UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 21, 2018
XSPAND PRODUCTS LAB, INC.
(Exact Name of Registrant as Specified in Charter)
Nevada | 001-38448 | 82-2199200 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
4030 Skyron Drive, Suite F Doylestown, Pennsylvania |
18902 | ||||
(Address of principal executive offices) | (Zip Code) |
(610) 829-1039 |
(Registrant’s Telephone Number, Including Area Code) |
(Former name or former address, if changed since last report)
Copies to:
Marc J. Adesso
Waller Lansden Dortch & Davis, LLP
511 Union Street, Suite 2700
Nashville, Tennessee 37219
Telephone: (615) 244-6380
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
Item 2.02. | Results of Operations and Financial Condition. |
On May 21, 2018, Xspand Products Lab, Inc. (the “Company”) issued a press release announcing its financial performance for the first fiscal quarter ended March 31, 2018, as well as discussing other recent corporate developments. A copy of the press release is furnished herewith as Exhibit 99.1.
Item 7.01. | Regulation FD Disclosure. |
On May 23, 2018, the Company issued a press release announcing its entrance into a two-year manufacturing agreement with a leading children’s sleep products brand. A copy of the press release is furnished herewith as Exhibit 99.2.
The information contained in this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. The furnishing of the information in this Current Report on Form 8-K is not intended to, and does not, constitute a representation that such furnishing is required by Regulation FD or that the information contained in this Current Report on Form 8-K constitutes material investor information that is not otherwise publicly available.
The Securities and Exchange Commission encourages registrants to disclose forward-looking information so that investors can better understand the future prospects of a registrant and make informed investment decisions. This Current Report on Form 8-K and exhibits may contain these types of statements, which are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and which involve risks, uncertainties and reflect the Company’s judgment as of the date of this Current Report on Form 8-K. Forward-looking statements may relate to, among other things, operating results and are indicated by words or phrases such as “expects,” “should,” “will,” and similar words or phrases. These statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from those anticipated at the date of this Current Report on Form 8-K. Investors are cautioned not to rely unduly on forward-looking statements when evaluating the information presented within.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit No. |
Description | |
99.1 | Press Release dated May 21, 2018 | |
99.2 | Press Release dated May 23, 2018 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 24, 2017
XSPAND PRODUCTS LAB, INC. | |||
By: | /s/ Christopher B. Ferguson | ||
Name: | Christopher B. Ferguson | ||
Title: | Chief Executive Officer |
Exhibit 99.1
Xspand Products Lab, Inc. Reports First Quarter 2018 Financial Results and Recent Corporate Highlights
Doylestown, Pennsylvania – May 21, 2018 – Xspand Products Lab, Inc. (“Xspand”), a full-service product development company, today reported its financial results for the first quarter ended March 31, 2018.
Recent Company Highlights:
· | Successfully completed initial public offering on April 30, 2018, selling an aggregate of 1,307,120 shares of its common stock at a public offering price of US$5.00 per share, resulting in approximately $6.5 million in gross proceeds. |
· | Xspand began trading on The Nasdaq Capital Market exchange on May 3, 2018 under the ticker symbol “XSPL”. |
· | Xspand secured approximately $1.0 million in purchase orders from a variety of customers, including two newly developed items for major theme parks based in Tokyo and Shanghai, for the one week period ending May 18, 2018. |
· | Xspand’s patented Goodie Gusher item, www.goodiegusher.com, has been purchased by and now available at Party City. |
· | Xspand’s arts and crafts brand, Pirasta, has secured its first international retail customer, Carefour, the world’s second largest retailer. |
· | The first crowdsourced micro brand opportunities are expected to roll out next month through partnership with Edison Nation. |
Management Commentary
“We are beginning 2018 with a great deal of enthusiasm,” noted Chris Ferguson, CEO of Xspand. “At heart, we are an award-winning product development company, with over 50 years of success designing, manufacturing and selling creative products and services globally to customers, including Fortune 500 companies. We believe our recent strategic partnership Edison Nation will provide a growing base of opportunities and even greater value proposition as we work to crowdsource innovation and scale products quickly and more efficiently than ever before.
“The $6.5 million in gross proceeds from our successful IPO have significantly strengthened our balance sheet, enabling us to accelerate revenue growth, both organically and via acquisition. Our acquisition strategy entails the acquisition of eight or more micro brands annually. We intended to commence this activity in the third quarter of 2018.
“We are serving a large, growing and dynamic market. The e-commerce marketplace continues to evolve with the rise of platforms like Kickstarter, which de-risk product launches before significant capital has been committed, and we intend to take advantage of this evolution to bring our products to a larger audience than ever before with minimal capital investment.”
“The entire company is laser focused on executing upon our stated goals. Management believes it is strongly aligned with shareholders and poised to create significant shareholder value,” concluded Ferguson.
First Quarter 2018 Financial Results
Revenue in the first quarter of 2018 totaled $3.4 million, compared to $3.9 million in the first quarter of 2017. This decrease in revenue was primarily attributable to the Walt Disney Company’s theme park safety officers terminating sales of toy weapons at their locations.
Gross profit totaled $1.1 million in the first quarter of 2018, compared to $1.1 million in the first quarter of 2017. Gross profit margin as a percentage of revenue increased to 32.1% in the first quarter of 2018, compared to 27.6% in the first quarter of 2017. The increase in gross profit margin as a percentage of revenues was primarily due to a favorable product mix.
Operating expenses were $2.5 million in the first quarter of 2018, compared to $0.5 million in the first quarter of 2017. The increase was primarily attributable to the certain indirect costs incurred related to the IPO as well as increased salaries related to the hiring of Xspand employees and executives during first quarter of 2018.
There was an equity neutral charge for non-cash stock-based compensation expense of $1.7 million related to the transfer of approximatley 350,000 shares of the original 3,000,000 million shares issued for the acquisition of SRM and Ferguson Containers. This is not a new issuance of shares, but rather, a reallocation of the original 3,000,000 million shares to satisfy certain consulting agreements from 2013, which were satisfied by the principal stockholder of SRM transferring approximately 350,000 shares to the consultants.
Net loss totaled $1.6 million, or ($0.53) per basic and diluted share in in the first quarter of 2018, compared to net income of $0.5 million, or $0.18 per basic and diluted share, in the first quarter of 2017. The decrease in net income was primarily due to the aforementioned increase in operating expenses, of which, $1.7 million was related to non-cash stock compensation expense.
Adjusted EBITDA totaled $0.3 million in the first quarter of 2018, compared to $0.6 million in the first quarter of 2017. See below under the heading, “Use of Non-GAAP Financial Information” for a discussion of Adjusted EBITDA and a reconciliation of such measure to the most comparable measure calculated under U.S. generally accepted accounting principles ("GAAP").
Cash and cash equivalents at March 31, 2018 totaled $1.1 million, as compared to $0.6 million at December 31, 2017. Subsequent to the close of the quarter on March 31, 2018, the Company completed its initial public offering, raising approximately $6.5 in gross proceeds. The Company believes it currently has sufficient funds to meet its working capital, debt service and capital expenditure requirements for at least the next 12 months.
Further details about Xspand’s results in the first quarter of 2018 are available in its Quarterly Report on Form 10-Q, accessible in the investor relations section of the Company’s website at www.xspandproductslab.com and through the U.S. Securities and Exchange Commission’s website.
Use of Non-GAAP Financial Information
EBITDA and Adjusted EBITDA is a financial measure that is not calculated in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management believes that because Adjusted EBITDA excludes (i) certain non-cash expenses (such as depreciation, amortization and stock-based compensation) and (ii) expenses that are not reflective of Xspand’s core operating results over time (such as restructuring costs, litigation or dispute settlement charges or gains, and transaction-related costs), this measure provides investors with additional useful information to measure Xspand’s financial performance, particularly with respect to changes in performance from period to period. Xspand’s management uses EBITDA and Adjusted EBITDA (a) as a measure of operating performance; (b) for planning and forecasting in future periods; and (c) in communications with Xspand’s Board of Directors concerning Xspand’s financial performance. Xspand’s presentation of EBITDA and Adjusted EBITDA are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation and should not be used by investors as a substitute or alternative to net income or any measure of financial performance calculated and presented in accordance with U.S. GAAP. Instead, management believes EBITDA and Adjusted EBITDA should be used to supplement Xspand’s financial measures derived in accordance with U.S. GAAP to provide a more complete understanding of the trends affecting the business.
About Xspand Products Lab, Inc.
Xspand Products Lab, Inc. (NASDAQ: XSPL) is a vertically integrated and full-service product development and manufacturing company, including design, sales, fulfillment and shipping. Xspand's model is to provide a risk mitigated platform that connects innovators with companies to bring new products to market. For more information, please visit www.xspandproductslab.com.
Forward Looking Statements
This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this press release regarding strategy, future operations and plans, including assumptions underlying such statements, are forward-looking statements, and should not be relied upon as representing Xspand’s views as of any subsequent date. Examples of such statements include statements regarding the strength of Xspand’s operations and financial position for 2018, anticipated cash resources for continued operations, sales of Xspand’s products, enhancement of Xspand’s marketing efforts, the impact of Xspand’s portfolio development strategy, planned regulatory submissions and potential approvals, anticipated product launches, the potential benefits of Xspand’s products, Xspand’s efforts with respect to marketing in U.S. and international markets, and results of potential third-party collaborations. Such forward-looking statements are based on information available to Xspand as of the date of this release and involve a number of risks and uncertainties, some beyond Xspand’s control, that could cause actual results to differ materially from those anticipated by these forward-looking statements, including consumer, regulatory and other factors affecting demand for Xspand’s products, any difficulty in marketing Xspand’s products in global markets, competition in the market for consumer products, any inability to raise capital to fund operations and service Xspand’s debt. Additional information that could lead to material changes in Xspand’s performance is contained in its filings with the SEC. Xspand is under no obligation to, and expressly disclaims any responsibility to, update or alter forward-looking statements contained in this release, whether as a result of new information, future events or otherwise.
Investor Relations:
Greg Falesnik
Managing Director
MZ North America
Direct: 949-385-6449
XSPL@mzgroup.us
Xspand Products Lab, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, | December 31, | |||||||
2018 | 2017 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 1,147,502 | $ | 557,268 | ||||
Accounts receivable, net | 1,878,748 | 1,430,236 | ||||||
Inventory | 223,576 | 240,061 | ||||||
Prepaid expenses and other current assets | 58,793 | 41,461 | ||||||
Due from related party | 962,586 | 834,897 | ||||||
Total Current Assets | 4,271,205 | 3,103,923 | ||||||
Deferred offering costs | 205,560 | - | ||||||
Property and equipment, net | 943,676 | 966,904 | ||||||
Total Assets | $ | 5,420,441 | $ | 4,070,827 | ||||
Liabilities and Stockholders' Deficit | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 1,793,775 | $ | 1,135,039 | ||||
Accrued expenses and other current liabilities | 242,250 | 137,709 | ||||||
Notes payable - current | 470,635 | - | ||||||
Current portion of notes payable - related parties | 239,689 | 225,553 | ||||||
Total Current Liabilities | 2,746,349 | 1,498,301 | ||||||
Notes payable - related parties, non-current | 2,728,568 | 2,770,947 | ||||||
Deferred tax liability | 34,209 | 34,209 | ||||||
Total Liabilities | $ | 5,509,126 | $ | 4,303,457 | ||||
Commitments and Contingencies (Note 7) | ||||||||
Stockholders' Deficit | ||||||||
Common stock, $0.001 par value, 250,000,000 shares authorized; 3,000,000 | ||||||||
shares issued and outstanding as of March 31, 2018 and Decemer 31, 2017 | $ | 3,000 | $ | 3,000 | ||||
Additional paid-in capital | 1,721,250 | - | ||||||
Accumulated Deficit | (1,812,935 | ) | (235,630 | ) | ||||
Total Stockholders' Deficit | (88,685 | ) | (232,630 | ) | ||||
Total Liabilities and Stockholders' Deficit | $ | 5,420,441 | $ | 4,070,827 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Xspand Products Lab, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Revenues, net | $ | 3,431,330 | $ | 3,861,776 | ||||
Cost of revenues | 2,328,994 | 2,797,672 | ||||||
Gross Profit | 1,102,336 | 1,064,104 | ||||||
Operating Expenses: | ||||||||
Selling, general and administrative | 831,487 | 507,819 | ||||||
Selling, general and administrative - stock-based compensation expense | 1,721,250 | - | ||||||
Total Operating Expenses | 2,552,737 | 507,819 | ||||||
Operating (Loss) Income | (1,450,401 | ) | 556,285 | |||||
Other (Expense) Income: | ||||||||
Rental income | 25,704 | 25,704 | ||||||
Interest (expense) income | (87,535 | ) | 1,191 | |||||
Total Other (Expense) Income | (61,831 | ) | 26,895 | |||||
(Loss) Income Before Income Taxes | (1,512,232 | ) | 583,180 | |||||
Income tax expense | 65,073 | 43,739 | ||||||
Net (Loss) Income | $ | (1,577,305 | ) | $ | 539,441 | |||
Net (Loss) Income Per Share | ||||||||
- Basic and Diluted | $ | (0.53 | ) | $ | 0.18 | |||
Weighted Average Number of Common Shares Outstanding | ||||||||
- Basic and Diluted | 3,000,000 | 3,000,000 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
For the Three Months Ended | ||||||||||||
March 31, 2018 | March 31, 2017 | %Change | ||||||||||
Net (loss) income | $ | (1,577,305 | ) | 539,441 | (392 | )% | ||||||
Interest expense, net | 87,535 | (1,191 | ) | (7450 | )% | |||||||
Income tax expense | 65,073 | 43,739 | 49 | % | ||||||||
Depreciation and amortization | 39,631 | 51,467 | (23 | )% | ||||||||
EBITDA | (1,385,066 | ) | 633,456 | (319 | )% | |||||||
Non-cash stock-based compensation | 1,721,250 | - | * | |||||||||
Adjusted EBITDA | $ | 336,184 | 633,456 | (47 | )% |
* represents change from zero value.
Exhibit 99.2
Xspand Products Lab Announces Exclusive Manufacturing Agreement with Brand for Leading Childrens Sleep Products
Doylestown, Pennsylvania – May 23, 2018 – Xspand Products Lab, Inc. (“Xspand”), a full-service product development company, today announced that is has signed an exclusive, two-year manufacturing agreement with a leading childrens sleep products brand with sales in North America, Europe, Asia and Australia.
The client, which sells a wide variety of award-winning products, is aimed at helping both young children and their parents sleep better at night. As part of the agreement, Xspand will work with the client to exclusively manufacture its existing products and assist in the development of new product lines.
“This agreement with a leading childrens sleep product brand stands as a testament to the inherent value that the market places in our proprietary product development platform,” said Chris Ferguson, CEO of Xspand Products Lab. “We look forward to leveraging our team’s product development expertise to not only manufacture this client’s existing products, but develop exciting new product lines as well, with a particular focus on lucrative direct to consumer opportunities. Agreements such as this are instrumental to our go-forward growth strategy. I look forward to providing further updates.”
About Xspand Products Lab, Inc.
Xspand Products Lab, Inc. (NASDAQ: XSPL) is a vertically integrated and full-service product development and manufacturing company, including design, sales, fulfillment and shipping. Xspand's model is to provide a risk mitigated platform that connects innovators with companies to bring new products to market. For more information, please visit www.xspandproductslab.com.
Forward Looking Statements
This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this press release regarding strategy, future operations and plans, including assumptions underlying such statements, are forward-looking statements, and should not be relied upon as representing Xspand’s views as of any subsequent date. Examples of such statements include statements regarding the strength of Xspand’s operations and financial position for 2018, anticipated cash resources for continued operations, sales of Xspand’s products, enhancement of Xspand’s marketing efforts, the impact of Xspand’s portfolio development strategy, planned regulatory submissions and potential approvals, anticipated product launches, the potential benefits of Xspand’s products, Xspand’s efforts with respect to marketing in U.S. and international markets, and results of potential third-party collaborations. Such forward-looking statements are based on information available to Xspand as of the date of this release and involve a number of risks and uncertainties, some beyond Xspand’s control, that could cause actual results to differ materially from those anticipated by these forward-looking statements, including consumer, regulatory and other factors affecting demand for Xspand’s products, any difficulty in marketing Xspand’s products in global markets, competition in the market for consumer products, any inability to raise capital to fund operations and service Xspand’s debt. Additional information that could lead to material changes in Xspand’s performance is contained in its filings with the SEC. Xspand is under no obligation to, and expressly disclaims any responsibility to, update or alter forward-looking statements contained in this release, whether as a result of new information, future events or otherwise.
Investor Relations:
Greg Falesnik
Managing Director
MZ North America
Direct: 949-385-6449
XSPL@mzgroup.us