First Quarter Results

Revenue

The sales results reveals the acquisition of Lumificient Corporation on April 30, 2008. Excluding Lumificient, revenues decreased 35% to around $1,960,000.

Commercial lighting sales increased 7% to $2,020,000, or $134,000, in the first quarter of 2009 as compared to the same period in 2008. This increase was driven by $1,077,000 of sales by Lumificient. First quarter revenue also included around $93,000 from sales of Array(TM) LED products, reflecting the company’s first orders for the new Selective Heat Sink replacement lamp. Excluding revenue attributable to Lumificient, the company’s commercial sales lessened 50% to $943,000, reflecting the major decreases in commercial construction activity in the US and around the world.

Pool & Spa sales were $1,017,000 in the first quarter of 2009 as compared to $1,133,000 for the same period in 2008. This $116,000 decrease reflects the significant year over year reductions in OEM spa / hot tub business tied to the steep drop in demand for luxury purchases. Mitigating this market softness, the company reported strong demand for new products such as the Savi Note and Melody lighting systems which have become cornerstones of this business.

Despite very difficult market conditions, we continued to focus on gross margin and operational improvements to our business and additional investment in our exciting new Array(TM) line of replacement bulbs, stated Mike Bauer, Nexxus Lighting’s president and chief executive officer.

The Array(TM) product line has been receiving rave reviews in mock ups and side by side comparisons to competitive product offerings, added Bauer. We are winning business and now are filling demand, including successful installations at several high profile customers. We are seeing very strong quotations pipeline growth for the balance of 2009. The product was recently featured in the Business/Technology section of the New York Times. The announcement and demonstration last week at Light Fair 2009 of our new quantum dot lens technology in collaboration with QD Vision also received global recognition via the Associated Press. Needless to say, we are very excited about Array Lighting, its reception in the market and its prospects for growth, concluded Bauer.

Gross Profit

Gross profit for the quarter ended March 31, 2009 was $1,055,000, or 35% of sales, compared to gross profit of $795,000, or 26% of sales, for the same period in 2008. Direct gross margins, defined as revenue less material costs, decreased slightly to 54% in 2009 from 55% in 2008.

Production costs declined by $276,000 to $579,000 in the first quarter of 2009 compared to the same period in 2008. The decline reflects lower labor costs of $117,000 as a result of the company’s production shift to third party manufacturers and the consolidation of the operations of the company’s Advanced Lighting Systems (ALS) subsidiary into other operations which was completed in March 2009. The company also experienced a $167,000 decrease in costs from higher absorption of capitalized labor and overhead in the first quarter of 2009 compared to a release of capitalized labor and overhead in the comparable period of 2008. Offsetting these decreases was the addition of Lumificient’s production costs in 2009.

Operating Expenses

Selling, general and administrative (SG&A) expenses were around $2,352,000 for the quarter ended March 31, 2009 compared to $1,915,000 for the same quarter in 2008. This increase of $437,000 primarily reflects the addition of Lumificient. Excluding Lumificient, SG&A expenses increased $10,000 or 1%.

Research and development expenses were around $108,000 and $125,000 during the three months ended March 31, 2009 and 2008, respectively. Most of these expenses were directed at the continued development of our Array(TM) product line.

During the first quarter of 2009, we completed the integration of ALS with SV Lighting’s operations to form the new Nexxus Commercial Lighting Division. The company integrated its network of independent commercial sales representatives to increase their focus on the company’s products. The company also updated its commercial product line to generate synergies and consolidated operations to eliminate redundant costs. In March, the company closed ALS’ Sauk Centre, Minnesota facility and transferred production to its Orlando, Florida facility and other third party manufacturers.

Net Loss

After including the effects of dividends related to the preferred stock and warrants issued in November 2008, loss attributable to common stockholders was around $1,686,000 for the three months ended March 31, 2009. Basic and diluted loss per common share attributable to common stockholders was $0.21 and $0.18 for the three months ended March 31, 2009 and 2008, respectively.

We continue to balance cost reductions with continued investment in longer-term growth opportunities, particularly within our line of Array(TM) LED replacement lamps, noted Gary Langford, chief financial officer of Nexxus Lighting. Response to our Array(TM) line has been extremely favorable. As a result, we believe that we are well positioned to expand this business despite current economic conditions while continuing to focus on operational improvements.