Polar Power Reports Third Quarter 2017 Financial Results

GARDENA, CA–(November 06, 2017) – Polar Power, Inc. (NASDAQ: POLA), a global provider of prime and backup DC power solutions, reported its financial results for the third quarter ended September 30, 2017.

Key Third Quarter 2017 and Subsequent Highlights:

  • Polar Power is currently an approved vendor to all the top 4 U.S. wireless carriers and to 32 overseas carriers.
  • Received a 57-unit purchase order of DC power systems from new Tier-1 wireless carrier customer for hurricane-affected telecom sites in Puerto Rico.
  • Continued to expand the manufacturing infrastructure to support future demand from domestic and international Tier-1 wireless carrier customers.
  • Assembled a strong international sales group covering major telecom carriers and tower operators. Full time Polar sales executives and support in: Singapore, Dubai, Australia, Dominican Republic, Romania, South Africa, California and Florida.
  • After five years of field trials in Australia, Polar has successfully demonstrated the reliability of its backup DC power system that no longer requires batteries on site. Removing batteries from an on-grid cell site reduces the operational cost of the site. With the success of this first trial Polar is currently expanding its field trials to include other major carriers.
  • Commenced marketing trailer mounted DC generators for emergency events and storm related power outages. This product will provide significant refueling and transportation advantages over legacy AC trailer mounted generators.
  • Deployed DC solution to leading U.S. military contractor for initial field testing for a large U.S. Army robotic mule project.
  • Net sales decreased 59% to $3.0 million, as compared to $7.5 million in Q3 2016.
  • Backlog totaled $1.5 million at September 30, 2017, as compared to $1.7 million at June 30, 2017.
  • Net loss was $0.4 million, or ($0.04) per basic and diluted share, as compared to net income of $1.8 million, or $0.24 per basic and diluted share, in Q3 2016.
  • Cash and cash equivalents totaled $14.8 million as of September 30, 2017 with no long-term debt outstanding.

Financial Results for the Three Months Ended September 30, 2017 Versus Same Year-Ago Quarter

Net sales totaled $3.0 million in Q3 2017, a decrease of 59%, as compared to $7.5 million in Q3 2016. The decrease in net sales was primarily a result of a decline in sales of DC power systems to our largest Tier-1 wireless carrier customer, coupled with a price reduction in DC power systems that took effect in March 2017.

Backlog totaled $1.5 million at September 30, 2017, as compared to $1.7 million at June 30, 2017. The decrease in backlog at the end of Q3 2017 as compared to the end of Q2 2017 was attributable to a decrease in sales of DC power systems to our largest Tier-1 wireless carrier customer.

Gross profit decreased 76% to $0.8 million in Q3 2017 as compared to $3.4 million in Q3 2016. Gross profit margin as a percentage of net sales declined to 27% in Q3 2017, as compared to 45% in Q3 2016. The gross profit for Q3 2017 was negatively affected by a price reduction on the company’s DC power systems and increased use of production staff in R&D projects. The company has made substantial improvements in its production facility and product line during 2017 and continues to believe that gross profit margin will improve to the 40%-45% range in the fourth quarter of 2017, particularly as the volume of sales increases.

Operating expenses increased to $1.5 million in Q3 2017 from $0.8 million in Q3 2016. The increase in operating expenses was primarily due to several major R&D projects, such as engineering changes to DC power systems to meet new customer requirements and the ongoing development of a new hybrid power system for international markets.

Net loss totaled $0.4 million, or ($0.04) per basic and diluted share in Q3 2017, compared to net income of $1.8 million, or $0.24 per basic and diluted share, in Q3 2016.

Cash at September 30, 2017 totaled $14.8 million, as compared to $16.2 million at December 31, 2016. The substantial balances of cash as of the comparative periods ended September 30, 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

“The third quarter of 2017 was highlighted with substantial progress made on building a strong domestic and international sales staff, obtaining vendor approvals and increasing our manufacturing resource,” said Polar Power CEO, Arthur Sams. “We are continuing to develop new products and improve our existing product lines. These initiatives further diversify our product portfolio and reduce our customer concentration while positioning Polar Power for substantial revenue growth in 2018.

“Unfortunately, relative to our poor financial performance in the third quarter, we were not immune to the effects of Hurricanes Harvey, Irma and Maria with our domestic Tier-1 wireless carrier customers. These adverse weather events diverted a significant amount of our wireless carrier customers’ manpower away from non-essential activities, as wireless carriers deployed significant resources to disaster-struck areas in an effort to minimize network downtime. We developed strong working relationships with our wireless carrier customers in the quarter and expect sales to notably increase over the course of the next several months.

“One ancillary benefit to our business from the hurricanes was the increased necessity amongst our customers to harden their network sites in order to minimize network downtime in the event of a natural disaster. In fact, already in the fourth quarter we received our first material purchase order from our newly signed Tier-1 wireless carrier customer for hurricane-affected telecom sites in Puerto Rico and most recently new purchase orders for telecom sites in Houston and Florida. We look forward to continuing our collaboration with all of our Tier-1 wireless carrier customers as we work together to provide solutions to aid in the redevelopment of all hurricane affected wireless networks,” continued Sams.

“On the R&D front, key progress made during the third quarter will continue to solidify Polar Power’s absolute technology leadership and drive growth for years to come. Some of our most exciting R&D initiatives include a battery-free DC hybrid solution for telecom backup that has drawn significant interest from multiple Tier-1 wireless carriers, a DC generator solution to a leading U.S. military contractor for initial field testing addressing a large revenue opportunity with the U.S. Army and continued progress on a 200kW DC generator for data center and military applications.

“Notable progress was also made on the international front after we established the necessary global reach to acquire and support new telecom customers with our DC power solutions during the second quarter. I spent substantial time during the third quarter visiting our new sales team members in Africa, Singapore, Dominican Republic and Australia attending industry conferences and meeting key contacts and customers from our new hires. Although our international carriers are taking longer to close and award solicitations, I am pleased to report based upon these meetings and the sequential growth in our international RFPs that we are close to realizing material revenues for the company in the coming quarters with some of the largest international telecommunication companies.

“Moving into the fourth quarter, we have never been more confident about the future of Polar Power and our team’s ability to create value for shareholders. We have a strong balance sheet, a record number of vendor approvals and are continually offering an innovative suite of products to meet market demand. We look forward to sharing more on our developing story at the upcoming Benchmark Micro Cap Discovery Conference on December 14, 2017 in Chicago,” concluded Sams.

Conference Call Details

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

To access the call, please use the following information:

Date: Monday, November 6, 2017
Time: 4:30 p.m. ET, 1:30 p.m. PT
Toll-free dial-in number: 1-800-310-7032
International dial-in number: 1-719-457-2619
Conference ID: 2782894

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 at http://public.viavid.com/index.php?id=126763 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 November 20, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 2782894

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; 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 40%-45% during the fourth quarter of 2017; Polar Power’s belief that customers will make major purchases in the coming quarters; and Polar Power’s belief that it is close to realizing material revenues from sales outside of the United States 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 economic and market conditions, including demand for DC power systems; raw material and manufacturing costs; changes in 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 August 14, 2017.

POLARPOWER INC.

CONDENSED BALANCE SHEETS

 

 

 

 

 

September 30,

2017

 

December 31,

 

(Unaudited)

 

2016

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cashand cash equivalents (including restricted cash of $1,000,423 at September30, 2017)

 

14,779,028

 

 

16,242,158

 

Accountsreceivable

 

1,978,929

 

 

4,403,946

 

Inventories, net

 

5,276,326

 

 

4,839,591

 

Prepaidexpenses

 

331,826

 

 

178,569

 

Refundableincome taxes

 

1,257,585

 

 

0

 

Totalcurrent assets

 

23,623,694

 

 

25,664,264

 

Otherassets:

 

 

 

 

 

 

Propertyand equipment, net

 

734,225

 

 

737,586

 

Deposits

 

77,296

 

 

66,796

 

Deferredtax assets

 

213,278

 

 

160,637

Total assets

 

24,648,493

 

 

26,629,283

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accountspayable

 

271,111

 

 

659,355

 

Customerdeposits

 

70,111

 

 

71,954

 

Incometaxes payable

 

0

 

 

1,227,308

 

Accruedexpenses and other current liabilities

 

557,901

 

 

669,889

 

Currentportion of notes payable

 

109,339

 

 

111,368

Total current liabilities

 

1,008,462

 

 

2,739,874

Notes payable, net of current portion

 

154,206

 

 

237,431

 

 

 

 

 

 

Total liabilities

 

1,162,668

 

 

2,977,305

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

Preferredstock, $0.0001 par value, 5,000,000 shares authorized, no shares issued andoutstanding

 

 

 

Common stock, $0.0001 par value, 50,000,000 shares authorized, 10,143,158 shares issued and outstanding

 

1,014

 

 

1,014

Additional paid-in capital

 

19,242,715

 

 

19,242,715

Retained earnings

 

4,242,096

 

 

4,408,249

Total shareholders’ equity

 

23,485,825

 

 

23,651,978

 

 

 

 

 

 

Total liabilities and shareholders’ equity

$

24,648,493

 

$

26,629,283

 

 

 

 

 

 

 

 

 

 

POLARPOWER INC.CONDENSED STATEMENTS OFOPERATIONS

 

(Unaudited)

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net Sales

 

$

3,030,026

 

 

$

7,458,949

 

 

$

10,438,761

 

 

$

15,525,231

 

Cost of Sales

 

 

2,201,083

 

 

 

4,063,404

 

 

 

6,925,464

 

 

 

9,240,701

 

Gross Profit

 

 

828,943

 

 

 

3,395,545

 

 

 

3,513,297

 

 

 

6,284,530

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

633,776

 

 

 

596,584

 

 

 

1,988,830

 

 

 

1,475,775

 

Research and development

 

 

480,405

 

 

 

58,610

 

 

 

947,427

 

 

 

147,744

 

Sales and Marketing

 

 

395,793

 

 

 

99,218

 

 

 

861,231

 

 

 

281,412

 

Depreciation and amortization

 

 

7,621

 

 

 

7,451

 

 

 

23,029

 

 

 

19,010

 

Total operating expenses

 

 

1,517,595

 

 

 

761,863

 

 

 

3,820,517

 

 

 

1,923,941

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) from operations

 

 

(688,652)

 

 

2,633,682

 

 

 

(307,220)

 

 

4,360,589

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expenses) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(4,463)

 

 

(32,635)

 

 

(14,656)

 

 

(96,426)

Other income (expense)

 

 

18,531

 

 

 

(1,144)

 

 

42,605

 

 

 

4,573

 

Total other (expenses) income, net

 

 

14,068

 

 

 

(33,779)

 

 

27,949

 

 

 

(91,853)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before income taxes

 

 

(674,584)

 

 

2,599,903

 

 

 

(279,271)

 

 

4,268,736

 

Income tax (provision) benefit

 

 

264,681

 

 

 

(818,584)

 

 

113,118

 

 

 

(1,548,728)

Net Income (Loss)

 

$

(409,903)

 

$

1,781,319

 

 

$

(166,153)

 

$

2,720,008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) per share – basic and diluted

 

$

(0.04)

 

$

0.24

 

 

$

(0.02)

 

$

0.37

 

Weighted average shares outstanding, basic and diluted

 

 

10,143,158

 

 

 

7,380,145

 

 

 

10,143,158

 

 

 

7,380,145

 

 

 

 

 

 

 

 

POLAR POWER INC.

 

CONDENSED STATEMENTS OF CASH FLOW

 

(Unaudited)

 

 

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net Income

 

$

(166,153)

 

$

2,720,008

 

Adjustments to reconcile net income to net cash used inoperating activities:

 

 

 

 

 

 

 

 

Common shares issued for services

 

 

 

 

 

37,500

 

Depreciation and amortization

 

 

185,757

 

 

 

150,270

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

2,425,017

 

 

 

(3,698,437)

 

Inventories

 

 

(436,735)

 

 

(1,785,512)

 

Prepaid expenses

 

 

(153,257)

 

 

(41,279)

 

Deposits

 

 

(10,500)

 

 

22,148

 

 

Refundable income taxes

 

 

(1,257,585)

 

 

 

 

Deferred tax assets

 

 

(52,641)

 

 

(63,887)

 

Accounts payable

 

 

(388,244)

 

 

816,147

 

 

Income taxes payable

 

 

(1,227,308)

 

 

1,316,838

 

 

Customer deposits

 

 

(1,843)

 

 

64,379

 

 

Accrued expenses and other current liabilities

 

 

(111,988)

 

 

396,417

 

Net cash used in operating activities

 

 

(1,195,480)

 

 

(65,408)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(182,396)

 

 

(168,173)

Payable for acquired technology

 

 

 

 

 

(131,215)

Net cash used in investing activities

 

 

(182,396)

 

 

(299,388)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Advances (repayment) of credit line; net

 

 

 

 

 

524,551

 

Repayment of notes

 

 

(85,254)

 

 

(292,197)

Net cash (used in) provided by financing activities

 

 

(85,254)

 

 

232,354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

 

(1,463,130)

 

 

(132,442)

Cash and cash equivalents, beginning of period

 

 

16,242,158

 

 

 

263,418

 

Cash and cash equivalents, end of period

 

$

14,779,028

 

 

$

130,976

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Taxes Paid

 

$

2,424,417

 

 

$

 

Interest Paid

 

 

10,193

 

 

 

63,791

 

Supplemental non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Assets acquired under notes payable

 

$

 

 

$

237,463

 

Media and Investor Relations:
Chris Tyson 
Managing Director
MZ North America
Direct: 949-491-8235
chris.tyson@mzgroup.us
www.mzgroup.us

Company Contact:
Polar Power, Inc.
249 E. Gardena Blvd.
Gardena, CA 90248
Tel: 310-830-9153
ir@polarpowerinc.com
www.polarpower.com

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