Press release

Message to Shareholders from James Lewis, Chief Executive Officer

1st August 2010

Dear NXT Shareholder,

I would like to take this opportunity to introduce myself, and to say how pleased I am to have been given the opportunity of taking NXT forward into its next phase. I’d like to share with you my thoughts about the company’s current status and the opportunities that lie ahead.

Firstly, a bit about me. I graduated as an electronics engineer at the University of London, and then worked as a design engineer in the aerospace industry before taking a position in an electronic component distribution group as an applications engineer supporting the sales team with technical back-up. This gave me a valuable insight into the commercial aspects of product development, and the quest for competitive advantage in all areas of business. At that time the ability to create customised integrated circuits was just becoming viable for average sized companies, and recognising the gap in the market for an organisation that combined the skill set to design these custom chips with the ability to consolidate manufacturing deals with far east semiconductor fabrication plants, in 1992 I formed Oxford Semiconductor to do exactly that. We developed a large number of chips to meet customers’ specific project needs including industrial systems, computer games, data communications, computer peripherals and eventfully data storage. This latter sector was potentially a massive growth opportunity, likely to be driven by computer-based music and photography, and so we developed a series of own-brand chips for external hard disk and optical drives. Timing was pretty good and we won dominant share of this rapid growth market, bringing on board customers and technology partners including Seagate, Western Digital and Apple, along with a large number of market-shaping early-adopter customers. I spent 4 years living and working in California to build the sales and tech support team there. We built the company to 150 people worldwide, after which I decided to get back to the world of start-ups. In the last five years I have worked with privately- and venture-funded start-ups, and helped innovative people with good ideas get their new enterprises up and running. I believe that my 25 years experience in electronics businesses, most of it customer-facing being judged on P&L performance has established the key attributes required to lead NXT in developing and deploying strategy that properly monetises its key Intellectual Property.

I have been on the board of directors of NXT for ten months, and this has given me the opportunity to understand the issues the company faces, and in the last couple of weeks to perform the depth of due diligence that you would expect any incoming CEO to do. There are three key areas that capture one’s attention on assessing any company - the people, the technology, and the finances. I have been able to meet most of the staff, and get to know some of them fairly well. I have been directly involved in an intensive programme to integrate the recently acquired Audium amplifier chip technology into NXT’s plans, and I have been thoroughly impressed by the dedication and team spirit that I have observed. In my opinion the bending wave technology created and developed over the company’s history is world-leading and remains the strong foundation that our future will be built on. But until now the company has been unable to connect its technology with a market in a way that realises its value and turns a profit.

Shareholders have willingly demonstrated their own belief in NXT’s technology by being extremely supportive to date, and I thank you for that. However, it is time for things to change. The company must be able to live within its means, and both revenue generation and costs will be addressed to close the cash gap. Future growth will then be planned based on deployment of cash generated by the business, and the prospects for accelerating that growth will be explored and executed.

Change will centre around the development of a new strategy firmly based on NXT’s highly differentiated bending wave technology that enables a more predictable and scalable business model. Early steps have been taken over the last year to generate direct sales of components. This model will become an important part of the new business plan. The next few weeks will see a full strategic review of the company to fully explore adaptable business models that focus on market opportunities that represent volume product sales of value-add products where NXT can command a key technology position with its customers.

Operationally I’ll be looking at the overall effectiveness of the business at delivering on its plan. We will consider the organisation of our teams, cost-effectiveness, accountability and ownership of responsibilities. Revenue generation from licenses, consulting projects and the prospect of increasing component and sub-system sales will be analysed, and forecasts scrutinised. Costs will be managed tightly. Establishment of solid growth-oriented revenue streams will be paramount.

I’m absolutely convinced that the value of NXT’s technology coupled with the commitment of its team will enable me to build a substantial business that can deliver shareholder value.

Thank you for your attention, and I look forward to meeting many of you at the AGM later this year.

Best wishes,

James Lewis
Chief Executive Officer
j.lewis@nxtsound.com
Mobile: +44 7903 849974