the exercise of the Efficient Lights option

The IES transaction was completed on April 1, 2010, and the acquisition ownership and deal structure is similar to the structure the Company successfully utilized during the development of its EfficientLights business. Specifically, PowerSecure owns a two-thirds controlling interest in IES, which it acquired for cash proceeds of $4.4 million, and the IES management team owns the remaining one-third.

As a result, PowerSecure will include the financial results of IES on a consolidated basis in its financial statements, with adjustments to reduce PowerSecure’s net income for the minority interest portion of IES’s net income. Additionally, PowerSecure has the option to increase its ownership of IES to 100% by issuing PowerSecure common shares in exchange for the remaining one-third ownership interest in IES. The number of shares led high bay lights issued will be determined according to a formula based on PowerSecure’s Revenue and E.P.S. multiples, subject to a $10 million minimum value. The formula enables PowerSecure to acquire the remaining one-third interest on terms that are accretive to the Company’s E.P.S., while providing the IES management team with significant incentives for delivering profitable growth.

PowerSecure’s plan to exercise its option to increase its ownership of EfficientLights from 67% to 100% recognizes the highly successful results EfficientLights has posted to date, its strong backlog of orders for 2010, and its strong prospects for future growth. The transaction is expected to be accretive, and will involve the issuance of PowerSecure common shares in exchange for the remaining one-third minority interest in EfficientLights.

The number of shares to be issued in exchange for the remaining one-third interest will be 1,000,000 shares, provided that if the average closing price of the PowerSecure shares over the ten days preceding the transaction is less than $10.00 per share, then the number of shares delivered increases to maintain a transaction value of $10.0 million. After the exercise of the Efficient Lights option, EfficientLights will become a wholly-owned subsidiary and the Company will realize 100% of the EfficientLights profit, and will no longer reduce its net income for the amount attributable to the EfficientLights non-controlling interest.

White LEDs are well-known in various fields such as for LCD TV’s backlights or lighting and they require strict color control of the chromaticity range, especially in white LED linear high bay light for general lighting. Usually, the products need to be ranked and sorted according to the requirements before shipment, as the color always varies even if the products are produced in the same lot.