QPC Lasers, Inc. (OTCBB:QPCI) “QPC,” a world leader in the design and manufacture of high brightness, high power semiconductor lasers for the consumer electronics, industrial, defense, and medical markets, today announced its financial results for the year ended December 31, 2007. Revenues were at the high end of expectations, indicating continued growing market demand for the Company’s chip based laser technology.
2007 Financial Highlights
- 158% year-over-year revenue growth for FY2007
- 119% year-over-year revenue growth for Q407
- $12 Million Laser TV Development and Production Order; Potential Value up to $230 Million
- $1.75 Million in Orders to Deliver High Energy Laser Engine Prototypes for Naval Aviation Directed Energy Weapons
- 51% Gross Margin for FY2007
2007 Development & Production Highlights
- Shipped Laser Engines at Eye-safe Wavelengths to U.S. Defense Contractors; Demonstrated Critical Technology Milestone for U.S. Army Contract
- Launched Generation III Technology; Shipped Initial Units
- Demonstrated New Green Laser for Multiple Display Applications
- Introduced Ultra-500(TM) High Power Laser Offering up to 425 Watts
- Introduced BrightLase® Seed Laser
- Joint Production Work with Northrop Grumman (NYSE: NOC)
- Hired VP of Manufacturing to Prepare for Ramp Up of Manufacturing Operations
Financial Discussion
“2007 marked a number of important milestones including our third consecutive year of triple digit revenue growth, the launch of our revolutionary Generation III technology and our exciting entrance into the multibillion dollar consumer electronics market,” said Dr. Jeffrey Ungar, chairman and chief executive officer of QPC. “Production revenue was a significant contributor to our overall revenue growth, increasing 242% over last year. More specifically, we saw notable growth in the medical and consumer electronics markets, a growth trend we expect to see continue into 2008.”
“Demand for our core Gen I and Gen II product families continues to accelerate, particularly for medical laser products. In fact, we have now shipped nearly 3,500 varicose vein removal lasers, which we feel is a noteworthy validation not only for growing customer demand for our products, but for the quality and reliability of our products,” Ungar added.
“As our target markets begin to truly understand the highly attractive value proposition of our Generation III technology, which offers up to a ten fold improvement in efficiency, cost, size, weight and ruggedness compared to today’s conventional laser technology, we believe that QPC’s technology will have the capacity to revolutionize the existing multibillion dollar solid state and gas laser market. Our recent entrance into the consumer electronics market is indicative of the potential impact this new advanced technology may have on our business,” Ungar concluded.
Fourth Quarter Financial Results
Total revenue for the fourth quarter of 2007 was $2.8 million, representing a 119% year-over-year increase compared to the $1.3 million reported for the fourth quarter of 2006 and a 32% sequential increase compared to $2.2 million reported in the third quarter of 2007. This increase is attributable to both increased product and government revenue. QPC released its initial Generation III products during the second half of 2007 and shipments of those products contributed to the growth in revenues. Additionally, with the announcement of its visible (green) wavelength laser demonstration, QPC entered a new market sector, the display market for consumer electronics, which contributed $1 million to our fourth quarter revenue.
Total operating expense for the fourth quarter of 2007 was $3.2 million, compared to $2.8 million reported for the fourth quarter of 2006.
Net loss for the fourth quarter of 2007 was $(1) million, or $(0.03) per share, an improvement over net loss of $(2.7) million, or $(0.09) per share, reported for the fourth quarter of 2006. The decrease in net loss is attributable to the increase in gross margins and non-cash income of $3.2 million as a result of the change in fair value of embedded derivative liabilities partially offset by higher interest expense of $2.5 million. Per share calculations are based on 38.7 million shares in 2007 versus 38.6 million shares in 2006.
Gross Margins for the fourth quarter of 2007 were 63%, a substantial improvement compared to 36% reported for the fourth quarter of 2006. The improvement in gross margins was unusually high and is primarily attributable to one time non-recurring engineering development revenues. In addition, the improvement in margins resulted in part from the growth in sales of the Gen II and Gen III products which have higher unit prices and contribute to higher margins.
Cash and cash equivalents as of December 31, 2007 were $6.4 million.
2007 Financial Results
Total revenue for 2007 was $7.9 million, representing a 158% year-over-year increase compared to the $3.1 million reported in 2006. This increase is attributable to both increased product and government revenue.
Total operating expense for 2007 was $10.7 million, an improvement compared to the $16.8 million reported for 2006. This was primarily attributable to a license termination fee of $6,000,000 incurred in 2006; no comparable charge was incurred during the year ended December 31, 2007.
Net loss for 2007 was $(9.7) million, or $(0.25) per share, an improvement over net loss of $(18.7) million, or $(0.60) per share, reported for 2006. The improvement in net loss is attributable to the growth in product revenues year-over-year, a reduction in operating expenses as a result the non-recurring license termination fee that was recognized in 2006, and an increase in income due to the change in fair value of embedded derivative liabilities, partially offset by an increase in sales and marketing expenses, and an increase in interest expense and financing costs. Per share calculations are based on weighted average shares of 38.6 million shares in 2007 versus 31.3 million shares in 2006.
Gross margins for 2007 were 51%, a significant improvement over the gross margins of 25% reported in 2006. The improvement in gross margins was partially attributable to one time non-recurring engineering development revenues and to the growth in sales of the Gen II and Gen III products which have higher unit prices and contribute to higher margins.
Business Outlook
“We have added consumer electronics to our target markets which represents a multibillion dollar and growing market, ramped our sales and marketing efforts around the world and rolled out a number of higher powered additions to our product line,” noted George Lintz, co-founder and chief financial officer of QPC. “I anticipate these achievements should contribute to continued strong revenue growth in 2008 and beyond. We will continue to focus on improving our operational efficiencies while growing our top-line revenue, our customer base, and our global presence,” Lintz concluded.
Conference Call Information
A live conference call for all interested parties is scheduled for 2:00 p.m. ET (11:00 a.m. PT) today.
To listen to the live web cast, logon via the following link:
http://www.vcall.com/conferences/event.asp?ID=127017
Or, through the company’s website at www.qpclasers.com
To access the live conference call, dial 800-240-2134 (toll free) or 303-262-2131 (International) and give the company name, “QPC Lasers.” Participants are asked to call the assigned number approximately 10 minutes before the conference call begins.
Conference Call Replay
An instant replay of the conference call will be available over the Internet at the web address above.
A replay of the conference call will be available (starting two hours after the call) for five business days by dialing 800-405-2236 and entering the following pass code: 11110346#. International callers may access the replay by calling 303-590-3000 and entering the pass code above.
Forward Looking Statements
This release and other materials released by the Company from time to time contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company's management as well as estimates and assumptions made by the Company's management. When used in the materials the words "anticipate," "believe," "estimate," "expect," "future," "intend," "plan" or the negative of these terms and similar expressions as they relate to the Company or the Company's management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions and other factors (including the risks contained in the sections of the Company's reports filed with the Securities and Exchange Commission entitled "Risk Factors") relating to the Company's industry, the Company's operations and results of operations and any businesses that may be acquired by the Company. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with the Company's reports filed with the Securities and Exchange Commission.
About QPC Lasers, Inc.
QPC Lasers, Inc. (www.QPClasers.com) is a world leader in the development, manufacture and distribution of high-brightness, high-power semiconductor lasers for the consumer electronics, defense, homeland security, industrial, and medical markets. Founded in the year 2000, QPC is vertically integrated from epitaxy through packaging and performs all critical fabrication processes at its state-of-the-art high-technology facility in the Los Angeles suburb of Sylmar, CA. QPC is a publicly traded U.S. company (OTCBB: QPCI) and is ISO certified.
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| QPC LASERS, INC. and Subsidiary | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| Years ended | Three Months Ended | |||||||||||||||
| December 31, 2007 | December 31, 2006 | December 31, 2007 | December 31, 2006 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| REVENUE | ||||||||||||||||
| Commercial customers | $ | 5,113,688 | $ | 1,496,454 | $ | 2,566,260 | $ | 585,416 | ||||||||
| Government contracts | 2,818,494 | 1,576,878 | 280,150 | 714,822 | ||||||||||||
| TOTAL REVENUE | 7,932,182 | 3,073,332 | 2,846,410 | 1,300,238 | ||||||||||||
| COST OF SALES | 3,901,588 | 2,291,851 | 1,059,456 | 826,714 | ||||||||||||
| GROSS PROFIT | 4,030,594 | 781,481 | 1,786,954 | 473,524 | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Research and Development | 4,509,052 | 4,502,132 | 1,390,443 | 1,161,360 | ||||||||||||
| General and Administrative | 6,224,201 | 6,282,043 | 1,772,139 | 1,611,178 | ||||||||||||
| License Termination | - | 6,000,000 | - | - | ||||||||||||
| Total operating expenses | 10,733,253 | 16,784,175 | 3,162,582 | 2,772,538 | ||||||||||||
| LOSS FROM OPERATIONS | (6,702,659 | ) | (16,002,694 | ) | (1,375,628 | ) | (2,299,014 | ) | ||||||||
| Interest Income | 228,004 | 41,632 | 70,801 | 13,716 | ||||||||||||
| Interest Expense | (8,397,494 | ) | (2,420,633 | ) | (2,956,933 | ) | (473,577 | ) | ||||||||
| Merger expense | - | (326,199 | ) | - | - | |||||||||||
| Private placement expense | (17,740,180 | ) | - | - | - | |||||||||||
| Change in fair value of embedded derivative | 22,822,370 | (68,703 | ) | 3,243,627 | - | |||||||||||
| Other income | 79,395 | 83,990 | 7,660 | 25,213 | ||||||||||||
| NET LOSS | $ | (9,710,564 | ) | $ | (18,692,607 | ) | $ | (1,010,473 | ) | $ | (2,733,662 | ) | ||||
| LOSS PER COMMON SHARE — Basic and Diluted | $ | (0.25 | ) | $ | (0.60 | ) | $ | (0.03 | ) | $ | (0.09 | ) | ||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, basic and diluted | 38,623,679 | 31,306,637 | 38,666,866 | 31,459,137 | ||||||||||||
| QPC LASERS, INC. and Subsidiary | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| December 31, 2007 and 2006 | ||||||||
| CURRENT ASSETS | December 31, 2007 | December 31, 2006 | ||||||
| Cash | $ | 6,431,744 | $ | 1,429,077 | ||||
| Accounts receivable, Commercial customers, net | 2,283,425 | 667,908 | ||||||
| Accounts receivable, Government contracts, net | 609,874 | 383,935 | ||||||
| Unbilled Revenue | 194,537 | 42,692 | ||||||
| Inventory | 688,364 | 550,655 | ||||||
| Prepaid expenses and other current assets | 226,466 | 272,418 | ||||||
| Total Current Assets | 10,434,410 | 3,346,685 | ||||||
| Capitalized Loan Fees, net of accumulated amortization | - | 38,039 | ||||||
| Property and equipment, net of accumulated depreciation of $6,051,713 at December 31, 2007 and $5,276,320 at December 31, 2006 | 3,359,711 | 3,961,796 | ||||||
| Other assets | 203,415 | 88,780 | ||||||
TOTAL ASSETS | $ | 13,997,536 | $ | 7,435,300 | ||||
| LIABILITIES AND STOCKHOLDER’S DEFICIENCY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and other current liabilities | $ | 1,737,581 | $ | 1,234,004 | ||||
| Embedded Derivative Liability | 10,283,181 | - | ||||||
| Current portion of long term debt | 624,834 | 1,034,437 | ||||||
| Total Current Liabilities | 12,645,596 | 2,268,441 | ||||||
| Long term debt, less current portion | 11,435,133 | 6,398,189 | ||||||
| Total Liabilities | 24,080,729 | 8,666,630 | ||||||
| STOCKHOLDERS’ DEFICIENCY | ||||||||
| Preferred stock, $.001 par value, 20,000,000 shares authorized, none issued | - | - | ||||||
| Common stock, $.001 par value, 180,000,000 shares authorized, 38,676,783 issued and outstanding at December 31, 2007 and 38,559,283 at December 31, 2006 | 38,677 | 38,559 | ||||||
| Additional paid in capital | 51,095,087 | 50,236,504 | ||||||
| Accumulated deficit | (61,216,957 | ) | (51,506,393 | ) | ||||
| Total stockholders’ deficiency | (10,083,193 | ) | (1,231,330 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | 13,997,536 | $ | 7,435,300 | ||||
Contacts:
Marie Dagresto, Director of Investor
Relations
818-986-0000
investors@qpclasers.com
www.QPClasers.com
