MIAMI, FL -- (Marketwired) -- 05/23/17 -- 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, 137 136
respectively
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, 140 140
respectively
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, 26 26
respectively
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 $ -
============= =============
Contact Information
Elaine Ketchmere
PEN Inc.
ir@pen-technology.com
(844) 273-6462
