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Ionatron Reports Third Quarter 2007 Financial Results

TUCSON, Ariz.--(BUSINESS WIRE)--Nov. 8, 2007--Ionatron, Inc., (Nasdaq:IOTN) the Laser Guided Energy (LGE(TM)) Company developing next generation Directed Energy Weapons, today reported financial results for the third quarter ended September 30, 2007. The Company will host a conference call today, November 8, 2007, at 11:00 a.m. (Eastern Standard Time).

Ionatron highlighted the following activities and accomplishments during the quarter:

    --  Received a $2.1 million contract from the Army Research,
        Development and Engineering Center (ARDEC) at Picatinny
        Arsenal, NJ for "ANVILS", a technology development program for
        the application of directed energy technologies to counter the
        threat of vehicle-borne Improvised Explosive Devices (IEDs).

    --  Received a $1.0 million contract from Joint IED Defeat
        Organization (JIEDDO), the U.S. Military's organization
        chartered to lead the effort against the IED threat to U.S.
        and coalition forces, for development and testing of a variant
        of our counter-IED technology. The program was requested by
        the U.S. Marine Corps and is an outgrowth of technology
        development and testing activities completed in the first
        quarter of 2007.

    --  Received a Phase II Small Business Technology Transfer
        Research (STTR) Contract from the U.S. Army Research Office
        for continued development of Light Filament Sensor technology.
        The U.S. Army Research Office requested the proposal for this
        work based upon the successful completion of the Phase I
        effort that provided data showing the promise of using
        ultra-short laser pulses for remote chemical detection.

    --  Received a $0.5 million contract for a commercial high-voltage
        product for application within a unique manufacturing
        situation.

The Company has also reported the following additional event after the close of the quarter:

    --  Received a $0.6 million contract for a commercial high-voltage
        system for a research application.

    --  Announced that Gerald P. Uyeno has joined Ionatron as Vice
        President of Engineering. Mr. Uyeno is a seasoned defense
        industry executive with 28 years of experience in various
        engineering, technology development, and program management
        roles within the TRW (now Northrop Grumman) Space and
        Electronics Group (Redondo Beach, CA) and within Raytheon
        Corporation Space and Airborne Systems Division (El Segundo,
        CA).

In addition, as of October 2007, Ionatron relinquished its interest in the leased facilities at the Stennis Space Center in Mississippi. The 100,000 square foot Stennis facility was initially leased and modified by Ionatron specifically for manufacturing its remotely operated counter-IED vehicle, a platform that the Company is not presently producing or marketing.

Ionatron is focused on adapting its counter-IED technology to enable its customers to field the system with their preferred manned platforms. The Company's counter-IED customers have recently expressed a preference for its packaged kits or "palletized" versions of the Company's counter-IED technology. These palletized systems are designed for integration into existing combat-rugged vehicles or other platforms supplied by the customer. Accordingly, in the third quarter of 2007 Ionatron suspended development of its remotely operated vehicles and re-evaluated certain inventory materials on hand and reduced the carrying value to lower-of-cost-or-market for inventory not technologically current or that was directly associated with the Company's remotely controlled vehicle development. This re-evaluation resulted in a lower-of-cost-or-market inventory adjustment of $1.5 million in September 2007.

Ionatron, beginning in the first quarter of 2007, has been engaged in an Exclusive Supplier Agreement for long-term technology and systems development related to advanced commercial and military applications with a leading aerospace company. The customer has already made important investments in concert with Ionatron's investments to advance this revolutionary and innovative technology. Ionatron's customer is currently funding a contract under the Agreement that includes concept development, fabrication and delivery of operational hardware systems. The current Agreement covers three years with options to extend for seven more years. The terms of the Agreement limit disclosure of the technology and application areas. Ionatron has deferred recognizing revenue until the initial phase is concluded and accepted by its customer. The Company estimates that its costs to complete the current tasks will exceed customer funding by a total of $1.1 million, $800,000 of which was charged during the third-quarter. Ionatron recognized the effect of these estimates with a loss provision accrual to cost of revenue. These charges resulted in a reported negative gross margin for this initial work in both the three- and nine-months ended September 30, 2007.

Dana Marshall, Ionatron's president and chief executive officer, stated, "We were pleased to have been awarded several new contracts in the third quarter relating to both our LGE and counter-IED programs. The ANVILS award was our first LGE related contract with the US Army and is focused on utilizing our technology on neutralization of vehicle borne IEDs. The JIEDDO contract represented an important step forward in our counter-IED program by funding the development of a system designed for integration into existing combat-rugged vehicles for the USMC. This customer requested platform, combined with the progress we have made thus far with this new system, led to our decision to suspend development of the remotely controlled platform. As a result, we no longer require the manufacturing space at Stennis and have made the adjustment for materials in inventory that were purchased primarily for remotely-operated-vehicle manufacturing activities. We believe our added value is in our technology, not in manufacturing capacity, and our production goal should be to speed the system to the field while maintaining control of the technology and managing the quality of the product."

Commenting on other programs, Mr. Marshall said, "The development of our LGE transportable demonstrator system for the Navy is on schedule and we expect to deliver this system to our customer prior to the end of the year. This system will provide our customer with the opportunity to evaluate this innovative technology in a variety of environments and should provide important insight into the capability of this advanced laser for military applications. Also during the quarter we received an award for a Phase II STTR contract from the Army to continue our development of laser remote chemical detection technologies. Our goal is to develop this as an adjunct capability for our LGE systems, primarily to assist in the detection of IEDs."

Third Quarter and Year-to-Date 2007 Financial Results

Revenue for the third quarter of 2007 was approximately $3.6 million, compared to approximately $1.5 million for the same period last year. The increase in revenue was primarily attributable to increased LGE-related contract activities and from increases in Counter-IED projects.

Net loss attributable to common shareholders for the third quarter of 2007 was ($5.5) million, or ($0.07) per diluted common share as compared to a net loss of ($3.7) million or ($0.5) per diluted common share for the same period last year. This increase in loss reflects an increase in G&A of $1.9 million and a further reduction of our gross margin by $534,000, offset by decreases in R&D of approximately $419,000 and increases in our net interest income of $88,000.

Revenue for the nine months ended September 30, 2007 was approximately $8.8 million, compared to approximately $8.6 million for the same period last year. The increase in revenue was primarily attributable to increased LGE-related contract activities, which was offset by decreases in Counter-IED projects and non-government projects.

Net loss attributable to common shareholders for the nine months ended September 30, 2007 was ($10.7) million, or ($0.14) per diluted common share as compared to a net loss of ($12.6) million or ($0.17) per diluted common share for the same period last year. This loss decreased primarily due to reductions in un-funded R&D expense of approximately $2.4 million and an increase in net interest income of $610,000, offset by a decrease in gross margin of $1.0 million and an increase of G&A expense of $243,000.

At September 30, 2007, the Company had approximately $25.4 million in cash and cash equivalents and securities available-for-sale as compared to $26.6 million cash and cash equivalents and securities available-for-sale at June 30, 2007 and $30.6 million in cash and cash equivalents and securities available-for-sale at December 31, 2006.

As of September 30, 2007 the Company had a backlog of $9.7 million, which is expected to be completed within the next twelve-months. This backlog does not include proposals and contracts under negotiation at September 30, 2007.

Conference Call

As previously announced, Ionatron will host a conference call on November 8, 2007, at 11:00 a.m. (Eastern Standard Time). Shareholders and other interested parties may participate in the conference call by dialing +1 866 356 4279 (domestic) or +1 617 597 5394 (international) and entering access code 32944726, a few minutes before 11:00 a.m. EDT on November 8, 2007. The call will also be broadcast live on the Internet at www.streetevents.com, www.fulldisclosure.com and www.ionatron.com.

A replay of the conference call will be accessible two hours after its completion through November 15, 2007, by dialing +1 888 286 8010 (domestic) or +1 617 801 6888 (international) and entering access code 48006388. The call will also be archived for 30 days at www.streetevents.com, www.fulldisclosure.com and www.ionatron.com.

About Ionatron Inc.

Ionatron, Inc. is a solution provider that develops and markets Laser Guided Energy (LGE(C)) and related products to defense and security customers for unique applications worldwide. Ionatron has significant expertise in the application of high-power lasers, high voltage electronics, advanced optics, and energy management technologies. Headquartered in Tucson, Arizona, Ionatron provides technology solutions directly for its government and security customers. For more information about Ionatron, please visit www.ionatron.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

Certain statements contained in this News Release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such factors include, but are not limited to: the dependence on sales of a limited number of products and the uncertainty of the timing and magnitude of government funding and orders, dependence on sales to government customers; the uncertainty of patent protection; the uncertainty of strategic alliances; the uncertainty of management tenure; the impact of third-party suppliers' manufacturing constraints or difficulties; management's ability to achieve business performance objectives, market acceptance of, and demand for, the Company's products, and resulting revenues; development and testing of technology and products; manufacturing capabilities; impact of competitive products and pricing; litigation and other risks detailed in the Company's filings with the Securities and Exchange Commission. The words "looking forward," "believe," "demonstrate," "intend," "expect," "contemplate," "estimate," "anticipate," "likely" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. Ionatron undertakes no obligation to update any forward-looking statements contained in this news release.

                            IONATRON, INC.
                     CONSOLIDATED BALANCE SHEETS

                                           September 30, December 31,
                                                2007          2006
                                           ---------------------------
ASSETS                                      (Unaudited)
                                           ---------------------------
Current assets
Cash and cash equivalents                  $ 16,942,067  $ 22,123,792
Accounts receivable - net                     1,877,469       640,082
Inventory                                     1,455,220     2,832,752
Securities available-for-sale                 8,500,000     8,500,000
Prepaid expenses and deposits                   186,156       639,728
Other receivables                                 1,237         2,918
                                           ---------------------------
Total current assets                         28,962,149    34,739,272
Property and equipment - net                  1,776,758     2,205,278
Other assets                                     34,516        72,776
Intangible assets - net                          98,400       135,300
                                           ---------------------------
TOTAL ASSETS                               $ 30,871,823  $ 37,152,626
                                           ===========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable - net                     $  1,259,451  $    570,572
Accrued expenses                                411,785       638,925
Accrued compensation                            764,339       818,779
Customer deposits                               492,877       284,279
Current portion of capital lease
 obligations                                     17,413        46,974
                                           ---------------------------
 Total current liabilities                    2,945,865     2,359,529
Capital lease obligations                         4,491        30,536
Deferred rent                                   125,034       112,641
                                           ---------------------------
Total liabilities                             3,075,390     2,502,706
                                           ---------------------------

Commitments and contingencies

Stockholders' equity
Series A Convertible Preferred stock,
 $.001 par value, 2,000,000 shares
authorized and 690,000 shares issued and
 outstanding at
September 30, 2007 and December 31, 2006.           690           690
Common stock, $.001 par value, 125,000,000
 shares authorized; 79,189,151
shares issued and outstanding at September
 30, 2007 and 78,171,267
shares issued and outstanding at December
 31, 2006                                        79,189        78,171
Additional paid-in capital                   64,296,743    60,488,633
Accumulated deficit                         (36,580,189)  (25,917,574)
                                           ---------------------------
Total stockholders' equity                   27,796,433    34,649,920
                                           ---------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 30,871,823  $ 37,152,626
                                           ===========================
                            IONATRON, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Unaudited)

                                               For the three months
                                                       ended
                                                   September 30,
                                             -------------------------
                                                 2007         2006
                                             -------------------------

Revenue                                      $ 3,608,584  $ 1,537,314

Cost of revenue                                4,143,906    1,539,077
                                             -------------------------

Gross loss                                      (535,322)      (1,763)

Operating expenses:
General and administrative                     4,348,838    2,492,610
Selling and marketing                             76,340      144,522
Research and development                         548,895      967,850
                                             -------------------------
Total operating expenses                       4,974,073    3,604,982
                                             -------------------------

Operating loss                                (5,509,395)  (3,606,745)

Other (expense) income
Interest expense                                    (453)      (2,122)
Interest income                                  341,872      255,093
Other                                                  -          500
                                             -------------------------
   Total other                                   341,419      253,471
                                             -------------------------

Loss before provision for income taxes        (5,167,976)  (3,353,274)

Provision for income taxes                             -       10,199
                                             -------------------------

Net loss                                      (5,167,976)  (3,363,473)

Preferred stock dividends                       (295,108)    (298,054)
                                             -------------------------

Net loss attributable to common stockholders $(5,463,084) $(3,661,527)
                                             =========================

Net loss per common share - basic and
 diluted                                     $     (0.07) $     (0.05)
                                             =========================

Weighted average number of shares
 outstanding, basic and diluted               79,107,767   76,084,796
                                             =========================
                            IONATRON, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Unaudited)

                                            For the nine months ended
                                                  September 30,
                                           ---------------------------
                                               2007          2006
                                           ---------------------------

Revenue                                    $  8,828,367  $  8,609,311

Cost of revenue                               9,552,526     8,329,486
                                           ---------------------------

Gross profit (loss)                            (724,159)      279,825

Operating expenses:
General and administrative                    8,951,015     8,708,326
Selling and marketing                           331,155       419,771
Research and development                        856,722     3,244,096
                                           ---------------------------
Total operating expenses                     10,138,892    12,372,193
                                           ---------------------------

Operating loss                              (10,863,051)  (12,092,368)

Other (expense) income
Interest expense                                 (1,941)      (11,485)
Interest income                               1,079,841       479,195
Other                                             7,847           544
                                           ---------------------------
   Total other                                1,085,747       468,254
                                           ---------------------------

Loss before provision for income taxes       (9,777,304)  (11,624,114)

Provision for income taxes                            -        32,101
                                           ---------------------------

Net loss                                     (9,777,304)  (11,656,215)

Preferred stock dividends                      (885,326)     (905,377)
                                           ---------------------------

Net loss attributable to common
 stockholders                              $(10,662,630) $(12,561,592)
                                           ===========================

Net loss per common share - basic and
 diluted                                   $      (0.14) $      (0.17)
                                           ===========================

Weighted average number of shares
 outstanding, basic and diluted              78,677,306    73,858,433
                                           ===========================

    CONTACT: Cameron Associates for Ionatron
             Kevin McGrath, 212-245-4577
             Kevin@cameronassoc.com

    SOURCE: Ionatron, Inc.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Applied Energetics, Inc.'s business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.