2018 Annual General Meeting 16 May 2018 - Prophotonix...2015 2016 2017 Company Confidential –...

Company Confidential – Property of ProPhotonix Limited 1

2018 Annual General Meeting 16 May 2018


• This presentation has been prepared by ProPhotonix Limited (the “Company”) solely for use in connection with providing you an understanding of

the Company.

• This presentation does not constitute or form part of, and should not be construed as, an offer, invitation or inducement to purchase or subscribe for any securities nor shall it or any part of it form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. This document does not constitute either advice or a recommendation regarding any securities of the Company. Any person who is in any doubt about the subject matter of this document should consult an authorized person.

• The contents of this document are strictly private and confidential and, accordingly, the contents of this document must not be published, reproduced, copied or disclosed to any person other than the recipients’ professional advisers and then only on the condition that such professional advisers maintain the confidentiality of this document. By accepting delivery hereof, the recipient agrees to return this document to the Company promptly on request, together with any other materials provided to it in connection herewith, without retaining any copies.

• Unless specifically attributed to another source, any targets, forecasts, estimates and projections contained in this document have been prepared by the management of the Company and involve elements of subjective judgments and analysis which may or may not be correct. In addition, some statements contained in this document or in documents referred to in it are or may be forward-looking statements. Actual results may differ from those expressed in such statements, depending on a variety of factors. Any forward-looking information contained in this document has been prepared on the basis of a number of assumptions that may prove to be incorrect, and accordingly, actual results may vary. The information set out herein may be subject to updating, completion, revision, verification and amendment and such information may change materially.

• Neither the Company nor its advisers nor any of their respective directors or employees or any other person make any representation or warranty, express or implied, as to the accuracy or completeness of the contents of this document or of any other document or information supplied at any time in connection with the proposed placing of Shares. In particular, but without limitation, no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on, any assumptions, targets, forecasts, projections, estimates or prospects with regard to the anticipated future performance of the Company. No responsibility or liability is accepted by any such person for any errors, misstatements or omissions in this document or any other such document or information. The exclusions set out in this paragraph do not extend to an exclusion of liability for, or remedy in respect of, fraudulent misrepresentation. Neither the Company nor its respective advisers or any of their respective directors or employees or any other person shall be obliged to provide the recipient with any further information or to update this document or correct any inaccuracies that become apparent.

• This document and the investment activity to which it relates may be communicated to, and is only directed at (i) persons outside the EEA, (ii) persons having professional experience in matters relating to investments, being investment professionals as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (“FPO”), (iii) persons falling within Article 49(2)(a) to (d) of the FPO (including high net worth companies and unincorporated associations), and (iv) persons to whom communication may otherwise be lawfully made, (together ”relevant persons”). The document must not be acted on or relied upon by any persons who are not relevant persons. Any investment or investment activity to which the document relates is available only to relevant persons and will be engaged in only with relevant persons.

• Any recipient of this document, to whom communication of it is not lawful, should return it to the Company immediately.

Disclaimer


Designs and manufactures high technology Laser and LED systems for OEMs in machine vision, UV curing, medical equipment and security markets


>100 Talented Employees and Growing

Annual capacity: 2.7 million chip placements 200,000 laser diode modules

at a glance

Established in 1951 ISO-certified production facilities

Global Sales team supported by

Distribution Partners


Wide range of configurable and custom laser solutions

• Unique position: Laser diode distributor and manufacturing integrator

• Established Supply chain: Laser diodes, optics and other components

• In-house machining of parts: Enhanced quality control, reduced lead times

• 1,500 strong design data base: Laser module designs for different applications

Laser Diodes Laser Assemblies Laser Diode Modules

Design, develop, manufacture in the United Kingdom


Custom and configurable LED solutions

• LED technology: Pioneer in “Chip on Board” LED technology

• Established Supply Chain: LEDs, optics, electronics and thermal

• Clean room Facility: Delivering manufacturing excellence

• Design library: Offering a wide range of designs and capability

LED array LED Modules LED Systems

Design, develop, manufacture in Ireland

Miniature LED Arrays to Turnkey Systems


Advantages of Chip on Board technology


Complementary LED and Laser solutions for a wide range of applications

UV LED Curing Modules

Laser Modules for 3D Scanning

Laser Modules for Dental X-ray

LED Lamps for Erasing Image

on Plates

3D Printing and Scanning

Optical Sorting

Dental Equipment

LED Lamps for Optical Sorting

Laser for Optical Sorting


In-house design capabilities

Complete

Solution

Software

Manufacturing

Thermal

Mechanical

Optical

Electronic


The ProPhotonix Approach

Definition Concept

Prototype

Pre-Production

Serial Production

Ongoing Support

• ProPhotonix R&D team becomes part of customer’s team

• Proven process with customer approval at every stage

• ProPhotonix process does not end when the solution goes into production

• Product lifecycle management through to GenN

Our team provides continuous support to improve the competitiveness of customer’s solution

Integrated Partnership


Financial and Business Review


• Revenue by Geography 2017 2016 – Europe 49% 48% – Americas 37% 42% – Middle East 5% 6% – Asia 9% 4%

• Revenue by Markets – Commercial/Industrial* 75% 82% – Medical/Dental 21% 14% – Security 4% 4%

*Inspection/sorting, Semi-conductor, robotics, UV, machine vision

World Class Customer Base/Diverse Markets and Geography

ProPhotonix uses a hybrid Direct/Indirect sales model. Asia – Indirect Distributors and Representatives EMEA – Direct sales and Indirect Distributors/Reps Americas - Direct sales and Indirect Distributors/Reps


Financial Trends – Year on Year progress

(5,000,000)

-

5,000,000

10,000,000

15,000,000

20,000,000

Revenue Gross Profit Operating Gain (Loss) EBITDA

2012

2013

2014

2015

2016

2017


Condensed Consolidated Statements of Income and Comprehensive Income

FY 2017 vs. FY 2016 ($ in thousands, except share and per share data)

FY 17 FY 16

Revenue $17,743 $16,245

Cost of Sales 9,822 8,862

Gross Profit 7,921 7,383

Operating expenses:

Research & development 763 814

Selling expenses 2,497 2,058

General & administrative 3,454 3,019

Total operating expenses 6,714 5,891

Operating income 1,207 1,492

Other income/ (expense), net 432 (16)

Interest expense 49 133

Amortization of debt discount and financing costs 18 88

Income/ (Loss) from Continuing Operations 1,572 1,255

Income/ (Loss) from Disco - -

Income before tax 1,572 1,255

Income tax benefit 469 -

Net income 2,092 1,255

Other comprehensive income:

Foreign currency translation 51 (19)

Total comprehensive income $ 2,092 $ 1,236

Net income per share:

Basic net income per share $ 0.022 $ 0.005

Diluted net income per share $ 0.020 $ 0.005

Shares used in per share calculation - basic 92,565,402 83,665,402

Shares used in per share calculation - diluted 104,193,859 90,740,402


Condensed Consolidated Balance Sheets ($ in thousands)

For the Periods Ended: 12/31/2017 12/31/2016

Assets

Current Assets:

Cash & Cash Equivalents 2,150 911

Account Receivable 3,114 2,302

Inventories 2,280 2,155

Pre-Paid Expenses and Other Current Assets 235 299

Total Current Assets: 7,779 5,666

Property, Plant & Equipment, Net 633 342

Deferred tax asset 475 -

Goodwill, net of Accumulated Depreciation 424 372

Other assets 239 74

Total Assets: 9,550 6,454

Liabilities & Stockholder's Equity

Current Liabilities:

Current portion of LTD - 402

Short-Term Debt 1,293 1,049

Accounts Payable 1,638 1,454

Accrued Expenses 1,788 1,823

Capital Lease obligations 95 68

Total Current Liabilities: 4,814 4,796

Long Term Capital Lease 98 52

Total Liabilities: 4,912 4,848

Stockholders' Equity:

Common Stock, par value $.001 93 84

Additional Paid In Capital 112,969 112,038

Cumulative Translation Adjustment 1,014 963

Retained Earnings (Deficit) (109,438) (111,479)

Total Stockholders' Equity 4,638 1,606

Total Liabilities & Stockholders' Equity 9,550 6,454


• Operating Income – 2014, 2015, 2016, 2017

• EBITDA – 2014, 2015, 2016, 2017

• Net income positive – 2015, 2016, 2017

• Term debt paid as of 30 June 2017

• Gross margin steady

• Continuing new product announcements

Financial/Business Summary


Technology and Market Strategy


Technology Leadership

Custom Systems Downstream innovation into

Premium Products

Custom Illumination Leverage commonality for Premium

Downstream innovation into Premium

Premium Standard Products

Common Platforms – Common Components – Modular – Configurable

Economical Standard Products

Ring/Spot/Line LED Simple Laser Modules

Core Technology

Chip-on-board LED Laser Diodes In-house manufacturing

Bespoke (manufactured by PPX)

Premium Brands (manufactured by PPX)

Core Capabilities

Technology Strategy


Laser Technology Roadmap

Q1 18

Q2 18

Q3 18

Q4 18

Development

Development

Prototype

Prototype

Q4 17

Launch

Launch

Prototype Develop-

ment

Diffuse

Diffuse

Technology Roadmap

Launch Diffuse


UV Development Roadmap


COBRA CURE FX SERIES

3D Printing

Curing

Printing


Key Specifications

Feature FX1 FX2 FX3

Optical Configuration DW 40° 0° DW 40° DW 40°

Max. Intensity (W/cm2) 7.5 5 6 15 8.4 30+ 16

Max. Energy Density (J/cm2) 7.5 4.4 5 22 17.5 55 42

Illumination Area (mm) 77 x 10 77 x 20

Communication Protocols Analog RS485

365, 385, 395, 405 (nm)

Fan-cooled

Scalable


ConfigurableUV LED Curing System


COBRA Cure FX Series available in increments of 75mm up to 600mm

Scalable


Precise Segment Control

Full control of Individual LED chains

• COBRA Cure FX1/FX2: 4 drivers per 77mm lamp – segment width 18.75mm • COBRA Cure FX3: 8 drivers per 77mm lamp – segment width 9.375mm


Product Enhancements

FX3 – DW Scalable

• Highest in class performance irradiance and dose – independent 3rd party tested • Improved unit to unit uniformity (95%) • Single optical window • 450mm units in production for Global ink and machine manufacturer


Capital Investment and Funding

People • Hire 5 additional Engineers to the UV

Team • 50% of LED Engineering team

dedicated to UV product development

Production • Automated Epoxy dispense system • Automated wire bond pull tester system • Automated encapsulation system • 3 x ovens, 3 x microscopes • Dedicated soldering & debug stations Quality Control • Automated LED header and test system • Automated UV test and calibration system • Dedicated burn-in room • Environmental chamber

€500k investment in UV Production Capability from IDA Grant and other investment to support UV growth strategy


UV LED Market

• 40% per annum growth rate • By 2017/2018, purification / disinfection applications should also start to emerge. We expect these

applications to represent nearly 30% of total UV LED revenue by 2019 / 2020.


THANK YOU!


Board of Directors - Governance

Mr. Losik was appointed as President and CEO of ProPhotonix on May 28, 2013 and has been a member of the board since June 2010. From January 2008, Mr. Losik held the positions of COO and CFO of ProPhotonix with responsibility for all day-to-day operations across the Group’s worldwide operating units and to head its financial organization. he. Prior to joining the Company, Mr. Losik held senior operating and/or financial executive positions for various publicly listed and private enterprises (primarily in the technology sector).

A member of the Board since 2000, Raymond Oglethorpe is Chairman, and a member of the Audit and Governance/Remuneration and Nomination Committees. He is currently President of Oglethorpe Holdings, LLC, a private investment company. Mr. Oglethorpe served as President of America Online, Inc. from 2000 until his retirement in 2002.

Appointed to the Board in March 2011, Tim Steel is a member of the Audit Committee and Chairman of the Governance/Remuneration and Nomination Committee. Tim Steel was previously Vice Chairman of Cazenove Capital Management Ltd, until the end of 2009. He initially joined Cazenove in 1980 from Robert Fleming. Tim Steel is currently Chairman of Castle Alternative Invest AG, Chairman of Committed Capital Limited, a private equity firm, and is a Non-Executive Director of W H Ireland, a financial services company.

Tim Losik,

President & CEO

Raymond Oglethorpe,

Chairman, Non-Executive Director

Tim Steel,

Non-Executive Director

Appointed to the Board in in March 2011, Vincent Thompson is a member of the Governance/Remuneration and Nomination Committee and Chairman of the Audit Committee. Mr. Thompson has over 30 years of experience in corporate finance, having spent the majority of his career with Morgan Grenfell & Co. Limited and Hambros Bank Limited (later Société Générale, following the takeover of Hambros Bank Limited) and was a Director at both. In 2009, Vincent Thompson formed his own corporate finance boutique, Easton Partners LLP.

Vincent Thompson,


Mark Weidman is currently the CEO of Harvest Power Inc., a company engaged in the environmental services sector and specializing in converting waste. Mark is also an operating partner at True North Venture Partners and the founder and owner of Birch Tree Environmental Group, LLC, a consulting firm providing services in the environmental services, energy and technology sectors. Mr. Weidman previously served as President and CEO of Wheelabrator Technologies Inc., from 2006 to July 2015. Mr. Weidman has been a member of the Board of the Company since July 2013 and is a member of both the Governance, Nominations and Remuneration committee and Audit committee.

Mark Weidman,


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2018 Annual General Meeting 16 May 2018 - Prophotonix...2015 2016 2017 Company Confidential –...

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