ProPhotonix : Results for the Year Ended December 31, 2020 and Notice of Posting of Annual ReportMarch 25, 2021

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

March 25, 2021

ProPhotonix Limited

("ProPhotonix" or the "Company")

RESULTS FOR THE YEAR ENDED DECEMBER 31, 2020 and

NOTICE OF POSTING 2020 ANNUAL REPORT

ProPhotonix Limited (London Stock Exchange - AIM: PPIX, OTC: STKR), a leading technology designer and manufacturer of LED illumination systems and laser diode modules, today announces its 2020 financial results and notice of availability on the Company's web site.

2020 Summary Results

Revenue for 2020 was $13.6 million (2019: $15.0 million) and operating income was $0.6 million (2019: $1.1 million). Operating income for 2019 includes a benefit of stock option compensation of $1.2 million whereas operating income for 2020 includes a stock option compensation charge of $58,000. Operating income and net income for 2020 include the benefit of $0.5 million relating to cost offsets from local government wage subsidy schemes in effect as a result of Covid-19 whereas no such benefit existed in 2019.

Cash and cash equivalents at December 31, 2020 was $2.6 million (2019: $1.5 million). The Company generated $2.1 million of cash from its operating activities for the year ended December 31, 2020; repaid net debt of $0.9 million; and increased the cash position by $1.1 million from December 31, 2019. Detailed financial results and notes follow.

Key metrics

• • Order bookings of $13.4 million (2019: $16.5 million)

• • Book-to-Bill ratio of 0.99 (2019: 1.09)

• • Percentage revenue by market sectors: 81% industrial, 18% medical and 1% security & defense

(2019: 75% industrial, 23% medical and 2% security & defense)

• • Percentage revenue by geography: 44% Europe, 54% North America and 2% Rest of World

(2019: 37% Europe, 61% North America and 2% Rest of World)

Tim Losik, President & CEO, commented:

Financial

"Overall, we are pleased with the year 2020. Though our revenue declined by 9%, largely from Covid-19, we were able to mitigate the reduction with an outstanding result. Most importantly, cash ended the year at $2.6 million, representing an increase of $1.1 million. The balance sheet strengthened not only from the increase in cash but also from a significant reduction in debt of $0.9 million. A measure of this improvement is the current ratio which improved to 2.0 from 1.7. We look forward to the opportunity that the future holds as we come through the pandemic to more prosperous times.

Product Development

"During 2020, we developed and announced new products including: several variants of the MultiSpec product family addressing the multispectral and hyperspectral industrial markets; a deep UV (UVC, 265 nanometer) FX product targeted to the biomedical and curing markets; several variants of the Prodigii laser product family (from UV to Near Infrared wavelengths) addressing the industrial markets. Additionally, numerous OEM specific projects have been undertaken to address specific applications and use cases for existing and new customers. Product development, accomplished by our experts at ProPhotonix, is focused on applications in growing markets and OEM projects requiring unique attributes that are not attainable in the general market. Specific use cases include applications such as: Algae growth, eye health, railway inspection, and 3D printing."

Covid-19

The outbreak of the COVID-19 pandemic and the measures adopted by local governments to mitigate its spread impacted the Company from March 2020 onwards. The outbreak of the pandemic caused the Company to shut down its facilities for brief periods in 2020. Risks in the supply chain became evident though to-date there have been no substantial delays or negative consequences to the business relating to the supply chain.

Posting of Results

The Company will publish and post its final audited results for the year ended December 31, 2020 on or before June 30, 2021. The Annual Report and Accounts will be available on the Company's website on or before March 31, 2021, atwww.prophotonix.com.

Trading update

Given the inherent uncertainties surrounding COVID-19, the Board continues to believe it is inappropriate to provide forward looking guidance to investors and analysts at the current time.

For further information:

ProPhotonix Limited

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact, including without limitation, those with respect to ProPhotonix's goals, plans and strategies set forth herein are forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: uncertainty that cash balances may not be sufficient to allow ProPhotonix to meet all of its business goals; uncertainty that ProPhotonix's new products will gain market acceptance; the risk that delays and unanticipated expenses in developing new products could delay the commercial release of those products and affect revenue estimates; the risk that one of our competitors could develop and bring to market a technology that is superior to those products that we are currently developing; and ProPhotonix's ability to capitalize on its significant research and development efforts by successfully marketing those products that the Company develops. Forward-looking statements represent management's current expectations and are inherently uncertain. All Company, brand, and product names are trademarks or registered trademarks of their respective holders. ProPhotonix undertakes no duty to update any of these forward-looking statements.

Chief Executive Officer and Non-Executive Chairman Statement:

Our business was not untouched by the outbreak of the COVID-19 pandemic in 2020 with our manufacturing plants in U.K. and Ireland closed for several weeks during the year, our customers' operations slowed as well and our revenue declined. As the breadth of the pandemic became apparent, we took a series of measures to mitigate the downside effect on our business. We cut back on operating costs through temporary pay reductions and, in some cases, elimination of certain personnel. We participated in government job retention schemes and took advantage of other government support measures and we deferred lease and loan payments where possible. These efforts led to generating cash from operating activities and put us in a position to make further investments in the business so that we may achieve our objectives.

We operate a subsidiary in the United Kingdom (UK) with implications relating to Brexit. In December 2020, the UK and the European Union entered into a trade and cooperation agreement. The agreement settles the uncertainty of trading between the two geographies though still leaves considerable uncertainty regarding the logistics and ease of movement of goods. During the period of transition, January 1, 2020 to December 31, 2020, and early in the first quarter of 2021 we have not experienced any substantive operational issues relating to Brexit.

Financial Summary:

Revenue decreased by $1.4 million, or 9%, for the year ended December 31, 2020 compared to the same period in 2019 and operating income decreased by $0.5 million over the same two periods. The decline in revenue was offset by significant reductions in operating costs and the benefit of $0.5 million of local government Covid-19 related support. Operating income for the year ended December 31, 2019 includes a benefit of stock option compensation of $1.2 million whereas operating income for the year ended December 31, 2020 includes a charge of stock option compensation of $58,000.

We generated $2.1 million of cash from our operating activities for the year ended December 31, 2020; repaid net debt of $0.9 million; and increased the cash position by $1.1 million compared to December 31, 2019. The net cash position (cash minus term debt and capital leases) was positive $1.9 million at December 31, 2020 compared to negative $0.1 million at December 31 2019. We ended the year with $2.6 million of cash and a current ratio of 2.0 compared to 1.7 for the prior year.

Strategy:

The first part of our strategy relates to getting our operations back up to the point where we can meet what we expect to be more buying demand from our customers in 2021 and beyond. Our customer relationships are vitally important and we provide solutions to them to achieve their own market success. Their success fuels our success and provides us the opportunity to develop new products and market solutions for other customers and applications. The second part of our strategy remains established in our OEM heritage as well as the development of products directed at specific markets. We have made and will continue to make investments in commercially attractive OEM opportunities and product development including UV, multi-wavelength devices and laser technology advances, in the fulfillment of our strategies. We continue to concentrate our engineering capacity in defined projects and areas that we believe are poised for fast market expansion.

Respectfully submitted,

Tim Losik

President and Chief Executive OfficerRay Oglethorpe Non-Executive Chairman

PROPHOTONIX LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except share data)

December 31

Assets Current assets:

Cash and cash equivalents

Accounts receivable, less allowances of $9 in 2020 and $10 in 2019 (Note 2) Inventories, less allowances of $873 in 2020 and $782 in 2019 (Note 3) Prepaid expenses and other current assets

Total current assets

Net property, plant and equipment (Note 4) Operating lease right-of-use asset (Note 13) Goodwill (Note 5)

Intangible assets, net (Note 6) Other long-term assets

Total assets

Liabilities and Stockholders' Equity Current liabilities:

Revolving credit facility (Note 7)

Current portion of long-term debt (Note 7) Accounts payable

Accrued payroll, benefits and incentive compensation

Deferred revenue (Note 15)

Accrued warranty expenses (Note 2) Other accrued expenses

Operating lease liabilities, current (Note 13)

Current portion of finance lease obligations (Note 13) Total current liabilities

Deferred revenue, noncurrent (Note 15)

Operating lease liabilities, noncurrent (Note 13)

Long term debt obligations, net of current portion (Note 7)

Long term finance lease obligations, net of current portion (Note 13)

Total liabilities

Stockholders' Equity:

Common stock, par value $0.001; shares authorized 250,000,000 at December 31, 2020 and 2019; 93,300,402 shares issued and outstanding at December 31, 2020 and 93,150,402 shares issued and outstanding at December 31, 2019 Additional paid-in capital

Deferred compensation Accumulated deficit

Accumulated other comprehensive income

Total stockholders' equity

Total liabilities and stockholders' equity

$

7,992 7,540

512 573

190 312

432 397

458 377

129 166

• $ 9,713

  $

  3,651 4,526

  409 227

  73 193

  346 387

  23 40

• $ 9,713

See the notes to consolidated financial statements.

2020

2019

2,641

$ 1,477

2,216 2,801

2,651 2,584

484 678

$ 9,365

- $ 912

329 220

1,460 1,941

419 283

553 553

168 164

562 276

117 119

43 58

4,502

5,373

93 112,894 - (108,658)

93

112,838

(2)

(109,750)

882 5,211

813

3,992

$ 9,365

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