SOURCE: PEN Inc.

PEN Inc.

May 23, 2017 08:30 ET

PEN Inc. Announces First Quarter 2017 Financial Results

Investor Webcast and Business Update Set for Thursday, June 1st, 1 pm ET

MIAMI, FL--(Marketwired - May 23, 2017) - PEN Inc. (OTCQB: PENC) ("PEN" or "the Company"), a global leader in developing, commercializing and marketing consumer and industrial products enabled by nanotechnology, reported financial results for its first quarter ended March 31, 2017.

For the quarter ended March 31, 2017, PEN recorded double digit sales growth, improved gross margin and delivered its first profitable quarter since 2014. 

Scott Rickert, PEN's President, Chairman and CEO, said: "We got off to a solid start in 2017, generating healthy revenue growth, profitable operations, positive operating cash flow and a much-improved cash position. 

"Our financial results for the quarter reflect the hard work we have done to increase our sales, and right-size operations over the last several years, first in Texas and more recently in Ohio. I know many investors wish that both the sales growth and the streamlining could have happened faster, and, as an investor, I agree. As the Chief Executive, however, I know that changes of this magnitude in any organization do not happen overnight. I am truly impressed with how nimble PEN has become, thanks to solid planning and execution by our team members throughout the organization. 

"Looking forward, we see additional opportunities to refocus operations in Ohio and are moving forward with our plan to rebrand and reintroduce some of our key health and safety products into the market later this year. I am confident in our ability to grow PEN over time."

First Quarter 2017 Financial Results

For the three months ended March 31, 2017, total revenues were $2,216,350, up 12% over revenues of $1,979,161 in the comparable period in 2016.

For the first quarter of 2017, overall gross profit amounted to $933,317, up 28% from $731,124 for the first quarter of 2016. Gross margin was 42%, compared to 37% in the year ago period. The increase in gross margin was attributable higher gross margin from the Product segment, which was partially offset by lower gross margin from the Contract services segment during the quarter. 

Operating expenses totaled $863,903 in the first quarter of 2017, down 2% from $879,235 in the first quarter of 2016. The decrease was due to lower salaries, wages and related benefits, research and development expenses and general and administrative expenses, offset by higher professional fees and selling and marketing expenses. 

Operating income was $69,414 in the first quarter of 2017, compared to an operating loss of $148,111 in the first quarter of 2016.

Other income was $24,998 in the first quarter of 2017, compared to $28,176 in the first quarter of 2016. 

Net income for the three months ended March 31, 2017 amounted to $94,412 or $0.03 per basic and diluted share, as compared to a net loss of $119,935 or ($0.04) per basic and diluted share, for the three months ended March 31, 2016. 

Basic and diluted earnings per share were based on 3,034,659 and 2,997,646 weighted average shares outstanding, respectively, for the three months ended March 31, 2017 and 2016. 

PEN Brands' Health and Safety Products - Product Segment

Sales from PEN's Product segment for the first quarter of 2017 were $1,996,489, up 18% from $1,693,426 for the three months ended March 31, 2016, due to a renewed focus on sales and increased sales of coatings products.

Gross margin in the Product segment in the first quarter of 2017 was 48%, compared to 45% in the year ago period, primarily due to differences in the assortment of products sold. 

PEN Design Center - Contract Services Segment

Revenues from the Contract services segment for the first quarter of 2017 were $219,861 compared to $285,735 in the first quarter of 2016. 

Gross margin from the Contract services segment in the first quarter of 2017 was negative 12%, compared to negative 10% in the year ago period. 

Financial Condition

As of March 31, 2017, PEN held cash and cash equivalents of $305,402 as compared to $189,128 at December 31, 2016. As of March 31, 2017, PEN had a working capital deficit of $917,040 compared to a working capital deficit of $1,072,691 at December 31, 2016. 

During the first quarter of 2017, PEN generated $151,188 in cash flow from operations. As of March 31, 2017, the Company had short-term debt of $1,095,450 compared to $1,070,137 as of December 31, 2016. 

Investor webcast and business update: Thursday, June 1st, 1 pm EDT

PEN will host an investor webcast on Thursday, June 1st at 1 pm EDT to discuss first quarter results, provide a business update and take questions from investors. Participants can register 20 minutes prior to the event at: https://services.choruscall.com/links/penc170601.html

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 health, transportation, military, sports, and safety industries. Through PEN's wholly-owned subsidiary PEN Brands LLC (formerly 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 an environmentally friendly 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 contract 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, 2016, 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.

   
PEN INC. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
             
    March 31,     December 31,  
    2017     2016  
    (Unaudited)        
  ASSETS                
CURRENT ASSETS:                
  Cash   $ 305,402     $ 189,128  
  Accounts receivable, net     919,184       722,845  
  Accounts receivable - related party     32,395       10,474  
  Inventory     1,016,542       1,035,499  
  Prepaid expenses and other current assets     87,499       75,080  
  Total Current Assets     2,361,022       2,033,026  
                 
OTHER ASSETS:                
  Property, plant and equipment, net     671,813       709,627  
  Other assets     77,793       51,078  
  Total Other Assets     749,606       760,705  
                 
Total Assets   $ 3,110,628     $ 2,793,731  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
                 
CURRENT LIABILITIES:                
  Bank revolving line of credit   $ 1,007,456     $ 979,688  
  Current portion of notes payable     87,994       90,449  
  Accounts payable     1,258,949       1,078,527  
  Accounts payable - related parties     41,887       52,887  
  Accrued expenses     881,776       904,166  
                 
  Total Current Liabilities     3,278,062       3,105,717  
                 
LONG-TERM LIABILITIES:                
  Notes payable, net of current portion     264,940       266,110  
                 
  Total Long-Term Liabilities     264,940       266,110  
                 
Total Liabilities     3,543,002       3,371,827  
                 
Commitments and Contingencies (See Note 11)                
                 
STOCKHOLDERS' DEFICIT:                
  Preferred stock, $0.0001 par value, 20,000,000 shares authorized; no shares issued and outstanding     -       -  
  Class A common stock: $0.0001 par value, 7,200,000 shares authorized; 1,371,277 and 1,367,431 issued and outstandingat March 31,2017 and December 31, 2016, respectively    
137
     
136
 
  Class B common stock: $0.0001 par value, 2,500,000 sharesauthorized; 1,404,668 and 1,402,104 issued and outstanding at March 31, 2017 and December 31, 2016, respectively    
140
     
140
 
  Class Z common stock: $0.0001 par value, 300,000 sharesauthorized; 262,631 and 262,631 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively    
26
     
26
 
  Additional paid-in capital     5,373,078       5,321,769  
  Accumulated deficit     (5,805,755 )     (5,900,167 )
                 
Total Stockholders' Deficit     (432,374 )     (578,096 )
                 
Total Liabilities and Stockholders' Deficit   $ 3,110,628     $ 2,793,731  
                 
                 
   
PEN INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
             
    For the Three Months Ended  
    March 31,  
    2017     2016  
    (unaudited)     (unaudited)  
REVENUES:                
  Products (including related party sales of $53,314 and $47,692 forthe three months ended March 31, 2017 and 2016, respectively)   $
1,996,489
    $
1,693,426
 
  Contract services     219,861       285,735  
                 
  Total Revenues     2,216,350       1,979,161  
                 
COST OF REVENUES:                
Products     1,035,835       934,926  
Contract services     247,198       313,111  
                 
Total Cost of Revenues     1,283,033       1,248,037  
                 
GROSS PROFIT     933,317       731,124  
                 
OPERATING EXPENSES:                
  Selling and marketing expenses     64,727       47,369  
  Salaries, wages and related benefits     300,214       413,737  
  Research and development     68,722       85,763  
  Professional fees     214,254       106,358  
  General and administrative expenses     215,986       226,008  
                 
  Total Operating Expenses     863,903       879,235  
                 
INCOME (LOSS) FROM OPERATIONS     69,414       (148,111 )
                 
OTHER (EXPENSE) INCOME:                
  Interest expense     (25,588 )     (28,134 )
  Other income, net     50,586       56,310  
                 
  Total Other Income     24,998       28,176  
                 
NET INCOME (LOSS)   $ 94,412     $ (119,935 )
                 
NET INCOME (LOSS) PER COMMON SHARE:                
  Basic   $ 0.03     $ (0.04 )
  Diluted   $ 0.03     $ (0.04 )
                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                
  Basic     3,034,659       2,997,646  
  Diluted     3,034,659       2,997,646  
                   
                   
   
PEN INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
             
    For the Three Months Ended  
    March 31,        
    2017     2016  
    (unaudited)     (unaudited)  
CASH FLOWS FROM OPERATING ACTIVITIES                
    Net loss   $ 94,412     $ (119,935 )
    Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
    Change in inventory obsolescence reserve     27,204       14,012  
    Depreciation and amortization expense     37,814       47,180  
    Amortization of deferred lease incentives     1,782       (3,208 )
    Gain on sale of property and equipment     -       (21,866 )
    Stock-based compensation     51,310       47,310  
    Change in operating assets and liabilities:                
    Accounts receivable     (196,339 )     153,024  
    Accounts receivable - related party     (21,921 )     (1,445 )
    Inventory     (8,247 )     (135,203 )
    Prepaid expenses and other assets     (39,134 )     3,118  
    Accounts payable     180,422       16,194  
    Accounts payable - related parties     (11,000 )     58,897  
    Accrued expenses     34,885       (128,450 )
    Deferred revenue     -       (21,692 )
                 
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES     151,188       (92,064 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
    Proceeds from sales of property and equipment     -       21,866  
                 
NET CASH PROVIDED BY INVESTING ACTIVITIES     -       21,866  
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
    Proceeds from bank lines of credit     1,774,000       1,670,000  
    Repayment of bank lines of credit     (1,787,864 )     (1,708,512 )
    Repayment of bank loans     (18,595 )     (18,596 )
    Repayment of loan to third party     (2,455 )     -  
                 
NET CASH USED IN FINANCING ACTIVITIES     (34,914 )     (57,108 )
                 
NET INCREASE (DECREASE) IN CASH     116,274       (127,306 )
                 
CASH, beginning of year     189,128       262,519  
                 
CASH, end of period   $ 305,402     $ 135,213  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                
    Cash paid during the period for interest                
    Interest   $ 25,588     $ 28,134  
    Income taxes   $ -     $ -  
                 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                
    Reclassification of accrued salary to notes payable - long-term   $ 17,425     $ -  
                     
                     

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