uSell.com Reports 2016 Results

Revenue Growth of 249% to $94.7 Million;
Expanded Capacity and Access to Supply;
Strengthened Financial Position to Grow Without Diluting Shareholders

NEW YORK, NY / ACCESSWIRE / March 29, 2017 / uSell.com (OTCQB: USEL), a large market maker of used smartphones, today reported financial and operational results for the twelve month period ended December 31, 2016.

Key Business Highlights for Full Year 2016:

Continued migration of customers to online platform
Positive trends in diversification of supply
New warehouse facility to more than double processing capacity
Solidified financial position to grow without diluting shareholders

Key Financial Highlights for Full Year 2016:

Revenues increased by $67.6 million, or 249%, to $94.7 million
Operating loss decreased by $3.0 million, or 62%, to $1.8 million
Net loss increased to $3.7 million from $2.6 million for 2015; however, the 2015 net loss included a $2.4 million income tax benefit
Adjusted EBITDA, a non-GAAP financial measure, improved to $0.6 million

The following table presents Adjusted EBITDA, a non-GAAP financial measure, and provides a reconciliation of Adjusted EBITDA to the directly comparable GAAP measure reported in the Company’s consolidated financial statements:

Year Ended December 31,

2016

2015

Net loss

$

(3,712,000

)

$

(2,632,000

)

Income tax benefit

–

(2,393,000

)

Stock-based compensation expense

525,000

2,954,000

Depreciation and amortization

1,912,000

820,000

Acquisition related costs

–

268,000

Interest expense

1,497,000

189,000

Interest and other income

–

(1,000

)

Change in fair value of derivative liability

370,000

–

Adjusted EBITDA

$

592,000

$

(795,000

)

See the discussion below of non-GAAP Financial Measures.

The Company made meaningful progress towards its long term objectives in 2016. These objectives included migrating sales of its newly acquired subsidiary, We Sell Cellular, to an online platform and diversifying its supplier base. In particular, the Company:

Successfully launched an online auction platform for a subset of We Sell Cellular’s product
Launched an “Online Stock List,” where buyers can log into their accounts and view its inventory on demand
Consolidated and streamlined the processes for lead capture, lead management, prospect management, and customer relationship management, which has increased the effectiveness of the sales team while laying the foundation for seamless online interactions with a much larger customer base
Added several new suppliers, substantially strengthening the Company’s ability to scale the business. The largest supplier’s share of purchases dropped from 97% in the first quarter, to 85% in the second quarter, to 62% in the third quarter, to 51% in the fourth quarter

On the finance side, 2016 was an important year for the Company in ensuring available liquidity for the core business while also securing extra working capital to take advantage of strategic opportunities. The Company began discussions with a financial partner during Q4 of 2016 and closed transactions in January of 2017, through which it:

Increased the size of its debt facility and extended the amortization period, resulting in greater flexibility of cash management and additional time to fully implement the Company’s business plan
Launched a new Special Purpose Entity (SPE). The SPE was funded by our new lender with an initial $5.2 million in funding, which provides uSell with additional capital to buy inventory and scale with its customer base. This funding can increase upon agreement by the lender and us, and provides the Company with the ability to increase its purchasing power without shareholder dilution or excess leverage

Nik Raman, Chief Executive Officer, stated, “In 2016, we validated the synergy with We Sell Cellular by successfully integrating the two companies and moving a meaningful portion of We Sell Cellular’s business online. Furthermore, by empowering We Sell Cellular’s sales force with better technology and actionable data, we were able to drive improvements in efficiency. In 2017, we intend to not only to continue building out our online platform, but to also further reduce waste and improve efficiency throughout the entire transaction lifecycle.”

Deloitte Global estimates that the global smartphone market was worth $17 billion in 2016, representing 50% growth over 2015. Furthermore, it forecasts that the growth rate of the used smartphone market is 4-5 times higher than the overall smartphone market and that it will likely accelerate through 2020 as both consumers and suppliers increasingly embrace the practice of selling or acquiring second-hand smartphones.

Financial Results for the Year Ended December 31, 2016:

Total revenue was $94.7 million for the twelve months ended December 31, 2016, a 249% increase from $27.1 million for the twelve months ended December 31, 2015.

Gross profit was $5.8 million for the twelve months ended December 31, 2016, a 64% increase from $3.5 million for the twelve months ended December 31, 2015.

Sales and marketing expense decreased $357,000, or 18%, from $2,037,000 during the year ended December 31, 2015 to $1,680,000 during the year ended December 31, 2016. While the decrease in this line item between 2015 and 2016 is not material between periods, the nature of our expenses is substantially different, and is much smaller as a percentage of overall sales. With the We Sell Cellular acquisition and the Company’s newfound ability to source devices directly from the carriers, retailers, and manufacturers, sales and marketing expenses have shifted from consumer marketing to paying out sales commissions. The Company believes this shifting profile will enable it to scale volume significantly while maintaining sales and marketing expense as a much lower percentage of sales than in prior years.

Operating loss for the twelve months ended December 31, 2016 was $1.8 million, an improvement of $3.0 million from a $4.8 million operating loss for the twelve months ended December 31, 2015, which was prior to the WeSell Cellular acquisition.

Net loss for the twelve months ended December 31, 2016 was $3.7 million, an improvement of $1.3 million from a $5.0 million net loss for the twelve months ended December 31, 2015, when the $2.4 million income tax benefit for 2015 is excluded.

Adjusted EBITDA, a non-GAAP financial measure, for the twelve months ended December 31, 2016 was $0.6 million, an improvement of $1.4 million from a $0.8 million Adjusted EBITDA loss for the twelve months ended December 31, 2015.

At December 31, 2016, uSell.com had $1.7 million of cash and cash equivalents, $8.9 million of inventory and 20.1 million shares issued and outstanding.

Non-GAAP Financial Measure – Adjusted EBITDA

We make reference to “Adjusted EBITDA,” a measure of financial performance not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”). Management has included Adjusted EBITDA because it believes that investors may find it useful to review our financial results as adjusted to exclude items as determined by management. Reconciliations of this non-GAAP financial measure to the most directly comparable GAAP financial measure, net loss, to the extent available without unreasonable effort, are set forth below. The Company defines Adjusted EBITDA as earnings or (loss) from continuing operations before the items noted in the table below.

Management believes Adjusted EBITDA provides a meaningful representation of our operating performance that provides useful information to investors regarding our financial condition and results of operations. Adjusted EBITDA is commonly used by financial analysts and others to measure operating performance. Furthermore, management believes that this non-GAAP financial measure may provide investors with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of our core ongoing business. However, while we consider Adjusted EBITDA to be an important measure of operating performance, Adjusted EBITDA and other non-GAAP financial measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Further, Adjusted EBITDA, as we define it, may not be comparable to EBITDA, or similarly titled measures, as defined by other companies.

Conference Call Details:

Date: Wednesday, March 29, 2017
Time: 4:30PM ET
Dial-in Number: (866) 682-6100
International Dial-in Number: (862) 255-5401
Webcast: http://www.investorcalendar.com/event/175776

Participants are recommended to dial-in approximately 10 minutes prior to the start of the event. A replay of the call will be available approximately two hours after completion through April 29, 2017. To listen to the replay, dial (877) 481-4010 (domestic) or (919) 882-2331 (international) and use replay ID 10296. The webcast replay will be available through June 29, 2017.

About uSell.com, Inc.

uSell.com, Inc. is a large market maker of used smartphones. uSell acquires products from both individual consumers, on its website, uSell.com, and from major carriers, big box retailers, and manufacturers through its subsidiary, We Sell Cellular, LLC (“We Sell Cellular”). The Company maximizes the value of these devices by reclassifying them, adding value to them, and moving them throughout the world to those who want them most. In order to serve its global and highly diverse customer base, uSell leverages both a traditional sales force and an online marketplace where professional buyers of used smartphones can buy inventory on-demand. Through participation on uSell’s online platform and through interaction with uSell’s salesforce, buyers can acquire high volumes of inventory in a cost effective manner, while minimizing risk.

For more information, please visit www.uSell.com and http://wesellcellular.com.

Forward-Looking Statements

This press release includes forward-looking statements including statements regarding growth, our 2017 plans, supplier diversification and future revenue growth and anticipated sales and marketing expenses. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include competition from large retail stores and wireless operators, our continued success in reducing dependence on a few suppliers, our ability to react quickly when supply of smartphones increases, the expected growth and usage of our technology platform, and our ability to further or maintain our relationships with large wholesalers. Further information on our risk factors is contained in our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2015 and will be included in the Form 10-K for the year ended December 31, 2016. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

Contact Information

Nik Raman
Chief Executive Officer
Phone: 212-213-6805
nik@usell.com

uSell.com, Inc. and Subsidiaries
Consolidated Balance Sheets

December 31,

2016

2015

Assets

Current Assets:

Cash and cash equivalents

$

1,657,422

$

1,047,786

Restricted cash

982,064

801,230

Accounts receivable, net

430,171

463,187

Inventory

8,874,099

7,099,970

Prepaid expenses and other current assets

130,141

297,023

Total Current Assets

12,073,897

9,709,196

Property and equipment, net

191,957

193,243

Goodwill

8,448,759

8,406,561

Intangible assets, net

3,724,466

5,043,972

Capitalized technology, net

934,193

886,543

Other assets

124,358

79,145

Total Assets

$

25,497,630

$

24,318,660

Liabilities and Stockholders’ Equity

Current Liabilities:

Accounts payable

$

4,328,422

$

2,563,598

Accrued expenses

916,961

729,160

Deferred revenue

374,098

814,295

Promissory note payable

673,332

–

Capital lease obligation

10,664

–

Lease termination payable

–

5,000

Total Current Liabilities

6,303,477

4,112,053

Promissory note payable, net of current portion

6,441,000

5,087,043

Capital lease obligation, net of current portion

47,986

–

Placement rights derivative liability

–

1,130,000

Total Liabilities

12,792,463

10,329,096

Stockholders’ Equity:

Convertible Series A preferred stock; $0.0001 par value; 325,000 shares authorized; no shares issued and outstanding

–

–

Convertible Series B preferred stock; $0.0001 value per share; 4,000,000 shares authorized; no shares issued and outstanding

–

–

Convertible Series C preferred stock; $0.0001 value per share; 146,667 shares authorized; no shares issued and outstanding

–

–

Convertible Series E preferred stock; $0.0001 value per share; 103,232 shares authorized; no shares issued and outstanding

–

–

Common stock; $0.0001 par value; 43,333,333 shares authorized; 20,134,999 shares and 19,751,999 shares issued and outstanding, respectively

2,013

1,976

Additional paid in capital

71,089,882

68,662,578

Accumulated deficit

(58,386,728

)

(54,674,990

)

Total Stockholders’ Equity

12,705,167

13,989,564

Total Liabilities and Stockholders’ Equity

$

25,497,630

$

24,318,660

uSell.com, Inc. and Subsidiaries
Consolidated Statements of Operations

Year Ended December 31,

2016

2015

Revenue

$

94,656,735

$

27,093,928

Cost of Revenue

88,834,912

23,549,098

Gross Profit

5,821,823

3,544,830

Operating Expenses:

Sales and marketing

1,680,364

2,037,371

General and administrative

5,986,273

6,344,539

Total operating expenses

7,666,637

8,381,910

Loss from Operations

(1,844,814

)

(4,837,080

)

Other (Expense) Income:

Interest income

429

956

Interest expense

(1,497,353

)

(189,245

)

Change in fair value of placement rights derivative liability

(370,000

)

–

Total Other Expense, Net

(1,866,924

)

(188,289

)

Loss before Income Tax Benefit

(3,711,738

)

(5,025,369

)

Income Tax Benefit

–

(2,392,994

)

Net Loss

$

(3,711,738

)

$

(2,632,375

)

Net loss per common share – basic and diluted

$

(0.19

)

$

(0.27

)

Weighted average number of common shares outstanding during the period – basic and diluted

20,029,701

9,687,951

uSell.com, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

Year Ended December 31,

2016

2015

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(3,711,738

)

$

(2,632,375

)

Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:

Depreciation and amortization

1,912,077

819,604

(Recovery of) Provision for bad debt expense

(1,876

)

5,432

Stock based compensation expense

524,841

2,953,969

Deferred tax benefit

–

(2,392,994

)

Amortization of debt issue costs into interest expense

479,340

51,564

Loss on disposal of property and equipment

112,284

–

Change in fair value of placement rights derivative liability

370,000

–

Changes in operating assets and liabilities:

Accounts receivable

34,892

(76,205

)

Inventory

(1,816,327

)

(3,718,347

)

Prepaid and other current assets

166,882

669,565

Other assets

13,222

(26,750

)

Accounts payable

1,764,824

727,466

Accrued expenses

187,801

(173,297

)

Lease termination payable

(5,000

)

(10,000

)

Deferred revenues

(440,197

)

459,400

Net Cash and Cash Equivalents Used In Operating Activities

(408,975

)

(3,342,968

)

CASH FLOWS FROM INVESTING ACTIVITIES:

Website development costs

(595,528

)

(601,404

)

Cash paid for acquisition, net of cash acquired

–

(2,365,859

)

Restricted cash

(180,834

)

(801,230

)

Cash paid to purchase property and equipment

(93,686

)

(16,789

)

Security deposits

(8,435

)

–

Net Cash and Cash Equivalents Used In Investing Activities

(878,483

)

(3,785,282

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from note payable

2,000,000

6,000,000

Payment of capital lease obligations

(3,355

)

–

Cash paid for debt issue costs

(99,551

)

(238,721

)

Net Cash and Cash Equivalents Provided By Financing Activities

1,897,094

5,761,279

Net Increase (Decrease) in Cash and Cash Equivalents

609,636

(1,366,971

)

Cash and Cash Equivalents – Beginning of Period

1,047,786

2,414,757

Cash and Cash Equivalents – End of Period

$

1,657,422

$

1,047,786

SOURCE: uSell.com

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