Revolution Lighting (RVLT) 10-Q 2017 Q3 Quarterly report

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission File No. 000-23590

REVOLUTION LIGHTING TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE	59-3046866
(State or other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

177 BROAD STREET, 12^th FLOOR, STAMFORD, CT 06901

(Address of Principal Executive Offices) (Zip Code)

(203) 504-1111

(Registrant’s Telephone Number, Including Area Code)

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐  (Do not check if a smaller reporting company)	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of October 20, 2017, the Registrant had 21,266,825 shares of Common Stock, $.001 par value, outstanding.

Revolution Lighting Technologies, Inc.

Index to Form10-Q

Table of Contents

	Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements		3
Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3. Quantitative and Qualitative Disclosures About Market Risk		21
Item 4. Controls and Procedures		21
PART II – OTHER INFORMATION
Item 1. Legal Proceedings		22
Item 1A. Risk Factors		22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		22
Item 3. Defaults Upon Senior Securities		22
Item 4. Mine Safety Disclosures		22
Item 5. Other Information		22
Item 6. Exhibits		23
SIGNATURES		24

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

	Page No.
Revolution Lighting Technologies, Inc. Unaudited Financial Statements
Condensed Consolidated Balance Sheets at September  30, 2017 and December 31, 2016		4
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2017 and 2016		5
Condensed Consolidated Statements of Stockholders’ Equity for the Year Ended December 31, 2016 and Nine Months Ended September 30, 2017		6
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016		7
Notes to Condensed Consolidated Financial Statements		8

3

Revolution Lighting Technologies, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except per share data)

	September 30,			December 31,
	2017			2016
ASSETS
Current Assets
Cash and cash equivalents	$	917		$	883
Trade receivables, net of allowance for doubtful accounts		47,970			53,347
Unbilled contracts receivable		5,511			10,167
Inventories, net		33,638			26,678
Vendor deposits, prepaid expenses and other		12,087			8,363
Total current assets		100,123			99,438
Property and equipment, net		1,802			1,474
Goodwill		72,210			72,074
Intangible assets, net		39,821			43,809
Other assets, net		979			704
Total assets	$	214,935		$	217,499
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	26,451		$	32,409
Accrued and other liabilities		11,636			10,541
Notes payable		2,360			2,360
Related party notes payable		1,000			1,500
Purchase price obligations		168			1,327
Total current liabilities		41,615			48,137
Revolving credit facility		40,659			25,993
Notes payable		1,796			12,066
Related party notes payable		9,565			2,565
Purchase price obligations		—			1,716
Other noncurrent liabilities		325			1,309
Total liabilities		93,960			91,786
Contingencies and Commitments
Stockholders’ Equity
Common stock, par value $0.001 — 35,000 shares authorized and 21,262 shares issued and outstanding at September 30, 2017 and 35,000 shares authorized and 20,893 shares issued and outstanding at December 31, 2016		21			21
Additionalpaid-in-capital		204,351			200,887
Accumulated deficit		(83,397	)		(75,195	)
Total stockholders’ equity		120,975			125,713
Total liabilities and stockholders’ equity	$	214,935		$	217,499

See accompanying notes to unaudited condensed consolidated financial statements.

4

Revolution Lighting Technologies, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue	$	43,084		$	50,168		$	117,029		$	120,879
Cost of sales		29,207			34,302			78,830			82,615
Gross profit		13,877			15,866			38,199			38,264
Operating expenses:
Selling, general and administrative		11,018			10,556			31,476			27,430
Research and development		1,068			719			2,656			1,938
Amortization and depreciation		1,534			1,627			4,794			4,502
Acquisition, severance and transition costs		1,233			126			2,774			3,127
Stock-based compensation		601			462			2,197			1,485
Total operating expenses		15,454			13,490			43,897			38,482
Operating income (loss)		(1,577	)		2,376			(5,698	)		(218	)
Interest expense and other charges		(943	)		(747	)		(2,504	)		(1,896	)
Net income (loss)	$	(2,520	)	$	1,629		$	(8,202	)	$	(2,114	)
Income (loss) per share, basic and diluted	$	(0.12	)	$	0.08		$	(0.39	)	$	(0.11	)
Weighted average shares outstanding, basic		20,936			20,491			20,766			18,519
Weighted average shares outstanding, diluted		20,936			21,143			20,766			18,519

See accompanying notes to unaudited condensed consolidated financial statements.

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Revolution Lighting Technologies, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands)

	Common Stock		Additional Paid-in- Capital		Accumulated Deficit			Total Stockholders’ Equity
Balance, January 1, 2016	$	16	$	176,760	$	(74,673	)	$	102,103
Stock-based compensation		1		1,310		—			1,311
Issuance of common stock for cash, net of issuance costs		3		16,189		—			16,192
Shares issued for contingent consideration and acquisition		1		6,628		—			6,629
Net loss		—		—		(522	)		(522	)
Balance, January 1, 2017		21		200,887		(75,195	)		125,713
Stock-based compensation		—		2,475		—			2,475
Shares issued for contingent consideration		—		989		—			989
Net loss		—		—		(8,202	)		(8,202	)
Balance, September 30, 2017	$	21	$	204,351	$	(83,397	)	$	120,975

See accompanying notes to unaudited condensed consolidated financial statements.

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Revolution Lighting Technologies, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Nine Months Ended September 30,
	2017			2016
Cash Flows from Operating Activities:
Net loss	$	(8,202	)	$	(2,114	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation		5,812			4,502
Stock-based compensation		2,197			1,485
Change in fair value of contingent consideration		(1,602	)		(69	)
Other noncash items affecting net income		(62	)		181
Changes in operating assets and liabilities, net of the effect of the acquisition:
(Increase) decrease in trade receivables, net		5,377			(5,321	)
(Increase) decrease in unbilled contracts receivable		4,656			(2,926	)
(Increase) decrease in inventories, net		(6,960	)		(1,722	)
(Increase) decrease in Vendor deposits, prepaid expenses and other		(5,264	)		(2,425	)
Increase (decrease) in accounts payable and accrued liabilities		(5,569	)		4,338
Net cash used in operating activities		(9,617	)		(4,071	)
Cash Flows from Investing Activities:
Payment of acquisition obligations		(284	)		(1,015	)
Purchase of property and equipment		(961	)		(220	)
Acquisition of business and other, net of cash acquired		—			(10,413	)
Proceeds from the sale of assets		—			2
Net cash used in investing activities		(1,245	)		(11,646	)
Cash Flows from Financing Activities:
Net proceeds from revolving credit facility		14,666			3,487
Net proceeds from related party notes payable		7,000			—
Repayments of notes payable and short-term borrowings		(10,270	)		(270	)
Repayments of related party notes payable		(500	)		—
Proceeds from issuance of common stock, net of issuance costs		—			16,192
Net cash provided by financing activities		10,896			19,409
Net increase in cash and cash equivalents		34			3,692
Cash and cash equivalents, beginning of period		883			219
Cash and cash equivalents, end of period	$	917		$	3,911
Non-cash investing and financing activities:
Issuance of common stock for contingent consideration		989			6,434
Contingent consideration and other		—			5,132

See accompanying notes to unaudited condensed consolidated financial statements.

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Revolution Lighting Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In millions, except share and per share data, or unless otherwise noted)

1. The Company

Revolution Lighting Technologies, Inc., together with its wholly-owned subsidiaries (“Revolution”, “we”, “us” or “our”), is a leader in the designing, manufacturing, marketing, and selling of light-emitting diode (“LED”) lighting solutions focusing on the industrial, commercial and government markets in the United States, Canada, and internationally. Through advanced LED technologies, we have created an innovative lighting company that offers a comprehensive advanced product platform of high-quality interior and exterior LED lamps and fixtures, including signage and control systems. We are uniquely positioned to act as an expert partner, offering full-service lighting solutions through our operating divisions, including Energy Source, Value Lighting,Tri-State LED,E-Lighting,All-Around Lighting and TNT Energy, to transform lighting into a source of superior energy savings, quality light and well-being.

We generate revenue by selling lighting products for use in the commercial, industrial and government markets, which include vertical markets such as military, municipal, commercial office, industrial, warehouse, education, hospitality, retail, healthcare, multi-family and signage-media-accent markets. We market and distribute our products globally through networks of distributors, independent sales agencies and representatives, electrical supply companies, as well as internal marketing and sales forces.

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

Basis of presentation

The accompanying condensed consolidated financial statements are unaudited, and have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form10-K for the year ended December 31, 2016. The Condensed Consolidated Balance Sheet as of December 31, 2016 was derived from our audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP.

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

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

The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the full year ending on December 31, 2017, or for any other future period. Our 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 historically experienced increasing revenue as the year progresses.

Sales Tax Revenue

We record sales tax revenue on a gross basis (included in both “Revenue” and “Cost of sales” in the unaudited Condensed Consolidated Statements of Operations). Revenues from sales tax were $1.1 million and $1.5 million for the three months ended September 30, 2017 and 2016, respectively, and $3.0 million and $3.7 million for the nine months ended September 30, 2017 and 2016, respectively.

Liquidity and Capital Resources

On January 26, 2017, we amended the Revolving Credit Facility which enabled us to borrow up to $50.0 million on a revolving basis, based upon specified percentages of eligible receivables and inventory, which matures on January 26, 2020. See Note 7.

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Our liquidity as of September 30, 2017 and December 31, 2016 was $8.6 million and $1.9 million, respectively, which consisted of cash and cash equivalents of $0.9 million in both periods, and additional borrowing capacity under the Revolving Credit Facility of $7.7 million and $1.0 million, respectively.

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

At September 30, 2017 and December 31, 2016, we had working capital of $58.5 million and $51.3 million, respectively. We believe we have adequate resources to meet our cash requirements for the foreseeable future.

Recent accounting pronouncements

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 standard was effective for fiscal years beginning after December 15, 2016. The adoption of this standard did not have a material effect on our financial statements.

In February 2016, the FASB issued ASU2016-02, “Leases,” which requires lessees to recognize aright-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 adoption of this standard is not expected to have a material effect on our results of operations.

In May 2014, the FASB issued ASU2014-09, “Revenue from Contracts with Customers”, with amendments issued during 2016. This standard is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The provisions of this ASU are effective with either a full retrospective approach or a modified retrospective approach for periods beginning after December 15, 2017. We are in the process of evaluating the new standard; however, the adoption of this standard is not expected to have a material effect on our financial statements. We are currently updating our processes and controls necessary for implementing this standard, including the increased disclosure requirements. We expect to adopt the new guidance beginning in 2018 using the modified retrospective approach.

In March 2016, the FASB issued ASU2016-09, “Compensation – Stock Compensation,” which is intended to simplify the accounting for share-based payment awards, including accounting for the income tax consequences, the classification of awards as either equity or liabilities and the classification on the statement of cash flows. The standard was effective for fiscal years beginning after December 15, 2016. The adoption of this standard did not have a material effect on our financial statements.

In August 2016, the FASB issued ASU2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments,” which provides guidance on eight specific cash flow issues. The provisions of this standard are effective for periods beginning after December 15, 2017. The adoption of this standard is not expected to have a material effect on our financial statements.

In January 2017, the FASB issued ASU2017-01, “Business Combinations: Clarifying the Definition of a Business,” which assists entities with evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The provisions of this standard are effective for periods beginning after December 15, 2017. The adoption of this standard is not expected to have a material impact on our financial statements.

In January 2017, the FASB issued ASU2017-04, “Simplifying the Test for Goodwill Impairment,” which simplifies the subsequent measure of goodwill by eliminating the second step from the goodwill impairment test. The provisions of this standard are effective for periods beginning after December 15, 2019. The adoption of this standard is not expected to have a material impact on our financial statements.

In May 2017, the FASB issued ASU2017-09, “Compensation—Stock Compensation: Scope of Modification Accounting” which provides guidance about which changes to the terms or conditions of a share-based payment award would require an entity to apply modification accounting. The provisions of this standard are effective for periods beginning after December 15, 2017. The adoption of this standard is not expected to have a material impact on our financial statements.

9

2. Accounts Receivable, Net of Allowance for Doubtful Accounts

Accounts receivable, net of allowance for doubtful accounts, consisted of the following:

	September 30,			December 31,
	2017			2016
Trade receivables	$	48.4		$	54.7
Allowance for doubtful accounts		(0.4	)		(1.4	)
Accounts receivable, net of allowance for doubtful accounts	$	48.0		$	53.3

Write-offs and other adjustments, which are recorded in “Other selling, general and administrative” in the unaudited Condensed Consolidated Statements of Operations, were $0.1 million for both the three months ended September 30, 2017 and 2016, and $0.5 million and $0.6 million for the nine months ended September 30, 2017 and 2016, respectively.

3. Inventories, Net

Inventories, which are primarily purchased from third parties, consisted of the following:

	September 30,			December 31,
	2017			2016
Raw materials	$	2.5		$	2.4
Finished goods, net		32.9			26.1
Total		35.4			28.5
Less: Provision for obsolescence		(1.8	)		(1.8	)
Inventories, net	$	33.6		$	26.7

4. Property and Equipment

Property and equipment, net of accumulated depreciation, consisted of the following:

	September 30,			December 31,
	2017			2016
Total property and equipment	$	3.3		$	3.2
Less accumulated depreciation		(1.5	)		(1.7	)
Property and equipment, net	$	1.8		$	1.5

Depreciation expense related to property and equipment, which was recorded in “Amortization and depreciation” in the unaudited Condensed Consolidated Statements of Operations, was $0.1 million for both the three months ended September 30, 2017 and 2016, and $0.4 million and $0.3 million for the nine months ended September 30, 2017 and 2016, respectively.

5. Intangible Assets

Intangible assets consisted of the following:

	September 30, 2017							December 31, 2016
	Gross Cost		Accumulated Amortization			Net Carrying Amount		Gross Cost		Accumulated Amortization			Net Carrying Amount
Customer relationships and product supply agreements	$	35.2	$	(10.7	)	$	24.5	$	35.0	$	(7.9	)	$	27.1
Trademarks/Trade Names		17.6		(4.2	)		13.4		17.6		(3.4	)		14.2
Technology		2.0		(0.8	)		1.2		2.0		(0.6	)		1.4
Non-compete agreement		1.4		(0.9	)		0.5		1.4		(0.7	)		0.7
Customer contracts and backlog		3.3		(3.3	)		—		3.3		(3.1	)		0.2
Other		0.6		(0.4	)		0.2		0.6		(0.4	)		0.2
Intangible assets, net	$	60.1	$	(20.3	)	$	39.8	$	59.9	$	(16.1	)	$	43.8

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Amortization expense related to intangible assets, which was recorded in “Amortization and depreciation” on the unaudited Condensed Consolidated Statements of Operations, was $1.4 million and $1.4 million for the three months ended September 30, 2017 and 2016, respectively, and $4.2 million and $3.8 million for the nine months ended September 30, 2017 and 2016, respectively.

6. Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following:

	September 30,		December 31,
	2017		2016
Compensation, benefits and commissions	$	3.9	$	4.4
Accruals and other liabilities		7.7		6.1
Accrued and other current liabilities	$	11.6	$	10.5

7. Financings

Revolving Credit Facility

On January 26, 2017, we amended the loan and security agreement with Bank of America to borrow up to $50.0 million on a revolving basis, based upon specified percentages of eligible receivables and inventory, which matures on January 26, 2020 (the “Revolving Credit Facility”). Under the Revolving Credit Facility, the maximum applicable margin for LIBOR rate loans is 2.75%, and the maximum applicable margin for base rate loans is 1.75%. As of September 30, 2017, our Chairman, Chief Executive Officer and President had guaranteed $10.0 million of the borrowings under the Revolving Credit Facility (see Note 13). At September 30, 2017 and December 31, 2016, the balance outstanding on the Revolving Credit Facility was $40.7 million and $26.0 million, respectively. We recorded interest expense of $0.4 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively, and $1.3 million and $0.7 million for the nine months ended September 30, 2017 and 2016, respectively.

In connection with obtaining the revolving credit facility, we incurred debt issuance costs, which are being amortized through the maturity date. At September 30, 2017 and December 31, 2016, we had $0.6 million and $0.2 million, respectively, of deferred debt issuance costs, which are recorded in “Other assets, net” in the Consolidated Balance Sheets. Amortization expense of deferred debt issuance costs was $0.1 million and less than $0.1 million for the three months ended September 30, 2017 and 2016, respectively, and $0.3 million and $0.2 million for the nine months ended September 30, 2017 and 2016, respectively.

Notes Payable

Notes payable consisted of the following:

	September 30,				December 31,
	2017				2016
Value Lighting acquisition note	$	2.2			$	2.4
TNT acquisition notes		2.0		��		2.0
Energy Source acquisition notes		—				10.0
Total notes payable		4.2				14.4
Less: Notes payable - current		(2.4	)			(2.4	)
Notes payable - noncurrent	$	1.8			$	12.0

Value Lighting Acquisition Note

In conjunction with the acquisition of Value Lighting, we refinanced $3.7 million of Value Lighting’s trade accounts payable by issuing a note payable to the creditor. The note is payable in monthly installments through October 2019 and a lump sum payment of $1.4 million is due on November 22, 2018, which may be settled, at our option, in either cash or an equivalent amount of common shares based upon their then-current market value.

TNT Acquisition Notes

In connection with the acquisition of TNT in May 2016, we issued $2.0 million in promissory notes bearing interest at 5% per annum, of which $1.0 million was due on April 21, 2017 and $1.0 million was due on November 6, 2017. In February 2017, the maturity date was extended to November 6, 2017 for all of the TNT promissory notes. Our Chairman, Chief Executive Officer, and President has provided irrevocable letters of credit to support the TNT acquisition notes (see Note 13). We recorded accrued interest of $0.1 million and less than $0.1 million at September 30, 2017 and December 31, 2016, respectively. We recorded interest expense of less than $0.1 million for both the three months ended September 30, 2016 and 2017, and $0.1 million and less than $0.1 million for the nine months ended September 30, 2017 and 2016, respectively.

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Energy Source Acquisition Notes

In connection with the acquisition of Energy Source in August 2015, we issued $10.0 million in promissory notes bearing interest at 5% per annum due July 20, 2016, which were supported by an irrevocable letter of credit from RVL. In July 2016, the maturity date was extended to January 20, 2017, with an interest rate of 7%. On January 26, 2017, we repaid the Energy Source acquisition notes, including interest of $0.4 million, using proceeds from the amended Revolving Credit Facility, and the related guarantee provided by RVL was terminated. We recorded interest expense of $0.2 million for the three months ended September 30, 2016, and less than $0.1 million and $0.4 million for the nine months ended September 30, 2017 and 2016, respectively.

Debt Maturities

At September 30, 2017, the scheduled maturities of our borrowings were as follows:

	Total
	Notes Payable
2017	$	2.1
2018		1.8
2019		0.3
2020		40.7
Total borrowings	$	44.9

8. Purchase Price Obligations

Changes in the fair value of purchase price obligations were as follows:

Fair value, January 1, 2017 (1)	$	3.0
Fair value of acquisition liabilities paid (2)		(1.2	)
Change in fair value (3)		(1.6	)
Fair value, September 30, 2017 (4)	$	0.2

(1) Includes $0.9 million to be paid in cash, $0.6 million to be settled in common stock and $1.5 million that may be settled, at our option, in either cash or an equivalent amount of common stock based upon their then-current market value, if certain performance criteria had been met.

(2) Such acquisition liabilities were settled in common stock and cash.

(3) Change in fair value includes a reduction due to a change in assumptions utilized in the calculation of purchase price obligations and not meeting applicable thresholds.

(4) Includes $0.2 million to be settled in common stock.

We determined the fair value of the purchase price obligation on a recurring basis using a Monte Carlo simulation. The fair value remeasurement is based on significant inputs not observable in the market and thus represent a Level 3 measurement. At September 30, 2017, we used the following assumptions in determining the purchase price obligations: volatility of 60%, risk free interest rate of 1.2% and dividend yield of 0%.

9. Stockholders’ Equity

Common Stock

The changes in issued and outstanding common stock during the nine months ended September 30, 2017 were as follows:

	Shares
Balance at January 1, 2017		20,893,262
Shares issued for stock-based compensation		195,365
Shares issued for contingent consideration		173,199
Balance at September 30, 2017		21,261,826

At September 30, 2017, 8,670,386 shares, or 41% of our outstanding shares, were owned by RVL and its affiliates.

12

Preferred Stock

We are authorized to issue up to 5,000,000 shares of preferred stock. There were no shares of preferred stock outstanding at September 30, 2017.

10. Income Taxes

We file income tax returns in the United States federal jurisdiction, as well as in various state jurisdictions. We did not record any current or deferred U.S. federal income tax provision or benefit during the nine months ended September 30, 2017 and 2016 because we have experienced operating losses since inception. We have recognized a full valuation allowance related to our net deferred tax assets, including substantial net operating loss carryforwards. As of September 30, 2017, we had approximately $61.0 million of net operating loss carryforwards and amortizable expenses related to acquisitions that can be used to offset our income for federal and state tax purposes.

11. Loss per Share

The computation of basic and diluted net income (loss) per share for the periods indicated is as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
Numerator:
Net income (loss)	$	(2.5	)	$	1.6	$	(8.2	)	$	(2.1	)
Denominator:
Weighted-average common shares (in thousands) - basic		20,936			20,491		20,766			18,519
Effect of restricted shares		—			385		—			—
Effect of restricted share units		—			11		—			—
Effect of contingent purchase price obligations		—			256		—			—
Weighted-average common shares (in thousands) - diluted		20,936			21,143		20,766			18,519
Basic and diluted net income (loss) per share	$	(0.12	)	$	0.08	$	(0.39	)	$	(0.11	)

Included in the computation of basic net loss per share for the three and nine months ended September 30, 2017 and 2016 were 13,333 and 66,668 potentially dilutive shares, respectively.

Additionally, at September 30, 2017 and 2016, we were contingently obligated to pay $0.2 million and $1.6 million, which may be settled, at our option, in either cash or an equivalent amount of common shares based upon their then-current market value, if certain performance criteria had been met. The equivalent amount of common shares have been excluded from the computation of diluted net loss per share for the three and nine months ended September 30, 2017 and 2016, as they were antidilutive.

At September 30, 2017 and 2016, 24,928 and 27,828 outstanding options, respectively, with an average exercise price of $44.45 and $44.76, respectively, were not recognized in the diluted earnings per share calculation as they were antidilutive.

12. Stock-Based Compensation

The 2003 Plan

The following table presents a summary of activity for the nine months ended September 30, 2017:

	Number of Options			Weighted Average Exercise Price		Weighted Average Contractual Life
Outstanding, January 1, 2017		27,828		$	44.76		3.01
Expired		(2,900	)		47.40
Outstanding and expected to vest, September 30, 2017		24,928		$	44.45		2.57
Exercisable, September 30, 2017		24,928		$	44.45		2.57

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During the nine months ended September 30, 2017, no options were issued. We issue new shares upon the exercise of options. Options outstanding at September 30, 2017 had no intrinsic value. At September 30, 2017, unrecognized compensation expense related to options was less than $0.1 million, which is expected to be recognized over a weighted-average period of one year.

The 2013 Plan

On May 2, 2017, our stockholders voted on a fourth amendment to the 2013 Plan (the “2013 Plan”) to increase the number of shares that may be issued to officers, employees,non-employee directors and consultants of Revolution and its affiliates under the 2013 Plan to 1,600,000.

Restricted Shares

The following table presents a summary of activity for the nine months ended September 30, 2017:

	Number of Shares			Weighted Average Grant Date Fair Value
Outstanding, January 1, 2017		360,305		$	7.32
Vested		(133,038	)		8.49
Forfeited		(767	)		17.68
Outstanding and expected to vest, September 30, 2017		226,500		$	6.59

At September 30, 2017, there was $1.2 million of unrecognized compensation expense related to nonvested restricted shares, which is expected to be recognized over a weighted-average period of 2.8 years. The total fair value of restricted shares that vested during the nine months ended September 30, 2016 was $1.1 million.

Restricted Share Units

During the nine months ended September 30, 2017, we granted restricted share units to employees which vest ratably over a three-year period. These awards are classified as equity awards, and are accounted for using the fair value established at the grant date.

The following table presents a summary of activity for the nine months ended September 30, 2017:

	Number of Units			Weighted Average Grant Date Fair Value
Outstanding, January 1, 2017		132,517		$	6.84
Granted		229,223			7.23
Vested		(196,132	)		6.60
Forfeited		(4,425	)		6.50
Outstanding and expected to vest, September 30, 2017		161,183		$	6.53

At September 30, 2017, there was $0.8 million of unrecognized compensation expense related to nonvested restricted share units, which is expected to be recognized over a weighted-average period of 1.8 years. The total fair value of restricted shares that vested during the nine months ended September 30, 2017 was $1.3 million.

13. Related Party Transactions

Chairman, Chief Executive Officer and President

As of September 30, 2017, our Chairman, Chief Executive Officer, and President has guaranteed $10.0 million of borrowings under our Revolving Credit Facility. In addition, our Chairman, Chief Executive Officer, and President has provided irrevocable letters of credit to support $2.0 million of the TNT acquisition notes. See Note 7.

Aston Capital

On April 1, 2016, we entered into a $2.6 million amended and restated promissory note with Aston Capital, LLC (“Aston”), which bears interest at 9% annually and matures on April 1, 2019, which can be prepaid at our option. In May 2017, we amended the promissory note with Aston to include an additional $7.0 million of borrowings.

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In March 2017, Aston provided a $1.5 million advance that bears interest annually at 9%, which is included in “Related party notes payable” on the unaudited Condensed Consolidated Balance Sheets at September 30, 2017. During the three months ended September 30, 2017, we repaid $0.5 million of the advance. On November 30, 2016, Aston provided a $1.5 million advance that bore interest annually at 9%, which is included in “Related party notes payable” on the unaudited Condensed Consolidated Balance Sheets at December 31, 2016, and was repaid on January 26, 2017 using proceeds from the amended Revolving Credit Facility.

At September 30, 2017 and December 31, 2016, we had accrued interest of $0.4 million and $0.2 million, respectively. We recorded interest expense related to financing agreements with Aston of $0.4 million and $0.1 million for the three months ended September 30, 2017 and 2016, respectively, and $0.6 million and $0.2 million for the nine months ended September 30, 2017 and 2016, respectively.

On January 5, 2017, we ratified a management services agreement with Aston (the “Management Agreement”) to memorialize certain management services that Aston has been providing to us since RVL acquired majority control of our 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 us 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 addition, two of the Aston members hold executive positions in Revolution, and receive no compensation. On May 12, 2016, we granted 250,000 shares of restricted stock to Aston, which vest in three annual installments on May 12, 2017, 2018, and 2019. 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.

Our corporate headquarters utilizes space in Stamford, Connecticut, which is also occupied by affiliates of our Chairman and Chief Executive Officer. Our proportionate share of the space under the underlying lease, which we paid to Aston, was $0.1 million and $0.1 million during the three months ended September 30, 2017 and 2016, respectively, and $0.3 million and $0.2 million during the nine months ended September 30, 2017 and 2016, respectively.

14. Acquisitions of Businesses

TNT Energy, LLC

On May 6, 2016, we completed the acquisition of TNT, a turnkey provider of LED lighting-based energy savings projects within the commercial, industrial, hospitality, retail, education and municipal sectors. TNT’s headquarters is located in Raynham, Massachusetts. The acquisition of TNT is expected to expand our footprint within key lighting retrofit markets in the United States. We believe this is a direct complementary fit with our division, Energy Source, based in Providence, RI. In addition to its broad existing customer base, TNT is a contract vendor for the Small C&I Business Programs of northeast utility companies, with a defined territory of approximately 120 municipalities throughout Massachusetts. We acquired TNT for its management team, its client base and operational and business development synergies.

We accounted for the acquisition of TNT under ASC 805,Business Combinations (“ASC 805”), which requires recording assets and liabilities at fair value. Under the acquisition method of accounting, each tangible and separately identifiable intangible asset acquired and liabilities assumed were recorded based on their estimated fair values on the date of the acquisition.

Consideration:
Cash paid	$	8.6
Promissory note		2.0
Contingent consideration		4.1
Net Assets	$	14.7
Fair Value of Assets Acquired and Liabilities Assumed:
Working capital, net	$	0.9
Goodwill (1)		7.9
Intangible assets		5.9
Net Assets	$	14.7

(1) Since our initial valuation on the date of the acquisition, we recorded a $1.7 million increase to goodwill related to adjustments in working capital, including $0.1 million in the second quarter of 2017. Goodwill is expected to be deductible for income tax purposes.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Revolution Lighting Technologies unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form10-Q, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form10-K for the year ended December 31, 2016. This discussion and other sections in this Quarterly Report on Form10-Q contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, and actual results could differ materially from those discussed in the forward-looking statements as a result of numerous factors. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements also can be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. The forward-looking statements are subject to risks, uncertainties and assumptions, which are presented in detail in our Form10-K.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain financial measures, which are not presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). We are presenting thesenon-U.S. GAAP financial measures because we believe they provide us, and readers of this Form10-Q, with additional insight into our operational performance relative to earlier periods and relative to our competitors. We do not intend for thesenon-U.S GAAP financial measures to be a substitute for any U.S. GAAP financial information. Readers of these statements should use thesenon-U.S. GAAP financial measures only in conjunction with the comparable U.S. GAAP financial measures.

Executive Overview

We are a leader in the designing, manufacturing, marketing, and selling of LED lighting solutions focusing on the industrial, commercial and government markets in the United States, Canada, and internationally. Through advanced LED technologies, we have created an innovative lighting company that offers a comprehensive advanced product platform of high-quality interior and exterior LED lamps and fixtures, including signage and control systems. We are uniquely positioned to act as an expert partner, offering full-service lighting solutions through our operating divisions, including Energy Source, Value Lighting,Tri-State LED,E-Lighting,All-Around Lighting and TNT Energy, to transform lighting into a source of superior energy savings, quality light and well-being.

We generate revenue by selling lighting products for use in the commercial, industrial and government markets, which include vertical markets such as military, municipal, commercial office, industrial, warehouse, education, hospitality, retail, healthcare, multi-family and signage-media-accent markets. We market and distribute our products globally through networks of distributors, independent sales agencies and representatives, electrical supply companies, as well as internal marketing and sales forces.

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

Recent Developments

Amended Revolving Credit Facility—On January 26, 2017, we amended the Revolving Credit Facility which enabled us to borrow up to $50.0 million on a revolving basis, based upon specified percentages of eligible receivables and inventory, which matures on January 26, 2020 (the “amended Revolving Credit Facility”). See Note 7 of Notes to unaudited Condensed Consolidated Financial Statements.

Opening of Buy American Act Facility– In March 2017, we opened a new state of the art facility in Simi Valley, California, which expanded our warehouse and production space for our industry leading LED technologies, including our high performance Buy American Act (“BAA”) and Trade Agreements Act (“TAA”) compliant LED tubes and fixtures. The new facility offers significantly larger space for inventory, production and testing.

Certification by the U.S. Navy – In April 2017, the U.S. Navy certified our two foot T8 LED tube for the military standard, which is ready for use in the U.S. Navy fleet. Additionally, we received an official part number that can be used throughout the fleet to order our advanced high efficiency LED tube. U.S. Navy ships will now be able to purchase our certified LED tube through the standard U.S. Navy supply chain.

Department of Defense Contract – In August 2017, we were awarded a Department of Defense contract through the Defense Logistics Agency to supply LED tubes to the U.S. Navy. We were selected because our LED lighting products incorporate Buy American Act (“BAA”) and Trade Agreements Act (“TAA”) compliant components, ensuring they meet the strict requirements needed for implementation into U.S. Navy vessels. These tubes will be manufactured in our newstate-of-the-art Simi Valley production and warehouse facility.

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U.S. National Guard – In September 2017, we received our first award from the U.S. National Guard, demonstrating that our Navy certified (“BAA/TAA”) compliant products could have a large market beyond the U.S. Navy, including other U.S. and international governmental entities.

Results of Operations

Three Months Ended September 30, 2017 Compared to the Three Months Ended September 30, 2016

	Three Months Ended September 30,
	2017			2016
	(In Millions)
Revenue	$	43.1		$	50.2
Cost of sales		29.2			34.3
Gross profit		13.9			15.9
Gross margin		32	%		32	%
Operating expenses:
Selling, general and administrative		11.1			10.6
Research and development		1.1			0.7
Amortization and depreciation		1.5			1.6
Acquisition, severance and transition costs		1.2			0.1
Stock-based compensation		0.6			0.5
Total operating expenses		15.5			13.5
Operating income (loss)		(1.6	)		2.4
Interest expense and other charges		(0.9	)		(0.8	)
Net income (loss)	$	(2.5	)	$	1.6

Revenue for the three months ended September 30, 2017 decreased $7.1 million, or 14%, as compared to the three months ended September 30, 2016. The decrease in revenue primarily reflects the impact of the recent hurricane activity in Texas and the southeastern United States impacting our multi-family lighting revenue, and the delay of a number of our Energy Source division projects from the third quarter to the fourth quarter. Despite overall lower unit sale prices, we maintained our gross profit margin of 32% for the three months ended September 30, 2017 reflecting an improved mix of products as we expand our portfolio of LED fixtures.

Operating expenses during the three months ended September 30, 2017 increased $2.0 million, or 15%, as compared to the three months ended September 30, 2016. The increase was primarily due to the following:

• Selling, general and administrative expenses increased $0.5 million primarily related to our ongoing investment in the expansion of sales and marketing resources focusing on agents, energy service companies (“ESCOs”), dealers and distributors and our investment in resources to advance our U.S. government and U.S. military specific product lines.

• Research and development increased due to our increasing portfolio of products.

• Acquisition, severance and transition costs increased $1.1 million in the three months ended September 30, 2017 compared to the same period in 2016. Acquisition, severance and transition costs during the three months ended September 30, 2017 primarily consisted of costs associated with the continued streamlining of our operations and the elimination of redundancies at our divisions.

Interest and other expenses for the three months ended September 30, 2017 increased $0.1 million from the three months ended September 30, 2016, primarily as a result of higher balances outstanding under our Bank of America Revolving Credit.

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Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016

	Nine Months Ended September 30,
	2017			2016
	(In Millions)
Revenue	$	117.0		$	120.9
Cost of sales		78.8			82.6
Gross profit		38.2			38.3
Gross margin		33	%		32	%
Operating expenses:
Selling, general and administrative		31.5			27.5
Research and development		2.6			1.9
Amortization and depreciation		4.8			4.5
Acquisition, severance and transition costs		2.8			3.1
Stock-based compensation		2.2			1.5
Total operating expenses		43.9			38.5
Operating loss		(5.7	)		(0.2	)
Interest expense and other charges		(2.5	)		(1.9	)
Net loss	$	(8.2	)	$	(2.1	)

Revenue for the nine months ended September 30, 2017 decreased $3.9 million, or 3%, as compared to the nine months ended September 30, 2016. The decrease in revenue primarily reflects the impact of the recent hurricane activity in Texas and the southeastern United States impacting our multi-family lighting revenue, and the delay of a number of our Energy Source division projects from the third quarter to the fourth quarter. During 2017, we experienced strong volume growth in product sales, as the demand for LED lighting continues to rise, which was partially offset by lower prices in certain retrofit andrelated-LED products. Despite overall lower unit sale prices, we increased our gross profit margin to 33% for the nine months ended September 30, 2017 from 32% for the nine months ended September 30, 2016 reflecting an improved mix of products as we expand our portfolio of LED fixtures.

Operating expenses during the nine months ended September 30, 2017 increased $5.4 million, or 14%, as compared to the nine months ended September 30, 2016. The increase was primarily due to the following:

• Selling, general and administrative expenses increased $4.0 million, which includes the acquisition of TNT which took place subsequent to the first quarter of 2016, as well as our ongoing investment in the expansion of sales and marketing resources focusing on agents, ESCOs, dealers and distributors and our investment in resources to advance our U.S. government and U.S. military specific product lines.

• The increase in amortization and depreciation was primarily due to the amortization of deferred financing costs associated with amending the Bank of America Revolving Credit Facility during 2017 (see Note 7) and the acquisition of TNT in May 2016.

• Acquisition, severance and transition costs decreased $0.3 million in the nine months ended September 30, 2017 compared to the same period in 2016. Acquisition, severance and transition costs during the nine months ended September 30, 2017 primarily consisted of costs associated with the continued streamlining of our operations and the elimination of redundancies at our divisions, partially offset by changes in our assumptions utilized in the calculation of purchase price obligations related to our acquired businesses.

Interest and other expenses for the nine months ended September 30, 2017 increased $0.6 million from the nine months ended September 30, 2016, primarily as a result of higher balances outstanding under our Bank of America Revolving Credit Facility.

Non-GAAP Financial Measure

Management usesnon-GAAP net income (loss),non-GAAP net income (loss) per share and adjusted EBITDA asnon-U.S. GAAP measures of financial performance and consider such measures to be important indicators of our operational strength and performance, and a useful measure of historical and prospective trends. However, there are significant limitations of the use of thesenon-GAAP measures since they exclude acquisition related charges and stock-based compensation, both of which affect profitability. We believe that these limitations are compensated by providing thesenon-GAAP measures along with U.S. GAAP performance measures and clearly identifying the differences between the two measures. Consequently,non-GAAP net income (loss),non-GAAP net income (loss) per share and adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss), operating income (loss) or net income (loss) per share presented in accordance with U.S. GAAP. Moreover,non-GAAP net income (loss),non-GAAP net income (loss) per share and adjusted EBITDA, as defined by Revolution, may not be comparable to similarly titled measures provided by other entities.

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Thesenon-GAAP measures are provided to investors to supplement the results of operations reported in accordance with U.S. GAAP. Management believes that thesenon-GAAP measures are useful to help investors analyze the operating trends in the business and to assess the relative underlying performance of the business. Management believes that thesenon-GAAP measures provide an additional tool for investors to use in comparing our financial results with other companies that usenon-GAAP net income (loss),non-GAAP net income (loss) per share and adjusted EBITDA in their communications with investors. Management also usesnon-GAAP net income (loss),non-GAAP net income (loss) per share and adjusted EBITDA to evaluate potential acquisitions, establish internal budgets and goals, and evaluate the performance of business units and management.

Non-GAAP Net Income (Loss) andNon-GAAP Net Income (Loss) Per Share

The following table reconciles net loss tonon-GAAP net loss for the periods presented:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
	(In Millions)
Net income (loss)	$	(2.5	)	$	1.6	$	(8.2	)	$	(2.1	)
Acquisition, severance and transition costs		1.2			0.1		2.8			3.1
Stock-based compensation		0.6			0.5		2.2			1.5
Non-GAAP net income (loss)	$	(0.7	)	$	2.2	$	(3.2	)	$	2.5

The following table reconciles diluted net loss per share tonon-GAAP net loss per share for the periods presented:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
	(In Millions)
Diluted net income (loss) per share	$	(0.12	)	$	0.08	$	(0.39	)	$	(0.11	)
Acquisition, severance and transition costs		0.06			0.01		0.13			0.17
Stock-based compensation		0.03			0.02		0.11			0.08
Dilutednon-GAAP net income (loss)	$	(0.03	)	$	0.11	$	(0.15	)	$	0.14
Weighted average shares outstanding, diluted (In thousands)		20,936			21,143		20,766			18,519

By excluding acquisition related costs and stock-based compensation, investors can evaluate our operations and compare our results with the results of other companies on a more consistent basis.

Acquisition, severance and transition costs include earn out liability adjustments related to our acquired businesses, acquisition costs, legal and professional services fees, costs related to the streamlining of our operations and costs associated with eliminating redundancies at our divisions. Acquisition, severance and transition costs are excluded fromnon-GAAP net income (loss) andnon-GAAP net income (loss) per share as they represent costs incurred in association with particular acquisitions. As such, once the acquisitions are complete, expenses associated with those particular acquisitions will no longer be incurred, and therefore, are not indicative of our operating performance. While we evaluate our performance excluding acquisition, severance and transition costs, investors should not presume these excluded items to beone-time costs. If we were to enter into additional acquisitions, similar costs could occur. Stock-based compensation expense is excluded fromnon-GAAP net income (loss) andnon-GAAP net income (loss) per share as it is anon-cash expense, and is not indicative of our operating performance.

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Non-GAAP Adjusted EBITDA

The following table reconciles net loss tonon-GAAP Adjusted EBITDA for the periods presented:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
	(In Millions)
Net income (loss)	$	(2.5	)	$	1.6	$	(8.2	)	$	(2.1	)
Amortization and depreciation, $1.0 million included in Research and development		2.1			1.6		5.8			4.5
Stock-based compensation		0.6			0.5		2.2			1.5
Acquisition, severance and transition costs		1.2			0.1		2.8			3.1
Interest expense and other charges		0.9			0.8		2.5			1.9
Non-GAAP Adjusted EBITDA	$	2.3		$	4.6	$	5.1		$	8.9

Liquidity and Capital Resources

On January 26, 2017, we entered into an amended Revolving Credit Facility, which enables us to borrow up to $50.0 million on a revolving basis, based upon specified percentages of eligible receivables and inventory.

Our liquidity as of September 30, 2017 and December 31, 2016 was $8.6 million and $1.9 million, respectively, which consisted of cash and cash equivalents of $0.9 million and $0.9 million, respectively, and additional borrowing capacity under the Revolving Credit Facility of $7.7 million and $1.0 million, respectively.

As of September 30, 2017, we were in compliance with our covenants under the Bank of America Revolving Credit Facility.

At September 30, 2017 and December 31, 2016, we had working capital of $58.5 million and $51.3 million, respectively. We believe we have adequate resources to meet our cash requirements for the foreseeable future.

Although we realized revenues of $117.0 million during the nine months ended September 30, 2017, we face challenges regarding profitability. There can be no assurance that we will achieve positive cash flows from operations or profitability in future periods. Our ability to meet our obligations in the ordinary course of business is dependent upon our ability to establish profitable operations, maintain our revolving credit facility, or raise additional capital through public or private debt or equity financing, or other sources of financing to fund operations, as well as support of our principal 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, our significant shareholder, RVL, and its affiliates have historically been a significant source of financing, and they continue to support our operations.

Cash Flows

	Nine Months Ended September 30,
	2017			2016
	(In Millions)
Cash used in operating activities	$	(9.6	)	$	(4.1	)
Cash used in investing activities		(1.3	)		(11.6	)
Cash provided by financing activities		10.9			19.4
Net (decrease) increase in cash and cash equivalents	$	—		$	3.7

Cash Flows used in Operating Activities -During the nine months ended September 30, 2017, we used cash in operating activities of $9.6 million compared to $4.1 million during the nine months ended September 30, 2016. Operating cash flows during the nine months ended September 30, 2017 primarily reflect increases in inventory vendor deposits and prepaid and other assets to support or expanding operations. Operating cash flows during the nine months ended September 30, 2016 primarily reflected increases in inventory to support an expected significant increase in revenues during 2016 and increases in accounts payable and accrued liabilities to support our greatly expanded operations.

Cash Flows used in Investing Activities —The use of cash during the nine months ended September 30, 2017 was primarily attributable to purchases of property and equipment of $1.0 million and the payment of acquisition obligations of $0.3 million. The use of cash during the nine months ended September 30, 2016 was primarily attributable to cash paid in connection with the TNT acquisition of $8.6 million, as well as a cash payment for acquisition obligations of $1.0 million.

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Cash Flows provided by Financing Activities —Net cash provided by financing activities during the nine months ended September 30, 2017 was primarily attributable to $7.0 million of net proceeds from related party notes payable (see Note 13 of Notes to unaudited Condensed Consolidated Financial Statements) and $14.7 million of net proceeds from the Revolving Credit Facility, partially offset by repayments on notes payable of $10.8 million, including the $10.0 million Energy Source note. Net cash provided by financing activities during the nine months ended September 30, 2016 was primarily attributable to $16.2 million of net cash received from the issuance of common stock and $3.5 million of net proceeds from the Revolving Credit Facility, partially offset by repayments of notes payable of $0.3 million.

Contractual Obligations

The following table sets forth information relating to our contractual obligations as of September 30, 2017:

	Contractual Obligation Payments Due by Year (3)(4)
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(Millions of U.S. dollars)
Operating lease obligations	$	13.4	$	3.8	$	5.9	$	3.3	$	0.4
Purchase price obligations and other (1) (2)		0.2		0.2		—		—		—
Total debt, including interest		56.7		3.2		2.2		51.3		—
Total	$	70.3	$	7.2	$	8.1	$	54.6	$	0.4

(1) Includes $0.2 million to be settled in common stock.

(2) As the result of channel distribution agreements entered into with distributors and contractors for the purposes of expanding the sale of our portfolio of products, we may be required to pay up to $1.0 million if certain revenue targets are achieved. The amounts are included in the table above.

Recent Accounting Pronouncements

See Note 1 of Notes to unaudited Condensed Consolidated Financial Statements for recently issued accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

At September 30, 2017, we were exposed to interest rate risk in connection with our variable-rate Revolving Credit Facility pursuant to which we may borrow up to $50.0 million. As such, during 2017, we are exposed to interest rate risk in connection with our Revolving Credit Facility. See Note 7 of the Notes to unaudited Condensed Consolidated Financial Statements.

ITEM 4. Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined inRules 13a-15(e) and15d-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 is 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 Quarterly Report on Form10-Q. 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 the report.

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

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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.

There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material legal proceeding required to be disclosed under Item 103 of RegulationS-K.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A. of our Annual Report on Form10-K for the year ended December 31, 2016, which was filed with the Securities Exchange Commission on March 9, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number	Document Description
31.1*	Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101***	The following financial statements from Revolution Lighting Technologies, Inc.’s Quarterly Report on Form10-Q for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations (iii) Condensed Consolidated Statements of Stockholders’ Equity (iv) Condensed Consolidated Statements of Cash Flows, (v) Notes to Condensed Consolidated Financial Statements.

* Filed herewith

** Furnished herewith

*** Submitted electronically with this Report pursuant to Rule 405 of RegulationS-T

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SIGNATURES

Pursuant to the requirements 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.

REVOLUTION LIGHTING TECHNOLOGIES, INC.
By:	/s/ Robert V. LaPenta	Date: October 26, 2017
	Robert V. LaPenta
	Chairman of the Board, Chief Executive Officer and President
	(Principal Executive Officer)
By:	/s/ James A. DePalma	Date: October 26, 2017
	James A. DePalma
	Chief Financial Officer
	(Principal Financial Officer)

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