Annual Report
2017
About the pictures on the front cover (left to right):
COBRA™ Cure FX3 DW UV LED Curing System
The COBRA Cure FX3 range has been extended to incorporate new optical configuration, DW, that results in a
28% increase in a dose - the key performance metric for our customers. The range now offers one of the highest
intensity UV LED curing products available on the market today. A similar upgrade to our compact COBRA
Cure FX1 product resulted in a 50% increase in dose. The COBRA Cure FX platform allows the company to
progressively develop additional options, allowing our customers to optimize the COBRA Cure FX series to
address their specific application challenges to configure their UV LED curing system.
Printing
ProPhotonix offers a range of solutions for UV curing of inks as well as vision systems lighting for print
inspection applications. The COBRA Cure FX series is ideally suited to UV curing of inks due to the high
power levels and superior uniformity provided. With its multi-wavelength capability, the new COBRA
MultiSpec offers users the opportunity to complete several inspections utilizing the same light and to tailor the
light output to the inspection.
3-meter COBRA™ RGB
ProPhotonix has now delivered a number of 3-meter COBRA RGB LED line lights for use in a print inspection
application. ProPhotonix’ ability to deliver a compact, 3- meter unit to provide uniform, high brightness light in
three wavelengths was key to the success of this project. Utilizing Chip-on-Board LED technology, COBRA
RGB offers superior brightness and uniformity. In addition, COBRA RGB has Ethernet control as standard
allowing users to remotely tailor the color of the illumination to maximize contrast in their specific machine
vision application.
Biomedical Applications
ProPhotonix offers a wide range of configurable laser modules in a range of form factors, wavelengths, output
powers, optical and electronic options that can be configured to offer an ideal solution for chemical and
biomedical applications. Additional capabilities include digital control and integral thermal management
ensuring consistent performance even in the most challenging environments.
PROdigii™ High-Performance Digital Laser Module
PROdigii has been designed to deliver outstanding wavelength stability and thermal management in even the
most challenging operating environments. This configurable, high-performance laser incorporates a digital
RS485 communication interface as well as integral thermal management. The PROdigii digital laser may be
configured as a uniform line generator for 3D measurement
Solutions for LEDs
ProPhotonix Limited (IRE)
3020 Euro Business Park
Little Island
Cork, Ireland
+353-21-5001300
Solutions for Lasers
ProPhotonix Limited
Sparrow Lane,
Hatfield Broad Oak
Hertfordshire, CM22 7BA UK
+44-1279-717170
Corporate
ProPhotonix Limited
13 Red Roof Lane, Suite
200
Salem, NH 03079
+1-603-893-8778
Page 2
Business Activities:
ProPhotonix Limited (together with its subsidiaries, “ProPhotonix” or the “Company”) 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 growth in revenue through its existing customers, new customer activity, and new product
and market expansion.
ProPhotonix Limited sells its products principally into three markets: industrial, (primarily machine vision
illumination), medical, and homeland security and defense. The Company foresees growth opportunities in all
three markets it serves which are briefly described 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, and a surgical illumination device 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 over the next several years and the Company is currently marketing its
laser and LED capabilities to additional security and Optical Character Recognition systems companies in this
market space.
Page 3
2017 Annual Report to Shareholders
To the Shareholders of ProPhotonix Limited:
ProPhotonix begins 2018 with a record order book, across both
businesses. Our existing customer base is largely demonstrating
growth and we continue to expand our mix of new OEM project
opportunities. With the strong order book beginning the year and
continued customer and product development, we remain positive
about our business pipeline and confident in our ability to achieve
continued successful momentum toward our profitability objectives.
Financial Progress:
Revenue Growth
Gross Profit growth
Net Income growth
9%
7%
63%
As compared to 2016, sales grew 9% to $17.7 million, gross profit improved 7%, and operating income increased 11%,
excluding stock compensation expense. Net income increased 63% from increased gross profit, R&D tax credits, the net
benefit of various tax attributes, and the change in foreign currency translation, which were partially offset by a full year
of expenses related to the addition of sales personnel in late Q4 2016, and the increase in stock compensation as noted
above. Adjusted EBITDA also improved 12% over 2016. Order bookings of $19.6 million, represented a 17.7% increase
from 2016 bookings of $16.7 million, ending the year with a book to bill ratio of 1.11 (2016: 1.03). In addition, we enter
2018 with a record backlog of $7.3 million (2016: $5.6 million), an increase of 30% from the previous year end.
Customer and Product Development Initiatives:
During the year, the ProPhotonix engineering team completed the development of several products and implemented a
number of new technology capabilities. In January, we announced the new Cobra Multispec line light of 12 Wavelengths,
and received the Vision Systems Design 2017 Innovators award in April 2017 for our Cobra RGB-IR Line Light. We
are also nearing completion of the EU funded Fast Track to Innovation program (“Wheelwatcher”); a development project
aimed at the train transport industry. This project enabled the Company to develop a digitally controlled laser. This new
product, PROdigiiTM, was demonstrated at the Photonics West show in February, 2018. In November, we announced a
new distribution agreement with Integrated Optics to extend our laser product offerings adding the innovative Matchbox
lasers and ARA combiners. We also announced a new high power configurable UV curing range of products as a part of
our Cobra Cure FXTM series. The FX2 DW and FX3 DW are the highest intensity UV LED devices in their class. In
addition, we’ve continued to work with some of our major original equipment manufacturers ("OEM") in new product
development efforts to help improve their products and processes.
Strategy:
The first part of our strategy relates to our existing customers and relationships. We consider these relationships
extremely important and continue to work with customers to provide solutions to achieve their continued market success.
Their success helps feed our success and provides us the opportunity to develop new products and market solutions for
other customers and applications. The second part of 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 strategies. We continue to concentrate our
engineering capacity in defined projects and areas that we believe are poised for fast market expansion.
Page 4
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 CureTM 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.
I am pleased with our improved financial performance and business accomplishments, and believe we will continue
improvement in 2018 and beyond. We believe we are positioned for success more readily than at any other time in the
recent history of the Company with the resources, talent and opportunities cultivated during 2016 and 2017.
In conclusion, I thank you, my co-workers, our customers, suppliers, service providers and investors for your continued
support.
Respectfully submitted,
Tim Losik
President and Chief Executive Officer
Page 5
Director Remuneration Report
For the year ended December 31, 2017
Executive Director Compensation - Executive Director Compensation is reviewed by the
Independent Non-Executive Directors.
Executive Director
($)
Bonus ($)
Salary
Pension
($)
Other (1)
($)
Total Cash
Compensation
($)
Options
($)
Total ($)
Total All
Compensation
2017 ($)
Total All
Compensation
2016 ($)
Tim Losik
326,500
60,000
6,000
-
392,500
226,191
226,191
618,691
508,614
Total Executive
Compensation
Non-Executive Director
326,500
60000
6,000
-
392,500
226,191
226,191
618,691
508,614
Ray Oglethorpe
Timothy Steel
-
-
-
-
-
-
37,313
37,313
2,855
2,855
40,168
31,485
37,313
37,313
2,855
2,855
40,168
31,485
Vincent Thompson
-
-
-
37,313
37,313
2,855
2,855
40,168
31,485
Mark Weidman
-
-
-
37,313
37,313
2,855
2,855
40,168
31,485
Total Non-Executive
Compensation
Director Share Options:
-
-
-
149,252
149,252
11,420
11,420
160,672
125,940
Director
Options @
12/31/16
Options
Granted
Options
Exercised
Options @
12/31/17
Tim Losik
4,900,000
5,250,000
(3,500,000)
6,650,000
Ray Oglethorpe
2,109,006
-
-
2,109,006
Timothy Steel
1,595,433
-
-
1,595,433
Vincent Thompson
1,595,433
-
-
1,595,433
Mark Weidman
1,150,000
-
(700,000)
450,000
Total All Directors
11,349,872
5,250,000
(4,200,000)
12,399,872
(1) Other compensation for non-executive directors represents cash payments expensed in the current year, plus the value of the fully vested shares issued in May,
2017. See note 11 for more detail related to the fully vested shares.
Page 6
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Page 7
ProPhotonix Limited
Consolidated Financial Statements
Years Ended December 31, 2017 and 2016
Page 8
CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Item
Page
Independent Auditor’s Report to the Members of ProPhotonix Limited .....................................................
10
Consolidated Balance Sheets as of December 31, 2017 and 2016 ...............................................................
12
Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31,
2017 and 2016 ...........................................................................................................................................
13
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2017 and 2016 ......
14
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017 and 2016 .....................
15
Notes to Consolidated Financial Statements………………………………………………………………. 16
Page 9
Independent Auditor’s Report
The Board of Directors
ProPhotonix Limited
We have audited the accompanying consolidated financial statements of ProPhotonix Limited and its
subsidiaries, which comprise the consolidated balance sheets as of December 31, 2017 and 2016, and the related
consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for the
years then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and
maintenance of internal control relevant to the preparation and fair presentation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of ProPhotonix Limited and its subsidiaries as of December 31, 2017 and 2016, and the
results of their operations and their cash flows for the years then ended in accordance with U.S. generally
accepted accounting principles.
The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Board of Directors of ProPhotonix Limited, as a body, in accordance with the
terms of our engagement. Our audit work has been undertaken so that we might state to the Board of Directors
of ProPhotonix Limited those matters we are required to state to them in our auditors’ report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than
Page 10
the Board of Directors of ProPhotonix Limited, as a body, for our audit work, for this report, or for the opinions
we have formed.
KPMG LLP
Altius House
One North Fourth Street
Central Milton Keynes
MK9 1NE
United Kingdom
21 March 2018
Page 11
PROPHOTONIX LIMITED
CONSOLIDATED BALANCE SHEETS
($ in thousands except share and per share data)
December 31
2017
2016
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, less allowances of $14 in 2017 and $30 in 2016
Inventories
Prepaid expenses and other current assets
Total current assets
Net property, plant and equipment
Deferred tax assets
Goodwill
Other long-term assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Revolving credit facility
Current portion of long-term debt
Accounts payable
Accrued payroll, benefits and incentive compensation
Customer advances
Deferred revenue
Accrued warranty expenses
All other accrued expenses
Capital lease obligations
Total current liabilities
Long term capital lease obligations, net of current portion
Total liabilities
Stockholders’ Equity:
Common stock, par value $0.001; shares authorized 250,000,000 at December 31, 2017 and at
December 31, 2016; 92,565,402 shares issued and outstanding at December 31, 2017 and
83,665,402 shares issued and outstanding at December 31, 2016
Additional paid-in capital
Deferred compensation
Accumulated deficit
Accumulated other comprehensive income
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
$
2,150
3,114
2,280
235
7,779
633
475
424
239
911
2,302
2,155
298
5,666
342
-
372
74
$ 9,550
$ 6,454
$
$
1,293
-
1,638
636
383
51
184
534
95
4,814
98
4,912
1,049
402
1,454
641
416
213
149
404
68
4,796
52
4,848
93
112,987
(18)
(109,438)
1,014
84
112,038
-
(111,479)
963
4,638
1,606
$
9,550
$
6,454
See the notes to consolidated financial statements.
Page 12
PROPHOTONIX LIMITED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
($ in thousands except share and per share data)
Revenue
Cost of Revenue
Gross Profit
Research & Development Expenses
Selling, General & Administrative Expenses
Operating Income
Other Income, net
Foreign Currency Exchange Gains (Losses)
Warrant & Debt Acquisition Expense
Interest Expense
Income Before Taxes
Income Tax Benefit
Net Income
Other Comprehensive Income:
Foreign currency translation
Total Comprehensive Income
Net Income Per Share:
Basic and diluted:
Basic net income per share
Diluted net income per share
Shares used in per share calculations - Basic
Shares used in per share calculations - Diluted
Years Ended
December 31,
2017
2016
$ 17,743
(9,822)
$ 16,245
(8,862)
7,921
(763)
(5,951)
1,207
375
57
(18)
(49)
1,572
469
7,383
(814)
(5,077)
1,492
344
(360)
(88)
(133)
1,255
-
$ 2,041
$ 1,255
51
(19)
$ 2,092
$ 1,236
$0.022
$0.020
92,565,402
104,193,859
$0.015
$0.014
83,665,402
90,740,402
See the notes to consolidated financial statements.
Page 13
PROPHOTONIX LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
($ in thousands except share and per share data)
Common Stock
Shares
$0.001
Par
Paid in
Capital
Deferred
Compensation
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Stockholders'
Equity
Balance December 31, 2015 83,665
$84 $111,860
Net profit
Translation adjustment
Share based compensation
-
-
-
-
-
-
-
-
178
Balance December 31, 2016 83,665
$84 $112,038
Net profit
Translation adjustment
Exercise of options
Exercise of warrants
Deferred compensation
Share based compensation
-
-
6,700
1,900
300
-
-
-
7
2
0
-
-
-
231
55
47
616
-
-
-
-
-
-
-
-
-
(47)
29
($112,734)
1,255
-
-
($111,479)
2,041
-
-
-
-
-
$982
-
(19)
-
$963
-
51
-
-
-
-
$192
1,255
(19)
178
$1,606
2,041
51
238
57
0
645
Balance December 31, 2017 92,565
$93 $112,987
($18)
($109,438)
$1,014
$4,638
See the notes to consolidated financial statements.
Page 14
PROPHOTONIX LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ In thousands)
Years Ended December 31
2017
2016
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Stock-based compensation expense
Depreciation
Foreign exchange (gain)
Amortization of debt discount and financing costs
Provision for inventories
Provision for bad debt
Other changes in assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Deferred tax asset
Accounts payable
Accrued expenses
Other assets and liabilities
Net cash provided by operating activities
Investing
Purchase of property, plant and equipment
Net cash used in investing activities
Financing
Exercise of options and warrants
Borrowings of revolving credit facilities, net
Capital lease
Principal repayment of long-term debt
Net cash used in financing activities
Effect of exchange rate on cash
Net change in cash and equivalents
Cash and equivalents at beginning of period
$ 2,041
$ 1,255
645
100
(264)
7
33
5
178
75
74
60
120
9
(553)
141
97
(475)
(11)
(150)
(164)
360
(809)
(168)
-
246
836
6
1,452
(170)
(170)
2,242
(121)
(121)
295
96
(81)
(449)
-
(237)
(66)
(1,100)
(139)
96
(1,403)
(241)
1,239
911
477
434
Cash and equivalents at end of period
$ 2,150 $ 911
Supplemental cash flow information:
Cash paid for interest
$ 49
$ 133
See the notes to consolidated financial statements.
Page 15
PROPHOTONIX LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND BASIS OF PRESENTATION
ProPhotonix Limited (also referred to in this document as “ProPhotonix”, “we”, or the “Company”)
operates in two segments: as an independent designer and manufacturer of LED systems through ProPhotonix
(IRL) Limited; and as a manufacturer of laser modules and a distributor of laser diodes through ProPhotonix
Limited, a U.K. subsidiary. The operating units are ProPhotonix (IRL) Limited based in Cork, Ireland,
ProPhotonix Limited, a U.K. subsidiary based near Stansted, United Kingdom and ProPhotonix Limited, based
in Salem, New Hampshire, U.S.A. The Company’s products serve a wide range of applications and industries
including machine vision and industrial inspection, biomedical, defense and security, and other commercial
applications.
ProPhotonix Limited was incorporated on March 27, 1951 in the Commonwealth of Massachusetts and
is currently incorporated in the state of Delaware. The Company’s common stock, $.001 par value per share (the
“Common Stock”), now trades on the OTC Market in the U.S. under the trading symbol “STKR” and is also
traded on the London Stock Exchange, plc (AIM listing), under the trading symbols “PPIX” and “PPIR”.
The accompanying consolidated financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As
shown in the consolidated financial statements, during the years ended December 31, 2017 and 2016, the
Company recorded net income of approximately $2,041,000 and $1,255,000, respectively. Net cash inflow
from operating activities for the same time periods were approximately $1,452,000 and $2,242,000,
respectively. The consolidated financial statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The Company believes that it has
adequate available working capital to continue to trade for at least the next twelve months from the issuance of
these financial statements.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements are prepared in conformity with U.S. Generally
Accepted Accounting Principles (“U.S. GAAP”) and reflect the application of the Company’s most significant
accounting policies as described in this note and elsewhere in the accompanying consolidated financial
statements and notes.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the Company and its wholly
owned subsidiaries, ProPhotonix (IRL) Limited, StockerYale (UK) Ltd., which owns 100% of ProPhotonix
Limited, a U.K. subsidiary, and ProPhotonix Holdings, Inc., which holds all of the outstanding shares of
StockerYale Canada. All intercompany balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers cash equivalents to consist of highly liquid investments with original maturities of
three months or less when purchased.
Page 16
ACCOUNTS RECEIVABLE
Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on
trade receivables are included in net cash provided by operating activities in the consolidated statements of cash
flows. The Company reviews the financial condition of new customers prior to granting credit. After
completing the credit review, the Company establishes a credit line for each customer. Periodically, the
Company reviews the credit line for major customers and adjusts the credit limit based upon an updated
financial condition of the customer, historical sales and payment information and expected future sales. The
Company has a large number of customers; therefore, material credit risk is limited.
The Company periodically reviews the collectability of its accounts receivable. Allowance for doubtful
accounts are established for accounts that are potentially uncollectible. The Company also has accounts
receivables insurance at ProPhotonix Limited, a U.K. subsidiary, which also covers most of the larger
customers at the ProPhotonix (IRL) Limited subsidiary, and allows the Company to submit a claim on overdue
receivables in excess of 60 days past invoice due date. The Company has not made any claims in either 2017 or
2016. Determining adequate allowances for accounts receivable requires management’s judgment in
combination with Company policies and procedures. Management’s assessment includes customer payment
trends, as well as discussions with customers over past due amounts. Conditions impacting the collectability of
the Company’s receivables could change causing actual write-offs to be materially different than the reserved
balances.
Changes in the allowance for doubtful accounts were as follows:
Years Ended December 31
Balance at beginning of period .................................................................
Charges to costs and expenses ..................................................................
Account write-offs and other deductions ..................................................
Balance at end of period ...........................................................................
2017
2016
In thousands
$
30 $
5
(21)
$
14 $
21
10
(1)
30
INVENTORY
The Company values inventories at the lower of cost or net realizable value using the first in, first-out
(“FIFO”) method. The Company periodically reviews the quantities of inventory on hand and compares these
amounts to the expected usage for each particular product or product line. The Company records as a charge to
cost of sales any amounts required to reduce the carrying value amount of the inventory to net realizable value.
Actual results could be different from management’s estimates and assumptions.
CAPITALIZATION OF SOFTWARE DEVELOPMENT FOR SALE
The Company’s capitalizes software development for sale in accordance with ASC 985-20. All costs
associated with establishing technical feasibility are expensed. Once technical feasibility has been established,
the costs of coding the software are capitalized and amortized over the expected life of the product. Once the
product is release to production, all future software de-bug costs are expensed in the period.
Page 17
INTANGIBLE ASSETS
The Company’s intangible assets consist of goodwill, trademarks, acquired patents and patented
technologies, distributor and customer relationships and related contracts, technology design and programs,
non-compete agreements and other intangible assets which, except for goodwill, are being amortized over their
useful lives and are assessed for impairment when triggering events occur. Goodwill is tested for impairment
on an annual basis, and between annual tests when indicators of impairment are present, and written down when
and if impaired. The Company has elected the end of the fourth quarter to complete its annual goodwill
impairment test.
LONG-LIVED ASSETS
The Company reviews the recoverability of its long-lived assets including property, plant and equipment
and amortizing intangible assets when events or changes in circumstances occur that indicate that the carrying
value of the assets may not be recoverable. This review is based on the Company’s ability to recover the
carrying value of the assets from expected undiscounted future cash flows. If impairment is indicated, the
Company measures the loss based on the difference between the carrying value and fair value of the asset using
various valuation techniques including discounted cash flows. If the asset is determined not to be recoverable,
the amount of the loss will be recorded in the consolidated statements of operations. It is possible that future
events or circumstances could cause these estimates to change.
INCOME PER SHARE
The Company calculates basic and diluted net income per common share by dividing the net income
applicable to common stockholders by the weighted average number of common shares outstanding.
As of December 31, 2017, 29,860,040 shares underlying options and 1,406,067 shares underlying warrants
could potentially have been included in the calculation of diluted shares. However, as the exercise price at
December 31, 2017 was $0.10005 per share, only 11,128,457 exercisable options and 500,000 warrants were
included in the calculation of earnings per share. All other options and warrants exercise price exceeded the
market price, or were unvested.
As of December 31, 2016, 22,965,040 shares underlying options and 4,456,067 shares underlying warrants
could potentially have been included in the calculation of diluted shares. However, as the exercise price at
December 31, 2016 was $0.062 per share, only 5,175,000 exercisable options and 1,900,000 warrants were
included in the calculation of earnings per share. All other options and warrants exercise price exceeded the
market price, or were unvested.
REVENUE RECOGNITION
The Company recognizes revenue from product sales at the time of shipment and when persuasive
evidence of an arrangement exists, performance of our obligation is complete, the price to the buyer is fixed or
determinable, and collectability is reasonably assured. Custom products are designed and supplied to original
equipment manufacturers and produced in accordance with a customer-approved design. Custom product
revenue is recognized when the criteria for acceptance has been met. Title to the product generally passes upon
shipment, as products are generally shipped free on board at shipping point. In certain limited situations,
distributors may have the right to return products. Such rights of return may preclude the Company from
recognizing revenue until the return period has ended.
Page 18
Revenues from funded research and development and product development are recognized based on
contractual arrangements, which may be based on cost reimbursement or fixed fee-for-service models. Revenue
from reimbursement contracts is recognized as services are performed. On fixed-price contracts, revenue is
generally recognized upon completion of performance, subject to any project management assessments as to the
status of work performed.
For those arrangements that include multiple deliverables, the Company first determines whether each
service or deliverable meets the separation criteria of FASB ASC 605-25, Revenue Recognition—Multiple-
Element Arrangements. In general, a deliverable (or a group of deliverables) meets the separation criteria if the
deliverable has stand-alone value to the customer and, if the arrangement includes a general right of return
related to the delivered item, that delivery or performance of the undelivered item(s) is considered probable and
is substantially in control of the Company. Each deliverable that meets the separation criteria is considered a
separate ‘‘unit of accounting”. After the arrangement consideration has been allocated to each unit of
accounting, the Company applies the appropriate revenue recognition method for each unit of accounting based
on the nature of the arrangement and the services included in each unit of accounting. All deliverables that do
not meet the separation criteria of FASB ASC 605-25 are combined into one unit of accounting, and the most
appropriate revenue recognition method is applied.
Effective January 1, 2018, the Company will recognize revenue under FASB ASC 606, whereby all
contracts containing a performance element will be evaluated for the necessity to recognize revenue as the
performance obligation is achieved.
WARRANTY
The Company provides standard warranties for most products for periods up to one year. The warranty is
limited to the cost of the product and the Company will repair or replace the product as required. The Company
monitors the actual warranty repair costs and trends in relation to the reserve as a percent of sales. The
Company adjusts annually the warranty provision based on actual experience and for any particular known
instances.
Warranty Reserves:
Years Ended December 31,
2017
2016
Balance at beginning of period ....................................................
Charges to costs and expenses .....................................................
Account write-offs and other deductions .....................................
$
$
In thousands
149
114
(79)
134
121
(106)
Balance at end of period ......................................................
$
184
$
149
The Company expenses advertising costs as incurred. Advertising expenses for the years ended 2017 and
2016 were approximately $107,000 and $87,000, respectively.
ADVERTISING EXPENSE
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The Company provides for depreciation on a straight-line
basis over the assets estimated useful lives. Plant and equipment held under capital lease are amortized on a
Page 19
straight-line basis over the shorter of the lease term or estimated useful life of the asset. Capital leases are
initially stated at the present value of minimum lease payments. The following table summarizes the estimated
useful lives by asset classification:
Asset Classification
Building and building improvements ................................... Term of the lease or 10-40 years
Computer equipment ............................................................
Machinery and equipment ....................................................
Furniture and fixtures ...........................................................
3 to 5 years
5 to 10 years
3 to 10 years
Estimated Useful Life
Maintenance and repairs are expensed as incurred.
INCOME TAXES
The Company accounts for income taxes under the asset and liability method. Under this method the
Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that
have been recognized in the financial statements or tax returns. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount that is more likely than not to be realized. The Company recognizes the tax benefit of
tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether
the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well
as consideration of the available facts and circumstances. With respect to any uncertain tax positions, the
Company records interest and penalties, if any, as a component of income tax expense. It did not have any
interest and penalties related to uncertain tax positions during the years ended December 31, 2017 or 2016.
STOCK-BASED COMPENSATION
the grant of a variety of awards with various
The Company has stock-based compensation plans for its employees, officers, and directors. The plans
permit
the
Remuneration Committee of the Company’s Board of Directors. Generally the grants vest over terms of one to
four years and are priced at fair market value, or in certain circumstances 110% of the fair market value, of the
Common Stock on the date of the grant. The options are generally exercisable after the period or periods
specified in the option agreement, but no option may be exercised after 10 years from the date of grant.
terms and prices as determined by
Additionally, in the case of incentive stock options, the exercise price may not be less than 100% of the
fair market value of the Company’s Common Stock on the date of grant, except in the case of a grant to an
employee who owns or controls more than 10% of the combined voting power of all classes of the Company’s
stock or the stock of any parent or subsidiary. In that case, the exercise price shall not be less than 110% of the
fair market value on the date of grant. In the case of non-qualified stock options, the exercise price shall not be
less than 85% of the fair market value of the Company’s Common Stock on the date of grant, except in the case
of a grant to an independent director; in which case the exercise price shall be equal to fair market value
determined by reference to market quotations on the date of grant.
During 2017, the Company recognized approximately $645,000 of stock-based compensation related to
options and fully vested shares issued to the directors as compensation (see FN 11), all of which were charged
to selling, general and administrative expense. During 2016, the Company recognized approximately $178,000
of stock-based compensation related to options, all of which was charged to selling, general and administrative
expense.
Page 20
Stock Option Awards—The fair value of each option grant is estimated using the Black-Scholes option
pricing model. The fair value is then expensed ratably over the requisite service periods of the awards, which is
generally the vesting period. Use of a valuation model requires management to make certain assumptions with
respect to selected model inputs. Expected volatility is calculated based on the historical volatility of the
Company’s stock at the time of the award. The average expected option term is based on historical trends. The
risk-free interest rate is based on U.S. Treasury zero-coupon issues assumed at the date of grant and generally
no dividends are assumed in the calculation. The compensation expense recognized for all equity-based awards
is net of estimated forfeitures. Forfeitures are estimated based on the historical trends.
TRANSLATION OF FOREIGN CURRENCIES
The Company’s operating results are affected by fluctuations in the value of the U.S. dollar as compared to
currencies in foreign countries, as a result of our transactions in these foreign markets. For foreign subsidiaries,
whose functional currency is not the U.S. dollar, assets and liabilities are translated using the foreign exchange
rates prevailing at the balance sheet date, and income and expense accounts using average exchange rates for
the period. Cumulative transaction gains or losses from the translation into the Company’s reporting currency
are included as a separate component of stockholder’s equity (accumulated deficit) (accumulated other
comprehensive income) in the accompanying consolidated balance sheets.
Management determined the functional currency of ProPhotonix Limited, a U.K. subsidiary, and
ProPhotonix (IRL) Limited is the euro, while the functional currency of ProPhotonix Limited U.S.A. is the U.S.
dollar.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company’s financial instruments consist mainly of cash and cash equivalents, accounts receivable,
revolving credit facility, accounts payable and long-term debt. The estimated fair value of these financial
instruments, with the exception of fixed rate long-term debt, approximates their carrying value due to the short-
term maturity of certain instruments and the variable interest rates associated with certain instruments, which
have the effect of re-pricing such instruments regularly.
At December 31, 2017, the Company estimated the fair value of long term fixed rate debt to be
approximately $117,000 compared to its carrying value of $98,000 (2016: fair value of approximately $507,000
compared to its carrying value of $475,000).
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist
principally of trade receivables. The risk is limited due to the relatively large number of customers composing
the Company’s customer base and their dispersion across many industries and geographic areas within the
United States, Canada, United Kingdom, Europe and Asia. The Company performs ongoing credit evaluations
of existing customers’ financial condition. The Company believes that its concentrated credit risk is limited to
only a small number of customers. The Company had one customer accounting for 10% or more of consolidated
revenues in 2017 and one customer accounting for 10% or more of consolidated revenues in 2016. The
Company had no customer that accounted for 10% or more of the outstanding accounts receivable balance at
December 31, 2017 or at December 31, 2016. The Company maintains its cash and cash equivalents in bank
deposit accounts, which at times may exceed insured limits. At December 31, 2017, the amount in excess of
governmental insurance protection was approximately $1.9 million, measured across all entities and
Page 21
jurisdictions. At December 31, 2016, the amount in excess of governmental insurance protection was
approximately $0.7 million. The Company believes it is not exposed to any significant credit risk on cash and
cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the
reported amounts of income and expenses during the reporting periods. Actual results in the future could vary
from the amounts derived from management’s estimates and assumptions.
(3) RECENT ACCOUNTING PRONOUNCEMENTS
Revenue Recognition. In May 2014, the Financial Accounting Standards Board (FASB) issued new
revenue recognition guidance to provide a single, comprehensive revenue recognition model for all contracts
with customers. Under the new guidance, an entity will recognize revenue to depict the transfer of promised
goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods
or services. A five-step model has been introduced for an entity to apply when recognizing revenue. The new
guidance also includes enhanced disclosure requirements, and is effective for public business entities for annual
and interim periods in fiscal years beginning after December 15, 2017. For all other entities, the ASU is
effective for annual periods in fiscal years beginning after December 15, 2018, and interim periods in fiscal
years beginning after December 15, 2019. Entities have the option to apply the new guidance under a
retrospective approach to each prior reporting period presented, or a modified retrospective approach with the
cumulative effect of initially applying the new guidance recognized at the date of initial application within the
Consolidated Statement of Changes in Stockholders' Equity. We have adopted the new guidance effective
January 1, 2018. Based on existing contracts at year end and as of now, the Company has not identified any
contract that will have an impact on our financial statements. Based on the current estimated impact to our
financial statements, we plan to adopt the new guidance under the modified retrospective approach.
In September 2017, the FASB announced that public companies must adopt Topic 606, Revenue from
Contracts with Customers, for annual reporting periods beginning after December 15 2017, including interim
reporting periods with that reporting period. The adoption of Topic 606 did not any impact on the current
consolidated financial statements, except for the disclosure of backlog and deferred revenue (see FN 17). The
Company will continue to review all customer contracts to determine if any contract has a performance
obligation clause that requires it to comply with the changes outlined in Topic 606.
Financial Instruments - Classification and Measurement. In January 2016, the FASB issued changes to
the accounting for financial instruments that primarily affect equity investments, financial liabilities under the
fair value option, and the presentation and disclosure requirements. This standard is effective for us beginning
in the first quarter of 2018. The new standard will be applied by means of a cumulative-effect adjustment to
the balance sheet as of the beginning of the fiscal year of 2018, with certain exceptions. Based on historical
trends, the Company believes the impact to the consolidated financial statements will be minimal.
Leases. In February 2016, the FASB issued a new lease accounting standard requiring that we recognize
lease assets and liabilities on the balance sheet. This standard is effective for us beginning in the first quarter of
2019; early adoption is permitted and we are evaluating whether we will do so. The new standard must be
adopted using a modified retrospective transition which includes certain practical expedients. We have not yet
determined the impact of the new standard on our consolidated condensed financial statements.
Page 22
Share-Based Compensation. In March 2016, the FASB issued an accounting standard update aimed at
simplifying the accounting for share-based payment transactions. Included in the update are modifications to the
accounting for income taxes upon vesting or settlement of awards, employer tax withholding on share-based
compensation, forfeitures, and financial statement presentation of excess tax benefits. This standard was
effective for us beginning in the first quarter of 2017. The adoption of this update had no significant impact on
our consolidated financial statements.
Balance Sheet Classification of Deferred Taxes. In 2017 the Company elected to early adopt ASU
2015-17, Balance Sheet Classification of Deferred Taxes, which requires all deferred tax assets and liabilities,
and related valuation allowances, to be classified as noncurrent. ASU 2015-17 is effective for the Company for
annual periods in fiscal years beginning after December 15, 2017, and requires either prospective or
retrospective adoption. The Company elected to early adopt the new standard for the current reporting period,
which is permitted, and will apply a prospective transition method.
In May 2017, the FASB issued and an accounting standards update to provide clarity and reduce (1)
diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation –
Stock Compensation, to a change to the terms or conditions of a share-based payment award. An entity may
change the terms or conditions of a share-based payment award for many different reasons, and the nature and
effect of the change can vary significantly. Some entities evaluate whether a change to the terms or conditions
of an award is substantive. When the conclusion is that it is substantive, then the entity must apply the
modification accounting in Topic 718. However, if the conclusion is that it is not substantive, then the
modification accounting in Topic 718 does not apply. This amendment is effective for all entities for annual
periods, and interim periods within those annual periods, beginning after December 15, 2017. Topic 718 had no
impact of our consolidated financial statements.
Income Taxes - Intra-Entity Asset Transfers. In October 2016, the FASB issued an accounting standard
update aimed at recognizing the income tax consequences of intra-entity transfers of assets other than inventory
when they occur. This removes the exception to postpone recognition until the asset has been sold to an outside
party. This standard is effective for us beginning in the first quarter of 2018, and early adoption is permitted. It
is required to be applied on a modified retrospective basis through a cumulative-effect adjustment to the balance
sheet as of the beginning of the fiscal year of adoption. We do not believe there will be any impact from the
new standard on our consolidated condensed financial statements.
Goodwill Impairment. In January 2017, the FASB issued new guidance that eliminates the requirement
to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a
goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a
reporting unit’s carrying value over its fair value (i.e. measure the charge based on today’s Step 1). The
standard has tiered effective dates, starting in 2020 for calendar-year public business entities that meet the
definition of an SEC filer. Early adoption is permitted for annual and interim goodwill impairment testing after
1 January, 2017. We do not believe there will be any impact from the new standard on our consolidated
condensed financial statements.
Inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value when applicable
and include materials, labor and overhead. Inventories are as follows:
(4) INVENTORIES
Page 23
Years Ended December 31
Finished goods .....................................................................................
Work in-process ...................................................................................
Raw materials ......................................................................................
Gross inventories
Inventory reserves ................................................................................
Net inventories .............................................................................
2017
2016
In thousands
$ 517
415
1,981
$ 2,913
(633)
$ 2,280
$ 508
397
1,832
$ 2,737
(582)
$ 2,155
Management performs quarterly reviews of inventory and either reserves or disposes of items not required
by their manufacturing plan, as well as reduces the carrying cost of inventory to the lower of cost or net
realizable value.
(5) PROPERTY, PLANT AND EQUIPMENT
Major classes of property, plant and equipment were as follows:
Years Ended December 31
2017
2016
Buildings and building improvements ...........................................
Computer equipment ......................................................................
Machinery and equipment ..............................................................
Furniture and fixtures .....................................................................
Property, plant and equipment ...............................................
Less accumulated depreciation.......................................................
Net property, plant and equipment .........................................
$
In thousands
$
288
409
2,219
484
258
394
1,681
419
$ 3,400
(2,767)
$ 2,752
(2,410)
$ 633
$ 342
Depreciation expense from operations was approximately $100,000 and $75,000 in the years ended
December 31, 2017 and 2016, respectively.
(6) GOODWILL
The Company uses a three-step approach to a goodwill impairment test. First, ASU 2011-08 allows
entities the option to first use an assessment of qualitative factors to determine whether the existence of events
or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is
less than its carrying amount. If a conclusion is reached that reporting unit fair value is not more likely than not
below carrying value, no further impairment testing is necessary. If further testing is necessary, the second step
is to estimate the fair value of its reporting units by using forecasts of discounted cash flows and compare that
value to the carrying value which requires that certain assumptions and estimates be made regarding industry
economic factors and future profitability of reporting units to assess the need for an impairment charge. The
methodology the Company uses to allocate certain corporate expenses is based on each unit’s use of services
and/or direct benefit to its employees. While the Company believes it has made reasonable estimates and
assumptions to calculate the fair value of the reporting units and implied fair value of goodwill, the impairment
analysis is highly sensitive to actual versus forecast results. Finally, if the estimated value is less than the
carrying value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s
goodwill over the implied fair value of that goodwill.
Page 24
In connection with the annual impairment test of goodwill, performed at the end of the fourth quarter 2017,
and at the end of the fourth quarter 2016, the Company concluded that no impairment existed. The conclusion
resulted from a combination of the project discounted cash flows under normal forecasted cash flow projections,
as well as from discounted cash flows with a sensitivity analysis showing no growth in revenues.
The changes in the carrying amount of goodwill for the years ended December 31, 2017 and 2016 were as
follows:
Beginning of the year ..................................................
Effect of exchange rate ...............................................
$ 372
52
$ 385
(13)
End of year ..................................................................
$ 424
$ 372
December 31, 2017
December 31, 2016
(In thousands)
The Company operates in two reporting units: LED’s (light emitting diode systems) and Laser &
Diodes. Goodwill as of December 31, 2017 and 2016 relates to the LED reporting unit.
(7) INTANGIBLE ASSETS
Intangible assets consist of distributor and customer relationships and related contracts, technology design
and programs, and other intangible assets. There are no intangible assets with indefinite lives. There were no
intangible assets acquired in 2017. Intangible assets and their respective useful lives are as follows:
Acquired customer contracts and relationships
Acquired technology design and programs
Other
Useful Life
5 – 8 Years
8 Years
3 – 7 Years
Gross carrying amounts and accumulated amortization of intangible assets were as follows as of
December 31, 2017 for each intangible asset class. The gross carrying values and the accumulated amortization
values are impacted by the foreign currency translation adjustment.
Gross
Carrying
Amount
Accumulated
Amortization
(in thousands)
Net Balances
Acquired customer contracts and relationships .........................
Acquired technology design and programs................................
Other ..........................................................................................
Total ...................................................................................
1,690
286
93
$ 2,069 $
(1,690)
(286)
(93)
(2,069)
$
-
-
-
-
Gross carrying amounts and accumulated amortization of intangible assets were as follows as of
December 31, 2016 for each intangible asset class.
Page 25
Gross
Carrying
Amount
Accumulated
Amortization
(in thousands)
Net Balances
Acquired customer contracts and relationships .........................
Acquired technology design and programs................................
Other ..........................................................................................
Total ...................................................................................
1,543
261
85
$ 1,889
(1,543)
(261)
(85)
(1,889)
$
$
-
-
-
-
Years Ended December 31
(8) DEBT
Senior Fixed Rate Secured Bond (“PPI Bond”) to a private investor,
matured on June 30, 2017 with an interest rate of 8%, at December
31, 2016.
Total debt less unamortized
discount and debt issuance
costs
2017(1)
2016
In thousands
$-
$179
Senior Fixed Rate Secured Bond to a private investor, matured on
June 30, 2017, with an interest rate of 12.25%, at December 31,
2016.
Total debt less unamortized
discount and debt issuance
costs
$-
$74
Senior Fixed Rate Secured Bond to a private investor, matured on
June 30, 2017, with an interest rate of 12.25%, at December 31,
2016.
Borrowings under Revolving Credit facility with Barclays Bank
Sales Financing with an interest rate of 2.0% above Barclay’s base
rate at December 31, 2017 and at December 31, 2016 (2.25% as of
December 31, 2017 and at December 31, 2016).
Total All Debt
Total debt less unamortized
discount and debt issuance
costs
Principal Amount
$-
$149
$1,293
$1,049
Principal Amount
Less: Revolving Credit
Facility
Less: current portion of
long term debt
Long-term debt less
unamortized discount and
debt issuance costs
$1,293
$1,451
$(1,293) $(1,049)
$(1,293) $( 402)
$-
$-
(1) As of December 31, 2017, the Company had approximately $ 434,000 available under the various
borrowing facilities.
Scheduled future maturities of debt for the next five years:
Due by period
2018
2019
2020
2022+
2021
in thousands
Total
Debt obligations ......................................
- $
$
- $
- $
-
$
-
$ -
Page 26
BORROWING AGREEMENTS
Private Investor Notes and Bond
ProPhotonix (IRL) Limited Senior Fixed Rate Secured Bond
On July 24, 2008, ProPhotonix (IRL) Limited issued a three-year 12% Senior Fixed Rate Secured Bond
(“PPI Bond”), as amended at various times, to a bondholder in the original principal amount of €935,000
($1,472,905 at July 24, 2008) secured by all of the assets of ProPhotonix (IRL) Limited.
On June 20, 2013 the bondholder entered into an amendment and waiver agreement with the Company
waiving all events of default from inception of the bond through the date of the amendment. In addition, the
bondholder also agreed to amend the terms of the bond as follows:
(a) Convert €144,324 ($193,132) of the balance of the bond into Common Stock of the Company with a
subsequent transfer of such Common Stock to the Term Loan holder, described below as part of the
Term Loan provided to the Company
(b) Issue 1,900,000 warrants over Common Stock of the Company exercisable at a price of $0.03 per share
through June 20, 2023 as described in Note 10. The fair value of these warrants of $55,185 was
deducted from the carrying value of the bond and is being amortized over the remaining term of the PPI
Bond
(c) Principal as of June 20, 2013:
€1,426,540 ($1,909,281)
(d) Interest Rate:
8% per annum
(e) Interest payments only:
June 30, 2013 through June 30, 2014
(f) Principal Repayment:
€15,000 per month plus interest July 1, 2014 through June 30,
2015, thereafter principal and interest monthly €56,378 ($61,486) from July 1, 2015 through June 30,
2017*
(g) One-time fee of €31,413 ($34,259) payable on June 30, 2017. This fee is being accrued ratably over the
life of the loan, payable in June, 2017. In addition, the Company recorded debt acquisition costs of
$134,484 which is being amortized over the life of the amended term note.
In addition to the terms above, the bondholder will be entitled to accelerated principal payments, on a
quarterly basis, equal to 30% of Free Cash Flow (defined as earnings before interest, taxes, depreciation,
and amortization (EBITDA) minus debt repaid and interest paid, minus capital expenditures not
financed, and minus taxes paid, each during such calendar quarter). Such payments are due within 45
days of the end of such calendar quarter, or as agreed to by the lender.
At December 31, 2017, the note was paid in full.
At December 31, 2016, $181,692 remained outstanding under the note, which has been classified as
current portion of long term debt and reported net of $952 of unamortized debt discount, and reported net of
unamortized debt acquisition costs of $2,320.
Term Notes:
PPI Bond Holder
On June 20, 2013, the Company entered into a Term Loan agreement with the PPI Bond holder to provide
up to $1.0 million of loan availability subject to certain terms as follows:
Page 27
(a) Available Loan (subject to (b) below):
(b) 50% of each advance shall be used to repay amounts owed under the PPI Bond
$1.0 million
(c) Interest Rate:
(d) Interest payments only:
(e) Principal Repayment term:
12.25% per annum
June 30, 2013 through June 30, 2014
36 months (July 1, 2014 through June 20, 2017)
The Company recorded debt acquisition costs of $70,437 which is being amortized over the life of the term
note. In addition, the Company is accruing a back-end fee of $15,000 ratably over the life of the loan, payable
in June, 2017.
At December 31, 2017, the note was paid in full.
At December 31, 2016, $75,288 remained outstanding under the note, which has been classified as current
portion of long-term debt and reported net of unamortized debt acquisition costs of $984. As of December 31,
2016, the Company had net available funding of $305,000.
Tiger Investments 1 LLC
On June 20, 2013, the Company entered into a Term Loan agreement with a Lender, which is owned
and controlled by the wife of Tim Losik, Patricia Losik. As Mr. Losik is a director and the Chief Executive of
the Company, the entry into the Loan Facility constitutes a “related party transaction” for the purposes of AIM
Rule 13.
The Term Loan provides availability to the Company of up to $2.0 million during the term of the Loan,
as follows, subject to certain restrictions:
(a) Available Loan:
(b) Interest Rate:
$2.0 million
12.25% per annum
(c) Interest payments only:
(d) Principal Repayment term:
June 30, 2013 through June 30, 2014
36 months (July 1, 2014 through June 20, 2017)
The Company recorded debt acquisition costs of $165,817 which is being amortized over the life of the
term note. In addition, the Company is accruing a back-end fee of $60,000 over the life of the loan, payable in
June, 2017.
At December 31, 2017, the note was paid in full.
At December 31, 2016, $150,577 remained outstanding under the note, which has been classified as
current portion of long-term debt and reported net of unamortized debt acquisition costs of $2,316. As of
December 31, 2016, the Company had $1,220,000 available under this borrowing facility.
Barclays Bank, PLC
On February 6, 2008, ProPhotonix Limited, a U.K. subsidiary, entered into a Confidential Invoice
Discounting Agreement, as amended at various times, with Barclays Bank Sales Financing (“Barclays”). Under
the Discounting Agreement, a three-year revolving line of credit was established. The facility requires the
maintenance of certain financial covenants including a minimum tangible net worth.
Page 28
On November 29, 2013, the Company entered into an amendment to the revolving credit facility to (i)
increase the line from £650,000 to £1,400,000; (ii) to reduce the discount rate from 2.65% plus Barclays base
rate to 2.50% plus Barclays base rate and service charges and extended the minimum period of this amendment
to 24 months through November 29, 2015. The Company recorded debt acquisition costs of $27,172 which was
fully amortized over the two-year amendment period to November, 2015.
On February 10, 2016, the Company entered into an amendment to the revolving credit facility to (i)
increase the line from £1,400,000 to £1,500,000; (ii) to reduce the discount rate from 2.50% plus Barclays base
rate to 2.00% plus Barclays base rate and service charges (iii) increase the early payment ceiling from 80% to
85% and extended the minimum period of this amendment to 12 months through February 10, 2017 with a
rolling evergreen provision.
The amount outstanding under the facility was $1,293,000 as of December 31, 2017 and $1,049,000 as
of December 31, 2016 reported as a short-term debt under revolving credit facility. As of December 31, 2017,
the Company had approximately $434,000 available under this facility.
(9) TAXES
The Company is required to determine whether its tax positions are “more-likely-than-not” to be sustained
upon examination by the applicable taxing authority, based on the technical merits of the position. Tax positions
not deemed to meet a “more-likely-than-not” threshold would be recorded as a tax expense in the current year.
Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax
benefits as of December 31, 2017. The Company had deferred tax assets, before considering the full valuation
allowance, totaling approximately $14.3 million as of December 31, 2017 and approximately $22.7 million as
of December 31, 2016. Realization of the deferred tax assets is dependent upon the Company’s ability to
generate sufficient future taxable income and, if necessary, execution of tax planning strategies. The Tax Cuts
and Jobs Act, which contains significant changes to the U.S. income tax regime, was signed into law on
December 22, 2017. While we have limited U.S. operations, certain aspects of the 2017 U.S. Tax Act could
have a meaningful impact on our income tax expense. In addition to lowering the U.S. corporate tax rate from
35% to 21% effective January 1, 2018, the 2017 U.S. Tax Act contains significant changes to the U.S. income
tax regime, including changes to the formation and use of net operating losses incurred after December 31,
2017, changes to the income tax deductibility of certain business expenses, including interest expense and
compensation paid to certain executive officers, the imposition of taxes on a one-time deemed mandatory
repatriation of earnings and profits of foreign corporations and a new tax on global intangible low-taxed
income.
Based on the size of the Company’s historical U.S. operating losses, there is doubt as to when, if ever,
any of the deferred tax assets related to its U.S. operations will be realized, even though the Company has
achieved positive operating results in the past three years. As a result, management has provided a valuation
allowance for the net deferred tax assets. In the event management determines that sufficient future taxable
income may be generated in subsequent periods and the previously recorded valuation allowance is no longer
needed, the Company will decrease the valuation allowance by providing an income tax benefit in the period
that such a determination is made. As it relates to a deferred tax impact relative to stock compensation, the
Company believes the deferred tax asset being disclosed in the footnote table below reflects the book
compensation previously recognized for grants outstanding as of the end of the year (fully or partially vested)
times the appropriate tax rate. In 2017, the Company has evaluated its deferred tax status of all of its
operations, and has concluded that its Ireland entity should recognize a deferred tax asset based on forward
looking operating profits in relation to its loss carryforwards of $475,000. Because of its historical operating
losses, the Company has not been subject to income taxes since 1996.
Page 29
The Company is subject to taxation in the U.S., Canada, the United Kingdom, Ireland and various states
and local jurisdictions. As a result of the Company’s tax loss position, the tax years 2001 through 2017 remain
open to examination by the federal and most state tax authorities. The Company completed an IRS compliance
audit for the 2012 tax year in 2015. In addition, the tax years 2011 through 2017 are open to examination in
foreign jurisdictions.
The following is a reconciliation of the federal income tax provision calculated at the statutory rate of 21%
to the recorded amount:
Years Ended December 31,
Income before taxes ...........................................................................
Reconciliation
Applicable statutory federal income tax expense ..............................
Foreign tax rate differential ...............................................................
Non-deductible items .........................................................................
Valuation allowance ..........................................................................
2017
2016
In thousands
$ 2,041
$ 1,255
429
(116)
4
(786)
427
(130)
28
(325)
Net income tax provision ...........................................................
$
(469)
$
-
The significant items comprising the deferred tax asset and liability at December 31, 2017 and 2016 are as
follows:
Years Ended December 31,
Domestic net operating loss carry forwards ................................
Foreign net operating loss carry forwards ...................................
R&D tax credit ............................................................................
Other ............................................................................................
Valuation allowance ....................................................................
Deferred tax asset ...................................................................
2017
2016
In Thousands
$ 12,885
1,000
525
593
(14,528)
$ 475
$ 20,953
1,236
525
500
(23,214)
$ -
As of December 31, 2017, the Company had United States federal net operating loss carry forwards
(NOLs) of approximately $61.0 million (2016: $61.5 million) available to offset future taxable income, if any.
These carry forwards expire through 2035 and are subject to review and possible adjustment by the Internal
Revenue Service. The Company may be subject to limitations under Section 382 of the Internal Revenue
Service Code as a result of changes in ownership. The Company’s U.S. historical operating losses raise
considerable doubt as to when, if ever, any of the deferred tax assets will be realized for U.S. operations, even
though there have been limited operating profits in each of the last three years. As a result, management has
provided a full valuation allowance for the net deferred tax assets.
At December 31, 2017, the Company also has Canadian federal NOLs of approximately $1.1 million
(2016: $1.1 million) available to offset future taxable income, if any. These carry forwards expire through 2031
and are subject to review and possible adjustment by the Canadian Revenue Agency. The Company may be
subject to limitations of the use of the Canadian NOLs as a result of changes in ownership. At December 31,
2017, the Company also has a United Kingdom NOL of approximately $2.7 million (2016: $3.4 million). At
Page 30
December 31, 2017, the Company also has an Ireland NOL of approximately $1.5 million (2016: $2.0 million),
but has recorded a deferred tax asset of $0.5 million in 2017. The total valuation allowance against deferred tax
assets decreased by $0.3 million (2016: decreased by $0.4 million).
(10) UNREGISTERED SALES OF EQUITY SECURITIES AND WARRANTS
Warrants
On April 5, 2017, one of the Company’s investors exercised a warrant for 1,900,000 shares at $0.03 per
share for a total cash remittance of $57,000. There were no warrants exercised in 2016.
As of December 31, 2017, there were 1,406,067 common shares outstanding warrants with the following
exercise prices and expiration dates:
Number of Common Shares
Warrants
906,067
500,000
1,406,067
Exercise Price
Expiration Date
$0.45 –$0.60
$0.10
2018
2019
(11) STOCK OPTION PLANS
On June 9, 2014, the Company implemented its 2014 Stock Incentive Plan (the “2014 Plan”). On June 5, 2017,
the Company amended the 2014 Stock Plan to increase the pool of shares available for issuance, and granted
new performance-based options.
New remuneration policy for senior management
Summary
In order to incentivize the achievement of its objectives, the Company has implemented a new remuneration
policy for its senior management with the following elements:
A one-off substantial performance-based option grant to key senior management at market value.
No further grants intended to said senior management through the end of the three-year measurement
period.
Cliff vesting on December 31, 2019 at different levels dependent on achievement against the performance
target (zero below 10% up to 150% vesting at 135% attainment)10-year option term.
Performance measure - Performance plan has two vesting components; (i) an Annual vesting component that
allows the participant to vest a maximum of 25% of the three year target at 100%, with a lessor amounts
eligible to be vested where the annual growth rate is less than a 25% growth over the previous years’
Adjusted EBITDA value (earnings before taxes, depreciation, interest, stock compensation and
amortization). Each annual vest is earned outright by the individual regardless any prior or subsequent
year’s Adjusted EBITDA performance and (ii) the cumulative vesting component which is determined on
the average total growth over the base Adjusted EBITDA (Base year = 2016) during the three years of 2017
to 2019. The cumulative vesting component allows the individual to vest shares based on the cumulative
performance from 2017 to 2019. The maximum vesting under the combined scheme, at the end of three
Page 31
years, is the greater of (a) the sum of the shares vested annually or (b) vesting of shares based on the
cumulative three year period.
Under the Company’s 2014 Plan, the Company may issue options, restricted stock, restricted stock units
and other stock-based awards to its employees, officers, directors, consultants and advisors. An aggregate of
10,200,000 shares of the Company’s Common Stock were initially reserved for issuance under the 2014 Plan,
which was increased to 24,200,000 on June 5, 2017. In addition, from 2018 to 2025 there is an automatic annual
increase to the number of shares reserved for issuance under the 2014 Plan equal to the lesser of (i) 2,000,000
shares of Common Stock, (ii) 5% of the outstanding shares of Common Stock of the Company, or (iii) an
amount determined by the Board of Directors of the Company.
As of December 31, 2017, there were 1,425,000 shares available to be issued from this plan.
On December 16, 2016, but effective January 1, 2017, the Board of Directors approved the Eighth
Amended and Restated Policy Regarding Compensation of Independent Directors, (i) cash compensation is
$30,000 per annum paid in arrears each quarter in installments of $7,500; and (ii) a grant of 75,000 fully vested
shares of the Company’s Common Stock, be automatically issued on the day after the annual meeting to each
Independent Director who is serving as director of the Company immediately following the date of each annual
meeting of stockholders (or special meeting in lieu thereof) beginning with the 2017 annual meeting. These
shares are pursuant to the 2014 Plan terms and conditions.
In May 2007, the Company adopted the 2007 Stock Option and Incentive Plan (the 2007 Option Plan) for
the purpose of issuing both Incentive Options and Nonqualified Options to officers, employees and directors of
the company. No further grants are allowed under this plan.
In May 2004, the Company adopted the 2004 Stock Option and Incentive Plan (the 2004 Option Plan) for
the purpose of issuing both Incentive Options and Nonqualified Options to officers, employees and directors of
the company. No further grants are allowed under this plan.
In May 2000, the Company adopted the 2000 Stock Option and Incentive Plan for the purpose of issuing
both Incentive Options and Nonqualified Options to officers, employees and directors of the Company. No
further grants are allowed under this plan.
The following table summarizes information about the stock options outstanding as of December 31, 2017.
There is an intrinsic value on the options outstanding, and exercisable, at December 31, 2017 of $721,000 and
$585,000, respectively. There was an intrinsic value on the options outstanding, and exercisable, at December
31, 2016 of $412,000 and $179,000, respectively.
During 2017 and 2016, the Remuneration Committee approved various qualified and non-qualified stock
option awards to purchase shares of the Company’s Common Stock to various officers, directors and
employees. There were 12,870,000 options granted during the year ended December 31, 2017 and there were
805,000 options granted during the year ended December 31, 2016. These options vest over a one year, a three
year, or a four-year anniversary of the grant date, provided that the recipient continues to serve the Company in
that capacity until each such vesting, or achieves the performance objectives as noted above. The weighted
average assumptions for grants during the years ended December 31, 2017 and December 31, 2016 used in the
Black-Scholes option pricing model were as follows:
Page 32
Volatility………………………………………..
Expected option life……………………………
Interest rate (risk free)………………………….
Dividends……………………………………….
Weighted average grant date fair value………...
Twelve months
Ended
December 31,
2017
196.98%
7.8 years
1.45%
$0
$0.239
Twelve months
Ended
December 31,
2016
226.1%
7.8 years
1.69%
$0
$0.046
Balance at December 31, 2015 ...................................
Granted ..............................................................
Exercised ............................................................
Cancelled ...........................................................
Options
Outstanding
22,965,040
805,000
-
(80,000)
Balance at December 31, 2016 ...................................
23,690,040
Vested and Exercisable at December 31, 2016 ..........
13,810,040
Weighted
Average
Exercise Price
per Share ($)
0.07
0.05
-
0.13
0.07
0.09
Balance at December 31, 2016 ...................................
Granted ..............................................................
Exercised ............................................................
Cancelled ...........................................................
23,690,040
12,870,000
(6,700,000)
-
0.07
0.24
0.04
-
Balance at December 31, 2017 ...................................
29,860,040
Vested and Exercisable at December 31, 2017 ..........
16,473,790
0.15
0.08
Weighted
Average
Remaining
Contractual
Term
(in Years)
7.03
6.15
5.15
6.15
6.74
4.64
Vested and Expected to Vest at December 31,
2017 ................................................................... 29,488,132
0.15
6.68
Page 33
Range of
Exercise Prices
$ 0.02 – 0.99
Options
Outstanding
29,860,040
Weighted
Average
Contractual
Life (years)
Weighted
Average
Exercise
Price
Options
Exercisable
Weighted
Average
Exercise
Price
6.7
$
0.15
16,473,790 $
0.08
At December 31, 2017, there was approximately $1,948,000 of total unrecognized compensation cost related to
stock options granted (2016: $20,000). The cost is expected to be recognized over the next 1.51 years. Total
stock option expense recorded in 2017 and 2016 was approximately $645,000 and $178,000, respectively.
There were 6,700,000 options exercised in 2017 at an exercise price of $238,260, and having a market value of
$721,075. There were no options exercised during 2016.
(12) EMPLOYEE STOCK PURCHASE PLAN
In May 2000, the Company adopted the 2000 Employee Stock Purchase Plan (the Stock Purchase Plan),
which permits the eligible employees of the Company and its subsidiaries to purchase shares of the Company’s
Common Stock, at a discount, through regular monthly payroll deductions of up to 10% of their pre-tax gross
salary. Subject to adjustment for stock splits, stock dividends and similar events, a maximum of 300,000 shares
of Common Stock may be issued under the Stock Purchase Plan. During the years ended December 31, 2017
and 2016, there were no shares issued under the Stock Purchase Plan.
(13) EMPLOYEE DEFINED CONTRIBUTION PLANS
On January 17, 1994, the Company established the ProPhotonix Limited 401(k) Plan (the Plan). Under the
Plan, employees are allowed to make pre-tax retirement contributions. In addition, the Company may make
matching contributions, not to exceed 100% of the employee contributions, and profit sharing contributions at
its discretion. The Company made matching contributions of $26,000 in the year ended December 31, 2017 and
$28,000 in the year ended December 31, 2016. The Company incurred costs of approximately $2,000 in 2017
and approximately $2,000 in 2016 to administer the Plan. The Company also has voluntary contribution
pension plans in Ireland and in the United Kingdom. In the United Kingdom, the Company contributes a
maximum of 3% of the participating employee salaries, with one exception, where the maximum contribution is
10%. The plan is voluntary, with plan administration costs coming out of the plan itself. The Company made
contributions of approximately $59,000 and $47,000 in the years ended December 31, 2017 and 2016. In
Ireland, the Company also has a voluntary plan that matches contributions for those participating employees
with minimum of 6 months of service. After two years of service, the Company will match up to a maximum of
5% of salary. The Company made contributions of approximately $37,000 and $29,000 in the years ended
December 31, 2017 and 2016, respectively. Plan administration costs come out of the plan itself.
(14) COMPANY FACILITIES, COMMITMENTS AND CONTINGENCIES
Other obligations and contingent liabilities
On February 24, 2017, the Company signed a 61-month lease, with an effective date of April 1, 2017, to
lease 3,200 square feet in an office building, in Salem, New Hampshire, with an average monthly rate of $3,525
per month plus the tenant’s share of expenses. Previously, the Company leased approximately 3,600 square feet
Page 34
for its corporate headquarters and sales office in another Salem, New Hampshire location. The term of the lease
required monthly tenant at-will payments with a 90 day termination notice. Base rent was $2,550 per month
plus the tenant’s share of expenses.
ProPhotonix (IRL) Limited rents approximately 10,000 square feet for its operations in Cork, Ireland. The
original five year lease term ended on August 22, 2013 and the Company rents the space for its operations on a
month to month basis. Base rent is €72,000 per year.
ProPhotonix Limited, a U.K. subsidiary, leases approximately 13,000 square feet of space in Hatfield
Broad Oak, Hertfordshire, U.K. The original lease had a term of nine years ending September 29, 2013 at
£87,000 per year, at which time the Company renegotiated the lease for an additional 3 years, ending September
30, 2016 at £70,000 per year. The Company has since renegotiated the lease for an additional 6 years at
£75,000 per year. After September 2019, there is a rent review for the final 3 years of the lease. The Company
has the option to terminate the lease with six months notice after September, 2017. The Company did not
exercise this option during 2017. A £10,000 penalty applies if this six months’ notice is prior to September
2019, but is penalty free after September 2019.
The Company utilizes, or has assumed, capital leases to finance purchases of equipment. At December 31,
2017, the outstanding balance of capital leases was approximately $209,000 and at December 31, 2016, the
outstanding balance of capital leases was approximately $119,000. The Company records depreciation expense
on assets acquired under a capital lease in the consolidated statement of income.
The net book value of assets acquired under capital leases at December 31, 2017 and December 31, 2016,
is as follows:
Assets under capital lease ...........................................................
Less—accumulated depreciation ................................................
2017
$ 883,000
(555,000)
2016
$ 612,000
(465,000)
Assets under capital lease, net ....................................................
$ 328,000
$ 147,000
Scheduled future minimum lease payments under non-cancelable operating leases and future capital lease
payments for the next five years:
Due by Period
2018
2019
2020
2021
2022
2023+
Total
Revolving Credit Facility
Capital lease obligations
Operating lease obligations
In thousands
$1,293
$104
$166
$1,563
$-
$46
$167
$213
$-
$45
$167
$212
$-
$14
$168
$182
$-
$-
$98
$98
$-
$-
$-
$-
$1,293
209
766
$2,268
The Company expensed approximately $217,000 and $206,000 in rent for the years ended December 31, 2017
and 2016, respectively.
(15) LEGAL PROCEEDINGS
The Company is party to various legal proceedings generally incidental to its business. Although the
disposition of any legal proceedings cannot be determined with certainty, it is the Company’s opinion that any
Page 35
pending or threatened litigation will not have a material adverse effect on the Company’s results of operations,
cash flow or financial condition.
(16) GOVERNMENT GRANTS
In June 2016, the Company entered into an EU funded Fast Track to Innovation program to partner with
other participants, including the end customer, in the development of a high power digital laser for a railway
industry inspection system. The grant estimate is up to €360,000 with completion of the entire development project on
June 1, 2018. During 2017, the Company billed the EU program for a total of $228,000 of direct expenses for
reimbursement, as well as $57,000 of indirect expenses for a total of $285,000. During 2016, the Company
billed the EU program for a total of $42,000 of direct expenses for reimbursement, as well as $11,000 of
indirect expenses for a total of $53,000. These amounts are reflected in the consolidated statements of income
for the years ending December 31, 2017 and 2016. In addition, at years ending December 31, 2017 and 2016,
the Company received advance funding with remaining totals of $5,000 and $285,000 respectively, which are
reflected on the consolidated balance sheets, net of any charges to the advances.
(17) DEFERRED REVENUE AND BACKLOG
At December 31, 2017, the Company had a total of $0.1 million in deferred revenue and $7.3 million in
backlog. At December 31, 2016, the Company had a total of $0.2 million in deferred revenue and $5.6 million
in backlog.
(18) SEGMENT INFORMATION
Operating segments are identified as components of an enterprise about which separate discrete financial
information is available for evaluation by the chief decision-making group, in making decisions how to allocate
resources and assess performance. The Company’s chief decision-maker is the Chief Executive Officer. The
Company’s accounting policies and method of presentation for segments is consistent with that used throughout
the consolidated financial statements.
The Company operates in two segments: LED’s (light emitting diode systems) and Laser & Diodes. In
the LED segment, the Company designs and manufactures LED systems for the inspection, machine vision,
medical and military markets. The Laser & Diodes segment distributes laser diodes and designs and
manufactures custom laser diodes modules for industrial, commercial, defense and medical applications. The
policies relating to segments are the same as the Company’s corporate policies.
The Company evaluates performance and allocates resources based on revenues and operating income.
The operating profit / (loss) for each segment includes selling, research and development and expenses directly
attributable to the segment. In addition, the operating profit includes amortization of acquired intangible assets,
including any impairment of these assets and of goodwill. Certain of the Company’s indirect overhead costs,
which include corporate general and administrative expenses, are allocated between the segments based upon an
estimate of costs associated with each segment. Segment assets include accounts receivable, inventory,
machinery and equipment, goodwill and intangible assets directly associated with the product line segment.
Page 36
2017
2016
(In thousands)
Years Ended December 31
Revenues:
LEDs ...........................................................................................................
Laser & diodes ............................................................................................
$ 8,398
9,345
$ 6,802
9,443
Total revenues .............................................................................................
$
17,743
$
16,245
Gross profit:
LEDs ...........................................................................................................
Laser & diodes ............................................................................................
$ 4,199
3,722
$ 3,276
4,107
Total gross profit .........................................................................................
$
7,921
$
7,383
Operating profit:
LEDs ...........................................................................................................
Laser & diodes ............................................................................................
$ 514
693
$ 190
1,302
Total operating profit ...................................................................................
$
1,207
$
1,492
Years Ended December 31
Current assets:
LEDs ...........................................................................................................
Laser & diodes ............................................................................................
Corporate .....................................................................................................
Total current assets ......................................................................................
Property, plant & equipment:
LEDs ...........................................................................................................
Laser & diodes ............................................................................................
Corporate .....................................................................................................
Total property, plant & equipment ..............................................................
Goodwill:
LEDs ...........................................................................................................
Laser & diodes ............................................................................................
Corporate .....................................................................................................
Total goodwill .............................................................................................
Other assets:
LEDs ...........................................................................................................
Laser & diodes ............................................................................................
Corporate .....................................................................................................
Total other assets .........................................................................................
Total assets:
LEDs ...........................................................................................................
Laser & diodes ............................................................................................
Corporate .....................................................................................................
Total assets ..................................................................................................
2017
2016
(In thousands)
$
$
$
$
$
$
$
$
$
2,950
2,601
2,228
7,779
282
350
1
633
424
—
—
424
635
74
5
714
4,291
3,025
2,234
9,550
$
$
$
$
$
$
$
$
$
2,060
2,641
965
5,666
39
298
5
342
372
—
—
372
69
—
5
74
2,540
2,939
975
6,454
Page 37
Years Ended December 31
Revenues by geographic area:
United States ...............................................................................................
Canada, Mexico & So. America ..................................................................
Europe .........................................................................................................
Asia & the rest of the world ........................................................................
$
5,580
938
8,744
2,481
$
4,850
1,932
7,777
1,686
Total ......................................................................................................................
$
17,743
$
16,245
2017
2016
(In thousands)
The Company’s long-lived assets consist of property, plant and equipment, goodwill and intangible assets
located in the following geographic locations:
Years Ended December 31
Long-lived assets by geographic area:
United States and North America ................................................................
Europe ..........................................................................................................
UK ...............................................................................................................
$
$
1
706
350
Total ......................................................................................................................
$
1,057
$
5
411
297
713
2017
2016
(In thousands)
(18) SUBSEQUENT EVENTS
The Company has evaluated subsequent events through March 21, 2018, the date which the financial statements
were available to be issued, and there were no additional events that impacted these financial statements or
required additional disclosure to the financial statements.
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