Revenue Growth of 23% to $27.6 Million
Operating Income of $0.5 Million
Solidified Financial Position to Grow Without Diluting Shareholders

NEW YORK, NY / ACCESSWIRE / May 15, 2017 / uSell.com (OTCQB: USEL), a large market maker of used smartphones, today reported financial and operational results for the three month period ended March 31, 2017.

Key Business Highlights for First Quarter 2017:

  • Continued transition of customers to online platform
  • Investments in processes and technology to increase capacity and decrease lead time to test and grade devices

Key Financial Highlights for First Quarter 2017:

  • Revenues increased by $5,179,000, or 23%, to $27,631,000 for the three months ended March 31, 2017, from $22,452,000 for the three months ended March 31, 2016
  • Operating income for the three months ended March 31, 2017 was $543,000, compared to an operating loss of ($1,009,000) for the three months ended March 31, 2016, a change of $1,552,000, or 154%
  • Net loss for the three months ended March 31, 2017 was $746,000, compared to $2,091,000 for the three months ended March 31, 2016
  • Adjusted EBITDA, a non-GAAP financial measure, improved to $1,018,000 for the three months ended March 31, 2017, from ($371,000) for the three months ended March 31, 2016. See "Non-GAAP Financial Measure - Adjusted EBITDA" below.

See the discussion on pages 3-4 of non-GAAP Financial Measures.

The Company saw substantial improvement in revenue and margin for the three months ended March 31, 2017 from the same period in the prior year. The operational improvements implemented by the Company after the turbulent market experienced in the first quarter of 2016 continue to be evident in its financial results. In the first quarter of 2017, the Company sold a higher percent of devices via e-commerce than in past quarters, which led to higher gross profit, partially offset by higher operating expenses. Total revenue increased due to operational efficiencies as well as growth in the Company's active customer base. While the Company does not expect margins to be negatively impacted by any event going forward, the projected margin for the future quarters is uncertain.

On the technology side, uSell continued to invest in its online platform and has steadily transitioned more of its customer interactions online. The Company has also invested resources in optimizing the processes and technology needed to test and grade devices in its warehouses, with the aim of increasing capacity and decreasing processing lead time.

On the supply side, uSell continued its supplier diversification initiatives, with its largest supplier's share of purchases representing 66% for the current quarter, down from 97% during the same period in 2016.

Nik Raman, Chief Executive Officer, commented, "We are pleased with our start to 2017 as we were able to realize some of the benefits of the investments we made over the last twelve months. We responded to the challenges presented to us in the beginning of 2016 by investing in our processes, technology, and team. As a result we were able to capitalize on the iPhone 7 launch and holiday trade in cycle, and are in a substantially better position to take advantage of new opportunities that will present themselves this year. We will continue to make long term investments in our people, processes, and technology so that we can provide more value to suppliers and take share from our competitors in the coming years."

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 First Quarter Ended March 31, 2017:

Revenue was $27.6 million for the three months ended March 31, 2017, a 23% increase from $22.5 million for the three months ended March 31, 2016.

During the three months ended March 31, 2017 and 2016, 64% and 73% of the Company's revenues, respectively, were originated in the United States, 26% and 8%, respectively, were originated in Europe and 6% and 17%, respectively, were originated in Hong Kong.

During the three months ended March 31, 2017, two vendors represented at least 10% of purchases, accounting for 66% and 13% of the Company's purchases. During the three months ended March 31, 2016, one vendor represented at least 10% of purchases, accounting for 97% of the Company's purchases.

Gross profit was $2.7 million for the three months ended March 31, 2017, a 202% increase from $0.9 million for the three months ended March 31, 2016. Gross profit margin increased substantially to 9.9% for the three months ended March 31, 2017, compared to 4.0% for the three months ended March 31, 2016. The margins have increased as a result of increased sales via e-commerce transactions, the increase in sales from our online auction portal and the absence of the margin pressure experienced during the quarter ended March 31, 2016 triggered by the unanticipated launch of the iPhone SE. There was also a positive impact to margins from the decision to shut down the Managed by uSell service and transition the uSell.com business back to the Agent Commission Revenue model.

Sales and marketing expense increased $221,000, or 59%, from $377,000 during the three months ended March 31, 2016 to $598,000 during the three months ended March 31, 2017. The increase is primarily attributable to the higher fees paid as a result of the increased eBay sales during the quarter ended March 31, 2017, compared to the quarter ended March 31, 2016. With the We Sell Cellular acquisition and the Company's newfound ability to source devices directly from the carriers, retailers, and manufacturers, the Company's primary sales and marketing expenses have shifted from consumer marketing to paying out sales commissions and fees. 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 income for the three months ended March 31, 2017 was $0.5 million, an improvement of $1.5 million from a $1.0 million operating loss for the three months ended March 31, 2016.

Net loss for the three months ended March 31, 2017 was $0.7 million, an improvement of $1.4 million from a $2.1 million net loss for the three months ended March 31, 2016.

Adjusted EBITDA, a non-GAAP financial measure, for the three months ended March 31, 2017 was $1.0 million, an improvement of $1.4 million from a $0.4 million Adjusted EBITDA loss for the three months ended March 31, 2016.

At March 31, 2017, uSell.com had $0.8 million of cash and cash equivalents, $11.0 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.

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:

Three Months Ended
March 31,
2017
2016
Net loss
$
(746,000
)
$
(2,091,000
)
Stock-based compensation expense
119,000
127,000
Depreciation and amortization
356,000
511,000
Interest expense
1,289,000
357,000
Change in fair value of derivative liability
-
725,000
Adjusted EBITDA
$
1,018,000
$
(371,000
)

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: Monday, May 15, 2017

Time: 4:30PM ET
Dial-in Number: (866) 682-6100
International Dial-in Number: (862) 255-5401
Webcast: http://www.investorcalendar.com/IC/CEPage.asp?ID=175956

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 August 15, 2017. To listen to the replay, dial (877) 481-4010 (domestic) or (919) 882-2331 (international) and use replay ID 10396. The webcast replay will be available through June 15, 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 our 2017 plans and the availability of growth opportunities and increasing market share. 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 and the availability of sufficient capital 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, 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
p212-213-6805
nik@usell.com

uSell.com, Inc. and Subsidiaries
Consolidated Balance Sheets

March 31,
December 31,
2017
2016
(unaudited)
Assets
Current Assets:
Cash and cash equivalents
$
845,426
$
1,657,422
Restricted cash
763,251
982,064
Accounts receivable, net
790,675
430,171
Inventory, net
11,038,989
8,874,099
Prepaid expenses and other current assets
153,497
130,141
Total Current Assets
13,591,838
12,073,897
Property and equipment, net
196,097
191,957
Goodwill
8,448,759
8,448,759
Intangible assets, net
3,530,423
3,724,466
Capitalized technology, net
922,271
934,193
Other assets
61,750
124,358
Total Assets
$
26,751,138
$
25,497,630
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable
$
4,563,873
$
4,328,422
Accrued expenses
1,544,288
916,961
Promissory note payable
-
673,332
Deferred revenue
249,894
374,098
Capital lease obligations
13,579
10,664
Total Current Liabilities
6,371,634
6,303,477
Promissory note payable, net of current portion
8,245,286
6,441,000
Capital lease obligations, net of current portion
56,958
47,986
Total Liabilities
14,673,878
12,792,463
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; 20,140,999 and 20,134,999 shares issued and outstanding, respectively
2,014
2,013
Additional paid in capital
71,208,454
71,089,882
Accumulated deficit
(59,133,208
)
(58,386,728
)
Total Stockholders' Equity
12,077,260
12,705,167
Total Liabilities and Stockholders' Equity
$
26,751,138
$
25,497,630

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

Three Months Ended
March 31,
2017
2016
Revenue
$
27,631,499
$
22,452,148
Cost of Revenue
24,903,258
21,547,751
Gross Profit
2,728,241
904,397
Operating Expenses:
Sales and marketing
598,479
377,095
General and administrative
1,586,863
1,535,835
Total operating expenses
2,185,342
1,912,930
Income (Loss) from Operations
542,899
(1,008,533
)
Other Expense:
Interest expense
(1,289,379
)
(357,051
)
Change in fair value of placement rights derivative liability
-
(725,000
)
Total Other Expense
(1,289,379
)
(1,082,051
)
Net Loss
$
(746,480
)
$
(2,090,584
)
Basic and Diluted Loss per Common Share:
Net loss per common share – basic and diluted
$
(0.04
)
$
(0.11
)
Weighted average number of common shares outstanding during the period – basic and diluted
20,136,999
19,751,999

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

Three Months Ended
March 31,
2017
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(746,480
)
$
(2,090,584
)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Depreciation and amortization
356,132
511,294
Stock based compensation expense
118,573
127,234
Amortization of debt issue costs into interest expense
990,063
85,850
Change in fair value of placement rights derivative liability
-
725,000
Changes in operating assets and liabilities:
Accounts receivable
(360,504
)
145,781
Inventory
(2,164,890
)
(715,313
)
Prepaid and other current assets
(23,356
)
116,884
Other assets
12,608
690
Accounts payable
235,451
(597,028
)
Accrued expenses
627,327
40,143
Lease termination payable
-
(5,000
)
Deferred revenues
(124,204
)
(452,942
)
Net Cash and Cash Equivalents Used In Operating Activities
(1,079,280
)
(2,107,991
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Website development costs
(135,949
)
(136,501
)
Restricted cash
218,813
(274,078
)
Cash paid to purchase property and equipment
(3,672
)
-
Security deposits
-
25,875
Net Cash and Cash Equivalents Provided By (Used In) Investing Activities
79,192
(384,704
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable
8,572,400
2,000,000
Principal repayments of note payable
(8,080,000
)
-
Payment of capital lease obligations
(2,799
)
-
Cash paid for debt issue costs
(301,509
)
(31,102
)
Net Cash and Cash Equivalents Provided By Financing Activities
188,092
1,968,898
Net Decrease in Cash and Cash Equivalents
(811,996
)
(523,797
)
Cash and Cash Equivalents - Beginning of Period
1,657,422
1,047,786
Cash and Cash Equivalents - End of Period
$
845,426
$
523,989

SOURCE: uSell.com, Inc.