Rockley Photonics Holdings (RKLY) stock dropped as they discontinue technical sales to Hengtong Rockley Technology.

Rockley Photonics Holdings. (NASDAQ: RKLY) stock gained by 0.96% at the last close whereas the RKLY stock price fell by 18.56% in the after-hours trading session. Rockley Photonics is an international pioneer in photonics-based health monitoring and communications systems. It is creating a wide range of photonic integrated circuits, sensors, and full-stack solutions.

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RKLY stock’ Current Update

Under the current conditions, Rockley Photonics has decided not to continue with its data-communications-related technical sale to Hengtong Rockley Technology. It is a partnership with Jiangsu Hengtong Optic-Electric. As an outcome, Rockley upgraded its business expectation for the entire fiscal year of 2021 and 2022. The deal was canceled because the US Department of Commerce’s Bureau of Industry and Security (BIS) placed Hengtong and some of its affiliates on the BIS “Entity List” with an effective date of December 17, 2021. This implies that corporations cannot provide products or technology to groups on the “Entity List” without prior authorization under the US Export Administration Regulations (EAR). The Company is presently analyzing its relationship with the JV and will make necessary choices based on what it discovers.

Andrew Rickman, founder, and CEO of Rockley stated that,

The creation and marketing of their sensing technology in the health monitoring arena has been and remains to be Rockley’s key emphasis. As detailed in their latest customer and technology developments, they continue to make exceptional progress in this area, and their outlook for this company remains positive. The technical sale to the JV was designed to be a cost-effective strategy for Rockley to commercialize its revolutionary data communications technology while remaining focused on its health and wellness offerings.

He further added,

They continue to completely comply with the rules, and they have chosen not to continue with their technical sale to the JV under the current conditions.  As a result of the BIS action, they will have to change their monetization plan for their communications technology. While they are upset with the immediate impact on their business, they feel that this move will be beneficial to Rockley in the long run. However, since these solutions were not critical to the future development possibilities, they will have no impact on the company’s long-term prospects.

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