Polar Power Reports Fourth Quarter and Full Year 2017 Financial Results

March 8, 2018 4:01 PM

GARDENA, CA -- (Marketwired) -- 03/08/18 -- Polar Power, Inc. (NASDAQ: POLA), a global provider of prime, backup and solar hybrid DC power solutions, reported its financial results for the fourth quarter and full year ended December 31, 2017.

Key 2017 and Subsequent Highlights:

Financial Results for the Three and Twelve Months Ended December 31, 2017

Net sales in 2017 totaled $14.4 million, a decrease of 37%, as compared to $22.8 million in 2016. Net sales totaled $4.0 million in Q4 2017, a decrease of 45%, as compared to $7.3 million in Q4 2016. The decrease in net sales was primarily a result of a decline in sales of DC power systems to our prior largest Tier-1 wireless carrier customer, coupled with a price reduction in DC power systems that took effect in March 2017.

Backlog totaled $1.8 million at December 31, 2017, as compared to $1.5 million at September 30, 2017 and $3.1 million at December 31, 2016. The decrease in backlog at the end of 2017 as compared to the end of 2016 was attributable to a decline in sales of DC power systems to our Tier-1 wireless carrier customers.

Gross profit decreased 52% to $4.8 million in 2017, as compared to $10.2 million in 2016. Gross profit decreased 66% to $1.3 million in Q4 2017, as compared to $3.9 million in Q4 2016. Gross profit as a percentage of net sales declined to 34% in 2017, as compared to 45% in 2016 and gross profit as a percentage of net sales declined to 33% in Q4 2017, as compared to 54% in Q4 2016. The gross profit in Q4 2017 and full year 2017 was negatively affected due to a combination of a price reduction of our DC power systems to Tier-1 wireless carrier customers and lower fixed manufacturing overhead absorption resulting from lower shipments. The company made substantial improvements in its production facility and product line during 2017 and continues to believe that gross profit margin will improve to within the range of 36%-42%, particularly as the volume of sales increases.

Operating expenses increased to $5.6 million in 2017 from $2.8 million in 2016, an increase of $2.8 million of which $1.1 million, $0.9 million are attributable to increased investments in R&D and sales. Operating expenses increased to $1.7 million in Q4 2017, from $0.9 million in Q4 2016. The increase in operating expenses in both periods was primarily due to investments in several major R&D projects, such as engineering changes and technology upgrades to our DC power systems to meet new customer requirements and the ongoing development of a new hybrid power system for international markets.

Net loss in 2017 totaled $0.8 million, or ($0.08) per basic and diluted share, compared to a net income of $4.4 million, or $0.58 per basic and diluted share, in 2016. The decline in EPS is attributable to a combination of higher operating losses and increase in weighted average shares outstanding from 7,564,629 in 2016 to 10,143,158 shares at the end of 2017. Net loss in Q4 2017 totaled $0.6 million, or ($0.06) per basic and diluted share, compared to a net income of $1.7 million, or $0.22 per basic and diluted share, in Q4 2016.

Cash at December 31, 2017 totaled $14.2 million, as compared to $16.2 million at December 31, 2016. The substantial balances of cash as of the comparative periods ended December 31, 2017 and December 31, 2016 resulted from the net proceeds of $17.0 million from the Company's initial public offering in December 2016.

Management Commentary

"2017 was a pivotal year for our company as we deployed the capital we raised in our December 2016 IPO to position Polar Power as a market leader of backup DC power systems in the United States," said Polar Power CEO, Arthur Sams. "Although the necessary steps taken in 2017 negatively impacted our year-over-year financial performance, we believe the foundation building we completed in 2017 has set the stage for substantial revenue growth in 2018 and beyond."

"During 2017 we built a strong domestic and international sales staff, obtained new vendor approvals, engaged in field trails, expanded our R&D efforts, introduced new products and increased our manufacturing resources. With respect to the progress made in such a short period of time, at the end of 2016 we had only one Tier-1 wireless carrier customer that drove 95% of our domestic revenues and we were listed with zero overseas carriers. Today, we are an approved vendor to the top 4 U.S. wireless carriers and 32 overseas carriers and our customer concentration has dramatically improved in that sales to our largest wireless carrier customer in 2016 now represent less than 30% of our total net sales.

"Although we have received some early success from Tier-1 wireless carriers in the U.S., which we believe will provide us with sustainable growth during 2018, we continue to introduce our DC technology and its advantages to our international clients and we anticipate positive results in 2018. In the fourth quarter of 2017, we established a sales and administrative presence in Australia to provide a regional footprint that competes with small, local competitors and closely resembles the telecom infrastructure in the United States. We anticipate leveling the playing field in terms of costs and after-market support with a much lower duration in sales cycles, while we continue to develop our presence in other regions," continued Sams.

"Outside of our core telecom market we are also seeing macro tailwinds with the new U.S. administration that is accelerating our progress with our core military customers and new discussions with additional branches of the military and federal government. This was further demonstrated in the fourth quarter of 2017, and now in the first quarter of 2018, with increased orders from Oshkosh Defense and our recent progress in the U.S. Army's robotic mule program. Based upon this progress and our participation in several R&D discussions and programs, we expect the U.S. military and federal government to become a material driver of new revenue growth in the years to come.

"In all, we have never been more excited about the progress made and the immense opportunities our portfolio of DC power systems currently address. We believe that our strong balance sheet, conservative cash management strategy, improved corporate governance team and product approvals by our key target customers will yield both short-term and long-term success. We look forward to sharing more on our developing story at the upcoming 30th Annual ROTH Conference on March 12, 2018 in Dana Point, California," concluded Sams.

Conference Call Details

Polar Power CEO Arthur Sams, CFO Luis Zavala and COO Raj Masina will host the conference call, followed by a question and answer period.

To access the call, please use the following information:

Date:                                 Thursday, March 8, 2018               
Time:                                 4:30 p.m. ET, 1:30 p.m. PT            
Toll-free dial-in number:             1-800-289-0438                        
International dial-in number:         1-323-994-2083                        
Conference ID:                        2727289                               

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact MZ Group at 1-949-491-8235.

The conference call will be broadcast live and available for replay http://public.viavid.com/index.php?id=128251 and via the investor relations section of the Company's website at www.polarpower.com.

A replay of the conference call will be available after 7:30 p.m. Eastern time through March 22, 2018.

Toll-free replay number:              1-844-512-2921                        
International replay number:          1-412-317-6671                        
Replay ID:                            2727289                               

About Polar Power, Inc.
Gardena, California-based Polar Power, Inc. (NASDAQ: POLA), designs, manufactures and sells direct current, or DC, power systems, lithium battery powered hybrid solar systems for applications in the telecommunications market and, in other markets, including military, electric vehicle charging, cogeneration, distributed power and uninterruptable power supply. Within the telecommunications market, Polar's systems provide reliable and low-cost energy for applications for off-grid and bad-grid applications with critical power needs that cannot be without power in the event of utility grid failure. For more information, please visit www.polarpower.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
With the exception of historical information, the matters discussed in this press release including, without limitation, Polar Power's belief that it is positioned for substantial revenue growth in 2018 and beyond; Polar Power's expectation that sales to its customers will increase over the course of the next several months; the expectation that Polar Power's gross profit as a percentage of net sales will return to within a range of 36%-42%; Polar Power's anticipation that it will level the playing field in its sales to customers in Australia; Polar Power's expectation that U.S. military and federal government will become a material driver of new revenue growth in the years to come; and Polar Power's belief that its strong balance sheet, conservative cash management strategy, improved corporate governance team and product approval by its key customers will yield both short-term and long-term success are forward-looking statements and considerations that involve a number of risks and uncertainties. The actual future results of Polar Power could differ from those statements. Factors that could cause or contribute to such differences include, but are not limited to, adverse domestic and foreign economic and market conditions, including demand for DC power systems; raw material and manufacturing costs; changes in domestic and foreign governmental regulations and policies; and other events, factors and risks previously and from time to time disclosed in Polar Power's filings with the Securities and Exchange Commission including, specifically, those factors set forth in the "Risk Factors" section contained in Polar Power's Form 10-Q filed with the Securities and Exchange Commission on November 13, 2017.

                             POLAR POWER, INC.                              
                               BALANCE SHEETS                               
                                             --------------- ---------------
                                               December 31,                 
                                                   2017        December 31, 
                                               (Unaudited)         2016     
                                             --------------- ---------------
Current assets                                                              
  Cash and cash equivalents (includes                                       
   restricted cash of $1,001,180 at December                                
   31, 2017)                                 $    14,201,163 $    16,242,158
  Accounts receivable                              3,058,266       4,403,946
  Inventories, net                                 5,567,053       4,839,591
  Prepaid expenses                                   236,670         178,569
  Refundable income taxes                            529,156               -
                                             --------------- ---------------
  Total current assets                            23,592,308      25,664,264
Other assets:                                                               
Property and equipment, net                          824,076         737,586
Deposits                                              87,496          66,796
Deferred tax assets                                        -         160,637
                                             --------------- ---------------
Total assets                                 $    24,503,880 $    26,629,283
                                             =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
Current liabilities                                                         
  Accounts payable                           $       757,753 $       659,355
  Customer deposits                                   40,039          71,954
  Income taxes payable                                     -       1,227,308
  Accrued liabilities and other current                                     
   liabilities                                       586,391         669,889
  Current portion of notes payable                   110,237         111,368
                                             ---------------  --------------
  Total current liabilities                        1,494,420       2,739,874
Notes payable, net of current portion                126,818         237,431
                                             --------------- ---------------
Total liabilities                                  1,621,238       2,977,305
                                             --------------- ---------------
Commitments and Contingencies                                               
Shareholders' Equity                                                        
  Preferred stock, $0.0001 par value,                                       
   5,000,000 shares authorized, no shares                                   
   issued and outstanding                                  -               -
  Common stock, $0.0001 par value, 50,000,000                               
   shares authorized, 10,143,158 and,                                       
   10,143,158, shares issued and outstanding,                               
   respectively                                        1,014           1,014
  Additional paid-in capital                      19,250,955      19,242,715
  Retained earnings                                3,630,673       4,408,249
                                             --------------- ---------------
  Total shareholders' equity                      22,882,642      23,651,978
                                             --------------- ---------------
Total liabilities and shareholders' equity   $    24,503,880 $    26,629,283
                                             =============== ===============
                             POLAR POWER, INC.                              
                          STATEMENTS OF OPERATIONS                          
                         For the Quarter Ended       For the Year Ended     
                             December 31,               December 31,        
                       ------------------------- ---------------------------
                           2017         2016         2017          2016     
                       (Unaudited)                (Unaudited)               
                       ------------ ------------ ------------- -------------
Net Sales              $ 3,979,965  $ 7,276,263  $ 14,418,726  $ 22,801,494 
Cost of Sales            2,652,094    3,379,136     9,577,558    12,619,837 
                       ------------ ------------ ------------- -------------
Gross Profit             1,327,871    3,897,127     4,841,168    10,181,657 
                       ------------ ------------ ------------- -------------
 Research and                                                               
  development              387,210       66,187     1,334,637       213,931 
 Sales and Marketing       487,224      143,167     1,348,455       424,579 
 General and                                                                
  Administrative           860,110      636,562     2,848,940     2,112,336 
 Depreciation and                                                           
  amortization               8,068        7,877        31,096        26,888 
                       ------------ ------------ ------------- -------------
Total operating                                                             
 expenses                1,742,612      853,793     5,563,128     2,777,734 
                       ------------ ------------ ------------- -------------
Income (loss) from                                                          
 operations               (414,741)   3,043,334      (721,960)    7,403,923 
                       ------------ ------------                            
Interest expenses           (3,166)     (16,124)      (17,822)     (112,550)
Other income (expenses)     19,761      (32,089)       62,366       (27,516)
                       ------------ ------------ ------------- -------------
Income (loss) before                                                        
 income taxes             (398,146)   2,995,121      (677,416)    7,263,857 
Income taxes provision     213,278    1,312,319       100,160     2,861,047 
                       ------------ ------------ ------------- -------------
Net income (loss)       $ (611,424) $ 1,682,802    $ (777,576)  $ 4,402,810 
                       ============ ============ ============= =============
Net income (loss) per                                                       
 share - basic and                                                          
 diluted                   $ (0.06)      $ 0.22       $ (0.08)       $ 0.58 
                       ============ ============ ============= =============
Weighted average shares                                                     
 outstanding            10,143,158    7,564,629    10,143,158     7,564,629 
                       ============ ============ ============= =============
                             POLAR POWER, INC.                              
                          STATEMENTS OF CASH FLOWS                          
                                                         Years Ended        
                                                        December 31,        
                                                  (Unaudited)      2016     
                                                 ------------  ------------ 
Cash flows from operating activities:                                       
Net Income (loss)                                $  (777,576)  $  4,402,810 
Adjustments to reconcile net income (loss) to                               
 net cash provided by (used in) operating                                   
  Common shares issued for services                         -        37,500 
  Stocks options issued                                 8,240             - 
  Depreciation and amortization                       255,631       207,857 
  Changes in operating assets and liabilities                               
    Accounts receivable                             1,345,680    (2,907,292)
    Inventories                                     (727,462)    (2,746,492)
    Prepaid expenses                                 (58,101)       (85,444)
    Deposits                                         (20,700)        22,148 
    Refundable income taxes                         (529,156)             - 
    Deferred tax assets                               160,637        44,363 
    Accounts payable                                   98,397       476,471 
    Income taxes payable                          (1,227,308)       931,530 
    Customer deposits                                (31,915)      (157,648)
    Accrued expenses and other current                                      
     liabilities                                     (83,497)       401,253 
                                                 ------------  ------------ 
Net cash provided by (used in) operating                                    
 activities                                       (1,587,130)       627,056 
                                                 ------------  ------------ 
Cash flows from investing activities:                                       
Acquisition of property and equipment               (342,121)      (165,088)
Payable for acquired technology                             -      (131,215)
                                                 ------------  ------------ 
Net cash used in investing activities               (342,121)      (296,303)
                                                 ------------  ------------ 
Cash flows from financing activities:                                       
Advances (repayment) of credit line net                     -      (965,150)
Repayment of notes                                  (111,744)      (344,197)
Proceeds from issuance of common stock                      -    16,957,334 
                                                 ------------  ------------ 
Net cash provided (used) by financing activities    (111,744)    15,647,987 
                                                 ------------  ------------ 
Increase (decrease) in cash and cash equivalents  (2,040,995)    15,978,740 
Cash and cash equivalents, beginning of period     16,242,158       263,418 
                                                 ------------  ------------ 
Cash and cash equivalents, end of period         $ 14,201,163  $ 16,242,158 
                                                 ============  ============ 
Supplemental Cash Flow Information:                                         
Interest paid                                    $     10,193  $    112,550 
Taxes Paid                                          2,424,417     1,885,337 
Supplemental non-cash investing and financing                               
Assets acquired under notes payable              $          -  $    237,463 
   Media and Investor Relations:Chris TysonManaging DirectorMZ North AmericaDirect: 949-491-8235chris.tyson@mzgroup.uswww.mzgroup.usCompany Contact:Polar Power, Inc.249 E. Gardena Blvd.Gardena, CA 90248Tel: 310-830-9153ir@polarpowerinc.comwww.polarpower.com

Source: Polar Power, Inc.


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