Polar Power, Inc. (NASDAQ: POLA), a global provider of prime,
backup and solar hybrid DC power solutions, today reported its
financial results for the third quarter and nine months ended
September 30, 2019.
Key Q3 2019 Results and Highlights:
Financial Results for the Three and Nine Months Ended
September 30, 2019
- Net sales for Q3 2019 increased to $6.9 million, a 37%
increase, compared to $5.0 million during the same period last
year. Net sales for the nine months ended September 30, 2019 were
$23.9 million, a 52% increase, as compared to $15.7 million in the
same period last year.
- Backlog as of the end of Q3 2019 was $3.0 million and we
anticipate that approximately 90% of these orders will ship and be
recognized as revenues during the next two quarters.
- Gross margins during Q3 2019 increased to 32.2%, as compared to
30.2% during Q3 2018, as a result of improvements in production
efficiency, coupled with reduction in material costs. The gross
margin during the nine months ended September 30, 2019 was 31.7%,
as compared to 32.2% during the same period in 2018.
- Operating expenses were $2.2 million during Q3 2019, as
compared to $2.3 million for Q3 2018. Operating expenses for the
nine months ended September 30, 2019 were $6.9 million, as compared
to $5.9 million for the same period in 2018. Operating expenses
remained flat resulting from our investments in R&D, and our
sales infrastructure during 2019.
- Net income for Q3 2019 totaled $48,000, or $0.00 per basic and
diluted share, compared to a net loss of $0.7 million, or $(0.07)
per basic and diluted share in Q3 2018. Net income increased for
the nine months ended September 30, 2019 to $0.7 million, or $0.07
per basic and diluted share, compared to a net loss of $0.8
million, or $(0.08) per basic and diluted shares, during the same
period in 2018. This increase in net income is attributable to
higher revenues resulting in higher contribution margins and
improved production efficiencies during the third quarter when
compared to the same period last year.
- Current assets at September 30, 2019 grew to $24.3 million
compared to $23.0 million at December 31, 2018. Inventory on
September 30, 2019 grew to $14.1 million compared to $8.5 million
on December 31, 2018. Cash on September 30, 2019 totaled $3.6
million, as compared to $5.6 million on December 31, 2018.
Management Commentary
“During the third quarter we experienced mixed results. Although
gross margins continued to improve as a result of our investments
in plant automation, new sales were lower resulting from a
reduction in bookings,” said Arthur Sams, Polar’s Chief Executive
Officer. “During the second half of 2019, we experienced a slowdown
in sales from our U.S. Tier-1 telecommunications customers, which
currently account for over 90% of our new equipment sales, but we
expect that business to rebound in 2020 as budgets get back on
track. We are also continuing to focus on our diversification
strategy in telecommunications as well as accelerating our efforts
to leverage our power solutions in new applications.”
Mr. Sams continued, “Let me take a moment to remind everyone of
our business model. We provide power and cooling solutions; we are
not just a generator manufacturer. One of the major components for
a solar hybrid or micro-grid system is the generator. Polar chose
DC generator technology because solar photovoltaic, fuel cells, and
batteries are all exclusively DC. Also, DC micro-grids transmit
power across distances more efficiently than AC. Therefore, we
believe that DC generators are more efficient than AC generators in
modern micro-grids and solar hybrid systems. When an application
requires AC power, for example appliances in your home, a simple DC
to AC inverter is installed. Most solar photovoltaic homes already
have DC to AC inverters installed to convert the solar DC to AC. As
solar hybrid, micro-grids and distributed power generation becomes
more prevalent, we believe the industry will turn towards the
high-end performance and reliability of DC generators, which is
what we bring. We compete with traditional sources of power based
on performance and we are not always the lowest priced from a
capital expenditure standpoint, but we believe that we are among
the lowest from an operational expenditure standpoint. We believe
that our customers recognize the long-term value of our products,
including higher performance, lower operating costs, better
reliability, lighter weight, smaller packages and lower
maintenance.
“We would also like to reiterate our belief that the domestic
telecom market is a compelling growth market for Polar, including
last-mile carriers. As we explained last quarter, we are
experiencing a period of short-term volatility with our Tier-1
wireless communications carriers, mostly centered around shifting
budgets to 5G rollouts, along with uncertainty as to how much
backup power is required on-site at the towers. Shipments and sales
are being postponed to 2020, but even with this guidance from our
Tier-1 wireless communications customers, we are continuing our
focus on diversification and accelerating our targeting of the
“last-mile” or rural carriers. To facilitate this initiative, we
are expanding our U.S. distribution network while introducing new
products including propane and natural gas generators powered by
Toyota engines, and energy storage systems which we believe gives
us the industry leading technology. Furthermore, we have recently
completed all emissions testing and are awaiting EPA certification
to begin marketing our lower emission product line to both
residential and commercial customers.
“In order to accelerate our expansion into new markets and
diversity customers, we have modified our organization to where our
Chief Operating Officer, Raj Masina, will manage domestic and
international sales. Recently, we significantly strengthened our
production management personnel, allowing Mr. Masina to focus on
sales. As part of this plan, we are adjusting our international
strategy to conduct an even narrower screening process and
concentrating our focus on comprehensive power solutions. We plan
to evaluate our international sales efforts on an ongoing basis and
focus our efforts on the highest potential markets only.
Domestically, we are expanding our sales infrastructure to reach
new markets through strategic partnerships with our existing
distribution networks.”
Mr. Sams continued, “As part of our strategic review we are
actively expanding into markets outside of the telecom market. It
is noteworthy that telecom applications make up less than 15% of
sub 40-kilowatt generator sales among the large generator
manufacturers and most of those sales involve home and commercial
backup power applications. Our market analysis of 30 large LPG
refineries and distribution companies indicates a significant
interest in our solar hybrid LPG systems for industrial,
residential and commercial uses. In countries like Chile we saw
restrictions on the use of diesel generators due to the negative
pollution effects. The recent power shutdown in California has
outlined a significant opportunity for our new LPG and natural gas
product line. In California alone, there are 4.88 million solar
powered homes, 570,000 electric vehicles and 1.18 million
residential homes with pools, all each of which would be a target
customer for these product solutions. Moving into the future
California is requiring all new constructions homes to include
solar; we expect other states to follow the same example.”
Mr. Sams concluded, “We have what we believe to be the most
versatile and efficient DC power system on the market for both
back-up and prime power applications. We believe that the solar,
wind, and distributed energy generation, or DEG, market is here to
stay and that the industry trends are converging towards our DC
technology and power solutions. We are excited about these diverse
market opportunities and plan to concentrate on markets that
provide the greatest returns for us and our shareholders.”
Conference Call DetailsPolar Power CEO Arthur
Sams, COO Rajesh Masina and CFO Luis Zavala will host the
conference call, followed by a question and answer period.
To access the call, please use the following information:
Date: |
Tuesday November 12, 2019 |
Time: |
4:30 p.m. ET, 1:30 p.m. PT |
Toll-free dial-in number: |
1-888-254-3590 |
International dial-in number: |
1-323-994-2093 |
Conference ID: |
6761324 |
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 Integra Investor Relations at
415-233-7094.
The conference call will be broadcast live and available for
replay at http://public.viavid.com/index.php?id=136958 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 19, 2019.
Toll-free replay number: |
1-844-512-2921 |
International replay number: |
1-412-317-6671 |
Replay ID: |
6761324 |
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 uninterruptible 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. or follow us on
www.linkedin.com/company/polar-power-inc/
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995
This news release contains certain statements of a
forward-looking nature relating to future events or future business
performance. Forward-looking statements can be identified by the
words “expects,” “anticipates,” “believes,” “intends,” “estimates,”
“plans,” “will,” “outlook” and similar expressions. Forward-looking
statements are based on management’s current plans, estimates,
assumptions and projections, and speak only as of the date they are
made. With the exception of historical information, the matters
discussed in this press release including, without limitation,
Polar Power’s expectation that sales from its U.S. Tier-1
telecommunications customers will rebound in 2020 as budgets get
back on track; Polar Power’s belief that DC generators are more
efficient than AC generators in modern micro-grids and solar hybrid
systems; Polar Power’s belief that the industry will turn towards
the high-end performance and reliability of DC generators; Polar
Power’s belief that it is among the lowest from an operational
expenditure standpoint and that its customers recognize the
long-term value of its products; Polar Power’s belief that the
domestic telecom market is a compelling growth market for Polar,
including last-mile carriers; Polar Power’s belief that it is
experiencing short-term volatility with its Tier-1 wireless
communications carriers, mostly centered around shifting budgets to
5G rollouts and uncertainty as to how much backup power is required
on-site at the towers; Polar Power’s belief that its new products,
including propane and natural gas generators powered by Toyota
engines, gives it industry leading technology; Polar Power’s belief
that it has the most versatile and efficient DC power system on the
market for both back-up and prime power applications; Polar Power’s
belief that the solar, wind, and distributed energy generation
market is here to stay and that industry trends are converging
towards its DC technology and power solutions; and Polar Power’s
plan to evaluate its international sales effort on an ongoing basis
and focus its efforts on the highest potential markets only 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; trade tariffs on raw
materials; changes in domestic and foreign governmental regulations
and policies; and other events, factors and risks. We undertake no
obligation to update any forward-looking statement in light of new
information or future events, except as otherwise required by law.
Forward-looking statements involve inherent risks and
uncertainties, most of which are difficult to predict and are
generally beyond our control. Actual results or outcomes may differ
materially from those implied by the forward-looking statements as
a result of the impact of a number of factors, many of which are
discussed in more detail in our reports filed with the Securities
and Exchange Commission.
Media and Investor Relations:Integra Investor
RelationsShawn M. Severson+1
415-233-7094info@integra-ir.com@Integra IRwww.integra-ir.com
Company Contact:Polar Power, Inc.249 E. Gardena
Blvd.Gardena, CA 90248Tel:
310-830-9153ir@polarpowerinc.comwww.polarpower.com
POLAR POWER, INC. BALANCE
SHEETS
|
|
September 30, 2019 |
|
|
December
31, 2018 |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents (including restricted cash of $1,002,683
at December 31, 2018) |
|
$ |
3,666,475 |
|
|
$ |
5,640,078 |
|
Accounts receivable |
|
|
5,038,302 |
|
|
|
7,726,919 |
|
Inventories, net |
|
|
14,142,895 |
|
|
|
8,471,769 |
|
Prepaid expenses |
|
|
1,174,216 |
|
|
|
468,666 |
|
Refundable income taxes |
|
|
231,444 |
|
|
|
715,916 |
|
Total current assets |
|
|
24,253,332 |
|
|
|
23,023,348 |
|
|
|
|
|
|
|
|
|
|
Operating lease right-of-use
assets, net |
|
|
2,339,353 |
|
|
|
- |
|
Property and equipment,
net |
|
|
2,242,210 |
|
|
|
2,122,757 |
|
Deposits |
|
|
94,001 |
|
|
|
94,001 |
|
Total assets |
|
$ |
28,928,896 |
|
|
$ |
25,240,106 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
856,656 |
|
|
$ |
1,066,415 |
|
Customer deposits |
|
|
228,268 |
|
|
|
79,184 |
|
Accrued expenses and other current liabilities |
|
|
942,292 |
|
|
|
504,559 |
|
Current portion of operating lease liabilities |
|
|
589,696 |
|
|
|
- |
|
Current portion of notes payable |
|
|
329,490 |
|
|
|
283,388 |
|
Total current liabilities |
|
|
2,946,402 |
|
|
|
1,933,546 |
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities,
net of current portion |
|
|
1,818,927 |
|
|
|
- |
|
Notes payable, net of current
portion |
|
|
858,983 |
|
|
|
924,539 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
5,624,312 |
|
|
|
2,858,085 |
|
|
|
|
|
|
|
|
|
|
Commitments and
Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ 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 shares issued and
outstanding |
|
|
1,014 |
|
|
|
1,014 |
|
Additional paid-in
capital |
|
|
19,815,258 |
|
|
|
19,578,426 |
|
Retained earnings |
|
|
3,488,312 |
|
|
|
2,802,581 |
|
Total stockholders’
equity |
|
|
23,304,584 |
|
|
|
22,382,021 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders’ equity |
|
$ |
28,928,896 |
|
|
$ |
25,240,106 |
|
POLAR POWER, INC. CONDENSED STATEMENTS OF
OPERATIONS(Unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Net
Sales |
|
$ |
6,939,318 |
|
|
$ |
5,061,158 |
|
|
$ |
23,922,651 |
|
|
$ |
15,748,845 |
|
Cost of
Sales |
|
|
4,707,412 |
|
|
|
3,530,847 |
|
|
|
16,336,576 |
|
|
|
10,672,707 |
|
Gross
Profit |
|
|
2,231,906 |
|
|
|
1,530,311 |
|
|
|
7,586,075 |
|
|
|
5,076,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
707,171 |
|
|
|
717,983 |
|
|
|
2,039,643 |
|
|
|
1,968,152 |
|
Research and development |
|
|
546,144 |
|
|
|
571,300 |
|
|
|
1,649,794 |
|
|
|
1,371,981 |
|
General and
administrative |
|
|
935,352 |
|
|
|
1,004,984 |
|
|
|
3,209,596 |
|
|
|
2,589,018 |
|
Total operating
expenses |
|
|
2,188,667 |
|
|
|
2,294,267 |
|
|
|
6,892,033 |
|
|
|
5,929,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations |
|
|
43,239 |
|
|
|
(763,956 |
) |
|
|
694,042 |
|
|
|
(853,013 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expenses)
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expenses |
|
|
(13,676 |
) |
|
|
(2,777 |
) |
|
|
(34,389 |
) |
|
|
(8,181 |
) |
Other income (expense) |
|
|
18,678 |
|
|
|
9,616 |
|
|
|
26,078 |
|
|
|
8,716 |
|
Total other (expenses)
income, net |
|
|
5,002 |
|
|
|
6,839 |
|
|
|
(8,311 |
) |
|
|
535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes |
|
|
48,241 |
|
|
|
(757,117 |
) |
|
|
685,731 |
|
|
|
(852,478 |
) |
Net income
(loss) |
|
$ |
48,241 |
|
|
$ |
(757,117 |
) |
|
$ |
685,731 |
|
|
$ |
(852,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share –
basic and diluted |
|
$ |
0.00 |
|
|
$ |
(0.07 |
) |
|
$ |
0.07 |
|
|
$ |
(0.08 |
) |
Weighted average shares
outstanding, basic and diluted |
|
|
10,143,158 |
|
|
|
10,143,158 |
|
|
|
10,143,158 |
|
|
|
10,143,158 |
|
POLAR POWER, INC. STATEMENTS OF CASH
FLOWS(Unaudited)
|
|
Nine Months Ended September 30, |
|
|
|
2019 |
|
|
2018 |
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
685,731 |
|
|
$ |
(95,361 |
) |
Adjustments to reconcile net
income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Fair value of vested stock
options |
|
|
236,832 |
|
|
|
128,383 |
|
Depreciation and
amortization |
|
|
459,110 |
|
|
|
154,947 |
|
Amortization of operating
lease right-of-use asset |
|
|
390,713 |
|
|
|
- |
|
Changes in operating assets
and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
2,688,617 |
|
|
|
(1,173,814 |
) |
Inventories |
|
|
(5,671,126 |
) |
|
|
(797,992 |
) |
Prepaid expenses |
|
|
(819,437 |
) |
|
|
(298,929 |
) |
Deposits |
|
|
- |
|
|
|
(26,705 |
) |
Refundable income taxes |
|
|
484,472 |
|
|
|
- |
|
Accounts payable |
|
|
(209,759 |
) |
|
|
(346,997 |
) |
Customer deposits |
|
|
149,084 |
|
|
|
158,124 |
|
Accrued expenses and other current liabilities |
|
|
468,042 |
|
|
|
4,616 |
|
Decrease in lease liability |
|
|
(351,752 |
) |
|
|
- |
|
Net cash used in operating
activities |
|
|
(1,489,473 |
) |
|
|
(2,293,728 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Acquisition of property and
equipment |
|
|
(311,369 |
) |
|
|
(138,821 |
) |
Net cash used in investing
activities |
|
|
(311,369 |
) |
|
|
(138,821 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Repayment of notes |
|
|
(172,761 |
) |
|
|
(54,578 |
) |
Net cash used in financing
activities |
|
|
(172,761 |
) |
|
|
(54,578 |
) |
|
|
|
|
|
|
|
|
|
Decrease in cash and cash
equivalents |
|
|
(1,973,603 |
) |
|
|
(2,487,127 |
) |
Cash and cash equivalents,
beginning of period |
|
|
5,640,078 |
|
|
|
14,201,163 |
|
Cash and cash
equivalents, end of period |
|
$ |
3,666,475 |
|
|
$ |
11,714,036 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH
INVESTING AND |
|
|
|
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
Assets acquired through
issuance of notes payable |
|
$ |
153,307 |
|
$ |
662,750 |
|
Initial recognition of
operating lease right-of-use assets and |
|
|
|
|
|
|
|
operating lease obligations upon adoption of ASC Topic
842 |
|
$ |
2,847,495 |
|
|
$ |
- |
|
Reclassification of prepaid
expenses to property and equipment |
|
$ |
113,887 |
|
|
$ |
- |
|
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