Photonic Products Group, Inc. Reports First Quarter 2009 Results

NORTHVALE, N.J., May 19 /PRNewswire-FirstCall/ -- Photonic Products Group,
Inc. (OTC Bulletin Board: PHPG) has reported its consolidated financial
results for its first quarter, which ended March 31, 2009.

Revenues for the first quarter were $2.8 million, down 32% from the same
period last year.

Orders for the first three months were $1.6 million compared to $6.9 million
in the first three months of 2008 with lower order activity in the first
quarter of 2009 being primarily attributable to the effect of the current
economic slowdown and its impact on our customers' business activity and
demand for our products.

Gross profit for the quarter was $382,000, or 13.6%, down from a gross profit
of $1.5 million, or 36.0% in last year's first quarter.

The Company reported a net loss of $(314,000) for the quarter just ended
compared with net income of $491,000 for the same period last year. This
quarter's results included a benefit from income taxes of $236,000, reflecting
the Company's recognition of a deferred tax asset, net of its current tax
provision. Last year's results reflected a benefit from income taxes of
$52,000, net of current tax expense. (Loss)/earnings per share were $(0.03)
diluted and basic in the current quarter. This compares with $0.05 basic and
$0.03 diluted in the first quarter of 2008.

First quarter 2009 results showed net cash provided by operating activities of
$357,000, compared to net cash used by operating activities of $223,000, in
the first quarter of last year. The Company ended the quarter with cash, cash
equivalents and short-term investments of $3,750,000.

Joe Rutherford, President and CEO of PPGI commented, "Our first quarter
results are disappointing but not unexpected given the current economic
conditions in the markets we serve. We have responded with cost cutting
measures throughout both our operations in Northvale and our MRC operations in
Sarasota. We have reduced our workforce levels to right size our operations to
better align them with the current economic realities. Our mission remains to
exceed our customer's expectations and to be responsive to those needs in the
future."

Founded in 1973, Photonic Products Group, Inc. develops, manufactures, and
markets products and services for use in diverse Photonics industry sectors
via its 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. www.ppgrpinc.com

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", "should", "will", "plan", "anticipate",
"targeting" or similar words. Such forward-looking statements, such as our
expectation for revenues, new orders, and income, 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 new
operations, inability to realize synergies from its acquisitions, inability to
raise capital, inability to retain key employees or hire new 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

March 31, December 31,
2009 2008
------ ------
(Unaudited) (Audited)
Assets
------
Current assets:
Cash and cash equivalents $2,941,545 $2,672,087
Certificates of deposit 807,738 800,000
Accounts receivable (net of allowance
for doubtful accounts of $15,000 in
2009 and 2008) 1,796,072 2,810,602
Inventories, net 2,639,186 2,732,336
Other current assets 259,153 188,084
Total current assets 8,443,694 9,203,109
Plant and equipment:
Plant and equipment, at cost 14,482,251 14,445,027
Less: Accumulated depreciation and
amortization (11,372,620) (11,139,771)
Total plant and equipment 3,109,631 3,305,526
Precious Metals 157,443 112,851
Deferred Income Taxes 644,000 408,000
Goodwill 1,869,646 1,869,646
Intangible Assets, net 731,939 751,580
Other Assets 47,852 81,707
$15,004,205 $15,732,149
Total Assets

Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities:
Current portion of notes
payable - other $135,165 $136,892
Accounts payable and accrued
liabilities 1,674,821 2,160,665
Customer advances 331,309 456,754
Total current liabilities 2,141,295 2,754,311

Related Party Convertible Notes
Payable 2,500,000 2,500,000
Other Long Term Notes 351,467 353,663
Total liabilities 4,992,762 5,607,974

Commitments and Contingencies - -

Shareholders' Equity:
Common stock: $.01 par value;
60,000,000 authorized shares;
11,302,466 shares issued at
March 31, 2009 and 11,230,678
issued at December 31, 2008 113,023 112,306
Capital in excess of par value 16,823,426 16,622,466
Accumulated deficit (6,910,056) (6,595,647)
10,026,393 10,139,125
Less - Common stock in treasury, at
cost (4,600 shares respectively) (14,950) (14,950)
Total Shareholders' Equity 10,011,443 10,124,175

Total Liabilities and
Shareholders' Equity $15,004,205 $15,732,149

PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended March 31,
2009 2008
------ ------
Total Revenue $2,815,097 $4,164,248

Cost and Expenses:
Cost of goods sold 2,433,410 2,662,655
Selling, general and
administrative expenses 907,079 986,813
3,340,489 3,649,468

Operating (loss) income (525,392) 514,780

Other income (expense):
Interest expense-net (32,388) (75,580)
Gain on sale of precious metals 7,371 -
(25,017) (75,580)

Net (loss) income before income
taxes (550,409) 439,200

Benefit from income taxes 236,000 52,000

Net (loss) income $(314,409) $491,200

Net (loss) income per common share
- basic $(0.03) $0.05

Net (loss) income per common share
- diluted $(0.03) $0.03

Weighted average common shares
outstanding-basic 11,260,199 10,535,075

Weighted average common shares
outstanding-diluted 11,260,199 15,862,817

PHOTONIC PRODUCTS GROUP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended March 31,
2009 2008
Cash flows from operating activities:
Net (loss) income $(314,409) $491,200

Adjustments to reconcile net (loss)
income to cash provided by (used in)
operating activities:
Depreciation and amortization 252,490 270,188
401(K) common stock contribution 179,068 160,181
Gain on sale of precious metals (7,371) -
Deferred income taxes (236,000) (102,000)
Stock based compensation 23,595 18,573
Changes in operating assets and
liabilities:
Accounts receivable 1,014,530 (184,226)
Inventories, net 93,150 (363,989)
Other current assets (71,069) (32,326)
Other assets 33,855 36,721
Accounts payable and accrued
liabilities (485,844) (217,335)
Customer advances (125,445) (300,011)
Total adjustments 670,959 (714,224)
Net cash provided by (used in)
operating activities 356,550 (223,024)

Cash flows from investing activities:
Capital expenditures (37,224) (186,363)
Purchase of precious metals (53,538) -
Purchase of certificate of
deposit, net (7,738) -
Proceeds from sale of precious
metals 16,317 -
Net cash (used in) investing
activities (82,183) (186,363)

Cash flows from financing activities:
Redemption of restricted stock units (986) -
Proceeds from issuance of common
stock - 139,580
Exercise of warrants - 591,587
Principal payment of convertible
note payable - (1,700,000)
Principal payments of other notes
payable (3,923) (3,699)
Principal payments of capital
lease obligations - (22,006)
Net cash used in financing
activities (4,909) (994,538)

Net increase (decrease) in cash
and cash equivalents 269,458 (1,403,925)

Cash and cash equivalents at
beginning of period 2,672,087 4,395,945

Cash and cash equivalents at end
of period $2,941,545 $2,992,020

Supplemental Disclosure of Cash
Flow Information:
Interest paid $3,596 $482,860
Income taxes paid $50,000 $10,000

SOURCE Photonic Products Group, Inc.

Photonic Products Group, Inc., +1-201-767-1910, or fax, +1-201-767-9644,
jrutherford@ppgrpinc.com