SOURCE: PEN Inc.

Products enabled by nanotechnology

March 31, 2016 08:30 ET

PEN Inc. Announces Fourth Quarter and Full Year 2015 Financial Results

MIAMI, FL--(Marketwired - March 31, 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 fourth quarter and full year ended December 31, 2015.

Scott Rickert, PEN's President, Chairman and CEO, said: "2015 was the first full-year of operations as the new PEN. I am proud of the progress we made on several fronts. Most rewarding is the teamwork and sharing of the expertise of our teams in Austin and Cleveland creating nanotechnology-based products with significant growth potential, particularly our HALO™ product. In 2015 we also undertook a substantial realignment of the operations at the Design Center in Austin. At the same time, we were working to establish new channels of distribution for our optical products that we see as a growth opportunity. Our fourth quarter financial results show tangible progress in reducing losses and improving operating cash flow to the break-even level. 

"In 2016, we continue to move forward to expand our branded products business into the mass market retail channel. Our broad product portfolio, including the Clarity® branded optical cleaners, Clarity Advanced® consumer electronics cleaners, Defog It™ defogging products and HALO brand surface protector, fortifier, and cleaner, are attracting the interest of national drug stores, sporting goods stores and other mass market retailers. Meanwhile, the latest breakthroughs in 3D printed electronics and graphene foil used in medical imaging are generating opportunities for new contract research revenue at the Design Center in Austin. We plan a strong marketing push for the HALO product as our resources support it." 

Fourth Quarter 2015 Financial Results

For the three months ended December 31, 2015, total revenues were $2,293,190, down 2.7% from revenues of $2,356,383 in the fourth quarter of 2014.

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

Sales from PEN's Product segment were $1,946,459, up 7.1% as compared to the three months ended December 31, 2014. The increase in product segment revenue was due to strong sales of optical cleaner products.

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 $346,731 in the fourth quarter of 2015, compared to $539,495 in the fourth quarter of 2014. 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 4.0%, down from 21.0% 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 fourth quarter of 2015, overall gross profit amounted to $892,769 up slightly from $878,694 for the fourth quarter of 2014. Gross margin was 39.0%, compared to 38.0% in the year ago period. The slight increase in gross margin was attributable to the higher gross margins from the Product segment.

Operating expenses totaled $1,208,917 in the fourth quarter of 2015, down from $3,338,134 in the fourth quarter of 2014. Management continued to implement aggressive cost-cutting measures to right-size operations. The higher costs in the fourth quarter of 2014 also reflected costs associated with the combination with Applied Nanotech, Inc. that closed in late August, 2014. 

Operating expenses include non-cash impairments of certain intangible assets acquired in the business combination totaling $188,051 and $1,933,144 in the fourth quarters of 2015 and 2014, respectively. The charges were recorded in accordance with the Company's accounting policies and do not reflect any revision of the assessment of the value of the intellectual property acquired in the business combination as far as potential future products, but results from an analysis of the present value of the cash flow of current products. 

Net loss for the three months ended December 31, 2015 amounted to $344,167, or ($0.12) per basic and diluted share, as compared to a net loss of $2,411,327, or ($0.82) per basic and diluted share, for the three months ended December 31, 2014. 

Non-GAAP adjusted net loss, computed by adding back to net loss the non-cash impairment loss, was $156,116, or ($0.05) per basic and diluted share, compared to non-GAAP adjusted loss of $478,183 or ($0.16) per basic and diluted share, in the fourth quarter of 2014. The calculations for non-GAAP adjusted net loss and loss per share are shown in a table following the financial statements.

Reported and non-GAAP basic and diluted earnings per share were based on 2,980,868 and 2,954,351 weighted average shares outstanding, respectively, for the three months ended December 31, 2015 and 2014. All share and per share information has been adjusted to reflect a 1-for-180 reverse stock split effective January 26, 2016.

Full Year 2015 Results

For the year ended December 31, 2015, total revenues were $9,685,072, down 2.7% from revenues of $9,950,477 in 2014. Gross profit was $3,340,939 in 2015, down 22.3% from gross profit of $4,300,361 in 2014. Gross margin was 34% compared to 43% in 2014. Net loss for the year ended December 31, 2015 amounted to $1,869,247, or ($0.63) per basic and diluted share, as compared to a net loss of $2,370,254, or $1.05 per basic and diluted share, for 2014. Comparing year-to-year results is difficult as the Company only included the results of Applied Nanotech from the closing of the combination on August 26, 2014.

Non-GAAP adjusted net loss, computed by adding back to net loss the non-cash impairment loss, was $1,681,196 or ($0.57) per basic and diluted share, compared to a non-GAAP adjusted loss of $437,110, or ($0.20) per basic and diluted share, in 2014. The calculations for non-GAAP adjusted net loss and loss per share are shown in a table following the financial statements.

Reported and non-GAAP basic and diluted earnings per share were based on 2,974,847 and 2,203,563 weighted average shares outstanding, respectively, for the years ended December 31, 2015 and 2014. 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 December 31, 2015, PEN held cash and cash equivalents of $262,519 as compared to $464,735 at December 31, 2014. As of December 31, 2015, PEN had a working capital deficit of $889,657 compared to working capital of $86,636 at December 31, 2014. 

Substantially all of the $804,208 in cash used in operating activities for the full year 2015 occurred during the first half of the year. Due to aggressive cost cutting measures and cash management, the Company was breakeven in regard to operating cash flow in the second half of 2015. 

The Company invested approximately $248,123 in capital expenditures during 2015, primarily for the purchase of additional packaging equipment related to the expansion of its distribution channels for its optical products in the second quarter of 2015. The Company does not anticipate significant capital expenditures in 2016.

As of December 31, 2015 the Company had short-term debt of $1,363,128 compared to $773,344 at December 31, 2014. At December 31, 2015, the Company had approximately $211,252 of additional borrowing available under its revolving credit facility.

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

About PEN Inc. 

PEN Inc. (OTCQB: PENC) is a global 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 and Defog It™ brand defogging products. 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.

Use of Non-GAAP Financial Measures

The Company has included in this press release certain non-GAAP financial measures. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of the Company and when planning and forecasting future periods. Readers are cautioned not to view non-GAAP financial measures on a stand-alone basis or as a substitute for GAAP measures, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP measures with non-GAAP measures also included herein.

Financial Tables

   
   
PEN INC. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
             
    December 31,     December 31,  
    2015     2014  
ASSETS                
CURRENT ASSETS:                
  Cash   $ 262,519     $ 464,735  
  Accounts receivable, net     1,100,352       1,032,995  
  Accounts receivable - related party     11,984       38,246  
  Inventory     1,083,385       1,557,100  
  Prepaid expenses and other current assets     194,950       200,079  
  Total Current Assets     2,653,190       3,293,155  
OTHER ASSETS:                
  Property, plant and equipment, net     897,358       850,847  
  Intangible assets, net     -       239,338  
  Other assets     32,103       41,841  
  Total Other Assets     929,461       1,132,026  
TOTAL ASSETS   $ 3,582,651     $ 4,425,181  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)          
CURRENT LIABILITIES:                
  Bank revolving line of credit   $ 1,288,748     $ 773,344  
  Current portion of notes payable     74,380       -  
  Convertible notes payable, net     -       13,333  
  Accounts payable     1,259,865       1,426,465  
  Accounts payable - related parties     27,064       -  
  Accrued expenses     871,098       964,587  
  Deferred revenue     21,692       28,790  
  Total Current Liabilities     3,542,847       3,206,519  
LONG-TERM LIABILITIES:                
  Notes payable, net of current portion     312,139       -  
  Total Long-term Liabilities     312,139       -  
  Total Liabilities     3,854,986       3,206,519  
Commitments and Contingencies                
STOCKHOLDERS' EQUITY (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; 1,336,759 and 1,304,137 issued and outstanding at December 31, 2015 and 2014, respectively     134       131  
  Class B common stock: $.0001 par value, 2,500,000 shares authorized; 1,395,678 and 1,394,545 issued and outstanding at December 31, 2015 and 2014, respectively     139       139  
  Class Z common stock: $.0001 par value, 300,000 shares authorized; 262,631 and 262,631 issued and outstanding at December 31, 2015 and 2014, respectively     26       26  
  Additional paid-in capital     5,071,532       4,693,285  
  Accumulated deficit     (5,344,166 )     (3,474,919 )
Total Stockholders' Equity (Deficit)     (272,335 )     1,218,662  
Total Liabilities and Stockholders' Equity (Deficit)   $ 3,582,651     $ 4,425,181  
                 
   
PEN INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
    For the Three Months Ended     For the Years Ended  
    December 31,     December 31,  
    2015     2014     2015     2014  
REVENUES:                                
  Products   $ 1,946,459     $ 1,816,888     $ 7,920,148     $ 9,177,568  
  Research and development services     346,731       539,495       1,764,924       772,909  
  Total Revenues     2,293,190       2,356,383       9,685,072       9,950,477  
COST OF REVENUES:                                
  Products     1,066,584       1,052,426       4,561,506       5,014,296  
  Research and development services     333,837       425,263       1,782,627       635,820  
  Total Cost of Revenues     1,400,421       1,477,689       6,344,133       5,650,116  
GROSS PROFIT     892,769       878,694       3,340,939       4,300,361  
OPERATING EXPENSES:                                
  Selling and marketing expenses     65,574       49,172       280,173       235,234  
  Salaries, wages and related benefits     472,708       555,063       2,214,956       2,003,996  
  Research and development     124,055       180,309       744,346       607,049  
  Professional fees     113,962       246,293       660,584       814,518  
  General and administrative expenses     244,567       374,153       993,032       996,238  
  Impairment loss     188,051       1,933,144       188,051       1,933,144  
  Total Operating Expenses     1,208,917       3,338,134       5,081,142       6,590,179  
LOSS FROM OPERATIONS     (316,148 )     (2,459,440 )     (1,740,203 )     (2,289,818 )
OTHER INCOME (EXPENSES):                                
 Interest expenses     (26,848 )     (9,737 )     (117,879 )     (28,967 )
 Other income, net     2,378       86,132       12,555       86,132  
    Total Other Income/(Expense)     (24,470 )     76,395       (105,324 )     57,165  
Loss before income taxes     (340,618 )     (2,383,045 )     (1,845,527 )     (2,232,653 )
Income tax expense     (3,549 )     (28,282 )     (23,720 )     (84,183 )
NET LOSS     (344,167 )     (2,411,327 )     (1,869,247 )     (2,316,836 )
Net (income) attributable to former non-controlling interest     -       -       -       (53,418 )
NET LOSS ATTRIBUTABLE TO PEN INC.   $ (344,167 )   $ (2,411,327 )   $ (1,869,247 )   $ (2,370,254 )
NET LOSS PER COMMON SHARE:                                
  Basic   $ (0.12 )   $ (0.82 )   $ (0.63 )   $ (1.05 )
  Diluted   $ (0.12 )   $ (0.82 )   $ (0.63 )   $ (1.05 )
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                                
  Basic     2,980,868       2,954,351       2,974,847       2,203,563  
  Diluted     2,980,868       2,954,351       2,974,847       2,203,563  
                                   
   
PEN INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
             
    For the Years Ended  
    December 31,  
    2015     2014  
CASH FLOWS FROM OPERATING ACTIVITIES                
  Net loss   $ (1,869,247 )   $ (2,316,836 )
  Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                
    Change in inventory obsolescence reserve     (35,652 )     (57,855 )
    Impairment loss     188,051       1,933,144  
    Depreciation and amortization expense     252,899       324,433  
    Amortization of deferred lease incentives     (12,830 )     (12,830 )
    Change in value of stock appreciation rights     6,962       (12,853 )
    Change in value of equity credits     (11,024 )     99  
    Stock-based compensation     241,240       151,400  
    Change in operating assets and liabilities:                
      Accounts receivable     (67,357 )     770,306  
      Accounts receivable - related party     26,262       (21,022 )
      Inventory     509,367       (14,789 )
      Prepaid expenses and other assets     14,867       (8,697 )
      Accounts payable     (166,600 )     (77,325 )
      Accounts payable - related parties     27,064       -  
      Accrued expenses     98,888       8,149  
      Deferred revenue     (7,098 )     (117,677 )
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES     (804,208 )     547,647  
CASH FLOWS FROM INVESTING ACTIVITIES                
  Cash acquired in acquisition     -       48,121  
  Purchases of property and equipment     (248,123 )     (229,825 )
NET CASH USED IN INVESTING ACTIVITIES     (248,123 )     (181,704 )
CASH FLOWS FROM FINANCING ACTIVITIES                
  Proceeds from bank lines of credit     7,439,000       7,153,129  
  Repayment of bank lines of credit     (6,923,596 )     (6,579,704 )
  Proceeds from bank loans     371,901       -  
  Repayment of bank loans     (37,190 )     (575,000 )
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES     850,115       (1,575 )
NET (DECREASE) INCREASE IN CASH     (202,216 )     364,368  
                 
CASH, beginning of year     464,735       100,367  
CASH, end of year   $ 262,519     $ 464,735  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION          
Cash paid for:                
  Interest   $ 117,879     $ 28,967  
  Income taxes   $ 23,720     $ 84,183  
                 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:  
  Common stock issued for convertible notes and accrued interest   $ 13,725     $ 137,504  
  Common stock issued for accrued expenses   $ 123,285     $ -  
  Reclassification of accrued salary to notes payable - long-term   $ 51,808     $ -  
  Value of equity credits forfeited at original purchase price, in exchange for cancellation of receivables   $ -     $ 18,313  
                   
  Liabilities assumed in share exchange   $ -     $ 1,589,070  
  Less: assets acquired in share exchange     -       496,693  
  Net liabilities assumed     -       1,092,377  
  Fair value of shares exchanged     -       1,235,282  
  Increase in intangible assets   $ -     $ 2,327,659  
                 
                 
Reconciliation of Non-GAAP Adjusted Net Loss and EPS  
    For the Three Months Ended     For the Years Ended  
    December 31,     December 31,  
    2015     2014     2015     2014  
                                 
Net Loss   $ (344,167 )   $ (2,411,327 )   $ (1,869,247 )   $ (2,370,254 )
Add: impairment of intangible assets   $ 188,051     $ 1,933,144     $ 188,051     $ 1,933,144  
Non-GAAP adjusted net loss   $ (156,116 )   $ (478,183 )   $ (1,681,196 )   $ (437,110 )
                                 
Weighted average shares - basic and diluted     2,980,868       2,954,351       2,974,847       2,203,563  
Non-GAAP adjusted EPS - basic and diluted   $ (0.05 )   $ (0.16 )   $ (0.57 )   $ (0.20 )
                                 

Contact Information

  • Contact Information
    Elaine Ketchmere
    PEN Inc.
    Email contact

    (844) 273-6462