NORTHVALE, NJ, MARCH 31 – Photonic Products Group, Inc. (OTC Bulletin Board: PHPG) today reported its consolidated financial results for the year ended December 31, 2009.

Fourth quarter sales of $3.0 million declined by 30% from $4.3 million in the corresponding quarter of 2008. Sales for the year were $11.1 million, or approximately 32% below last year’s all-time high of $16.3 million. All three of the Company’s brands had a sales decline for the year.

Bookings for 2009 were $9.5 million, a decrease of 27% from $13.0 million a year earlier. Year-end backlog was $4.4 million versus $6.1 million at the end of 2008.

Net (loss) income applicable to common shareholders was $(26,000) for the fourth quarter of 2009, compared to $144,000, last year in the comparable period, which included a deferred tax benefit from income taxes of $87,000. Fourth quarter (loss) earnings per share was $0.00 basic and diluted in 2009 and $0.01 basic and diluted in 2008, respectively.

For the year ended December 31, 2009, the Company’s net (loss) applicable to shareholders was $(2.8) million, including a non-cash goodwill impairment charge of $1.6 million against the full carrying value of goodwill in its Florida subsidiary. In 2008, the Company reported net income applicable to common shareholders of $1.1 million. For 2009, basic and diluted (loss) per share was $(0.25) compared to earnings per share of $0.10 basic and $0.08 diluted for 2008. The 2008 results include the positive impact of a deferred tax benefit of $408,000.

Despite lower sales in the fourth quarter compared to the fourth quarter of last year, gross profit margin as a percentage of sales (“GPM”) increased, reflecting the positive impact of management’s cost reductions implemented throughout 2009. Fourth quarter 2009 GPM was 25.3% of sales or $747,000, up from 23.8% of sales, or $1.03 million in 2008. For fiscal 2009, GPM of $2.15 million or 19.5% of sales decreased from $4.8 million or 29.5% of sales in the previous year.

EBITDA1 for the year was a loss of $(1.6) million versus EBITDA of $2.1 million in 2008. Excluding the $1.6 million goodwill impairment charge which the Company recorded in the third quarter of 2009, adjusted EBITDA2 for the year was $10,000.

During the year, the Company continued to reduce its debt obligations by paying the balance of $125,000 on a Promissory Note originally issued by the Company in 2004, as part of the purchase price of its Florida subsidiary.

Net cash flow from operating activities improved for the year to $815,000 compared to $548,000 in 2008. Cash flows were favorably impacted by reductions in accounts receivable and inventory balances, net of lower accounts payable and customer advances. Although the Company incurred losses in 2009, PPGI ended the year in a strong cash position, up $597,000 from the previous year balance including certificates of deposit.

Joe Rutherford, President and CEO of PPGI stated, "The severe economic recession affected most of the markets we served in 2009 and continues to impact our business in the first quarter of 2010. The company experienced an increase in business from the universities/national laboratories sector but this was not significant enough to offset the severe downturn in the semiconductor related marketplace that we serve. In addition, sales of products into the defense/aerospace marketplace declined due to program delays and/or cutbacks. We do, however, have reason to be optimistic that the economy and the markets we serve, are improving due to a significant increase in requests for quotes in the fourth quarter of 2009 and orders received in the first quarter of 2010. During the past year we increased our efforts to improve our international sales and are seeing encouraging interest and demand for our products in both Europe and the Far East. Our focus remains on improving our customer relationships, and decreasing our product cost while improving our product quality through process improvements."

"During 2009 the Company strengthened its cash position, made selective capital investments to improve our metrology, and prioritized our efforts in the development of new products to be released in 2010. In the first quarter of 2010, we are adding to our engineering and sales staff in order to better serve our customers and to respond to the improved business environment anticipated in 2010. We look forward to the future with cautious optimism."

1, 2 Note Regarding Use of Certain Non-GAAP Financial Measures:

The Company defines EBITDA1 as (loss) earnings before non-cash, stock-based compensation, net interest, income taxes, depreciation, and amortization. Adjusted EBITDA2 is calculated by excluding the goodwill impairment charge from the EBITDA results. EBITDA and adjusted EBITDA are presented herein because we consider these numbers an important measure of the Company’s ability to internally fund capital expenditures and service debt. EBITDA and adjusted EBITDA should not be considered an alternative to cash flow as an indicator of the Company’s financial performance, or liquidity. The reader is referred to the Supplemental Financial Data set forth below for a reconciliation of net (loss) income to EBITDA.

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