MIAMI, Nov. 14, 2016 /PRNewswire/ -- 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 third quarter and nine months ended September 30, 2016.
Scott Rickert, PEN's President, Chairman and CEO, said: "During the third quarter of 2016, we saw a slight uptick in sales of health and safety products supported a portfolio of CLARITY™ branded products. More importantly, we maintained gross margin while posting a dramatic improvement in the bottom line and generating positive cash flow from operations.
"After successfully transforming our operations in Austin into an innovative nanotechnology design house aligned with PEN's mission, we are now in the process of right-sizing and repositioning our Ohio operations to become PEN Brands - a retail consumer products business focused on the areas of health, safety and sustainability. With new management in place in Ohio, we should reinvigorate sales of our branded products in the retail market and set the stage for the relaunch of our environmentally friendly surface protector. We look forward to entering the new year in a stronger competitive position as we move forward with our business plan."
PEN Brands' Health and Safety Products - Product Segment
Sales from PEN's Product segment for the third quarter of 2016 were $1,781,755, up 6% from $1,674,242 for the three months ended September 30, 2015. For the nine months ended September 30, 2016, Product segment sales were $5,391,305, down 10% from the first nine months of 2015, due primarily to several institutional customers who bought significant inventory in the first nine-months of 2015 and did not purchase in the first nine months of 2016. Due to variability in the timing of purchases by large customers, the Company's revenue from this segment can fluctuate significantly from quarter to quarter.
Gross margin in the Product segment in the third quarter of 2016 was 37%, compared to 40% in the year ago period, primarily due to differences in the assortment of products sold. In the first nine months of 2016, gross margin was 41%, essentially unchanged from the year ago period.
PEN Design Center - R&D Services Segment
Revenues from the Research and development services segment for the third quarter of 2016 were $225,083, compared to $336,550 in the third quarter of 2015. In the first nine months of 2016, revenues from this segment were $804,522, compared to $1,418,193 in the year ago period. The decrease in revenue was primarily due to fewer research contracts in part attributable to the Company's decision not to seek government research contracts that include a cost share.
Gross margin from the Research and development services segment in the third quarter of 2016 was negative 15%, compared to negative 44% in the year ago period. The improvement in gross margin from this segment for the third quarter of 2016 as compared to the year ago period was attributable to lower cost of revenues. In the first nine months of 2016, gross margin from Research and development services was negative 8% compared to negative 2% in the year ago period.
Third Quarter 2016 Financial Results
For the three months ended September 30, 2016, total revenues were $2,006,838 compared to revenues of $2,010,792 in the comparable period in 2015.
For the third quarter of 2016, overall gross profit amounted to $631,083, up from $516,449 for the third quarter of 2015. Gross margin was 31%, compared to 26% in the year ago period. The increase in gross margin was attributable to the higher proportion of revenue from the Product segment and improved gross margin from the Research and development services segment during the quarter.
Operating expenses totaled $866,855 in the third quarter of 2016, down 31% from $1,249,442 in the third quarter of 2015. The decrease was due to lower salaries, wages and related benefits, research and development expenses and professional fees and selling and marketing expenses.
Operating loss was $235,772 in the third quarter of 2016, compared to an operating loss of $732,993 in the third quarter of 2015.
Other income was $24,870 in the third quarter of 2016, compared to other expense of $24,117 in the third quarter of 2015. The increase was primarily related to rental income for subleased office space in Austin.
Net loss for the three months ended September 30, 2016 amounted to $210,902 or ($0.07) per basic and diluted share, as compared to a net loss of $757,110 or ($0.25) per basic and diluted share, for the three months ended September 30, 2015.
Basic and diluted earnings per share were based on 3,020,062 and 2,975,814 weighted average shares outstanding, respectively, for the three months ended September 30, 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.
Nine Month Results
For the nine months ended September 30, 2015, total revenues were $6,195,827 down 16% from revenues of $7,391,882 in the first nine months of 2015. Gross profit was $2,155,293 in the first nine months of 2016, down 12% from gross profit of $2,448,170 in the first nine months of 2015. Gross margin was 35%, up from 33% in the first nine months of 2015. Net loss for first nine months of 2016 amounted to $456,528 or ($0.15) per basic and diluted share, as compared to net loss of $1,525,080, or ($0.51) per basic and diluted share, for the first nine months of 2015. Basic and diluted earnings per share were based on 3,006,837 and 2,972,810 weighted average shares outstanding, respectively, for the nine months ended September 30, 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 September 30, 2016, PEN held cash and cash equivalents of $126,714 as compared to $262,519 at December 31, 2015. As of September 30, 2016, PEN had a working capital deficit of $1,054,842 compared to a working capital deficit of $889,657 at December 31, 2015.
During the first nine months of 2016, PEN generated $188,459 in cash flow from operations. The Company generated $17,866 in cash flow from investing activities in the first nine months of 2016, which was primarily related to the sale of property and equipment in the Research and development services segment. As of September 30, 2016, the Company had short-term debt of $1,043,783 compared to $1,363,128 as of December 31, 2015.
Investor webcast and business update: Monday, November 21, 1 pm EST
PEN will host an investor webcast on Monday, November 21 at 1 pm ET to discuss third 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/penc161121.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 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 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 | ||||||||
September 30, | December 31, | |||||||
2016 | 2015 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash | $ | 126,714 | $ | 262,519 | ||||
Accounts receivable, net | 636,205 | 1,100,352 | ||||||
Accounts receivable - related party | 40,336 | 11,984 | ||||||
Inventory | 1,261,662 | 1,083,385 | ||||||
Prepaid expenses and other current assets | 96,751 | 194,950 | ||||||
Total Current Assets | 2,161,668 | 2,653,190 | ||||||
OTHER ASSETS: | ||||||||
Property, plant and equipment, net | 764,760 | 897,358 | ||||||
Other assets | 53,668 | 32,103 | ||||||
Total Other Assets | 818,428 | 929,461 | ||||||
TOTAL ASSETS | $ | 2,980,096 | $ | 3,582,651 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES: | ||||||||
Bank revolving line of credit | $ | 958,797 | $ | 1,288,748 | ||||
Current portion of notes payable | 84,986 | 74,380 | ||||||
Accounts payable | 1,267,911 | 1,259,865 | ||||||
Accounts payable - related parties | 41,887 | 27,064 | ||||||
Accrued expenses | 862,929 | 871,098 | ||||||
Deferred revenue | - | 21,692 | ||||||
Total Current Liabilities | 3,216,510 | 3,542,847 | ||||||
LONG-TERM LIABILITIES: | ||||||||
Notes payable, net of current portion | 292,593 | 312,139 | ||||||
Total Long-Term Liabilities | 292,593 | 312,139 | ||||||
Total Liabilities | 3,509,103 | 3,854,986 | ||||||
Commitments and Contingencies | ||||||||
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; 1,363,795 and 1,336,759 issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 136 | 134 | ||||||
Class B common stock: $0.0001 par value, 2,500,000 shares authorized; 1,399,680 and 1,395,678 issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 140 | 139 | ||||||
Class Z common stock: $0.0001 par value, 300,000 shares authorized; 262,631 and 262,631 issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 26 | 26 | ||||||
Additional paid-in capital | 5,271,385 | 5,071,532 | ||||||
Accumulated deficit | (5,800,694) | (5,344,166) | ||||||
Total Stockholders' Deficit | (529,007) | (272,335) | ||||||
Total Liabilities and Stockholders' Deficit | $ | 2,980,096 | $ | 3,582,651 | ||||
PEN INC. AND SUBSIDIARIES | ||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
REVENUES: | ||||||||||||||||
Products (including related party sales of $52,328 and $38,198 for the three months ended September 30, 2016 and 2015, respectively, and $148,624 and $115,316 for the nine months ended September 30, 2016 and 2015, respectively) | $ | 1,781,755 | $ | 1,674,242 | $ | 5,391,305 | $ | 5,973,689 | ||||||||
Research and development services | 225,083 | 336,550 | 804,522 | 1,418,193 | ||||||||||||
Total Revenues | 2,006,838 | 2,010,792 | 6,195,827 | 7,391,882 | ||||||||||||
COST OF REVENUES: | ||||||||||||||||
Products | 1,116,987 | 1,009,775 | 3,175,629 | 3,494,922 | ||||||||||||
Research and development services | 258,768 | 484,568 | 864,905 | 1,448,790 | ||||||||||||
Total Cost of Revenues | 1,375,755 | 1,494,343 | 4,040,534 | 4,943,712 | ||||||||||||
GROSS PROFIT | 631,083 | 516,449 | 2,155,293 | 2,448,170 | ||||||||||||
OPERATING EXPENSES: | ||||||||||||||||
Selling and marketing expenses | 57,942 | 83,488 | 177,274 | 214,599 | ||||||||||||
Salaries, wages and related benefits | 375,794 | 554,809 | 1,241,033 | 1,742,248 | ||||||||||||
Research and development | 71,921 | 174,736 | 236,534 | 620,291 | ||||||||||||
Professional fees | 118,818 | 202,571 | 364,450 | 546,622 | ||||||||||||
General and administrative expenses | 242,380 | 233,838 | 738,909 | 768,636 | ||||||||||||
Total Operating Expenses | 866,855 | 1,249,442 | 2,758,200 | 3,892,396 | ||||||||||||
LOSS FROM OPERATIONS | (235,772) | (732,993) | (602,907) | (1,444,226) | ||||||||||||
OTHER INCOME (EXPENSES): | ||||||||||||||||
Interest expenses | (26,000) | (26,947) | (82,270) | (91,031) | ||||||||||||
Other income, net | 50,870 | 2,830 | 228,649 | 10,177 | ||||||||||||
Total Other Income/(Expense) | 24,870 | (24,117) | 146,379 | (80,854) | ||||||||||||
NET LOSS | $ | (210,902) | $ | (757,110) | $ | (456,528) | $ | (1,525,080) | ||||||||
NET LOSS PER COMMON SHARE: | ||||||||||||||||
Basic | $ | (0.07) | $ | (0.25) | $ | (0.15) | $ | (0.51) | ||||||||
Diluted | $ | (0.07) | $ | (0.25) | $ | (0.15) | $ | (0.51) | ||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||
Basic | 3,020,062 | 2,975,814 | 3,006,837 | 2,972,810 | ||||||||||||
Diluted | 3,020,062 | 2,975,814 | 3,006,837 | 2,972,810 | ||||||||||||
PEN INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
For the Nine Months Ended | ||||||||
September 30, | ||||||||
2016 | 2015 | |||||||
(Unaudited) | (Unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (456,528) | $ | (1,525,080) | ||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Change in inventory obsolescence reserve | 34,184 | (6,650) | ||||||
Bad debt expense | 12,034 | - | ||||||
Depreciation and amortization expense | 136,598 | 190,719 | ||||||
Amortization of deferred lease incentives | 9,623 | (3,208) | ||||||
Gain on sale of property and equipment | (21,866) | - | ||||||
Gain on settlement of accounts payable | (33,511) | - | ||||||
Gain on settlement of accrued salary | (36,973) | - | ||||||
Stock-based compensation | 151,856 | 137,931 | ||||||
Change in operating assets and liabilities: | ||||||||
Accounts receivable | 452,113 | 15,881 | ||||||
Accounts receivable - related party | (28,352) | 27,404 | ||||||
Inventory | (212,461) | 343,702 | ||||||
Prepaid expenses and other assets | 76,634 | (48,617) | ||||||
Accounts payable | 41,557 | (104,014) | ||||||
Accounts payable - related parties | 14,823 | 14,072 | ||||||
Accrued expenses | 70,420 | 210,346 | ||||||
Deferred revenue | (21,692) | (2,376) | ||||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 188,459 | (749,890) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Proceeds from sales of property and equipment | 21,866 | - | ||||||
Purchases of property and equipment | (4,000) | (231,796) | ||||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | 17,866 | (231,796) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from sale of common stock | 50,000 | - | ||||||
Payment of issuance costs related to sale of common stock | (2,000) | - | ||||||
Proceeds from bank line of credit | 5,193,000 | 6,209,500 | ||||||
Repayment of bank lines of credit | (5,522,951) | (5,855,754) | ||||||
Proceeds from bank loan | - | 371,901 | ||||||
Repayment of bank loans | (55,785) | (18,595) | ||||||
Repayment of loan to third party | (4,394) | - | ||||||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | (342,130) | 707,052 | ||||||
NET DECREASE IN CASH | (135,805) | (274,634) | ||||||
CASH, beginning of period | 262,519 | 464,735 | ||||||
CASH, end of period | $ | 126,714 | $ | 190,101 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
Cash paid during the period for interest | ||||||||
Interest | $ | 82,270 | $ | 91,031 | ||||
Income taxes | $ | - | $ | - | ||||
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 | ||||
Reclassification of accrued salary to notes payable - long-term | $ | 51,239 | $ | 41,770 | ||||
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/pen-inc-announces-third-quarter-2016-financial-results-300361895.html
SOURCE PEN Inc.