Nexxus Lighting Reports Significantly Higher Second Quarter 2011 Results
2nd Quarter Revenue Tripled Q2 2010 Revenue
CHARLOTTE, N.C., Aug. 12, 2011 /PRNewswire/ -- Nexxus Lighting, Inc. (NASDAQ Capital Market: NEXS) today reported its second quarter 2011 results. Highlights include:
- Revenue for the quarter increased 206% over Q2 2010 to $4.1 million
- Sales of Array® LED replacement light bulbs increased 647% to $3.2 million
- Launch of Array® to 1,100 Lowe's Home Improvement ("Lowe's") stores completed ahead of schedule
- Expansion of our patent portfolio to 37 patents issued and 30 patents pending
Second Quarter 2011 Performance
Revenue
Total revenue for the three months ended June 30, 2011 increased 206%, or approximately $2,739,000, to approximately $4,066,000 as compared to approximately $1,327,000 for the three months ended June 30, 2010.
Sales of Array products in the second quarter of 2011 grew more than six-fold or approximately $2,786,000 over the comparable period in 2010. This growth represents the launch of our Array products for sale through the consumer market channel. We completed the initial shipments of our Array products to approximately 1,100 Lowe's stores across the United States in the second quarter of 2011. Lowe's offers seventeen different Array products, including our PAR 38, R30, R16, MR16 and GU10 lamps that have qualified for the Energy Star rating. The ramp of sales to the consumer market may have adversely affected our ability to service other commercial market customers. Sales to commercial market customers declined as a result. Sales of Lumificient products decreased 5% from approximately $897,000 in the second quarter of 2010 to approximately $850,000 in the second quarter of 2011 as market conditions softened as compared to the first quarter of 2011.
"Our record Array results for the quarter reflect the expansion of our market strategy into the consumer market channel," stated Mike Bauer, President and Chief Executive Officer. "While we incurred some unexpected freight and installation costs, we were able to deliver 100% of the product on time to each of the approximate 1,100 stores. This performance demonstrates our ability to cost-effectively ramp our capacity and profitably service this new channel. There were challenges faced in this effort, but we overcame them with a team effort that included the support from certain strategic vendors."
"Our attention now turns to supporting the sell-through process of the Array product and expanding this channel," added Mr. Bauer. "Point-of-sale educational displays and graphics are being created, along with other consumer marketing materials, that highlight the benefits of LED lighting and our Array products in particular. We will be conducting training sessions with Lowe's commercial sales professionals over the next few months. Finally, we are working with Lowe's representatives and utilities to pursue rebates for consumer purchases."
Gross Profit
Gross profit for the quarter ended June 30, 2011 was approximately $1,004,000, or 25% of revenue, as compared to approximately $433,000, or 33% of revenue, for the comparable period of 2010. Direct gross margin, which is revenue less material cost, decreased from 46% in the second quarter of 2010 to 35% in the second quarter of 2011. This decrease reflects a shift in sales mix to Array products and the impact of launching the Array product line into the consumer market channel. We do not expect that we will be able to command our historical margins for sales through the consumer market channel. However, the additional unit volume generated by sales through this channel has allowed us to significantly lower our costs and compete more effectively across all market channels.
In the second quarter of 2011, distribution costs, which include some light assembly costs, increased to approximately $439,000, or 11% of revenue, as compared to approximately $177,000, or 13% of revenue, in the second quarter of 2010. We were able to leverage the sales growth across our supply chain assets. In particular, depreciation expense decreased from 11% of Array sales in the second quarter of 2010 to 2% of Array sales in the second quarter of 2011. Offsetting this improvement were higher freight expenses of approximately $151,000 and an increase in the inventory reserve for Array products of approximately $43,000 over the comparable period of 2010. As part of the introduction of Array products into the consumer market channel, we agreed to pay certain freight expenses.
Operating Expenses
Selling, general and administrative (SG&A) expenses were approximately $1,628,000 for the quarter ended June 30, 2011 as compared to approximately $1,758,000 for the same period in 2010, a decrease of approximately $130,000, or 7%. Selling expenses decreased due to lower payroll expenses of approximately $66,000; lower tradeshow expenses of approximately $46,000; and lower travel expenses of approximately $36,000.
Research and development costs were approximately $214,000 during the three months ended June 30, 2011 as compared to approximately $273,000 during the same period in 2010. This decrease of approximately $59,000 was primarily due to lower payroll expenses of approximately $14,000 and lower project-related costs of approximately $42,000 in the second quarter of 2011, as compared to the same period of 2010.
Net Loss
Net loss for the three months ended June 30, 2011 and 2010 was approximately $868,000 and $1,884,000, respectively, including a loss from discontinued operations related to the Legacy Commercial and Pool Lighting Businesses of approximately $2,000 in 2011 and approximately $259,000 in 2010. Basic and diluted loss per common share was $0.05 and $0.12 for the three months ended June 30, 2011 and 2010, respectively. Basic and diluted loss per common share from continuing operations was $0.05 and $0.10 for the three months ended June 30, 2011 and 2010, respectively. Basic and diluted loss per common share from discontinued operations was $0.00 and $0.02 for the three months ended June 30, 2011 and 2010, respectively.
Cash and Recent Activities
As of June 30, 2011, we had cash and cash equivalents of $3,541,000 and long term debt of $2,272,000, net of an unamortized debt discount of approximately $164,000. Our long term debt consists of promissory notes issued in exchange for our preferred stock in December 2009. These notes have a principal amount of $2.4 million, bear interest at 1% per annum, mature three years from the date of issuance and are convertible into shares of common stock at a fixed conversion price of $5.33.
During the week ending on July 8, 2011, we utilized a receivable financing program to sell certain receivables and obtained proceeds of approximately $2,602,000. In conjunction with this financing, we paid financing fees of approximately $9,000 and used the proceeds to pay approximately $1,638,000 to certain strategic vendors who facilitated our sales growth by providing extended terms.
"The launch of Array into the consumer market channel allowed us to demonstrate our ability to manage our working capital requirements," stated Gary Langford, Chief Financial Officer. "The financing program made available to us and the steps that we took in early July leave Nexxus well-positioned for future growth."
"I also would like to congratulate our team and strategic vendors for their assistance in the current quarter's growth," added Mr. Langford. "Across the supply chain, we were able to avoid a lot of costs through planning and communication."
Year to Date 2011 Performance
Revenue
Total revenue for the six months ended June 30, 2011 more than doubled to approximately $5,619,000 as compared to the six months ended June 30, 2010. Sales of Lumificient products increased approximately $204,000 from approximately $1,820,000 in the first half of 2010 to $2,024,000 in the first half of 2011. The increase in revenue from Lumificient products reflects growth in national sign programs and other commercial applications.
Sales of our Array LED lamps more than tripled to approximately $3,595,000 in the first half of 2011 compared to approximately $932,000 in the first half of 2010. The sales increase of approximately $2,664,000 represents the launch of Array products for sale through the consumer market channel. In the second quarter of 2011, we completed our initial shipments of Array products to approximately 1,100 Lowe's stores across the United States. Lowe's offers seventeen different Array products, including our PAR 38, R30, R16, MR16 and GU10 lamps that have qualified for the Energy Star rating. During 2011, we also began modifying our market strategy to target higher direct sale opportunities, including major Energy Service Companies ("ESCOs").
Gross Profit
Gross profit for the six months ended June 30, 2011 was approximately $1,494,000, or 27% of revenue, as compared to approximately $940,000, or 34% of revenue, for the comparable period of 2010. Direct gross margin, which is revenue less material cost, decreased from 47% in the first half of 2010 to 39% in the first half of 2011, reflecting a shift in sales mix to Array products and the impact of launching the Array product line into the consumer market channel. We do not expect that we will be able to command our historical margins for sales through the consumer market channel. However, the additional unit volume generated by sales through this channel has allowed us to significantly lower our costs and compete more effectively across all market channels.
In the first half of 2011, distribution costs, which include some light assembly costs, increased to approximately $682,000, or 12% of revenue, as compared to approximately $345,000, or 13% of revenue, in the first half of 2010. We were able to leverage the sales growth across our supply chain assets. In particular, depreciation expense decreased from 10% of Array sales in the first half of 2010 to 3% of Array sales in the first half of 2011. Offsetting this improvement were higher freight expenses of approximately $176,000 and an increase in the inventory reserve for Array products of approximately $63,000 over the comparable period of 2010.
Operating Expenses
Selling, general and administrative (SG&A) expenses were approximately $3,221,000 for the six months ended June 30, 2011 as compared to approximately $3,398,000 for the same period in 2010, a decrease of approximately $177,000, or 5%. This decrease is primarily the result of approximately $104,000 in lower payroll expenses for sales personnel.
Research and development costs were approximately $418,000 during the six months ended June 30, 2011 as compared to approximately $523,000 during the same period in 2010. This decrease of approximately $105,000 was primarily due to lower payroll expenses of approximately $48,000 and lower project-related costs of approximately $63,000, in the first half of 2011, as compared to the same period of 2010.
Net Loss
Net loss for the six months ended June 30, 2011 and 2010 was approximately $2,197,000 and $4,350,000, respectively, including income from discontinued operations related to the Legacy Commercial and Pool Lighting Businesses of approximately $4,000 in 2011 and a loss of approximately $741,000 in 2010. Basic and diluted loss per common share was $0.13 and $0.27 for the six months ended June 30, 2011 and 2010, respectively. Basic and diluted loss per common share from continuing operations was $0.13 and $0.22 for the six months ended June 30, 2011 and 2010, respectively. Basic and diluted loss per common share from discontinued operations was $0.00 and $0.05 for the six months ended June 30, 2011 and 2010, respectively.
Nexxus Lighting, Inc. Life's Brighter!™
For more information, please visit the new Nexxus Lighting web site at www.nexxuslighting.com
Certain of the above statements contained in this press release are forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Reference is made to Nexxus Lighting's filings under the Securities Exchange Act for factors that could cause actual results to differ materially. Nexxus Lighting undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements.
Nexxus Lighting, Inc. Consolidated Balance Sheets |
||||||
(Unaudited) |
||||||
June 30, |
December 31, |
|||||
2011 |
2010 |
|||||
ASSETS |
||||||
Current Assets: |
||||||
Cash and cash equivalents |
$ |
3,541,429 |
$ |
5,308,900 |
||
Trade accounts receivable, less allowance for doubtful accounts of $35,789 and $35,899 |
3,517,959 |
645,254 |
||||
Inventories, less reserve of $354,885 and $270,797 |
3,628,615 |
3,543,526 |
||||
Note receivable |
-- |
1,110,982 |
||||
Prepaid expenses |
136,513 |
109,648 |
||||
Other assets |
37,203 |
15,605 |
||||
Total current assets |
10,861,719 |
10,733,915 |
||||
Property and equipment |
3,356,926 |
3,172,715 |
||||
Accumulated depreciation and amortization |
(2,320,048) |
(2,091,230) |
||||
Net property and equipment |
1,036,878 |
1,081,485 |
||||
Goodwill |
2,396,289 |
2,396,289 |
||||
Other intangible assets, less accumulated amortization of $733,422 and $592,645 |
2,685,297 |
2,750,010 |
||||
Deposits on equipment |
12,200 |
— |
||||
Other assets, net |
26,955 |
58,510 |
||||
$ |
17,019,338 |
$ |
17,020,209 |
|||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||
Current Liabilities: |
||||||
Accounts payable and accrued liabilities |
$ |
2,863,434 |
$ |
1,270,937 |
||
Related party payable |
81,125 |
35,212 |
||||
Accrued compensation and benefits |
244,751 |
213,414 |
||||
Current portion of deferred rent |
64,503 |
80,131 |
||||
Other current liabilities |
215 |
3,434 |
||||
Total current liabilities |
3,254,028 |
1,603,128 |
||||
Convertible promissory notes to related parties, net of debt discount |
2,272,158 |
2,231,588 |
||||
Deferred rent, less current portion |
2,658 |
25,882 |
||||
Total liabilities |
5,528,844 |
3,860,598 |
||||
Stockholders' Equity: |
||||||
Common stock, $.001 par value, 30,000,000 and 25,000,000 shares authorized, 16,452,738 and 16,245,503 issued and outstanding |
16,453 |
16,246 |
||||
Additional paid-in capital |
49,914,140 |
49,386,782 |
||||
Accumulated deficit |
(38,440,099) |
(36,243,417) |
||||
Total stockholders' equity |
11,490,494 |
13,159,611 |
||||
$ |
17,019,338 |
$ |
17,020,209 |
|||
Nexxus Lighting, Inc. Consolidated Statements of Operations (Unaudited) |
||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||
June 30, |
June 30, |
|||||||||||
2011 |
2010 |
2011 |
2010 |
|||||||||
Revenue |
$ |
4,065,716 |
$ |
1,327,027 |
$ |
5,619,310 |
$ |
2,751,444 |
||||
Cost of sales |
3,061,309 |
893,670 |
4,125,746 |
1,811,549 |
||||||||
Gross profit |
1,004,407 |
433,357 |
1,493,564 |
939,895 |
||||||||
Operating expenses: |
||||||||||||
Selling, general and administrative |
1,628,341 |
1,758,310 |
3,221,175 |
3,397,835 |
||||||||
Research and development |
214,095 |
273,384 |
417,683 |
523,070 |
||||||||
Total operating expenses |
1,842,436 |
2,031,694 |
3,638,858 |
3,920,905 |
||||||||
Operating loss |
(838,029) |
(1,598,337) |
(2,145,294) |
(2,981,010) |
||||||||
Non-operating income (expense): |
||||||||||||
Interest expense |
(28,085) |
(26,943) |
(55,622) |
(186,422) |
||||||||
Debt extinguishment costs |
-- |
-- |
-- |
(441,741) |
||||||||
Other income |
164 |
579 |
404 |
877 |
||||||||
Total non-operating expense, net |
(27,921) |
(26,364) |
(55,218) |
(627,286) |
||||||||
Loss from continuing operations |
$ |
(865,950) |
$ |
(1,624,701) |
$ |
(2,200,512) |
$ |
(3,608,296) |
||||
Discontinued operations: |
||||||||||||
Income (loss) from discontinued operations |
(1,555) |
(259,333) |
3,830 |
(741,375) |
||||||||
Net loss |
$ |
(867,505) |
$ |
(1,884,034) |
$ |
(2,196,682) |
$ |
(4,349,671) |
||||
Basic and diluted loss per common share: |
||||||||||||
Continuing operations |
$ |
(0.05) |
$ |
(0.10) |
$ |
(0.13) |
$ |
(0.22) |
||||
Discontinued operations |
$ |
0.00 |
$ |
(0.02) |
$ |
0.00 |
$ |
(0.05) |
||||
Net loss |
$ |
(0.05) |
$ |
(0.12) |
$ |
(0.13) |
$ |
(0.27) |
||||
Basic and diluted weighted average shares outstanding |
16,444,444 |
16,245,503 |
16,301,320 |
16,243,183 |
||||||||
Nexxus Lighting, Inc. Consolidated Statements of Cash Flows (Unaudited) |
||||||
Six Months Ended |
||||||
June 30, |
||||||
2011 |
2010 |
|||||
Cash Flows from Operating Activities: |
||||||
Net loss |
$ |
(2,196,682) |
$ |
(4,349,671) |
||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||
Depreciation |
229,944 |
278,772 |
||||
Amortization of intangible and other assets |
140,777 |
139,438 |
||||
Amortization of debt discount and debt issuance costs |
55,549 |
127,753 |
||||
Debt extinguishment costs |
-- |
441,741 |
||||
Amortization of deferred rent |
(38,852) |
(30,661) |
||||
Loss on sale of businesses |
622 |
-- |
||||
Loss on disposal of property and equipment |
7,323 |
9,116 |
||||
Increase in inventory reserve |
84,088 |
217,261 |
||||
Stock-based compensation |
202,815 |
177,755 |
||||
Changes in operating assets and liabilities: |
||||||
(Increase) decrease in: |
||||||
Trade accounts receivable, net |
(2,872,705) |
(411,839) |
||||
Inventories |
(169,177) |
(787,652) |
||||
Prepaid expenses |
(26,865) |
(15,421) |
||||
Other assets |
6,978 |
(5,851) |
||||
Increase (decrease) in: |
||||||
Accounts payable, accrued liabilities and related party payable |
1,626,410 |
1,076,268 |
||||
Accrued compensation and benefits |
31,337 |
31,029 |
||||
Other liabilities |
(3,219) |
(9,467) |
||||
Total adjustments |
(724,975) |
1,238,242 |
||||
Net cash used in operating activities |
(2,921,657) |
(3,111,429) |
||||
Cash Flows from Investing Activities: |
||||||
Proceeds from the sale of businesses, net of transaction costs |
1,110,360 |
-- |
||||
Purchase of property and equipment |
(204,860) |
(226,638) |
||||
Proceeds from the sale of property and equipment |
-- |
6,600 |
||||
Acquisition costs of Lumificient Corporation, net of cash acquired |
-- |
(105,911) |
||||
Patents and trademark costs |
(76,064) |
(142,357) |
||||
Net cash provided by (used in) investing activities |
829,436 |
(468,306) |
||||
Cash Flows from Financing Activities: |
||||||
Payments on promissory notes |
-- |
(3,800,000) |
||||
Proceeds from exercise of employee stock options and warrants, net |
324,750 |
14,900 |
||||
Fees related to follow-on equity offering |
-- |
(49,954) |
||||
Net cash provided by (used in) financing activities |
324,750 |
(3,835,054) |
||||
Net decrease in Cash and Cash Equivalents |
(1,767,471) |
(7,414,789) |
||||
Cash and Cash Equivalents, beginning of period |
5,308,900 |
15,167,496 |
||||
Cash and Cash Equivalents, end of period |
$ |
3,541,429 |
$ |
7,752,707 |
||
Supplemental Cash Flow Information: |
||||||
Cash paid for interest |
$ |
-- |
$ |
262,356 |
||
SOURCE Nexxus Lighting, Inc.
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