ProPhotonix : Interim Results for the Half Year Ended June 30, 2020September 10, 2020

September 10, 2020

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

ProPhotonix Limited

("ProPhotonix" or "the Company")

INTERIM RESULTS FOR THE HALF YEAR ENDED JUNE 30, 2020

ProPhotonix Limited (London Stock Exchange - AIM: PPIX & PPIR, 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 interim results for the six months ended June 30, 2020.

Financial Highlights

• Revenue decreased 3.7% to $6.9 million (H1-2019: $7.2 million)
• Gross profit increased 21.7% to $3.3 million (H1-2019: $2.7 million)
• Operating income (excluding stock compensation expense of $50,000) of $0.3 million (H1-2019: $0.6 million operating loss, excluding stock compensation credit $0.5 million).
• Net income of $0.3 million (H1-2019: $0.2 million net loss)
• Adjusted EBITDA of $0.4 million (H1-2019: $0.5 million loss).
• Order bookings of $6.8 million (H1-2019: $7.5 million)
• Book-to-Billratio of 0.99 (H1-2019: 1.04)
• Percentage revenue by market sectors: 84% industrial, 15% medical and 1% security & defense
  (H1-2019: 73% industrial, 23% medical and 4% security & defense)
• Percentage revenue by geography: 41% Europe, 53% North America and 6% Rest of World
  (H1-2019: 40% Europe, 58% North America and 2% Rest of World)

Tim Losik, President & CEO, commented:

Financial

"Revenues in the first half of 2020 decreased 3.7% over the same period 2019 primarily due to a decrease of $0.8 million in LED product sales offset by a net increase in Laser and Diode product sales of $0.5 million. Gross profit margin improved to 47.1% compared with 37.2% for the same period in 2019, mainly due to a shift in product mix and the absorption of manufacturing overhead into inventory. In the first half of 2020 we experienced an operating profit of $0.3 million compared to operating loss of $0.1 million in 2019. The operating profit for first half of 2020 was primarily a result of higher profit margins and cost reduction measures put in place to lower the cost structure in response to the Director's concern over the potential negative economic impact associated with COVID-19. Excluding the stock option expense/benefit, operating income in the first half 2020 was $0.3 million as compared to an operating loss of $0.6 million in 2019. Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, stock-based compensation and impairment charges) was a profit of $0.4 million, as compared to a loss of $0.5 million in the first half of 2019.

The cash position of the Company improved to $1.9 million as compared to $1.5 million at year end, due to increased operating profits, strict working capital management, and various Covid-19 related State aid. The debt position of the Company improved substantially in the first half of 2020 as it repaid the $0.9 million revolving credit facility in full. As of June 30, 2020, the Company held a net cash position of $1.3 million versus a net debt position as of December 31, 2019 of $0.1 million."

Trading update

Given the inherent uncertainties surrounding COVID-19, the Board continues to believe it is inappropriate to provide forward looking guidance to investors and analysts at the current time.

Enquiries:
ProPhotonix Limited	Tel: [phone]
Tim Losik, President & CEO	[e-mail]
WH Ireland Limited
Katy Mitchell	Nominated Adviser and Broker
Matthew Chan	Tel: [phone]

Half Year 2020 Financial Results

Revenue for the half year ended June 30, 2020 was $6.9 million, a decrease of 3.7% compared with $7.2 million in the same period of 2019 primarily due to a net decrease in LED product sales offset by a net increase in Laser and Diode product sales.

Gross profit was $3.2 million, an increase of 21.8% compared to $2.7 million in the first half of 2019. Gross profit margin improved to 47.1% compared with 37.2% for the same period in 2019, mainly due to a shift in product mix and absorption of manufacturing overhead expenses into inventory.

Operating expenses totaled $3.0 million versus $2.8 million for the comparable period in 2019; inclusive a benefit in 2019 of $0.5 million for stock compensation. Selling, general and administrative expenses increased $0.2 million to $2.4 million primarily due to increased stock compensation as there was a stock compensation credit of $0.5 million in 2019 that was not repeated in 2020. Research and development expenses remained relatively flat compared with the prior year at $0.5 million compared to $0.6 million in 2019.

The improved gross profit resulted in an operating profit of $0.3 million ($0.3 million profit excluding stock compensation expense), compared with an operating loss of $0.1 million in the first half of 2019 ($0.6 million loss excluding stock compensation credit).

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, stock-based compensation and impairment charges) was a profit of $0.4 million, as compared to a loss of $0.5 million in the first half of 2019.

Net income was $0.3 million, as compared to a $0.1 million net loss in the first half 2019.

PROPHOTONIX LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

$ In thousands except share and per share data

(unaudited)

		Six Months Ended
			June 30,
		2020				2019
Revenue	$	6,902			$	7,165
Cost of revenue		(3,654)				(4,497)
Gross profit		3,248				2,668
Selling, general and administrative expenses		(2,430)				(2,192)
Research and development expenses		(544)				(603)
Operating income (loss)		274				(127)
Other income (expense), net		31				(16)
Interest expense		(33)				(55)
Warrant and debt acquisition expense		(6)				(8)
Income (loss) before income tax		266				(206)
Income tax		-				-
Net income (loss)		266				(206)
Other comprehensive income:
Foreign currency translation		(26)				73
Total comprehensive income (loss)	$	240			$	(133)
Net income (loss) per share:
Basic net income (loss) per share	$	0.003			$	(0.002)
Diluted net income (loss) per share	$	0.003			$	(0.002)
Shares used in per share calculation - basic	93,150,402			93,075,402
Shares used in per share calculation - diluted	93,150,402			93,075,402