Quarterly report pursuant to Section 13 or 15(d)

The Company

v3.5.0.2
The Company
9 Months Ended
Sep. 30, 2016
The Company

1.The Company

Revolution Lighting Technologies, Inc. and its wholly-owned subsidiaries (“Revolution”, “we”, “us” or “our”) is a leader in the designing, manufacturing, marketing, and selling of LED lighting solutions focusing on the industrial, commercial and government markets in the United States, Canada, and internationally. Through advanced LED technologies, we have created an innovative lighting company that offers a comprehensive advanced product platform of high-quality interior and exterior LED lamps and fixtures, including signage and control systems. We are uniquely positioned to act as an expert partner, offering full-service lighting solutions through our operating divisions, including Energy Source, Value Lighting, Tri-State LED, E-Lighting, All-Around Lighting and TNT Energy, to transform lighting into a source of superior energy savings, quality light and well-being. We market and distribute our products through a network of regional and national independent sales representatives and distributors, as well as through energy savings companies and national accounts. We generate revenue by selling lighting products for use in the commercial, industrial and government markets, which include vertical markets such as military, municipal, hospitality, institutional, educational, healthcare and signage markets. We market and distribute our products globally through networks of distributors, independent sales agencies and representatives, electrical supply companies, as well as internal marketing and sales forces.

Our operations consist of one reportable segment for financial reporting purposes: Lighting Products and Solutions (principally LED fixtures and lamps).

During the second quarter of 2016, we purchased all the equity interests of TNT Energy, LLC (“TNT”), a turnkey provider of LED lighting-based energy savings projects within the commercial, industrial, hospitality, retail, educational and municipal sectors (see Note 2).

In the third quarter of 2015, we completed the acquisition of Energy Source, LLC (“Energy Source”), a provider of turnkey comprehensive energy savings projects (principally LED fixtures and lamps) within the commercial, industrial, hospitality, retail, education and municipal sectors (see Note 2).

Basis of presentation

The accompanying condensed consolidated financial statements are unaudited, and have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015. The Condensed Consolidated Balance Sheet as of December 31, 2015 was derived from our audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP.

In the opinion of management, these accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to fairly state our financial position, results of operations, and cash flows as of and for the dates and periods presented. The unaudited condensed consolidated financial statements include the accounts of Revolution Lighting Technologies, Inc. and its wholly owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to valuation of receivables and inventories, purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, income taxes and contingencies. Actual results could differ from those estimates.

The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the full year ending on December 31, 2016, or for any other future period.

Sales Tax Revenue

We record sales tax revenue on a gross basis (included in revenues and costs). Revenues from sales taxes were $1.5 million and $1.2 million for the three months ended September 30, 2016 and 2015, respectively, and $3.7 million and $3.0 million for the nine months ended September 30, 2016 and 2015, respectively.

 

Stock Split

On March 10, 2016, we filed a certificate of amendment to our Amended and Restated Certificate of Incorporation, as amended, to effect a 1-for-10 reverse stock split, as approved by the holder of a majority of the common stock and the Board (the “Split”), that became effective for trading purposes on March 11, 2016. The number of authorized shares and the par value of our common stock remained unchanged following the Split. All references to number of shares and per share data in the consolidated financial statements and applicable disclosures have been adjusted to reflect the reverse stock split, unless otherwise noted (see Note 10).

Liquidity and Capital Resources

Our liquidity as of September 30, 2016 and December 31, 2015 was $5.4 million and $2.8 million, respectively, which was comprised of cash and cash equivalent of $3.9 million and $0.2 million, respectively, and additional borrowing capacity under the Revolving Credit Facility of $1.5 million and $2.6 million, respectively.

Historically, our significant shareholder, RVL 1 LLC (“RVL”), and its affiliates have been a significant source of financing, and they continue to support our operations.

In May 2016, we raised $15.2 million from the issuance of common stock, net of expenses. The proceeds were used to fund the cash portion of the TNT acquisition, pay debt under our credit facility, and for general corporate purposes. In June 2016, we raised an additional $1.0 million in a private placement of our common stock to one of our distributors.

We have a loan and security agreement with Bank of America to borrow up to $27.0 million on a revolving basis, based upon specified percentages of eligible receivables and inventory (the “Revolving Credit Facility”) which matures in October 2017. At September 30, 2016, the balance outstanding on the Revolving Credit Facility was $25.5 million. As of September 30, 2016, we were in compliance with our covenants.

At September 30, 2016 and December 31, 2015, we had working capital of $40.8 million and $25.9 million, respectively.

We believe we have adequate resources to meet our cash requirements for the foreseeable future.

Contingencies

In the ordinary course of business, we may become a party to various legal proceedings generally involving contractual matters, infringement actions, product liability claims and other matters. Based upon such evaluation, at September 30, 2016, we are not party to any pending legal or administrative proceedings that may have a material adverse effect, either individually or in the aggregate, on our business, financial condition or results of operations. We may be required to make payments under a certain channel distribution agreement if certain revenue targets are achieved. The maximum amount of such payments is $1.0 million, which has been accrued for as of September 30, 2016.

Recent accounting pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases, that requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. We have not determined the effect that this accounting pronouncement will have on our financial statements.

In March, April and May 2016, respectively, the FASB issued ASU 2016-08, ASU 2016-10, ASU 2016-11 and ASU 2016-12, all of which relate to, “Revenue from Contracts with Customers”, which are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The provisions of the ASU’s are effective for periods beginning after December 15, 2017. The adoption of these ASU’s are not expected to have a material effect on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation, which is intended to simplify the accounting for share-based payment awards. The standard is effective for fiscal years beginning after December 15, 2016. We have not determined the effect that this accounting pronouncement will have on our financial statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments,”(“ASU 2016-15”), which provides guidance on eight specific cash flow issues. The provisions of ASU 2016-15 are effective for periods beginning after December 15, 2017. The adoption of ASU 2016-15 is not expected to have a material effect on our consolidated financial statements.