Nexxus Lighting Reports Third Quarter 2009 Results

http://www.businesswire.com/news/home/20091109006632/en

CHARLOTTE, N.C.--(Business Wire)--
Nexxus Lighting, Inc. (NASDAQ:NEXS) today reported results for its third quarter
ending September 30, 2009.

* Operating loss of $1.3 million flat with 3rd Quarter 2008 on lower revenue
* Sales of new Array Lighting LED replacement lamps more than doubled from 2nd
Quarter 2009 levels; quadrupled from 1st Quarter 2009 levels
* Revenue increased more than 10% over 2nd Quarter 2009
* Gross Margins improved over prior year and 2nd Quarter 2009
* Company benefited from cost reduction initiatives
* Company announced that it will not host an Earnings Conference Call, citing
its registration statement filed with the Securities and Exchange Commission
relating to a proposed follow-on offering of its common stock

Third Quarter Results

Revenue

Total revenue for the three months ended September 30, 2009 was approximately
$2,894,000 as compared to approximately $3,884,000 for the three months ended
September 30, 2008, a decrease of approximately $990,000. Year-over-year
quarterly sales declined approximately 25% in the third quarter compared to a
32% drop in the second quarter.

"Although we expect any recovery to be gradual and uneven, our legacy commercial
and pool businesses appear to have stabilized," said Mike Bauer, President and
Chief Executive Officer. "Third quarter revenue increased over 10% from the
second quarter driven, in large part by our Array line of LED replacement lamps
as they continue to gain traction in the marketplace. I am excited by the
progress that we have made with a number of large corporations, retailers and
universities."

Sales of our new Array LED lamps more than doubled from approximately $197,000
in the second quarter of 2009 to approximately $423,000 in the third quarter of
2009. This amount almost equals sales of our legacy commercial products, which
were approximately $478,000 in the third quarter of 2009, a 62% drop from
approximately $1,269,000 for the same quarter in 2008. Sales of Lumificient
products in the third quarter of 2009 and 2008 were approximately $848,000 and
$1,302,000, respectively.

Overall, revenue from sales of commercial lighting products decreased by
$862,000, or 33%, from approximately $2,613,000 in the third quarter of 2008 to
approximately $1,751,000 in the third quarter of 2009. The decrease in sales of
our legacy commercial and Lumificient products is primarily the result of
significant decreases in commercial construction and new signage activity across
the U.S. This decrease was offset in part by sales of our new Array LED lamps.

Revenue from sales of pool and spa lighting products was approximately
$1,143,000 in the third quarter of 2009, as compared to $1,270,000 for the same
period of 2008, a decrease of $127,000, or 10%. This decrease reflects the
continuation of reduced demand in pool and OEM spa markets, along with decreased
inventories held by our distributors in response to these market conditions.

Gross Profit

Gross profit for the quarter ended September 30, 2009 was approximately
$837,000, or 29% of revenue, as compared to approximately $1,054,000, or 27% of
revenue, for the comparable period of 2008. Direct gross margin for the third
quarter of 2009, which is revenue less material cost, increased slightly as
improved margins across our company were offset by a shift in sales mix.

Production costs decreased approximately $276,000 on significantly lower sales
volume. Excluding the impact of Lumificient, we reduced production costs by
approximately $313,000 to more closely match sales activity.

Operating Expenses

Selling, general and administrative (SG&A) expenses were approximately
$1,941,000 for the quarter ended September 30, 2009 as compared to approximately
$2,090,000 for the same period in 2008, a decrease of approximately $149,000, or
7%. SG&A expenses decreased primarily due to the first quarter consolidation of
the operations of our Advanced Lighting Systems subsidiary into our SV Lighting
Division, resulting in the elimination of SG&A costs totaling $214,000 incurred
in the third quarter of 2008. This decrease in SG&A was offset by our investment
in additional sales and marketing resources related to our new Array LED lamps.

Research and development costs were approximately $170,000 during the three
months ended September 30, 2009 as compared to approximately $219,000 during the
same period in 2008. This decrease of approximately $48,000, or 22%, was
primarily due to lower employee costs and project-related costs in the third
quarter of 2009 as compared to the same period of 2008.

"The initiatives that we took to manage costs and rationalize production
capacity in our legacy businesses, including consolidating the operations of our
Advanced Lighting Systems subsidiary with other company operations, bolstered
our results in an otherwise difficult environment," noted Gary Langford, Chief
Financial Officer. "We will continue to review these operations for ways to fuel
profitability."

Net Loss

Net loss for the three months ended September 30, 2009 and 2008 was
approximately $1,488,000 and $1,432,000, respectively. After including the
effects of the dividends related to the preferred stock and warrants issued in
November 2008, net loss attributable to common stockholders was approximately
$1,854,000 and $1,432,000 for the three months ended September 30, 2009 and
2008, respectively. Basic and diluted loss per common share attributable to
common stockholders was $0.22 and $0.18 for the three months ended September 30,
2009 and 2008, respectively.

Year to Date Results

Revenue

Total revenue for the nine months ended September 30, 2009 was approximately
$8,536,000 as compared to approximately $10,733,000 for the nine months ended
September 30, 2008, a decrease of approximately $2,197,000. Revenue increased as
a result of the April 30, 2008 acquisition of Lumificient, which serves the
commercial and signage lighting markets. Excluding revenue attributable to
Lumificient from our consolidated results, revenue decreased approximately 34%
to approximately $5,773,000 in the first nine months of 2009 compared to
approximately $8,788,000 in the same period of 2008.

Sales of our new Array LED lamps grew to approximately $713,000 in the nine
months ended September 30, 2009. Revenue from sales of our legacy commercial
lighting products decreased by $3,025,000, or 61%, from approximately $4,940,000
in the first nine months of 2008 to approximately $1,915,000 in the first nine
months of 2009. This decrease reflects the steep drop in commercial construction
activity across the U.S. Sales of Lumificient products increased approximately
$817,000, as compared to the nine months ended September 30, 2008, to $2,763,000
for the nine months ended September 30, 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 $1,544,000, or 22%, in the first nine months of 2009 as compared
to the same period in 2008.

Revenue from sales of pool and spa lighting products was approximately
$3,137,000 in the first nine months of 2009, as compared to $3,790,000 for the
same period of 2008, a decrease of $653,000, or 17%. 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 U.S. recession.

Gross Profit

Gross profit for the nine months ended September 30, 2009 was approximately
$2,542,000, or 30% of revenue, as compared to approximately $3,103,000, or 29%
of revenue, for the comparable period of 2008. Direct gross margin for the first
nine months of 2009, which is revenue less material cost, decreased as improved
margins across our company were offset by a shift in sales mix. Production costs
decreased approximately $668,000 on lower sales volume.

Operating Expenses

Selling, general and administrative (SG&A) expenses were approximately
$6,342,000 for the nine months ended September 30, 2009 as compared to
approximately $6,462,000 for the same period in 2008, a decrease of
approximately $120,000, or 2%. Excluding the impact of Lumificient, which was
acquired on April 30, 2008, our company reduced SG&A expenses by $642,000,
including $558,000 of savings from consolidating the operations of our
subsidiary, ALS, into other company operations in March 2009.

Research and development costs were approximately $409,000 during the nine
months ended September 30, 2009 as compared to approximately $504,000 during the
same period in 2008. This decrease of approximately $95,000, or 19%, was
primarily due to lower employee and project costs in 2009 as compared to the
same period of 2008.

Net Loss

Net loss for the nine months ended September 30, 2009 and 2008 was approximately
$4,447,000 and $4,009,000, respectively. After including the effects of the
dividends related to the preferred stock and warrants issued in November 2008,
net loss attributable to common stockholders was approximately $5,420,000 and
$4,009,000 for the nine months ended September 30, 2009 and 2008, respectively.
Basic and diluted loss per common share attributable to common stockholders was
$0.65 and $0.52 for the nine months ended September 30, 2009 and 2008,
respectively.

Nexxus Lighting, Inc.Life`s Brighter!

For more information, please visit the new Nexxus Lighting web site at
www.nexxuslighting.com

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.

Nexxus Lighting, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)
September 30, December 31,
2009 2008
ASSETS
Current Assets:
Cash and cash equivalents $ 2,307,289 $ 2,948,632
Trade accounts receivable, less allowance for doubtful accounts of $135,834 and $123,837 1,626,454 2,085,343
Inventories, less reserve of $694,263 and $729,765 5,278,367 4,300,952
Prepaid expenses 173,597 123,180
Other assets 20,211 37,624
Total current assets 9,405,918 9,495,731

Property and equipment 5,760,337 5,498,043
Accumulated depreciation and amortization (3,882,438) (3,484,511)
Net property and equipment 1,877,899 2,013,532

Goodwill 3,008,921 2,926,158
Other intangible assets, less accumulated amortization of $484,925 and $293,694 3,220,424 3,306,533
Deposits on equipment 8,291 57,306
Other assets, net 275,591 44,433
$ 17,797,044 $ 17,843,693
LIABILITIES AND STOCKHOLDERS` EQUITY
Current Liabilities:
Accounts payable $ 3,070,852 $ 3,422,160
Accrued severance and lease termination costs 17,357 588,181
Accrued compensation and benefits 321,518 305,490
Current portion of payable to related party under acquisition agreement 100,000 497,242
Dividends payable 615,369 80,717
Customer deposits 5,493 65,157
Current portion of deferred rent 57,740 56,702
Other current liabilities 9,117 117,445
Total current liabilities 4,197,446 5,133,094

Promissory notes, net of debt discount 1,935,508 -
Promissory notes to related parties, net of debt discount 1,401,118 -
Deferred rent, less current portion 126,524 166,172
Payable to related party under acquisition agreement, less current portion - 100,000
Other liabilities - 17,059
Total liabilities 7,660,596 5,416,325

Stockholders` Equity:
Series A convertible preferred stock, $.001 par value, 3,000 shares authorized, 1,571 issued and outstanding 1,213,091 774,646
Common stock, $.001 par value, 25,000,000 shares authorized, 8,758,509 and 8,134,132 issued and outstanding 8,759 8,134
Additional paid-in capital 34,438,513 32,721,442
Accumulated deficit (25,523,915) (21,076,854)
Total stockholders` equity 10,136,448 12,427,368
$ 17,797,044 $ 17,843,693

Nexxus Lighting, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Revenue $ 2,894,133 $ 3,883,914 $ 8,535,859 $ 10,733,436
Cost of sales 2,057,329 2,829,641 5,993,922 7,630,450
Gross profit 836,804 1,054,273 2,541,937 3,102,986

Operating Expenses:
Selling, general and administrative 1,941,270 2,089,841 6,341,516 6,462,189
Research and development 170,398 218,643 408,501 503,733
Total operating expenses 2,111,668 2,308,484 6,750,017 6,965,922
Operating Loss (1,274,864) (1,254,211) (4,208,080) (3,862,936)

Non-Operating Income (Expense):
Interest income 74 6,597 1,887 52,208
Interest expense (212,835) (189,426) (240,868) (238,266)
Other income - 5,164 - 40,220
Total non-operating expense, net (212,761) (177,665) (238,981) (145,838)
Net Loss $ (1,487,625) $ (1,431,876) $ (4,447,061) $ (4,008,774)
Preferred stock dividends:
Accretion of the preferred stock beneficial conversion feature and preferred stock discount (170,134) - (438,445) -
Accrual of preferred stock dividends (196,394) - (534,652) -
Net loss attributable to common stockholders $ (1,854,153) $ (1,431,876) $ (5,420,158) $ (4,008,774)
Basic and diluted loss per common share attributable to common shareholders $ (0.22) $ (0.18) $ (0.65) $ (0.52)
Basic and diluted weighted average shares outstanding 8,615,585 8,088,089 8,384,873 7,680,529

Nexxus Lighting, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended
September 30,
2009 2008
Cash Flows from Operating Activities:
Net loss $ (4,447,061) $ (4,008,774)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 413,376 337,499
Amortization of intangible and other assets 206,641 42,894
Amortization of debt discount and debt issuance costs 131,705 131,285
Amortization of deferred rent (38,610) (26,925)
Increase in inventory reserve 136,109 163,534
Stock-based compensation 293,380 297,253
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade accounts receivable, net 458,889 (292,460)
Inventories (1,173,463) (108,151)
Prepaid expenses (50,417) (172,101)
Other assets 15,601 46,489
Increase (decrease) in:
Accounts payable (351,308) 1,311,349
Accrued compensation and benefits 10,704 166,746
Customer deposits (59,664) (165,938)
Total adjustments (7,057) 1,731,474
Net cash used in operating activities (4,454,118) (2,277,300)

Cash Flows from Investing Activities:
Purchase of property and equipment (228,726) (570,178)
Acquisition costs and earnouts of Lumificient Corporation, net of cash acquired (115,285) (2,512,674)
Acquisition earnouts of Advanced Lighting Systems, LLC, net of cash acquired (107,539) (102,380)
Trademark and patent development costs (120,532) (112,016)
Proceeds from sale of investments - 2,875,000
Net cash used in investing activities (572,082) (422,248)

Cash Flows from Financing Activities:
Proceeds from exercise of employee stock options and warrants, net 857,081 1,922,453
Proceeds from promissory notes 3,800,000 3,500,000
Payments on promissory notes (116,419) (4,080)
Deferred financing costs (64,205) (179,509)
Fees related to follow-on equity offering (65,865) (153,553)
Issuance cost of preferred stock and warrants (25,735) -
Net payments on revolving line of credit - (1,443,000)
Net cash provided by financing activities 4,384,857 3,642,311

Net (Decrease) Increase in Cash and Cash Equivalents (641,343) 942,763

Cash and Cash Equivalents, beginning of period 2,948,632 170,266
Cash and Cash Equivalents, end of period $ 2,307,289 $ 1,113,029

Supplemental Cash Flow Information:
Cash paid for interest $ - $ 46,182
Non-cash Investing and Financing Activities:
Fair value of warrants recorded as a debt discount $ 570,325 $ 597,188
Issuance of common stock for acquisitions $ 297,242 $ 2,392,813
Accrual of dividends on preferred stock $ 534,652 $ -
Issuance of common stock to related party for settlement of lease and severance obligations $ 565,500 $ -
Issuance of common stock to promissory notes placement agent $ 133,000 $ -

Nexxus Lighting, Inc.
Gary R. Langford, Chief Financial Officer, 704-405-0416
GLangford@NexxusLighting.com

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