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.
Consolidated Balance Sheets









(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 
            
$57,931 and $52,912


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 
          amortization of $800,080 and $879,490


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
              
preference of $6,000,000; 1,000,000 shares authorized, 600,000
              
and 0 issued and outstanding

$

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.
Consolidated Statements of Operations (Unaudited)






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
 
conversion feature


(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.
Consolidated Statements of Cash Flows (Unaudited)




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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