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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2015
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number 0-23590
REVOLUTION LIGHTING TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
177 Broad Street, 12th Floor, Stamford, CT
(Address of principal executive offices)
59-3046866
(I.R.S. Employer
Identification No.)
06901
(Zip Code)
Registrant’s telephone number: (203) 504-1111
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class
Common Stock, $.001 par value
Name of each exchange on which registered
The NASDAQ Stock Market LLC
(NASDAQ Capital Market)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
Accelerated filer
x
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of common equity held by non-affiliates of the registrant as of June 30, 2015, based upon the last sale price of
such equity reported on The NASDAQ Capital Market, was approximately $64,455,236.
As of March 1, 2016, there were 159,985,587 shares of Common Stock, $.001 par value, of the registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Part III of Form 10-K is incorporated by reference to the Registrant’s definitive proxy or information
statement for the 2016 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission.
Table of Contents
Revolution Lighting Technologies, Inc.
Index to Annual Report on Form 10-K
For the Year Ended December 31, 2015
Business
Part I
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Financial Statements and Supplementary Data
Change in and Disagreements with Accountants on Accounting and Financial Disclosure
Part II
Item 5.
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Item 15. Exhibits and Financial Statement Schedules
Signatures
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The information contained in this Annual Report on Form 10-K, other than historical information, may include “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The
Private Securities Litigation Reform Act of 1995 (the “Act”) provides certain “safe harbor” provisions for forward-looking statements. All
forward-looking statements made in this Annual Report on Form 10-K are made pursuant to the Act. Words such as “may,” “expect,”
“intend,” “anticipate,” “believe,” “estimate,” “continue,” “plan” and similar expressions in this report identify forward-looking statements.
The forward-looking statements are based on our current views with respect to future events and financial performance. Actual results may
differ materially from those projected in the forward-looking statements. The forward-looking statements are subject to risks, uncertainties
and assumptions, including, among other factors:
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our history of losses and that we may be unable to cover our cost of operations unless we generate sufficient operating
income from the sale of our products, or raise additional debt or equity capital;
the future issuance of additional shares of common stock and/or preferred stock could dilute existing stockholders;
our loan agreement contains financial covenants that may limit our operating and strategic flexibility;
our growth strategy depends in part on our ability to execute successful strategic acquisitions;
we must realize the expected benefits of our acquisitions, including our recent acquisitions of Value Lighting, Inc., All
Around, Inc., E-Lighting, Inc., and Energy Source, Inc., or face the potential for losses and impairments;
we face competition from larger companies in each of our product areas;
the risk that demand for our LED products fails to emerge as anticipated;
we are dependent on the availability of components used in our finished products and if third-party manufacturers
experience delays, or shipping or transportation is disrupted due to labor unrest or other factors, we may incur delays in
shipment to our customers, which would damage our business;
if the companies to which we outsource the manufacture of our products fail to meet our requirements for quality, quantity
and timeliness, our revenue and reputation in the marketplace could be harmed;
we depend on distributors and independent sales representatives for a portion of our revenue and sales, and the failure to
successfully manage our relationships with these third-parties, or the termination of these relationships, could cause our
revenue to decline and harm our business; and
the risk that we may not be able to adequately protect our intellectual property rights or that infringement claims by others
may subject us to significant costs.
The factors listed under Item 1A. Risk Factors of this Annual Report on Form 10-K, as well as any other cautionary language in
this report, provide examples of risks, uncertainties and events which may cause our actual results to differ materially from the
expectations we described in our forward-looking statements. Although we believe that the assumptions underlying the forward-
looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that
the forward-looking information will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information should not be regarded as a representation by us or any other
person that the objectives or plans of our company will be achieved. We do not undertake any obligation to publicly release the
results of any revisions to these forward-looking statements.
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Item 1.
Business.
General
PART I
Revolution Lighting Technologies, Inc. and its wholly-owned subsidiaries (“the Company”, “we”, “our”, “us”) design, manufacture, market
and sell commercial grade light-emitting diode (“LED”) solutions for outdoor and indoor applications, focusing on the commercial and
industrial (“C&I”), and government markets in the United States, Canada and internationally. We believe that our product offerings and
designs, combined with our comprehensive service capabilities, enable us to provide the highest performance products available to generate
significant energy and maintenance cost savings for our customers, while enhancing safety and productivity through superior light quality
and output.
We generate revenue by selling lighting products globally for use in the commercial and industrial, and government markets, which include
vertical markets such as industrial, commercial and government facilities, hospitality, institutional, educational, healthcare and signage
markets. We market and distribute our products directly to customers and through networks of distributors, independent sales agencies and
representatives, electrical supply companies, as well as internal marketing and sales forces whose knowledge and understanding of state
and utility rebate and incentive programs, lighting technology, building constraints, and regulatory environment enables customers to select
the best solution for their needs.
We provide our customers with leading experience and industry knowledge. We have continued to make key investments to offer leading
services, including scope development, product specification, incentive procurement, bidding and project management capabilities.
Investments include Seesmart Technologies, Relume Technologies, Value Lighting, Tri-State LED, All Around Lighting, and most recently
Energy Source, a full service turnkey solutions provider and installer of LED technology, to ensure that we continue to combine the highest
quality lighting products with exceptional service.
The Company’s operations consist of one reportable segment for financial reporting purposes: Lighting Products and Solutions (principally
LED fixtures and lamps). For each of the two years ended December 31, 2014, we reported two segments, Lighting Fixtures and Lamps,
and Lighting Signage and Media. Due to changes in the management, organizational structure and internal reporting, our operations now
comprise one reportable segment for financial reporting purposes, and therefore segment disclosures are no longer presented.
History of Our Business
We were incorporated in Delaware on December 16, 1993. We are the successor by merger to a Florida corporation named Super Vision
International, Inc., which was incorporated in January 1991. In April 2007, we changed our name from Super Vision International, Inc. to
Nexxus Lighting, Inc. In November 2012, we changed our name from Nexxus Lighting, Inc. to Revolution Lighting Technologies, Inc.
We acquired Lumificient in 2008. We began shipping our line of Array LED replacement lamps in December 2008 and continued to launch
Array products in 2009. We broadened the product line by adding additional lamp sizes and options, as well as upgrades to the original
products.
On October 28, 2010, we sold substantially all of the assets of our legacy commercial/architectural lighting and pool and spa lighting
businesses (the “Legacy Commercial and Pool Lighting Businesses”). Our Legacy Commercial and Pool Lighting Businesses consisted of
the manufacture, marketing and sale of LED and fiber optic lighting products used for applications in commercial, architectural and pool
and spa markets, excluding the Array business and the business of Lumificient. The divestiture of these businesses was consistent with our
strategic plans to focus our resources on businesses where we see more significant long-term growth potential.
On September 25, 2012, we completed the transactions contemplated by an Investment Agreement (the “Series B Investment Agreement”)
with RVL 1 LLC (“RVL”), an affiliate of Aston Capital, LLC (“Aston”), whereby the Company issued to RVL shares of Series B
Convertible Preferred Stock (the “Series B Investment” or “Investment”), representing 73% of the Company’s outstanding voting stock.
The proceeds from the Series B Investment were used to extinguish $2.5 million of existing short-term debt, to fund a settlement payment
in connection with the settlement of a lawsuit, to pay the fees and expenses in connection with the Investment and for working capital
purposes. The Investment resulted in a change in control of the Company under applicable regulations of The NASDAQ Stock Market
(“NASDAQ”) and was consummated pursuant to an exception from the NASDAQ stockholder approval rules pursuant to the “financial
viability exception” set forth in NASDAQ Rule 5635(f).
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On December 20, 2012, we acquired Seesmart Technologies, Inc. (“Seesmart”), headquartered in Simi Valley, California. Seesmart
designs, manufactures, markets and sells high-performance, commercial grade LED’s in the C&I and municipal market. We completed the
acquisition of Seesmart for consideration of $10.1 million in cash, 7.7 million shares of common stock valued at $5.0 million and 11,915
shares of Series D convertible preferred stock valued at $1.5 million. In connection with the funding of the Seesmart acquisition, the
Company closed an investment agreement with RVL whereby the Company issued 10,000 shares of Series C preferred stock to RVL for
cash of $10 million. With the acquisition of Seesmart, we targeted the C&I segment sales channel, moving away from the big box store
model that was previously pursued. We believe that Seesmart’s management combined with its exclusive network of experienced lighting
distributors and sales representatives provides us with a customer and solution-focused advantage.
On August 22, 2013, we acquired Relume Technologies, Inc. (“Relume”), for a total purchase price of $11.6 million, $4.3 million in cash
net of adjustments and 2,174,000 shares of common stock valued at $7.3 million. The cash portion of the purchase price was funded with
the proceeds from the issuance of Series F preferred stock to RVL. Relume is a manufacturer of outdoor LED products and smart grid
control systems for outdoor lighting applications. Relume services several outdoor LED markets, including Municipal Street and roadway
lights, parking lots and garages, pedestrian areas, buildings and outdoor advertising displays. Relume’s business is primarily made up of
outdoor lighting, with the remaining part of the business split between smart grid control systems, and LED lighting for media and signage.
Relume’s patented Silver Circuitry™ process for LED thermal management offers the first seven-year LED warranty, adding value to
customers by improving LED performance, lowering operating temperature and extending LED life.
On November 15, 2013, we acquired Tri-State DE LLC (“Tri-State”), a distributor of Revolution’s Seesmart products, for $3.3 million of
cash and 815,000 common shares valued at $1.1 million. Tri-State has a strong management team and a significant client base in New
York, New Jersey and Connecticut.
On April 17, 2014, we acquired Value Lighting, Inc. (“Value Lighting”), a supplier of lighting solutions to the multifamily residential
market, for a total purchase price of $39.3 million, of which $10.6 million was paid in cash funded with a loan from an affiliate, an
unconditional obligation to issue an aggregate of 8,468,192 shares of common stock in four installments at nine, twelve, eighteen and
twenty-four months from the acquisition date, valued at $20.9 million, and contingent consideration payable in cash or common stock at
the option of the Company, aggregating up to a total of $11 million, if certain revenue and EBITDA targets are achieved by Value Lighting
for 2014 and 2015 (valued at $7.8 million). We acquired Value Lighting for its presence in the multifamily residential and construction
markets, the experience of the management team, its customer base, operational and business development synergies.
On December 18, 2014, we acquired All Around Lighting, Inc., a supplier of lighting fixtures, for a total purchase price of $5.0 million.
The purchase price consisted of $0.9 million cash, 1,600,000 shares of the Company’s common stock, and additional cash consideration if
certain revenue targets are achieved in 2015 and 2016 (initially valued at $0.3 million). The shares of common stock have been valued at
$1.8 million, and are being issued in eleven installments over three years beginning in June 2015. The shares are subject to a price floor of
$2.00 per share (initially valued at $1.9 million), which will terminate when total share consideration received is equal to $3.2 million. The
aggregate purchase price of $5.0 million has been allocated to $1.7 million of tangible assets, $2.2 million of identifiable intangible assets
and $2.8 million of goodwill, reduced by $1.7 million of liabilities assumed.
On February 5, 2015, the Company acquired the assets of DPI Management, Inc. d/b/a E Lighting for $0.6 million. The purchase price
consisted of cash paid at closing of $0.1 million, $0.15 million paid in cash on September 1, 2015, $0.15 million payable in cash on
March 1, 2016, and $0.2 million payable on September 1, 2016 in cash or common stock, at the Company’s option. The aggregate purchase
price of $0.6 million was assigned to inventories.
On August 5, 2015, the Company completed its 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. The purchase consideration aggregated $31.5 million, which consisted of $10 million in cash, $9.7
million in common stock, $10 million in promissory notes due at the one year anniversary of the acquisition and contingent consideration
initially valued at $1.8 million based on projected EBITDA during 2015, 2016 and 2017. The cash portion of the acquisition was funded
through the issuance of 8,695,652 shares of common stock to a third party investor for $10 million. The promissory notes are supported by
an irrevocable letter of credit from RVL. The Company acquired Energy Source for its management team, its client base and operational
and business development synergies.
The Lighting Industry
The global lighting industry generally is divided between three major market segments: commercial, industrial and residential. Within these
three market segments exist two broad product categories: fixtures and light bulbs (referred to as lamps in the lighting industry). The
fixtures category includes all apparatuses, luminaires and power/heat-control systems, while lamps consist of the replaceable devices that
emit light. Conventional lamps include incandescent, fluorescent and high-intensity discharge (HID) products. For residential applications
within the general illumination market, inexpensive incandescent and, to a lesser extent, compact fluorescent (CFL) bulbs have been the
preferred choice. For commercial applications, we believe that the more expensive and long-lasting fluorescent and HID bulbs and fixtures
have the largest market share at this time.
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With rapid advancements in the performance, efficiency and cost of energy-efficient lighting, including LED-based solutions, conventional
light sources are beginning to be replaced by advanced technologies with lower operating costs over their useful lives. In addition, the
energy-efficient nature of LED technology makes it an environmentally friendly light source, and the compact size of LEDs has created
new possibilities in lighting fixture and lamp design. Product selection is influenced by a number of factors, including overall cost, energy
efficiency, product life, lumen output and other product features, as well as regulatory, maintenance and environmental factors. We believe
our unique advanced lighting solutions are well positioned to increasingly displace conventional lighting in each of our targeted markets.
In North America, lighting manufacturers typically sell products directly to customers and through independent manufacturer’s
representatives and electrical supply and distribution companies. The distributors then market products to electrical contractors and other
end-users. Representatives also have direct contact with lighting designers, electrical engineers, architects and general contractors that
influence buying decisions. The manufacturer’s representatives often provide value-added services, such as product promotion or design
and implementation assistance. The ability of smaller companies to compete against larger more-established rivals is heavily rooted in their
capacity to leverage their unique product portfolios and customer service to garner maximum productivity from each representative.
LED Lighting Industry Trends
LEDs are semiconductor-based devices that generate light. As the cost of LEDs decreases while performance improves, combined with
increased consumer education, we expect this lighting technology will continue to compete more effectively in the general illumination
market versus traditional lighting. We believe the LED lighting industry is experiencing the following trends:
High Energy Costs Drive LED Adoption. As a result of rising electricity prices, particularly within dense urban areas already impacted by
high energy costs, businesses and consumers seek new technologies to reduce energy consumption. LED lighting technology is one of the
fastest growing opportunities to generate significant savings and quick returns on investment. LEDs are 60% more efficient than
fluorescent lighting, and 80% more efficient than halogen and incandescent lighting. Based on the large percentage of a building’s energy
usage consumed by lighting (20% commercial, 15% residential, 7% industrial), industry experts believe LED lighting will be the number-
one energy efficiency retrofit opportunity by 2020.
Technological Maturity: The technological advancement to LED lighting has achieved commercial viability in terms of brightness,
efficiency, lamp life, safety, maintenance reduction and color-rendering (CRI). This maturity continues to drive growing market adoption.
According to a U.S. Department of Energy study, LED market share is expected to account for $72 billion of the $105 billion general global
lighting market by 2020.
Cost Compression: Market forces, including competitive pressure, greater manufacturing efficiencies, and increased technology adoption
among consumers, continue to significantly drive down LED lamp prices. As a result, the global lighting market is experiencing increased
LED adoption.
Superior Efficiency: Since the introduction of the first visible LED in the 1960s, the technology has offered an increasingly wide variety of
colored lighting, beginning with red and expanding to green, yellow and orange. Initial rudimentary applications included traffic lights,
automotive brake lights and indicator lights. In the mid-1990s, LEDs became capable of emitting blue light. With the advent of blue LEDs,
combined with phosphor technology, LEDs made another technological leap by emitting white light. This breakthrough enabled LEDs,
through its full color spectrum output capabilities, to compete with preferred color temperatures achieved by traditional lighting solutions
for applications in commercial, industrial and residential markets.
In an effort to lower energy consumption, lighting companies are focusing on increasing “lumens per watt.” Lumens per watt (often
referred to as “efficacy”) is an industry standard that measures the amount of light emitted per watt of electrical power used, meaning the
more lumens per watt, the more energy-efficient the product. Typical incandescent light sources produce between 15 and 25 lumens per
watt, while fluorescent and HID light sources can produce output exceeding 100 lumens per watt. Today’s LEDs currently perform at over
140 lumens per watt, delivering the highest efficiency light source to the market.
Governmental Influence: U.S. government regulation continues to drive efficiency, requiring greater standards among many lighting
products today. Such initiatives by the United States Department of Energy and the Environmental Protection Agency’s Energy Star
Certification Program set industry-wide standards for lighting products that outline efficiency and performance criteria, helping
manufacturers promote their products while enhancing consumer awareness and education, allowing for more informed decisions when
purchasing lighting products.
Local governments are also adopting regulations to address greater energy efficiency standards while meeting obligations to improve social
responsibility and environmental conservation. Mandates requiring greater efficiency are often combined with divestment of energy sources
to include more sources of alternate and renewable forms of energy generation, including solar, wind, cogeneration,
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geothermal and fuel cell technologies. State and federal tax incentives continue to provide a significant tailwind to support the growing
adoption of these renewable technologies. This net effect translates into reduced energy use, particularly during times of peak energy
demand that often relies on older and dirtier forms of energy generation, typically from coal power plants and other less efficient facilities.
LED lighting is an attractive solution, considering improved lighting and safety and the significant efficiency benefits versus upfront costs
investment to offer a quick and efficient solution with rapid return on investment to meet new legislation requirements.
Increased Incentive: Demand on the existing power grid in the United States continues to rise. This increased demand creates unique
challenges for municipalities and energy providers in order to generate more power. Extensive investments to expand capacity, construct
new facilities, and upgrade aging infrastructure are combined with costly and time-consuming regulatory approval processes, community
and environmental challenges, and extended construction periods. As a result, many state government agencies, working in conjunction
with the utility companies, provide incentives through the form of credits and rebates to help manage or reduce consumer demand. As LED
lighting technology matured, more utilities are now offering incentives and rebate programs toward the installation of LED lighting to
reduce upfront costs and improve return on investment. In an effort to encourage the development of high-quality, energy-efficient
commercial LED lamps eligible for utility rebates, the DesignLights Consortium (DLC) was created. This organization works to establish
rigorous performance standards for the LED lighting industry. LED products that meet DLC’s standards become listed on its qualified-
products list, making them eligible for substantial rebates from utility companies.
Customer Acceptance: While LEDs are rapidly gaining popularity, one of the biggest challenges remaining is educating potential
customers on the true benefits of LED technology. Early adoption continues to show positive results reducing lifetime energy and
maintenance costs, due to rated life expectancy of more than 8 years (exceeding 70,000 hours).
Social Responsibility: LED lighting solutions provide a significant opportunity for individuals, corporations and governments to meet
environmental goals. LEDs do not contain mercury, unlike fluorescent lighting, which can be harmful to the environment, do not emit
ultraviolet radiation (UV), typically do not contain glass, and are 100% recyclable.
Retrofit Focus: The energy savings and positive environmental impact of LED technology in both commercial and residential applications
are increasing the market size of retrofit and renovation as compared to new construction. We believe we are experts in both retrofit and
renovation. Retrofit consists of the replacement of a luminaire or lamp, one for one, without changing the location or type of luminaire.
Renovation consists of redesign of the existing space with LED, potentially using new luminaires in a different location, and possibly
adding a control system to further enhance the environment and the energy savings. There are billions of sockets currently operating with
traditional light sources that we believe will be converted to LED.
Our Competitive Advantages
We believe the following strengths of our company provide us with competitive advantages in the marketplace:
Product Quality: We offer a high performance product, allowing clients to maximize economic returns and payback.
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We design, manufacture and sell high-quality and reliable products across all of our brands with demonstrable performance
advantages that are cost competitive. Many of our products are designed to operate over 70,000 hours, and are backed by
warranties of up to 10 years. We achieve this, in part, through a combination of sourcing high-quality LEDs, utilizing proprietary
thermal management techniques and conducting rigorous third-party product testing. To deliver cost-competitive solutions, we are
investing in product advancements, leveraging purchasing volume, capitalizing on strategic vendor relationships and migrating
high-volume products to our proprietary manufacturing process.
Delivering Solutions and Savings: We provide leading energy efficiency solutions, featuring products with support for multiple markets,
and are designed to exceed customer energy efficiency and environmental goals. Based upon our review of publicly available performance
data from competitors, our products can provide a quicker return on investment than competitive products, including a 60% energy savings
over fluorescent and up to a 90% energy savings over halogen and incandescent lamps.
Authoritative Knowledge: We invest in employees with extensive knowledge, understanding and experience of lighting technology,
building constraints, and regulatory environments that enables us to continue to provide superior quality products and service for our
customers.
Distributors, Dealers and Agency Network: Our sales teams act as an invested partner committed to providing constant, expert, responsive
guidance to our customers to ensure projects are completed on time and on budget.
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We have 76 dealers, distributors and teaming partners in the United States, and distributors in four other countries. We are on
track to continue to grow in selected domestic and international markets. Our distributor and dealer network provides us with a
competitive advantage in delivering high-quality products rapidly to market and providing leading end-user education. We also
have established relationships with 38 independent commercial sales agencies, which are overseen by four regional sales
directors, to provide a geographic footprint spanning the entire United States territory.
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Experienced Management Team. Our senior management team includes individuals with diverse backgrounds and broad experience. We
are led by our Chairman, Chief Executive Officer and President Robert V. LaPenta, a very successful leader with over 40 years of executive
management experience in building billion-dollar companies, and Chief Financial Officer and Director, James DePalma, with over 40 years
of operational and finance experience in the defense and technology industries. In addition, our division senior management is comprised of
individuals with accomplished experience in the lighting industry. Our management team has demonstrated the ability to drive organic
growth and pursue and integrate strategic acquisitions.
Our Growth Strategy
Target Markets: Our objective is to become the leading provider of advanced LED lighting solutions and services. A key element of our
growth strategy is servicing the following markets through the integration of LED lighting, controls and services including:
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Commercial and Industrial (C&I)
Warehouse
Education
Healthcare
Hospitality
Federal government, including the military
State and local government
Multi-family
Signs and media
Regional/National Distribution: As the LED lighting market continues to build momentum, becoming the dominant lighting technology
sold throughout the marketplace requires relationships with regional and national distribution groups. We plan to continue to establish
relationships with regional and national distribution groups; this will provide us with another sales channel and significant opportunity for
mass product distribution across key industries.
Expert Partner. We believe that quality service and expert partnership with our customers is instrumental to the continued success of our
business. We will continue to deliver unmatched knowledge and understanding of lighting technology, building constraints, and regulatory
environment, enabling repeat and new customers to select the best solution for their needs.
Refining our LED Product Portfolio. We intend to continue to refine and improve our LED product portfolio through our research and
development team to ensure the highest quality solutions are available to meet our customer’s lighting needs.
Operational Efficiency: By introducing new products and expanding sales of existing products, we believe that we can significantly
improve operational efficiency by reducing our cost of materials, components and manufacturing. Refining our products and increasing our
sales also allows us to gain additional leverage from sales representatives within our distribution network, while maintaining competitive
price points.
Developing and Protecting Our Intellectual Property. We have devoted significant resources to building an advanced research and
development team for developing complementary intellectual property to expand our portfolio of advanced lighting technologies. Securing
and defending intellectual property related to the design, manufacture and application of advanced lighting technology is expected to be a
key element of our existing and future business. The strength of our design and intellectual property portfolio allows us to provide the
highest quality LED solutions available, providing a significant advantage over many of our competitors.
Products
Commercial Lamps and Fixtures. The RVLT umbrella for commercial lamps and fixtures products includes the following commercial
indoor and outdoor lighting products:
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Linear Tube Lighting
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Multi – Family Lighting
Commercial Troffer Lighting
High- and Low-Bay Lighting
Garage and Parking Area Lighting
Street Lighting
Luminaire LED Retrofit Kits
Downlighting and Accent Lighting
Replacement LED Lamps
Multi-Purpose Lighting
Signage and Accent Lighting
Smart Grid Control Systems
These categories encompass extensive product solutions with various sizes, shapes, color-temperature choices, light angles, lens options,
and wattages. Applications include interior use, outdoor use, new fixture installation, retrofit installation, smart grid control systems and
integration of our LED technology into custom applications.
Competition
We currently face competition from both traditional lighting companies that provide general lighting products, including incandescent,
fluorescent, HID, metal halide (MH) and neon lighting. We also have competitors from specialized lighting companies that are engaged in
providing LED products. In general, we compete with both groups on the basis of design, innovation, quality of light, maintenance costs,
safety issues, energy consumption, price, product quality and brightness.
In the general illumination market, we compete with traditional lighting companies that include Acuity Brands Lighting, Inc., Cooper
Lighting (a division of Cooper Industries, Inc.), Hubbell Lighting, Inc. (a division of Hubbell Incorporated), Lithonia Lighting, Osram
Sylvania, GE Lighting and Royal Philips Lighting (a division of Koninklijke Philips Electronics N.V.). Our LED products tend to be
alternatives to conventional lighting sources for applications within the commercial market. In these markets, we compete on the basis of
performance, energy savings, lamp life and durability.
We also compete with providers of LED replacement lamps and other energy-efficient lighting products and fixtures. These companies
include traditional lighting companies such as Sylvania and Philips; specialized lighting companies such as Cree, Inc.; certain packaged
LED suppliers such as Cree, as well as multiple low-cost offshore providers. In the market for LED lighting products, we compete on the
basis of design, innovation, light quality, maintenance costs, safety issues, energy consumption, price, product quality, brightness, and
DLC, Energy Star and UL certifications.
We believe that we will compete favorably in our markets, based on the following factors:
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Unique design and quality of our product
Superior product performance
Experienced and robust sales and marketing resources
Authoritative knowledge of our expansive internal and external national distribution network and developed relationships
Invested partner committed to providing constant, expert, responsive guidance
Ability to deliver a seamless experience
Speed to market with the latest technology at competitive price points
UL, DLC and Energy Star certifications
We expect our markets to remain competitive and to reflect rapid technological evolution and continuously evolving customer and
regulatory requirements. Our ability to remain competitive depends upon our success in maintaining and delivering superior product
performance in the market at competitive prices on a timely basis.
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Sales and Marketing
We design, manufacture, market and sell LED solutions; we believe that we furnish exceptional customer service and the highest-quality
LED products available for commercial installation. Our Value Lighting and All Around divisions also sell conventional lighting products
in the multifamily market based on customer needs.
We market and sell our LED products through our internal sales force and national dealer and distribution network and commercial agency
networks. Generally, our distributors, dealers and agencies are recruited, trained and monitored by us directly. We maintain a firm policy
on the use of our name for branding our LED lighting products, and we control the message going to our end users in all of our self-
generated collateral material.
We promote our brands and products through print media, online media, trade shows and educational seminars. Our advertising is geared
toward lead generation, distributor and dealer recruitment, brand awareness and end-user acceptance of LED technology.
We maintain an in-house channel management team that supports our distributor and dealer base. As we grow, we plan to grow our team to
manage their accounts and give them the support they need to build their business and promote the brands we own.
Manufacturing and Suppliers
We design and engineer our products and outsource a significant portion of the manufacture and assembly of our products to a number of
contract manufacturers both domestically and internationally. These contract manufacturers purchase components that we specify and
provide the necessary facilities and labor to manufacture our products. We leverage the strength of the contract manufacturers and allocate
the manufacture of specific products to the contract manufacturer best suited to the task. Quality control and lot testing is conducted in our
facilities in Simi Valley, California and Oxford, Michigan where we also assemble and manufacture certain of our products. These facilities
are also dedicated to assemble products that satisfy the definition of “Made in America”.
Some of our products use a custom LED package and are sourced from a limited number of suppliers. Although we currently are dependent
on these suppliers, we believe that, if necessary, alternative sources of supply could be found. However, any interruption or delay at our
third-party manufacturers or in the supply of the components, or in our ability to obtain components from alternate sources at acceptable
prices in a timely manner, could harm our business, financial condition and results of operations.
Research and Product Development
We pride ourselves on delivering the highest quality lighting products. Our research and development team is focused on the design and
integration of electronics, optics and thermal management solutions to create advanced lighting solutions. Through these efforts, we seek to
enhance our existing products, design new products, and develop solutions for customer applications. We believe that quick responsiveness
to customer demands and our ability to achieve industry certifications such as UL, DLC and Energy Star for certain products differentiates
us from many of our competitors, as we rapidly introduce new products to address market needs.
During 2015, 2014 and 2013, we spent $2.5 million, $2.1 million and $1.8 million, respectively, on research and product development
activities. We continue to invest in our product development, prototypes and specifications as we believe that increased levels of spending
on research and development will be necessary to successfully develop advanced lighting products that will have the brightness of
traditional lighting systems while being offered at acceptable prices.
Patents and Proprietary Rights
We currently hold 26 patents related to our LED lighting intellectual property and have 12 patent applications currently filed with the
United States Patent and Trademark Office or with the World Intellectual Property Organization or foreign patent offices.
Although we expect that several of our patent applications will issue, we cannot be certain that patents will be granted with respect to any of
our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any patents that
may be granted to us in the future will be commercially useful in protecting our technology. In addition, despite our efforts to protect our
intellectual property, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as
proprietary.
Royalties
The Company has from time to time entered into agreements whereby we have agreed to pay royalties for the use of certain LED
technologies. Royalty expense incurred under these agreements was immaterial for all years presented.
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Regulations, Standards and Conventions
Our products are generally required to meet the electrical codes of the jurisdictions in which they are sold. Meeting the typically more
stringent codes established in the United States and the European Union usually allows our products to meet the codes in other geographic
regions.
Many of our customers require that our products be listed by UL. UL is a U.S., independent, nationally recognized testing laboratory and
certification organization. UL develops standards and test procedures for products, materials, components, assemblies, tools and equipment,
chiefly dealing with product safety. UL evaluates products, components, materials, systems for compliance to specific requirements, and it
permits acceptable products to carry a UL certification mark, as long as they remain compliant with the standards. UL offers several
categories of certification. Products that are “UL Listed,” are identified by the distinctive UL mark. Many of our LED lighting products are
UL-listed, which boosts demand by ensuring their quality and safety.
Today, many of our customers and end-users also expect our products to meet the applicable DLC or Energy Star requirements. DLC and
Energy Star are industry standards for energy-efficient lighting products. To qualify for Energy Star certification, LED lighting products
must pass a variety of rigorous tests to prove that the products have certain performance and efficiency characteristics. Four of our former
Array-branded lamps were among the first lamps to be certified under the Energy Star program, which began accepting applications for
lamps in September 2010. A variety of our LED products are DLC-listed, too, making them eligible for valuable rebates from utility
companies. As of March 1, 2016, the DLC lists 793 Revolution Lighting Technologies LED products on its Qualified Products List. Like
Energy Star, DLC sets stringent product performance and efficiency requirements that manufacturers must meet to qualify for certification.
In fact, DLC bases many of its performance requirements on the Energy Star model. However, unlike Energy Star, which primarily
regulates products for the residential lighting market, DLC regulates lighting products manufactured for the commercial market. By
designing and manufacturing LED products that meet DLC, Energy Star and UL standards, we expect to further improve our sales and
industry reputation.
Seasonality
The business exhibits some seasonality, with net sales being affected by the impact of weather and seasonal demand on construction and
installation programs, particularly during the winter months. Because of these seasonal factors, we have experienced, and generally expect
to experience, increasing revenue as the year progresses.
Our lighting solutions are sold to customers in both the new construction and renovation and retrofit markets. The construction market is
cyclical in nature and subject to change in general economic conditions. Unit sales volume has a major impact on our profitability.
Economic downturns and the potential decline in key construction markets may have a material effect on the net sales and operating
income.
Financial Information about Foreign and Domestic Operations
See Note 12 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Environmental Protection Regulations
We believe that compliance with environmental protection regulations will not have a material impact on our financial position and results
of operations.
Employees
As of December 31, 2015, we had a total of 235 full-time employees and three part-time employees. We enjoy good employee relations.
Our employees are not members of any labor union, and we are not a party to any collective bargaining agreement.
Corporate Information
Our principal executive offices are located at 177 Broad Street, 12 th Floor, Stamford, CT 06901. Our telephone number is (203) 504-1100
and our website is located at www.rvlti.com.
We are a public company and are subject to informational requirements of the Securities Exchange Act of 1934. Accordingly, we filed
periodic reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). Such reports, proxy
statements and other information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street NE, Room 1580,
Washington D.C. 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website (http://www.sec.gov) that
contains reports, proxy and information statements and other information regarding us and other issuers that file electronically. We
maintain a corporate website at www.rvlti.com. Other than an investor’s own internet access charges, we make available free of charge
through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and
amendments to these reports, as soon as reasonably practicable after we have electronically filed such material with, or furnished such
material to, the SEC. We intend to use our website as a regular means of disclosing material
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information and for complying with disclosure obligations under Regulation FD promulgated by the SEC. Such disclosures will be included
on the website under the heading “Investor Relations”. Accordingly, investors should monitor such portions of the website, in addition to
following the Company’s press releases, SEC filings and public conference calls and webcasts.
Item 1A. Risk Factors
The following are some of the factors that we believe could cause our actual results to differ materially from expected and historical
results. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not
currently known to us or that we currently deemed immaterial may also affect our business operations.
We have a history of losses and may incur losses in the future. We may be unable to generate sufficient operating income from the sale
of our products or raise additional debt or equity capital.
We have experienced net losses of $2.4 million, $5.2 million and $16.8 million for the years ended December 31, 2015, 2014 and 2013,
respectively. As of December 31, 2015, we had an accumulated deficit of $74.7 million. In order for us to attain profitability and growth,
we will need to successfully execute our production, marketing and sales plans for our product lines and improve our distribution and
supply chain performance. We may fail to achieve profitability in the future, and our business may not be as successful as we envision.
Continuing losses could exhaust our capital resources and force us to scale back, suspend or discontinue our operations. Our operating
expenses may continue to increase as we spend resources on growing our business, and if our revenue does not correspondingly increase,
our operating results and financial condition will suffer.
We have funded our operations primarily through the issuance of common and preferred stock. We have received financing primarily from
our affiliate RVL 1, LLC (“RVL”), an entity affiliated with our Chairman, Chief Executive Officer and President. The actual amount of
funds that we will need to meet our operating needs will be determined by a number of factors, many of which are beyond our control.
These factors include the timing and volume of sales transactions, the success of our marketing strategy, market acceptance of our products,
the success of our manufacturing and research and product development efforts (including any unanticipated delays), the costs associated
with obtaining and enforcing our intellectual property rights, regulatory changes, competition, technological developments in the market,
evolving industry standards and the amount of working capital investments we are required to make. If we raise funds by selling additional
shares of our common stock or securities convertible or exercisable into our common stock, the ownership interest of our existing
stockholders will be diluted. If we are unable to obtain sufficient outside capital when needed, our business and future prospects will be
adversely affected and we could be forced to scale back, suspend or discontinue operations.
The future issuance of additional shares of common stock and/or preferred stock could dilute existing stockholders.
Pursuant to our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), we currently have authorized
200,000,000 shares of common stock and 5,000,000 shares of preferred stock. To the extent that common shares are available for issuance,
subject to compliance with applicable stock exchange listing rules, our board of directors has the ability to issue additional shares of
common stock in the future for such consideration as the board of directors may consider sufficient. The issuance of any additional
securities could, among other things, result in substantial dilution of the percentage ownership of our stockholders at the time of issuance,
result in substantial dilution of our earnings per share and adversely affect the prevailing market price for our common stock.
In addition, our Certificate of Incorporation provides that our board of directors may designate the rights and preferences of preferred stock
without a vote by the stockholders. A new series of preferred stock holders could adversely affect the rights of holders of common stock
insofar as such series:
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provides for voting, redemption and conversion rights to the detriment of the holders of common stock;
provides for dividends that must be paid prior to any distributions on our common stock;
receives preferences over the holders of common stock or surplus funds in the event of our dissolution or liquidation; or
has the potential to delay, defer or prevent a change in control of our company, and discourage bids for our common stock.
Our Loan Agreement contains financial covenants that may limit our operating and strategic flexibility.
Our loan and security agreement with Bank of America, N.A., as amended (the “Loan Agreement”), contains financial covenants and other
restrictions that limit our ability to engage in certain types of transactions. For example, these restrictions require that we maintain certain
solvency ratios tied to our ability to borrow under the terms of the Loan Agreement, and generally require us to obtain lender consents for
acquisitions. There can be no assurance that we will be in compliance with all covenants in the future or that Bank of America will agree to
modify the Loan Agreement, should that become necessary.
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Events beyond our control could affect our ability to comply with these covenants and restrictions. Failure to comply with any of these
covenants and restrictions would result in an event of default under the Loan Agreement. If we do not cure an event of default or obtain
necessary waivers within the required time periods, Bank of America would be permitted to accelerate the maturity of the debt under the
Loan Agreement, foreclose upon our assets securing the debt, and terminate any further commitments to lend to us. Under these
circumstances, we may not have sufficient funds or other resources to satisfy our other obligations. In addition, the limitations imposed by
the Loan Agreement may significantly impair our ability to obtain other debt or equity financing.
There can be no assurance that any waivers we request will be received on a timely basis, if at all, or that any waivers obtained will extend
for a sufficient period of time to avoid an acceleration event, an event of default, or other restrictions on our business. The failure to obtain
any necessary waivers could have a material adverse effect on our business, liquidity, and financial condition.
Our growth strategy depends in part on our ability to execute successful strategic acquisitions. We have made strategic acquisitions in
the past and may do so in the future, and if the acquired companies do not perform as expected, this could adversely affect our
operating results, financial condition and existing business.
We may continue to expand our business through strategic acquisitions. The success of any acquisition will depend on, among other
things:
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the availability of suitable candidates;
competition from other companies for the purchase of available candidates;
our ability to value those candidates accurately and negotiate favorable terms for those acquisitions;
the availability of funds to finance acquisitions and obtaining any consents necessary under our credit facility;
the ability to establish new informational, operational and financial systems to meet the needs of our business;
the ability to achieve anticipated synergies, including with respect to complementary products or services; and
the availability of management resources to oversee the integration and operation of the acquired businesses.
We may not be successful in effectively integrating acquired businesses and completing acquisitions in the future. We also may incur
substantial expenses and devote significant management time and resources in seeking to complete acquisitions. Acquired businesses may
fail to meet our performance expectations. If we do not achieve the anticipated benefits of an acquisition as rapidly as expected, or at all,
investors or analysts may not perceive the same benefits of the acquisition as we do. If these risks materialize, our stock price could be
materially adversely affected.
Integration of acquired businesses may be difficult to achieve and will consume significant financial and managerial resources which
may adversely affect operations.
Part of our strategy to increase revenue and market share is to grow through strategic acquisitions in order to complement and expand our
business. On December 20, 2012, we acquired Seesmart; on August 22, 2013, we acquired Relume; on November 15, 2013, we acquired
Tri-State; on April 17, 2014, we acquired Value Lighting; on December 18, 2014, we acquired All Around; on Feb 5, 2015 we acquired E-
Lighting; and on August 5, 2015 we acquired Energy Source. These acquisitions involve risks related to the integration and management of
technology, operations and personnel of separate companies. The integration of these businesses will be a complex, time-consuming and
expensive process and may disrupt our business if not completed in a timely and efficient manner.
We may encounter difficulties, costs and delays involved in integrating the operations, including:
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exposure to unknown liabilities of acquired companies or its assets;
higher than anticipated acquisition costs and expenses;
potential conflicts between business cultures;
adverse changes in business focus perceived by third-party constituencies;
disruption of our ongoing business;
potential conflicts in distribution, marketing or other important relationships;
potential constraints of management resources;
inability to implement uniform standards, controls, procedures and policies;
failure to maximize our financial and strategic position by the successful incorporation of acquired technology;
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failure to realize the potential of acquired technology, complete product development, or properly obtain or secure
appropriate protection of intellectual property rights; and
loss of key employees and/or the diversion of management’s attention from other ongoing business concerns.
In addition, in the first quarter of 2013, we transitioned our corporate headquarters from Charlotte, North Carolina to Stamford,
Connecticut. Seesmart has California and Illinois locations; Relume is headquartered in Michigan; Value Lighting is headquartered in
Georgia with facilities in Georgia, Texas and Maryland; Tri-State is headquartered in Connecticut; All Around is headquartered in Texas;
E-Lighting is headquartered in Texas; and Energy Source is headquartered in Rhode Island. The geographic distance between the
companies and their respective offices and operations increases the risk that the integration will not be completed successfully or in a
timely and cost-effective manner. We may not successfully overcome these risks or any other problems encountered in connection with the
integration of the companies.
Our acquisitions could result in future impairment charges and other charges which could adversely affect our results of operations.
As a result of our acquisitions of Seesmart, Relume, Tri-State, Value Lighting, All Around, E-Lighting and Energy Source, and in
consideration of future acquisitions, goodwill and other intangible assets have been and will be recorded. At the purchase date, the
recorded amounts for goodwill and other intangible assets represent fair values estimated at a point in time and are based on valuations that
require significant estimates and assumptions about future events, which are derived from information obtained from the management of
the acquired businesses and our business plans for the acquired businesses or intellectual property. If estimates and assumptions used to
initially record goodwill and intangible assets do not materialize, ongoing reviews of the carrying amounts of such goodwill and intangible
assets may result in impairments which will require us to record a charge in the period in which such an impairment is identified. Such
charge could have a severe negative impact on our business, financial condition and results of operations. The following factors also could
result in material charges that would adversely affect our results:
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accrual of newly identified pre-acquisition contingent liabilities, in which case the related charge could be required to be
included in earnings in the period in which the accrual is determined to the extent it is identified subsequent to the
finalization of the purchase price allocation; and
charges to income to eliminate certain pre-acquisition activities that duplicate those of the combined company or to reduce
our cost structure.
If we are not able to compete effectively against companies with greater resources, our prospects for future success will be jeopardized.
The lighting industry is highly competitive. In the high performance lighting markets in which we sell our LED lighting solutions, our
products compete with lighting products utilizing traditional lighting technology provided by larger and better-established lighting
operators. Management expects competition to intensify in the future. Many of our competitors have longer operating histories, larger
customer bases, greater brand recognition and significantly greater financial, marketing, technical and other resources. Our competitors
may acquire or be acquired by, receive investments from or enter into other commercial relationships with, larger, well established and
well-financed competitors. Therefore, some of our competitors with other revenue sources may be able to devote greater resources to
marketing and promotional campaigns, adopt more aggressive pricing policies, and devote substantially more resources to product
development. It is difficult to effectively compete with companies that have these resources so we cannot assure that we will ever become a
significant company in the industry.
In the replacement lamp market where we sell our Seesmart, Relume, Array and CMG line of LED products, we expect to encounter
competition from an even greater number of companies. Our competitors are expected to include the large, established companies in the
general lighting industry, such as GE Lighting, Osram Sylvania and Royal Philips Lighting. We believe each of these competitors has
undertaken initiatives to develop white light LED technology. These companies have global marketing capabilities and substantially greater
resources to devote to research and development and other aspects of the development, manufacture and marketing of LED lighting
products than we do. We may also face increased competition from traditional lighting fixture companies, such as Acuity Brands, Cree,
Cooper Lighting, Hubbell Lighting, Lithonia Lighting and Royal Philips Lighting. In each of our markets, we also anticipate the possibility
that LED manufacturers, including those that currently supply us with LEDs, may seek to compete with us by introducing more complete
systems that might not infringe on our patents. Our competitors’ lighting technologies and products may be more readily accepted by
customers than our products. The relatively low barriers to entry into the lighting industry and the limited proprietary nature of many
lighting products also permit new competitors to enter the industry easily. Increased competition may result in reduced operating margins,
loss of market share and diminished value in our brands.
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If our advanced lighting products do not gain wider market acceptance, prospects for our growth and profitability may be limited.
We face competition from both traditional lighting technologies, such as incandescent, florescent and neon lighting, and from competitors
engaged in providing LED lighting products. Traditional lighting technologies have the advantage of a long history of market acceptance
and familiarity as compared to our LED lighting solutions. Potential customers for our LED products may be reluctant to adopt these as
alternatives to traditional lighting technologies because of their higher initial cost to achieve comparable light output, although our LED
lighting products tend to be more energy efficient and require less maintenance.
Our success will depend upon both the increased acceptance of our LED products as an alternative to traditional lighting technologies and
the development of higher lumen producing products to meet traditional lighting applications. Obstacles to adoption of LED lighting in the
general lighting market include the high initial cost of high brightness white LEDs and the need for further advances in brightness, color
characteristics, efficiency and the predicted life of the LEDs before they require replacement. Our future results are dependent upon sales
growth in the commercial, hospitality, institutional, retail and sign markets. As part of our sales and marketing strategy, we actively seek to
educate our target markets as to the advantages of our LED lighting solutions. We believe that achievement of this objective is critical to
our future success. Our lighting products may not continue to gain market share within the overall lighting market or competitors may
introduce better lighting technologies, displacing our LED and other lighting products in the market. If acceptance of our lighting products
in general does not continue to grow, then opportunities to increase our revenue and operate profitably may be limited.
The reduction or elimination of investments in, or incentives to adopt, LED lighting or the elimination of, or changes in, policies,
incentives or rebates in certain states or countries that encourage the use of LEDs over some traditional lighting technologies could
cause the growth in demand for our products to slow, which could materially and adversely affect our revenues, profits and margins.
Reductions in (including as a result of any budgetary constraints), or the elimination of, government investment and favorable energy
policies designed to accelerate the adoption of LED lighting could result in decreased demand for our products and decrease our revenues,
profits and margins. Further, if our products fail to qualify for any financial incentives or rebates provided by governmental agencies or
utilities for which our competitors’ products qualify, such programs may diminish or eliminate our ability to compete by offering products
at lower prices than our competitors.
We believe that certification and compliance issues are critical to adoption of our lighting systems, and failure to obtain such
certification or compliance would harm our business.
We are required to comply with certain legal requirements governing the materials in our products. Although we are not aware of any
efforts to amend any existing legal requirements or implement new legal requirements in a manner with which we cannot comply, our
revenue might be materially harmed if such an amendment or implementation were to occur.
We cannot ensure that we will be able to obtain any required certifications for our new products or that, if certification standards are
amended, we will be able to maintain any such certifications for our existing products, especially since existing codes and standards were
not created with our lighting products in mind. Moreover, although we are not aware of any effort to amend any existing certification
standard or implement a new certification standard in a manner that would render us unable to maintain certification for our existing
products or obtain certification for new products, our revenue might be materially harmed if such an amendment or implementation were to
occur.
Regulations related to conflict-free minerals may force us to incur additional expenses.
The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and accountability
concerning the supply of minerals originating from the conflict zones of the Democratic Republic of the Congo (DRC) and adjoining
countries. As a result, in August 2012, the SEC established annual disclosure and reporting requirements for those companies who may use
“conflict” minerals mined from the DRC and adjoining countries in their products. These requirements required us to undertake due
diligence efforts beginning in the 2013 calendar year, with initial disclosure requirements beginning in May 2014. These requirements
could affect the sourcing and availability of certain minerals used in the manufacturing of our products. As a result, we may not be able to
obtain the relevant minerals at competitive prices, and there will likely be additional costs associated with complying with the due diligence
procedures as required by the SEC. In addition, as our supply chain is complex, we may face reputational challenges with our customers
and other stakeholders if we are unable to sufficiently verify the origins of all minerals used in our products through the due diligence
procedures that we implement, and we may incur additional costs as a result of changes to product, processes or sources of supply as a
consequence of these new requirements.
Customers may be unable to obtain financing to make purchases from us.
Some of our customers require financing in order to purchase our products. The potential inability of these customers to access the capital
needed to finance purchases of our products and meet their payment obligations to us could adversely impact our financial
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condition and results of operations. If our customers become insolvent due to market and economic conditions or otherwise, it could have a
material adverse impact on our business, financial condition and results of operations. Our affiliate, Aston, has provided financing to some
customers, but is under no obligation to continue to provide capital for future orders or other customers. There can be no assurance that
Aston or other third party finance companies will continue to provide capital to our customers.
If components used in our finished products become unavailable, or third-party manufacturers otherwise experience delays, or shipping
or transportation is disrupted due to labor unrest or other factors, we may incur delays in shipment to our customers, which would
damage our business.
We depend on third-party suppliers for substantially all of our components and products. We purchase these products and components from
third-party suppliers that serve the advanced lighting systems market and we believe that alternative sources of supply are readily available
for most products and components. However, consolidation in the LED lighting industry could result in one or more current suppliers being
acquired by a competitor, rendering us unable to continue purchasing necessary amounts of key components at competitive prices. In
addition, for certain of our customized components, arrangements for additional or replacement suppliers will take time and result in
delays. We purchase products and components pursuant to purchase orders placed from time to time in the ordinary course of business. This
means we are vulnerable to unanticipated price increases and product shortages. Any interruption or delay in the supply of components and
products, or our inability to obtain components and products from alternate sources at acceptable prices in a timely manner, could harm our
business, financial condition and results of operations.
We outsource the production of certain parts and components as well as finished goods in our product lines to a number of suppliers. While
we believe alternative manufacturers for these products are available, we have selected these particular manufacturers based on their ability
to consistently produce these products per our specifications ensuring the best quality product at the most cost effective price. We depend
on our third-party manufacturers to satisfy performance and quality specifications and to dedicate sufficient production capacity within
scheduled delivery times. Accordingly, the loss of all or one of these manufacturers or delays in obtaining shipments could have a material
adverse effect on our operations until such time as an alternative manufacturer could be found.
We may be subject to various import duties applicable to materials manufactured in foreign countries and, in addition, may be affected by
various other import and export restrictions, as well as other considerations or developments impacting upon international trade, including
economic or political instability, shipping delays and product quotas. These international trade factors will, under certain circumstances,
have an impact both on the cost of components (which will, in turn, have an impact on the cost to us of the manufactured product) and the
wholesale and retail prices of our products.
In addition, there has been labor unrest, including strikes and work stoppages, among workers at various transportation providers and in
industries affecting the transportation industry, such as port workers. We could lose business due to any significant work stoppage
or slowdown and, if labor unrest results in increased rates for transportation providers, we may not be able to pass these cost increases on to
our customers. Strikes among longshoreman and clerical workers at ports in the past few years have slowed down the ports for a time,
creating a major impact on the transportation industry. Any significant work stoppage, slowdown or other disruption involving ports,
railroads, truckers or draymen could adversely affect our business and results of operations.
If the companies to which we outsource the manufacture of our products fail to meet our requirements for quality, quantity and
timeliness, our revenue and reputation in the marketplace could be harmed.
We outsource a significant portion of the manufacture and assembly of our products. We currently depend on a small number of contract
manufacturers to manufacture our products at plants in the U.S. and China. These manufacturers supply finished products, components and
raw materials (in some cases we procure and provide our contract manufacturers with certain components, such as LEDs) and provide
necessary facilities and labor to manufacture our products. If these companies were to terminate their arrangements with us without
adequate notice, or fail to provide the required capacity and quality on a timely basis, we would be unable to manufacture and ship our
lighting products until replacement manufacturing services could be obtained. To qualify a new contract manufacturer, familiarize it with
our products, quality standards and other requirements, and commence volume production is a costly and time-consuming process. If it
became necessary to do so, we may not be able to establish alternative manufacturing relationships on acceptable terms.
Our reliance on contract manufacturers involves certain additional risks, including the following:
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lack of direct control over production capacity and delivery schedules;
lack of direct control over quality assurance, manufacturing yields and production costs;
risk of loss of inventory while in transit from foreign manufacturers; and
risks associated with international commerce, particularly with China, including unexpected changes in legal and
regulatory requirements, changes in tariffs and trade policies, risks associated with the protection of intellectual property
and political and economic instability.
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Any interruption in our ability to manufacture and distribute products could result in delays in shipment, lost sales, reductions in revenue
and damage to our reputation in the market, all of which would adversely affect our business.
We depend on distributors and independent sales representatives for a portion of our revenue and sales, and the failure to successfully
manage our relationships with these third-parties, or the termination of these relationships, could cause our revenue to decline and
harm our business.
We intend to continue to seek strategic relationships to distribute, license and sell certain products. We intend to maximize organic growth
of our market. A portion of our revenue comes from sales to distributors including systems integrators, distributors and resellers. We may
not be able to negotiate acceptable relationships in the future and cannot predict whether current or future relationships will be successful.
Some of these relationships have not been formalized in a detailed contract, and may be subject to termination at any time. The agreements
that are formalized in a contract are generally short-term, not exclusive, and can be cancelled by these sales channels without significant
financial consequence. In addition, these parties provide technical sales support to end-users. We cannot control how these sales channels
perform and cannot be certain that end-users will be satisfied by their performance. If these distributors and agents significantly change
their terms with us, or change their historical pattern of ordering products from us, there could be a significant impact on our revenue and
profits.
Claims by others that our products infringe their patents or other intellectual property rights could prevent us from manufacturing and
selling some of our products or require us to pay royalties or incur substantial costs from litigation or development of non-infringing
technology.
In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. We may
receive notices that claim we have infringed upon the intellectual property of others. Even if these claims are not valid, they could subject
us to significant costs. Any such claims, with or without merit, could be time-consuming to defend, result in costly litigation, divert our
attention and resources, cause product shipment delays or require us to enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to us or at all. We have engaged in litigation and litigation may be
necessary in the future to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others.
Litigation may also be necessary to defend against claims of infringement or invalidity by others. A successful claim of intellectual
property infringement against us and our failure or inability to license the infringed technology or develop or license technology with
comparable functionality could have a material adverse effect on our business, financial condition and operating results.
Our products could contain defects or they may be installed or operated incorrectly, which could reduce sales of those products or result
in claims against us.
Despite testing by us, errors have been found and may be found in the future in our existing or future products. This could result in, among
other things, a delay in the recognition or loss of revenue, loss of market share or failure to achieve market acceptance. These defects could
cause us to incur significant warranty, support and repair costs, divert the attention of our engineering personnel from our product
development efforts and harm our relationships with our customers. The occurrence of these problems could result in the delay or loss of
market acceptance of our lighting products and would likely harm our business. Defects, integration issues or other performance problems
in our lighting products could result in personal injury or financial or other damages to end-users or could damage market acceptance of our
products. Our customers and end-users could also seek damages from us for their losses. A product liability claim brought against us, even
if unsuccessful, would likely be time consuming and costly to defend.
If we are unable to attract or retain qualified personnel, our business and product development efforts could be harmed.
To a significant extent, our success will depend on our senior management team, including the Chairman, Chief Executive Officer and
President Robert V. LaPenta, and other members of the executive team. The loss of any of these individuals could severely harm the
business. Our success also depends on our continued ability to identify, attract, hire, train, retain and motivate highly skilled technical,
managerial, manufacturing, administrative and sales and marketing personnel. Competition for these individuals is intense, and we may not
be able to successfully recruit, assimilate or retain sufficiently qualified personnel. In particular, we may encounter difficulties in recruiting
and retaining a sufficient number of qualified technical personnel, which could harm our ability to develop new products and adversely
impact our relationships with existing and future customers. The inability to attract and retain necessary technical, managerial,
manufacturing, administrative and sales and marketing personnel could harm our ability to obtain new customers and develop new products
and could adversely affect our business and operating results.
17
Table of Contents
We are a “controlled company” within the meaning of the rules of NASDAQ and, as a result, are exempt from certain corporate
governance requirements that offer protections to stockholders of other NASDAQ-listed companies.
As of March 1, 2016, a majority of our outstanding stock is owned by RVL and its affiliates, including our Chairmen, Chief Executive
Officer and President and our Chief Financial Officer. As of March 1, 2016, the Company has 160.0 million common shares outstanding,
of which 84.2 million shares, or 52.6%, are beneficially owned by RVL and its affiliates. As a result, we are a “controlled company” within
the meaning of NASDAQ Marketplace Rule 5615. As a controlled company, we are exempt from certain NASDAQ corporate governance
requirements, including that:
•
•
compensation of officers be determined or recommended to the board of directors by a majority of its independent
directors or by a compensation committee comprised solely of independent directors; and
director nominees be selected or recommended to the board of directors by a majority of its independent directors or by a
nominating committee that is composed entirely of independent directors.
We currently utilize these exemptions. Accordingly, our stockholders are currently not afforded the same protections as stockholders of
other NASDAQ-listed companies that are subject to the NASDAQ corporate governance requirements. As a result, it is possible that our
directors will have interests and take actions that are in conflict with the interests of the stockholders. We anticipate that we will lose our
“controlled company” status during 2016.
We are currently controlled by our majority stockholder, RVL, whose interests may not be aligned with the interests of our other
stockholders.
RVL and its affiliates currently beneficially own a majority of our outstanding shares of common stock. Consequently, RVL controls the
outcome of all matters submitted for stockholder action, including the composition of our board of directors and the approval of significant
corporate transactions. Through its majority representation on our board of directors, RVL has a controlling influence on our strategic
direction, policies and management, including the ability to appoint and remove officers. As a result, RVL may cause us to take actions that
may not be aligned with the interests of other stockholders. For example, RVL may prevent, delay or accelerate any transaction involving a
change in control of us or in which our stockholders might receive a premium over the prevailing market price for their shares, or may
determine to pursue a transaction not involving a premium. Although we anticipate that RVL and its affiliates will cease to hold a majority
of our outstanding shares during 2016, RVL will continue to exert substantial influence on stockholder and board decisions.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2.
Properties.
The following table summarizes information with respect to our facilities, which are all leased:
Corporate headquarters
Office and warehouse
Office, distribution and light manufacturing
Office and distribution center
Office and training center
Office, distribution and light manufacturing,
showroom and training
Office and warehouse
Warehouse and distribution center
Office, warehouse and distribution center
Office and warehouse
Office and warehouse
Office
Office and warehouse
Office
Location
Area (sq. feet)
Year of
Lease
Expiration
Stamford, Connecticut
Simi Valley, California
Maple Grove, Minnesota
Greenwich, Connecticut
Crystal Lake, Illinois
Oxford, Michigan
Marietta, Georgia
Marietta, Georgia
Carrollton, Texas
Beltsville, Maryland
Carrollton, Texas
Providence, RI
San Marcos, Texas
Billerica, Massachusetts
16,626
12,200
13,200
5,230
10,000
45,000
63,000
14,372
37,824
28,800
73,986
4,225
20,376
2,883
2020
2018
2018
2020
2018
2017
2024
2016
2022
2018
2020
2018
2018
2020
We consider our facilities adequate for our current needs and believe that suitable additional space would be available if necessary.
18
Table of Contents
Item 3.
Legal Proceedings
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. The Company is not currently a party to any pending legal proceedings
which it believes to be material.
Item 4.
Mine Safety Disclosures
Not applicable.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a) Our common stock is quoted on The NASDAQ Capital Market under the symbol “RVLT.” The following table sets forth the high and
low sales prices for our Common Stock for the periods indicated as reported by The NASDAQ Capital Market:
2015
2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Low High
High
Low
$1.39 $0.92 $4.35 $2.81
2.01
1.63
0.98
3.40
2.67
2.17
1.06
0.91
0.68
1.50
1.28
1.06
(b) The number of holders of record of our Common Stock on March 1, 2016 was 125. This number does not include beneficial owners of
our Common Stock whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries. On
March 1, 2016, the last reported sale price of our common stock on the Nasdaq Capital Market was $0.75 per share.
(c) We have never paid a cash dividend on our Common Stock and intend to continue to follow a policy of retaining earnings to finance
future growth. Accordingly, we do not anticipate the payment of cash dividends to holders of our Common Stock in the foreseeable future.
We are also limited in our ability to pay dividends under our loan and security agreement with Bank of America. For additional information
on our loan and security agreement, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Liquidity, Capital Resources and Cash Flows” and Note 15 of our Notes to Consolidated Financial Statements.
(d) Equity Compensation Plan Information as of December 31, 2015
The following table provides information as of December 31, 2015 with respect to shares of our Common Stock that may be issued under
our equity compensation plans. For additional information regarding our stock option plans and the accounting effects of our stock-based
compensation, please see Notes 1 and 8 of our Notes to Consolidated Financial Statements.
(a)
Number of common
shares to be
issued upon exercise of
outstanding
options, warrants and
rights
(b)
Weighted-average
exercise price of
outstanding
options,
warrants and
rights
(c)
Number of
common shares
available for
future issuance
(excluding
securities
reflected in
column (a))
314,834
$
4.36
—
—
314,834
N/A
N/A
2,437,186
2,437,186
Plan Category
Equity compensation plans (stock options)
approved by stockholders
Equity compensation plans (restricted
share awards) approved by
stockholders (a)
Totals
(a) Excludes previous grants of restricted stock totaling 2,706,664 shares and 831,150 shares for incentive compensation.
19
Table of Contents
Stock Performance Graphs
The following information contained in this Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or
to be “filed” with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the
Exchange Act, and will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act,
except to the extent we specifically incorporate it by reference into such filing.
Supplemental stock performance graph
In 2012, a change in control of the Company was effected when RVL purchased 73% of the Company’s outstanding voting stock. The
following supplemental graph compares the cumulative total return on our common stock with the cumulative total returns of the NASDAQ
Composite Index and the Dow Jones US Electrical Components and Equipment Index for the period commencing on September 12, 2012,
the date when RVL announced its initial investment in the Company, to December 31, 2015. The stock price performance shown on the
graph is not necessarily indicative of future price performance.
Revolution Lighting Technologies, Inc.
NASDAQ Composite
Dow Jones US Electrical Components & Equipment Index
20
9/12/12 12/31/12
12/31/14 12/31/15
$100.00 $484.61 $2,638.68 $1,038.55 $615.44
160.59
136.56
96.92
100.45
100.00
100.00
133.97
137.26
151.89
146.50
12/31/13
Table of Contents
Five-year stock performance graph
The following graph compares the cumulative total return on our common stock with the cumulative total returns of the NASDAQ
Composite Index and the Dow Jones US Electrical Components and Equipment Index for the five-year period commencing on
December 31, 2010. The stock price performance shown on the graph is not necessarily indicative of future price performance.
2010
2011
2012
2013
2014
2015
Revolution Lighting Technologies, Inc.
NASDAQ Composite Index
Dow Jones US Electrical Components & Equipment Index
21
$100.00 $53.19 $ 30.73 $167.05 $ 65.75 $ 38.96
188.98
145.72
100.00
100.00
157.59
146.56
113.94
107.23
178.74
156.33
98.26
88.62
Table of Contents
Item 6.
Selected Financial Data
The following table presents selected historical consolidated financial data of Revolution Lighting Technologies, Inc. for the fiscal years
ended December 31, 2015, 2014, 2013, 2012 and 2011. The selected historical consolidated financial data has been derived from
Revolution Lighting Technologies, Inc.’s audited consolidated financial statements for the respective dates and periods.
The information presented below should be read together with “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and the consolidated financial statements and notes thereto included in “Item 8. Financial Statements and
Supplementary Data.”
(in thousands, except per share data)
Statement of Operations Data:
Revenue
Cost of sales
Gross profit (loss)
Operating expenses:
Selling, general and administrative:
Acquisition, severance and transition costs
Amortization and depreciation
Stock-based compensation
Other selling, general and administrative
Research and development
Impairment expense
Total operating expenses
Operating loss
Non-operating income (expense):
Gain on debt restructuring
Change in fair value of embedded derivative
Gain on bargain purchase of business
Interest expense and other bank charges
Total non-operating income (expense), net
Loss before income taxes
Deferred income tax benefit
Net loss
Accretion of preferred stock redemption value, beneficial conversion feature, and
discount
Accrual of preferred stock dividends
Deemed distribution on exchange of preferred stock
Net loss attributable to common stockholders
2015 (1) 2014 (2) 2013 (3) 2012 (4)
2011
Year Ended December 31,
$129,656 $ 76,840 $ 26,060 $ 4,481 $ 8,988
4,705 7,075
86,366 52,617 16,108
(224) 1,913
9,952
43,290 24,223
2,488
5,644
1,711
1,950
4,868
2,719
3,541
3,122
809
32,179 23,204 11,193
1,809
— —
44,191 35,123 20,474
(901) (10,900) (10,522)
2,475
—
2,076
286 —
447
493
301
45
4,417 5,233
834
555
3,397
408
9,193 7,223
(9,417) (5,310)
1,048 —
— —
—
(6,990) — —
—
—
743 — —
—
—
(115)
(209)
(52)
(830)
(1,481)
(1,481)
(115)
839
(6,299)
(830)
(8,578) (5,425)
(2,382) (11,730) (16,821)
6,550 — — —
(8,578) (5,425)
(5,180) (16,821)
—
(2,382)
—
—
—
(5,195) —
(919)
(1,445)
(31) —
(5,301) — — —
$ (2,382) $ (12,845) $(20,471) $(13,804) $ (5,425)
(2,290)
(1,360)
Basic and diluted net loss per common share attributable to common stockholders $
(0.02) $
(0.14) $
(0.26) $
(0.63) $ (0.33)
(in thousands)
Balance Sheet Data (at end of period):
Cash and cash equivalents
Working capital
Total assets
Related party notes payable
Revolving credit facility
Total liabilities
Convertible redeemable preferred stock
Total stockholders’ equity
2015
As of December 31,
2013
2014
2012
2011
219 $
(1,796)
6,033 $ 1,757 $ 4,434 $ 3,015
$
25,851 18,788
(1,815) 5,326
177,635 126,542 52,237 31,277 11,948
2,565
2,565 — — 2,315
8,760 — — —
22,026
75,532 49,226 15,815 10,581 3,637
— 10,966 — —
—
102,103 77,316 25,456 20,696 8,311
22
Table of Contents
(1) Reflects the acquisition of E-lighting on February 5, 2015, and Energy Source on August 5, 2015.
(2) Reflects the acquisition of Value Lighting on April 17, 2014, All Around on December 18, 2014, the Preferred Stock Exchange on
December 1, 2014 (see Note 7 of the Notes to the Consolidated Financial Statements), and the public offering of common stock on
December 1, 2014.
(3) Reflects the acquisition of Relume on August 22, 2013 and Tri-State on November 15, 2013.
(4) Reflects the acquisition of Seesmart on December 20, 2012 and the investment by RVL1 LLC on September 12, 2012.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our results of operations and financial condition is based upon, and should be read in conjunction with, our
consolidated financial statements and accompanying notes thereto included elsewhere in this report. This discussion contains forward-
looking statements. Actual results could differ materially from the results discussed in the forward-looking statements. Please see “Risk
Factors” and “Cautionary Note Regarding Forward-Looking Statements” for a discussion of some of the uncertainties, risks and
assumptions associated with these statements.
Overview
We design, manufacture, market and sell high-performance, commercial grade smart grid control systems, commercial grade LED fixtures
for outdoor and indoor applications, LED-based signage, channel-letter and contour lighting products, and LED replacement lamps, as well
as conventional lighting fixtures. We sell our LED products under the RVLT, Seesmart, Lumificient, Value Lighting, Array and CMG
brand names. Our products incorporate many proprietary and innovative features. We believe that our product offerings and patented
designs provide opportunities for significant savings in energy and maintenance costs without compromising the environment. We generate
revenue by selling lighting products for use in the commercial and industrial, and government markets, which include vertical markets such
as federal, state and local governments, industrial, commercial and government facilities, multi-family real estate construction, hospitality,
institutional, educational, healthcare and signage. 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.
On December 20, 2012, we acquired Seesmart, headquartered in Simi Valley, California. With the acquisition of Seesmart, we targeted the
C&I sales channel, moving away from the big box store model the Company previously pursued. Seesmart is a leading LED solutions
provider with a range of solutions serving the commercial lighting market. We believe that Seesmart’s management combined with its
exclusive network of experienced lighting distributors and sales representatives provides us with a customer and solution-focused
advantage.
On August 22, 2013, we acquired Relume. Relume is a manufacturer of outdoor LED products and smart grid control systems for outdoor
lighting applications. Relume services several outdoor LED markets, including municipal street and roadway lights, parking lots and
garages, pedestrian areas, buildings and outdoor advertising displays. Relume’s patented Silver Circuitry™ process for LED thermal
management offers the first seven-year LED warranty, adding value to Revolution Lighting customers by improving LED performance,
lowering operating temperature and extending LED life.
On November 15, 2013, we completed the acquisition of Tri-State, a distributor of Seesmart products. Tri-State has a strong management
team and a significant client base in New York, New Jersey and Connecticut.
On April 17, 2014, we completed the acquisition of Value Lighting, a supplier of lighting solutions to the multifamily residential market.
We acquired Value Lighting for its presence in the multifamily residential market and construction, the experience of the management
team, its customer base, and operational and business development synergies which we believe provide an opportunity to offer our LED
solutions through Value Lighting’s existing distribution channels.
On December 18, 2014, we completed the acquisition of All Around for its presence in the multifamily residential market and construction,
the experience of the management team, its customer base, operational and business development synergies.
On February 5, 2015, the Company acquired the assets of DPI Management, Inc. d/b/a E Lighting, consisting principally of inventory.
On August 5, 2015, we completed the acquisition of 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. We acquired
Energy Source for its management team, its client base and operational and business development synergies.
23
Table of Contents
Segment information
The Company’s operations consist of one reportable segment for financial reporting purposes: Lighting Products and Solutions (principally
LED fixtures and lamps). For each of the two years ended December 31, 2014, we reported two segments, Lighting Fixtures and Lamps,
and Lighting Signage and Media. Due to changes in the management, organizational structure and internal reporting, our operations now
comprise one reportable segment for financial reporting purposes, and therefore segment disclosures are no longer presented.
See Note 12 of the Notes to the Consolidated Financial Statements for financial information about foreign and domestic operations.
Results of operations
Revenue
Revenue is derived from sales of our advanced lighting products. These products consist of solid-state LED replacement lamps, lighting
systems and controls, as well as conventional lighting fixtures. Revenue is subject to both quarterly and annual fluctuations and is impacted
by the timing of individually large orders as well as delays in product orders or changes to the timing of shipments or deliveries. We
recognize revenue upon shipment or delivery to our customers in accordance with the respective contractual arrangements. We recognize
revenue from fixed-price and modified fixed-price contracts for turnkey energy conservation projects using the percentage-of-completion
method of accounting. The majority of our sales are to the North American market (which includes Canada, but excludes Mexico for our
purposes), and we expect that region to continue to be a major source of revenue for us. However, we also derive a portion of our revenue
from customers outside of the North American market. Substantially all of our revenue is denominated in U.S. dollars.
Cost of Goods Sold
Our cost of goods sold consists primarily of purchased components and products from our contract manufacturers and manufacturing-
related overhead such as depreciation, rent and utilities. In addition, our cost of goods sold includes provisions for excess and obsolete
inventory, inbound freight costs and other indirect costs of sale. We source our manufactured products based on sales expectations and
customer orders.
Gross Profit
Our gross profit has been and will continue to be affected by a variety of factors, including average sales prices of our products, product
mix, our ability to reduce manufacturing costs and fluctuations in the cost of our purchased components. We sometimes use the term of
direct gross margin which we define as revenue less direct material costs.
Operating Expenses
Operating expenses consist primarily of salaries and associated costs for employees in sales, engineering, finance, and administrative
activities. In addition, operating expenses include charges relating to accounting, legal, insurance and stock-based compensation.
Summary of Results
For the year ended December 31, 2015, the Company reported revenues of $129.7 million and a net loss of $2.4 million, compared to
revenues of $76.8 million and a net loss of $5.2 million for the corresponding period in 2014 and revenues of $26.1 million and a net loss
of $16.8 million for the corresponding period in 2013. The 2015 results reflect the acquisitions of E-Lighting and Energy Source from their
respective dates of acquisition; the 2014 results reflect the acquisition of Value Lighting and All Around from their respective dates of
acquisition; and the 2013 results reflect the acquisitions of Relume and Tri-State from their respective dates of acquisition. The Company’s
reported net losses for the years ended December 31, 2015, 2014 and 2013 included the following:
(in millions)
Acquisition, severance and transition costs
Amortization and depreciation
Stock-based compensation cost
Change in fair value of embedded derivatives
Gain on bargain purchase of business
Interest expense and other bank charges
Deferred income tax benefit
Total
24
2015
$ (2.0)
(4.9)
(2.7)
—
—
(1.4)
2014
$(2.5)
(5.6)
(1.7)
—
—
(0.8)
2013
$ (3.5)
(3.1)
(0.8)
(7.0)
0.7
(0.1)
—
$(11.0)
6.6
$(4.0)
—
$(13.8)
Table of Contents
In connection with the acquisitions in 2014, the Company recorded net deferred tax liabilities of $6.6 million, primarily resulting from the
recognition of amortizable intangible assets at the date of acquisition. These net deferred tax liabilities can be used to reduce net deferred
tax assets for which the Company had provided a valuation allowance. Accordingly, the valuation allowance has been reduced by a
corresponding amount during the year ended December 31, 2014.
A significant portion of our 2015 and 2014 revenue is from acquisitions consummated during those years. On a pro forma basis, after
giving effect to the acquisitions as if they had been consummated on January 1, 2014, revenues for the year ended December 31, 2015
increased by $22.6 million, or 20%, to $138.5 million from $115.9 million for the year ended December 31, 2014.
Revenue
(in thousands)
Total revenue
Fiscal 2015 compared with fiscal 2014
Year Ended December 31,
2015
$129,656
2014
$76,840
2013
$26,060
Total revenue for the year ended December 31, 2015 increased 69%, or $52.9 million, to $129.7 million as compared to $76.8 million for
the year ended December 31, 2014. Of this increase, $16.3 million results from the 2015 acquisitions (See Note 2 of the Notes to the
Consolidated Financial Statements). The remaining $36.6 million increase reflects organic growth of 18% due to strong LED sales and the
full-year effect of the 2014 acquisitions of Value and All-Around.
Fiscal 2014 compared with fiscal 2013
Total revenue for the year ended December 31, 2014 increased 195%, or $50.7 million, to $76.8 million as compared to $26.1 million for
the year ended December 31, 2013. Of this increase, $46.2 million results from the 2014 acquisitions (see Note 2 of the Notes to the
Consolidated Financial Statements). The remaining increase primarily reflects the full-year effect of the 2013 acquisitions of Relume and
Tri-State, partially offset by the 2013 impact of the fulfillment of several large orders from a group of related customers that did not recur
in 2014.
Profit and Cost of Goods Sold
(in thousands)
Revenue
Cost of sales
Gross profit
Gross margin %
Fiscal 2015 compared with fiscal 2014
Year Ended December 31,
2015
$129,656
86,366
$ 43,290
2014
$76,840
52,617
$24,223
2013
$26,060
16,108
$ 9,952
33.4%
31.5%
38.2%
Gross profit for the year ended December 31, 2015 was $43.3 million, or 33.4% of revenue, as compared to gross profit of $24.2 million,
or 31.5% of revenue, for the corresponding period of 2014. The increase in gross margin percentage reflects the impact of the acquisitions
noted above from their respective dates of acquisition and the continued effort of the sourcing team to leverage increased volume to reduce
cost.
Fiscal 2014 compared with fiscal 2013
Gross profit for the year ended December 31, 2014 was $24.2 million, or 31.5% of revenue, as compared to gross profit of $10 million, or
38.2% of revenue, for the corresponding period of 2013. The increase in gross profit reflects the impact of the acquisitions noted above
from their respective dates of acquisition. The 2013 results reflect the revenue and margin impact of several large, non-recurring orders.
25
Table of Contents
Operating Expenses
(in thousands)
Operating expenses:
Selling, general and administrative
Acquisition, severance and transition costs
Amortization and depreciation
Stock-based compensation
Other selling, general and administrative
Research and development
Total operating expenses
Fiscal 2015 compared with fiscal 2014
Year Ended December 31,
2014
2013
2015
$ 1,950
4,868
2,719
32,179
41,716
2,475
$ 44,191
$ 2,488
5,644
1,711
23,204
33,047
2,076
$ 35,123
$ 3,541
3,122
809
11,193
18,665
1,809
$ 20,474
Selling, general and administrative (“SG&A”) expenses were $41.7 million for the year ended December 31, 2015 as compared to $33.0
million for the same period in 2014, an increase of $8.7 million, or 26%. This results from the 2015 acquisitions of E-Lighting and Energy
Source, and the full-year effect of the 2014 acquisitions of Value Lighting and All Around. As a percentage of net sales, SG&A, decreased
from 43% during 2014 to 32% during 2015, as increased revenue enabled the Company to realize economies of scale. We incurred non-
cash amortization and depreciation of $4.9 million for the year ended December 31, 2015, a decrease of $0.8 million over the same period
in 2014, primarily due to additional amortization recognized in 2014 for our short-lived intangible assets associated with our Value
Lighting acquisition.
Research and development costs increased $0.4 million, or 19%, to $2.5 million during the year ended December 31, 2015, compared to the
same period in 2014, reflecting our continued commitment to the development of high-quality LED technology.
Fiscal 2014 compared with fiscal 2013
SG&A expenses, were $33.0 million for the year ended December 31, 2014 as compared to $18.7 million for the same period in 2013, an
increase of $14.3 million, or 77%. This results from the 2014 acquisitions of Value Lighting and All Around, and the full-year effect of the
2013 acquisitions of Tri-State and Relume. As a percentage of net sales, SG&A expenses decreased from 72% during 2013 to 43% during
2014, as increased revenue enables the Company to realize economies of scale. We incurred non-cash amortization and depreciation of $5.6
million for the year ended December 31, 2014, an increase of $2.5 million over the same period in 2013, primarily due to the amortization
of intangible assets acquired in the Value Lighting acquisition.
Research and development costs increased $0.3 million, or 15%, to $2.1 million during the year ended December 31, 2014, compared to the
same period in 2013, reflecting our continued commitment to the development of high-quality LED technology.
Other Income and Expense
(in thousands)
Change in fair value of embedded derivative
Gain on bargain purchase of business
Interest expense and other bank charges
Total other expense, net
26
Year Ended December 31,
2015
$ —
—
(1,481)
$(1,481)
2014
$ —
—
(830)
$(830)
2013
$(6,990)
743
(52)
$(6,299)
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For the year ended December 31, 2015 and 2014, the Company recorded interest expense and other bank charges of $1.5 million and $0.8
million, respectively, primarily related to borrowings under the Bank of America revolving credit facility and certain borrowings from RVL
and its affiliates (see Notes 14 and 15 of the Notes to Consolidated Financial Statements).
In connection with the acquisition of the Elite business during the year ended December 31, 2013, we recognized a bargain purchase gain
of $0.7 million. See Note 2 of the Notes to Consolidated Financial Statements.
The change in fair value relates to the embedded conversion feature on the Series E Preferred Stock. See Note 7 of the Notes to
Consolidated Financial Statements. The Series E Preferred Stock is no longer outstanding as of December 31, 2014.
Income Tax
A tax benefit of $6.6 million was recognized in 2014. In connection with the 2014 acquisitions, we recorded deferred tax liabilities in this
amount, primarily resulting from the recognition of amortizable intangible assets at the dates of acquisition. These net deferred tax
liabilities can be used to reduce net deferred tax assets for which the Company provided a valuation allowance; accordingly, the valuation
allowance has been reduced by a corresponding amount. No income tax benefit was recorded for the years ended December 31, 2015 and
2013 since the tax benefits of the losses incurred were offset by a corresponding increase in the related deferred tax valuation allowance.
Net Loss
(in thousands, except per share data)
Net loss
Net loss attributable to common stockholders
Basic and diluted loss per common share applicable to common
stockholders
Year Ended December 31,
2014
2015
$(2,382)
(2,382)
$ (5,180)
(12,845)
2013
$(16,821)
(20,471)
(0.02)
(0.14)
(0.26)
Net loss attributable to common stockholders for the year ended December 31, 2014 includes the $5.3 million effect of the Preferred Stock
Exchange. See Notes 1 and 7 of the Notes to Consolidated Financial Statements.
Net loss attributable to common stockholders for the year ended December 31, 2014 and 2013 includes the effects of the accretion to
redemption value of the Series E and F Preferred Stock and accrual of preferred stock dividends. These amounts were greatly reduced in
2014 due to the June 2014 exchange of Series F Preferred Stock for Series G Preferred Stock, and the December Preferred Stock Exchange.
See Notes 1 and 7 of the Notes to Consolidated Financial Statements.
Weighted average shares outstanding were 149.3 million, 92.2 million and 77.3 million for the years ended on December 31, 2015, 2014
and 2013, respectively.
LIQUIDITY, CAPITAL RESOURCES AND CASH FLOWS
Liquidity and capital resources
At December 31, 2015, we had cash and cash equivalents on hand of $0.2 million and we estimate that we were eligible to borrow an
additional $2.6 million under our loan and security agreement with Bank of America, as described below, based upon the current levels of
inventory and accounts receivable. During the years ended December 31, 2015, 2014 and 2013, we reported negative cash flow from
operations of $16.7 million, $14.3 million and $8.1 million, respectively. Negative operating cash flows during 2015 reflect our higher
working capital investment to support our greatly expanded 2015 operations.
Cash flows during 2015 include net proceeds of $9.5 million from the sale of 8.7 million shares of our common stock to a third party
investor. The proceeds were used to fund the cash portion of the Energy Source acquisition. Cash flows during 2014 include net proceeds
of $8.6 million from an underwritten public offering of 8 million shares of our common stock. The proceeds were used for general
corporate purposes.
During 2014, we received various loans from RVL and its affiliates aggregating $18.1 million, of which $10.6 million was used to pay the
cash portion of the purchase price of Value Lighting. On June 30, 2014, $12.6 million of outstanding principal and interest owed to RVL
and its affiliates was exchanged for shares of our Series G Preferred Stock, including the amount borrowed to fund the cash portion of the
purchase price of Value Lighting. On July 31, 2014, certain outstanding short-term loans and cash advances owed to RVL and its affiliates
were consolidated into a longer-term note in the principal amount of $5.7 million, due April 1, 2016. A portion of this note was repaid with
proceeds from the Bank of America revolving credit facility (as described below), such that a balance of $2.6 million remained outstanding
under the note as of December 31, 2015, due April 1, 2017.
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During 2014, the Company entered into a loan and security agreement with Bank of America to borrow up to $25 million on a revolving
basis, based upon specified percentages of eligible receivables and inventory. Borrowings under this facility were $22.0 million as of
December 31, 2015, an increase of $13.3 million during 2015. The Loan Agreement contains covenants which limit the ability of the
Company to, among other things, (i) create, incur, guarantee or suffer to exist any indebtedness; (ii) create or suffer any lien upon any
property; (iii) declare or make distributions to equity holders or create any restriction on the ability of a subsidiary to make such a
distribution; (iv) make investments; (v) sell, lease, license, consign or otherwise dispose of any property; (vi) make loans or other advances
of money to any person; (vii) make payments on certain indebtedness; and (viii) enter into transactions with affiliates. In addition, the Loan
Agreement includes financial covenants that, on a consolidated basis, requires the Company to maintain, for the most recent twelve fiscal
months, a ratio of (i) EBITDA minus Capital Expenditures (as defined in the Loan Agreement) and cash taxes paid to (ii) Fixed Charges (as
defined in the Loan Agreement), of not less than 1.1 to 1.0, and a ratio of (i) Senior Debt (as defined in the loan agreement) to (ii) EBITDA
of not more than 3.5 to 1.0. We are in compliance with our covenants and obligations under the facility.
On December 1, 2014, we converted all outstanding series of preferred stock, including accrued but unpaid dividends thereon, to an
aggregate of 36,300,171 shares of our unregistered common stock (the “Preferred Stock Exchange”). All rights relating to the preferred
stock were extinguished as a result of the transaction, accordingly we have been relieved of the ongoing obligation to pay dividends on
preferred stock.
At December 31, 2015, the Company had positive working capital of $25.9 million, compared to positive working capital at December 31,
2014 of $18.8 million. The increase in working capital is the result of investment needed to support the greatly expanded business.
Significant balance sheet changes during 2015 were primarily the result of the 2015 acquisitions and increases in business volume.
While the Company generated negative cash flows from operations in the full fiscal year 2015, it did achieve positive cash flows from
operations in the fourth quarter of 2015 and the Company believes it has adequate resources to meet its cash requirements in the foreseeable
future.
Although we have realized revenues of $129.7 million during the year ended December 31, 2015 and positive earnings and cash flow in the
fourth quarter, we face challenges in order to maintain profitability, and there can be no assurance that we will sustain positive cash flows
from operations and profitability in future periods. Our ability to meet our obligations in the ordinary course of business is dependent upon
our ability to maintain profitable operations, maintain our revolving credit facility, or raise additional capital. Additional capital could take
the form of public or private debt, equity financing, other sources of financing to fund operations, or the support of our controlling
stockholder. There can be no assurance such financing will be available on terms acceptable to us or that any financing transaction will not
be dilutive to our current stockholders.
In addition, to accelerate the growth of our operations in response to new market opportunities or to acquire other technologies or
businesses, we may need to raise additional capital. Additional capital may come from several sources, including the issuance of additional
common stock, preferred stock, debt (whether convertible or not) or other securities. Increased indebtedness could negatively affect our
liquidity and operating flexibility. The issuance of any additional securities could, among other things, result in substantial dilution of the
percentage ownership of our stockholders at the time of issuance, result in substantial dilution of our earnings per share, and adversely
affect the prevailing market price for our common stock. In addition, we may not be able to obtain additional financing on terms favorable
to us, if at all. If additional funds become necessary and are not available on terms favorable to us, or at all, we may be unable to expand
our business or pursue an acquisition and our business, results of operations and financial condition may be materially adversely affected.
Cash Flows
(in thousands)
Operating activities
Investing activities
Financing activities
Total
2015
2014
2013
$(16,689)
$(14,303)
$ (8,146)
(10,961)
(12,006)
(10,570)
21,836
$ (5,814)
30,585
$ 4,276
16,039
$ (2,677)
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Fiscal 2015 compared with fiscal 2014
While we generated positive cash flow from operations in the fourth quarter, net cash used in operating activities increased $2.4 million, to
$16.7 million for the year ended December 31, 2015, as compared to $14.3 million for the year ended December 31, 2014. Operating cash
flows during 2015 reflect our higher working capital investment, particularly in accounts receivable and inventory, to support our greatly
expanded 2015 operations.
Net cash used in investing activities decreased by $1.0 million for the year ended December 31, 2015 as compared to the same period in
2014. The decrease in cash used in investing activities reflects $10.5 million of cash used for acquisitions in the year ended December 31,
2015 compared to $11.5 million in 2014.
Net cash provided by financing activities decreased by $8.7 million for the year ended December 31, 2015 as compared to the same period
in 2014 primarily due to net proceeds of related party loans received in 2014, partially offset by increased borrowings from the revolving
credit facility in 2015.
Fiscal 2014 compared with fiscal 2013
Net cash used in operating activities increased $6.2 million, to $14.3 million for the year ended December 31, 2014, as compared to $8.1
million for the year ended December 31, 2013. Operating cash flows during 2014 reflect our higher working capital investment,
particularly in accounts receivable, to support our greatly expanded 2014 operations.
Net cash used in investing activities increased by $1.4 million for the year ended December 31, 2014 as compared to the same period in
2013. The increase in cash used in investing activities reflects $11.5 million of cash used for acquisitions in the year ended December 31,
2014 compared to $10.4 million in 2013.
Net cash provided by financing activities increased by $14.5 million for the year ended December 31, 2014 as compared to the same period
in 2013. This increase includes the net proceeds from a public offering of our common stock, borrowings against our new revolving credit
facility, and related-party loans received during 2014.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We use certain accounting policies and procedures to manage changes that occur in our business environment that may affect accounting
estimates made in preparation of our financial statements. These estimates relate primarily to our allowance for doubtful accounts
receivable, reserve for product returns, provision for inventories, warranties and product liability, revenue recognition, stock-based
compensation, goodwill, intangible assets, income taxes and purchase price allocation.
Revenue recognition –We recognize revenue for our products upon shipment or delivery to customers in accordance with the respective
contractual arrangements, provided no significant obligations remain and collection is probable. For sales that include customer acceptance
terms, revenue is recorded after customer acceptance. It is our policy that all sales are final. Requests for returns are reviewed on a case by
case basis. As revenue is recorded, we accrue an estimated amount for product returns as a reduction of revenue.
The Company recognizes revenue from fixed-price and modified fixed-price contracts for turnkey energy conservation projects using the
percentage-of-completion method of accounting. The percentage-of-completion is computed by dividing the actual incurred cost to date by
the most recent estimated total cost to complete the project. The computed percentage is applied to the expected revenue for the project to
calculate the contract revenue to be recognized in the current period. This method is used because management considers total cost to be the
best available measure of progress on these contracts. Contract costs include all direct material and labor costs and indirect costs related to
contract performance. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are
determined.
The Company has elected to record sales tax revenue on a gross basis (included in revenues and costs).
Accounts Receivable and Bad Debts - Our strategy for managing doubtful accounts includes centralized credit policies and collection
procedures for all customer accounts. We use a credit risk rating system in order to measure the quality of individual credit transactions. We
strive to identify potential problem receivables early, take appropriate collection actions, and maintain adequate reserve levels. As revenue
is recorded, we accrue an estimated amount for product returns as a reduction of revenue. Our estimate for product returns is based on our
historical return experience and our expectation of future returns. We believe that our allowance for doubtful accounts and reserve for
product returns were adequate at December 31, 2015 and 2014.
Inventory Provisions - Our strategy for providing for inventory obsolescence includes the evaluation of existing inventory usage and
realizable value. We believe that our provision for inventory obsolescence is adequate at December 31, 2015 and 2014.
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Warranties and product liability - Our products typically carry a warranty that ranges from one to ten years and includes replacement of
defective parts. A warranty reserve is recorded for the estimated costs associated with warranty expense related to recorded sales, which is
included within accrued liabilities. The estimate is based on historical experience. If future experience proves to be different from historical
experience, we may need to increase or decrease the reserve.
Stock-based Compensation - We account for stock-based compensation under the provisions of FASB ASC 718 “Compensation-Stock
Compensation”. Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date
based on the value of the award and is recognized as expense over the requisite service period, which is typically the vesting period.
Determining the fair value of share-based option awards at the grant date requires judgment, including estimating volatility and expected
lives. In addition, judgment is also required in estimating the amount of share-based awards that are expected to be forfeited. If actual
results differ significantly from our estimates, our results of operations could be materially impacted.
Purchase Price Allocation - Valuations of acquired businesses require us to make significant estimates, which are derived from information
obtained from the management of the acquired businesses, our business plans for the acquired businesses or intellectual property and other
sources. Critical assumptions and estimates used in the initial valuation of goodwill and other intangible assets include, but are not limited
to:
•
•
•
•
•
•
Assessments of appropriate valuation methodologies in the circumstances;
Future expected cash flows from product sales, customer contracts and acquired developed technologies, patents and other
intellectual property;
Expected costs to complete any in process research and development projects and commercialized viable products and
estimated cash flows from the sales of such products;
The acquired company’s brand awareness and market position;
Assumptions about the period of time over which we will continue to use the acquired brand and intangible assets; and
Discount rates.
The estimates and assumptions may not materialize because unanticipated events and circumstances may occur. If estimates and
assumptions used to initially value goodwill and intangible assets prove to be different from actual results, ongoing reviews of the carrying
values of such goodwill and intangible assets may indicate impairment, which will require us to record an impairment charge in the period
in which it is identified.
Goodwill and Intangible Assets - We record goodwill as the excess of purchase price over the fair value of the identifiable net assets
acquired. FASB ASC 350 “Intangibles – Goodwill and Other” (“ASC 350”), prescribes a two-step process for annual impairment testing of
goodwill. The first step tests for impairment, while the second step, if necessary, measures the impairment. Step one compares the fair
value of our reporting unit to its carrying amount. If the fair value of the reporting unit is greater than its carrying amount, there is no
impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to measure the amount of
impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net
assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit
is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been
acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss will be recognized
in an amount equal to the excess. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant
estimates and assumptions, including revenue growth rates, strategic plans, future market conditions, cash flows and discount rates, among
others. There can be no assurance that our estimates and assumptions made for purposes of the goodwill impairment testing will prove to be
accurate predictions of the future. If our assumptions regarding forecasted revenue or margin growth rates are not achieved or changes in
strategy or market conditions occur, we may be required to record goodwill impairment charges in future periods. Due to the change in
reportable segments in 2015, at October 1, 2015, the Company had one reporting unit for goodwill impairment testing purposes.
Income Taxes - We have recorded net deferred tax assets, before valuation allowance, of $5.1 million at December 31, 2015, including the
tax benefits of net operating loss carryforwards aggregating $11.1 million. We evaluate the adequacy of the valuation allowance annually
and, if its assessment of whether it is more likely than not that the related tax benefits will be realized changes, the valuation allowance will
be increased or reduced with a corresponding benefit or charge included in income. Management evaluated the adequacy of the valuation
allowance at December 31, 2015 in light of the historical results of operations and concluded that a full valuation allowance for net
deferred tax assets was required. In connection with the acquisitions of Value Lighting and All Around in 2014, we recorded deferred tax
liabilities of $6.6 million. These net deferred tax liabilities were used to reduce net deferred tax assets and accordingly, we reduced our
valuation allowance by this amount during 2014.
At December 31, 2015, we have U.S. Federal net operating loss carryforwards of $24.9 million, which may be used to reduce future taxable
income. Utilization of net operating loss carryforwards is dependent on generating future taxable income of the appropriate
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type and in the appropriate jurisdiction. In addition, as a result of transactions consummated during 2013 and 2012, including the issuance
of common and preferred stock by the Company and the acquisitions of Seesmart and Relume, substantially all of our net operating loss
carryforwards are subject to limitations imposed by Section 382 of the Internal Revenue Code. The determination of such limitations is
complex and requires a significant amount of analysis and review of past transactions, including those related transactions involving
acquired companies and their predecessors. During 2013 the Company performed an evaluation of the Section 382 limitations on the use of
net operating loss carryforwards, and adjusted them accordingly. The Company has recognized a full valuation allowance related to its
remaining net deferred tax assets, including the remaining net operating loss carryforwards.
Uncertain tax positions are recognized if we determine that it is more likely than not that a tax position will be sustained based on the
technical merits of the position, on the presumption that the position will be examined by the appropriate taxing authority that would have
full knowledge of all relevant information. The tax position is measured at the largest amount of benefit that is greater than 50 percent
likely of being realized upon ultimate settlement.
CONTRACTUAL OBLIGATIONS
The following table sets forth our contractual obligations at December 31, 2015:
(in thousands)
Operating lease obligations
Purchase price obligations
Debt
Total
Purchase Price Obligations
Total
$11,021
8,803
37,377
$57,201
Less than 1 year
2,466
$
7,039
10,360
19,865
$
Payments due by period
1-3 years
$ 4,584
1,764
27,017
$33,365
4-5 years More than 5 years
1,430
$
$ 2,541
—
—
$ 2,541
1,430
$
The amounts reflected in the table represent the discounted values of our estimates of amounts ultimately payable. We are obligated to pay
$8.4 million (undiscounted) assuming certain performance targets are met during 2015, 2016 and 2017, of which $6.5 million may be paid
in cash or common stock at our option. As a result of the 2014 acquisitions, we have issued 7,138,523 shares of common stock and we are
obligated to issue an additional 2,929,669 shares in installments through December 2017. The table above includes $1.2 million
representing the fair value of the $2 price floor attributed to 1,066,667 of these shares.
Purchase Obligations
We are not a party to any significant long-term service or supply contracts. We generally do not enter into any long-term purchase
commitments in the ordinary course of business.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 to the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for information related to
new accounting pronouncements that impact the Company.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that
are material to our investors.
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QUARTERLY RESULTS OF OPERATIONS (Unaudited):
(in thousands, except per share data)
Fiscal year ended December 31, 2015:
Revenues
Gross profit
Net (loss) income
Net (loss) income attributable to common stockholders
Basic and diluted (loss) income per common share attributable to
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$20,330 $27,245 $37,733 $44,348
14,861
1,437
1,437
7,171
(2,046)
(2,046)
12,186
(285)
(285)
9,072
(1,488)
(1,488)
common stockholders (1)
$ (0.01) $ (0.01) $ (0.00) $
0.01
Fiscal year ended December 31, 2014:
Revenues
Gross profit
Net (loss) income
Net (loss) income attributable to common stockholders
Basic and diluted (loss) income per common share attributable to
$ 4,952
1,603
(3,570)
(3,977)
17,517 $26,877
8,559
5,563
(1,404)
2,410
(2,055)
1,100
27,494
8,498
(2,616)
(7,913)
common stockholders (1)
$ (0.04) $
0.01 $ (0.02) $ (0.07)
(1) The quarterly earnings per share information is computed separately for each period. Therefore, the sum of such quarterly per share
amounts may differ from the total for the year.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to interest rate risk in connection with its variable-rate revolving credit facility pursuant to which it may borrow
up to $25.0 million. See Note 15 of the Notes to Consolidated Financial Statements.
The Company sells its products principally in the United States of America in US dollars and thus is not exposed to foreign currency risk.
The Company sources components from its providers from manufacturers in Asia in US dollars and is thus not exposed to foreign exchange
risk directly.
Item 8.
Financial Statements and Supplementary Data
The report of the independent registered public accounting firm and financial statements are filed as part of this Annual Report on Form
10-K. The following information appears in this Annual Report on Form 10-K beginning on page 41:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2015 and 2014
Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013
Notes to Consolidated Financial Statements
Item 9.
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
The certifications of our principal executive officer and principal financial officer in accordance with Rule 13a-14(a) under the Exchange
Act are attached as exhibits to this Annual Report on Form 10-K. The disclosures set forth in this Item 9A contain information concerning
the evaluation of our disclosure controls and procedures, and changes in our internal control over financial reporting referred to in
paragraph 4 of such certifications. Such certifications should be read in conjunction with this Item 9A for a more complete understanding
of the matters covered by the certifications.
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(a) Evaluation of disclosure controls and procedures
We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended) that are designed to ensure that information required to be disclosed in the reports we file under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our
chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management
necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Furthermore,
our controls and procedures can be circumvented by the individual acts of some persons, by collusion of two or more people or by
management override of the control and misstatements due to error or fraud may occur and not be detected on a timely basis.
An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and
chief financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual
Report on Form 10-K. Based on this evaluation, our management concluded that our disclosure controls and procedures were effective at a
reasonable assurance level as of the end of the period covered by this report.
(b) Management’s annual report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our Company.
Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and
the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United
States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly
reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial
statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management’s
authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material
effect on the financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over
financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or
detected. Furthermore, our controls and procedures can be circumvented by the individual acts of some persons, by collusion of two or
more people or by management override of the control and misstatements due to error or fraud may occur and not be detected on a timely
basis.
Management conducted its evaluation of the effectiveness of our Company’s internal controls over financial reporting based on the
framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission in 2013, and concluded that our Company’s internal control over financial reporting was effective as of December 31, 2015.
In conducting the Company’s evaluation of the effectiveness of its internal control over financial reporting, management determined that
the internal control systems of E-Lighting and Energy Source, wholly owned subsidiaries effectively acquired on February 5, 2015 and
August 5, 2015, respectively, would be excluded from its internal control assessment, as permitted by guidance issued by the Securities and
Exchange Commission. Accordingly, as of and for the year ended December 31, 2015, internal control systems underlying to 14% of
consolidated revenues and 6% of consolidated assets (excluding goodwill and identifiable intangible assets), have been excluded from
management’s evaluation of internal control over financial reporting.
The effectiveness of our internal control over financial reporting as of December 31, 2015 has been audited by RSM US LLP, an
independent registered public accounting firm, as stated in their attestation report, which is included below in Item 9A in this Annual
Report.
c) Changes in internal controls
There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2015 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Revolution Lighting Technologies, Inc.
We have audited Revolution Lighting Technologies, Inc. and subsidiaries’ internal control over financial reporting as of December 31,
2015, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission in 2013. The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an
opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
As described in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A, management has
excluded DPI Management Inc. d/b/a E-Lighting (“E-Lighting”) and Energy Source, LLC (“Energy Source”) from its assessment of
internal control over financial reporting as of December 31, 2015, because these entities were acquired by the Company in purchase
business combinations in 2015. We have also excluded E-Lighting and Energy Source from our audit of internal control over financial
reporting. E-Lighting and Energy Source are wholly owned subsidiaries whose revenues and total assets (excluding goodwill and
identifiable intangible assets of 17%) represent 14% and 6%, respectively, of the related consolidated financial statement amounts as of and
for the year ended December 31, 2015.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Revolution Lighting Technologies, Inc. maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2015, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of the Company as of December 31, 2015 and 2014, and the related consolidated statements of operations,
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015, and our report dated March 10,
2016 expressed an unqualified opinion.
/s/ RSM US LLP
Stamford, Connecticut
March 10, 2016
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Item 9B. Other Information
None
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
The information required by this item will be set forth in our definitive proxy or information statement to be filed with the Securities and
Exchange Commission in connection with our 2016 annual meeting of stockholders and is incorporated herein by reference. Information
relating to our Code of Business Conduct and Ethics and to compliance with Section 16(a) of the Securities Exchange Act of 1934, as
amended, will be set forth in our definitive proxy or information statement relating to our 2016 annual meeting of stockholders and is
incorporated herein by reference.
Item 11.
Executive Compensation
The information required by this item will be set forth in our definitive proxy or information statement to be filed with the Securities and
Exchange Commission in connection with our 2016 annual meeting of stockholders and is incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be set forth in our definitive proxy or information statement to be filed with the Securities and
Exchange Commission in connection with our 2016 annual meeting of stockholders and is incorporated herein by reference.
Item 13.
Certain Relationships and Related Transactions and Director Independence
The information required by this item will be set forth in our definitive proxy or information statement to be filed with the Securities and
Exchange Commission in connection with our 2016 annual meeting of stockholders and is incorporated herein by reference.
Item 14.
Principal Accountant Fees and Services
The information required by this item will be set forth in our definitive proxy or information statement to be filed with the Securities and
Exchange Commission in connection with our 2016 annual meeting of stockholders and is incorporated herein by reference.
35
Table of Contents
Item 15.
Exhibits and Financial Statement Schedules
Exhibit
Number
2.1
2.2
2.3
2.4
3.1
Description
Agreement and Plan of Merger, dated as of December 1, 2012, by and among, Revolution Lighting Technologies, Inc., Seesmart
Acquisition Company, Inc., Seesmart Merger Company, LLC, Seesmart Technologies, Inc. and Ken Ames as the Stockholder
Representative (incorporated by reference to our Current Report on Form 8-K filed December 6, 2012)+
Agreement and Plan of Merger, dated as of August 9, 2013, by and among, Revolution Lighting Technologies, Inc., Relume
Acquisition Company, Inc., Relume Technologies, Inc. Beringea Invest Michigan, as noteholder representative and the
Noteholders named therein (incorporated by reference to our Current Report on Form 8-K filed August 5, 2013)+
Agreement and Plan of Merger, dated as of March 6, 2014, by and among, Revolution Lighting Technologies, Inc., Value
MergerSub, LLC, Value Lighting, Inc., AL Enterprises, Inc., Value Lighting of Houston, LLC and the Stockholders named
therein (incorporated by reference from our Current Report on Form 8-K filed March 10, 2014)+
Membership Interest Purchase Agreement by and among Revolution Lighting Technologies – Energy Source, Inc., Energy
Source, LLC, Michael H. Lemoi, Jr. and Ronald T. Sliney, dated as of August 5, 2015 (incorporated by reference to our
Quarterly Report on Form 10-Q filed August 6, 2015)+
Amended and Restated Certificate of Incorporation, as amended (incorporated by reference to our Quarterly Report on
Form 10-Q filed on August 6, 2015)
3.2 Amended and Restated Bylaws (incorporated by reference to our Current Report on Form 8-K filed on January 30, 2013)
10.1
Form of Indemnification Agreement (incorporated by reference to our Current Report on Form 8-K filed on November 16, 2012)
++
10.2
2003 Stock Incentive Plan (incorporated by reference to our Definitive Proxy Statement filed April 16, 2004)++
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
Form of Warrant Agreement between Revolution Lighting Technologies, Inc. and Brett M. Kingstone (incorporated by reference
to our Definitive Proxy Statement filed November 3, 2005)
Management Services Agreement, dated as of April 16, 2013, by and between the Company and Aston Capital LLC
(incorporated by reference to our Annual Report on Form 10-K filed on April 16, 2013)
Investment Agreement, dated as of September 12, 2012, by and between Revolution Lighting Technologies, Inc. and RVL 1 LLC
(incorporated by reference to our Current Report on Form 8-K filed September 17, 2012)
Termination and Exchange Agreement, dated as of September 12, 2012, by and between Revolution Lighting Technologies, Inc.
and each holder of the Convertible Promissory Notes dated December 21, 2009 (incorporated by reference to our Current Report
on Form 8-K filed September 17, 2012)
Registration Rights Agreement, dated as of September 25, 2012, by and between Revolution Lighting Technologies, Inc. and
RVL 1 LLC (incorporated by reference to our Current Report on Form 8-K filed September 26, 2012)
Settlement and Patent License Agreement, dated as of August 1, 2012, by and between Revolution Lighting Technologies, Inc.
and Koninklijke Philips Electronics N.V. (incorporated by reference to our Quarterly Report on Form 10-Q filed November 14,
2012)
Separation and General Release Agreement, dated as of January 25, 2013, by and between Revolution Lighting Technologies, Inc.
and Michael A. Bauer (incorporated by reference to our Current Report on Form 8-K filed January 30, 2013)++
Investment Agreement, dated as of February 21, 2013, by and between Revolution Lighting Technologies, Inc. and RVL 1 LLC
(incorporated by reference to our Current Report on Form 8-K filed February 22, 2013)
36
Table of Contents
Exhibit
Number
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.22 (a)
10.22 (b)
10.22 (c)
Description
Transition, Separation and General Release Agreement, dated as of February 16, 2013, by and between Revolution Lighting
Technologies, Inc. and Gary R. Langford (incorporated by reference to our Current Report on Form 8-K filed February 22,
2013)++
Investment Agreement, dated as of March 8, 2013, by and among Revolution Lighting Technologies, Inc., Great American
Insurance Company, and Great American Life Insurance Company (incorporated by reference to our Current Report on
Form 8-K filed March 14, 2013)
Form of Restricted Share Award Agreement (incorporated by reference to our Quarterly Report on Form 10-Q filed May 15,
2013)++
Revolution Lighting Technologies, Inc. 2013 Stock Incentive Plan, as amended (incorporated by reference to Annex A to the
Company’s Definitive Information Statement on Schedule 14C filed on April 21, 2015)++
Promissory Note dated as of February 25, 2014 between the Company and Aston Capital LLC (incorporated by reference to
our Annual Report on Form 10-K filed March 14, 2014)
Promissory Note dated as of April 4, 2014 between the Company and Aston Capital LLC (incorporated herein by reference
to our Current Report on Form 8-K filed April 23, 2014)
Promissory Note dated as of April 17, 2014 between the Company and RVL 1 LLC (incorporated herein by reference to our
Current Report on Form 8-K filed April 23, 2014)
Exchange Agreement, dated June 30, 2014, by and among Revolution Lighting Technologies, Inc., RVL 1 LLC and Aston
Capital, LLC. (incorporated by reference to our Current Report on Form 8-K filed July 3, 2014)
Exchange Agreement dated as of July 31, 2014 between the Company and Aston Capital LLC (incorporated by reference to
our Current Report on Form 8-K filed August 4, 2014)
Promissory Note, dated as of July 31, 2014, by and between Revolution Lighting Technologies, Inc. and Aston Capital, LLC
(incorporated by reference to our Current Report on Form 8-K filed August 4, 2014)
Loan and Security Agreement, dated as of August 20, 2014, as amended, among Revolution Lighting Technologies, Inc.,
Lumificient Corporation, Lighting Integration Technologies, LLC, Seesmart Technologies, LLC, Relume Technologies, Inc.,
Tri-State LED DE, LLC, Value Lighting, LLC, the Guarantors party thereto and Bank of America, N.A. (incorporated by
reference to our Current Report on Form 8-K filed August 26, 2014)
Guaranty, dated as of August 20, 2014, by each of Revolution Lighting Technologies, Inc., Lumificient Corporation,
Lighting Integration Technologies, LLC, Seesmart Technologies, LLC, Relume Technologies, Inc., Tri-State LED DE, LLC,
Value Lighting, LLC, Seesmart, Inc., Envirolight LED, LLC, Sentinel System, LLC and Value Lighting of Houston, LLC, in
favor of Bank of America, N.A. and the Secured Parties (incorporated by reference to our Current Report on Form 8-K filed
August 26, 2014)
Consent and First Amendment to Loan and Security Agreement, dated as of September 29, 2014, among Revolution Lighting
Technologies, Inc., Lumificient Corporation, Lighting Integration Technologies, LLC, Seesmart Technologies, LLC, Relume
Technologies, Inc., Tri-State LED DE, LLC, Value Lighting, LLC, the Guarantors party thereto and Bank of America, N.A.*
Consent, Joinder and Second Amendment to Loan and Security Agreement, dated as of December 19, 2014, among
Revolution Lighting Technologies, Inc., Lumificient Corporation, Lighting Integration Technologies, LLC, Seesmart
Technologies, LLC, Relume Technologies, Inc., Tri-State LED DE, LLC, Value Lighting, LLC, All Around Lighting,
L.L.C., the Guarantors party thereto and Bank of America, N.A.*
Third Amendment to Loan and Security Agreement, dated as of April 17, 2015, among Revolution Lighting Technologies,
Inc., Lumificient Corporation, Lighting Integration Technologies, LLC, Seesmart Technologies, LLC, Relume Technologies,
Inc., Tri-State LED DE, LLC, Value Lighting, LLC, All Around Lighting, L.L.C., the Guarantors party thereto and Bank of
America, N.A.*
37
Table of Contents
Exhibit
Number
10.22 (d)
10.22 (e)
10.22 (f)
10.23
10.24
10.25
10.26
10.27
10.28
14
21
23.1
31.1
31.2
32.1
101**
Description
Consent and Fourth Amendment to Loan and Security Agreement, dated as of June 10, 2015, among Revolution Lighting
Technologies, Inc., Lumificient Corporation, Lighting Integration Technologies, LLC, Seesmart Technologies, LLC, Relume
Technologies, Inc., Tri-State LED DE, LLC, Value Lighting, LLC, All Around Lighting, L.L.C., the Guarantors party
thereto and Bank of America, N.A.*
Consent, Joinder and Fifth Amendment to Loan and Security Agreement, dated as of August 5, 2015, among Revolution
Lighting Technologies, Inc., Lumificient Corporation, Lighting Integration Technologies, LLC, Seesmart Technologies,
LLC, Relume Technologies, Inc., Tri-State LED DE, LLC, Value Lighting, LLC, All Around Lighting, L.L.C., Energy
Source, LLC, the Guarantors party thereto and Bank of America, N.A.*
Consent, Joinder and Sixth Amendment to Loan and Security Agreement, dated as of October 27, 2015, among Revolution
Lighting Technologies, Inc., Lumificient Corporation, Lighting Integration Technologies, LLC, Seesmart Technologies,
LLC, Relume Technologies, Inc., Tri-State LED DE, LLC, Value Lighting, LLC, All Around Lighting, L.L.C., Energy
Source, LLC, Revolution Lighting – E-Lighting, Inc., the Guarantors party thereto and Bank of America, N.A.*
Pledge Agreement, dated as of August 20, 2014, by and among Revolution Lighting Technologies, Inc., the Borrowers listed
on Schedule I thereto, the Guarantors listed on Schedule II thereto and Bank of America, N.A. (incorporated by reference to
our Current Report on Form 8-K filed August 26, 2014)
Exchange Agreement, dated as of November 25, 2014, by and between Revolution Lighting Technologies, Inc. and RVL 1
LLC (incorporated by reference to our Current Report on Form 8-K filed November 26, 2014)
Investment Agreement, dated as of August 5, 2015, by and among Revolution Lighting Technologies, Inc., Great American
Insurance Company, Great American Life Insurance Company and BFLT, LLC (incorporated by reference to our Quarterly
Report on Form 10-Q filed August 6, 2015)
Registration Rights Agreement, dated as of August 5, 2015, by and among Revolution Lighting Technologies, Inc., Great
American Insurance Company, Great American Life Insurance Company and BFLT, LLC (incorporated by reference to our
Quarterly Report on Form 10-Q filed August 6, 2015)
Promissory Note dated August 5, 2015 issued by Revolution Lighting Technologies – Energy Source, Inc. to Michael H.
Lemoi, Jr. (incorporated by reference to our Quarterly Report on Form 10-Q filed August 6, 2015)
Promissory Note dated August 5, 2015 issued by Revolution Lighting Technologies – Energy Source, Inc. to Ronald T.
Sliney (incorporated by reference to our Quarterly Report on Form 10-Q filed August 6, 2015)
Code of Business Conduct and Ethics (incorporated by reference to our Annual Report on Form 10-KSB filed March 26,
2004)
Subsidiaries of Revolution Lighting Technologies, Inc. *
Consent of RSM US LLP, Independent Registered Public Accounting Firm*
Certifications by our chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certifications by our chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certifications by our chief executive officer and chief financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002*
The following financial statements from Revolution Lighting Technologies, Inc.’s Yearly Report on Form 10-K for the year
ended December 31, 2015, filed on March 10, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i)
Consolidated Balance Sheets, (ii) Consolidated Statements of Operations (iii) Consolidated Statements of Stockholders’
Equity (iv) Consolidated Statements of Cash Flows, (v) Notes to Consolidated Financial Statements
38
Table of Contents
*
**
+
Filed herewith
Submitted electronically with this Report pursuant to Rule 405 of Regulation S-T
Revolution Lighting Technologies, Inc. hereby agrees to furnish a supplemental copy of any omitted schedule or similar attachment to
this agreement to the Securities and Exchange Commission upon its request.
++ Management contract or compensatory plan or arrangement.
39
Table of Contents
REVOLUTION LIGHTING TECHNOLOGIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2015 and 2014
Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013
Notes to Consolidated Financial Statements
40
Page
41
42
43
44-46
47
48-67
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Revolution Lighting Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Revolution Lighting Technologies, Inc. and subsidiaries (the
“Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, stockholders’ equity and cash flows
for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Revolution Lighting Technologies, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting
principles.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Revolution
Lighting Technologies, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2015, based on criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission in 2013, and our report dated March 10, 2016 expressed an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting.
/s/ RSM US LLP
Stamford, Connecticut
March 10, 2016
41
Table of Contents
REVOLUTION LIGHTING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
Current Assets:
ASSETS
Cash and cash equivalents
Trade accounts receivable, less allowance for doubtful accounts of $1,005 and $108
Unbilled contract receivables
Inventories, less reserves of $1,946 and $1,669
Other current assets
Total current assets
Property and equipment:
Machinery and equipment
Furniture and fixtures
Computers and software
Construction in process
Leasehold improvements
Accumulated depreciation and amortization
Net property and equipment
Goodwill
Intangible assets, less accumulated amortization of $12,849 and $8,881
Other assets, net
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
Accrued compensation and benefits
Notes payable
Accrued and other current liabilities
Purchase price obligations - current
Total current liabilities
Revolving credit facility
Related party payable
Note payable
Purchase price obligations - noncurrent
Other liabilities
Total liabilities
Stockholders’ Equity:
Common stock, $.001 par value, 200,000 shares authorized, 159,645 and 129,714 issued and
outstanding at December 31, 2015 and 2014, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
See accompanying notes to consolidated financial statements.
42
December 31,
2015
2014
$
219 $
41,132
4,559
22,135
3,830
71,875
6,033
23,779
—
13,673
3,157
46,642
1,083
726
644
43
206
2,702
(1,455)
1,247
1,004
263
598
251
126
2,242
(1,031)
1,211
64,267
39,595
651
42,991
34,784
914
$177,635 $126,542
$ 19,908 $ 11,573
2,281
360
7,371
6,269
27,854
3,388
10,360
5,329
7,039
46,024
22,026
2,565
2,426
1,764
8,760
2,565
2,816
6,086
727
75,532
1,145
49,226
160
176,616
(74,673)
102,103
130
149,477
(72,291)
77,316
$177,635 $126,542
Table of Contents
REVOLUTION LIGHTING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Revenues
Cost of sales
Gross profit
Operating expenses:
Selling, general and administrative:
Acquisition, severance and transition costs
Amortization and depreciation
Stock-based compensation
Other selling, general and administrative
Research and development
Total operating expenses
Operating loss
Other income (expense):
Change in fair value of embedded derivative
Gain on bargain purchase of business
Interest expense and other bank charges
Total other expense, net
Loss before income taxes
Deferred income tax benefit
Net loss
2015
Year Ended December 31,
2014
$129,656 $ 76,840 $ 26,060
86,366 52,617 16,108
9,952
43,290 24,223
2013
1,950
4,868
2,719
2,488
5,644
1,711
3,541
3,122
809
32,179 23,204 11,193
1,809
44,191 35,123 20,474
(901) (10,900) (10,522)
2,076
2,475
— —
— —
(830)
(830)
(6,990)
743
(1,481)
(52)
(6,299)
(1,481)
(2,382) (11,730) (16,821)
6,550 —
(5,180) (16,821)
—
(2,382)
Accretion of preferred stock to redemption value, beneficial conversion feature and discount
Accrual of preferred stock dividends
Deemed distribution on exchange of preferred stock
Net loss attributable to common stockholders
—
—
—
(2,290)
(919)
(1,445)
(1,360)
(5,301) —
$ (2,382) $(12,845) $(20,471)
Basic and diluted loss per common share:
Net loss per common share attributable to common stockholders – Basic and Diluted
$
(0.02) $
(0.14) $
(0.26)
Weighted average shares outstanding – Basic and Diluted
149,297 92,158 77,317
See accompanying notes to consolidated financial statements.
43
Table of Contents
REVOLUTION LIGHTING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended December 31, 2015, 2014 and 2013
(in thousands, except per share data)
Preferred Stock Common Stock Additional
Balance January 01, 2013
Exercise of stock options
Stock-based compensation for employees
Stock-based compensation for non-employees
Issuance of Series F redeemable convertible
preferred stock, net of issuance costs
Issuance of Series E redeemable convertible
preferred stock, net of issuance costs
Accrual of dividends on convertible preferred
stock
Embedded Conversion Liability
Issuance of Series D convertible preferred stock
Conversion of preferred stock to common stock
Accretion of Series E and F preferred stock to
Shares Amount Shares Amount
21 $10,880 70,213 $
108 —
— —
— —
191 —
— — — —
Paid-in
Capital
70 $ 60,036 $
265
302
507
Accumulated
Deficit
(50,290) $
—
—
—
Total
Stockholders’
Equity
Temporary
Equity
20,696 $
265
302
507
—
—
—
—
— — — —
—
—
—
4,999
— — — —
—
—
—
4,968
— — — —
— — — —
62 — —
1
(12) (1,006) 1,712
1
(1,360)
8,626
—
1,005
—
—
—
—
(1,360)
8,626
62
—
346
(1,637)
—
—
redemption value
— — — —
(2,290)
—
(2,290)
2,290
Issuance of common stock for cash, net of
issuance costs
— — 4,348
Issuance of restricted common stock for services — — 1,084
Issuance of common stock for acquisition –
5
1
5,064
(1)
—
—
5,069
—
—
—
Seesmart
— — 1,993
2
1,293
—
1,295
—
Issuance of common stock for acquisition –
Relume
— — 2,174
2
7,303
—
7,305
—
Issuance of common stock for acquisition – Tri-
State
1
Fees associated with issuances of common stock — — — —
— — — —
Common stock to be issued
— — — —
Net loss
Balance, December 31, 2013
809
(119)
1,109
—
82 82,549
10 9,936 82,095
— —
272
—
—
—
(16,821)
(67,111)
810
(119)
1,109
(16,821)
25,456
—
—
—
—
10,966
44
Table of Contents
(in thousands, except per share data)
Preferred Stock Common Stock
Stock-based compensation for employees
Stock-based compensation for non-employees
Accretion of Series E preferred stock to
Shares Amount Shares Amount
— — — —
— — — —
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
Temporary
Equity
840
(40)
—
—
840
(40)
—
—
redemption value
— — — —
(19)
—
(19)
19
Accrual of dividends on convertible preferred
stock
Issuance of dividends on Series C
Issuance of common stock for services
Issuance of preferred stock Series E
Issuance of common stock for cash, net of
issuance costs
Cancellation of Series F preferred stock
Issuance of preferred stock Series G and
accretion to redemption value
Forfeiture of restricted stock
Adjustment for shares issued for acquisition –
— — — —
— 1,028 — —
1
— —
— — — —
849
(1,445)
(28)
(1)
—
— —
8
— — — —
8,000
8,606
—
— — — —
(130) —
— —
(900)
—
—
—
—
—
—
—
—
—
(1,445)
1,000
—
—
691
—
—
(56)
8,614
—
—
(5,404)
(900)
—
18,863
—
Tri-State
— —
(7) —
—
—
—
—
Issuance of escrowed common stock for
acquisition – Seesmart
— —
Shares issued for acquisition – Value Lighting — —
Shares to be issued for acquisitions
Exchange of preferred stock for common stock
Net loss
Balance, December 31, 2014
Stock-based compensation for employees
Stock-based compensation for non-employees
Shares issued for contingent consideration –
373
(2)
— — — 22,737
36 36,807
—
130 149,477
1,892
297
— — — —
— — 129,714
— —
2
1,588
— — — —
(10) (10,964) 36,300
575
2,032
1
2
—
—
—
—
(5,180)
(72,291)
—
—
374
—
22,737
25,879
(5,180)
77,316
1,894
297
—
—
—
(25,079)
—
—
—
—
Tri-State
— —
543 —
339
—
339
—
Shares issued for contingent consideration –
Value Lighting
— —
4,895
5
5,495
—
5,500
—
45
Table of Contents
(in thousands, except per share data)
Preferred Stock Common Stock
Shares issued for acquisition – Value Lighting
Shares issued for acquisition – All Around
Issuance of common stock for cash, net of
issuance costs
Shares issued for acquisition – Energy Source
Cancellation of reacquired escrowed common
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
Temporary
Equity
Shares Amount Shares Amount
— —
5
979 —
— —
4,573
(5)
477
— —
— —
8,696
8,820
9
9
9,498
9,693
—
—
—
—
—
477
9,507
9,702
stock
Net loss
— —
(163) —
— — — —
(547)
—
—
(2,382)
(547)
(2,382)
Balance, December 31, 2015
— $ — 159,645 $ 160 $176,616 $
(74,673) $
102,103 $
See accompanying notes to consolidated financial statements.
46
—
—
—
—
—
—
—
Table of Contents
REVOLUTION LIGHTING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash Flows from Operating Activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred income tax benefit
Depreciation
Amortization of intangible and other assets
Stock-based compensation
Change in fair value of contingent consideration
Change in fair value of embedded derivative
Gain on bargain purchase of business
Changes in operating assets and liabilities, net of the effect of the acquisitions (Note 2):
(Increase) in trade accounts receivable, net
(Increase) in unbilled contract receivables, net
(Increase) in inventories, net
(Increase) in other assets
Increase / (decrease) in accounts payable and other accrued liabilities
Net cash used in operating activities
Cash Flows from Investing Activities:
Acquisitions of businesses, net of cash acquired
Purchase of property and equipment
Net cash used in investing activities
Cash Flows from Financing Activities:
Proceeds from issuance of common stock, net of issuance costs and other
Proceeds from issuances of preferred stock, net of issuance costs
(Repayments) proceeds from short-term borrowings and notes payable
Proceeds from revolving credit facility, net
Proceeds from loans from affiliates of controlling stockholder, net
Net proceeds from exercise of employee stock options and warrants
Net cash provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental Disclosure of Cash Flow Information:
Cash paid during period for interest
Non-cash investing and financing activities:
Issuance of common stock for acquisitions
Issuance of promissory notes for acquisition
Contingent consideration for acquisitions
Issuance of common stock for contingent consideration
Deferred consideration for acquisition
Exchange of trade accounts payable for note
Issuance of Series D preferred stock for acquisition
Issuance of Series G preferred stock for extinguishment of note payable ($12,600) and Series F
preferred stock ($5,400)
Conversion of preferred stock for common stock
Accrual of dividends on preferred stock
In-kind dividends on Series C preferred stock
See accompanying notes to consolidated financial statements.
47
Year Ended December 31,
2014
2015
2013
$ (2,382) $ (5,180) $(16,821)
—
550
4,318
2,719
864
—
—
(15,111)
(2,246)
(7,234)
(699)
2,532
(16,689)
(6,550)
495
5,149
1,711
1,419
—
—
(10,291)
—
(60)
(977)
(19)
(14,303)
—
263
2,859
809
88
6,990
(743)
(1,727)
—
(697)
(385)
1,218
(8,146)
(10,499)
(462)
(10,961)
(11,521)
(485)
(12,006)
(10,437)
(133)
(10,570)
8,960
—
(390)
13,266
—
—
21,836
8,614
(94)
(1,552)
8,760
14,857
—
30,585
4,950
9,964
860
—
—
265
16,039
(5,814)
6,033
(2,677)
4,276
4,434
1,757
219 $ 6,033 $ 1,757
$
$
688 $
543 $
21
9,702
10,000
1,550
6,316
350
—
—
23,111
—
9,976
—
—
3,736
—
9,435
—
960
—
—
—
62
—
—
—
—
18,000
36,843
1,449
1,000
—
1,006
1,360
—
Table of Contents
REVOLUTION LIGHTING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
1.
Summary of Significant Accounting Policies:
Business – Revolution Lighting Technologies, Inc. and its wholly-owned subsidiaries (“the Company”, “we”, “our”, “us”) design,
manufacture, market and sell commercial grade light-emitting diode (“LED”) fixtures for outdoor and indoor applications, LED-based
signage, channel-letter and contour lighting products, replacement lamps and high-performance, commercial grade smart grid control
systems and provide turnkey comprehensive energy saving projects (principally LED fixtures and lamps). We sell these products under
the RVLT, Seesmart, Relume, Lumificient, Value Lighting, Array and CMG brand names. Our products incorporate many proprietary
and innovative features. Our product offerings and patented designs provide opportunities for significant savings in energy and
maintenance costs without compromising the environment. We generate revenue by selling lighting products for use in the commercial
and industrial, and government markets, which include vertical markets such as commercial and industrial, government, 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.
The Company’s operations consist of one reportable segment for financial reporting purposes: Lighting Products and Solutions
(principally LED fixtures and lamps). For each of the two years ended December 31, 2014, we reported two segments, Lighting
Fixtures and Lamps, and Lighting Signage and Media. Due to changes in the management, organizational structure and internal
reporting, our operations now comprise one reportable segment for financial reporting purposes, and therefore segment disclosures are
no longer presented.
On April 17, 2014, the Company completed the acquisition of Value Lighting Inc. and certain of its affiliates (“Value Lighting”), a
supplier of lighting solutions to the multifamily residential market. Value Lighting is headquartered in Marietta, Georgia with facilities
in Marietta, Georgia; Dallas, Texas; Houston, Texas and Beltsville, Maryland.
On December 18, 2014, the Company completed the acquisition of All Around Inc. (“All Around”), a supplier of lighting fixtures. All
Around is headquartered in Conroe, Texas.
On February 5, 2015, the Company acquired the assets of DPI Management, Inc. d/b/a E Lighting. E-Lighting is in Carrolton, Texas.
On August 5, 2015, the Company completed its 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. Energy Source is headquartered in Providence, Rhode Island.
Liquidity – At December 31, 2015, the Company had positive working capital of $25.9 million, compared to positive working capital at
December 31, 2014 of $18.8 million.
While the Company generated negative cash flows from operations in the full fiscal year 2015, it did achieve positive cash flows from
operations in the fourth quarter of 2015 and the Company believes it has adequate resources to meet its cash requirements in the
foreseeable future.
On December 1, 2014, we exchanged all outstanding series of preferred stock, including accrued but unpaid dividends thereon, to an
aggregate of 36,300,171 shares of our unregistered common stock (the “Preferred Stock Exchange”). All rights relating to the preferred
stock were extinguished as a result of this transaction. Accordingly, we have been relieved of the ongoing obligation to pay dividends
on preferred stock.
In August 2014, the Company entered into a loan and security agreement with Bank of America to borrow up to $25 million on a
revolving basis, based upon specified percentages of eligible receivables and inventory (“the Revolving Credit Facility”). In April
2015, our Chairman and Chief Executive Officer guaranteed $5 million of borrowings under the Revolving Credit Facility, enabling us
to borrow up to $5 million in addition to the amount that is based upon receivables and inventory. This guarantee may be terminated
under certain circumstances. Bank of America agreed to amend the Revolving Credit Facility to enable the Company to borrow up to
$30 million under certain conditions. As of December 31, 2015, the balance on the Revolving Credit Facility was $22.0 million, with
additional borrowing capacity of $2.6 million.
We are in compliance with our covenants and obligations under the revolving credit facility as of March 1, 2016.
48
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Although we realized revenues of $129.7 million during the year ended December 31, 2015 and achieved positive earnings and
positive cash flow from operations during the fourth quarter, we face challenges to maintain profitability, and there can be no assurance
that we will sustain positive cash flows from operations or profitability. Our ability to meet our obligations in the ordinary course of
business is dependent upon our ability to maintain profitable operations, maintain our revolving credit facility, or raise additional
capital. Additional capital could take the form of public or private debt, equity financing, other sources of financing to fund operations,
or the support of our controlling stockholder. There can be no assurance such financing will be available on terms acceptable to us or
that any financing transaction will not be dilutive to our current stockholders.
In addition, to accelerate the growth of our operations in response to new market opportunities or to acquire other technologies or
businesses, we may need to raise additional capital. Additional capital may come from several sources, including the issuance of
additional common stock, preferred stock, debt (whether convertible or not) or other securities. Increased indebtedness could
negatively affect our liquidity and operating flexibility. The issuance of any additional securities could, among other things, result in
substantial dilution of the percentage ownership of our stockholders at the time of issuance, result in substantial dilution of our earnings
per share, and adversely affect the prevailing market price for our common stock. In addition, we may not be able to obtain additional
financing on terms favorable to us, if at all. If additional funds become necessary and are not available on terms favorable to us, or at
all, we may be unable to expand our business or pursue an acquisition and our business, results of operations and financial condition
may be materially adversely affected.
Principles of consolidation – The consolidated financial statements include the accounts of Revolution Lighting Technologies, Inc. and
its wholly owned subsidiaries. Significant inter-company accounts and transactions have been eliminated.
Use of estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America 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 revenue recognition, valuation of receivables and inventories,
purchase price allocation of acquired businesses, impairment of long lived assets and goodwill, valuation of financial instruments,
income taxes, and contingencies. Actual results could differ from those estimates.
Revenue recognition – The Company recognizes revenue from its product sales upon shipment or delivery to customers in accordance
with the respective contractual arrangements, provided no significant obligations remain and collection is probable. For sales that
include customer acceptance terms, revenue is recorded after customer acceptance. It is the Company’s policy that all sales are
final. Requests for returns are reviewed on a case by case basis. As revenue is recorded, the Company accrues an estimated amount for
product returns as a reduction of revenue.
The Company recognizes revenue from fixed-price and modified fixed-price contracts for turnkey energy conservation projects using
the percentage-of-completion method of accounting. The percentage-of-completion is computed by dividing the actual incurred cost to
date by the most recent estimated total cost to complete the project. The computed percentage is applied to the expected revenue for the
project to calculate the contract revenue to be recognized in the current period. This method is used because management considers
total cost to be the best available measure of progress on these contracts. Contract costs include all direct material and labor costs and
indirect costs related to contract performance. Provisions for estimated losses on uncompleted contracts are made in the period in
which such losses are determined. The current asset “unbilled contract receivables” represents revenues in excess of amounts billed,
which management believes will generally be billed within the next twelve months.
The Company records sales tax revenue on a gross basis (included in revenues and costs). For the years ended December 31, 2015,
2014 and 2013, revenues from sales taxes were $4.5 million, $2.7 million and $0.5 million, respectively.
Warranties and product liability – The Company’s products typically carry a warranty that ranges from one to ten years and includes
replacement of defective parts. A warranty reserve is recorded for the estimated costs associated with warranty expense related to
recorded sales, which is included within accrued liabilities. Changes in the Company’s warranty liability for the years ended
December 31, 2015, 2014 and 2013 are as follows:
(in thousands)
Warranty liability at January 1,
Warranty liability assumed in acquisitions
Revision of warranty estimate
Provisions for current year sales
Current year claims
Warranty liability at December 31,
49
Year Ended December 31,
2015
$ 443
—
(100)
233
(153)
$ 423
2014
$ 597
—
(185)
196
(165)
$ 443
2013
$ 346
101
—
348
(198)
$ 597
Table of Contents
Fair value measurements – The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820
“Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value as the exchange price that would be received for an asset
or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an
entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard
describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable.
Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own
assumptions about the assumptions that market participants would use in pricing.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as
of December 31, 2015. The Company uses the market approach to measure fair value for its Level 1 financial assets and liabilities. The
market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets
or liabilities. The respective carrying value of certain balance sheet financial instruments approximates its fair value. These financial
instruments include cash, trade receivables, related party payables, accounts payable, accrued liabilities and short-term borrowings. Fair
values were estimated to approximate carrying values for these financial instruments since they are short term in nature and they are
receivable or payable on demand.
The estimated fair value of assets and liabilities acquired in business combinations and reporting units and long-lived assets used in the
related asset impairment tests utilize inputs classified as Level 3 in the fair value hierarchy. Based on the borrowing rates currently
available to the Company for bank loans with similar terms and average maturities, the fair value of borrowings under our Revolving
Credit facility and Notes payable are equal to the carrying value (see Note 15).
The Company determines the fair value of certain purchase price obligations on a recurring basis based on a probability-weighted
discounted cash flow analysis and Monte Carlo simulation. The fair value remeasurement is based on significant inputs not observable
in the market and thus represents a Level 3 measurement as defined in the fair value hierarchy. In each period, the Company reassesses
its current estimates of performance relative to the stated targets and adjusts the liability to fair value. Any such adjustments are
included in Acquisition, severance and transition costs, a component of Selling, general and administrative expense in the Consolidated
Statement of Operations. Changes in the fair value of purchase price obligations for the year ended December 31, 2015 were as
follows:
(in thousands)
Fair value, January 1
Fair value of contingent consideration issued during the period
Fair value of acquisition liabilities paid during the period
Change in fair value
Fair value, December 31
2015
$12,355
1,800
(6,566)
864
$ 8,453
The following table presents quantitative information about Level 3 fair value measurements as of December 31, 2015:
(in thousands)
Earnout liabilities
Stock distribution price floor
Fair Value at
December 31, 2015
7,231
$
Valuation Technique
Income approach
Unobservable Inputs
Discount rate – 15.5%
1,222 Monte Carlo
simulation
Volatility – 60%
Risk free rate – 1.2%
Dividend yield – 0%
Fair value, December 31, 2015
$
8,453
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Derivative financial instruments – The Company does not use derivative instruments to hedge exposures to cash flow, market or
foreign currency risk. Terms of convertible preferred stock and convertible promissory note instruments are reviewed to determine
whether or not they contain embedded derivative instruments that are required to be accounted for separately from the host contract,
and recorded on the balance sheet at fair value. The fair value of derivative liabilities is required to be revalued at each reporting date,
with corresponding changes in fair value recorded in current period operating results.
Cash equivalents – Temporary cash investments with an original maturity of three months or less are considered to be cash equivalents.
Accounts receivable – Accounts receivable are customer obligations due under normal trade terms. The Company performs periodic
credit evaluations of its customers’ financial condition. The Company records an allowance for doubtful accounts based upon factors
surrounding the credit risk of certain customers and specifically identified amounts that it believes to be uncollectible. Recovery of bad
debt amounts previously written off is recorded as a reduction of bad debt expense in the period the payment is collected. If the
Company’s actual collection experience changes, revisions to its allowance may be required. After all attempts to collect a receivable
have failed, the receivable is written off against the allowance. The following summarizes the changes in the allowance for doubtful
accounts for the periods indicated.
(in thousands)
Allowance for doubtful accounts at January 1,
Additions
Write-offs
Allowance for doubtful accounts at December 31,
2015
$ 108
1,260
(363)
$1,005
2014
$ 210
350
(452)
$ 108
2013
$ 57
170
(17)
$210
Inventories – Inventories are stated at the lower of cost (first-in, first-out) or market. A reserve is recorded for any inventory deemed
excessive or obsolete.
Property and equipment – Property and equipment are stated at cost or fair value if acquired as part of a business combination.
Depreciation is computed by the straight-line method and is charged to operations over the estimated useful lives of the assets.
Maintenance and repairs are charged to expense as incurred. The carrying amount and accumulated depreciation of assets sold or
retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in results of operations. The
estimated useful lives of property and equipment are as follows:
Machinery and equipment
Furniture and fixtures
Computers and software
Motor vehicles
Leasehold improvements
Estimated useful lives
3-7 years
5-7 years
3-7 years
5 years
Lesser of lease term or estimated useful life
Intangible assets and goodwill – Goodwill is not amortized, but is subject to annual impairment testing unless circumstances dictate
more frequent assessments. The Company performs an annual impairment assessment for goodwill during the fourth quarter of each
year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the
carrying amount. Due to the change in reportable segments in 2015, at October 1, 2015, the Company had one reporting unit for
goodwill impairment testing purposes. Goodwill impairment testing is a two-step process. Step one compares the fair value of the
reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and
market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances
surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows
of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows.
For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free
interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and
industry and other Company specific risks. Other significant assumptions used in the income approach include the terminal value,
growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples
from guideline
51
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businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than its carrying
amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed
to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all
tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the
fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation
as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill,
an impairment loss is recognized in an amount equal to the excess.
Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions,
including revenue growth rates, strategic plans and future market conditions, among others. There can be no assurance that the
Company’s estimates and assumptions made for purposes of the goodwill impairment testing will prove to be accurate predictions of
the future. Changes in assumptions and estimates could cause the Company to perform an impairment test prior to the annual
impairment test scheduled in the fourth quarter.
Long-lived assets – The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances
have indicated that an asset may not be recoverable. The long-lived asset is grouped with other assets at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected
undiscounted cash flows is less than the carrying value of the assets, the assets are written down to the estimated fair value.
Accrued rent – The Company accounts for certain operating leases containing predetermined fixed increases of the base rental rate
during the lease term as rental expense on a straight-line basis over the lease term. The Company has reported the difference between
the amounts charged to operations and amounts payable under the leases as a liability in the accompanying consolidated balance sheets.
Shipping and handling costs – Shipping and handling costs related to the acquisition of goods from vendors are included in cost of
sales.
Research and development – Research and development costs to develop new products are charged to expense as incurred.
Advertising – Advertising costs, included in selling, general and administrative expenses, are expensed when the advertising first takes
place. The Company promotes its product lines primarily through print media and trade shows, including trade publications, and
promotional brochures. Advertising expenses were $0.3 million for each of the years ended December 31, 2015, 2014 and 2013,
respectively.
Income taxes – Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the
carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the
future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or
settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company applies the provisions of FASB ASC 740-10, “Accounting for “Uncertainty in Income Taxes”, and has not recognized a
liability pursuant to that standard. In addition, a reconciliation of the beginning and ending amount of unrecognized tax benefits has not
been provided since there are no unrecognized benefits since the date of adoption. If there were an unrecognized tax benefit, the
Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
The Company evaluates the adequacy of the valuation allowance annually and, if its assessment of whether it is more likely than not
that the related tax benefits will be realized changes, the valuation allowance will be increased or reduced with a corresponding benefit
or charge included in income. Management evaluated the adequacy of the valuation allowance at December 31, 2015, 2014 and 2013 in
light of the historical results of operations and concluded that a full valuation allowance for net deferred tax assets was required. In
connection with the acquisitions in 2014, the Company recorded deferred tax liabilities of $6.6 million. These net deferred tax
liabilities can be used to reduce net deferred tax assets, and accordingly, the Company reduced its valuation allowance by this amount.
No provision for income taxes has been recorded for the years ended December 31, 2015 and 2013 since the tax benefits of the losses
incurred have been offset by a corresponding increase in the deferred tax valuation allowance.
Stock-based compensation – The Company recognizes the cost of employee or director services received in exchange for an award of
equity instruments in the financial statements, which is measured based on the grant date fair value of the award. Stock-based
compensation expense is recognized over the period during which an employee is required to provide service in exchange for the award
(typically, the vesting period).
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The Company values restricted stock awards to employees at the quoted market price on the grant date. The Company estimates the
fair value of option awards issued under its stock option plans on the date of grant using a Black-Scholes option-pricing model that
uses the assumptions noted below. The Company estimates the volatility of its common stock at the date of grant based on the
historical volatility of its common stock. The Company determines the expected life based on historical experience with similar
awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. For shares that vest contingent
upon achievement of certain performance criteria, an estimate of the probability of achievement is applied in the estimate of fair value.
If the goals are not met, no compensation cost is recognized and any previously recognized compensation cost is reversed. The
Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining
term approximately equal to the expected life of the award. The Company has never paid any cash dividends on its common stock and
does not anticipate paying any cash dividends in the foreseeable future. No options were awarded in the years ended December 31,
2015 and 2013. For the year ended December 31, 2014, the Company computed expense for each group utilizing the following
assumptions:
Expected volatility
Weighted-average volatility
Risk-free interest rate
Expected dividend yield
Expected life in years
Year Ended December 31,
2014
94.2%
94.2%
1.64%
0%
3.5 – 8.6
The Company from time to time enters into arrangements with non-employee service providers pursuant to which it issues restricted
stock vesting over specified periods for time-based services. These arrangements are accounted for under the provisions of FASB ASC
505-50 “Equity-Based Payments to Non-Employees”. Pursuant to this standard, the restricted stock is valued at the quoted price at the
date of vesting. Prior to vesting, compensation is recorded on a cumulative basis based on the quoted market price at the end of the
reporting period.
Loss per share – Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average
common shares outstanding for the period. Diluted loss per share is computed giving effect to all potentially dilutive common shares.
Potentially dilutive common shares consist of incremental shares issuable upon the exercise of stock options and vesting of restricted
shares and the conversion of outstanding convertible securities. In periods in which a net loss has been incurred, all potentially dilutive
common shares are considered anti-dilutive and thus are excluded from the calculation.
In connection with the 2014 acquisitions (see Note 2), the Company is unconditionally obligated during 2015, 2016 and 2017 to issue
an additional 2,929,669 shares of its common stock and 8,035,826 shares of its common stock as of December 31, 2015 and 2014,
respectively. These potentially dilutive shares have been included in the 2015 and 2014 computation of basic and diluted earnings per
share, respectively. Also in connection with the 2014 and 2015 acquisitions, the Company is contingently obligated to pay up to $6.5
million as of December 31, 2015 and $11.7 million as of December 31, 2014, or at its option, an equivalent amount of common shares
based upon its then-current market value, assuming certain performance criteria have been met. These shares have been excluded from
the 2015 and 2014 computation of diluted earnings per share because the effect would be antidilutive.
The Preferred Stock Exchange has been accounted for as provided in ASC S99-2, which states that in such an extinguishment of
preferred stock, the difference between (1) the fair value of the consideration transferred to the holders of the preferred stock and
(2) the carrying amount of the preferred stock in the Company’s balance sheet, should be reflected in a manner similar to a dividend on
preferred stock and subtracted from net income to arrive at income attributable to common shareholders in the calculation of earnings
per share. Under this method, $5.3 million has been subtracted from the Company’s net loss to arrive at net loss attributable to common
stockholders for the year ended December 31, 2014.
Contingencies – In the ordinary course of business, the Company may become a party to various legal proceedings generally involving
contractual matters, infringement actions, product liability claims and other matters. The Company evaluates such matters in
accordance with the criteria set forth in Accounting Standards Codification 450. Based upon such evaluation, at December 31, 2015 the
Company is not a party to any pending legal proceedings which it believes to be material.
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Recent accounting pronouncements – In May 2014, the Financial Accounting Standards Board issued the standard “Revenue from
Contracts with Customers” which supersedes existing revenue recognition standards including most industry-specific revenue
recognition guidance. In April 2015, the FASB deferred the effective date of the standard, making it effective for annual periods
beginning after December 15, 2017. Early adoption is permitted on or after December 15, 2016. The Company has not determined the
effect that this accounting pronouncement will have on its financial statements.
In August 2014, the FASB issued ASU No. 2014-15 (“ASU 2014-15”), Presentation of Financial Statements—Going Concern
(Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This ASU requires
management to assess and evaluate whether conditions or events exist, considered in the aggregate, that raise substantial doubt about
the entity’s ability to continue as a going concern within one year after the financial statements issue date. The provisions of ASU
2014-15 are effective for annual periods beginning after December 15, 2016 and for annual and interim periods thereafter; early
adoption is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on our consolidated financial statements.
In January 2015, the FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20), which
eliminates the accounting concept of extraordinary items for periods beginning after December 15, 2015. The adoption of this ASU is
not expected to have a material effect on our consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis”, which modifies the criteria for
evaluating whether certain legal entities should be consolidated. The provisions of the ASU are effective for fiscal periods beginning
after December 15, 2015, however earlier adoption is permitted. The Company has adopted the ASU effective January 1, 2015, without
material effect on its consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs”, which requires debt issuance
costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt
liability. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs
Associated with Line-of-Credit Arrangements”, that allows an entity to defer and present debt issuance costs as an asset and
subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement. The provisions of the
ASU are effective for periods beginning after December 15, 2015. The adoption of this ASU is not expected to have a material effect
on our consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory”, which require an entity to measure
inventory at the lower of cost and net realizable value. The provisions of the ASU are effective for periods beginning after
December 15, 2016. The adoption of this ASU is not expected to have a material effect on our consolidated financial statements.
In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments”, that
eliminates the requirement to restate prior period financial statements for measurement adjustments. The new guidance requires that the
cumulative impact of a measurement period adjustment be recognized in the reporting period in which the adjustment is identified. The
provisions of the ASU are effective for periods beginning after December 15, 2015. The adoption of this ASU is not expected to have a
material effect on our consolidated financial statements.
In February 2016, 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. The Company has not determined the effect that this accounting pronouncement will have on its financial
statements.
2.
Acquisitions:
Energy Source – On August 5, 2015, the Company completed its 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. The purchase consideration aggregated $31.5 million, which consisted of $10 million in cash,
$9.7 million in common stock, $10 million in promissory notes due at the one year anniversary of the acquisition and contingent
consideration initially valued at $1.8 million based on projected EBITDA during 2015, 2016 and 2017. The cash portion of the
acquisition was funded through the issuance of 8,695,652 shares of common stock to a third party investor for $10 million. The
promissory notes are supported by an irrevocable letter of credit from RVL. The Company acquired Energy Source for its management
team, its client base and operational and business development synergies.
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The following amounts represent the determination of the fair value of identifiable assets acquired and liabilities assumed in the
Energy Source acquisition:
(in thousands)
Tangible assets
Goodwill
Intangible assets
Assets acquired
Liabilities assumed
Purchase price
$ 5,379
21,276
8,768
35,423
3,921
$31,502
The acquired intangible assets are being amortized consistent with the period the underlying cash flows are generated. Goodwill is
expected to be deductible for income tax purposes.
E-Lighting – On February 5, 2015, the Company acquired the assets of DPI Management, Inc. d/b/a E Lighting for $0.6 million. The
purchase price consists of cash paid at closing of $0.1 million, $0.15 million paid in cash on September 1, 2015, $0.15 million payable
in cash on March 1, 2016, and $0.2 million payable on September 1, 2016 in cash or common stock, at the Company’s option. The
aggregate purchase price of $0.6 million was assigned to inventories.
All Around – On December 18, 2014, the company acquired All Around, a supplier of lighting fixtures, for $5.0 million. The purchase
price consisted of $0.9 million cash, 1,600,000 unregistered shares of the Company’s restricted common stock, and additional cash
consideration if certain revenue targets are achieved in 2015 and 2016 (initially valued at $0.3 million). The unregistered shares of
restricted common stock have been valued at $1.8 million, and are being issued in eleven installments beginning in June 2015. The
shares are subject to a price floor of $2.00 per share (initially valued at $1.9 million), which will terminate when total share
consideration received is equal to $3.2 million. The aggregate purchase price of $5.0 million has been allocated to $1.7 million of
tangible assets, $2.2 million of identifiable intangible assets and $2.8 million of goodwill, reduced by $1.7 million of liabilities
assumed. The acquired intangibles are being amortized consistent with the period the underlying cash flows are generated. The
Company acquired All Around for its presence in the multifamily residential market and construction, the experience of the
management team, its customer base, operational and business development synergies. Goodwill is not expected to be deductible for
income tax purposes.
Value Lighting – On April 17, 2014, the Company completed the acquisition of Value Lighting, a supplier of lighting solutions to the
multifamily residential market. The purchase consideration aggregated $39.3 million and consisted of cash of $10.6 million funded
with a loan from an affiliate, an unconditional obligation to issue an aggregate of 8,468,192 shares of common stock in four
installments at six, twelve, eighteen and twenty-four months from the acquisition date, valued at $20.9 million, and contingent
consideration payable in cash or common stock at the option of the Company aggregating up to a total of $11 million, valued at $7.8
million, if certain revenue and EBITDA targets are achieved by Value Lighting during 2014 and 2015. The Company acquired Value
Lighting for its presence in the multifamily residential and construction markets, the experience of the management team, its customer
base, operational and business development synergies.
The following amounts represent the determination of the fair value of identifiable assets acquired and liabilities assumed from the
Value Lighting acquisition. The excess of the purchase price over the estimated fair value of the net tangible assets acquired was
allocated to intangible assets of $20.0 million and goodwill of $18.6 million.
(in thousands)
Current Assets
Goodwill
Intangible Assets
Other assets
Assets acquired
Accounts payable and other liabilities
Deferred income tax liability
Liabilities assumed
Purchase price
55
$16,260
18,635
19,951
2,901
57,747
12,613
5,825
18,438
$39,309
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The acquired intangibles are being amortized consistent with the period the underlying cash flows are generated. Goodwill is not
expected to be deductible for income tax purposes.
Value Lighting achieved its 2014 performance targets, and as a result, during the quarter ended March 31, 2015, the Company issued
4.9 million shares of its common stock (valued at $5.5 million) in payment of the 2014 contingent purchase consideration. Value
Lighting achieved its 2015 performance targets and earned $5.5 million. Payment in common stock or cash, at the Company’s option,
is expected to be made by March 31, 2016.
Other – On March 8, 2013, LIT, a wholly owned subsidiary of the Company, acquired certain assets of Elite LED Solutions. The
purchase resulted in a gain on bargain purchase of $0.7 million in 2013.
Pro forma information – The following unaudited supplemental pro forma information assumes the Energy Source acquisition and the
2014 acquisitions referred to above had been completed as of January 1, 2014 and is not indicative of the results of operations that
would have been achieved had the transactions been consummated on such date or of results that might be achieved in the future. The
pro forma effect of the E-Lighting acquisition was not significant.
(in thousands)
Revenues
Operating loss
Net loss
Year Ended December 31,
2015
2014
$138,524
$ (1,223)
$ (2,993)
$115,900
$ (8,931)
$ (4,063)
The pro forma results for the years ended December 31, 2015 and 2014, include the amortization of the customer backlog of $0.4
million and $2.4 million, respectively, and acquisition, severance and transition costs of $2.0 million and $2.5 million, respectively.
The pro forma results for the year ended December 31, 2014 also include an income tax benefit of $6.6 million. These non-recurring
charges and credits are directly related to the acquisitions but do not have a continuing impact on the results of operations.
The revenue of the 2015 acquisitions included in the Company’s 2015 actual results of operations from their respective acquisition
dates through December 31, 2015 totaled $16.3 million. The net income of the 2015 acquisitions included in the Company’s 2015
actual results of operations from their respective acquisition dates through December 31, 2015 totaled $2.9 million. The revenue of the
2014 acquisitions, included in the Company’s 2014 actual results operations from their respective acquisition dates through
December 31, 2014 totaled $46.2 million. The net income of the 2014 acquisitions, included in the Company’s 2014 actual results of
operations, from their respective acquisition dates through December 31, 2014 totaled $1.6 million.
3.
Inventories:
Inventories, which are primarily purchased from third parties, consist of the following:
(in thousands)
Raw materials
Finished goods
Less provision for obsolescence
Net inventories
56
December 31,
2015
$ 3,789
20,292
24,081
(1,946)
$22,135
2014
$ 3,895
11,447
15,342
(1,669)
$13,673
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(in thousands)
Inventory reserve at January 1,
Additions
Write offs
Inventory reserve at December 31,
Year Ended December 31,
2015
2014
2013
$1,669 $1,708 $ 1,669
1,644
(1,605)
$1,946 $1,669 $ 1,708
1,087
(810)
179
(218)
4.
Intangible Assets:
At December 31, 2015, the Company had the following intangible assets subject to amortization:
(in thousands)
Patents
Trade names
Customer relationships
Customer contracts and backlog
Technology
Favorable lease
Non-compete agreements
Product certification and licensing costs
Gross Carrying Amount Accumulated Amortization Net Carrying Amount
91
$
12,097
24,413
341
1,705
194
744
10
39,595
(177) $
(2,884)
(4,488)
(4,481)
(248)
(140)
(369)
(62)
(12,849) $
268 $
14,981
28,901
4,822
1,953
334
1,113
72
52,444 $
$
At December 31, 2014, the Company had the following intangible assets subject to amortization:
(in thousands)
Patents
Trade names
Customer relationships
Customer contracts and backlog
Technology
Favorable lease
Non-compete agreements
Product certification and licensing costs
Gross Carrying Amount Accumulated Amortization Net Carrying Amount
115
$
10,078
21,513
458
1,757
270
589
4
34,784
268 $
11,358
24,455
4,496
1,953
334
740
61
43,665 $
(153) $
(1,280)
(2,942)
(4,038)
(196)
(64)
(151)
(57)
(8,881) $
$
Intangibles are amortized using the straight-line method over their estimated useful lives. Amortization expense during the years ended
December 31, 2015, 2014 and 2013 is as follows:
(in thousands)
Patents and trade names
Customer relationships
Customer contracts and backlog
Technology
Favorable Leases
Non-compete agreement
Product certification and licensing costs
Total
Estimated useful life
12 to 17 years
10 to 15 years
1 to 3 years
10 years
10 years
6 years
3 years
2015
$ 939
2,094
443
195
77
215
5
2014
$ 688
1,694
2,425
129
61
141
11
2013
$ 388
761
1,613
67
3
10
17
$3,968
$5,149
$2,859
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Amortization expense for intangible assets for the next 5 years is estimated as follows:
(in thousands)
Patents
Trade names
Customer relationships
Customer contracts and backlog
Technology
Favorable Leases
Non-compete agreement
Product certification and licensing costs
Total
5. Goodwill:
$
2017
2018
2016
2019
23 $
23 $
23 $
2020
22 $ —
1,080
2,166
—
195
22
—
—
$4,196 $3,923 $3,788 $3,608 $3,463
1,135
2,166
—
195
22
68
—
1,135
2,267
56
195
22
222
3
1,135
2,267
246
195
43
283
4
1,135
2,200
39
195
22
171
3
The changes in the carrying amount of goodwill for the years ended December 31, 2015 and 2014 are presented below:
(in thousands)
Balance, January 1, 2014
Acquisitions
Balance, December 31, 2014
Acquisitions
Balance, December 31, 2015
Accumulated Balances:
Goodwill
Accumulated impairment losses
Balance, December 31, 2015
$21,498
21,493
42,991
21,276
$64,267
$66,663
(2,396)
$64,267
During the fourth quarter of 2015, the Company performed step one of the impairment testing as described in Note 1 which indicated
the fair value of its reporting unit exceeded the net carrying amount of the net assets of its reporting unit. Accordingly, step two was
not performed.
6.
Common Stock Transactions:
As of December 31, 2015, the Company had 159.6 million shares of its common stock outstanding, of which 84.2 million shares, or
52.8%, were beneficially owned by RVL and its affiliates.
On August 5, 2015, in connection with the Energy Source acquisition (see Note 2), the Company issued 8.8 million of its common
shares, valued at $9.7 million, to the sellers of Energy Source, and 8.7 million shares for $9.5 million, net of expenses, to third party
investors to fund the cash portion of the purchase price.
On May 11, 2015, the shareholders approved an amendment to the Company’s Certificate of Incorporation to increase the authorized
shares of common stock from 150,000,000 to 200,000,000.
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On May 11, 2015, the shareholders approved a proposal to grant authority to the Board of Directors (the “Board”) to potentially
conduct a reverse stock split (the “Split”), if and when the Board determines it is in the best interests of the Company and its
shareholders to do so. Additionally, the Board was granted authority to determine the specific ratio at which to conduct the Split,
within the range of 1-for-4 to 1-for-7 based upon then-current market conditions, or to abandon the Split if the Board determines that it
is not in the best interests of the Company and its shareholders. On February 16, 2016 the Company filed a Schedule 14C Information
Statement to inform shareholders of its intent to effect a reverse stock split of its Common Stock at a ratio of 1-for-10, as approved by
the Board of Directors on February 3, 2016.
On December 1, 2014, the Company completed an underwritten public offering of 8 million shares of its common stock, at an offering
price of $1.25. Net proceeds of the offering approximated $8.6 million, which was used for general corporate purposes.
On December 1, 2014, the Company completed the Preferred Stock Exchange, in which the Company exchanged all outstanding
preferred stock, including accrued but unpaid dividends thereon, for 36,300,171 shares of unregistered common stock. All rights
relating to the preferred stock were extinguished as a result of this transaction, and at December 31, 2014 the Company has no
outstanding preferred stock. See Note 7 for additional information.
The Company has a Management Services Agreement (the “Management Agreement”) with Aston, an affiliate of RVL, under which
Aston provides consulting services in connection with financing matters, budgeting, strategic planning and business development. On
April 9, 2013, in consideration of the services provided, the Company issued 500,000 shares of restricted common stock to Aston,
vesting in three equal annual increments, with the first such vesting date being September 25, 2013. On April 21, 2014, as
compensation for management services provided, the Company granted 300,000 shares of restricted stock to Aston, which vest in three
annual installments with the first such vesting date of September 25, 2014. The Audit Committee of the Board will consider from time
to time (at a minimum at such times when the Compensation Committee of the Board evaluates director compensation) whether
additional compensation to Aston is appropriate given the nature of the services provided.
Stock warrants – On September 9, 2005, the Company granted a 10-year warrant (“Kingstone Warrants”) for 289,187 shares of
common stock at an exercise price of $4.30 per share to Brett Kingstone. Mr. Kingstone was the Chief Executive Officer of the
Company until December 31, 2005 and was the Chairman of the Board of the Company until March 11, 2009. The Kingstone Warrants
expired in September 2015.
At December 31, 2015, the Company has reserved common stock for issuance in relation to the following:
Employee stock options and restricted stock
Shares to be issued for acquisitions
Total reserved shares
2,752,020
2,929,669
5,681,689
7.
Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of preferred stock.
As a result of the December 1, 2014 Preferred Stock Exchange, all rights relating to the preferred stock were extinguished, and at
December 31, 2015 the Company has no outstanding preferred stock.
Series C Convertible Preferred Stock – The Company previously designated 25,000 shares of preferred stock as Series C Convertible
Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”).
On December 20, 2012, the Company issued to RVL 10,000 shares of the Series C Preferred Stock, for cash of $10 million, which was
used to fund the Seesmart acquisition (Note 2) and for working capital purposes.
The Series C Preferred Stock was initially non-voting and non-convertible. The Series C Preferred Stock became voting and
convertible into shares of the Company’s common stock effective May 15, 2013, following the Company’s compliance with the
requirements of Rule 14c-2 of the Securities Exchange Act of 1934, as amended. Additionally RVL was given the right to appoint four
members to the Company’s board of directors (the “Board”), with the size of the Board not to exceed seven members. RVL’s right to
appoint four directors will decline proportionately to take into account subsequent material reductions in RVL’s ownership position in
the Company.
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Each share of Series C Preferred Stock carried a liquidation preference and was entitled to receive cumulative dividends payable at a
rate per annum of 10% of the Series C Stated Value on the date of issuance (i.e. $1,000). Such dividends were payable through the
issuance of additional shares of Series C Preferred Stock on each anniversary of the date of issuance. Additionally, the Series C
Preferred Stock shared ratably on an as-converted basis with the common stock in the payment of all other dividends and distributions.
For the year ended December 31, 2013, the Company accrued dividends of $1,014,000. On December 1, 2014, all outstanding shares
of Series C Preferred were converted to common stock in the Preferred Stock Exchange.
Series D Convertible Preferred Stock – The Company previously designated 13,000 shares of preferred stock as Series D Convertible
Preferred Stock, par value $0.001 per share (the “Series D Preferred Stock”).
On December 20, 2012, the Company issued 11,177 shares of Series D Preferred Stock, and in the first quarter of 2013, the Company
issued 738 shares of Series D Preferred Stock, as partial consideration in the Seesmart acquisition (Note 2). The Series D Preferred
Stock had a liquidation preference of $100 per share and shared ratably on an as-converted basis with the Company’s common stock in
the payment of dividends and distributions. The Series D Preferred Stock was non-voting and was initially non-convertible. On
May 15, 2013, all 11,915 shares of Series D Preferred Stock were automatically converted into 1,712,167 shares of common stock at a
conversion price per share equal to $0.6959 (the “Series D Conversion Price”).
Series E Redeemable Convertible Preferred Stock – The Company previously designated 10,000 shares of preferred stock as Series E
Convertible Redeemable Preferred Stock, par value $0.001 per share (the “Series E Preferred Stock”).
On February 21, 2013, the Company issued to RVL 5,000 shares of Series E Preferred Stock for cash of $5 million, which was used for
working capital purposes. The Series E Preferred Stock was initially non-voting and non-convertible and became voting and
convertible into shares of the Company’s common stock on May 15, 2013.
Each share of Series E Preferred Stock was entitled to receive cumulative dividends payable at a rate per annum of 5% of the Series E
Stated Value then in effect. Additionally, the Series E Preferred Stock shared ratably on an as-converted basis with the common stock
in the payment of all other dividends and distributions. For the year ended December 31, 2013, the Company accrued dividends of
$218,000.
In accordance with Accounting Standards Codification 480 (ASC 480), the Company classified the Series E Preferred Stock as
temporary equity in the financial statements as it was subject to mandatory redemption at the option of the holder. The Company
concluded that the Series E Preferred Stock is more akin to a debt-type instrument than an equity-type instrument. Accordingly the
Series E Preferred Stock was accreted to the redemption amount in effect on the balance sheet date.
The embedded conversion feature was not deemed to be closely and clearly related to the debt-type host instrument and before the
modification described below did not meet the requirements for classification as equity. Accordingly, it was accounted for as a liability
at fair value with subsequent changes in fair value included in earnings. The change in fair value of the embedded derivative included
in the statement of earnings was $ 7.0 million were for the year ended December 31, 2013. On May 14, 2013, the host instrument was
modified by eliminating certain provisions that prevented the embedded conversion feature from meeting the criteria for classification
as equity. Accordingly, the fair value of the embedded conversion liability of $8.6 million as of May 14, 2013 was reclassified to paid
in capital.
On December 1, 2014, all outstanding shares of Series E Preferred were converted to common stock in the Preferred Stock Exchange
described above.
Series F Redeemable Convertible Preferred Stock – The Company previously designated 10,000 shares of preferred stock as Series F
Senior Convertible Redeemable Preferred Stock, par value $0.001 per share (the “Series F Preferred Stock”).
On August 22, 2013, the Company issued to RVL 5,000 shares of Series F Preferred Stock for cash of $5 million, which was used for
working capital purposes.
Each share of Series F Preferred Stock was voting and carried a liquidation preference. It was redeemable for cash at the option of the
Company, and convertible to either common stock or cash at the option of the holder. Additionally, it was entitled to receive dividends
at a rate per annum equal to 7% of the Series F Stated Value then in effect. For the year ended December 31, 2013, the Company
accrued Series F Dividends of $129,000.
All outstanding shares of Series F preferred stock were redeemed in connection with the exchange of Series F preferred stock for Series
G preferred stock described below. Following the redemption, the Series F preferred stock was cancelled in June 2014.
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In accordance with Accounting Standards Codification 489 (“ASC 480”), the Company classified the Series F Preferred Stock as
temporary equity in the financial statements as it was subject to mandatory redemption at the option of the holder. The Company
concluded that the Series F Preferred Stock is more akin to a debt-type instrument than an equity-type instrument. Accordingly the
preferred stock was accreted to the redemption amount in effect on the balance sheet date.
Series G Redeemable Convertible Preferred stock – The Company previously designated 18,000 shares of preferred stock as Series G
Convertible Redeemable Preferred Stock, par value $0.001 per share (the “Series G Preferred Stock”).
On June 30, 2014, the Company issued to RVL and its affiliate an aggregate of 18,000 shares Series G Preferred Stock as follows. The
Company issued 10,956,000 shares in exchange for cancellation of the outstanding balance on the RVL Note (see Note 16), which
aggregated $10,956,000 including accrued and unpaid interest thereon. An additional 5,404 shares were issued in exchange for the
5,000 shares (including accrued and unpaid dividends thereon) of the Company’s outstanding Series F Preferred Stock, and 1,640
shares were issued to Aston in exchange for $1,640,085, a portion of the outstanding balance on the February Note (see Note 15).
The Series G Preferred Stock carried a liquidation preference, and was voting and convertible into shares of the Company’s common
stock at any time at the option of the holder at a conversion price equal to $2.30. In accordance with ASC 480, the Company classified
the Series G Preferred Stock as temporary equity in the financial statements as it was subject to mandatory redemption at the option of
the holder.
Additionally, the Company had the option to redeem all or any part of the Series G Preferred Stock for cash at any time subject to the
holder’s right to convert and require delivery of shares of common stock. For so long as shares of Series G Preferred Stock were
outstanding, the Company was prohibited from taking certain actions specified in the Series G certificate of designations without the
consent of a majority of the holders.
Each share of Series G Preferred Stock was entitled to receive cumulative dividends payable at a rate per annum of nine percent
(9%) of the Series G Stated Value.
On December 1, 2014, all outstanding shares of Series G Preferred were converted to common stock in the Preferred Stock Exchange.
8.
Stock-Based Compensation Plans:
On September 18, 2003, the Company adopted a stock option plan (the “2003 Plan”) that provides for the grant of incentive stock
options and nonqualified stock options. The option price of incentive stock options must be at least 100% of market value at the date of
the grant and incentive stock options have a maximum term of 10 years. Options granted typically vest ratably over a three-year period
or are based on achievement of performance criteria. The Company grants selected executives and other key employees share option
awards, whose vesting is contingent upon meeting various departmental and company-wide performance goals including meeting sales
targets and net profit targets. In March 2009, the Company amended the 2003 Plan to extend the post-service termination exercise
period of non-statutory stock options granted to directors for their service to the Company as directors from three months after the
director’s termination date to the tenth anniversary of the date of grant. The 2003 Plan does not contain any provisions which would
trigger automatic vesting upon a change in control. The Board has determined that no further awards will be made pursuant to the 2003
Plan. As of December 31, 2015, options for 289,834 shares of common stock were vested and exercisable under the 2003 Plan, and
289,834 shares have been reserved for issuance under the 2003 Plan.
In May 2013, shareholders approved the 2013 Stock Incentive Plan (the “2013 Plan”). An aggregate of 6,000,000 shares of the
Company’s common stock may be issued pursuant to the 2013 Plan, as amended, to officers, employees, non-employee directors and
consultants of the Company and its affiliates. Awards under the plan may be in the form of stock options, which may constitute
incentive stock options, or non-qualified stock options, restricted shares, restricted stock units, performance awards, stock bonus
awards, share appreciation rights and other stock based awards. Stock options will be issued at an exercise price not less than 100% of
the market value at the date of grant and expire no later than ten years after the date of grant. Stock awards typically vest over three
years but vesting periods for non-employees may be longer or based on the achievement of performance goals.
Through December 31, 2015, the Company has issued 25,000 options, 2,706,664 restricted shares, net of forfeitures, and 831,150
shares for incentive compensation, under the 2013 Plan. A total of 2,462,186 common shares (including 25,000 for stock options
already awarded) are reserved for future issuance under the 2013 Plan.
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A summary of non-vested restricted shares follows:
Outstanding non-vested December 31, 2014
Shares granted
Shares vested
Shares forfeited
Outstanding non-vested December 31, 2015
Number of
Restricted
Shares
1,255,667
1,103,500
(666,500)
(346,334)
1,346,333
Weighted
Average
Grant Date
Fair Value
Per Share
2.38
$
1.33
2.29
2.03
1.66
$
The weighted average term of employee restricted stock is three years. Unrecognized compensation expense for employee restricted
stock grants outstanding at December 31, 2015 amounted to $1,425,000, which will be amortized over the next three years.
The following table summarizes option activity of the 2003 and 2013 Plans. Substantially all of the options are exercisable as of
December 31, 2015:
Balance, December 31, 2014
Options granted at market
Options exercised
Options forfeited or expired
Balance, December 31, 2015
Number of
Shares
Outstanding
Under Option
414,380
—
—
(99,546)
314,834
Weighted
Average
Exercise
Price
$
4.29
—
—
4.07
4.36
$
The total future compensation cost related to non-vested stock option awards is estimated to be nominal. The total intrinsic value of
options exercised during the year ended December 31, 2013 was $95,000. No options were exercised in 2015 and 2014. Options
outstanding at December 31, 2015 had no intrinsic value. The total fair value of options vested during the years ended December 31,
2015, 2014 and 2013 was nominal.
Under the 2003 Plan, 153,600 and 7,640 performance options expired during 2013 and 2014, respectively. These performance options
were also included in the summary of option activity above.
Stock-based compensation expense for employees recognized in the accompanying statements of operations for the years ended
December 31, 2015, 2014 and 2013 was $2,422,000, $1,751,000 and $303,000, respectively. Stock-based compensation expense
(benefit) recorded with respect to non-employee service providers during the years ended December 31, 2015, 2014 and 2013 was
$297,000, ($40,000) and $506,000, respectively. Stock-based compensation for 2015 and 2014 includes $1,123,000 and $941,000,
respectively, of bonus and commissions paid in the form of common stock.
9. Operating Leases:
The Company leases office, warehouse and manufacturing facilities throughout the United States. Generally, the leases require the
Company to pay the operating expenses of the properties, in some cases including property taxes. The majority of the Company’s
leases include renewal options at existing or current market rates.
The following schedule shows the total rent expense under operating leases:
(in thousands)
Rent expense
Less sublease rentals
Total rent expense
62
Year Ended December 31,
2015
$2,026
—
$2,026
2014
$953
—
$953
2013
$577
(47)
$530
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The future minimum payment obligations as of December 31, 2015 for operating leases are as follows:
(in thousands)
2016
2017
2018
2019
2020
Thereafter
Total future payment obligations
$ 2,466
2,313
2,271
1,709
832
1,430
$11,021
10. Risk Concentrations:
The Company’s financial instruments that are exposed to concentrations of credit risk consist of cash, cash equivalents, trade accounts
receivable and accounts payable. The Company places its cash and cash equivalents with high credit quality institutions. At times such
balances may be in excess of the FDIC insurance limit.
A portion of the Company’s LEDs and LED lighting products and systems are manufactured by select contract manufacturers. While
the Company believes alternative manufacturers for the production of these products are available, the Company has selected these
particular manufacturers based on their ability to consistently produce these products per the Company’s specifications ensuring the
best quality product at the most cost effective price.
The Company depends on these manufacturers to satisfy performance and quality specifications and to dedicate sufficient production
capacity for finished products within scheduled delivery times. Accordingly, the loss of one or more of these manufacturers or delays
in obtaining shipments could have a material adverse effect on the Company’s operations until such time as an alternative manufacturer
could be found.
11.
Income Taxes:
The Company did not record any current or deferred U.S. federal income tax provision or benefit for December 31, 2015 and 2013
because of its net operating loss carryforwards. The Company has recognized a full valuation allowance related to its net deferred tax
assets, including substantial net operating loss carryforwards. In conjunction with the 2014 acquisitions of Value Lighting and All
Around, the Company recorded a net deferred tax liability of $6.6 million in its purchase price allocation (see Note 2). This liability can
be used to reduce the overall deferred tax asset of the Company and as a result, the Company recognized a corresponding tax benefit
related to the reduction of the existing valuation allowance. This benefit resulted in a credit recorded in earnings of $6.6 million for
2014.
As of December 31, 2015, the Company had net operating loss carryforwards for federal and state income tax purposes of $24.9
million and $35.6 million, respectively, which expire between 2020 and 2035. Utilization of net operating loss carryforwards is
dependent on generating future taxable income of the appropriate type and in the appropriate jurisdiction. In addition, as a result of
transactions consummated during 2012 and 2013, including the issuance of common and preferred stock by the Company and the
acquisition of Seesmart and Relume, substantially all of the Company’s net operating loss carryforwards as of December 31, 2014 are
subject to limitations imposed by Section 382 of the Internal Revenue Code. During 2013 the Company performed an evaluation of the
Section 382 limitations on the use of net operating loss carryforwards and has adjusted them accordingly. The Company has
recognized a full valuation allowance related to its remaining net deferred tax assets, including the remaining net operating loss
carryforwards.
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Components of deferred tax assets (liabilities) are as follows:
(in thousands)
Accounts receivable
Inventories
Accrued expenses
Depreciation
Intangible assets
Stock options
Deferred revenue
Other
Net operating loss carryforwards
Net deferred tax asset
Valuation allowance
December 31,
2015
$
430
1,324
749
(97)
(9,843)
1,410
3
15
11,123
5,114
(5,114)
$ —
2014
$
233
1,847
818
(5)
(11,232)
1,339
22
5
11,860
4,887
(4,887)
$ —
In accordance with FASB ASC 740 “Income Taxes”, valuation allowances are provided against deferred tax assets if, based on the
weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company has not recorded a provision for income taxes in 2015 and 2013 as the deferred tax benefits of the net losses were offset
by a corresponding increase in the deferred tax valuation allowance. The following is a reconciliation of tax computed at the statutory
federal rate to the income tax expense in the statements of operations for the years ended December 31, 2015, 2014 and 2013:
(in thousands, except %)
Tax benefit at statutory federal rate
Deferred state tax benefit
Change in valuation allowance
Tax benefit of acquisition
Adjustment to net operating loss carryforwards
Non-deductible expenses
Impact of rate change
Income tax benefit
2015
2013
5 0.2
December 31,
2014
Amount % Amount % Amount %
$ (810) (34.0) $(3,988) (34.0) $ (5,719) (34.0)
(258) (1.5)
(383) (3.3)
371 16.2 4,982 42.5 (10,446) (62.1)
— — (6,550) (55.8) — —
(120) (1.0) 13,828 82.2
160 1.4
2,595 15.4
(651) (5.6) — —
$ — — $(6,550) (55.8) $ — —
(482) (21.1)
1,060 45.0
(144) (6.3)
12. Foreign and Domestic Operations:
Net revenues by geographic location, based on location of customers, were as follows:
(in thousands)
United States
Canada
Other
Total
Net long-lived assets by geographic location were as follows:
(in thousands)
United States
Other
Total
64
2015
$129,328
257
71
$129,656
December 31,
2014
$74,839
1,839
162
$76,840
2013
$25,243
574
243
$26,060
2015
$40,749
93
$40,842
December 31,
2014
$35,883
112
$35,995
2013
$18,489
137
$18,626
Table of Contents
13 Benefit Plans:
The Company has established a profit sharing plan that permits participants to make contributions by salary reduction pursuant to
Section 401(k) of the Internal Revenue Code of 1986, as amended. On November 1, 2008, the Company elected to cease matching
contributions. The Company elected to reinstate the matching contribution during 2013. During 2015, 2014 and 2013, the Company
had $166,000, $120,000 and $39,000, respectively, in expenses related to this plan.
14. Related Party Transactions:
Financings – In August 2015, RVL provided an irrevocable letter of credit to support the $10 million promissory notes issued to the
sellers of Energy Source (see Note 15).
In April 2015, our Chairman and Chief Executive Officer guaranteed $5 million of borrowings under our Revolving Credit Facility,
increasing our Borrowing Base by that amount (see Note 15). Bank of America agreed to amend the Revolving Credit Facility to enable
the Company to borrow up to $30 million under certain conditions.
In February 2014, the Company entered in an arrangement with Aston, an affiliate of our Chairman and Chief Executive Officer,
pursuant to which the Company borrowed $3.5 million for general corporate purposes (the “February Note”). The borrowing bore
interest at 9% annually and originally had a scheduled maturity of April 1, 2015. The Company had the option to prepay the note at any
time without penalty. In April 2014, the Company borrowed an additional $1 million from Aston for general corporate purposes on the
same terms and conditions as the February Note (the “April Note”). Also in April 2014, the Company borrowed $10.8 million from
RVL to fund the acquisition of Value Lighting (the “RVL Note”), which bore interest at 9% annually and originally had a scheduled
maturity of the earliest of April 1, 2015 or the date on which the Company received proceeds from any debt, factoring or other similar
facility or equity securities in the commercial banking, private placement or public markets.
In June 2014, the company exchanged the $10.8 million RVL Note and $1.6 million of the February Note plus related accrued interest,
for an equivalent amount of Series G preferred stock (see Note 7). The remaining $1.9 million of the February Note, together with
accrued interest thereon, was refinanced with a new Note Payable to Aston dated June 30, 2014.
In addition, Aston advanced an additional $ 2.7 million for general corporate purposes in four separate transactions during May and
June 2014. As of July 31, 2014, the Audit Committee ratified these advances and approved the issuance of a promissory note in respect
of such amount, which bears interest and matures on April 1, 2017 and can be prepaid at any time at the option of the Company (the
“July Note”).
The Company has accrued interest on the July Note of $0.3 million at December 31, 2015 and recorded interest expense of $1.1 million
for the year ended December 31, 2015.
Investment Agreements – The Company has entered into four separate investment agreements and an Exchange Agreement with RVL,
an affiliate of Aston and the Company’s Chairman and Chief Executive Officer, whereby the Company issued to RVL Series B, C, E, F
and G preferred stock. Cash received by the Company for the issuance for Series B, C, E, and F preferred stock aggregated to $26.0
million. Cash received for debt exchanged for Series G preferred stock aggregated to $12.5 million. On December 1, 2014, all
outstanding preferred stock was exchanged for common stock of the Company. In addition, in 2013 an affiliate of RVL purchased
75,000 shares of common stock from the Company for $192,000, at the closing market price of the stock on the date purchased.
Customer Financing – In 2013, Aston provided $9.9 million in financing to a related group of customers of the Company who used the
proceeds to repay its obligations to the Company for the purchase of Company products. The Company has no obligations to Aston
with respect to the financing arrangements between the customer and Aston. The Company’s obligations to the customer are limited to
the standard warranty obligation on the products sold and amounts accrued.
Management Agreement – On April 9, 2013, the Company ratified a management services agreement with Aston (the “Management
Agreement”) to memorialize certain management services that Aston has been providing to the Company since RVL acquired majority
control of the Company’s voting securities in September 2012. Pursuant to the Management Agreement, Aston provides consulting
services in connection with financing matters, budgeting, strategic planning and business development, including, without limitation,
assisting the Company in (i) analyzing the operations and historical performance of target companies; (ii) analyzing and evaluating the
transactions with such target companies; (iii) conducting financial, business and operational due diligence, and (iv) evaluating related
structuring and other matters. In consideration of the services provided by Aston under the Management Agreement, the Company
issued 500,000 shares of restricted common stock to Aston to vest in three equal annual increments, with the first such vesting date
being September 25, 2013. On April 21, 2014, the Company granted an additional 300,000 shares of restricted stock to Aston which
vest in three annual installments with the first such vesting date being September 25, 2014. The Audit Committee of the Board will
consider from time to time (at a minimum at such times when the Compensation Committee of the Board evaluates director
compensation) whether additional compensation to Aston is appropriate given the nature of the services provided.
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Table of Contents
Relocation of Corporate Headquarters – During the first quarter of 2013, the Company relocated its corporate headquarters to
Stamford, Connecticut to a space also occupied by affiliates of the Company’s Chairman and Chief Executive Officer. The terms and
conditions of the arrangement have not been finalized but the Audit Committee of the Board agreed to an allocation of the costs of the
Stamford headquarters between Aston and the Company. The Company pays Aston $26,537 monthly, representing its proportionate
share of the space under the underlying lease. Costs allocated to the Company amounted to $0.3 million and $0.7 million for the years
ended December 31, 2015 and 2014, respectively.
RVL Transaction Fees – Pursuant to the Series E and Series F Investment Agreement with RVL, the Company agreed to pay certain
transaction costs incurred by RVL in connection with its investment. For the year ended December 31, 2013, the Company incurred
$33,000 related to these costs. Pursuant to the Series G Exchange Agreement with Aston and RVL, the Company also agreed to pay
certain transaction costs incurred by Aston in connection with the issuance of the Series G stock.
15. Financings
In August 2015, in connection with the acquisition of Energy Source (see Note 2), the Company issued $10 million of promissory
notes bearing interest at 5% per annum. The promissory notes are due on July 20, 2016 and are supported by an irrevocable letter of
credit from RVL.
In August 2014, the Company entered into a three-year loan and security agreement with Bank of America (“the Revolving Credit
Facility”) pursuant to which the Company can borrow up to specified percentages against eligible accounts receivable and inventory as
defined in the Revolving Credit Facility (the “Borrowing Base”) up to a maximum of $25 million.
In April 2015, our Chairman and Chief Executive Officer guaranteed $5 million of borrowings under the Revolving Credit Facility,
increasing the Borrowing Base (but not the $25 million maximum) by that amount. This guarantee may be terminated under certain
circumstances. Bank of America agreed to amend the Revolving Credit Facility to enable the Company to borrow up to $30 million
under certain conditions.
Borrowings under the arrangement bear interest at a LIBOR rate or a defined base rate, each plus an applicable margin. The weighted
average annual interest rate was 3.65% at December 31, 2015. The Company is also obligated to pay various fees monthly. Outstanding
loans become payable on demand to the extent that such loans exceed the Borrowing Base, and all outstanding amounts must be repaid
on August 20, 2017. All obligations under the Revolving Credit Facility are secured by the assets of the Company and its subsidiaries
and are guaranteed by the Company and its subsidiaries. Borrowings outstanding as of December 31, 2015 amount to $22 million and
are included in non-current liabilities in the accompanying Consolidated Balance Sheet. We are in compliance with our covenants and
obligations under the facility, and we estimate that as of December 31, 2015 we are eligible to borrow an additional $2.6 million under
the facility based upon current levels of inventory and accounts receivable.
The Loan Agreement contains covenants which limit the ability of the Company to, among other things, (i) create, incur, guarantee or
suffer to exist any indebtedness; (ii) create or suffer any lien upon any property; (iii) declare or make distributions to equity holders or
create any restriction on the ability of a subsidiary to make such a distribution; (iv) make investments; (v) sell, lease, license, consign or
otherwise dispose of any property; (vi) make loans or other advances of money to any person; (vii) make payments on certain
indebtedness; and (viii) enter into transactions with affiliates. In addition, the Loan Agreement includes financial covenants that, on a
consolidated basis, requires the Company to maintain, for the most recent twelve fiscal months, a ratio of (i) EBITDA minus Capital
Expenditures (as defined in the Loan Agreement) and cash taxes paid to (ii) Fixed Charges (as defined in the Loan Agreement), of not
less than 1.1 to 1.0, and a ratio of (i) Senior Debt (as defined in the loan agreement) to (ii) EBITDA of not more than 3.5 to 1.0.
From time to time the Company enters into financing arrangements with RVL and its affiliates (see Note 14).
In conjunction with the acquisition of Value Lighting (see Note 2), the Company refinanced $3.7 million of Value Lighting’s trade
accounts payable by issuing a note payable to the creditor. The note is payable in installments through November 2018, at which time a
balloon payment of $1.4 million is due.
Maturities of long-term borrowings for each of the next five years are as follows:
(in thousands)
2016
2017
2018
2019
2020
$10,360
24,951
2,066
—
—
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16. Quarterly Results of Operations (Unaudited):
(in thousands, except per share data)
Fiscal year ended December 31, 2015:
Revenues
Gross profit
Net (loss) income
Net (loss) income attributable to common stockholders
Basic and diluted (loss) income per common share attributable to
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$20,330 $27,245 $37,733 $44,348
14,861
1,437
1,437
7,171
(2,046)
(2,046)
12,186
(285)
(285)
9,072
(1,488)
(1,488)
common stockholders (1)
$ (0.01) $ (0.01) $ (0.00) $
0.01
Fiscal year ended December 31, 2014:
Revenues
Gross profit
Net (loss) income
Net (loss) income attributable to common stockholders
Basic and diluted (loss) income per common share attributable to
$ 4,952 $17,517 $26,877 $27,494
8,498
(2,616)
(7,913)
1,603
(3,570)
(3,977)
8,559
(1,404)
(2,055)
5,563
2,410
1,100
common stockholders (1)
$ (0.04) $
0.01 $ (0.02) $ (0.07)
The 2015 and 2014 acquisitions are included in consolidated results of operations from their respective acquisition dates.
(2) The quarterly earnings per share information is computed separately for each period. Therefore, the sum of such quarterly per share
amounts may differ from the total for the year.
67
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 10, 2016
REVOLUTION LIGHTING TECHNOLOGIES, INC.
By: /s/ Robert V. LaPenta
Robert V. LaPenta
Chairman of the Board, Chief Executive
Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
/s/ Robert V. LaPenta
Robert V. LaPenta
Chairman of the Board, Chief Executive
Officer and President
(Principal Executive Officer)
/s/ James A. DePalma
James A. DePalma – Chief Financial Officer and Director
(Principal Financial and Accounting Officer)
/s/ Robert A. Basil, Jr.
Robert A. Basil, Jr. – Director
/s/ Bill Ingram
Bill Ingram – Director
/s/ Robert V. LaPenta, Jr.
Robert V. LaPenta, Jr. – Director
/s/ Dennis McCarthy
Dennis McCarthy – Director
/s/ Stephen G. Virtue
Stephen G. Virtue – Director
/s/ Charles J. Schafer
Charles J. Schafer – Director
68
March 10, 2016
March 10, 2016
March 10, 2016
March 10, 2016
March 10, 2016
March 10, 2016
March 10, 2016
March 10, 2016
CONSENT AND FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
AND FIRST AMENDMENT TO PLEDGE AGREEMENT
Exhibit 10.22(A)
THIS CONSENT AND FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT AND FIRST AMENDMENT TO
PLEDGE AGREEMENT (this “Amendment”) is made as of this 29th day of September, 2014 by and among REVOLUTION LIGHTING
TECHNOLOGIES, INC., a Delaware corporation (“RLT”), LUMIFICIENT CORPORATION, a Minnesota corporation (“Lumificient”),
LIGHTING INTEGRATION TECHNOLOGIES, LLC, a Delaware limited liability company (“LIT”), SEESMART TECHNOLOGIES,
LLC, a Delaware limited liability company (“Seesmart Tech”), RELUME TECHNOLOGIES, INC., a Delaware corporation (“Relume”),
TRI-STATE LED DE, LLC, a Delaware limited liability company (“Tri-State”), and VALUE LIGHTING, LLC, a Delaware limited
liability company (“Value Lighting”, and together with RLT, Lumificient, LIT, Seesmart Tech, Relume and Tri-State, singly and
collectively, jointly and severally, “Borrowers” and each a “Borrower”), the Guarantors party hereto, and BANK OF AMERICA, N.A., a
national banking association (“Lender”).
W I T N E S S E T H:
WHEREAS, the Obligors and the Lender are parties to a certain Loan and Security Agreement, dated as of August 20, 2014 (as
amended, modified, supplemented or restated and in effect from time to time, collectively, the “Loan Agreement”);
WHEREAS, the Obligors and the Lender are parties to a certain Pledge Agreement, dated as of August 20, 2014 (as amended,
modified, supplemented or restated and in effect from time to time, collectively, the “Pledge Agreement”);
WHEREAS, the Obligors have advised the Lender that solely for Tax liability savings purposes, the Obligors intend consummate a
Recapitalization (as defined below) of the Equity Interests of Relume and Seesmart;
WHEREAS, pursuant to the terms and conditions of the Loan Agreement, the Pledge Agreement and the other Loan Documents, the
Obligors must obtain the written approval of the Lender prior to consummating the Recapitalization;
WHEREAS, the Obligors have also requested that the Lender modify and amend certain terms and conditions of the Loan Agreement
and the Pledge Agreement; and
WHEREAS, the Lender is willing to so consent to the Recapitalization and to so modify and amend certain terms and conditions of
the Loan Agreement and the Pledge Agreement, subject to the terms and conditions contained herein.
1
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
Obligors and the Lender agree as follows:
1. Capitalized Terms. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Loan
Agreement.
2. Consent to the Recapitalization. Simultaneous with the execution of this Amendment, the Equity Interests of Relume and Seesmart
shall be recapitalized as follows, and the Certificates of Incorporation (which constitute Organic Documents) of Relume and Seesmart,
respectively, shall be accordingly amended and filed with the Secretary of State of the State of Delaware (collectively, the
“Recapitalization”):
(a) Relume. The authorized common stock of Relume shall be reduced from 150,000,000 shares to 1,000 shares via a reverse stock
split, and any and all classes of preferred stock of Relume shall be cancelled and eliminated, and RLT shall remain as the sole
stockholder of Relume.
(b) Seesmart. The authorized common stock of Seesmart shall be reduced from 40,000,000 shares to 1,000 shares via a reverse stock
split, and any and all classes of preferred stock of Seesmart shall be cancelled and eliminated, and Seesmart Tech shall remain as
the sole stockholder of Seesmart.
The Obligors acknowledge and agree that under no circumstances shall any cash Distributions be made relating to the Recapitalization. The
Lender hereby consents to the Recapitalization subject to the terms and conditions contained herein, including, but not limited to, the
fulfillment of the Conditions Precedent to Effectiveness set forth in Section 8 hereof, all as determined by the Lender in its sole discretion.
3. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows:
(a)
Schedule 8.1.4 to the Loan Agreement is hereby deleted in its entirety, and the amended and restated Schedule 8.1.4 to the Loan
Agreement attached hereto as Exhibit “A” is hereby substituted in its stead.
4. Amendments to Pledge Agreement. The Pledge Agreement is hereby amended as follows:
(a)
Schedule III to the Pledge Agreement is hereby deleted in its entirety, and the amended and restated Schedule III to the Pledge
Agreement attached hereto as Exhibit “B” is hereby substituted in its stead.
5. Ratification of Loan Documents . Except as specifically amended by this Amendment, all of the terms and conditions of the Loan
Agreement and of each of the other Loan Documents shall remain in full force and effect. The Obligors hereby ratify, confirm, and reaffirm
all of the representations, warranties and covenants contained therein. Further, the
2
Obligors warrant and represent that no Events of Default exist, and nothing contained herein shall be deemed to constitute a waiver by the
Lender of any Event of Default which may nonetheless exist as of the date hereof.
6. Breach. Without limiting the provisions of the Loan Documents, a breach of any agreement, covenant, warranty, representation or
certification of the Obligors under this Amendment and/or the failure of the Obligors to perform its obligations under this Amendment shall
constitute and Event of Default under the Loan Agreement.
7. Waiver. Each Obligor acknowledges, confirms and agrees that it has no claims, counterclaims, offsets, defenses or causes of action
against the Lender with respect to amounts outstanding under the Loan Agreement or otherwise. To the extent such claims, counterclaims,
offsets, defenses and/or causes of actions should exist, whether known or unknown, at law or in equity, each Obligor hereby WAIVES
same and RELEASES the Lender from any and all liability in connection therewith.
8. Conditions Precedent to Effectiveness. This Amendment shall not be effective until each of the following conditions precedent has
been fulfilled to the sole satisfaction of the Lender:
(a) This Amendment shall have been duly executed and delivered by the respective parties hereto, and shall be in full force and effect
and shall be in form and substance satisfactory to the Lender.
(b) All action on the part of the Obligors necessary for the valid execution, delivery and performance by the Obligors of this
Amendment and all other documentation, instruments, and agreements to be executed in connection herewith shall have been
duly and effectively taken and evidence thereof satisfactory to the Lender shall have been provided to the Lender.
(c) No Event of Default shall have occurred and be continuing.
(d) The Obligors shall have paid to Lender all costs and expenses of the Lender, including, without limitation, reasonable attorneys’
fees, in connection with the preparation, negotiation, execution and delivery of this Amendment.
(e) The Lender shall have received true and correct, fully executed copies of the following documents relating to the
Recapitalization:
(i) Written Consent of the Sole Stockholder of Relume Technologies, Inc.;
(ii) Written Consent of the Board of Directors of Relume Technologies, Inc.;
(iii) Written Consent of the Sole Stockholder of Seesmart, Inc.;
(iv) Written Consent of the Board of Directors of Seesmart, Inc.;
3
(v)
(vi)
Fourth Amended and Restated Certificate of Incorporation of Relume Technologies, Inc. (as file-stamped and certified by
the Secretary of State of the State of Delaware); and
Second Amended and Restated Certificate of Incorporation of Seesmart, Inc. (as file-stamped and certified by the Secretary
of State of the State of Delaware).
(f)
The Lender shall have received the original stock certificates of Relume and Seesmart, respectively, reflecting the
Recapitalization, which original stock certificates shall be accompanied by stock powers duly executed in blank or other
instruments of transfer reasonably satisfactory to the Lender.
(g) The Obligors shall have executed and delivered to the Lender such additional documents, instruments, and agreements as the
Lender may reasonably request.
9. Miscellaneous.
(a) This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall constitute one instrument. Delivery of an executed
signature page of this Amendment (or any notice or agreement delivered pursuant to the terms hereof) by facsimile transmission
or electronic transmission shall be as effective as delivery of a manually executed counterpart hereof.
(b) This Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior
negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.
(c) Any determination that any provision of this Amendment or any application hereof is invalid, illegal or unenforceable in any
respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the
validity, legality or enforceability of any other provisions of this Amendment.
(d) THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AMENDMENT AND ANY DISPUTE ARISING
OUT OF THE RELATIONSHIP BETWEEN THE PARTIES HERETO, WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).
[SIGNATURE PAGE FOLLOWS]
4
IN WITNESS WHEREOF, the parties have executed this Amendment as a sealed instrument by their respective duly authorized
officers.
LENDER:
BANK OF AMERICA, N.A.
/s/ Cynthia G. Stannard
By:
Name: Cynthia G. Stannard
Title: Sr. Vice President
[Signatures Continue on Next Page]
5
BORROWERS:
REVOLUTION LIGHTING TECHNOLOGIES,
INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President and Chief Financial Officer
LUMIFICIENT CORPORATION
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
LIGHTING INTEGRATION TECHNOLOGIES,
LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
SEESMART TECHNOLOGIES, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
RELUME TECHNOLOGIES, INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President, Secretary and Treasurer
[Signatures Continue on Next Page]
6
TRI-STATE LED DE, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
VALUE LIGHTING, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
[Signatures Continue on Next Page]
7
GUARANTORS:
SEESMART, INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President and Secretary
SENTINEL SYSTEM, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President, Secretary and Treasurer
VALUE LIGHTING OF HOUSTON, LLC
By: Value Lighting, LLC, its Sole Member
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
ENVIROLIGHT LED, LLC
By: Seesmart, Inc., its Sole Member
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President and Secretary
8
CONSENT, JOINDER AND SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
AND SECOND AMENDMENT TO PLEDGE AGREEMENT
Exhibit 10.22(B)
THIS CONSENT, JOINDER AND SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT AND FIRST
AMENDMENT TO PLEDGE AGREEMENT (this “Second Amendment”) is made as of this 19th day of December, 2014 by and among
REVOLUTION LIGHTING TECHNOLOGIES, INC., a Delaware corporation (“RLT”), LUMIFICIENT CORPORATION, a Minnesota
corporation (“Lumificient”), LIGHTING INTEGRATION TECHNOLOGIES, LLC, a Delaware limited liability company (“LIT”),
SEESMART TECHNOLOGIES, LLC, a Delaware limited liability company (“Seesmart Tech”), RELUME TECHNOLOGIES, INC., a
Delaware corporation (“Relume”), TRI-STATE LED DE, LLC, a Delaware limited liability company (“Tri-State”), VALUE LIGHTING,
LLC, a Delaware limited liability company (“Value Lighting”), and ALL AROUND LIGHTING, L.L.C., a Texas limited liability company
(“All Around”, and together with RLT, Lumificient, LIT, Seesmart Tech, Relume, Tri-State and Value Lighting, singly and collectively,
jointly and severally, “Borrowers” and each a “Borrower”), the Guarantors party hereto, and BANK OF AMERICA, N.A., a national
banking association (“Lender”).
W I T N E S S E T H:
WHEREAS, the Obligors (other than All Around and Break One Nine, Inc., a Texas corporation (“Break One”)) and the Lender are
parties to a certain Loan and Security Agreement, dated as of August 20, 2014 (as amended, modified, supplemented or restated and in
effect from time to time, collectively, the “Loan Agreement”);
WHEREAS, the Obligors (other than All Around and Break One) and the Lender are parties to a certain Pledge Agreement, dated as
of August 20, 2014 (as amended, modified, supplemented or restated and in effect from time to time, collectively, the “Pledge Agreement”);
WHEREAS, the Obligors (other than All Around and Break One) have advised the Lender that simultaneously with the execution of
this Amendment, the Obligors intend to consummate the All Around Merger (as defined below);
WHEREAS, pursuant to the terms and conditions of the Loan Agreement, the Pledge Agreement and the other Loan Documents, the
Obligors (other than All Around and Break One) must obtain the written approval of the Lender prior to consummating the All Around
Merger; and
WHEREAS, the Lender is willing to so consent to the All Around Merger and the joinder of All Around and Break One, provided
that, inter alia, certain terms of the Loan Agreement and the Pledge Agreement are modified as set forth below.
1
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
Obligors and the Lender agree as follows:
1. Capitalized Terms. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Loan
Agreement.
2. Consent to the All Around Merger. The Obligors hereby represent and warrant to the Lender that RLT, Revolution Lighting – All
Around, Inc., a Delaware corporation (“Merger Sub”), All Around, Break One and certain other shareholder parties are entering into that
certain Agreement and Plan of Merger and Reorganization (the “All Around Merger Agreement”), whereas the Merger Sub will be merged
into Break One (with Break One being the successor to the Merger Sub), and Break One will become a wholly-owned subsidiary of RLT,
with Break One remaining the sole member of All Around (collectively, the “All Around Merger”). The Obligors further represent and
warrant to the Lender that attached to this Second Amendment as Exhibit “A” are true and complete copies of (A) the All Around Merger
Agreement and (B) Disclosure Schedules to the All Around Merger Agreement (collectively, the “Material Transaction Documents ”). The
Lender hereby consents to the All Around Merger, provided that each of the Conditions Precedent to Effectiveness set forth in Section 10
hereof shall be satisfied, all as determined by the Lender in its sole reasonable discretion.
3. Joinder; Grant of Security Interest. Effective as of the Second Amendment Effective Date, All Around and Break One each hereby:
(a)
(b)
(c)
acknowledge that they have received and reviewed copies of the Loan Agreement and the other Loan Documents;
join in the execution of, and become parties to, the Loan Agreement and the other Loan Documents as a Borrower and as an
Obligor, in the case of All Around, and as a Guarantor and an Obligor, in the case of Break One, as indicated by their signature
below;
agree to be bound by all representations, warranties, covenants, agreements, liabilities and acknowledgments of a Borrower and
as an Obligor, in the case of All Around, and as a Guarantor and an Obligor, in the case of Break One, under the Loan Agreement
and the other Loan Documents, in each case, with the same force and effect as if they were signatories to the Loan Agreement
and the other Loan Documents and were expressly named as a Borrower and as an Obligor, in the case of All Around, and as a
Guarantor and an Obligor, in the case of Break One;
(d)
pledge and grant to Lender, on behalf of itself and the other Secured Parties, a continuing security interest in and Lien upon all
Collateral , whether now owned or hereafter acquired, and wherever located; provided, that in no event shall the Collateral
include more than 65% of the voting stock of any Foreign Subsidiary;
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(e)
(f)
assume and agree to perform all applicable duties and obligations as a Borrower and as an Obligor, in the case of All Around, and
as a Guarantor and an Obligor, in the case of Break One, under the Loan Agreement and the other Loan Documents; and
irrevocably authorize the Lender at any time and from time to time to authenticate and file in any relevant jurisdiction to file any
financing statement that describes the Collateral as “all assets” or “all personal property”, or words to similar effect, and any
amendments or continuations with respect to such financing statements, and ratify any action taken by Lender before the date
hereof to effect or perfect its Lien on any Collateral. All Around and Break One hereby further authorize the Lender to file filings
with the United States Patent and Trademark Office and United States Copyright Office (or any successor office or any similar
office in any other country) or other necessary documents for the purpose of perfecting, confirming, continuing, enforcing or
protecting the security interest granted by them hereunder in any Intellectual Property, without their signatures, and naming each
of them as debtor and Lender as secured party.
4. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows:
(a) The definition of “Guarantors” as contained in Section 1.1 of the Loan Agreement ( Definitions) is hereby deleted in its entirety
and the following substituted in its stead:
““Guarantors”: Seesmart, Envirolight, Sentinel, Value Lighting Houston, and Break One, and each Borrower as to each other
Borrower, and each other Person that guarantees payment or performance of Obligations.”
(b) The definition of “Material Contract” as contained in Section 1.1 of the Loan Agreement ( Definitions) is hereby deleted in its
entirety and the following substituted in its stead:
““Material Contract”: any agreement or arrangement to which an Obligor is party (other than the Loan Documents) (a) that is
deemed to be a material contract under any securities law applicable to such Person, including the Securities Act of 1933; (b) for
which breach, termination, nonperformance or failure to renew would reasonably be expected to have a Material Adverse Effect;
(c) that relates to Subordinated Debt, or to Permitted Debt in an aggregate amount of $250,000 or more, (d) the Tri-State
Agreement, (e) the Value Lighting Merger Agreement, and (f) the All Around Merger Agreement.”
(c) The provisions of Section 1.1 of the Loan Agreement (Definitions) are hereby amended by inserting the following new
definitions in their applicable alphabetical orders:
““All Around Merger”: as defined in the Second Amendment.”
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““All Around Closing Consideration” means “Closing Consideration” as that term is defined in Section 1.6(b) of the All Around
Merger Agreement in effect on the Second Amendment Effective Date, which Closing Consideration is $940,000, subject to the
adjustments, if any, as set forth in the All Around Merger Agreement in effect on the Second Amendment Effective Date.”
““All Around Payment Conditions”: means the following conditions with respect to any payment in cash of (i) adjustments, if
any, to the All Around Closing Consideration required to be paid after the Second Amendment Effective Date to the Shareholders
(as that term is defined in the All Around Merger Agreement) pursuant to the terms and conditions of the All Around Merger
Agreement, (ii) any All Around Earnout Payments, and (iii) any All Around Parent Shares Consideration:
(a) before and after giving effect to such payment, no Event of Default shall have occurred and be continuing;
(b) before and after giving effect to such payment, Availability shall be no less than $5,000,000; and
(c) after giving effect to such payment, the proforma Fixed Charge Coverage shall be at least 1.25 to 1.0.”
““All Around Earnout Payments”: means the “Earnout Consideration” as that term is defined in Section 1.6(c) of the All Around
Merger Agreement in effect on the Second Amendment Effective Date required to be paid to the Shareholders (as that term is
defined in the All Around Merger Agreement) pursuant to the terms and conditions of the All Around Merger Agreement.”
““All Around Merger Agreement”: as defined in the Second Amendment.”
““All Around Parent Shares Consideration” means “Parent Shares Consideration” as that term is defined in Section 1.6(d) of the
All Around Merger Agreement in effect on the Second Amendment Effective Date.”
““Material Transaction Documents ”: as defined in the Second Amendment.”
““Post-Second Amendment Obligations”: as defined in the Second Amendment.”
““Second Amendment” means that certain Consent, Joinder and Second Amendment to Loan and Security Agreement and Second
Amendment to Pledge Agreement, dated as of December 19, 2014, by and among the Obligors and the Lender.”
““Second Amendment Effective Date”: means December 19, 2014.”
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(d) Section 9.2.7 of the Loan Agreement is hereby amended by adding the following new subsections to the end thereof:
“(j) any adjustments to the All Around Closing Consideration required to be paid in cash after the Second Amendment Effective
Date to the Shareholders (as that term is defined in the All Around Merger Agreement) pursuant to the terms and conditions of
the All Around Merger Agreement, unless the Borrower Agent has certified to Lender within five (5) Business Days prior to the
making of such payment, that the All Around Payment Conditions have been and will continue to be satisfied;
(k) All Around Earnout Payments in cash, unless the Borrower Agent has certified to Lender within five (5) Business Days prior
to the making of such payment, that the All Around Payment Conditions have been and will continue to be satisfied; and
(l) All Around Parent Shares Consideration in cash, unless the Borrower Agent has certified to Lender within five (5) Business
Days prior to the making of such payment, that the All Around Payment Conditions have been and will continue to be satisfied.”
(e)
Schedule 8.1.4 to the Loan Agreement is hereby deleted in its entirety, and the amended and restated Schedule 8.1.4 to the Loan
Agreement attached hereto as Exhibit “B” is hereby substituted in its stead.
5. Amendments to Pledge Agreement. The Pledge Agreement is hereby amended as follows:
(a)
Schedule III to the Pledge Agreement is hereby deleted in its entirety, and the amended and restated Schedule III to the Pledge
Agreement attached hereto as Exhibit “C” is hereby substituted in its stead.
6. Post-Second Amendment Obligations. The Obligors hereby agree to deliver the following duly completed and executed items to
the Lender by no later than thirty (30) days after the Second Amendment Effective Date (collectively the “Post-Second Amendment
Obligations”), all in the form and substance reasonably satisfactory to the Lender, and the Obligors further agree that any failure by the
Obligors to duly and timely comply with the Post-Second Amendment Obligations shall constitute an Event of Default under the Loan
Agreement; provided that the Obligors expressly acknowledge and agree that no Accounts or Inventory of All Around and/or Break One
can be deemed to be Eligible Accounts or Eligible Inventory (even if so otherwise qualified as Eligible Accounts or Eligible Inventory as
determined by the Lender in accordance with the terms and conditions of the Loan Agreement) until each of the Post-Second Amendment
Obligations are satisfied:
(a)
Perfection Certificate for All Around and Break One.
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(b) Any UCC-3 Terminations for All Around and Break One as determined by the Lender to ensure that the Lender has a first
priority Lien in the Collateral of All Around and Break One, respectively, subject to any Permitted Liens.
(c)
Intellectual Property Security Agreement for All Around and Break One if determined by the Lender to be necessary after
conducting Intellectual Property searches.
(d) Control Agreements for the Deposit Accounts and/or Securities Accounts of All Around and Break One if determined by the
Lender to be necessary.
(e) Certificates of a duly authorized officer of each of RLT, All Around and Break One, certifying (i) that the attached copies of such
Obligor’s Organic Documents are true and complete, and in full force and effect, without amendment except as shown; (ii) that
an attached copy of resolutions authorizing execution and delivery of the Second Amendment and all documents referenced
therein and related thereto and the Material Transaction Documents are true and complete, and that such resolutions are in full
force and effect, were duly adopted, have not been amended, modified or revoked, and constitute all resolutions adopted with
respect to this credit facility; and (iii) to the title, name and signature of each Person authorized to sign such documents.
(f) All consents as required by the Organic Documents of RLT.
(g) A written opinion of Lownestein Sandler LLP with regard to the matters addressed in the Second Amendment.
(h) Copies of policies or certificates of insurance for the insurance policies carried by All Around and Break One, all in compliance
with the Loan Documents.
(i)
(j)
For each insurance policy of All Around and Break One, copies of satisfactory endorsements (i) showing Lender as lender’s loss
payee or additional insured as its interests may appear; (ii) requiring thirty (30) days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever; and (iii) specifying that the interest of Lender shall not be impaired or
invalidated by any act or neglect of such Obligor or the owner of the Property, nor by the occupation of the premises for purposes
more hazardous than are permitted by the policy.
Lien Waivers with respect to the locations utilized by All Around and Break One. If, notwithstanding the Obligors’ commercially
reasonable efforts, the Obligors are unable to timely obtain the foregoing Lien Waiver, such failure shall not constitute a Default
or Event of Default, and the Lender reserves the right to institute a Rent and Charges Reserve for such location.
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7. Ratification of Loan Documents . Except as specifically amended by this Amendment, all of the terms and conditions of the Loan
Agreement and of each of the other Loan Documents shall remain in full force and effect. The Obligors hereby ratify, confirm, and reaffirm
all of the representations, warranties and covenants contained therein. Further, the Obligors warrant and represent that no Event of Default
exists, and nothing contained herein shall be deemed to constitute a waiver by the Lender of any Event of Default which may nonetheless
exist as of the date hereof.
8. Breach. Without limiting the provisions of the Loan Documents, a breach of any agreement, covenant, warranty, representation or
certification of the Obligors under this Amendment and/or the failure of the Obligors to perform its obligations under this Amendment shall
constitute an Event of Default under the Loan Agreement.
9. Waiver. Each Obligor acknowledges, confirms and agrees that it has no claims, counterclaims, offsets, defenses or causes of action
against the Lender with respect to amounts outstanding under the Loan Agreement or otherwise. To the extent such claims, counterclaims,
offsets, defenses and/or causes of actions should exist, whether known or unknown, at law or in equity, each Obligor hereby WAIVES
same and RELEASES the Lender from any and all liability in connection therewith.
10. Conditions Precedent to Effectiveness. This Amendment shall not be effective until each of the following conditions precedent
has been fulfilled to the sole satisfaction of the Lender:
(a) This Amendment shall have been duly executed and delivered by the respective parties hereto, and shall be in full force and effect
and shall be in form and substance satisfactory to the Lender.
(b) All action on the part of the Obligors necessary for the valid execution, delivery and performance by the Obligors of this
Amendment and all other documentation, instruments, and agreements to be executed in connection herewith shall have been
duly and effectively taken and evidence thereof satisfactory to the Lender shall have been provided to the Lender.
(c) The Lender shall have received true and correct, fully executed copies of the Material Transaction Documents.
(d) The Lender shall have received the original stock certificates of Break One and All Around, respectively, which original stock
certificates / membership certificates shall be accompanied by stock powers duly executed in blank or other instruments of
transfer reasonably satisfactory to the Lender.
(e) The Obligors shall have executed and delivered to the Lender such additional documents, instruments, and agreements as the
Lender may reasonably request.
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(f)
The Lender shall have completed and received satisfactory results of all Patriot Act inquiries with respect to All Around and
Break One.
(g) All conditions precedent to the consummation of the All Around Merger as required by the Material Transaction Documents
have been satisfied or waived by the applicable parties, and the All Around Merger has been consummated in accordance with
the provisions of the Material Transaction Documents.
(h) The Obligors shall have paid the All Around Closing Consideration with funds derived solely from the proceeds derived from the
issuance of Equity Interests of RLT that occurred prior to the Second Amendment Effective Date.
(i) After giving effect to the consummation of the All Around Merger and this Second Amendment, no Default or Event of Default
shall exist.
11. Miscellaneous.
(a)
In accordance with the terms and conditions of Loan Agreement, the Obligors shall pay to Lender all costs and expenses of the
Lender, including, without limitation, reasonable attorneys’ fees, in connection with the preparation, negotiation, execution and
delivery of this Amendment.
(b) This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall constitute one instrument. Delivery of an executed
signature page of this Amendment (or any notice or agreement delivered pursuant to the terms hereof) by facsimile transmission
or electronic transmission shall be as effective as delivery of a manually executed counterpart hereof.
(c) This Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior
negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.
(d) Any determination that any provision of this Amendment or any application hereof is invalid, illegal or unenforceable in any
respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the
validity, legality or enforceability of any other provisions of this Amendment.
(e) THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AMENDMENT AND ANY DISPUTE ARISING
OUT OF THE RELATIONSHIP BETWEEN THE PARTIES HERETO, WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Amendment as a sealed instrument by their respective duly authorized
officers.
LENDER:
BANK OF AMERICA, N.A.
/s/ Cynthia G. Stannard
By:
Name: Cynthia G. Stannard
Title: Sr. Vice President
[Signatures Continue on Next Page]
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BORROWERS:
REVOLUTION LIGHTING TECHNOLOGIES,
INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
LUMIFICIENT CORPORATION
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
LIGHTING INTEGRATION TECHNOLOGIES,
LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
SEESMART TECHNOLOGIES, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
RELUME TECHNOLOGIES, INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
[Signatures Continue on Next Page]
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TRI-STATE LED DE, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
VALUE LIGHTING, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
ALL AROUND LIGHTING, L.L.C.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
[Signatures Continue on Next Page]
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GUARANTORS:
SEESMART, INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
SENTINEL SYSTEM, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
VALUE LIGHTING OF HOUSTON, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President of Sole Member
ENVIROLIGHT LED, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President of Sole Member
BREAK ONE NINE, INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
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THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
Exhibit 10.22(C)
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Third Amendment”) is made as of this 17th day of
April, 2015 by and among REVOLUTION LIGHTING TECHNOLOGIES, INC., a Delaware corporation (“RLT”), LUMIFICIENT
CORPORATION, a Minnesota corporation (“Lumificient”), LIGHTING INTEGRATION TECHNOLOGIES, LLC, a Delaware
limited liability company (“LIT”), SEESMART TECHNOLOGIES, LLC, a Delaware limited liability company (“Seesmart Tech”),
RELUME TECHNOLOGIES, INC., a Delaware corporation (“Relume”), TRI-STATE LED DE, LLC, a Delaware limited liability
company (“Tri-State”), VALUE LIGHTING, LLC, a Delaware limited liability company (“Value Lighting”), and ALL AROUND
LIGHTING, L.L.C., a Texas limited liability company (“All Around”, and together with RLT, Lumificient, LIT, Seesmart Tech, Relume,
Tri-State and Value Lighting, singly and collectively, jointly and severally, “Borrowers” and each a “Borrower”), the Guarantors party
hereto, and BANK OF AMERICA, N.A., a national banking association (“Lender”).
W I T N E S S E T H:
WHEREAS, the Obligors and the Lender are parties to a certain Loan and Security Agreement, dated as of August 20, 2014 (as
amended, modified, supplemented or restated and in effect from time to time, collectively, the “Loan Agreement”);
WHEREAS, reference is made to the Lender’s April 14, 2015 correspondence to the Borrower Agent (the “ROR Letter”) pursuant to
which, among other things, the Lender advised the Borrowers of the existence and continuation of certain Events of Default (the “Stated
Events of Default”), and as a result thereof and in accordance with its rights under the Loan Agreement, implemented the Default Rate; and
WHEREAS, the Obligors and the Lender have agreed to enter into this Third Amendment to address the matters set forth in the ROR
Letter.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
Obligors and the Lender agree as follows:
1. Capitalized Terms. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Loan
Agreement.
2. Stated Events of Default. The Lender hereby agrees to waive the Stated Events of Default. The waiver of the Stated Events of
Default is a one-time waiver only, and shall not be deemed to constitute an agreement by the Lender to waive any future breach of
provisions of the Loan Agreement. Further, nothing contained herein shall be deemed to constitute a waiver of any other Event of Default,
which may exist as of the date hereof.
1
3. Default Rate. Interest accruing at the Default Rate is hereby waived retroactively from April 13, 2015; provided, however, the
Lender reserves the right to implement the Default Rate in the future in accordance with its rights under the Loan Agreement.
4. April Overadvance. The Lender acknowledges and agrees that upon the effectiveness of this Third Amendment, the April
Overadvance (as defined in the ROR Letter) shall have been eliminated.
5. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows:
(a) The following definitions as contained in Section 1.1 of the Loan Agreement (Definitions) are hereby amended as follows:
(i)
The definition of “Borrowing Base” is hereby deleted in its entirety and the following substituted in its stead:
“Borrowing Base: on any date of determination, an amount equal to the lesser of:
(a) the Revolver Commitment; or
(b) the sum of:
(i) 85% of the Value of Eligible Accounts; plus
(ii) the lesser of (A) 70% of the Value of Eligible Inventory; or (B) 85% of the NOLV Percentage of the Value of Eligible
Inventory; plus
(iii) 100% of the Pledged Cash Collateral; minus
(iv) the Availability Reserve.”
(ii)
The definition of “Guarantors” is hereby amended by inserting the following sentence at the end thereof:
“As of the Third Amendment Effective Date, the Pledgor is a non-recourse Guarantor to the extent set forth in Pledgor’s
Guaranty dated as of the Third Amendment Effective Date.”
(iii)
The definition of “Obligors” is hereby amended by inserting the following sentence at the end thereof:
“Notwithstanding the foregoing, the Pledgor is not an Obligor.”
(iv)
The definition of “Security Documents” is hereby amended by inserting the following sentence at the end thereof:
“For avoidance of doubt, the Cash Collateral Pledge Agreement and the Guaranty executed by the Pledgor constitute
Security Documents.”
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(b) The provisions of Section 1.1 of the Loan Agreement (Definitions) are hereby amended by inserting the following new
definitions in their applicable alphabetical orders:
(i)
(ii)
“Cash Collateral Pledge Agreement: that certain pledge agreement executed and delivered by the Pledgor in favor of
Lender, pursuant to which Pledgor grants to Lender a Lien on the Pledged Cash Collateral held by such Pledgor, as security
for the Obligations.”
“Pledged Cash Collateral: means all of Pledgor’s right, title and interest in and to the cash and other assets more
particularly described in the Cash Collateral Pledge Agreement and which shall be under the sole dominion and control of
the Lender.”
(iii)
“Pledgor: means Robert V. LaPenta”
(iv)
“Post-Third Amendment Obligations: has the meaning given that term in the Third Amendment.”
(v)
“Third Amendment: means that certain Third Amendment to Loan and Security Agreement dated as of Third Amendment
Effective Date, by and among the Obligors and the Lender.”
(vi)
“Third Amendment Effective Date: means April 17, 2015.”
(c)
Section 7.6 (Further Assurances; Extent of Lien) is hereby amended by inserting the following provision at the end thereof as a
new paragraph:
“Borrower Agent has advised Lender that Borrowers intend to retain one (1) of the following four (4) financial consultants:
(i) Stuart W. Noyes of Winter Harbor, LLC, (ii) Howard Gross of Richter Consulting, (iii) Harvey Mason, Jr. of Capstone
Partners LLC, or (iv) Philip J. Gund of M. Marotta Gund & Dzera, LLC (the “Financial Consultant”) as Borrowers’ business and
financial consultant with respect to Borrowers’ business operation by no later than May 1, 2015. Borrowers covenant and agree
that Borrowers shall engage the Financial Consultant by no later than said date and shall continue to retain Financial Consultant,
or such other financial consultant acceptable to Lender in Lender’s sole and exclusive discretion, so long as this Agreement is in
effect or until December 31, 2015, provided that no Event of Default shall have occurred and be continuing. In connection with
the foregoing, Borrowers:
(i)
Shall provide the Lender with evidence of the retention of the Financial Consultant by no later than May 1, 2015;
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(ii)
Hereby authorize Lender to communicate directly with Financial Consultant regarding all matters relating to the services
to be rendered by Financial Consultant to Borrowers, including, without limitation, to discuss all financial reports, business
information, findings and recommendations of Financial Consultant;
(iii) Hereby authorize and direct Financial Consultant to communicate directly with Lender regarding all matters relating to the
services to be rendered by Financial Consultant to Borrowers, including, without limitation, to discuss all financial reports,
business information, and all findings, and recommendations of Financial Consultant; and
(iv) Hereby authorize and direct Financial Consultant to provide Lender with copies of all final reports (and supporting
documentation if requested by Lender) and other material information prepared or reviewed by Financial Consultant, and
Borrowers covenant and agree that Lender may rely on any information provided by Financial Consultant as if provided
directly by Borrowers.”
6. Post-Third Amendment Obligations. The Obligors hereby agree to deliver the following duly completed and executed items to the
Lender by no later than thirty (30) days after the Third Amendment Effective Date (collectively the “Post-Third Amendment Obligations”),
all in the form and substance reasonably satisfactory to the Lender, and the Obligors further agree that any failure by the Obligors to duly
and timely comply with the Post-Third Amendment Obligations shall constitute an Event of Default under the Loan Agreement:
(a) Evidence that (i) the Debt of All Around in favor of Prosperity Bank f/k/a First Victoria National Bank (“Prosperity”), which Debt
does not constitute Permitted Debt has been repaid in full, and (ii) the related Lien of Prosperity against the Property of All
Around, which Lien does not constitute a Permitted Lien, has been terminated by Prosperity (or Borrower and/or its agents have
been given permission to terminate said Lien);
(b) Evidence that the Debt of All Around in favor of Crestron Electronics, Inc. (“Crestron”), which Debt does not constitute Permitted
Debt has been repaid in full;
(c) Evidence of the perfection of the Lender’s first priority Lien upon the Deposit Accounts of All Around maintained at
(1) Prosperity and (2) First National Bank of Eagle Lake; and
(d) Copies of policies or certificates of insurance for the insurance policies carried by All Around and Break One, including
endorsements (i) showing Lender as lender’s loss payee or additional insured as its interests may appear; (ii) requiring thirty
(30) days prior written notice to Lender in the event of cancellation of the policy for any reason whatsoever; and (iii) specifying
that the interest of Lender
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shall not be impaired or invalidated by any act or neglect of such Obligor or the owner of the Property, nor by the occupation of
the premises for purposes more hazardous than are permitted by the policy.
7. Ratification of Loan Documents . Except as specifically amended by this Amendment, all of the terms and conditions of the Loan
Agreement and of each of the other Loan Documents shall remain in full force and effect. The Obligors hereby ratify, confirm, and reaffirm
all of the representations, warranties and covenants contained therein. Further, the Obligors warrant and represent that except for the Stated
Events of Default, no other Event of Default exists, and nothing contained herein shall be deemed to constitute a waiver by the Lender of
any Event of Default which may nonetheless exist as of the date hereof.
8. Breach. Without limiting the provisions of the Loan Documents, a breach of any agreement, covenant, warranty, representation or
certification of the Obligors under this Amendment and/or the failure of the Obligors to perform its obligations under this Amendment shall
constitute an Event of Default under the Loan Agreement.
9. Waiver. Each Obligor acknowledges, confirms and agrees that it has no claims, counterclaims, offsets, defenses or causes of action
against the Lender with respect to amounts outstanding under the Loan Agreement or otherwise. To the extent such claims, counterclaims,
offsets, defenses and/or causes of actions should exist, whether known or unknown, at law or in equity, each Obligor hereby WAIVES
same and RELEASES the Lender from any and all liability in connection therewith.
10. Conditions Precedent to Effectiveness. This Amendment shall not be effective until each of the following conditions precedent
has been fulfilled to the sole satisfaction of the Lender:
(a) This Amendment shall have been duly executed and delivered by the respective parties hereto, and shall be in full force and effect
and shall be in form and substance satisfactory to the Lender.
(b) All action on the part of the Obligors necessary for the valid execution, delivery and performance by the Obligors of this
Amendment and all other documentation, instruments, and agreements to be executed in connection herewith shall have been
duly and effectively taken and evidence thereof satisfactory to the Lender shall have been provided to the Lender.
(c) The Lender shall have received the Guaranty, the Cash Collateral Pledge Agreement and the Pledged Cash Collateral from the
Pledgor.
11. Miscellaneous.
(a)
In accordance with the terms and conditions of Loan Agreement, the Obligors shall pay to Lender all costs and expenses of the
Lender, including, without limitation, reasonable attorneys’ fees, in connection with the preparation,
5
negotiation, execution and delivery of this Amendment, which attorneys’ fees and expenses are $16,704.00, plus $30,209.83 in
outstanding prior amounts due in connection with this loan facility.
(b) This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall constitute one instrument. Delivery of an executed
signature page of this Amendment (or any notice or agreement delivered pursuant to the terms hereof) by facsimile transmission
or electronic transmission shall be as effective as delivery of a manually executed counterpart hereof.
(c) This Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior
negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.
(d) Any determination that any provision of this Amendment or any application hereof is invalid, illegal or unenforceable in any
respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the
validity, legality or enforceability of any other provisions of this Amendment.
(e) THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AMENDMENT AND ANY DISPUTE ARISING
OUT OF THE RELATIONSHIP BETWEEN THE PARTIES HERETO, WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Amendment as a sealed instrument by their respective duly authorized
officers.
LENDER:
BANK OF AMERICA, N.A.
/s/ Cynthia G. Stannard
By:
Name: Cynthia G. Stannard
Title: Sr. Vice President
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BORROWERS:
REVOLUTION LIGHTING TECHNOLOGIES,
INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
LUMIFICIENT CORPORATION
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
LIGHTING INTEGRATION TECHNOLOGIES,
LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
SEESMART TECHNOLOGIES, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
RELUME TECHNOLOGIES, INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
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TRI-STATE LED DE, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
VALUE LIGHTING, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
ALL AROUND LIGHTING, L.L.C.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
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GUARANTORS:
SEESMART, INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
SENTINEL SYSTEM, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
VALUE LIGHTING OF HOUSTON, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President of Sole Member
ENVIROLIGHT LED, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President of Sole Member
BREAK ONE NINE, INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
10
CONSENT AND FOURTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT
Exhibit 10.22(D)
THIS CONSENT AND FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Fourth Amendment”) is made
as of this 10th day of June, 2015 by and among REVOLUTION LIGHTING TECHNOLOGIES, INC., a Delaware corporation (“RLT”),
LUMIFICIENT CORPORATION, a Minnesota corporation (“Lumificient”), LIGHTING INTEGRATION TECHNOLOGIES, LLC,
a Delaware limited liability company (“LIT”), SEESMART TECHNOLOGIES, LLC, a Delaware limited liability company (“Seesmart
Tech”), RELUME TECHNOLOGIES, INC., a Delaware corporation (“Relume”), TRI-STATE LED DE, LLC, a Delaware limited
liability company (“Tri-State”), VALUE LIGHTING, LLC, a Delaware limited liability company (“Value Lighting”), and ALL
AROUND LIGHTING, L.L.C., a Texas limited liability company (“All Around”, and together with RLT, Lumificient, LIT, Seesmart
Tech, Relume, Tri-State and Value Lighting, singly and collectively, jointly and severally, “Borrowers” and each a “Borrower”), the
Guarantors party hereto, and BANK OF AMERICA, N.A., a national banking association (“Lender”).
W I T N E S S E T H:
WHEREAS, the Obligors and the Lender are parties to a certain Loan and Security Agreement, dated as of August 20, 2014 (as
amended, modified, supplemented or restated and in effect from time to time, collectively, the “Loan Agreement”);
WHEREAS, the Obligors have advised the Lender that the Obligors intend consummate a Recapitalization (as defined below) of the
Equity Interests of RLT;
WHEREAS, pursuant to the terms and conditions of the Loan Agreement and the other Loan Documents, the Obligors must obtain
the written approval of the Lender prior to consummating the Recapitalization;
WHEREAS, the Obligors have also requested that the Lender modify and amend certain terms and conditions of the Loan
Agreement; and
WHEREAS, the Lender is willing to so consent to the Recapitalization and to so modify and amend certain terms and conditions of
the Loan Agreement, subject to the terms and conditions contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
Obligors and the Lender agree as follows:
1. Capitalized Terms. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Loan
Agreement.
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2. Consent to the Recapitalization. Simultaneous with the execution of this Fourth Amendment, the Equity Interests of RLT shall be
recapitalized to increase the authorized common stock of RLT from 150,000,000 shares to 200,000,000 shares, and the Certificate of
Incorporation (which constitutes an Organic Document) of RLT shall be accordingly amended and filed with the Secretary of State of the
State of Delaware (collectively, the “Recapitalization”). The Obligors acknowledge and agree that under no circumstances shall any cash
Distributions be made relating to the Recapitalization. The Lender hereby consents to the Recapitalization subject to the terms and
conditions contained herein, including, but not limited to, the fulfillment of the Conditions Precedent to Effectiveness set forth in Section 8
hereof, all as determined by the Lender in its sole reasonable discretion
3. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows:
(a)
Schedule 8.1.4 to the Loan Agreement is hereby deleted in its entirety, and the amended and restated Schedule 8.1.4 to the Loan
Agreement attached hereto as Exhibit “A” is hereby substituted in its stead.
4. Post-Fourth Amendment Obligations. The Obligors hereby agree to deliver the following duly completed and executed items to the
Lender by no later than forty-five (45) days after the Fourth Amendment Effective Date (collectively the “Post-Fourth Amendment
Obligations”), all in the form and substance reasonably satisfactory to the Lender, and the Obligors further agree that any failure by the
Obligors to duly and timely comply with the Post-Fourth Amendment Obligations shall constitute an Event of Default under the Loan
Agreement:
(a) Evidence of (i) the perfection of the Lender’s first priority Lien upon the Deposit Accounts of All Around maintained at
(1) Prosperity and (2) First National Bank of Eagle Lake or (ii) the closing of either or both of such Deposit Accounts; and
(b) Copies of policies or certificates of insurance for the insurance policies carried by All Around and Break One, including
endorsements or amendments to such policies (i) showing Lender as a lender’s loss payee or an additional insured; (ii) requiring
ten (10) days prior written notice to Lender in the event of cancellation of the policy for any reason of nonpayment of premium
and thirty (30) prior written notice to Lender in the event of cancellation of the policy for any other reason; and (iii) specifying
that the interest of Lender shall not be impaired or invalidated by any act or neglect of such Obligor or the owner of the Property,
nor by the occupation of the premises for purposes more hazardous than are permitted by the policy.
5. Ratification of Loan Documents . Except as specifically amended by this Fourth Amendment, all of the terms and conditions of the
Loan Agreement and of each of the other Loan Documents shall remain in full force and effect. The Obligors hereby ratify, confirm, and
reaffirm all of the representations, warranties and covenants contained therein. Further, the Obligors warrant and represent that, after giving
effect to Section 4 hereof, no Event of Default exists, and nothing contained herein shall be deemed to constitute a waiver by the Lender of
any Event of Default which may nonetheless exist as of the date hereof.
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6. Breach. Without limiting the provisions of the Loan Documents, a breach of any agreement, covenant, warranty, representation or
certification of the Obligors under this Fourth Amendment and/or the failure of the Obligors to perform its obligations under this Fourth
Amendment shall constitute an Event of Default under the Loan Agreement.
7. Waiver. Each Obligor acknowledges, confirms and agrees that it has no claims, counterclaims, offsets, defenses or causes of action
against the Lender with respect to amounts outstanding under the Loan Agreement or otherwise. To the extent such claims, counterclaims,
offsets, defenses and/or causes of actions should exist, whether known or unknown, at law or in equity, each Obligor hereby WAIVES
same and RELEASES the Lender from any and all liability in connection therewith.
8. Conditions Precedent to Effectiveness. This Fourth Amendment shall not be effective until each of the following conditions
precedent has been fulfilled to the sole satisfaction of the Lender:
(a) This Fourth Amendment shall have been duly executed and delivered by the respective parties hereto, and shall be in full force
and effect and shall be in form and substance satisfactory to the Lender.
(b) All action on the part of the Obligors necessary for the valid execution, delivery and performance by the Obligors of this Fourth
Amendment and all other documentation, instruments, and agreements to be executed in connection herewith shall have been
duly and effectively taken and evidence thereof satisfactory to the Lender shall have been provided to the Lender.
(c) No Event of Default shall have occurred and be continuing.
(d) The Lender shall have received true and correct, fully executed copies of the following documents relating to the
Recapitalization:
(i) Written Consent of the Board of Directors of Revolution Lighting Technologies, Inc.; and
(ii)
Certificate of Amendment of Certificate of Incorporation of Revolution Lighting Technologies, Inc. (as file-stamped and
certified by the Secretary of State of the State of Delaware).
9. Miscellaneous.
(a)
In accordance with the terms and conditions of Loan Agreement, the Obligors shall pay to Lender all costs and expenses of the
Lender, including, without limitation, reasonable attorneys’ fees, in connection with the preparation, negotiation, execution and
delivery of this Fourth Amendment.
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(b) This Fourth Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which
when so executed and delivered shall be an original, and all of which together shall constitute one instrument. Delivery of an
executed signature page of this Fourth Amendment (or any notice or agreement delivered pursuant to the terms hereof) by
facsimile transmission or electronic transmission shall be as effective as delivery of a manually executed counterpart hereof.
(c) This Fourth Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby.
No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.
(d) Any determination that any provision of this Fourth Amendment or any application hereof is invalid, illegal or unenforceable in
any respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or
the validity, legality or enforceability of any other provisions of this Fourth Amendment.
(e) THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FOURTH AMENDMENT AND ANY DISPUTE
ARISING OUT OF THE RELATIONSHIP BETWEEN THE PARTIES HERETO, WHETHER IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Fourth Amendment as a sealed instrument by their respective duly
authorized officers.
LENDER:
BANK OF AMERICA, N.A.
/s/ Cynthia G. Stannard
By:
Name: Cynthia G. Stannard
Title: Sr. Vice President
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BORROWERS:
REVOLUTION LIGHTING TECHNOLOGIES,
INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
LUMIFICIENT CORPORATION
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
LIGHTING INTEGRATION TECHNOLOGIES,
LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
SEESMART TECHNOLOGIES, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
RELUME TECHNOLOGIES, INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
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TRI-STATE LED DE, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
VALUE LIGHTING, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
ALL AROUND LIGHTING, L.L.C.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
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GUARANTORS:
SEESMART, INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
SENTINEL SYSTEM, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
VALUE LIGHTING OF HOUSTON, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President of Sole Member
ENVIROLIGHT LED, LLC
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President of Sole Member
BREAK ONE NINE, INC.
/s/ Charles J. Schafer
By:
Name: Charles J. Schafer
Title: President
8
CONSENT, JOINDER AND FIFTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT
AND THIRD AMENDMENT TO PLEDGE AGREEMENT
Exhibit 10.22(E)
THIS CONSENT, JOINDER AND FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND THIRD
AMENDMENT TO PLEDGE AGREEMENT (this “Fifth Amendment”) is made as of this 5th day of August, 2015 by and among
REVOLUTION LIGHTING TECHNOLOGIES, INC., a Delaware corporation (“RLT”), LUMIFICIENT CORPORATION, a Minnesota
corporation (“Lumificient”), LIGHTING INTEGRATION TECHNOLOGIES, LLC, a Delaware limited liability company (“LIT”),
SEESMART TECHNOLOGIES, LLC, a Delaware limited liability company (“Seesmart Tech”), RELUME TECHNOLOGIES, INC., a
Delaware corporation (“Relume”), TRI-STATE LED DE, LLC, a Delaware limited liability company (“Tri-State”), VALUE LIGHTING,
LLC, a Delaware limited liability company (“Value Lighting”), ALL AROUND LIGHTING, L.L.C., a Texas limited liability company
(“All Around”), and ENERGY SOURCE, LLC, a Rhode Island limited liability company (“Energy Source”, and together with RLT,
Lumificient, LIT, Seesmart Tech, Relume, Tri-State, Value Lighting, and All Around, singly and collectively, jointly and severally,
“Borrowers” and each a “Borrower”), the Guarantors party hereto, and BANK OF AMERICA, N.A., a national banking association
(“Lender”).
W I T N E S S E T H:
WHEREAS, the Obligors (other than Energy Source and Revolution Lighting Technologies – Energy Source, Inc., a Delaware
corporation and a wholly-owned subsidiary of RLT (“RLT-ES”)) and the Lender are parties to a certain Loan and Security Agreement,
dated as of August 20, 2014 (as amended, modified, supplemented or restated and in effect from time to time, collectively, the “Loan
Agreement”);
WHEREAS, the Obligors (other than Energy Source and RLT-ES) and the Lender are parties to a certain Pledge Agreement, dated as
of August 20, 2014 (as amended, modified, supplemented or restated and in effect from time to time, collectively, the “Pledge Agreement”);
WHEREAS, the Obligors (other than Energy Source and RLT-ES) have advised the Lender that simultaneously with the execution of
this Amendment, the Obligors intend to consummate the Energy Source Acquisition (as defined below);
WHEREAS, pursuant to the terms and conditions of the Loan Agreement, the Obligors (other than Energy Source and RLT-ES) must
obtain the written approval of the Lender prior to consummating the Energy Source Acquisition; and
WHEREAS, the Lender is willing to so consent to the Energy Source Acquisition; provided that, inter alia, that (i) Energy Source is
joined as a Borrower and an Obligor, (ii) RLT-ES is joined as a Guarantor and an Obligor, and (iii) certain terms of the Loan Agreement
and the Pledge Agreement are modified as set forth below.
1
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
Obligors and the Lender agree as follows:
1. Capitalized Terms. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Loan
Agreement.
2. Consent to the Energy Source Acquisition. The Obligors hereby represent and warrant to the Lender that RLT-ES, Energy Source,
Michael H. Lemoi, Jr. (“Lemoi”) and Ronald T. Sliney (“Sliney”) are entering into that certain Membership Interest Purchase Agreement
dated as of August 5, 2015 (the “Energy Source MIPA”), pursuant to which, inter alia, RLT-ES will acquire all of the membership interests
of Energy Source (collectively, the “Energy Source Acquisition”). The Obligors further represent and warrant to the Lender that attached to
this Fifth Amendment as Exhibit “A” are true and complete copies of the following documents (collectively, the “Energy Source Material
Transaction Documents”): (A) the Energy Source MIPA, (B) (i) that certain Promissory Note, dated as of the Fifth Amendment Effective
Date, in the original principal amount of $5,000,000, executed and delivered by RLT-ES, as maker, in favor of Lemoi, as payee, and
(ii) that certain Promissory Note, dated as of the Fifth Amendment Effective Date, in the original principal amount of $5,000,000, executed
and delivered by RLT-ES, as maker, in favor of Sliney, as payee (i) and (ii) collectively the “Energy Source Note”), (C) that certain
Employment Agreement, dated as of the date of the Energy Source MIPA, by and between Lemoi, as employee, and Energy Source, as
employer (the “Lemoi Employment Agreement”), (D) that certain Employment Agreement, dated as of the date of the Energy Source
MIPA, by and between Sliney, as employee, and Energy Source, as employer (the “Sliney Employment Agreement”), (E) that certain
Investor Representation and Lockup Agreement, dated as of the Fifth Amendment Date, by and between Lemoi and RLT, and (F) that
certain Investor Representation and Lockup Agreement, dated as of the Fifth Amendment Date, by and between Sliney and RLT. The
Lender hereby consents to the Energy Source Acquisition, provided that each of the Conditions Precedent to Effectiveness set forth in
Section 10 hereof shall be satisfied, all as determined by the Lender in its sole reasonable discretion.
3. Joinder; Grant of Security Interest. Effective as of the Fifth Amendment Effective Date, Energy Source and RLT-ES each hereby:
(a)
(b)
(c)
acknowledges that it has received and reviewed copies of the Loan Agreement and the other Loan Documents;
joins in the execution of, and become parties to, the Loan Agreement and the other Loan Documents as a Borrower and as an
Obligor, in the case of Energy Source, and as Guarantor and an Obligor, in the case of RLT-ES, as indicated by its respective
signature below;
agrees to be bound by all representations, warranties, covenants, agreements, liabilities and acknowledgments of a Borrower and
as an Obligor, in the case of Energy Source, and as Guarantor and an Obligor, in the case of RLT-ES, under the Loan Agreement
and the other Loan Documents, with the same force and effect as if it was a signatory to the Loan Agreement and the other Loan
Documents and was expressly named as a Borrower and as an Obligor, in the case of Energy Source, and as Guarantor and an
Obligor, in the case of RLT-ES;
2
(d)
(e)
(f)
pledges and grants to Lender, on behalf of itself and the other Secured Parties, a continuing security interest in and Lien upon all
Collateral, whether now owned or hereafter acquired, and wherever located; provided, that in no event shall the Collateral include
more than 65% of the voting stock of any Foreign Subsidiary;
assumes and agrees to perform all applicable duties and obligations as a Borrower and as an Obligor, in the case of Energy
Source, and as a Guarantor and an Obligor, in the case of RLT-ES, under the Loan Agreement and the other Loan Documents, to
the extent Energy Source and RLT-ES are respectively parties thereto; and
irrevocably authorizes the Lender at any time and from time to time to authenticate and file in any relevant jurisdiction to file any
financing statement that describes the Collateral as “all assets” or “all personal property”, or words to similar effect, and any
amendments or continuations with respect to such financing statements, and ratify any action taken by the Lender before the date
hereof to effect or perfect its Lien on any Collateral. Energy Source and RLT-ES each hereby further authorizes the Lender to file
filings with the United States Patent and Trademark Office and United States Copyright Office (or any successor office or any
similar office in any other country) or other necessary documents for the purpose of perfecting, confirming, continuing, enforcing
or protecting the security interest granted by it hereunder in any Intellectual Property, without its signature, and naming it as a
debtor and the Lender as secured party.
4. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows:
(a) The definition of “EBITDA” as contained in Section 1.1 of the Loan Agreement ( Definitions) is hereby deleted in its entirety and
the following substituted in its stead:
““EBITDA”: determined on a consolidated basis for RLT’s and Subsidiaries’ net income or loss for any period calculated before
interest expense and other financing charges, provision for or benefit from income taxes, depreciation, and amortization expense,
stock-based compensation expense, gains or losses arising from sales of capital assets, losses on impairment of long-lived assets
and goodwill, unrealized gains and losses resulting from changes in fair values of derivatives and financial instruments (including
changes in fair value of contingent consideration related to business combinations), directly related charges related to the
consummation of business combinations (and, if such charges are paid in cash, solely to the extent approved by the Lender;
provided however, that such charges paid in cash with respect to the Energy Source Acquisition shall be deemed to be $1,500,000
for the period commencing as of
3
the Fifth Amendment Effective Date and ending 12 months thereafter), severance and restructuring charges (and, if such charges
are paid in cash, solely to the extent approved by the Lender), extraordinary gains and losses (including losses and gains from
extinguishment of debt), and non-recurring expenses and income which do not represent cash items in such period (in each case to
the extent included in determining net income).”
(b) The definition of “Guarantors” as contained in Section 1.1 of the Loan Agreement ( Definitions) is hereby deleted in its entirety
and the following substituted in its stead:
““Guarantors”: Seesmart, Envirolight, Sentinel, Value Lighting Houston, Break One, and RLT-ES, and each Borrower as to each
other Borrower, and each other Person that guarantees payment or performance of Obligations. Pledgor is also a non-recourse
Guarantor to the extent set forth in Pledgor’s Guaranty dated as of the Third Amendment Effective Date.”
(c) The definition of “Material Contract” as contained in Section 1.1 of the Loan Agreement ( Definitions) is hereby deleted in its
entirety and the following substituted in its stead:
““Material Contract”: any agreement or arrangement to which an Obligor is party (other than the Loan Documents) (a) that is
deemed to be a material contract under any securities law applicable to such Person, including the Securities Act of 1933; (b) for
which breach, termination, nonperformance or failure to renew would reasonably be expected to have a Material Adverse Effect;
(c) that relates to Subordinated Debt, or to Permitted Debt in an aggregate amount of $250,000 or more, (d) the Tri-State
Agreement, (e) the Value Lighting Merger Agreement, (f) the All Around Merger Agreement, and (g) the Energy Source Material
Transaction Documents.”
(d) The definition of “Subordinated Debt” as contained in Section 1.1 of the Loan Agreement ( Definitions) is hereby deleted in its
entirety and the following substituted in its stead:
““Subordinated Debt: all of the indebtedness owed by any Obligor to any Person the repayment of which is subordinated to the
repayment of the Obligations pursuant to the terms of a debt subordination agreement approved by Lender in its reasonable
discretion. For sake of clarity, the DPI/Epiphany Debt, the Aston Debt and the Energy Source Debt constitute Subordinated
Debt.”
(e) The provisions of Section 1.1 of the Loan Agreement (Definitions) are hereby amended by inserting the following new
definitions in their applicable alphabetical orders:
““Energy Source Acquisition”: as defined in the Fifth Amendment.”
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““Energy Source Debt: means the Debt of RLT-ES to Lemoi and Sliney, as evidenced by the Energy Source Note, together with
interest, costs and expenses set forth in the Energy Source Note.”
““Energy Source Earnout Payments”: means the “Earnout Consideration” as that term is defined in Section 1.7 of the Energy
Source MIPA in effect on the Fifth Amendment Effective Date required to be paid to the Sellers (as that term is defined in the
Energy Source MIPA) pursuant to the terms and conditions of the Energy Source MIPA.”
““Energy Source Material Transaction Documents ”: as defined in the Fifth Amendment.”
““Energy Source MIPA”: as defined in the Fifth Amendment.”
““Energy Source Note”: as defined in the Fifth Amendment.”
““Energy Source Parent Shares Consideration” means “Parent Shares Consideration” as that term is defined in Section 1.2(b) of
the Energy Source MIPA in effect on the Fifth Amendment Effective Date.”
““Energy Source Profit Payments”: means the “Profit Consideration” as that term is defined in Section 1.8 of the Energy Source
MIPA in effect on the Fifth Amendment Effective Date required to be paid to the Sellers (as that term is defined in the Energy
Source MIPA) pursuant to the terms and conditions of the Energy Source MIPA.”
““Energy Source Purchase Price” means “Purchase Price” as that term is defined in Section 1.2(a) of the Energy Source MIPA in
effect on the Fifth Amendment Effective Date, which Purchase Price consists of $10,000,000 in cash, subject to the adjustments,
if any, as set forth in the Energy Source MIPA in effect on the Fifth Amendment Effective Date.”
““Energy Source Payment Conditions”: means the following conditions with respect to any payment in cash of (i) adjustments, if
any, to the cash portion of the Energy Source Purchase Price required to be paid after the Fifth Amendment Effective Date to the
Sellers (as that term is defined in the Energy Source MIPA) pursuant to the terms and conditions of the Energy Source MIPA,
(ii) any Energy Source Earnout Payments, (iii) any cash consideration paid in lieu of Energy Source Parent Shares Consideration,
and (iv) any Energy Source Profit Payments:
(a) before and after giving effect to such payment, no Event of Default shall have occurred and be continuing;
(b) before and after giving effect to such payment, Availability shall be no less than $5,000,000; and
(c) after giving effect to such payment, the proforma Fixed Charge Coverage shall be at least 1.25 to 1.0.”
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““Fifth Amendment” means that certain Consent, Joinder and Fifth Amendment to Loan and Security Agreement and Third
Amendment to Pledge Agreement, dated as of August 5, 2015, by and among the Obligors and the Lender.”
““Fifth Amendment Effective Date”: means August 5, 2015.”
““Lemoi”: as defined in the Fifth Amendment.”
““Lemoi Employment Agreement”: as defined in the Fifth Amendment.”
““Post-Fifth Amendment Obligations”: as defined in the Fifth Amendment.”
““Senior Debt” shall mean, as of the date of determination thereof, the aggregate principal and interest amount of the Obligations
outstanding to the Lender.
““Senior Leverage Ratio” means the ratio of (a) Senior Debt, to (b) EBITDA for RLT and its Subsidiaries, calculated on a trailing
twelve (12) month basis.”
““Sliney”: as defined in the Fifth Amendment.”
““Sliney Employment Agreement”: as defined in the Fifth Amendment.”
(f)
Section 8.1.30 of the Loan Agreement is hereby deleted in its entirety and the following substituted in its stead:
“8.1.30. Subordinated Debt. Borrowers have delivered to Lender complete and correct copies of the DPI/Epiphany Settlement
Agreement, the Aston Note, and the Energy Source Note, including all schedules and exhibits thereto. No Obligor is in default in
the performance or compliance with any material provisions thereof.”
(g) Section 9.2.7 of the Loan Agreement is hereby amended by adding the following new subsections to the end thereof:
“(m) any adjustments to the Energy Source Purchase Price required to be paid in cash after the Fifth Amendment Effective Date
pursuant to the terms and conditions of the energy Source MIPA, unless the Borrower Agent has certified to Lender within five
(5) Business Days prior to the making of such payment, that the Energy Source Payment Conditions have been and will,
immediately after said payment, be satisfied;
(n) Energy Source Earnout Payments in cash, unless the Borrower Agent has certified to Lender within five (5) Business Days
prior to the making of such payment, that the Energy Source Payment Conditions have been and will, immediately after said
payment, continue to be satisfied;
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(o) cash consideration in lieu of Energy Source Parent Shares Consideration, unless the Borrower Agent has certified to Lender
within five (5) Business Days prior to the making of such payment, that the Energy Source Payment Conditions have been and
will, immediately after said cash payment, continue to be satisfied;
(p) Energy Source Profit Payments in cash, unless the Borrower Agent has certified to Lender within five (5) Business Days prior
to the making of such payment, that the Energy Source Payment Conditions have been and will, immediately after said cash
payment, continue to be satisfied;
(q) the Energy Source Debt;
(r) compensation to Lemoi under the Lemoi Employment Agreement other than regular payments of salary and expense
reimbursements; and
(s) compensation to Sliney under the Sliney Employment Agreement other than regular payments of salary and expense
reimbursements.”
(h) Section 9.2.16 of the Loan Agreement is hereby deleted in its entirety and the following substituted in its stead:
“9.2.16. Affiliate Transactions. Enter into or be party to any transaction with an Affiliate, except (a) transactions expressly
permitted by the Loan Documents; (b) payment of reasonable compensation to officers and employees for services actually
rendered, and payment of customary directors’ fees and indemnities; (c) the Management Services Agreement; (d) the Lemoi
Employment Agreement; (e) the Sliney Employment Agreement; and (f) transactions with Affiliates in the Ordinary Course of
Business (including those consummated prior to the Closing Date and shown on Schedule 9.2.17) so long as such transactions are
upon fair and reasonable terms fully disclosed to Lender and no less favorable than would be obtained in a comparable arm’s-
length transaction with a non-Affiliate.”
(i)
The provisions of Section 9.3 of the Loan Agreement are hereby amended by adding the following new subsection to the end
thereof:
“9.3.2 Senior Leverage Ratio. Maintain a Senior Leverage Ratio, tested as of the last day of each of the following Fiscal
Quarters, as follows:
(a)
(b)
(c)
for the Fiscal Quarter ending September 30, 2015, a maximum of 4.5:1.0;
for the Fiscal Quarter ending December 31, 2015, a maximum of 4.0:1.0; and
thereafter, as of the end of each subsequent Fiscal Quarter, a maximum of 3.5:1.0.”
(j)
Schedule 8.1.4 to the Loan Agreement is hereby deleted in its entirety, and the amended and restated Schedule 8.1.4 to the Loan
Agreement attached hereto as Exhibit “B” is hereby substituted in its stead.
7
5. Amendments to Pledge Agreement. The Pledge Agreement is hereby amended as follows:
(a)
Schedule III to the Pledge Agreement is hereby deleted in its entirety, and the amended and restated Schedule III to the Pledge
Agreement attached hereto as Exhibit “C” is hereby substituted in its stead.
6. Post-Fifth Amendment Obligations. The Obligors hereby agree to deliver the following duly completed and executed items to the
Lender by no later than forty-five (45) days after the Fifth Amendment Effective Date (collectively the “Post-Fifth Amendment
Obligations”), all in the form and substance reasonably satisfactory to the Lender, and the Obligors further agree that any failure by the
Obligors to duly and timely comply with the Post-Fifth Amendment Obligations shall constitute an Event of Default under the Loan
Agreement; provided that the Obligors expressly acknowledge and agree that no Accounts or Inventory of Energy Source and/or RLT-ES
can be deemed to be Eligible Accounts or Eligible Inventory (even if so otherwise qualified as Eligible Accounts or Eligible Inventory as
determined by the Lender in accordance with the terms and conditions of the Loan Agreement) until each of the Post-Fifth Amendment
Obligations are satisfied:
(a)
Perfection Certificates for Energy Source and RLT-ES.
(b) Any UCC-3 Terminations for Energy Source and RLT-ES as determined by the Lender to ensure that the Lender has a first
priority Lien in the Collateral of Energy Source and RLT-ES, respectively.
(c) Control Agreements for the Deposit Accounts and/or Securities Accounts of Energy Source and RLT-ES if determined by the
Lender to be necessary.
(d) Lien Waivers with respect to the locations utilized by Energy Source and RLT-ES. If, notwithstanding the Obligors’
commercially reasonable efforts, the Obligors are unable to timely obtain the foregoing Lien Waivers, such failure shall not
constitute a Default or Event of Default, and the Lender reserves the right to institute a Rent and Charges Reserve for such
location.
(e) The Obligors’ reasonable assistance in facilitating the completion of an appraisal and field examination by the Lender with
respect to the accounts receivable of Energy Source, the results of which shall be reasonably satisfactory to the Lender; provided
that, to the extent said accounts receivable are determined to be unsatisfactory in the Lender’s sole reasonable discretion, such
determination shall not constitute an Event of Default; provided, however, that any such unsatisfactory accounts shall be excluded
from the definition of Eligible Accounts.
8
(f)
Execution and delivery by Energy Source and RLT-ES of Intellectual Property Security Agreements to the extent reasonably
determined by the Lender to be necessary after the Lender conducts intellectual property searches of said Obligors.
(g) Evidence of the closing of the Deposit Accounts of All Around maintained at (1) Prosperity and (2) First National Bank of Eagle
Lake.
(h) Copies of policies or certificates of insurance for the insurance policies carried by Energy Source and RLT-ES, all in compliance
with the Loan Documents, including endorsements or amendments to such policies (i) showing Lender as a lender’s loss payee or
an additional insured; (ii) requiring ten (10) days prior written notice to Lender in the event of cancellation of the policy for any
reason of nonpayment of premium and thirty (30) prior written notice to Lender in the event of cancellation of the policy for any
other reason; and (iii) specifying that the interest of Lender shall not be impaired or invalidated by any act or neglect of such
Obligor or the owner of the Property, nor by the occupation of the premises for purposes more hazardous than are permitted by
the policy.
7. Ratification of Loan Documents . Except as specifically amended by this Amendment, all of the terms and conditions of the Loan
Agreement and of each of the other Loan Documents shall remain in full force and effect. The Obligors hereby ratify, confirm, and reaffirm
all of the representations, warranties and covenants contained therein. Further, the Obligors warrant and represent that no Event of Default
exists, and nothing contained herein shall be deemed to constitute a waiver by the Lender of any Event of Default which may nonetheless
exist as of the date hereof.
8. Breach. Without limiting the provisions of the Loan Documents, a breach of any agreement, covenant, warranty, representation or
certification of the Obligors under this Amendment and/or the failure of the Obligors to perform its obligations under this Amendment shall
constitute an Event of Default under the Loan Agreement.
9. Waiver. Each Obligor acknowledges, confirms and agrees that it has no claims, counterclaims, offsets, defenses or causes of action
against the Lender with respect to amounts outstanding under the Loan Agreement or otherwise. To the extent such claims, counterclaims,
offsets, defenses and/or causes of actions should exist, whether known or unknown, at law or in equity, each Obligor hereby WAIVES
same and RELEASES the Lender from any and all liability in connection therewith.
10. Conditions Precedent to Effectiveness. This Amendment shall not be effective until each of the following conditions precedent
has been fulfilled to the sole satisfaction of the Lender:
(a) This Amendment shall have been duly executed and delivered by the respective parties hereto, and shall be in full force and effect
and shall be in form and substance satisfactory to the Lender.
9
(b) All action on the part of the Obligors necessary for the valid execution, delivery and performance by the Obligors of this
Amendment and all other documentation, instruments, and agreements to be executed in connection herewith shall have been
duly and effectively taken and evidence thereof satisfactory to the Lender shall have been provided to the Lender.
(c) The Lender shall have received from the Obligors an amendment fee in the amount of Twenty-Five Thousand Dollars
($25,000.00) (the “Amendment Fee”). The Amendment Fee shall be fully and irrevocably earned by the Lender upon execution
of this Amendment, and is non-refundable to the Obligors.
(d) The Lender shall have received true and correct, fully executed copies of the Energy Source Material Transaction Documents.
(e) The Lender shall have received true and correct, fully-executed (as applicable) copies of those items set forth on the Lender’s
closing checklist which has been provided to the Obligors.
(f)
The Lender shall have received the original membership/stock certificates of Energy Source and RLT-ES, respectively, which
original membership/stock certificates shall be accompanied by stock powers duly executed in blank or other instruments of
transfer reasonably satisfactory to the Lender.
(g) The Obligors shall have executed and delivered to the Lender such additional documents, instruments, and agreements as the
Lender may reasonably request.
(h) The Lender shall have completed and received satisfactory results of all Patriot Act inquiries with respect to Energy Source and
RLT-ES.
(i) All conditions precedent to the consummation of the Energy Source Acquisition as required by the Energy Source Material
Transaction Documents shall have been satisfied or waived by the applicable parties, and the Energy Source Acquisition shall
have been consummated in accordance with the provisions of the Energy Source Material Transaction Documents.
(j)
The Obligors shall have paid the cash portion of the Energy Source Purchase Price with funds derived solely from the proceeds
derived from the issuance of Equity Interests of RLT pursuant to the terms and conditions of that certain Investment Agreement,
dated as of even date herewith, by any among RLT, Great American Insurance Company, Great American Life Insurance
Company and BFLT, LLC, a fully-executed true and complete version of which has been delivered to the Lender.
(k) After giving effect to the consummation of the Energy Source Acquisition and this Fifth Amendment, no Default or Event of
Default shall exist except with respect to the failure of the Obligors to obtain the consent of the Lender with respect to (i) the
creation of Revolution Lighting – E-Lighting, Inc., a Delaware corporation “RLT-E-Lighting”) as a wholly owned subsidiary of
RLT, (ii) the
10
purchase by RLT of certain assets of DPI Management, Inc. d/b/a E Lighting, a Texas corporation (“E-Lighting”), pursuant to a
certain Asset Purchase Agreement dated as of February 5, 2015 by and among RLT, E-Lighting and others, and (iii) the
contribution of certain assets so acquired to RLT-E-Lighting (i) through and including (iii) the “RLT-E-Lighting Transaction.”
The Lender hereby waives any Event of Default attributable solely to the RLT-E-Lighting Transaction; provided however, that
any such Event of Default shall constitute an Event of Default unless, within 30 days of the date hereof, the Obligors and RLT-E-
Lighting execute and deliver such joinder agreement and related documents, instruments and agreements substantially similar to
prior forms as reasonably requested by the Lender in order to join RLT-E-Lighting as a Borrower, to cause the stock of RLT-E-
Lighting to be pledged to the Lender as Collateral and to cause RLT-E-Lighting to pledge its assets to the Lender as Collateral.
11. Miscellaneous.
(a)
In accordance with the terms and conditions of Loan Agreement, the Obligors shall pay to Lender all costs and expenses of the
Lender, including, without limitation, reasonable attorneys’ fees, in connection with the preparation, negotiation, execution and
delivery of this Amendment.
(b) This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall constitute one instrument. Delivery of an executed
signature page of this Amendment (or any notice or agreement delivered pursuant to the terms hereof) by facsimile transmission
or electronic transmission shall be as effective as delivery of a manually executed counterpart hereof; provided that the Obligors
shall deliver originals of all applicable documents referenced in this Amendment, including, but not limited to, the original stock
certificate and duly-executed stock power of RLT-ES by no later than three (3) Business Days after the Fifth Amendment
Effective Date.
(c) This Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior
negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.
(d) Any determination that any provision of this Amendment or any application hereof is invalid, illegal or unenforceable in any
respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the
validity, legality or enforceability of any other provisions of this Amendment.
(e) THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AMENDMENT AND ANY DISPUTE ARISING
OUT OF THE RELATIONSHIP BETWEEN THE PARTIES HERETO, WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Amendment as a sealed instrument by their respective duly authorized
officers.
LENDER:
BANK OF AMERICA, N.A.
/s/ Cynthia G. Stannard
By:
Name: Cynthia G. Stannard
Title: Sr. Vice President
[Signatures Continue on Next Page]
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BORROWERS:
REVOLUTION LIGHTING TECHNOLOGIES,
INC.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: Chief Financial Officer
LUMIFICIENT CORPORATION
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
LIGHTING INTEGRATION TECHNOLOGIES,
LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
SEESMART TECHNOLOGIES, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
RELUME TECHNOLOGIES, INC.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
[Signatures Continue on Next Page]
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TRI-STATE LED DE, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
VALUE LIGHTING, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
ALL AROUND LIGHTING, L.L.C.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
ENERGY SOURCE, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: Secretary and Treasurer
[Signatures Continue on Next Page]
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GUARANTORS:
SEESMART, INC.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
SENTINEL SYSTEM, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
VALUE LIGHTING OF HOUSTON, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President of Sole Member
ENVIROLIGHT LED, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President of Sole Member
BREAK ONE NINE, INC.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
REVOLUTION LIGHTING TECHNOLOGIES –
ENERGY SOURCE, INC.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: Secretary and Treasurer
15
CONSENT, JOINDER AND SIXTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT
AND FOURTH AMENDMENT TO PLEDGE AGREEMENT
Exhibit 10.22(F)
THIS CONSENT, JOINDER AND SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND FOURTH
AMENDMENT TO PLEDGE AGREEMENT (this “Sixth Amendment”) is made as of this 27th day of October, 2015 by and among
REVOLUTION LIGHTING TECHNOLOGIES, INC., a Delaware corporation (“RLT”), LUMIFICIENT CORPORATION, a Minnesota
corporation (“Lumificient”), LIGHTING INTEGRATION TECHNOLOGIES, LLC, a Delaware limited liability company (“LIT”),
SEESMART TECHNOLOGIES, LLC, a Delaware limited liability company (“Seesmart Tech”), RELUME TECHNOLOGIES, INC., a
Delaware corporation (“Relume”), TRI-STATE LED DE, LLC, a Delaware limited liability company (“Tri-State”), VALUE LIGHTING,
LLC, a Delaware limited liability company (“Value Lighting”), ALL AROUND LIGHTING, L.L.C., a Texas limited liability company
(“All Around”), ENERGY SOURCE, LLC, a Rhode Island limited liability company (“Energy Source”), and REVOLUTION LIGHTING –
E-LIGHTING, INC., a Delaware corporation (“RLT-E-Lighting”, and together with RLT, Lumificient, LIT, Seesmart Tech, Relume, Tri-
State, Value Lighting, All Around, and Energy Source, singly and collectively, jointly and severally, “Borrowers” and each a “Borrower”),
the Guarantors party hereto, and BANK OF AMERICA, N.A., a national banking association (“Lender”).
W I T N E S S E T H:
WHEREAS, the Obligors (other than RLT-E-Lighting) and the Lender are parties to a certain Loan and Security Agreement, dated as
of August 20, 2014 (as amended, modified, supplemented or restated and in effect from time to time, collectively, the “Loan Agreement”);
WHEREAS, the Obligors (other than RLT-E-Lighting) and the Lender are parties to a certain Pledge Agreement, dated as of
August 20, 2014 (as amended, modified, supplemented or restated and in effect from time to time, collectively, the “Pledge Agreement”);
WHEREAS, the Obligors have advised the Lender that on February 5, 2015, the Obligors (other than RLT-E-Lighting) consummated
the RLT-L-Lighting Acquisition (as defined below);
WHEREAS, pursuant to the terms and conditions of the Loan Agreement, the Obligors (other than RLT-E-Lighting) should have
obtained the written consent of the Lender prior to consummating the RLT-E-Lighting Acquisition, and the Obligors are now hereby
seeking such consent; and
WHEREAS, the Lender is willing to so consent to the RLT-E-Lighting Acquisition; provided that, inter alia, (i) RLT-E-Lighting is
joined as a Borrower and an Obligor and (ii) certain terms of the Loan Agreement and the Pledge Agreement are modified as set forth
below.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
Obligors and the Lender agree as follows:
1. Capitalized Terms. All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Loan
Agreement.
1
2. Consent to the RLT-E-Lighting Acquisition. The Obligors hereby represent and warrant to the Lender that (i) RLT, DPI
Management, Inc. d/b/a E-Lighting, a Texas corporation (“E-Lighting”) and James Shaw, an individual, entered into that certain Asset
Purchase Agreement dated as of February 5, 2015 (the “RLT-E-Lighting APA”), pursuant to which, inter alia, RLT acquired certain assets
of E-Lighting; (ii) on March 3, 2015, the Obligors created RLT-E-Lighting as a wholly-owned subsidiary of RLT; and (iii) RLT
subsequently contributed the assets acquired pursuant to the RLT-E-Lighting APA to RLT-E-Lighting (collectively, the “RLT-E-Lighting
Acquisition”). The Obligors further represent and warrant to the Lender that attached to this Sixth Amendment as Exhibit “A” is a true and
complete copy of the RLT-E-Lighting APA. The Lender hereby consents to the RLT-E-Lighting Acquisition, provided that each of the
Conditions Precedent to Effectiveness set forth in Section 10 hereof shall be satisfied, all as determined by the Lender in its sole reasonable
discretion.
3. Joinder; Grant of Security Interest. Effective as of March 3, 2015, RLT-E-Lighting hereby:
(a)
(b)
(c)
(d)
(e)
(f)
acknowledges that it has received and reviewed copies of the Loan Agreement and the other Loan Documents;
joins in the execution of, and become parties to, the Loan Agreement and the other Loan Documents as a Borrower and as an
Obligor, as indicated by its respective signature below;
agrees to be bound by all representations, warranties, covenants, agreements, liabilities and acknowledgments of a Borrower and
as an Obligor under the Loan Agreement and the other Loan Documents, with the same force and effect as if it was a signatory to
the Loan Agreement and the other Loan Documents and was expressly named as a Borrower and as an Obligor;
pledges and grants to Lender, on behalf of itself and the other Secured Parties, a continuing security interest in and Lien upon all
Collateral, whether now owned or hereafter acquired, and wherever located; provided, that in no event shall the Collateral include
more than 65% of the voting stock of any Foreign Subsidiary;
assumes and agrees to perform all applicable duties and obligations as a Borrower and as an Obligor under the Loan Agreement
and the other Loan Documents, to the extent RLT-E-Lighting is a party thereto; and
irrevocably authorizes the Lender at any time and from time to time to authenticate and file in any relevant jurisdiction to file
any financing statement that describes the Collateral as “all assets” or “all personal property”, or words to similar effect, and any
amendments or continuations with respect to such financing statements, and ratify any action taken by the Lender before the
date hereof to effect or perfect its Lien on any Collateral. RLT-E-Lighting further authorizes the Lender to file filings with the
United States Patent and Trademark
2
Office and United States Copyright Office (or any successor office or any similar office in any other country) or other necessary
documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest granted by it
hereunder in any Intellectual Property, without its signature, and naming it as a debtor and the Lender as secured party.
4. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows:
(a) The definition of “Material Contract” as contained in Section 1.1 of the Loan Agreement ( Definitions) is hereby deleted in its
entirety and the following substituted in its stead:
““Material Contract”: any agreement or arrangement to which an Obligor is party (other than the Loan Documents) (a) that is
deemed to be a material contract under any securities law applicable to such Person, including the Securities Act of 1933; (b) for
which breach, termination, nonperformance or failure to renew would reasonably be expected to have a Material Adverse Effect;
(c) that relates to Subordinated Debt, or to Permitted Debt in an aggregate amount of $250,000 or more, (d) the Tri-State
Agreement, (e) the Value Lighting Merger Agreement, (f) the All Around Merger Agreement, (g) the Energy Source Material
Transaction Documents, and (h) the RLT-E-Lighting APA.”
(b) The definition of “Senior Debt” as contained in Section 1.1 of the Loan Agreement ( Definitions) is hereby deleted in its entirety
and the following substituted in its stead:
““Senior Debt” shall mean, as of the date of determination thereof, (i) the aggregate principal and interest amount of the
Obligations outstanding to the Lender plus (ii) the aggregate amount of all Capital Leases.”
(c) The definition of “Senior Leverage Ratio” as contained in Section 1.1 of the Loan Agreement ( Definitions) is hereby deleted in
its entirety and the following substituted in its stead:
““Senior Leverage Ratio” means the ratio of (a) Senior Debt to (b) EBITDA for RLT and its Subsidiaries.”
(d) The provisions of Section 1.1 of the Loan Agreement (Definitions) are hereby amended by inserting the following new
definitions in their applicable alphabetical orders:
““Post-Sixth Amendment Obligations”: as defined in the Sixth Amendment.”
““RLT-E-Lighting Acquisition”: as defined in the Sixth Amendment.”
““RLT-E-Lighting APA”: as defined in the Sixth Amendment.”
3
““RLT-E-Lighting Purchase Price” means the “Purchase Price” as that term is defined in Section 1.3 of the RLT-E-Lighting APA
in effect on the Sixth Amendment Effective Date, which Purchase Price consists of $600,000 in cash and/or Equity Interests of
RLT, subject to the adjustments, if any, as set forth in the RLT-E-Lighting APA in effect on the Sixth Amendment Effective
Date.”
““RLT-E-Lighting Payment Conditions”: means the following conditions with respect to (i) any payments of, and any
adjustments to, any Cash Consideration (as that term is defined in the RLT-E-Lighting APA) portion of the RLT-E-Lighting
Purchase Price required to be paid after February 5, 2015 to the Seller (as that term is defined in the RLT-E-Lighting APA)
pursuant to the terms and conditions of the RLT-E-Lighting APA and (ii) any Cash Consideration paid in lieu of any Stock
Consideration (as that term is defined in the RLT-E-Lighting APA) required to be paid after February 5, 2015 to the Seller
pursuant to the terms and conditions of the RLT-E-Lighting APA:
(a) before and after giving effect to such payment, no Event of Default shall have occurred and be continuing;
(b) before and after giving effect to such payment, Availability shall be no less than $5,000,000; and
(c) after giving effect to such payment, the proforma Fixed Charge Coverage shall be at least 1.25 to 1.0.”
““Sixth Amendment” means that certain Consent, Joinder and Sixth Amendment to Loan and Security Agreement and Fourth
Amendment to Pledge Agreement, dated as of October 27, 2015, by and among the Obligors and the Lender.”
““Sixth Amendment Effective Date”: means October 27, 2015.”
(e)
Section 9.2.7 of the Loan Agreement is hereby amended by adding the following new subsection to the end thereof:
“(t) any payments of, or adjustments to, the RLT-E-Lighting Purchase Price required to be paid in cash after February 5, 2015
pursuant to the terms and conditions of the RLT-E-Lighting APA, unless the Borrower Agent has certified to Lender within five
(5) Business Days prior to the making of such payment, that the RLT-E-Lighting Payment Conditions have been and will,
immediately after said payment, be satisfied.”
(f)
Section 9.3.2 of the Loan Agreement is hereby is hereby deleted in its entirety and the following substituted in its stead:
“9.3.2 Senior Leverage Ratio. Maintain a Senior Leverage Ratio, tested as of the last day of each of the following Fiscal
Quarters, as follows:
(a)
for the Fiscal Quarter ending September 30, 2015, a maximum of 3.5:1.0, calculated for the then-ended Fiscal Quarter and
annualized accordingly;
4
(b)
(a)
(b)
for the Fiscal Quarter ending December 31, 2015, a maximum of 3.5:1.0, calculated for the last two ended Fiscal Quarters
and annualized accordingly;
for the Fiscal Quarter ending March 31, 2016, a maximum of 3.5:1.0, calculated for the last three ended Fiscal Quarters
and annualized accordingly; and
for the Fiscal Quarter ending June 30, 2016, and all fiscal Quarters ending thereafter, a maximum of 3.5:1.0, calculated on
a trailing twelve (12) month basis.”
(g) Schedule 8.1.4 to the Loan Agreement is hereby deleted in its entirety, and the amended and restated Schedule 8.1.4 to the Loan
Agreement attached hereto as Exhibit “B” is hereby substituted in its stead.
5. Amendments to Pledge Agreement. The Pledge Agreement is hereby amended as follows:
(a)
Schedule III to the Pledge Agreement is hereby deleted in its entirety, and the amended and restated Schedule III to the Pledge
Agreement attached hereto as Exhibit “C” is hereby substituted in its stead.
6. Post-Sixth Amendment Obligations. The Obligors hereby agree to deliver the following duly completed and executed items to the
Lender by no later than (i) thirty (30) days after the Sixth Amendment Effective Date or (ii) each such earlier date as noted below
(collectively the “Post-Sixth Amendment Obligations”), all in the form and substance reasonably satisfactory to the Lender, and the
Obligors further agree that any failure by the Obligors to duly and timely comply with the Post-Sixth Amendment Obligations shall
constitute an Event of Default under the Loan Agreement; provided that the Obligors expressly acknowledge and agree that no Accounts or
Inventory of RLT-E-Lighting can be deemed to be Eligible Accounts or Eligible Inventory (even if so otherwise qualified as Eligible
Accounts or Eligible Inventory as determined by the Lender in accordance with the terms and conditions of the Loan Agreement) until each
of the Post-Sixth Amendment Obligations are satisfied:
(a)
Perfection Certificate for RLT-E-Lighting.
(b) Any UCC-3 Terminations for RLT-E-Lighting as determined by the Lender to ensure that the Lender has a first priority Lien in
the Collateral of RLT-E-Lighting.
(c) Control Agreements for the Deposit Accounts and/or Securities Accounts of RLT-E-Lighting, Energy Source and RLT-ES if
determined by the Lender to be necessary.
5
(d) Lien Waivers with respect to the locations utilized by RLT-E-Lighting. If, notwithstanding the Obligors’ commercially reasonable
efforts, the Obligors are unable to timely obtain the foregoing Lien Waivers, such failure shall not constitute a Default or Event of
Default, and the Lender reserves the right to institute a Rent and Charges Reserve for such location.
(e) Execution and delivery by RLT-E-Lighting of Intellectual Property Security Agreements to the extent reasonably determined by
the Lender to be necessary after the Lender conducts intellectual property searches of said Obligors.
(f) Copies of policies or certificates of insurance for the insurance policies carried by RLT-E-Lighting, Energy Source and RLT-ES,
all in compliance with the Loan Documents, including endorsements or amendments to such policies (i) showing Lender as a
lender’s loss payee or an additional insured; (ii) requiring ten (10) days prior written notice to Lender in the event of cancellation
of the policy for any reason of nonpayment of premium and thirty (30) prior written notice to Lender in the event of cancellation
of the policy for any other reason; and (iii) specifying that the interest of Lender shall not be impaired or invalidated by any act or
neglect of such Obligor or the owner of the Property, nor by the occupation of the premises for purposes more hazardous than are
permitted by the policy.
(g) By no later than ten (10) days after the Sixth Amendment Effective Date, the Lender shall have received the original stock
certificates of RLT-E-Lighting, which original stock certificates shall be accompanied by stock powers duly executed in blank or
other instruments of transfer reasonably satisfactory to the Lender.
(h) By no later than ten (10) days after the Sixth Amendment Effective Date, the Lender shall have received the original legal
opinion of Lowenstein Sandler LLP with regard to this 6th Amendment, in form and substance reasonably satisfactory to the
Lender.
7. Ratification of Loan Documents . Except as specifically amended by this Amendment, all of the terms and conditions of the Loan
Agreement and of each of the other Loan Documents shall remain in full force and effect. The Obligors hereby ratify, confirm, and reaffirm
all of the representations, warranties and covenants contained therein. Further, the Obligors warrant and represent that no Event of Default
exists, and nothing contained herein shall be deemed to constitute a waiver by the Lender of any Event of Default which may nonetheless
exist as of the date hereof.
8. Breach. Without limiting the provisions of the Loan Documents, a breach of any agreement, covenant, warranty, representation or
certification of the Obligors under this Amendment and/or the failure of the Obligors to perform its obligations under this Amendment shall
constitute an Event of Default under the Loan Agreement.
9. Waiver. Each Obligor acknowledges, confirms and agrees that it has no claims, counterclaims, offsets, defenses or causes of action
against the Lender with respect to amounts
6
outstanding under the Loan Agreement or otherwise. To the extent such claims, counterclaims, offsets, defenses and/or causes of actions
should exist, whether known or unknown, at law or in equity, each Obligor hereby WAIVES same and RELEASES the Lender from any
and all liability in connection therewith.
10. Conditions Precedent to Effectiveness. This Amendment shall not be effective until each of the following conditions precedent
has been fulfilled to the sole satisfaction of the Lender:
(a) This Amendment shall have been duly executed and delivered by the respective parties hereto, and shall be in full force and effect
and shall be in form and substance satisfactory to the Lender.
(b) All action on the part of the Obligors necessary for the valid execution, delivery and performance by the Obligors of this
Amendment and all other documentation, instruments, and agreements to be executed in connection herewith shall have been
duly and effectively taken and evidence thereof satisfactory to the Lender shall have been provided to the Lender.
(c) The Lender shall have received from the Obligors an amendment fee in the amount of Two Thousand Five Hundred Dollars
($2,500.00) (the “Amendment Fee”). The Amendment Fee shall be fully and irrevocably earned by the Lender upon execution of
this Amendment, and is non-refundable to the Obligors.
(d) The Lender shall have received true and correct, fully executed copies of the RLT-E-Lighting APA.
(e) The Lender shall have received true and correct, fully-executed (as applicable) copies of those items set forth on the Lender’s
closing checklist which has been provided to the Obligors.
(f)
The Obligors shall have executed and delivered to the Lender such additional documents, instruments, and agreements as the
Lender may reasonably request.
(g) The Lender shall have completed and received satisfactory results of all Patriot Act inquiries with respect to RLT-E-Lighting.
(h)
In accordance with the terms and conditions of Loan Agreement, the Obligors shall pay to Lender (i) all costs and expenses of the
Lender, including, without limitation, reasonable attorneys’ fees, in connection with the preparation, negotiation, execution and
delivery of this Amendment and (ii) all outstanding amounts of attorneys’ fees due prior to the Sixth Amendment Effective Date.
11. Miscellaneous.
(a) This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall constitute one instrument. Delivery of an
7
executed signature page of this Amendment (or any notice or agreement delivered pursuant to the terms hereof) by facsimile
transmission or electronic transmission shall be as effective as delivery of a manually executed counterpart hereof; provided that
the Obligors shall deliver originals of all applicable documents referenced in this Amendment by no later than three (3) Business
Days after the Sixth Amendment Effective Date.
(b) This Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior
negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.
(c) Any determination that any provision of this Amendment or any application hereof is invalid, illegal or unenforceable in any
respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the
validity, legality or enforceability of any other provisions of this Amendment.
(d) THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AMENDMENT AND ANY DISPUTE ARISING
OUT OF THE RELATIONSHIP BETWEEN THE PARTIES HERETO, WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).
[SIGNATURE PAGE FOLLOWS]
8
IN WITNESS WHEREOF, the parties have executed this Amendment as a sealed instrument by their respective duly authorized
officers.
LENDER:
BANK OF AMERICA, N.A.
/s/ Cynthia G. Stannard
By:
Name: Cynthia G. Stannard
Title: Sr. Vice President
[Signatures Continue on Next Page]
9
BORROWERS:
REVOLUTION LIGHTING TECHNOLOGIES,
INC.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: Chief Financial Officer
LUMIFICIENT CORPORATION
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
LIGHTING INTEGRATION TECHNOLOGIES,
LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
SEESMART TECHNOLOGIES, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
RELUME TECHNOLOGIES, INC.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
[Signatures Continue on Next Page]
10
TRI-STATE LED DE, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
VALUE LIGHTING, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
ALL AROUND LIGHTING, L.L.C.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
ENERGY SOURCE, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: Secretary and Treasurer
REVOLUTION LIGHTING – E-LIGHTING, INC.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
[Signatures Continue on Next Page]
11
GUARANTORS:
SEESMART, INC.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
SENTINEL SYSTEM, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
VALUE LIGHTING OF HOUSTON, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President of Sole Member
ENVIROLIGHT LED, LLC
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President of Sole Member
BREAK ONE NINE, INC.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: President
REVOLUTION LIGHTING TECHNOLOGIES –
ENERGY SOURCE, INC.
/s/ James A. DePalma
By:
Name: James A. DePalma
Title: Secretary and Treasurer
12
SUBSIDIARIES OF REVOLUTION LIGHTING TECHNOLOGIES, INC.
Exhibit 21.1
Subsidiary of the Company
Lumificient Corporation
Seesmart Technologies, LLC
Lighting Integration Technologies, LLC
Relume Technologies, Inc.
Tri-State DE LLC
Value Lighting, Inc.
All Around Lighting, LLC
Energy Source, LLC
E-Lighting, Inc.
Subsidiary of Seesmart Technologies, LLC
Seesmart Technologies, Inc.
Subsidiary of Relume Technologies, Inc.
Sentinel System, LLC
Jurisdiction of
Incorporation/Formation
Minnesota
Delaware
Delaware
Delaware
Delaware
Delaware
Texas
Delaware
Delaware
Nevada
Michigan
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in Registration Statements on Form S-3 (No. 333-140286 and No. 333-199510) and Form S-
8 (No. 333-123984, No. 333-150778, No. 333-172289, No. 333-188719, No. 333-197843 and No. 333-204172) of Revolution Lighting
Technologies, Inc. of our reports dated March 10, 2016 relating to our audits of the consolidated financial statements and internal control
over financial reporting, which appear in this Annual Report on Form 10-K of Revolution Lighting Technologies, Inc. for the year ended
December 31, 2015.
Exhibit 23.1
/s/ RSM US LLP
Stamford, Connecticut
March 10, 2016
CERTIFICATION
Exhibit 31.1
I, Robert V. LaPenta, Chairman of the Board, Chief Executive Officer and President of Revolution Lighting Technologies, Inc., certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Revolution Lighting Technologies, Inc.;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 10, 2016
/s/ Robert V. LaPenta
Robert V. LaPenta
Chairman of the Board, Chief Executive
Officer and President
(Principal Executive Officer)
Exhibit 31.2
I, James A. DePalma, Chief Financial Officer of Revolution Lighting Technologies, Inc., certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Revolution Lighting Technologies, Inc.;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 10, 2016
/s/ James A. DePalma
James A. DePalma
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
This Certificate is being filed pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002. This
Certification is included solely for the purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act and is not
intended to be used for any other purpose. In connection with the accompanying Annual Report on Form 10-K of Revolution Lighting
Technologies, Inc. for the year ended December 31, 2015, the undersigned hereby certifies in his capacity as an officer of Revolution
Lighting Technologies, Inc. that to such officer’s knowledge:
1. such Annual Report on Form 10-K of Revolution Lighting Technologies, Inc. for the year ended December 31, 2015, fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in such Annual Report on Form 10-K of Revolution Lighting Technologies, Inc. for the year ending
December 31, 2015, fairly presents, in all material respects, the financial condition and results of operations of Revolution Lighting
Technologies, Inc.
March 10, 2016
REVOLUTION LIGHTING TECHNOLOGIES, INC.
/s/ Robert V. LaPenta
Robert V. LaPenta
Chairman of the Board, Chief Executive
Officer and President
(Principal Executive Officer)
/s/ James A. DePalma
James A. DePalma
Chief Financial Officer
(Principal Financial Officer)