Nexxus Lighting

CHARLOTTE, NC – March 30, 2010 --Nexxus Lighting, Inc. (NASDAQ Capital Market: NEXS) today reported its fourth quarter and full year 2009 results. Highlights include:

Revenue for the year ended December 31, 2009 was approximately $11,557,000 as compared to approximately $14,233,000 for the year ended December 31, 2008, a decrease of approximately $2,675,000. The decrease in revenue was partially offset by an increase in revenue as a result of the introduction of Array and the April 30, 2008 acquisition of Lumificient Corporation (Lumificient), which serves the commercial and signage lighting markets. Excluding revenue attributable to Lumificient from our consolidated results, revenue decreased to approximately $7,935,000 in fiscal year 2009 compared to approximately $11,152,000 in fiscal year 2008.

Sales of our new Array LED lamps grew to approximately $1,366,000 for the year ended December 31, 2009. Revenue from sales of our legacy commercial lighting products decreased by $3,836,000, or 62%, from approximately $6,182,000 in 2008 to approximately $2,346,000 in 2009. This decrease reflects the steep drop in commercial construction activity across the US. Sales of Lumificient products increased approximately $542,000, as compared to 2008, to $3,622,000 for 2009. This increase represented the full year impact of the April 30, 2008 acquisition of Lumificient, offset by a drop in commercial construction and signage activity. Overall, our commercial product sales decreased $1,930,000, or 21%, in 2009 as compared to 2008.

Revenue from sales of pool and spa lighting products was approximately $4,223,000 in 2009, as compared to $4,968,000 for 2008, a decrease of $745,000, or 15%. This decrease reflects the continued significant year over year reductions in the pool and OEM spa markets tied to the steep drop in demand for luxury items related to the US recession.

The introduction of the Array line continues our expansion of LED product sales. Sales of LED products accounted for 77% and 68% of our revenue while sales of fiber optic lighting products accounted for 18% and 29% of our revenue for the years ended December 31, 2009 and 2008, respectively. The balance of the revenue mix consisted primarily of sales of water feature products.

“Nexxus faced many challenges last year,” stated Mike Bauer, Nexxus’ President and Chief Executive Officer. “Sales levels for our legacy commercial and pool businesses were depressed as the industry experienced broad reductions in demand as the global recession was felt throughout the lighting market. However, we were able to lay the foundation for overcoming the upheaval affecting our industry with the introduction and expansion of our Array product line. With the continued introduction of new technically innovative products, we expect Array revenues to continue to grow in 2010.”

Gross Profit
Gross profit for 2009 and 2008 was $3,089,000 and $3,480,000, respectively. Gross margins increased from approximately 24% in 2008 to approximately 27% of sales for 2009. Direct gross margins, which is revenue less material costs, remained flat at approximately 50% for both years. We experienced improvements in direct gross margins in our pool and spa lighting products and Lumificient products. Offsetting these gains was a decline in direct gross margins resulting from a shift in sales away from historically higher margin legacy commercial products.
Production costs in 2009 decreased to approximately $2,739,000, or 24% of revenue, as compared to $3,635,000, or 26% of revenue, in 2008. Excluding the impact of Lumificient, we reduced production costs by approximately $1,177,000. The reduction reflects the elimination of approximately $301,000 of costs associated with our Advanced Lighting Systems, LLC (ALS) subsidiary whose operations were consolidated with other company operations in March 2009. The decline in production costs includes decreases of approximately $534,000 in freight costs, $169,000 in payroll and staff expenses, and $111,000 for shipping costs and supplies. The decline also reflects a $263,000 decrease in expenses for obsolete inventory, scrap and inventory reserves. Inventory reserves were approximately $683,000 and $730,000 at December 31, 2009 and 2008, respectively. Offsetting these declines was $266,000 of higher expense from a release of capitalized labor, overhead and freight costs.

Operating Expenses
Selling, general and administrative (SG&A) expenses were approximately $8,415,000 for the year ended December 31, 2009 as compared to approximately $9,014,000 for the same period in 2008, a decrease of approximately $600,000, or 7%. Excluding the impact of Lumificient, which was acquired on April 30, 2008, our company reduced SG&A expenses by $1,158,000 or 15%. This reduction includes $824,000 of savings from consolidating the operations of our subsidiary, ALS, into other company operations in March 2009. Offsetting this reduction were expenses relating to the launch of our new Array LED lamps.

Research and development costs were approximately $635,000 during 2009 as compared to approximately $747,000 during 2008. This decrease of approximately $112,000 was primarily due to lower employee costs and project-related costs in 2009 as compared to the same period of 2008.

During the fourth quarter of 2008, we made a strategic decision to integrate ALS’ operations with SV Lighting’s operations in Orlando, Florida. In the first quarter of 2009, we integrated the operations of ALS into our SV Lighting Division, creating the new Nexxus Commercial Lighting Division. In March 2009, we closed ALS’ Sauk Centre facility and transferred production to our Orlando facility and to existing third party manufacturers. We recorded a restructuring and impairment charge of approximately $2,922,000 in 2008 primarily related to the consolidation of our ALS operations. The charge consists primarily of impairment of intangible assets totaling approximately $2,139,000, stay bonuses and one-time termination benefits of approximately $22,000, an increase in the reserve for inventory to be scrapped or destroyed of approximately $172,000 and the write off of equipment and other assets of $23,000. In addition, the charge includes a liability of approximately $566,000 for the settlement of a related party office lease and severance obligation, which was paid by issuing 78,000 shares of our common stock during 2009. The majority of these expenses were noncash charges. In 2009, we recorded an additional charge of approximately $737,000 for impairment of intangible assets acquired in the ALS acquisition.

“We completed a number of initiatives to adjust costs this year which significantly alleviated the decline in sales. The breadth and scope of these changes resulted in the organization finishing the year looking significantly different than when it entered the year,” commented Gary Langford, Nexxus’ Chief Financial Officer. Added Langford, “We continue to review opportunities to reduce costs and restructure our operations, especially those related to our legacy commercial and pool businesses.”

Net loss for the years ended December 31, 2009 and December 31, 2008 was approximately $7,155,000 and $10,370,000, respectively. Excluding restructuring and impairment charges, Net loss for the years ended December 31, 2009 and December 31, 2008 was approximately $6,418,000 and $7,448,000, respectively.

Effect of Preferred Stock and Exchange of Preferred Stock
On December 21, 2009, we consummated the exchange of our Series A preferred stock for other securities of our company. As a result of the exchange, we recorded deemed dividends of approximately $6,420,000. After including the effects of dividends and deemed distributions related to the Series A preferred stock and related warrants, net loss attributable to common stockholders was approximately $14,900,000 and $10,512,000 for the years ended December 31, 2009 and 2008, respectively. Basic and diluted loss per common share attributable to common stockholders was $1.71 and $1.35 for the years ended December 31, 2009 and December 31, 2008, respectively. Excluding the restructuring and impairment charge and the deemed dividend associated with the exchange or our Series A preferred stock discussed above, net loss attributable to common stockholders for the year ended December 31, 2009 was approximately $7,744,000 and basic and diluted loss per common share attributable to common stockholders was $0.89.

Research and Development Update
During 2009, we made significant additions to our portfolio of issued and pending patents. In our 2008 Annual Report, we reported 26 issued and 22 pending patents. Our portfolio has increased and now consists of 47 issued and 37 pending patents. Of these patents, we have 19 issued and 27 pending patents related to our Array brand of LED light bulbs.

“Nexxus is making a sizeable and growing commitment to developing its proprietary technology and intellectual property, with a number of important Array projects in progress,” noted Kevin Carpenter, Nexxus’ Director of Engineering. “Innovation is important in this industry and it is one of our competitive advantages, as highlighted by our patents and product development.”

Added Bauer, “We believe that if you look through current market conditions, demand for LED replacement lamps will grow significantly. We view the Department of Energy’s publication of EnergyStar guidelines in December, which become effective August 31, 2010, as a key component in organizing demand for LED light bulbs, even if it may temporarily slow market adoption in the interim. We expect it will increasingly be a guideline used by customers in their purchase decisions and by utilities for their incentives.”

Total revenues for the three months ended December 31, 2009 decreased approximately 14% to approximately $3,022,000 as compared to approximately $3,499,000 for the fourth quarter of 2008. Revenue from sales of our commercial lighting products decreased by 12%, or approximately $272,000 in the quarter, as compared to the same period in 2008. The decrease reflects a steep drop in sales from our legacy commercial products. This decrease was partially offset by sales of our new Array LED lamps, which totaled approximately $654,000 for the quarter ended December 31, 2009. Pool and spa revenue decreased 16%, or approximately $206,000, in the fourth quarter of 2009 as compared to the fourth quarter of 2008. Partially compensating for the decline in the pool and OEM spa markets, we introduced two new product lines in 2009, the Savi Melody and Savi X-stream, which are driving our market share gains in a down market.

Gross Profit
Gross profit for the quarter ended December 31, 2009 increased $170,000 to $547,000 as compared to $377,000 for the quarter ended December 31, 2008. Direct gross margins, which is revenue less material costs, increased from 43% in the fourth quarter of 2008 to 48% in the fourth quarter of 2009. We experienced improved direct gross margins across all businesses, offset in part by a shift in sales away from historically higher margin legacy commercial products.

Production costs in the fourth quarter of 2009 decreased to approximately $890,000, or 29% of revenue, as compared to $1,117,000, or 32% of revenue, in the fourth quarter of 2008. We eliminated approximately $101,000 of costs by consolidating the operations of our ALS subsidiary in March 2009. Other factors included decreases of approximately $146,000 in freight costs and $43,000 for shipping costs and supplies. The decline also reflects a $73,000 decrease in expenses for obsolete inventory, scrap and inventory reserves. Offsetting these declines was $128,000 of higher expense from a release of capitalized labor, overhead and freight costs.

“Nexxus recorded a large write down on the value of our inventory in 2008 related to the consolidation of ALS’ operations and the rationalization of the legacy commercial product line. In 2009 we continued to experience higher write-offs of legacy commercial inventory, reflecting the further decline in sales and rationalization of the product line,” noted Langford.

Operating expenses for the quarter ended December 31, 2009 decreased approximately $2,682,000 to approximately $3,036,000 as compared to approximately $5,718,000 for the quarter ended December 31, 2008. In the fourth quarter of 2009, we recognized an impairment charge of $737,000, compared to a restructuring and impairment charge of $2,922,000 in the fourth quarter of 2008. Excluding these charges, we reduced operating expenses by $496,000 or 18% due primarily to the consolidation of ALS.

Fourth Quarter Net Loss
Net loss for the three months ended December 31, 2009 and December 31, 2008 was approximately $2,708,000 and $6,361,000, respectively.

After including the effects related to the preferred stock described above, net loss attributable to common stockholders was approximately $9,480,000 and $6,503,000 for the three months ended December 31, 2009 and December 31, 2008, respectively.

Cash and Recent Financing Activities
As of December 31, 2009 the company had cash and cash equivalents of $15,167,000 and long term debt of $5,570,000, net of unamortized debt discounts of approximately $702,000. On December 21, 2009, we completed a follow-on public offering of common stock, generating net proceeds of approximately $15,738,000. Net proceeds from the offering were used in part to pay preferred stock dividends of approximately $792,000.

In February 2010, we reduced our long term debt by repaying all outstanding borrowings under $3,800,000 in principal amount of promissory notes issued in June 2009, along with associated interest in the aggregate amount of approximately $262,000. The company’s remaining long term debt consists of promissory notes issued in exchange for our preferred stock in December 2009. These notes have a principal amount of $2.4 million, bear interest at 1% per annum, mature three years from the date of issuance and are convertible into shares of common stock at a fixed conversion price of $5.33.

“Despite tight capital market conditions and a volatile global economy, we were able to achieve several objectives in 2009. One of our objectives was to significantly strengthen our balance sheet,” said Langford. “The completion of our common stock offering and the exchange of our preferred stock in December, along with the repayment of debt in February 2010, positions the company for growth in 2010 and supports expanded investment in our Array business.”

About Nexxus Lighting, Inc.
Nexxus Lighting is a leader in advanced lighting technology, including solid-state LED and fiber optic lighting systems and controls used in commercial, architectural, signage, swimming pool, entertainment and retail lighting. Nexxus Lighting sells its products through its Commercial Lighting, Lumificient and Nexxus Lighting Pool & Spa divisions under the Array™ Lighting, Savi®, eLum™, LiveLED™, Super Vision® and Lumificient™ brand names.

Nexxus Lighting - Life’s Brighter! ®
www.nexxuslighting.com

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Certain of the above statements contained in this press release are forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Reference is made to Nexxus Lighting’s filings under the Securities Exchange Act for factors that could cause actual results to differ materially. Nexxus Lighting undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward-looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements.

	Year Ended December 31,
	2009			2008
Revenues	$	11,557,486	$		14,232,769
Cost of sales	8,468,721			10,753,118
Gross profit	3,088,765			3,479,651
Operating expenses:
Selling, general and administrative	8,414,560			9,014,274
Research and development	634,716			746,836
Restructuring and impairment charge	736,635			2,922,331
Total operating expenses	9,785,911			12,683,441

Operating loss	(6,697,146)			(9,203,790)
Non-operating income (expense):
Interest income	2,023			62,347
Other income	525			41,822
Debt extinguishment costs	—			(628,271)
Abandoned offering costs	—			(318,853)
Interest expense	(460,495)			(323,208)
Total non-operating expense, net	(457,947)			(1,166,163)
Net loss	$	(7,155,093)	$		(10,369,953)
Preferred stock dividends:
Amortization of the preferred stock beneficial conversion feature and preferred stock discount	(613,743)			(61,279)
Accrual of preferred stock dividends	(711,407)			(80,717)
Deemed dividend on issuance of promissory notes and warrants for preferred stock	(3,074,707)			—
Deemed dividend on issuance of common stock for preferred stock	(3,345,211)			—
Net loss attributable to common stockholders	$	(14,900,161)	$		(10,511,949)
Basic and diluted loss per common share attributable to common stockholders	$	(1.71)	$		(1.35)
Basic and diluted weighted average shares outstanding	8,704,534			7,790,708

NEXXUS LIGHTING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2009 and 2008

Nexxus Lighting reports fourth quarter and full year 2009 results