Nexxus Lighting Reports Fourth Quarter and Full Year 2010 Results

4th Quarter Revenues Increased 14% over Q3 2010 with Array™ Revenues Increasing 68% to $550,000 for the 4th Quarter

Mar 25, 2011, 08:15 ET from Nexxus Lighting, Inc.

CHARLOTTE, N.C., March 25, 2011 /PRNewswire/ -- Nexxus Lighting, Inc. (Nasdaq Capital Market: NEXS) today reported its fourth quarter and full year 2010 results.  Highlights include:

  • Full year revenue increases 9% to $5.4 million in 2010 versus $5.0 million in 2009
  • Sales of Array LED replacement light bulbs increase 32% to $1.8 million in 2010 versus $1.4 million in 2009
  • Expansion of our patent portfolio to 33 patents issued and 29 patents pending, including 31 issued and 28 pending patents related to our Array product
  • Array LED lamps are among the first to qualify for ENERGY STAR label

2010 Full Year Performance

Revenue

Revenue for the year ended December 31, 2010 was approximately $5,422,000 as compared to approximately $4,989,000 for the year ended December 31, 2009, an increase of approximately $434,000, or 9%.

Sales of our Array LED lamps grew approximately $441,000 to approximately $1,808,000 for the year ended December 31, 2010, as compared to approximately $1,366,000 for the year ended December 31, 2009. This growth reflects the full year impact of the Array business launched in 2009; the expansion of the Array product line, particularly with the introduction of the PAR38 products; and the award of ENERGY STAR certification to a number of Array lamps.  Sales of Lumificient products remained flat at approximately $3,615,000 for the year ended December 31, 2010, reflecting penetration into new markets offsetting the difficult environment for sign lighting businesses.  

As we have accounted for our legacy commercial and pool lighting businesses as discontinued operations, sales of LED products represented 100% of our revenue from continuing operations for the years ended December 31, 2010 and 2009. 

"Nexxus finished 2010 with solid performance highlighted by growth in Array sales," stated Mike Bauer, Nexxus' President and Chief Executive Officer.  "The fourth quarter was our strongest of the year for Array sales and this growth reflects a number of high profile projects at universities, hotels and a large regional mall.  We also completed the sale of our legacy commercial and pool businesses, allowing us to redirect resources to our core Array and Lumificient businesses."  

"As we progress in 2011, I am encouraged by the many opportunities that lie before us," concluded Mr. Bauer.  "One of these opportunities is our recently announced partnership with Lowe's which includes our Array brand of LED replacement lamps being sold through Lowes.com and through 1,100 Lowe's stores beginning in June of this year. Not to be overshadowed, we also are seeing sales growth for Lumificient through several national sign programs."  

Gross Profit

Gross profit for the years ended December 31, 2010 and 2009 was approximately $1,363,000 and $1,620,000, respectively.  Gross margins decreased from approximately 32% of sales in 2009 to approximately 25% of sales in 2010.  Direct gross margin, which is revenue less direct material costs, decreased from 48% in 2009 to approximately 45% in 2010.  The decline in direct gross margin reflects more aggressive pricing of both Array and Lumificient products, particularly for the 230v Array product used in certain international markets.

Production costs in 2010 increased to approximately $1,075,000, or 20% of revenue, as compared to $783,000, or 16% of revenue, in 2009.  The increase of approximately $292,000 in production costs for the year ended December 31, 2010, as compared to the year ended December 31, 2009, includes an increase of approximately $226,000 in our inventory reserves for excess Array product, particularly for the 230v product and certain products made with cool white LEDs. In addition, we incurred an increase of approximately $47,000 in depreciation expense primarily related to tooling for our Array lighting products for the year ended December 31, 2010 as compared to the year ended December 31, 2009.  

"Our financial results for the year, and especially for the 4th quarter, were significantly affected by the increased reserves and inventory adjustments noted above," commented Gary Langford, Nexxus' Chief Financial Officer.  "These adjustments primarily reflect the lower sales volumes from international markets and of higher color temperature products.  We continue to look for improvements in our global go-to-market strategy and are committed to driving profitability based on accelerated growth and operating leverage."

Operating Expenses  

Selling, general and administrative ("SG&A") expenses were approximately $6,097,000 for the year ended December 31, 2010 as compared to approximately $5,858,000 for the same period in 2009, an increase of approximately $239,000, or 4%.  This increase primarily reflects higher investment in resources dedicated to the sale of our Array products, including internal sales, advertising and commissions.

Research and development costs were approximately $944,000 for the year ended December 31, 2010 as compared to approximately $551,000 for the year ended December 31, 2009.

This increase of approximately $393,000 was primarily due to higher employee and project-related costs in 2010 as compared to 2009.

"Our plans entering 2010 were to significantly increase the engineering resources for our Array line.  We are pleased with the results of our investment.  We grew our portfolio of intellectual property to 33 issued patents and 29 combined U.S. and foreign patent applications related to our Array Lighting and Lumificient product offerings," noted Mr. Bauer.  "Four of our Array lamp types were among the first lamps to be certified under the Energy Star program.  We introduced our new PAR38 product in the 3rd quarter; saw its sales ramp in the 4th quarter; and recently qualified two of these PAR38 lamps under the ENERGY STAR program. In addition, our new MR16 HO product, which was officially launched in January, was designed and developed in 2010."

Net Loss

Net loss for the years ended December 31, 2010 and December 31, 2009 was approximately $8,011,000 and $7,155,000, respectively, including a loss from discontinued operations related to the legacy commercial and pool lighting businesses of approximately $1,646,000 and $1,908,000 for 2010 and 2009, respectively.  On December 21, 2009, we consummated the exchange of our Series A preferred stock for other securities of our company.  As a result of the exchange, we recorded deemed dividends of approximately $6,420,000 as of December 31, 2009.  After including the effects of the dividends related to the preferred stock and warrants issued in November 2008, net loss attributable to common stockholders was approximately $8,011,000 and $14,900,000 for the years ended December 31, 2010 and 2009, respectively.  Basic and diluted loss per common share attributable to common stockholders was $0.49 and $1.71 for the years ended December 31, 2010 and 2009, respectively.  Basic and diluted loss per common share from continuing operations was $0.39 and $0.60 for the years ended December 31, 2010 and 2009, respectively.  Basic and diluted loss per common share from discontinued operations was $0.10 and $0.22 for the years ended December 31, 2010 and 2009, respectively.  

LED Supply Update

Nexxus purchases LEDs from two suppliers, both of whom produce and package the product in plants located in Japan.  To date, Nexxus has not been materially affected by the tragedy in Japan.  The facilities that produce our LEDs were not damaged and we continue to receive product from both suppliers.  Where necessary, we have adjusted production schedules between suppliers to reflect any delays at a supplier.  We continue to monitor the situation and are in close communication with our suppliers.

Fourth Quarter 2010 Performance

Revenue

Total revenues for the three months ended December 31, 2010 were approximately $1,422,000 as compared to approximately $1,486,000 for the fourth quarter of 2009.  Revenue from sales of our Array LED lamps was approximately $550,000 in the quarter.  This represents a 68% increase over the 3rd quarter of 2010 and was the highest revenue from sales of Array lamps of any quarter in 2010.  Compared to the 4th quarter of 2009, Array revenues decreased 16% due to the timing of a large project shipment.  Sales of Lumificient products increased slightly to approximately $872,000 for the fourth quarter of 2010, compared to approximately $833,000 for the fourth quarter of 2009.

Gross Profit

Gross profit for the quarter ended December 31, 2010 decreased $130,000 to $287,000 as compared to $417,000 for the quarter ended December 31, 2009.  Direct gross margin, which is revenue less material costs, decreased from 46% in the fourth quarter of 2009 to 42% in the fourth quarter of 2010.  

Production costs in the fourth quarter of 2010 increased to approximately $313,000, or 22% of revenue, as compared to $261,000, or 18% of revenue, in the fourth quarter of 2009.  Expenses for obsolete inventory, scrap and inventory reserves for our Array product increased by approximately $38,000 in the fourth quarter of 2010.  In addition, we incurred an increase of approximately $14,000 relating to distribution and third party warehousing costs for the year ended December 31, 2010 as compared to the year ended December 31, 2009.  

Operating Expenses

Operating expenses for the quarter ended December 31, 2010 decreased approximately $73,000 to approximately $1,645,000 as compared to approximately $1,718,000 for the quarter ended December 31, 2009.  

Fourth Quarter Net Loss

Net loss for the fourth quarter ended December 31, 2010 and December 31, 2009 was approximately $1,268,000 and $2,708,000, respectively, including a gain from discontinued operations related to the legacy commercial and pool lighting businesses of approximately $123,000 for the fourth quarter of 2010 and a loss from discontinued operations of approximately $1,188,000 for the quarter ended December 31, 2009.

After including the effects related to the preferred stock, net loss attributable to common stockholders was approximately $1,268,000 and $9,480,000 for the three months ended December 31, 2010 and December 31, 2009, respectively.  

Cash and Recent Activities

"One of our objectives for 2010 was to re-engineer our infrastructure to focus on Array. The sale of our legacy commercial and pool businesses was a central target in this endeavor," said Langford.  I am pleased that we ended 2010 with $5.3 million in cash and that the purchaser of our legacy businesses has since paid-off the $1.1 million note receivable that we reported outstanding as of December 31."  

As of December 31, 2010, we had cash and cash equivalents of $5,309,000 and long term debt of $2,232,000, net of an unamortized debt discount of approximately $216,000.  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.

On October 28, 2010, we sold substantially all of the assets of our legacy commercial and pool lighting businesses for a purchase price of approximately $2.3 million, with approximately $1.3 million accounting for the purchase of inventory. Of the total consideration, we received $1.0 million in cash in connection with closing, which included $750,000 of non-refundable deposits previously paid by the buyer. Subject to the terms of the purchase agreement and a secured promissory note, the buyer was obligated to pay the remaining approximately $1.3 million over the seven month period ending May 28, 2011 as the buyer sold the purchased inventory, with 50% of the agreed upon value of the inventory paid no later than February 28, 2011 and the balance paid no later than May 28, 2011. As of March 4, 2011, the $1.3 million balance of the purchase price was paid in full.  

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









December 31,



2010



2009

ASSETS






Current Assets:






 Cash and cash equivalents

$

5,308,900


$

15,167,496

 Trade accounts receivable, less allowance for doubtful accounts of $35,899 and $60,000



645,254



1,103,569

 Inventories, less reserve of $270,797 and $0


3,543,526



2,798,738

 Note receivable


1,110,982



 Prepaid expenses


109,648



170,216

   Other assets


15,605



7,367

   Assets associated with discontinued operations, current




2,915,906

Total current assets


10,733,915



22,163,292







Property and equipment:






 Machinery and equipment


1,182,556



927,352

 Furniture and fixtures


645,292



634,841

 Computers and software


791,035



777,889

 Leasehold improvements


553,832



550,506



3,172,715



2,890,588

 Accumulated depreciation and amortization


(2,091,230)



(1,657,845)

                           Net property and equipment


1,081,485



1,232,743







Goodwill


2,396,289



2,396,289

Other intangible assets, less accumulated amortization of $592,645 and $342,858


2,750,010



2,710,703

Other assets, net


58,510



204,023

Assets associated with discontinued operations, noncurrent




845,994


$

17,020,209


$

29,553,044

Liabilities and Stockholders' Equity






Current Liabilities:






  Accounts payable and accrued liabilities

$

1,270,937


$

1,931,297

  Accrued compensation and benefits


213,414



303,736

  Related party payable


35,212



  Current portion of payable to related party under acquisition agreement




100,000

  Current portion of deferred rent


80,131



58,065

  Other current liabilities


3,434



9,291

  Liabilities associated with discontinued operations




572,343

Total current liabilities


1,603,128



2,974,732







Promissory notes, net of debt discount




1,978,135

Promissory notes to related parties, net of debt discount




1,438,644

Convertible promissory notes to related parties, net of debt discount


2,231,588



2,153,191

Deferred rent, less current portion


25,882



113,733

Other liabilities




6,582

                           Total liabilities


3,860,598



8,665,017







Stockholders' Equity:






 Common stock, $.001 par value, 25,000,000 shares authorized,






     16,245,503 and 16,240,503 issued and outstanding


16,246



16,241

  Additional paid-in capital


49,386,782



49,103,733

  Accumulated deficit


(36,243,417)



(28,231,947)

Total stockholders' equity


13,159,611



20,888,027


$

17,020,209


$

29,553,044




NEXXUS LIGHTING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



(Unaudited)




Three Months Ended


Twelve Months Ended


December 31,


December 31,



2010



2009



2010



2009

Revenue

$

1,422,498


$

1,486,419


$

5,422,443


$

4,988,638

Cost of sales


1,135,519



1,069,445



4,059,756



3,368,379

   Gross profit


286,979



416,974



1,362,687



1,620,259













Operating Expenses:












   Selling, general and administrative


1,435,962



1,513,174



6,096,585



5,857,969

   Research and development


208,837



204,746



943,606



550,599

             Total operating expenses


1,644,799



1,717,920



7,040,191



6,408,568

Operating Loss


(1,357,820)



(1,300,946)



(5,677,504)



(4,788,309)













Non-Operating Income (Expense):












   Interest income


242



662



1,657



2,016

   Interest expense


(33,736)



(219,627)



(247,688)



(460,495)

   Debt extinguishment costs






(441,741)



            Total non-operating income, net


(33,494)



(218,965)



(687,772)



(458,479)

Loss from continuing operations

$

(1,391,314)


$

(1,519,911)


$

(6,365,276)


$

(5,246,788)













Discontinued Operations:












   Loss from discontinued operations  


123,321



(1,188,121)



(1,646,194)



(1,908,305)

Net Loss

$

(1,267,993)


$

(2,708,032)


$

(8,011,470)


$

(7,155,093)

  Preferred stock dividends:












Accretion of the preferred stock beneficial conversion feature and preferred stock discount




(175,298)





(613,743)

Accrual of preferred stock dividends




(176,755)





(711,407)

Deemed dividend on issuance of  promissory notes and warrants for preferred stock




(3,074,707)





(3,074,707)

Deemed dividend on issuance of common stock for preferred stock




(3,345,211)





(3,345,211)

Net loss attributable to common stockholders

$

(1,267,993)


$

(9,480,003)


$

(8,011,470)


$

(14,900,161)













Basic and diluted loss per common share attributable to common stockholders:












   Continuing operations

$

(0.09)


$

(0.16)


$

(0.39)


$

(0.60)

   Discontinued operations

$

0.01


$

(0.12)


$

(0.10)


$

(0.22)

   Net loss attributable to common stockholders

$

(0.08)


$

(0.98)


$

(0.49)


$

(1.71)

Basic and diluted weighted average shares outstanding


16,245,503



9,656,095



16,244,352



8,704,534




NEXXUS LIGHTING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2010 and 2009




Year Ended December 31,



2010


2009

Cash Flows from Operating Activities:





Net loss

  $

(8,011,470)

$

(7,155,093)

Adjustments to reconcile net loss to net cash used in operating activities:





Depreciation


545,896


556,353

Amortization of intangible assets and other assets


282,250


279,008

Amortization of debt discount and debt issuance costs


158,927


254,629

Amortization of deferred rent


(65,785)


(51,076)

Write down of assets relating to discontinued operations


631,172


Gain on sale of businesses


(16,866)


Loss on disposal of property and equipment


9,114


Debt extinguishment costs


441,741


Restructuring and impairment charge



736,635

(Decrease) increase in inventory reserve


(199,691)


124,596

Stock-based compensation


318,108


388,910

Changes in operating assets and liabilities:





Decrease in trade accounts receivable, net


647,371


196,926

Increase in inventories


(399,009)


(788,161)

Decrease (increase) in prepaid expenses


51,013


(72,254)

(Increase) decrease in other assets


(8,238)


27,777

Decrease in accounts payable, accrued liabilities and related party payable


(733,477)


(921,302)

Decrease in accrued compensation and benefits


(90,322)


(24,435)

Decrease in other liabilities


(13,597)


(62,375)

Total adjustments


1,558,607


645,231

Net cash used in operating activities


(6,452,863)


(6,509,862)

Cash Flows from Investing Activities:





Proceeds from sale of businesses, net of transaction costs


1,147,509


Proceeds from sale of property and equipment


6,600


Purchase of property and equipment


(313,446)


(232,222)

Acquisition costs of Lumificient Corporation


(100,000)


(115,285)

Acquisition costs of Advanced Lighting Systems, LLC



(107,539)

Patents and trademark costs


(311,342)


(145,672)

    Net cash provided by (used in) investing activities


429,321


(600,718)

    Cash Flows from Financing Activities:





Payments on promissory note


(3,800,000)


(118,633)

Payment of dividends



(792,124)

Proceeds from sale of common stock, net of issuance costs


(49,954)


15,737,616

Net proceeds from issuance of secured promissory notes



3,735,795

Net proceeds from issuance of preferred stock and warrants



(25,735)

Net proceeds from exercise of employee stock options and warrants


14,900


852,080

Costs associated with the issuance of common stock for preferred stock



(41,331)

Costs associated with the issuance of promissory notes and warrants for preferred stock



(18,224)

                             Net cash (used in) provided by financing activities


(3,835,054)


19,329,444

Net (decrease) increase in cash and cash equivalents


(9,858,596)


12,218,864

Cash and cash equivalents, beginning of period


15,167,496


2,948,632

Cash and cash equivalents, end of period

   $

5,308,900

$

15,167,496

Supplemental Disclosure of Cash Flow Information:





Cash paid during period for interest

  $

292,267

$

10,324

Non-cash investing and financing activities:





Note receivable from sale of businesses


1,110,982


Issuance of common stock for acquisition



297,242

Issuance of common stock to related party for settlement of lease and severance obligations



565,500

Issuance of common stock to promissory notes placement agent



133,000

Exchange of preferred stock for promissory notes and warrants



2,400,000

Exchange of preferred stock for common stock



5,455,776




SOURCE Nexxus Lighting, Inc.



RELATED LINKS

http://www.nexxuslighting.com