On September 30, 2012, the Company is authorized to issue 5,000,000 shares of preferred stock, of which 3,000 shares have been designated as Series A Preferred Stock and 1,000,000 shares have been designated as Series B Convertible Preferred Stock. The Company has no shares of Series A Preferred Stock outstanding.

On September 12, 2012, the Company entered into an Investment Agreement (the “Investment Agreement”) with RVL 1 LLC (the “Investor”), an affiliate of Aston Capital, LLC. The closing of the Investment occurred on September 25, 2012. In consideration of a cash payment of $6 million (the “Investment”), the Company issued to the Investor 600,000 shares of newly-created Series B Convertible Preferred Stock, $.001 par value per share (the “Preferred Stock”). The Preferred Stock is convertible into shares of the Company’s common stock, $.001 par value per share (the “Common Stock”) at a conversion price per share equal to $0.13, subject to certain anti-dilution adjustments. The conversion price was the closing price of the Company’s Common Stock on August 2, 2012, the date the Company entered into the letter of intent with respect to the Investment. The proceeds from the Investment were used to extinguish the Exchange Notes and related accrued interest (Note 7), to fund a settlement payment in connection with the settlement of the Philips lawsuit described in Note 11, to pay the fees and expenses in connection with the Investment and for working capital purposes.

After giving effect to the conversion of the Preferred Stock and the other transactions contemplated by the Investment Agreement, the Investor would own 46,153,846 as-converted common shares, or approximately 73% of the Company’s outstanding Common Stock. At September 30, 2012, the Preferred Stock represented approximately 73% of the outstanding voting stock of the Company on an as-converted basis and resulted in a change in control of the Company. The Investor is entitled to vote the Preferred Stock on an as-converted basis with the Company’s Common Stock. On October 3, 2012, the Investor converted 228,186 shares of Preferred Stock into 17,552,769 shares of Common Stock.

The Preferred Stock has a liquidation preference of $10 per share and will share ratably on an as-converted basis with the Company’s Common Stock in the payment of dividends and distributions. In addition, the Company is prohibited from taking certain actions specified in the Certificate of Designations with respect to the Preferred Stock without the consent of the holders of at least a majority of the then outstanding shares of Preferred Stock.

The Company has concluded that the Preferred Stock is more akin to an equity-type instrument than a debt-type instrument. As the embedded conversion option in the Preferred Stock is clearly and closely related to an equity-type host, the conversion option does not require classification and measurement as a derivative financial instrument.

A beneficial conversion feature (“BCF”) is recorded when the consideration allocated to a convertible security, divided by the number of common shares into which the security converts, is below the fair value of the common stock at the commitment date. The Company’s Common Stock price on the date of the Investment Agreement was $0.13 per share, which is equal to the conversion price of the Preferred Stock. As the Investment Agreement included certain conditions for closing, the commitment date for the Investment is deemed to be the date the Preferred Stock is issued. On September 25, 2012, the closing date of the Investment, the Company’s Common Stock price had increased to $0.59 per share. As a result of the increase in the Company’s Common Stock price between the dates of the Investment Agreement and the closing of the Investment, the Company has recognized a BCF. The value of the BCF is limited to the basis that is initially allocated to the convertible security. The Company received cash proceeds, net of transactions costs, totaling $5,195,225 for the Preferred Stock. The Company allocated the entire net proceeds of $5,195,225 to the BCF which is initially recorded in additional paid-in capital. The BCF is treated as a deemed dividend on the Preferred Stock and is accreted to the Preferred Stock using the effective interest method through the date of earliest conversion. As the Preferred Stock is immediately convertible, the Company included a deduction of $5,195,225 in determining loss per share for the three and nine months ended September 30, 2012. The aforementioned deduction had no impact on the Company’s Stockholders’ Equity.

The rules of The NASDAQ Stock Market (“NASDAQ”) would have normally required that Nexxus’ stockholders approve the Investment prior to closing the transactions contemplated by the Investment Agreement. However, NASDAQ granted Nexxus an exception from this stockholder voting requirement under Listing Rule 5635(f), which provides that an exception may be granted when (i) the delay in securing stockholder approval would seriously jeopardize the financial viability of the enterprise and (ii) reliance on such exception has been expressly approved by the audit committee of the board of directors comprised solely of independent, disinterested directors. NASDAQ also has granted Nexxus an exception from the voting rights requirements of Listing Rule 5640 and IM-5640 with respect to the transactions contemplated by the Investment Agreement.