TIDMPPIX

RNS Number : 2148V

ProPhotonix Limited

05 April 2019

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

April 5, 2019

ProPhotonix Limited

("ProPhotonix" or "the Company")

PRELIMINARY RESULTS FOR THE YEARED DECEMBER 31, 2018

and Notice of Annual General Meeting

ProPhotonix Limited (London Stock Exchange - AIM: PPIX, OTC: STKR), a high technology designer and manufacturer of LED illumination systems and laser diode modules, with operations in Ireland and the United Kingdom, today announces its unaudited preliminary results for the year ended December 31, 2018.

Financial Overview

   --     Full year results slightly ahead of guidance issued to the market on November 2, 2018 
   --     Revenue decreased 8% to $16.4 million (2017: $17.7 million) 
   --     Gross profit decreased 20% to $6.3 million (2017: $7.9 million) 
   --     Gross profit margin decreased to 38.7% (2017: 44.6%) 
   --     Operating (loss) profit decreased to $(1.0) million (2017: $1.2 million). 
   --     Adjusted EBITDA decreased to $0.3 million (2017: $2.0 million) 
   --     Net (loss) income decreased 166% to ($1.3) million (2017: $2.0 million) 

-- Available borrowing capacity of $0.2 million from its revolving credit facility at December 31, 2018 (2017: $0.4 million)

   --     Order bookings of $16.1 million (2017: $19.6 million) 
   --     Order backlog decreased to $6.8 million (2017: $7.3 million) 
   --     Book-to-Bill ratio of 0.98 (2017: 1.11) 

-- Percentage revenue by market sectors: industrial 77%, medical 19%, and homeland security & defense 4% (2017: industrial 75%, medical 21%, and homeland security and defense 4%)

-- Percentage revenue by geography: 48% Europe, 36% North America and 16% Rest of World (2017: 49% Europe, 37% North America and 14% Rest of World)

Tim Losik, President & CEO, Commented:

"2018 has been a challenging year for the Company with setbacks in revenue, gross profit, and net income. As announced in a trading update released by the Company on November 2, 2018, the Directors provided revised estimates for 2018 with revenue of $16.0 million and a net loss of $2.0 million. Actual revenue and net loss were slightly better than those described in November.

"As compared to 2017, sales decreased 8% to $16.4 million due in large part to the decline in business with one customer's delayed new product launch; gross profit decreased 20% primarily from unabsorbed manufacturing overhead due to lower sales volumes; and these factors contributed to the Company incurring an operating loss of $1.0 million compared to an operating profit of $1.2 million in 2017. In addition, R&D costs increased $0.2 million to $1.0 million (in line with budget), Selling, General, and Administrative costs increased $0.4 million primarily due to increased stock based compensation expense, a non-cash movement in Foreign Currency Exchange loss of $0.3 million compared with 2017 and zero tax benefit in 2018 versus $0.5 million in 2017. These factors all contributed to the profit profile of the Company.

"The balance sheet remains consistent with the prior year with cash at year end of $1.9 million (2017: $2.2 million) and a current ratio of 1.68 compared to 1.62 at year end 2017."

Customer and Product Development Initiatives

During the year, the ProPhotonix engineering and operations teams achieved several milestones. The PROdigii laser module, announced in January 2018, is a compact laser module controlled and monitored through a digital RS485 communication interface providing laser output control and performance monitoring. Integral thermal management ensures exceptional output wavelength stabilization with enhanced diode life due to superior output power control and the ability to maintain consistent power levels. The new digital laser platform is available in a range of wavelengths from 405nm to 850nm. Output powers of up 500mW continuous wave or 1W pulsed are available. The platform is ideally suited to high-speed automated inspection, 3D measurement especially in high ambient light or temperature conditions, chemical, and biomedical analysis.

In addition, significant advances have been made in the UV LED product family with enhancements in power levels of all products, features available to users, and reliability. Notably, the FX1 COBRA Cure was certified by Underwriter Laboratories (UL) during the year. The FX2 and FX3 curing products will also be submitted for UL certification in the future.

The Company's laser module business, ProPhotonix (UK) Limited, successfully transitioned from ISO9001:2008 to ISO9001:2015 during 2018. ProPhotonix (UK) Limited has been continuously certified to the ISO9001 standard since 2003. International Organization for Standardization (ISO) 9001:2015 is the most recent version of the widely recognized ISO9001 standard that measures the effectiveness of a company's quality management system and performance, with a focus on organization-wide risk-based thinking which provides additional assurance that ProPhotonix is focused on continuous improvement and achieving excellence in our customer service and delivery. Our Irish subsidiary was successfully transitioned to ISO9001:2015 in November 2017.

Strategy and Markets

ProPhotonix consists of two business units: the LED systems manufacturing business based in Ireland (Cork), and the laser modules production and laser diode distribution business located in the United Kingdom (Hatfield Broad Oak). Corporate headquarters and the North American sales activities are based in Salem, New Hampshire, USA. The fundamental strategy of the Company is to grow revenues from existing customers, to win new customers, release new products, and grow market share within existing market segments and to select new market segments.

Firstly, our existing customers and relationships are vital to our continuing growth and success. Their success helps feed our success and provides us with the opportunity to develop new products and market solutions for other customers and applications. Secondly, the Company's strategy remains established in its OEM heritage as well as the development of products directed at specific markets. ProPhotonix has made and will continue to make investments in commercially attractive OEM opportunities and product development including UV LED, multi-wavelength devices and laser technology advances, in the fulfillment of our strategy. We continue to concentrate our engineering capacity in these defined projects and areas that we believe are poised for fast market expansion.

The first of these is the UV LED and laser market for various applications including: printing, curing, bonding, 3D printing, bio-luminescence, medical microscopy and other applications. The Company has launched several versions of its COBRA Cure(TM) product and continues to work with many potential customers in their applications using this technology. We plan to continue to launch new higher power products while continuously enhancing our current product lines to serve this market during 2018 and beyond.

ProPhotonix also continues to focus on the market requirements for multi-wavelength devices and systems, both laser and LED solutions. Increasingly, customers are seeking multi-wavelength solutions requiring innovative optics, complex electronics, on-board sensing capabilities and sophisticated software control. We see opportunities which include a broad range of applications in printing, microscopy, industrial inspection and sorting, solar simulation and security markets. As announced in January 2017, the Company introduced the Cobra Multispec, a 12-wavelength modular designed line light as a follow-on product to the Cobra RGB. We intend to continue to enhance and expand this offering as market demand dictates.

ProPhotonix sells its products principally into three markets: industrial (primarily machine vision illumination), medical, and homeland security and defense. The Company expects growth opportunities in all three of these markets as described further below:

Industrial (Machine Vision)

Within the industrial market, machine vision is the term used to describe computerized analysis for controlling manufacturing processes, for example automated inspection. In terms of quality and speed, lighting is often a critical component in machine vision and the Company manufactures both LED systems and lasers designed specifically for this market.

Medical

The medical and dental market requires many different LED systems and laser modules for unique processes, procedures, and applications. The Company provides a variety of products for medical and dental applications to current customers including a world leader in stationary imaging equipment, a portable x-ray equipment and dental imaging manufacturer. The Company intends to broaden its product marketing effort in the medical field since it offers significant long-term revenue growth opportunities.

Homeland Security & Defense

LED systems, laser modules and laser diodes are used in a wide variety of applications in the security and defense fields. The Company currently supplies several defense sighting manufacturers in the US and Europe, as well as leading manufacturers of Auto Number Plate Recognition systems. This market offers significant growth opportunities for ProPhotonix and the Company is currently marketing its laser and LED capabilities to additional security and optical character recognition systems companies in this market space.

Outlook

Bookings in the first thirteen weeks of 2019 are $4.2 million (2018: $4.3 million) and the backlog rests at $7.8 million (2018: $7.4 million). ProPhotonix has received initial production orders for a customer delayed product launch and expects fully to ramp up production in Q2 2019. Development of the Cobra Cure UV LED products continues with ever increasing intensity, as evidenced by the two recently awarded patents from the United States Patent and Trademark Office relating to the UVLED products. The Directors remain positive about our business pipeline and confident in our ability to resume growth.

Annual General Meeting and Posting of Results

The Company will hold its Annual General Meeting on May 16, 2019 at 10:00 a.m. British Summer Time at the offices of K&L Gates LLP, One New Change, London EC4M 9AF. The Company intends to publish its final audited accounts for the year ended December 31, 2018 in April 2019.

Enquiries:

 
 ProPhotonix Limited                  Tel: +1 603 893 8778 
  Tim Losik, President and CEO         ir@prophotonix.com 
  Cantor Fitzgerald Europe 
   (Nominated Adviser and Broker)    Tel: +44 (0)207 894 7000 
   David Foreman 
   Richard Salmond 
 
 

About ProPhotonix

ProPhotonix Limited, headquartered in Salem, New Hampshire, is a high technology designer and manufacturer of diode-based laser modules and LED systems for industry leading OEMs and medical equipment companies. In addition, the Company distributes premium diodes for Ushio, Osram, QSI, Panasonic, and Sony. The Company serves a wide range of markets including the machine vision, industrial inspection, security, and medical markets. ProPhotonix has offices and subsidiaries in the U.S., Ireland, U.K., and Europe. For more information about ProPhotonix and its innovative products, visit the Company's web site at www.prophotonix.com.

 
                                  PROPHOTONIX LIMITED 
               CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME 
                    ($ in thousands except share and per share data) 
 
                                                               Years Ended 
                                                               December 31, 
                                                  ------------------------------------- 
                                                        2018                2017 
                                                  -----------------  ------------------ 
Revenue                                                    $ 16,401            $ 17,743 
Cost of Revenue                                            (10,057)             (9,822) 
                                                  -----------------  ------------------ 
Gross Profit                                                  6,344               7,921 
                                                  -----------------  ------------------ 
Research & Development Expenses                             (1,011)               (763) 
Selling, General & Administrative Expenses                  (6,327)             (5,951) 
Operating (Loss) Income                                       (994)               1,207 
Other Income, net                                                20                 375 
Foreign Currency Exchange (Losses) Gains                      (232)                  57 
Warrant & Debt Acquisition Expense                             (11)                (18) 
Interest Expense                                               (91)                (49) 
                                                  -----------------  ------------------ 
(Loss) Income Before Taxes                                  (1,308)               1,572 
Income Tax Benefit                                                -                 469 
                                                  -----------------  ------------------ 
Net (Loss) Income                                         $ (1,308)             $ 2,041 
Other Comprehensive Income: 
    Foreign currency translation                              (132)                  51 
                                                  -----------------  ------------------ 
Total Comprehensive (Loss) Income                         $ (1,440)             $ 2,092 
                                                  =================  ================== 
 
Net (Loss) Income Per Share: 
 Basic and diluted: 
Basic net (loss) income per share                          $(0.014)              $0.022 
Diluted net (loss) income per share                        $(0.014)              $0.020 
                                                  -----------------   ----------------- 
 
Shares used in per share calculations - Basic            92,782,902          92,565,402 
                                                  -----------------   ----------------- 
Shares used in per share calculations - Diluted          92,782,902         104,193,859 
------------------------------------------------  -----------------   ----------------- 
 
 

PROPHOTONIX LIMITED

CONSOLIDATED BALANCE SHEETS

 
 
    ($ in thousands except share and per share data) 
 
 
 
                      December 31                                          2018                          2017 
 
Assets 
Current assets: 
Cash and cash equivalents                                                      $ 1,939                       $ 2,150 
Accounts receivable, less allowances of $49 in 2018 and 
 $14 in 2017                                                                     2,872                         3,114 
Inventories, less allowances of $615 in 2018 and $633 in 
 2017 (Note 4)                                                                   2,399                         2,280 
Prepaid expenses and other current assets                                          289                           235 
 
        Total current assets                                                     7,499                         7,779 
Net property, plant and equipment (Note 5)                                         646                           633 
Deferred tax assets (Note 9)                                                       454                           475 
Goodwill (Note 6)                                                                  405                           424 
Other long-term assets                                                             423                           239 
 
        Total assets                                        $ 9,427                       $ 9,550 
 
Liabilities and Stockholders' Equity 
Current liabilities: 
Revolving credit facility (Note 8)                                             $ 1,096                       $ 1,293 
Current portion of long-term debt (Note 8)                                         188                             - 
Accounts payable                                                                 1,791                         1,638 
Accrued payroll, benefits and incentive compensation                               399                           636 
Deferred revenue                                                                   498                           434 
Accrued warranty expenses                                                          170                           184 
All other accrued expenses                                                         270                           534 
Current portion of capital lease obligations                                        63                            95 
 
        Total current liabilities                                                4,475                         4,814 
Long term debt obligations, net of current portion (Note 
8)                                                                                 581                             - 
Long term capital lease obligations, net of current 
 portion                                                                            94                            98 
 
        Total liabilities                                                        5,150                         4,912 
 
 
Stockholders' Equity: 
Common stock, par value $0.001; shares authorized 
 250,000,000 at December 31, 2018 and at 
 December 31, 2018; 93,000,402 shares issued and 
 outstanding at December 31, 2018 and 92,565,402 
 shares issued and outstanding at December 31, 2017                                 93                            93 
Additional paid-in capital                                                     114,067                       112,987 
Deferred compensation                                                            (19 )                         (18 ) 
Accumulated deficit                                                         (110,746 )                    (109,438 ) 
Accumulated other comprehensive income                                             882                         1,014 
 
        Total stockholders' equity                                               4,277                         4,638 
 
        Total liabilities and stockholders' equity                             $ 9,427                       $ 9,550 
 
 
 

PROPHOTONIX LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ In thousands)

 
 
 Years Ended December                           2018                                                    2017 
          31 
 
 Cash flows from 
 operating activities 
 Net (loss) income                                                  $ (1,308)                                                $ 2,041 
 Adjustments to 
 reconcile net income 
 to net cash provided 
 by operating 
 activities: 
        Stock-based 
         compensation 
         expense                                                        1,075                                                    645 
        Depreciation                                                      169                                                    100 
        Foreign 
         exchange 
         loss (gain)                                                       77                                                  (264) 
        Amortization 
         of debt 
         discount and 
         financing 
         costs                                                             10                                                      7 
        Allowance for 
         inventories                                                        5                                                     33 
        Allowance for 
         bad debt                                                          37                                                      5 
 Other changes in 
 assets and 
 liabilities: 
        Accounts 
         receivable                                                        68                                                  (553) 
        Inventories                                                     (235)                                                    141 
        Prepaid 
         expenses and 
         other 
         current 
         assets                                                          (62)                                                     97 
        Deferred tax 
         asset                                                              -                                                  (475) 
        Accounts 
         payable                                                          233                                                   (11) 
        Accrued                                                         (389)                                                  (150) 
        expenses 
        Other assets 
         and 
         liabilities                                                    (183)                                                  (164) 
 
 Net cash (used in) 
  provided by 
  operating 
  activities                                                            (503)                                                  1,452 
 
 Investing 
 Purchase of 
  property, plant and 
  equipment                                                            (200 )                                                 (170 ) 
 
 Net cash used in 
  investing 
  activities                                                           (200 )                                                 (170 ) 
 
 Financing 
 Proceeds from                                                              4                                                    295 
 exercise of options 
 and warrants 
 Net proceeds from                                                        875                                                      - 
 issuance of debt 
 Borrowings of                                                          (151)                                                     96 
 revolving credit 
 facilities, net 
 Payments for capital 
  leases                                                                (138)                                                   (81) 
 Principal repayment 
  of long-term debt                                                      (88)                                                 (449 ) 
 
 Net cash provided by 
  (used in financing 
  activities)                                                             502                                                  (139) 
 
 Effect of exchange 
  rate on cash                                                           (10)                                                     96 
 
 Net change in cash 
  and equivalents                                                       (211)                                                  1,239 
 Cash and equivalents                                                   2,150                                                    911 
 at beginning of 
 period 
 
 Cash and equivalents 
  at end of period      $ 1,939                                                                                              $ 2,150 
 
 Supplemental cash 
 flow information: 
 Cash paid for 
  interest              $ 91                                                                                                    $ 49 
 

PROPHOTONIX LIMITED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

 
 
                     Common Stock 
           -------------------------------- 
                                                                                      Accumulated 
                                                                                         Other          Total 
                                               Paid in      Deferred    Accumulated  Comprehensive  Stockholders' 
                         Shares  Par $0.001    Capital    Compensation    Deficit       Income         Equity 
           --------------------  ----------  -----------  ------------  -----------  -------------  ------------- 
      Balance December 
       31, 2016          83,665         $84     $112,038             -   ($111,479)           $963         $1,606 
      Net profit              -           -            -             -        2,041              -          2,041 
      Translation 
       adjustment             -           -            -             -            -             51             51 
      Exercise of 
       options            6,700           7          231             -            -              -            238 
      Exercise of 
       warrants           1,900           2           55             -            -              -             57 
      Deferred 
       compensation         300           -           47          (47)            -              -              - 
      Share based 
       compensation           -           -          616            29            -              -            645 
      Balance December 
       31, 2017          92,565         $93     $112,987         ($18)   ($109,438)         $1,014         $4,638 
      Net loss                -           -            -             -      (1,308)              -        (1,308) 
      Translation 
       adjustment             -           -            -             -            -          (132)          (132) 
      Exercise of 
       options              135           -            4             -            -              -              4 
      Deferred 
       compensation         300           -           49          (49)            -              -              - 
      Share based 
       compensation           -           -        1,027            48            -              -          1,075 
 
      Balance December 
       31, 2018          93,000         $93     $114,067         ($19)   ($110,746)           $882         $4,277 
                        =======  ==========  ===========  ============  ===========  =============  ============= 
 
 
 

Notes to unaudited Preliminary Results - Basis of Presentation

The financial information set out in this document does not constitute the Company's statutory accounts for 2017 and 2018 or the Company's annual audited accounts for 2018 to be published and sent to shareholders in accordance with Rule 19 of the AIM Rules for Companies. The 2018 accounts included herein are unaudited and therefore subject to change at the time the audited accounts are issued. The 2018 unaudited preliminary financial statements were prepared under US GAAP and were approved on April 4, 2019, by the Directors for issue on April 5, 2019. A copy of this announcement is available on the Company's website at www.prophotonix.com. It is intended that the Company's 2018 annual report and audited accounts will be available to shareholders in April 2019.

Cautionary Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact, including without limitation, those with respect to ProPhotonix's goals, plans and strategies set forth herein are forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: uncertainty that cash balances may not be sufficient to allow ProPhotonix to meet all of its business goals; uncertainty that ProPhotonix's new products will gain market acceptance; the risk that delays and unanticipated expenses in developing new products could delay the commercial release of those products and affect revenue estimates; the risk that one of our competitors could develop and bring to market a technology that is superior to those products that we are currently developing; and ProPhotonix's ability to capitalize on its significant research and development efforts by successfully marketing those products that the Company develops. Forward-looking statements represent management's current expectations and are inherently uncertain. All Company, brand, and product names are trademarks or registered trademarks of their respective holders. ProPhotonix undertakes no duty to update any of these forward-looking statements.

Use of Non-GAAP Financial Measures

The Company provides non-GAAP financial measures, such as Adjusted EBITDA, to complement its consolidated financial statements presented in accordance with GAAP. Non-GAAP financial measures do not have any standardized definition and, therefore, are unlikely to be comparable to similar measures presented by other reporting companies. These non-GAAP financial measures are intended to supplement the user's overall understanding of the Company's current financial and operating performance and its prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by identifying certain expenses, gains and losses that, when excluded from the GAAP results, may provide additional understanding of the Company's core operating results or business performance, which management uses to evaluate financial performance for purposes of planning for future periods. However, these non-GAAP financial measures are not intended to supersede or replace the Company's GAAP results.

The Company uses Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and stock-based compensation) as a non-GAAP financial measure in this press release. A reconciliation of net income to Adjusted EBITDA for the total year 2018 and 2017 is as follows:

 
                                                 (in thousands) 
                                             Year Ended December 31, 
                                                 2018                 2017 
                                    ------------------------------  -------- 
 Net (loss) income                                       $ (1,308)   $ 2,041 
 Plus: 
  Interest and other expense, net                              314     (365) 
  Taxes                                                          -     (469) 
  Depreciation                                                 169       100 
  Stock based compensation                                   1,075       645 
 Adjusted EBITDA                                             $ 250   $ 1,952 
                                    ------------------------------  -------- 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR SSAFULFUSEFL

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April 05, 2019 02:00 ET (06:00 GMT)

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