
Balance | $ 500,000 | $ 0 |
Purchases | 0 | 500,000 |
Sales | 0 | 0 |
Change in fair value | 0 | 0 |
Balance | 500,000 | 500,000 |
Derivative Liability Put Option Contract [Member] | ||
Balance | 0 | 0 |
Purchases | 0 | 0 |
Sales | (6,682,500) | 6,682,500 |
Change in fair value | (732,600) | (732,600) |
Balance | $ (7,415,100) | $ (7,415,100) |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies (Details 4) | 9 Months Ended |
Sep. 30, 2018shares | |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1,631,258 |
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 | 65,626 |
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 Accoun_9
Summary of Significant Accounting Policies (Details 5) | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | ||||
Customer A [Member] | Sales Revenue, Net [Member] | |||||||
Concentration Risk, Percentage | 23.00% | [1] | 10.00% | [1] | |||
Customer A [Member] | Accounts Receivable [Member] | |||||||
Concentration Risk, Percentage | 29.00% | ||||||
Customer B [Member] | Sales Revenue, Net [Member] | |||||||
Concentration Risk, Percentage | [1] | 16.00% | 17.00% | 25.00% | |||
Customer B [Member] | Accounts Receivable [Member] | |||||||
Concentration Risk, Percentage | 12.00% | ||||||
[1] | Customer did not represent greater than 10% of total net revenue. |
Summary of Significant Accou_10
Summary of Significant Accounting Policies (Details 6) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
North America [Member] | ||||
Concentration Risk, Percentage | 84.00% | 81.00% | 81.00% | 81.00% |
Asia Pacific [Member] | ||||
Concentration Risk, Percentage | 11.00% | 12.00% | 15.00% | 13.00% |
Summary of Significant Accou_11
Summary of Significant Accounting Policies (Details Textual) - USD ($) | 1 Months Ended | 9 Months Ended | 12 Months Ended | ||
Feb. 14, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | 35.00% | |||
Stockholders' Equity, Reverse Stock Split | 1-for-3.333333 | 1-for-3.333333 | |||
Cash, Uninsured Amount | $ 1,352,000 | ||||
Foreign Bank Accounts [Member] | |||||
Cash | $ 360,000 | ||||
Sales Revenue, Net [Member] | Geographic Concentration Risk [Member] | |||||
Concentration Risk, Percentage | 10.00% | 10.00% | |||
Scenario, Plan [Member] | |||||
Concentration Risk, Percentage | 21.00% |
Acquisition (Details)
Acquisition (Details) - Edison Nation Holdings LLC [Member] | Sep. 04, 2018USD ($) |
Business Acquisition [Line Items] | |
Cash paid to members of Edison Nation Holdings, LLC | $ 700,000 |
Repayment of debt and related obligations | 250,000 |
Issuance of 4%, 5-year senior convertible notes to satisfy indebtedness and related obligations | 1,428,161 |
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 | 6,682,500 |
Issuance of 557,084 shares of the Company's common stock to satisfy indebtedness and related obligations | 3,760,317 |
Business Combination, Consideration Transferred | $ 12,820,978 |
Acquisition (Details 1)
Acquisition (Details 1) - USD ($) | Sep. 30, 2018 | Sep. 04, 2018 | Dec. 31, 2017 |
Business Acquisition [Line Items] | |||
Goodwill | $ 12,785,855 | $ 0 | |
Edison Nation Holdings LLC [Member] | |||
Business Acquisition [Line Items] | |||
Cash and cash equivalents | $ 68,682 | ||
Accounts receivable | 15,259 | ||
Other current assets | 40,204 | ||
Property and equipment | 1,852 | ||
Patents | 53,750 | ||
Goodwill | 12,785,855 | ||
Total assets acquired | 12,965,602 | ||
Accounts payable | 75,711 | ||
Accrued expenses and other current liabilities | 68,913 | ||
Total liabilities assumed | 144,624 | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net | $ 12,820,978 |
Acquisition (Details 2)
Acquisition (Details 2) - Edison Nation Holdings LLC [Member] - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Business Acquisition [Line Items] | ||||
Revenues, net | $ 5,117,995 | $ 3,487,352 | $ 13,279,279 | $ 12,445,560 |
Cost of revenues | 3,637,000 | 2,233,907 | 9,116,670 | 8,375,279 |
Gross profit | 1,480,995 | 1,253,445 | 4,162,609 | 4,070,281 |
Selling, general and administrative | 2,196,686 | 1,043,093 | 6,776,134 | 2,764,771 |
Operating (loss) income | (715,691) | 210,352 | (2,613,525) | 1,305,510 |
Other (expense) income: | ||||
Rental income | 25,704 | 25,704 | 77,111 | 77,111 |
Change in fair value of put option contract | (732,600) | 0 | (732,600) | 0 |
Interest (expense) income | (42,128) | 1,228 | (407,260) | 3,690 |
Total other (expense) income | (749,024) | 26,932 | (1,062,749) | 80,801 |
(Loss) income before income taxes | (1,464,715) | 237,284 | (3,676,274) | 1,386,311 |
Income tax expense (benefit) | 167,813 | (26,570) | 312,186 | 64,655 |
Net (loss) income | $ (1,632,528) | $ 263,854 | $ (3,988,460) | $ 1,321,656 |
Net (loss) income per share - basic and diluted | $ (0.33) | $ 0.07 | $ (0.96) | $ 0.37 |
Weighted average number of common shares outstanding – basic and diluted | 4,954,199 | 3,557,084 | 4,151,528 | 3,557,084 |
Acquisition (Details Textual)
Acquisition (Details Textual) | Sep. 04, 2018USD ($)shares | May 31, 2018shares | Dec. 31, 2017USD ($) | Sep. 30, 2018USD ($)shares | Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) |
Business Acquisition [Line Items] | ||||||
Payments to Acquire Businesses, Net of Cash Acquired | $ 881,318 | |||||
Debt Instrument, Convertible, Number of Equity Instruments | 20,000 | 20,000 | ||||
Debt Conversion, Converted Instrument, Shares Issued | shares | 13,500 | 13,500 | ||||
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, Original Debt, Amount | $ 4,127,601.94 | |||||
Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual | $ 78,488 | |||||
Business Combination, Pro Forma Information, Earnings or Loss of Acquiree since Acquisition Date, Actual | $ 11,384 | |||||
Transaction Costs For Business Acquisition | $ 239,682 | $ 84,980 |
Inventory (Details)
Inventory (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Raw materials | $ 23,896 | $ 30,410 |
Finished goods | 176,191 | 209,651 |
Total inventory | $ 200,087 | $ 240,061 |
Prepaid expenses and other cu_3
Prepaid expenses and other current assets (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Deposits for inventory | $ 831,744 | $ 0 |
Deposits | 45,458 | 22,814 |
Retainers with consultants | 158,500 | |
Prepaid insurance | 34,461 | 0 |
Deposits | 13,478 | 0 |
Other | 31,283 | 18,647 |
Total prepaid expenses and other current assets | $ 1,114,924 | $ 41,461 |
Loan held for investment (Detai
Loan held for investment (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2018 | Jun. 04, 2018 | Dec. 31, 2017 | |
Cloud b, Inc., Promissory note, past due, Wall Street Journal prime rate plus 3% interest | $ 2,270,000 | ||
Non-accretable purchase discount | (1,770,000) | ||
Total loan held-for-investment | $ 500,000 | $ 500,000 | $ 0 |
Loan held for investment (Det_2
Loan held for investment (Details Textual) - USD ($) | 1 Months Ended | 9 Months Ended | ||
Oct. 29, 2018 | Sep. 30, 2018 | Jun. 04, 2018 | Dec. 31, 2017 | |
Receivable with Imputed Interest, Effective Yield (Interest Rate) | 8.00% | |||
Notes, Loans and Financing Receivable, Net, Current | $ 500,000 | $ 500,000 | $ 0 | |
Subsequent Event [Member] | ||||
Outstanding Capital Stock Percentage | 72.15% |
Notes Payable (Details Textual)
Notes Payable (Details Textual) | Sep. 07, 2018USD ($) | May 31, 2018shares | Sep. 30, 2018USD ($)shares |
Debt Conversion, Converted Instrument, Shares Issued | shares | 13,500 | 13,500 | |
Debt Instrument, Convertible, Number of Equity Instruments | 20,000 | 20,000 | |
Amortization of Debt Discount (Premium) | $ 167,500 | ||
Long-term Debt | $ 3,805,882 | ||
Debt Instrument, Maturity Date | Sep. 4, 2023 | ||
February 2018 and March 2018 Notes [Member] | |||
Notes Payable | $ 645,000 | ||
Commercial Delivery Vehicle Borrowings [Member] | |||
Long-term Debt | $ 73,559 | ||
Debt Instrument, Periodic Payment | $ 1,371 | ||
Debt Instrument, Maturity Date | Sep. 6, 2023 |
Related Party Transactions (Det
Related Party Transactions (Details) | Sep. 30, 2018USD ($) |
2,018 | $ 106,770 |
2,019 | 239,461 |
2,020 | 254,230 |
2,021 | 857,069 |
2,022 | 1,420,190 |
Thereafter | 1,428,162 |
Long-term Debt, Gross | 4,305,882 |
Less: debt discount | (500,000) |
Long-term Debt | $ 3,805,882 |
Related Party Transactions (D_2
Related Party Transactions (Details Textual) - USD ($) | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Due from Related Parties, Current | $ 1,307,247 | $ 834,897 | |
Debt Instrument, Maturity Date | Sep. 4, 2023 | ||
Interest Expense, Related Party | $ 145,656 | $ 0 | |
Debt Instrument, Unamortized Discount | 500,000 | ||
Senior Convertible Notes Payable [Member] | |||
Convertible Notes Payable | $ 1,428,161 | ||
Debt Instrument, Convertible, Conversion Price | $ 5 | ||
NL Penn Capital, L.P [Member] | |||
Debt Instrument, Face Amount | $ 2,120,000 | ||
Debt Instrument, Periodic Payment Terms, Balloon Payment to be Paid | $ 677,698 | ||
Debt Instrument, Maturity Date | Dec. 1, 2020 | ||
Stockholders of Fergco [Member] | |||
Debt Instrument, Face Amount | $ 876,500 | ||
Debt Instrument, Periodic Payment Terms, Balloon Payment to be Paid | $ 1,249,043 | ||
Debt Instrument, Maturity Date | Dec. 1, 2022 | ||
SRM and Fergco Acquisition [Member] | |||
Business Combination, Consideration Transferred, Notes Payable Issued | $ 2,996,500 | $ 2,996,500 | |
Debt Instrument, Interest Rate, Effective Percentage | 6.00% | ||
Debt Instrument, Term | 10 years |
Commitments and Contingencies (
Commitments and Contingencies (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
Aug. 02, 2018 | May 31, 2017 | Aug. 08, 2016 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Lease Expiration Date | Aug. 7, 2020 | ||||||
Operating Leases, Rent Expense, Minimum Rentals | $ 15,000 | $ 6,400 | |||||
Operating Leases, Rent Expense, Net | $ 65,244 | $ 83,218 | $ 211,780 | $ 126,328 | |||
Operating Leases, Future Minimum Payments Due | $ 154,000 | ||||||
Operating Leases, Rent Expense, Sublease Rentals | $ 25,704 | $ 25,704 | $ 77,111 | $ 77,111 | |||
Operating Lease, Payments | $ 3,333 | ||||||
Base Rent Percent | 5.00% | ||||||
Lessee, Operating Lease, Renewal Term | 5 years |
Stockholders' Equity (Details)
Stockholders' Equity (Details) | 9 Months Ended |
Sep. 30, 2018$ / shares | |
Weighted average fair value of option granted | $ 1.82 |
Risk-free interest rate | 2.20% |
Expected term in years | 2 years 6 months |
Volatility | 50.00% |
Dividend rate | 0.00% |
Stockholders' Equity (Details 1
Stockholders' Equity (Details 1) | 9 Months Ended |
Sep. 30, 2018USD ($)$ / sharesshares | |
Shares, Balance, January 1, 2018 | shares | 0 |
Shares, Granted | shares | 290,000 |
Shares, Balance, September 30, 2018 | shares | 290,000 |
Weighted Average Exercise Price, Balance, January 1, 2018 | $ 0 |
Weighted Average Exercise Price, Granted | 5.55 |
Weighted Average Exercise Price, Balance, September 30, 2018 | $ 5.55 |
Remaining Contractual Life in Years, Granted | 4 years 6 months |
Remaining Contractual Life in Years, Balance, September 30, 2018 | 4 years 6 months |
Aggregate Intrinsic Value, Balance, January 1, 2018 | $ | $ 0 |
Aggregate Intrinsic Value, Granted | $ 0 |
Aggregate Intrinsic Value, Balance, September 30, 2018 | $ | $ 561,300 |
Stockholders' Equity (Details T
Stockholders' Equity (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Aug. 31, 2018 | Feb. 28, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Aug. 16, 2018 | Feb. 09, 2018 | |
Stock Issued During Period, Shares, Issued for Services | 344,250 | |||||||
Share-based Compensation | $ 2,666,576 | $ 0 | ||||||
Stock Issued During Period, Value, New Issues | 5,358,570 | |||||||
Proceeds from Issuance of Common Stock | 5,358,570 | 0 | ||||||
Stock Issued During Period, Value, Issued for Services | 375,000 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 1,764,705 | |||||||
Employee Stock Option [Member] | ||||||||
Share-based Compensation | $ 260,826 | $ 0 | $ 260,826 | $ 0 | ||||
Regulation A Offering [Member] | ||||||||
Stock Issued During Period, Shares, Issued for Services | 75,000 | |||||||
Share-based Compensation | $ 1,721,250 | |||||||
Stock Issued During Period, Shares, New Issues | 1,312,520 | |||||||
Shares Issued, Price Per Share | $ 5 | |||||||
Stock Issued During Period, Value, New Issues | $ 6,562,600 | |||||||
Proceeds from Issuance of Common Stock | 5,358,570 | |||||||
Legal Fees | 157,358 | |||||||
Deferred Offering Costs | 1,204,030 | |||||||
Stock Issued During Period, Value, Issued for Services | $ 375,000 | |||||||
Underwriter Commissions and Expenses | 714,802 | |||||||
Escrow Closing Fees | $ 4,000 | |||||||
Regulation A Offering [Member] | Selling Agent Warrants [Member] | ||||||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 6 | $ 6 | ||||||
Class of Warrant or Right, Outstanding | 65,626 | |||||||
Class of Warrant or Right Expiration Period | 5 years | |||||||
Class of Warrant or Right Exercise Price Percentage Threshold | 20.00% | |||||||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 65,626 | |||||||
IPO [Member] | ||||||||
Stock Issued During Period, Shares, Issued for Services | 61,900 | |||||||
Stock Issued During Period, Value, Issued for Services | $ 309,500 |
Segment Reporting (Details)
Segment Reporting (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Segment Reporting [Line items] | |||||
Total segment and consolidated revenues | $ 4,940,188 | $ 3,174,722 | $ 12,758,715 | $ 11,571,468 | |
Total segment and consolidated gross profit | 1,303,188 | 1,031,775 | 3,668,500 | 3,345,406 | |
Total segment and consolidated (loss) income from operations | (762,467) | 261,666 | (2,608,330) | 1,412,254 | |
Total segment depreciation and amortization | 40,741 | 50,056 | 120,004 | 157,765 | |
Total segment and consolidated assets | 21,825,158 | 21,825,158 | $ 4,070,827 | ||
Packaging materials [Member] | |||||
Segment Reporting [Line items] | |||||
Total segment and consolidated revenues | 1,567,723 | 1,234,208 | 4,593,051 | 3,911,040 | |
Total segment and consolidated gross profit | 417,627 | 487,227 | 1,278,349 | 1,192,668 | |
Total segment and consolidated (loss) income from operations | 78,369 | 202,699 | 219,627 | 136,961 | |
Total segment depreciation and amortization | 28,878 | 36,202 | 84,413 | 104,374 | |
Total segment and consolidated assets | 2,435,580 | 2,435,580 | 1,853,273 | ||
Consumer goods [Member] | |||||
Segment Reporting [Line items] | |||||
Total segment and consolidated revenues | 3,372,465 | 1,940,514 | 8,165,664 | 7,660,428 | |
Total segment and consolidated gross profit | 885,561 | 544,548 | 2,390,151 | 2,152,738 | |
Total segment and consolidated (loss) income from operations | 696,255 | 141,079 | 1,904,145 | 1,357,405 | |
Total segment depreciation and amortization | 11,863 | 13,854 | 35,591 | 48,616 | |
Total segment and consolidated assets | 17,584,758 | 17,584,758 | 2,217,296 | ||
Corporate [Member] | |||||
Segment Reporting [Line items] | |||||
Total segment and consolidated (loss) income from operations | (1,537,091) | $ (82,112) | (4,732,102) | $ (82,112) | |
Total segment and consolidated assets | $ 1,804,820 | $ 1,804,820 | $ 258 |
Subsequent Events (Details Text
Subsequent Events (Details Textual) - USD ($) | Oct. 01, 2018 | Oct. 29, 2018 | Aug. 02, 2018 | Aug. 08, 2016 |
Operating Leases, Rent Expense, Minimum Rentals | $ 15,000 | $ 6,400 | ||
Operating Leases, Future Minimum Payments Due | $ 154,000 | |||
Lease Expiration Date | Aug. 7, 2020 | |||
Subsequent Event [Member] | ||||
Operating Leases, Rent Expense, Minimum Rentals | $ 1,887 | |||
Operating Leases, Future Minimum Payments Due | $ 45,288 | |||
Lease Expiration Date | Sep. 30, 2020 | |||
Subsequent Event [Member] | Cloud B Inc [Member] | ||||
Business Acquisition, Percentage of Voting Interests Acquired | 72.15% | |||
Business Acquisition Number of Shares Acquired | 489,293 |