Nexxus Lighting Announces Third Quarter 2012 Results
Aston Capital Investment Positions Company for Growth
CHARLOTTE, N.C., Nov. 14, 2012 /PRNewswire/ -- Nexxus Lighting, Inc. (NASDAQ Capital Market: NEXS) today reported its third quarter 2012 results. Key highlights include:
- Completed an initial $6 million investment by Aston Capital to enhance operational and financial discipline and accelerate growth to tap into the large and growing LED lighting market
- Evaluating Strategic Acquisitions with the expectation to significantly enhance breadth of offerings and distribution capabilities
- Significantly strengthened the balance sheet including the extinguishment of $2.4 million of debt and cash position strengthened to $4.3 million at September 30, 2012
Vision and Company Strategy
The Company and Aston's joint vision is to build the market's leading designer, developer and distributor of energy efficient LED Lighting solutions for the commercial, industrial, government and municipal markets. The Company's values will be defined by a dedication to customer education, best-of-breed technology, high quality products and leading customer service. The identified customer markets represent significant LED lighting adopters and growth potential for the Company due to their operational and financial requirements for longer burn hours and operating cost sensitivities.
The Company intends to significantly expand its product offerings to address growth areas in these identified markets and to simultaneously enhance the distribution capabilities and channels to drive market education, adoption and sales growth. The Company in conjunction with Aston is currently evaluating strategic opportunities and expects to drive significant growth and synergies through investments and acquisitions. The Aston Capital team has a proven track record of building market leaders and increasing shareholder value by combining sound fundamental operating principles with the acquisition of complimentary assets.
Recent Events
On September 12, 2012, we entered into an Investment Agreement with RVL 1 LLC, an affiliate of Aston Capital, LLC. The closing of the Investment occurred on September 25, 2012. In consideration of a cash payment of $6 million, we issued to the Investor 600,000 shares of newly-created Series B Convertible Preferred Stock, $.001 par value per share. The Preferred Stock is convertible into shares of our common stock, $.001 par value per share at a conversion price per share equal to $0.13, subject to certain anti-dilution adjustments. The conversion price was the closing price of the Company's Common Stock on August 2, 2012, the date the Company entered into the letter of intent.
In September 2012, we used a portion of the proceeds from the Investment to the settle a patent infringement lawsuit brought against the Company by Koninklijke Philips Electronics N.V. and Philips Solid-State Lighting Solutions, Inc. (collectively, "Philips").
In addition, concurrent with closing the Investment, on September 25, 2012, the holders of $2.4 million in aggregate principal amount of convertible promissory notes of the Company (the "Exchange Notes") exchanged the Exchange Notes (including interest) for a total of $880,000 in cash and 1,000,000 newly-issued shares of the Company's Common Stock.
Third Quarter 2012 Performance
Total revenue for the three months ended September 30, 2012 decreased 41%, or approximately $862,000, to approximately $1,251,000 as compared to approximately $2,113,000 for the three months ended September 30, 2011. Revenues decreased primarily due to lower sales to Lowe's due to the expiration of our arrangement. Gross profit for the three months ended September 30, 2012 was approximately $315,000, or 25% of revenue, as compared to gross profit of approximately $656,000, or 31% of revenue for the comparable period of 2011 due to certain non-recurring activities. Selling, general and administrative (SG&A) expenses were approximately $899,000 for the quarter ended September 30, 2012 as compared to approximately $1,433,000 for the same period in 2011, a decrease of approximately $534,000, or 37% reflecting a continued focus on costs, operating leverage and efficiencies.
In the third quarter of 2012, we recorded a gain on debt restructuring of approximately $1,048,000 related to our extinguishment of debt concurrent with the Investment. The Exchange Notes had a principal value of $2.4 million, plus accrued interest. Net income for the three months ended September 30, 2012 was approximately $259,000. As more fully described in the Company's 10-Q and shown below, net loss attributable to common stockholders includes a non-cash adjustment of approximately $5,195,000 (net value of the preferred stock investment) since the price of the Company's stock appreciated from the time the Company entered into the Investment Agreement and the closing price. Net loss for the three months ended September 30, 2011 was approximately $1,029,000, including income from discontinued operations related to our legacy commercial and pool lighting businesses. As of September 30, 2012, we had cash and cash equivalents of $4,298,000 compared to $1,086,000 at June 30, 2012.
Year to Date 2012 Performance
Total revenue for the nine months ended September 30, 2012 declined 55% to approximately $3,452,000 as compared to the nine months ended September 30, 2011. Revenues decreased primarily due to lower sales to Lowe's due to the expiration of our arrangement. Negative gross profit for the nine months ended September 30, 2012 was approximately $378,000, or -11% of revenue, as compared to gross profit of approximately $2,150,000, or 28% of revenue for the comparable period of 2011. Direct gross margin, which is revenue less material cost, remained flat at 40% for both periods.
Selling, general and administrative (SG&A) expenses were approximately $3,855,000 for the nine months ended September 30, 2012 as compared to approximately $4,654,000 for the same period in 2011, a decrease of approximately $799,000, or -17%. These expense reductions were offset by higher expense of approximately $265,000 to resolve patent infringement litigation and other potential claims during the nine months ended September 30, 2012 compared to the same period in 2011.
In the second quarter of 2012, we recorded an impairment charge for our Array segment of approximately $3,378,000 and an impairment charge for our corporate trademarks of approximately $19,000. These charges include approximately $1,989,000 for goodwill impairment, approximately $1,015,000 for impairment of other intangible assets and approximately $393,000 for impairment of property and equipment. Net loss for the nine months ended September 30, 2012 and 2011 was approximately $7,240,000 and $3,226,000, respectively, including income from discontinued operations related to the legacy commercial and pool lighting businesses in 2011. As more fully described in the Company's 10-Q and shown below, net loss attributable to common stockholders includes a non-cash adjustment of approximately $5,195,000 (net value of the preferred stock investment) since the price of the Company's stock appreciated from the time the Company entered into the Investment Agreement and the closing price. Basic and diluted loss per common share attributable to common stockholders was $0.75 and $0.20 for the nine months ended September 30, 2012 and 2011, respectively. Basic and diluted loss per common share from continuing operations attributable to common stockholders was $0.75 and $0.20 for the nine months ended September 30, 2012 and 2011, respectively.
"Recapitalizing the Company and successfully resolving the Philips litigation were critical in providing the Company with the required stability to meet our customer's long-term product and service needs," stated Mike Bauer, Nexxus' President and Chief Executive Officer. "We accomplished those goals in the 3rd Quarter and are now focused on both organic and strategic growth as we move through the end of the year and into 2013."
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. |
|||||
| (Unaudited) |
|||||
| September 30, |
December 31, |
||||
| 2012 |
2011 |
||||
| ASSETS |
|||||
| Current Assets: |
|||||
| Cash and cash equivalents |
$ |
4,297,721 |
$ |
3,014,656 |
|
| Trade accounts receivable, less allowance for doubtful accounts of |
594,640 |
564,474 |
|||
| Inventories, less reserve of $1,524,419 and $895,415 |
1,336,677 |
2,977,047 |
|||
| Prepaid expenses |
92,890 |
65,749 |
|||
| Other assets |
8,772 |
26,359 |
|||
| Total current assets |
6,330,700 |
6,648,285 |
|||
| Property and equipment |
509,247 |
3,279,121 |
|||
| Accumulated depreciation and amortization |
(364,131) |
(2,536,144) |
|||
| Net property and equipment |
145,116 |
742,977 |
|||
| Goodwill |
— |
1,988,920 |
|||
| Other intangible assets, less accumulated |
1,418,841 |
2,543,969 |
|||
| Other assets, net |
9,295 |
23,857 |
|||
| $ |
7,903,952 |
$ |
11,948,008 |
||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||
| Current Liabilities: |
|||||
| Accounts payable |
$ |
772,642 |
$ |
825,100 |
|
| Accrued liabilities |
135,707 |
245,816 |
|||
| Related party payable |
3,868 |
18,151 |
|||
| Accrued compensation and benefits |
91,337 |
206,803 |
|||
| Current portion of deferred rent |
1,330 |
25,882 |
|||
| Other current liabilities |
280 |
74 |
|||
| Total current liabilities |
1,005,164 |
1,321,826 |
|||
| Convertible promissory notes to related parties, net of debt discount |
— |
2,314,854 |
|||
| Total liabilities |
1,005,164 |
3,636,680 |
|||
| Commitments and contingencies |
|||||
| Stockholders' Equity: |
|||||
| Series B convertible preferred stock, $.001 par value, aggregate liquidation |
$ |
5,195,225 |
$ |
— |
|
| Common stock, $.001 par value, 40,000,000 and 30,000,000 shares authorized, 17,452,738 and 16,452,738 issued and outstanding |
17,453 |
16,453 |
|||
| Additional paid-in capital |
50,638,575 |
50,007,362 |
|||
| Accumulated deficit |
(48,952,465) |
(41,712,487) |
|||
| Total stockholders' equity |
6,898,788 |
8,311,328 |
|||
| $ |
7,903,952 |
$ |
11,948,008 |
||
| Nexxus Lighting, Inc. |
|||||||||||
| Three Months Ended |
Nine Months Ended |
||||||||||
| September 30, |
September 30, |
||||||||||
| 2012 |
2011 |
2012 |
2011 |
||||||||
| Revenue |
$ |
1,250,515 |
$ |
2,113,003 |
$ |
3,452,067 |
$ |
7,732,313 |
|||
| Cost of sales |
935,379 |
1,456,946 |
3,830,215 |
5,582,692 |
|||||||
| Gross profit (loss) |
315,136 |
656,057 |
(378,148) |
2,149,621 |
|||||||
| Operating expenses: |
|||||||||||
| Selling, general and administrative |
899,116 |
1,432,920 |
3,854,782 |
4,654,095 |
|||||||
| Research and development |
125,924 |
214,116 |
448,920 |
631,799 |
|||||||
| Impairment charge |
— |
— |
3,397,212 |
— |
|||||||
| Total operating expenses |
1,025,040 |
1,647,036 |
7,700,914 |
5,285,894 |
|||||||
| Operating loss |
(709,904) |
(990,979) |
(8,079,062) |
(3,136,273) |
|||||||
| Non-operating income (expense): |
|||||||||||
| Interest expense |
(79,452) |
(41,576) |
(210,014) |
(97,198) |
|||||||
| Gain on debt restructuring |
1,048,308 |
— |
1,048,308 |
— |
|||||||
| Other income |
17 |
85 |
107 |
489 |
|||||||
| Total non-operating income (expense), net |
968,873 |
(41,491) |
838,401 |
(96,709) |
|||||||
| Income (loss) from continuing operations |
$ |
258,969 |
$ |
(1,032,470) |
$ |
(7,240,661) |
$ |
(3,232,982) |
|||
| Discontinued operations: |
|||||||||||
| Income from discontinued operations |
— |
3,272 |
683 |
7,102 |
|||||||
| Net income (loss) |
$ |
258,969 |
$ |
(1,029,198) |
$ |
(7,239,978) |
$ |
(3,225,880) |
|||
| Accretion of preferred stock beneficial |
(5,195,225) |
— |
(5,195,225) |
— |
|||||||
| Net loss attributable to common stockholders |
$ |
(4,936,256) |
$ |
(1,029,198) |
$ |
(12,435,203) |
$ |
(3,225,880) |
|||
| Basic and diluted loss per common share: |
|||||||||||
| Loss from continuing operations attributable to common stockholders |
$ |
(0.30) |
$ |
(0.06) |
$ |
(0.75) |
$ |
(0.20) |
|||
| Discontinued operations |
$ |
0.00 |
$ |
0.00 |
$ |
0.00 |
$ |
0.00 |
|||
| Net loss attributable to common stockholders |
$ |
(0.30) |
$ |
(0.06) |
$ |
(0.75) |
$ |
(0.20) |
|||
| Basic and diluted weighted average shares outstanding |
16,517,955 |
16,452,738 |
16,474,716 |
16,389,967 |
|||||||
| Nexxus Lighting, Inc. |
|||||
| Nine Months Ended |
|||||
| September 30, |
|||||
| 2012 |
2011 |
||||
| Cash Flows from Operating Activities: |
|||||
| Net loss |
$ |
(7,239,978) |
$ |
(3,225,880) |
|
| Adjustments to reconcile net loss to net cash used in operating activities: |
|||||
| Depreciation |
210,556 |
349,295 |
|||
| Amortization of other intangible assets |
193,070 |
214,299 |
|||
| Amortization of debt discount and debt issuance costs |
68,976 |
84,277 |
|||
| Amortization of deferred rent |
(24,552) |
(59,491) |
|||
| Impairment charge |
3,397,212 |
— |
|||
| Gain on debt restructuring |
(1,048,308) |
— |
|||
| Interest expense forgiven on debt restructuring |
140,667 |
— |
|||
| Loss on sale of businesses |
— |
622 |
|||
| Loss on disposal of property and equipment |
6,062 |
3,401 |
|||
| Increase in inventory reserve and inventory write downs |
629,004 |
114,470 |
|||
| Stock-based compensation |
44,313 |
291,759 |
|||
| Changes in operating assets and liabilities: |
|||||
| (Increase) decrease in: |
|||||
| Trade accounts receivable, net |
(30,166) |
(145,709) |
|||
| Inventories |
1,011,366 |
(253,612) |
|||
| Prepaid expenses |
(27,141) |
20,328 |
|||
| Other assets |
25,959 |
8,847 |
|||
| Increase (decrease) in: |
|||||
| Accounts payable, accrued liabilities and related party payable |
(178,950) |
280,413 |
|||
| Accrued compensation and benefits |
(115,466) |
6,300 |
|||
| Other liabilities |
206 |
(3,369) |
|||
| Total adjustments |
4,302,808 |
911,830 |
|||
| Net cash used in operating activities |
(2,937,170) |
(2,314,050) |
|||
| Cash Flows from Investing Activities: |
|||||
| Patents, trademarks and other intangible assets costs |
(83,076) |
(134,321) |
|||
| Purchase of property and equipment |
(19,599) |
(216,661) |
|||
| Proceeds from the sale of property and equipment |
7,685 |
7,500 |
|||
| Proceeds from the sale of businesses, net of transaction costs |
— |
1,110,360 |
|||
| Net cash (used in) provided by investing activities |
(94,990) |
766,878 |
|||
| Cash Flows from Financing Activities: |
|||||
| Proceeds from issuance of convertible preferred stock, net of issuance costs |
5,195,225 |
— |
|||
| Payment to restructure convertible promissory notes |
(880,000) |
— |
|||
| Proceeds from exercise of employee stock options and warrants, net |
— |
319,750 |
|||
| Net cash provided by financing activities |
4,315,225 |
319,750 |
|||
| Net increase (decrease) in Cash and Cash Equivalents |
1,283,065 |
(1,227,422) |
|||
| Cash and Cash Equivalents, beginning of period |
3,014,656 |
5,308,900 |
|||
| Cash and Cash Equivalents, end of period |
$ |
4,297,721 |
$ |
4,081,478 |
|
SOURCE Nexxus Lighting, Inc.
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