Photonic Products Group, Inc. Reports Record Financial Results for FY 2007

NORTHVALE, N.J., March 31 /PRNewswire-FirstCall/ -- Photonic Products
Group, Inc. (PHPG) today reported its consolidated, audited, financial results
for its fiscal year which ended December 31, 2007.
Revenues in fiscal year 2007 were a record at $15,100,000 up 8.5% compared
with $13,921,000 last year. Order intake for the year was our highest ever at
$17,802,000 as was our year-end backlog of $9,672,000, up 34.0% and 38.4% from
2006, respectively.
Pre-tax income for the year was $2,130,000 compared to $793,000 in 2006,
up 169%. Net income in 2007 was $1,880,000, after an income tax provision of
$250,000. Net income in 2006 was $772,000, after an income tax provision of
$21,000.
Gross profit of $5,959,000 was up 31% from $4,544,000 in 2006, as gross
profit margin for the year improved to 39.5% from 32.6%. Income from
operations increased to $2,397,000, up 161% from last year's $917,000.
Basic and diluted earnings per share, after accounting for the common
stock dividend on preferred stock, were $0.19 and $0.13, respectively, in
2007, compared with basic and diluted EPS of $0.07 and $0.06, respectively in
2006.
Net cash flow from operating activities was $3,001,000 for the year,
compared with $2,672,000 in 2006. For 2007, cash and cash equivalents
increased $1,318,000 to $4,396,000 at year-end, after net cash outlays for
debt repayments and redemptions of $1,893,000, and a decrease of $117,000 in
customer advances. In 2006, cash and cash equivalents increased by $1,921,000,
including net borrowings of $373,000 and an increase of $336,000 in customer
advances, to $3,078,000 at year-end.
EBITDA(1) for the year rose to $3,545,000, up from $2,412,000 in 2006 and
$1,485,000 in 2005.
The Company reported fourth quarter revenues of $4,042,000 this year,
compared with revenues of $3,678,000 in the same period, a year ago. Pre-tax
net income was $421,000 vs. $412,000 in the same period last year, the
Company's tenth consecutive quarter with positive net income. After-tax net
income for the fourth quarter was $251,000 in 2007, after allowing for the
significantly increased 2007 income tax provision applied to fourth quarter
earnings. This compares with fourth quarter net income of $391,000 in 2006.
Basic and diluted earnings per share for the fourth quarter were $0.03, and
$0.02, respectively. This compares with basic and diluted income per share of
$0.05 and $0.04, respectively, in the fourth quarter of 2006.
Dan Lehrfeld, President and CEO of PPGI commented, "I am pleased to report
that we exceeded our financial goals for 2007, setting new records for
revenues, new orders, backlog at year-end, net income, and cash flow from
operations. We were solidly profitable for the year as a whole, with record
net income of 11.9% of sales, up from 5.5% of sales in 2006. Early in the year
we launched an initiative to strengthen our balance sheet, and worked at it
steadily. We recalled all of our outstanding convertible preferred shares, and
our shareholders elected to accept conversion to common shares. We deployed
close to $2,000,000 of cash into accelerating repayment of debt, while still
ending the year with our cash balance up over $1,300,000 for the year to a
record $4,396,000. We continued this initiative in the first quarter of 2008
with the repayment in full of our $1,700,000 senior secured note and all
accrued interest. In 2008 we are off to a good start and look forward to our
again delivering positive financial results, and continued growth.
(1) Note Regarding Use of Certain Non-GAAP Financial Measures:
The Company defines EBITDA as earnings before non-cash, stock-based
compensation, net interest, income taxes, depreciation, and amortization.
EBITDA is presented herein because it is a measure of PPGI's ability to
internally fund capital expenditures and service debt. EBITDA should not be
considered as an alternative to cash flow as an indicator of PPGI's financial
performance, or of the Company's liquidity. The reader is referred to the
Supplemental Financial Data set forth below for a reconciliation of net income
to EBITDA.

At December 31,
Reconciliation of EBITDA to
Net Income 2007 2006 2005

Net income (loss), as reported $1,880,000 $ 772,000 $ (11,000)
Non-cash, stock-based
compensation 34,000 118,000 21,000
Non-GAAP based net income 1,914,000 890,000 10,000
Income tax provision 250,000 21,000 -
Interest expense, net 261,000 402,000 505,000
Depreciation and Amortization 1,120,000 1,099,000 970,000
EBITDA $3,545,000 $2,412,000 $1,485,000

Photonic Products Group, Inc. develops, manufactures, and markets products
and services for use in diverse Photonics industry sectors via its expanding
portfolio of distinctly branded businesses. INRAD specializes in crystal-based
optical components and devices, laser accessories and instruments. Laser
Optics specializes in precision custom optical components, assemblies, and
optical coatings. MRC Optics' business specializes in precision diamond turned
optics, metal optics, and opto-mechanical and electro-optical assemblies.
PPGI's customers include leading corporations in the Defense and Aerospace,
Laser Systems, and Process Control and Metrology sectors of the Photonics
Industry, as well as the U.S. Government. Its products are also used by
researchers at National Laboratories and Universities world-wide.
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: The statements contained in this press release that are not purely
historical are forward looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Act of 1934.
These statements may be identified by their use of forward-looking terminology
such as "believes", "expects", "will", "plan", "targeting" or similar words.
Such forward-looking statements, such as our expectation for continued growth
in sales and our expectation that the year will be profitable, involve risks
and uncertainties that could cause actual results to differ materially from
those projected. Risks and uncertainties that could cause actual results to
differ materially from such forward looking statements are, but are not
limited to, uncertainties in market demand for the company's products or the
products of its customers, future actions by competitors, inability to deliver
product on time, inability to implement its growth strategies or to integrate
its new operations, inability to make acquisitions, inability to realize
synergies from its acquisitions, inability to raise capital, inability to
retain key employees, and other factors discussed from time to time in the
Company's filings with the Securities and Exchange Commission. The forward
looking statements made in this news release are made as of the date hereof
and Photonic Products Group, Inc. does not assume any obligation to update
publicly any forward looking statement.

PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31,
2007 2006
Assets
Current assets:
Cash and cash equivalents $ 4,395,945 $ 3,078,052
Accounts receivable (after allowance
for doubtful accounts of $15,000 in
2007 and 2006) 2,181,859 2,396,486
Inventories 2,931,080 2,336,033
Other current assets 164,065 176,587
Total Current Assets 9,672,949 7,987,158
Plant and equipment:
Plant and equipment at cost 13,690,229 13,459,212
Less: Accumulated depreciation and
amortization (10,189,853) (9,164,031)
Total plant and equipment 3,500,376 4,295,181
Precious Metals 112,851 130,732
Goodwill 1,869,646 1,869,646
Intangible Assets, net of accumulated
amortization 830,144 908,708
Other Assets 91,981 124,835
Total Assets $16,077,947 $15,316,260

Liabilities and Shareholders' Equity
Current Liabilities:

Current portion of notes payable -other $ 14,814 $ 100,079
Accounts payable and accrued liabilities 2,741,966 2,495,398
Customer advances 870,550 987,963
Current obligations under capital leases 47,088 196,350
Related party secured note due within
one year 1,700,000 -
Total Current Liabilities 5,374,418 3,779,790

Related Party Convertible and Secured
Notes Payable 2,500,000 5,200,000
Notes Payable - Other, net of current
portion 490,730 1,052,680
Capital Lease Obligations, Net of
current portion - 47,087
Total Liabilities 8,365,148 10,079,557

Commitments and Contingencies - -

Shareholders' equity:
10% convertible preferred stock,
Series A no par value; no shares issued
and outstanding at December 31, 2007
and 500 shares issued and outstanding
at December 31, 2006 - 500,000

10% convertible preferred stock,
Series B no par value; no shares issued
and outstanding at December 31, 2007
and 2,082 shares issued and outstanding
at December 31, 2006 - 2,082,000

Common stock: $.01 par value; 60,000,000
authorized shares 10,104,719 issued at
December 31, 2007 and 7,882,074 issued
at December 31, 2006 101,046 78,820
Capital in excess of par value 15,320,771 11,926,815
Accumulated deficit (7,694,068) (9,335,982)
7,727,749 5,251,653

Less - Common stock in treasury, at cost
(4,600 shares) (14,950) (14,950)
Total Shareholders' Equity 7,712,799 5,236,703
Total Liabilities & Shareholders'
Equity $16,077,947 $15,316,260

PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,
2007 2006 2005
Revenues
Net sales $15,099,878 $13,921,127 $13,785,057

Cost and expenses
Cost of goods sold 9,141,049 9,377,313 9,956,125
Selling, general and
administrative expense 3,561,570 3,627,244 3,450,224
Internal research and
development expense - - 20,279
12,702,619 13,004,557 13,426,628

Operating income 2,397,259 916,570 358,429

Other income (expense)

Interest expense, net (261,327) (402,154) (504,509)
Settlement of insurance
claim 300,000 -
(Loss) gain on sale of
precious metals (5,851) - 135,931
Other (21,150) (1,249)
(267,178) (123,304) (369,827)

Income (loss) before income
tax provision and preferred
stock dividends 2,130,081 793,266 (11,398)

Income tax provision 250,000 21,000 -

Net income (loss) 1,880,081 772,266 (11,398)

Preferred stock dividends (238,167) (234,500) (134,000)

Net income (loss) applicable
to common shareholders $ 1,641,914 $ 537,766 $ (145,398)

Net income (loss) per share
- basic $ 0.19 $ 0.07 $ (0.02)

Net income (loss) per share
- diluted $ 0.13 $ 0.06 $ (0.02)

Weighted average shares
outstanding - basic 8,609,822 7,572,637 7,218,244

Weighted average shares
outstanding - diluted 13,777,114 11,915,090 7,218,244

PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,
2007 2006 2005
Cash flows from operating
activities:
Net income (loss) $1,880,081 $ 772,266 $ (11,398)

Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and
amortization 1,119,887 1,099,003 1,025,074
Loss/(gain) on sale of
precious metal 5,851 - (135,931)
401K common stock contribution 166,694 150,501 68,780
Stock option acceleration
expense - - 21,298
Stock option expense 34,074 117,687 -
Change in allowance for
doubtful accounts - - (73,000)
Change in inventory reserve 163,391 102,817 (254,526)

Changes in operating assets
and liabilities:
Accounts receivable 214,627 (130,552) (744,939)
Inventories (758,438) (14,971) 309,720
Other current assets 12,522 (22,864) (66,184)
Other assets 32,854 39,549 28,981
Accounts payable and
accrued liabilities 246,568 222,718 81,740
Customer advances (117,413) 335,699 110,546
Total adjustments 1,120,617 1,899,587 371,659
Net cash provided by
operating activities 3,000,698 2,671,853 360,261

Cash flows from investing
activities:
Capital expenditures (246,518) (986,732) (453,615)
Proceeds from sale of
precious metals 12,030 - 314,764
Net cash used in
investing activities (234,488) (986,732) (138,851)

Cash flows from financing
activities:
Net proceeds (uses) from
issuance of common stock 445,247 112,830 (19,492)
Proceeds from secured notes
payable 700,000 -
Redemption of Series B
Preferred shares (50,000) - -
Principal payments of notes
payable (647,215) (326,724) (166,515)
Principal payments of
convertible promissory notes (1,000,000)
Principal payments of
capital lease obligations (196,349) (249,738) (272,347)

Net cash provided by
(used in) financing
activities (1,448,317) 236,368 (458,354)

Net increase (decrease) in
cash and cash equivalents 1,317,893 1,921,489 (236,944)

Cash and cash equivalents at
beginning of the year 3,078,052 1,156,563 1,393,507

Cash and cash equivalents at
end of the year $4,395,945 $3,078,052 $1,156,563

SOURCE Photonic Products Group, Inc.

Daniel Lehrfeld, President and CEO of Photonic Products Group, Inc.,
+1-201-767-1910, or fax, +1-201-767-9644, dlehrfeld@ppgrpinc.com