SOURCE: PEN Inc.

Products enabled by nanotechnology

May 17, 2016 08:30 ET

PEN Inc. Announces First Quarter 2016 Financial Results

Investor Webcast and Business Update Set for May 25th, 1 pm ET

MIAMI, FL--(Marketwired - May 17, 2016) - PEN Inc. (OTCQB: PENC) ("PEN" or "the Company"), a global leader in developing, commercializing and marketing consumer and industrial products enabled by nanotechnology, yesterday reported financial results for its first quarter ended March 31, 2016.

Scott Rickert, PEN's President, Chairman and CEO, said: "During the first quarter of 2016, we remained focused on building a consumer products business with great products enabled by nanotechnology and friendly to the environment. We continue to roll out new products and formulations, most recently our CLARITY™ FREE alcohol-free eyeglass cleaner. We are also making inroads into the mass market retail channel for our CLARITY™ branded products. Our Design Center in Austin, Texas has attracted considerable interest for its groundbreaking work in graphene foil used in medical imaging and its inkjet multifunctional copper ink for 3D printed electronics.

"I am confident that the impressive efforts of our team in cutting costs and becoming more efficient will enable us to turn the corner to profitability. Thanks to our effort over the last year to realign operations, our cost structure is much improved and will be a boost to our results going forward."

First Quarter 2016 Financial Results

For the three months ended March 31, 2016, total revenues were $1,979,161 with a net loss of $119,935 ($0.04) per basic and fully diluted share. In the comparable period in 2015, revenues were$3,067,741 with a net loss of $185,392 ($0.06) per basic and fully diluted share).

Product Segment -- Optical, Surface Treatments & Coatings and Related Products

Sales from PEN's Product segment were $1,693,280, as compared to $2,437,314 for the three months ended March 31, 2015. Due to variability in the timing of purchases by large customers, the Company's revenue from the product segment can fluctuate significantly from quarter to quarter.

Gross margin in the Product segment was 45%, up from 42% in the year ago period, primarily due to differences in the assortment of optical products sold.

Nanotechnology R&D Contract Services Segment

Revenues from Research and development services were $285,881 in the first quarter of 2016, compared to $630,427 in the first quarter of 2015. The decrease in revenue from Research and development services was primarily due to fewer contracts being performed in the current quarter.

Gross margin from Research and development services was negative 10%, down from 19% in the year ago period. The decrease in gross margin was due to fewer research projects being performed and the allocation of fixed overhead and salaries to the reduced number of projects.

For the first quarter of 2016, overall gross profit amounted to $731,124, down from $1,152,638 for the first quarter of 2015. Gross margin was 37%, compared to 38% in the year ago period. The slight decrease in gross margin was attributable to negative gross margin in the Research and development services segment which was largely offset by higher gross margin from the Product segment.

Operating expenses totaled $876,398 in the first quarter of 2016, down 33% from $1,312,188 in the first quarter of 2015. Management continued to implement aggressive cost-cutting measures to right-size operations, resulting in lower operating expenses across the board.

Operating loss was $145,274 in the first quarter of 2016, compared to an operating loss of $159,550 in the first quarter of 2015.

Other income, net was $28,176 in the first quarter of 2016, compared to other expense, net of $20,898 in the first quarter of 2015. The increase was primarily attributable to $49,479 in sales of used equipment in Austin.

Net loss for the three months ended March 31, 2016 amounted to $119,935, or ($0.04) per basic and diluted share, as compared to a net loss of $185,392, or ($0.06) per basic and diluted share, for the three months ended March 31, 2015.

Basic and diluted earnings per share were based on 2,997,646 and 2,967,870 weighted average shares outstanding, respectively, for the three months ended March 31, 2016 and 2015. All share and per share information has been adjusted to reflect a 1-for-180 reverse stock split effective January 26, 2016.

Financial Condition

As of March 31, 2016, PEN held cash and cash equivalents of $135,213 as compared to $262,519 at December 31, 2015. As of March 31, 2016, PEN had a working capital deficit of $932,913 compared to working capital of $889,657 at December 31, 2015.

During the first quarter of 2016, PEN used cash in operations of $92,064, primarily due to the net loss for the period as well as an increase in inventory ahead of anticipated sales in the remainder of 2016. The Company generated $21,866 in cash flow from investing activities, which was related to the sale of property and equipment in the Research and development services segment.

As of March 31, 2016, the Company had short-term debt of $1,324,616 compared to $1,363,128 as of December 31, 2015. At March 31, 2016, the Company had approximately $249,764 of additional borrowing available under its revolving credit facility.

The entire Form 10Q and related financial statements are available at www.sec.gov or the company's website, www.penc.us.

Investor webcast and business update: Wednesday, May 25, 1 pm EDT

PEN will host an investor webcast Wednesday, May 25, at 1 pm ET to discuss first quarter results, provide a business update and take questions from investors. Participants can register for the event at: http://event.on24.com/wcc/r/1189426/6BAED9606F5A0F5476E332427659467D.

Questions for the event may be submitted in advance to ir@pen-technology.com.

About PEN Inc.

PEN Inc. (OTCQB: PENC) is a leader in developing, commercializing, and marketing consumer and industrial products enabled by nanotechnology that solve everyday problems for customers in the optical, transportation, military, sports, and safety industries. Through PEN's wholly-owned subsidiary Nanofilm Ltd., the Company develops, manufactures and sells products based on nanotechnology including the ULTRA CLARITY® brand eyeglass cleaner, CLARITY DEFOG IT™ brand defogging products and CLARITY ULTRASEAL® nanocoating products for glass and ceramics. The Company also sells the environmentally friendly HALO™ brand surface protector, fortifier, and cleaner through a wholly-owned subsidiary, PEN Technology, LLC. The Company's Applied Nanotech, Inc. subsidiary in Austin, Texas functions as the Design Center conducting research and development services for government and private customers and new product development for PEN focusing on innovative and advanced product solutions in the areas of safety, health, and sustainability. For more information about PEN, visit www.penc.us.

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties concerning our business, products, and financial results. Actual results may differ materially from the results predicted. More information about potential risk factors that could affect our business, products, and financial results are included in our annual report on Form 10-K for the fiscal year ended December 31, 2015, and in reports subsequently filed by us with the Securities and Exchange Commission ("SEC"). All documents are available through the SEC's Electronic Data Gathering Analysis and Retrieval System (EDGAR) at www.sec.gov or from our website listed above. We hereby disclaim any obligation to publicly update the information provided above, including forward-looking statements, to reflect subsequent events or circumstances.

Financial Tables

 
PEN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
         
    March 31,   December 31,
    2016   2015
    (Unaudited)    
ASSETS            
CURRENT ASSETS:            
  Cash   $ 135,213   $ 262,519
  Accounts receivable, net     947,328     1,100,352
  Accounts receivable - related party     13,429     11,984
  Inventory     1,204,576     1,083,385
  Prepaid expenses and other current assets     192,616     194,950
  Total Current Assets     2,493,162     2,653,190
OTHER ASSETS:            
  Property, plant and equipment, net     850,178     897,358
  Other assets     31,319     32,103
  Total Other Assets     881,497     929,461
TOTAL ASSETS   $ 3,374,659   $ 3,582,651
             
LIABILITIES AND STOCKHOLDERS' DEFICIT      
CURRENT LIABILITIES:            
  Bank revolving line of credit   $ 1,250,236   $ 1,288,748
  Current portion of notes payable     74,380     74,380
  Accounts payable     1,276,059     1,259,865
  Accounts payable - related parties     85,961     27,064
  Accrued expenses     739,439     871,098
  Deferred revenue     -     21,692
  Total Current Liabilities     3,426,075     3,542,847
LONG-TERM LIABILITIES:            
  Notes payable, net of current portion     293,543     312,139
  Total Long-term Liabilities     293,543     312,139
  Total Liabilities     3,719,618     3,854,986
             
Commitments and Contingencies            
             
STOCKHOLDERS' DEFICIT:            
  Preferred stock, $.0001 par value, 20,000,000 shares authorized; No shares issued and outstanding     -     -
             
  Class A common stock: $.0001 par value, 7,200,000 shares authorized; 1,340,534 and 1,336,759 issued and outstanding at March 31, 2016 and December 31, 2015, respectively     134     134
  Class B common stock: $.0001 par value, 2,500,000 shares authorized; 1,396,302 And 1,395,678 issued and outstanding at March 31, 2016 and December 31, 2015, Respectively     140     139
  Class Z common stock: $.0001 par value, 300,000 shares authorized; 262,631 and 262,631 issued and outstanding at March 31, 2016 and December 31, 2015, Respectively     26     26
  Additional paid-in capital     5,118,842     5,071,532
  Accumulated deficit     (5,464,101)     (5,344,166)
Total Stockholders' Deficit     (344,959)     (272,335)
Total Liabilities and Stockholders' Deficit   $ 3,374,659   $ 3,582,651
             
             
 
PEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
         
    For the Three Months Ended
    March 31,
    2016   2015
    (Unaudited)   (Unaudited)
REVENUES:            
  Products (including related party sales of $47,692 and $44,827 for the three months ended March 31, 2016 and 2015, respectively)   $ 1,693,426   $ 2,437,314
  Research and development services     285,735     630,427
  Total Revenues     1,979,161     3,067,741
COST OF REVENUES:            
  Products     934,926     1,406,719
  Research and development services     313,111     508,384
  Total Cost of Revenues     1,248,037     1,915,103
GROSS PROFIT     731,124     1,152,638
OPERATING EXPENSES:            
  Selling and marketing expenses     47,369     82,209
  Salaries, wages and related benefits     413,737     587,830
  Research and development     85,763     195,202
  Professional fees     106,358     180,552
  General and administrative expenses     223,171     266,395
  Total Operating Expenses     876,398     1,312,188
LOSS FROM OPERATIONS     (145,274)     (159,550)
OTHER INCOME (EXPENSES):            
Interest expenses     (28,134)     (27,729)
Other income, net     56,310     6,831
  Total Other Income/(Expense)     28,176     (20,898)
Loss before income taxes     (117,098)     (180,448)
Income tax expense     (2,837)     (4,944)
NET LOSS   $ (119,935)   $ (185,392)
NET LOSS PER COMMON SHARE:            
  Basic   $ (0.04)   $ (0.06)
  Diluted   $ (0.04)   $ (0.06)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:      
  Basic     2,997,646     2,967,870
  Diluted     2,997,646     2,967,870
             
             
 
PEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
         
    For the Three Months Ended
    March 31,
    2016   2015
      (Unaudited)     (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:            
  Net loss   $ (119,935)   $ (185,392)
  Adjustments to reconcile net loss to net cash used in operating activities:            
    Change in inventory obsolescence reserve     14,012     (6,650)
    Depreciation and amortization expense     47,180     63,563
    Amortization of deferred lease incentives     (3,208)     (3,208)
    Gain on sale of property and equipment     (21,866)     -
    Stock-based compensation     47,310     41,310
    Change in operating assets and liabilities:            
      Accounts receivable     153,024     (262,097)
      Accounts receivable - related party     (1,445)     27,201
      Inventory     (135,203)     191,067
      Prepaid expenses and other assets     3,118     (45,146)
      Accounts payable     16,194     (83,219)
      Accounts payable - related parties     58,897     -
      Accrued expenses     (128,450)     (18,579)
      Deferred revenue     (21,692)     1,263
NET CASH USED IN OPERATING ACTIVITIES     (92,064)     (279,887)
CASH FLOWS FROM INVESTING ACTIVITIES:            
  Proceeds from sale of property and equipment     21,866     -
  Purchases of property and equipment     -     (30,311)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES     21,866     (30,311)
CASH FLOWS FROM FINANCING ACTIVITIES:            
  Proceeds from bank lines of credit     1,670,000     2,067,500
  Repayment of bank lines of credit     (1,708,512)     (2,213,562)
  Proceeds from bank loans     -     165,258
  Repayment of bank loans     (18,596)     -
             
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES     (57,108)     19,196
NET DECREASE IN CASH     (127,306)     (291,002)
CASH, beginning of year     262,519     464,735
CASH, end of period   $ 135,213   $ 173,733
             
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION            
Cash paid for:            
  Interest   $ 28,134   $ 27,655
  Income taxes   $ 2,837   $ 4,944
             
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:      
  Common stock issued for convertible notes and accrued interest   $ -   $ 13,725
  Common stock issued for accrued expenses   $ -   $ 123,285
             

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