The subsidiary, which handles the legacy light-emitting diode (LED) fixed lighting side of the business, ceased trading as of today. The company alerted the market earlier this morning that it was considering selling off the business or putting it into administration.
The PhotonStar LED subsidiary generated the majority of the group's revenues, accounting for £1.15mln of the group's revenues of £1.33mln in the first half of 2018 but it also incurred the majority of the group's trading losses.
The group's trade finance facility borrowing was with the subsidiary, so the group's debts should be significantly reduced as a result of the unit going into administration.
The directors believe that the assets and the vast majority of the liabilities of PhotonStar LED are ring-fenced from the group's other operations.
Nevertheless, the losses run up by the struggling LED business means the company will need to raise additional funds in the medium-term to keep the PhotonStar Technology subsidiary on the road.
PhotonStar Technology Limited remains focused on the group's v2 halcyon cloudBMS software, halcyon PRO2, and the upgraded cloud service platform, cloudBMS.
PhotonStar Technology remains in discussions with several potential customers regarding these products but is yet to sign a material contract for the roll-out of Halcyon V2.
The decision to close the legacy business will not come as a big surprise to the market given the group had been flagging for some time that the unit had been under pricing pressure for some time.
While the hope had been that the group could manage the decline of its original business while it developed its new Internet of Things-based building solutions business, the group said this morning that it was apparent that the uplift in sales the subsidiary normally receives towards the end of the year would not be at the same level as in previous years.
Shares in PhotonStar lost two-thirds of their value on Wednesday, reducing the market capitalisation of the company to just over £1mln.
--- adds share price reaction and the announcement of a virtual meeting of shareholders ---