Item 1.01 Entry into a Material Definitive Agreement.
Twentieth Amendment to Credit Facility; Purchase Order Finance Agreement
Effective on January 6, 2020, Revolution Lighting Technologies, Inc. (the
"Company") and its direct and indirect subsidiaries (collectively, the
"Obligors") entered into a Twentieth Amendment (the "Twentieth Amendment") to
its loan and security agreement (the "Loan Agreement") with Bank of America N.A.
("Bank of America").
Under the terms of the Twentieth Amendment, Bank of America agreed to certain
amendments to the Loan Agreement to permit the Company to enter into a Purchase
Order Financing Agreement (the "Financing Agreement") with Aston Finance I LLC
("Aston"), an entity controlled by the Company's Chief Executive Officer, Robert
V. LaPenta Sr., to provide short-term financing for a project that a Company
subsidiary is pursuing in the ordinary course of its business (the "Project").
Pursuant to the terms of the Twentieth Amendment, the Company is required to
maintain a separate, designated bank account with Bank of America to deposit
payments received from the Project and the Company must notify Bank of America
in writing within one business day of receiving any such payments. Further, the
Company acknowledged that it is in default under the Loan Agreement and that
Bank of America has the right to enforce its rights and remedies under the Loan
Agreement at any time.
As noted above, the Company entered into the Financing Agreement with Aston on
January 6, 2020 to finance the Project. Pursuant to the terms of the Financing
Agreement, Aston will charge a fixed interest rate of 1.25% of the principal of
each advance for the first thirty days of such advance, with an additional rate
of 0.041% for each subsequent daily period. Additionally, Aston may charge an
additional 3.0% per annum on any advance outstanding following an event of
default under the Financing Agreement. Aston will have a first priority lien on
all inventory and accounts receivable pertaining to the Project. The Company and
its subsidiary will repay Aston for each advance upon the earlier of:
(i) receipt of funds by the Company for financed goods which are the subject of
such advance, (ii) cancellation of a purchase order for which an advance has
been made, (iii) 180 days following an advance or (iv) acceleration due to an
event of default under the Financing Agreement. The Financing Agreement contains
covenants that are customary to a purchase money lending facility in regards to
notice, protection of collateral, access and required payments.
As of January 7, 2020, the Company had total debt of approximately $77.8
million, including aggregate principal and interest outstanding under the
Company's line of credit with Bank of America of approximately $23.4 million,
aggregate principal and interest outstanding under loans from Mr. LaPenta and
Aston Capital, LLC of approximately $53.3 million and approximately $1.1 million
from other sources. As of January 7, 2020, the Company estimates that it had
$2.1 million of available liquidity, reflecting its net cash position plus the
remaining borrowing availability under the Loan Agreement.
The Company will likely need additional funding to continue its operations
beyond the end of the first quarter of 2020. The extent of additional funds
required will depend on the Company's results of operations, the amount of time
and expense necessary to complete the previously announced investigation by the
Securities and Exchange Commission (the "SEC") and to complete the audit and
restatement of certain of the Company's financial statements and other related
costs. The Company plans to work with Bank of America to further amend the Loan
Agreement to extend the current maturity date of January 26, 2020, and to
provide for ongoing borrowing availability. However, there can be no assurance
that the Company will obtain such an amendment and extension. Any failure to
obtain such an amendment under the Loan Agreement could result in the exercise
of remedies by Bank of America and all amounts becoming due under the Loan
Agreement, and cause the Company to become unable to operate as a going concern.
The foregoing descriptions of the Twentieth Amendment and Financing Agreement
are not complete and are qualified in their entirety by reference to the full
text of the Twentieth Amendment and Financing Agreement, which are attached to
this Form 8-K as Exhibits 99.1 and 99.2, respectively.
Item 2.02 Results of Operations and Financial Condition
The disclosure set forth in the third paragraph (last sentence only) and fourth
paragraph of Item 8.01 is incorporated by reference in its entirety in this Item
2.02.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The disclosure under Item 1.01 is incorporated by reference in its entirety in
this Item 2.03.
--------------------------------------------------------------------------------
Item 8.01 Other Events
As previously disclosed in its prior filings with the SEC, the Company is
cooperating with an ongoing investigation by the SEC relating in part to the
manner in which the Company recognized revenue on "bill and hold" transactions.
The Audit Committee of the Company's Board of Directors conducted an
investigation and found, among other things, that the Company did not meet all
of the accounting criteria for recognizing revenue on a bill and hold basis from
2014 through the second quarter of 2018 and, thus, certain revenues during this
timeframe were not recognized in the proper period.
As previously disclosed, the Company has concluded that its consolidated
financial statements as of and for each of the annual periods in the four-year
period ended December 31, 2017, each fiscal quarter of 2017 and the first two
fiscal quarters of 2018 should no longer be relied upon and should be restated.
The Company previously provided estimates on the impact of the restatement of
its financial statements. In the course of the continuing audit of the Company's
financial statements, the Company has found that additional adjustments to the
financial statements will be required. As a result, the Company is not able to
provide an updated impact of the restatement. The Company expects revenue during
the fiscal year ended December 31, 2019 to be approximately $105 million (with a
backlog of approximately $45 million) and projects that revenue during the
fiscal year ended December 31, 2020 will be in line with the results from fiscal
year 2019.
The revenue and backlog estimates above are preliminary and have not been
reviewed by the Company's independent registered public accounting firm and
therefore are subject to change. The revenue estimates in the Company's prior
filings are subject to revision based on the outcome of the restatement and
audit of the Company's financial statements as described above. The Company's
final results may differ materially from these estimates and previously reported
results.
The Company and certain of its officers and directors have been named as
defendants in putative class, individual and derivative actions pending in the
United States District Court for the District of Connecticut and for the
Southern District of New York: In re Revolution Lighting Technologies, Inc.
Securities Litigation, United States District Court for the Southern District of
New York, Civil Action No. 19-980 (Lead Class Action) and related cases; Graham
v. Revolution Lighting, et al., United States District Court for the Southern
District of New York, Civil Action No. 19-8337 (individual action); Jenkins v.
LaPenta, et al., United States District Court for the District of Connecticut,
Civil Action No. 19-621 (derivative action); Barton v. LaPenta, et al., United
States District Court for the District of Connecticut, Civil Action No. 19-856
(derivative action); Wages v. LaPenta, et al., United States District Court for
the District of Connecticut, Civil Action No. 19-721 (derivative action); Persin
v. LaPenta, United States District Court for the District of Connecticut, Civil
Action No. 19-716(derivative action); Hopewell v. LaPenta, et al., United States
District Court for the Southern District of New York, Civil Action No. 3913
(Lead New York Derivative Action) and related cases. The Company has reached
agreements in principle, subject to Court approval, that it believes will
resolve all of the pending actions. The Company's insurer has agreed to pay the
agreed upon amounts to settle these actions.
Forward-looking statements
Except for statements of historical fact, the matters discussed herein are
"forward-looking statements" within the meaning of the applicable securities
laws and regulations. The words "will," "may," "estimates," "expects,"
"intends," "plans," "believes" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
these identifying words. Forward-looking statements, including statements
regarding projected revenues and backlog, further amendments to the Loan
Agreement and the resolution of the Company's pending litigation, the Company's
future levels of indebtedness and funding needs and the availability of funding
from Mr. LaPenta or Bank of America, involve risks and uncertainties that may
cause actual results to differ materially from those stated here. Factors that
could cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to, the Company's
results of operations, the Company's ability to complete the restatement and the
ongoing audit of its financial statements, the Company's ability to obtain an
extension of maturity under the Loan Agreement, the Company's ability to
continue to meet its liquidity needs, the Company's ongoing litigation, and SEC
investigation and potential future litigation and the other risks described more
fully in the Company's filings with the SEC. Forward-looking statements reflect
the views of the Company's management as of the date hereof. The Company does
not undertake to revise these statements to reflect subsequent developments.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit
No. Description
99.1 Twentieth Amendment to Loan and Security Agreement, dated January
6, 2020, among Revolution Lighting Technologies, Inc., Lighting
Integration Technologies, LLC, Tri-State LED DE, LLC, Value Lighting,
LLC, All Around Lighting, L.L.C., Energy Source, LLC, Revolution
Lighting - E-Lighting, Inc., Seesmart, LLC, TNT Energy, LLC, the
Guarantors party thereto and Bank of America, N.A.
99.2 Purchase Order Financing Agreement, dated January 6, 2020, among
Revolution Lighting Technologies, Inc., Value Lighting, LLC and Aston
Finance I LLC.
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses