Nexxus Lighting Reports First Quarter 2012 Results

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May 15, 2012, 08:10 ET

CHARLOTTE, N.C., May 15, 2012 /PRNewswire/ -- Nexxus Lighting, Inc. (NASDAQ Capital Market: NEXS) today reported its first quarter 2012 results.

First Quarter 2012 Performance

Revenue

Total revenue for the three months ended March 31, 2012 decreased 26%, or approximately $405,000, to approximately $1,148,000 as compared to approximately $1,554,000 for the three months ended March 31, 2011. Sales of Lumificient products decreased 27% from approximately $1,175,000 in the first quarter of 2011 to approximately $858,000 in the first quarter of 2012. This decrease reflects the deferral of purchases by several large national sign customers in the first quarter of 2012 that should return once the programs are re-initiated, which is expected to be later this year. In addition, Lumificient experienced a growth in sales for non-sign lighting applications in the first quarter of 2011, which was not replicated in the first quarter of 2012.

Sales of Array® products decreased 23% from approximately $379,000 in the first quarter of 2011 to approximately $290,000 in the first quarter of 2012. Sales were adversely affected by lower adoption rates of LED lights, competitive price pressures and general economic conditions.

"The first quarter was extremely difficult and disappointing from a revenue standpoint," stated Mike Bauer, Nexxus' President and Chief Executive Officer. "We have not executed well on the sales front and in the last two quarters we have seen competitors, with lesser products, dramatically cutting prices to gain market share. We are acutely aware that the LED lighting market dynamics for Nexxus have changed significantly in a short period of time, and we are working hard to increase revenue by expanding commercial sales, large national accounts, and our growing direct portal customer base. At the same time, we are also working to drive down costs and price competitively."

"With a product that has been proven to be best in class, we are the one new lighting company that has been able to complete nationally with the large lighting conglomerates at the consumer retail level. As a result, we have become a target and have to work harder and explore every option to keep our Array® brand competitive in the market. As we mentioned in our recent press release, we have engaged Canaccord-Genuity to assist us in evaluating strategic alternatives available to the company, which may include a sale or merger," added Bauer.

Gross Profit

For the quarter ended March 31, 2012, we reported a negative gross profit of approximately $39,000, or -3% of revenue, as compared to a gross profit of approximately $489,000, or 31% of revenue, for the comparable period of 2011. Direct gross margin, which is revenue less material cost, decreased from 47% in the first quarter of 2011 to 43% in the first quarter of 2012. This decrease primarily reflects sales of surplus inventory at reduced prices and competitive market pressures.

In the first quarter of 2012, distribution costs, which include some light assembly costs, increased to approximately $537,000, or 47% of revenue, as compared to approximately $243,000, or 16% of revenue, in the first quarter of 2011. The increase in distribution costs includes approximately $243,000 more expense for inventory reserves recorded in the first quarter of 2012 compared to the same period in 2011. In response to our sales efforts and tightening market conditions, we established a general inventory reserve in the first quarter of 2012 to provide us with the flexibility to lower our selling price for Array products in certain circumstances.

Operating Expenses

Selling, general and administrative (SG&A) expenses were approximately $1,488,000 for the quarter ended March 31, 2012 as compared to approximately $1,602,000 for the same period in 2011, a decrease of approximately $115,000, or 7%. SG&A expenses decreased in the first quarter of 2012 due to lower employee compensation costs of approximately $112,000 and lower stock-based compensation expense of approximately $47,000.

Research and development costs were approximately $197,000 during the three months ended March 31, 2012 and were flat as compared to the same period in 2011.

Net Loss

Net loss for the three months ended March 31, 2012 and 2011 was approximately $1,771,000 and $1,329,000, respectively, including income from discontinued operations related to the Legacy Commercial and Pool Lighting Businesses of approximately $1,000 and $5,000 for the three months ended March 31, 2012 and 2011, respectively. Basic and diluted loss per common share was $0.11 and $0.08 for the three months ended March 31, 2012 and 2011, respectively. Basic and diluted loss per common share from continuing operations was $0.11 and $0.08 for the three months ended March 31, 2012 and 2011, respectively. Basic and diluted loss per common share from discontinued operations was $0.00 for the three months ended March 31, 2012 and 2011.

We expect continuing losses in 2012, further eroding our cash position. In the event that we are unable to successfully manage our costs and expenses and raise additional capital through debt or equity financing or the liquidation or divestiture of assets or businesses, these conditions could significantly impair our ability to fund future operations. On April 30, 2012, we announced that we are exploring strategic alternatives available to us, including a possible sale of the company. However, we can make no assurances and there is uncertainty regarding our ability to conclude transactions necessary for us to maintain liquidity sufficient to operate our business effectively over at least the next twelve months.

Cash and Recent Activities

As of March 31, 2012, we had cash and cash equivalents of $1,915,000.

Our long term debt consists of convertible promissory notes issued in exchange for our preferred stock in December 2009. These notes have a principal amount of $2.4 million, provided for interest at 1% per annum, were originally to mature three years from the date of issuance and are convertible into shares of common stock at a fixed conversion price of $5.33. On February 28, 2012, our company and the holders of the notes amended the notes. As of the amendment date, the notes bear interest at 10% per annum and mature on June 30, 2013. Interest on the outstanding principal amount of the notes will be due and payable on the maturity date. The notes remain convertible into 450,281 shares of common stock at a fixed conversion price of $5.33.

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)
		March 31,		December 31,
		2012		2011
ASSETS
Current Assets:
Cash and cash equivalents	$	1,915,404	$	3,014,656
Trade accounts receivable, less allowance for doubtful accounts of $33,232 and $52,912		525,432		564,474
Inventories, less reserve of $1,138,025 and $895,415		2,482,619		2,977,047
Prepaid expenses		86,471		65,749
Other assets		862		26,359
Total current assets		5,010,788		6,648,285

Property and equipment		1,672,699		3,279,121
Accumulated depreciation and amortization		(1,047,147)		(2,536,144)
Net property and equipment		625,552		742,977

Goodwill		1,988,920		1,988,920
Other intangible assets, less accumulated amortization of $952,915 and $879,490		2,501,183		2,543,969
Other assets, net		22,315		23,857
	$	10,148,758	$	11,948,008
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	1,037,889	$	1,070,916
Related party payable		17,961		18,151
Accrued compensation and benefits		160,774		206,803
Current portion of deferred rent		4,917		25,882
Other current liabilities		74		74
Total current liabilities		1,221,615		1,321,826

Convertible promissory notes to related parties, net of debt discount		2,336,079		2,314,854
Accrued interest		24,000		—
Total liabilities		3,581,694		3,636,680

Commitments and contingencies

Stockholders' Equity:
Common stock, $.001 par value, 30,000,000 shares authorized, 16,452,738 issued and outstanding		16,453		16,453
Additional paid-in capital		50,033,601		50,007,362
Accumulated deficit		(43,482,990)		(41,712,487)
Total stockholders' equity		6,567,064		8,311,328
	$	10,148,758	$	11,948,008

Nexxus Lighting, Inc. Consolidated Statements of Operations (Unaudited)

	Three Months Ended
	March 31,
	2012		2011
Revenue	$	1,148,247	$	1,553,594
Cost of sales		1,187,713		1,064,437
Gross (loss) profit		(39,466)		489,157

Operating expenses:
Selling, general and administrative		1,487,720		1,602,359
Research and development		197,172		194,063
Total operating expenses		1,684,892		1,796,422
Operating loss		(1,724,358)		(1,307,265)

Non-operating income (expense):
Interest expense		(46,884)		(27,537)
Other income		56		240
Total non-operating expense, net		(46,828)		(27,297)
Loss from continuing operations	$	(1,771,186)	$	(1,334,562)

Discontinued operations:
Income from discontinued operations		683		5,385
Net loss	$	(1,770,503)	$	(1,329,177)

Basic and diluted loss per common share:
Continuing operations	$	(0.11)	$	(0.08)
Discontinued operations	$	0.00	$	0.00
Net loss	$	(0.11)	$	(0.08)
Basic and diluted weighted average shares outstanding		16,452,738		16,270,719

Nexxus Lighting, Inc. Consolidated Statements of Cash Flows (Unaudited)

	Three Months Ended
	March 31,
	2012		2011
Cash Flows from Operating Activities:
Net loss	$	(1,770,503)	$	(1,329,177)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		123,278		113,502
Amortization of intangibles		73,425		70,025
Amortization of debt discount and debt issuance costs		22,767		27,461
Amortization of deferred rent		(20,965)		(18,213)
Stock-based compensation		26,239		72,989
Loss on disposal of property and equipment		6,062		7,323
Loss on sale of businesses		—		648
Increase in inventory reserve		242,610		35,450
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade accounts receivable, net		39,042		(23,689)
Inventories		251,818		(1,036,262)
Prepaid expenses		(20,722)		(50,374)
Other assets		25,497		4,863
Increase (decrease) in:
Accounts payable, accrued liabilities and related party payable		(33,217)		1,048,788
Accrued compensation and benefits		(46,029)		(35,739)
Other liabilities		24,000		(3,379)
Total adjustments		713,805		213,393
Net cash used in operating activities		(1,056,698)		(1,115,784)

Cash Flows from Investing Activities:
Proceeds from the sale of businesses, net of transaction costs		—		1,110,334
Purchase of property and equipment		(19,600)		(78,180)
Patent and trademark costs		(30,639)		(40,663)
Proceeds from the sale of property and equipment		7,685		—
Net cash (used in) provided by investing activities		(42,554)		991,491

Cash Flows from Financing Activities:
Proceeds from exercise of employee stock options and warrants, net		—		300,000
Net cash provided by financing activities		—		300,000

Net (decrease) increase in Cash and Cash Equivalents		(1,099,252)		175,707

Cash and Cash Equivalents, beginning of period		3,014,656		5,308,900
Cash and Cash Equivalents, end of period	$	1,915,404	$	5,484,607