- Investor Webcast and Business Update Set for Tuesday, November 21, 1 pm ET
MIAMI, Nov. 15, 2017 (GLOBE NEWSWIRE) -- 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 ended September 30, 2017.
Scott Rickert, PEN’s President, Chairman and CEO, said: “During the third quarter, we relocated our Ohio operations to a facility nearby with a much smaller footprint. Although we incurred some one-time charges related to the relocation which impacted this quarter’s financial results, this move will ultimately lower our cost structure and provide for operating leverage in the future. It will also allow us to focus on what PEN does best—developing groundbreaking formulas, providing outstanding customer service and meeting the flexible packaging needs of our customers.
“We will soon begin the rollout of our rebranded environmentally friendly surface protector to customers in the hospitality industry and related markets. While it will take some time for sales to ramp, we are excited to be actively marketing this revolutionary product that addresses the growing need for safe and effective products that protect us from disease. The PEN Design Center continues to distinguish itself as a valuable development partner, especially in the area of nuclear medicine. I am pleased with our progress in executing our business plan and look forward to closing the year with a fully streamlined organization positioned for future growth.”
Third Quarter 2017 Financial Results
During the third quarter of 2017, PEN’s revenues and gross margins were relatively stable. The Company generated a loss for the quarter, which includes the impact of a one-time, non-cash loss on the sale of equipment associated with the relocation of its Ohio operations. The Company generated over $100,000 in cash flow from operations during the quarter.
For the three months ended September 30, 2017, total revenues were $2,028,261, compared to revenues of $2,006,838 in the comparable period in 2016.
For the third quarter of 2017, overall gross profit amounted to $632,982 compared to $631,083 for the third quarter of 2016. Gross margin was 31%, relatively unchanged from the year ago period.
Operating expenses totaled $681,113 in the third quarter of 2017, down from $866,855 in the third quarter of 2016. In the third quarter of 2017, salaries, wages and related benefits decreased by 33% due to personnel reductions related to the Company’s ongoing efforts to reduce costs. Selling and marketing expenses decreased by 64% as a result of heavy spending earlier in the year, and general and administrative expenses decreased by 22% due to several factors, including the end of amortization of intangibles, and personnel reductions. These reductions were partially offset by minor increases in professional fees and research and development expenses attributable to further work on specialty coatings for new markets and evaluating different parameters and potential enhancements of the surface protector and fortifier product.
Operating loss was $48,131 in the third quarter of 2017, compared to an operating loss of $235,772 in the third quarter of 2016.
Other expense was $76,599 in the third quarter of 2017, due primarily to a $122,050 loss on disposal of fixed assets, which was partially offset by other income. This compares to other income of $24,870 in the third quarter of 2016.
Net loss for the three months ended September 30, 2017 amounted to $124,730 or ($0.04) per basic and diluted share, as compared to a net loss of $210,902, or ($0.07) per basic and diluted share, for the three months ended September 30, 2016.
Basic and diluted earnings per share were based on 3,062,759 and 3,020,062 weighted average shares outstanding, respectively, for the three months ended September 30, 2017 and 2016.
PEN Brands’ Health and Safety Products - Product Segment
Sales from PEN’s Product segment for the third quarter of 2017 were $1,772,960, relatively unchanged from $1,781,755 for the three months ended September 30, 2016. During the third quarter of 2017, the Company recorded a one-time adjustment to its cooperative advertising liability which increased Product segment revenue by approximately $346,000. In addition, certain orders from PEN’s large customers that were expected to be filled in the third quarter of 2017 were postponed until the fourth quarter of 2017.
Gross margin in the Product segment in the second quarter of 2017 was 37%, relatively unchanged from the year-ago period.
PEN Design Center – Contract Services Segment
Revenues from the Contract services segment for the third quarter of 2017 were $255,301 compared to $225,083 in the third quarter of 2016.
Gross margin from the Contract services segment in the third quarter of 2017 was negative 7%, compared to negative 15% in the year ago period. The improvement in gross margin from was attributable to increased revenue and fixed costs that were unchanged.
Nine Months 2017 Results
For the nine months ended September 30, 2017, total revenues were $6,427,220 up slightly from revenues of $6,195,827 in the first nine months of 2016. Gross profit was $2,222,556 in the first nine months of 2017, up from gross profit of $2,155,293 in the first nine months of 2016. Gross margin was 36%, up from 35% in the first nine months of 2016. Net loss for first nine months of 2017 amounted to $351,508 or ($0.12) per basic and diluted share, as compared to net loss of $456,528, or ($0.15) per basic and diluted share, for the first nine months of 2016. Basic and diluted earnings per share were based on 3,051,826 and 3,000,837 weighted average shares outstanding, respectively, for the nine months ended September 30, 2017 and 2016.
Financial Condition
As of September 30, 2017, PEN held cash and cash equivalents of $73,927 as compared to $189,128 at December 31, 2016. As of September 30, 2017, PEN had a working capital deficit of $1,033,150 compared to a working capital deficit of $1,072,691 at December 31, 2016.
During the first nine months of 2017, PEN generated $283,581 in cash flow from operations. As of September 30, 2017, the Company had short-term debt of $769,211 compared to $1,070,137 as of December 31, 2016.
Investor webcast and business update: Tuesday, November 21st, 1 pm EST
PEN will host an investor webcast on Tuesday, November 21st at 1 pm EST 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/penc171121.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, CLARITY ULTRASEAL® nanocoating products for glass and ceramics and an environmentally friendly surface protector, fortifier, and cleaner. 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.
Contact Information
Elaine Ketchmere
PEN Inc.
ir@pen-technology.com
(844) 273-6462
| PEN INC. AND SUBSIDIARIES | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| REVENUES: | ||||||||||||||||
| Products | $ | 1,772,960 | $ | 1,781,755 | $ | 5,523,785 | $ | 5,391,305 | ||||||||
| Contract services | 255,301 | 225,083 | 723,435 | 804,522 | ||||||||||||
| Total Revenues | 2,028,261 | 2,006,838 | 6,247,220 | 6,195,827 | ||||||||||||
| COST OF REVENUES: | ||||||||||||||||
| Products | 1,121,039 | 1,116,987 | 3,237,221 | 3,175,629 | ||||||||||||
| Contract services | 274,240 | 258,768 | 787,443 | 864,905 | ||||||||||||
| Total Cost of Revenues | 1,395,279 | 1,375,755 | 4,024,664 | 4,040,534 | ||||||||||||
| GROSS PROFIT | 632,982 | 631,083 | 2,222,556 | 2,155,293 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Selling and marketing expenses | 20,933 | 57,942 | 257,803 | 177,274 | ||||||||||||
| Salaries, wages and related benefits | 253,615 | 375,794 | 820,051 | 1,241,033 | ||||||||||||
| Research and development | 82,544 | 71,921 | 297,697 | 236,534 | ||||||||||||
| Professional fees | 135,261 | 118,818 | 536,284 | 364,450 | ||||||||||||
| General and administrative expenses | 188,760 | 242,380 | 653,008 | 738,909 | ||||||||||||
| Total Operating Expenses | 681,113 | 866,855 | 2,564,843 | 2,758,200 | ||||||||||||
| LOSS FROM OPERATIONS | (48,131 | ) | (235,772 | ) | (342,287 | ) | (602,907 | ) | ||||||||
| OTHER (EXPENSE) INCOME: | ||||||||||||||||
| Interest expense | (20,124 | ) | (26,000 | ) | (54,038 | ) | (82,270 | ) | ||||||||
| Loss on disposal of fixed assets | (122,050 | ) | - | (122,050 | ) | - | ||||||||||
| Other income, net | 65,575 | 50,870 | 166,867 | 228,649 | ||||||||||||
| Total Other (Expense) Income | (76,599 | ) | 24,870 | (9,221 | ) | 146,379 | ||||||||||
| NET LOSS | $ | (124,730 | ) | $ | (210,902 | ) | $ | (351,508 | ) | $ | (456,528 | ) | ||||
| NET LOSS PER COMMON SHARE: | ||||||||||||||||
| Basic | $ | (0.04 | ) | $ | (0.07 | ) | $ | (0.12 | ) | $ | (0.15 | ) | ||||
| Diluted | $ | (0.04 | ) | $ | (0.07 | ) | $ | (0.12 | ) | $ | (0.15 | ) | ||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||
| Basic | 3,062,759 | 3,020,062 | 3,051,826 | 3,006,837 | ||||||||||||
| Diluted | 3,062,759 | 3,020,062 | 3,051,826 | 3,006,837 | ||||||||||||
| PEN INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| September 30, 2017 | December 31, 2016 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 73,927 | $ | 189,128 | ||||
| Accounts receivable, net | 819,306 | 722,845 | ||||||
| Accounts receivable - related party | 14,226 | 10,474 | ||||||
| Inventory | 1,133,502 | 1,035,499 | ||||||
| Prepaid expenses and other current assets | 42,314 | 75,080 | ||||||
| Total Current Assets | 2,083,275 | 2,033,026 | ||||||
| OTHER ASSETS: | ||||||||
| Property, plant and equipment, net | 400,778 | 709,627 | ||||||
| Other assets | 89,325 | 51,078 | ||||||
| Total Other Assets | 490,103 | 760,705 | ||||||
| Total Assets | $ | 2,573,378 | $ | 2,793,731 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Bank revolving line of credit | $ | 689,232 | $ | 979,688 | ||||
| Current portion of notes payable | 79,979 | 90,449 | ||||||
| Accounts payable | 1,606,816 | 1,078,527 | ||||||
| Accounts payable - related parties | 20,887 | 52,887 | ||||||
| Deferred revenue | 70,180 | - | ||||||
| Accrued expenses | 649,331 | 904,166 | ||||||
| Total Current Liabilities | 3,116,425 | 3,105,717 | ||||||
| LONG-TERM LIABILITIES: | ||||||||
| Notes payable, net of current portion | 227,397 | 266,110 | ||||||
| Total Long-Term Liabilities | 227,397 | 266,110 | ||||||
| Total Liabilities | 3,343,822 | 3,371,827 | ||||||
| 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; 1,648,708 and 1,367,431 issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 165 | 136 | ||||||
| Class B common stock: $0.0001 par value, 2,500,000 shares authorized; 1,420,176 and 1,402,104 issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 142 | 140 | ||||||
| Class Z common stock: $0.0001 par value, 300,000 shares authorized; 0 and 262,631 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | - | 26 | ||||||
| Additional paid-in capital | 5,480,924 | 5,321,769 | ||||||
| Accumulated deficit | (6,251,675 | ) | (5,900,167 | ) | ||||
| Total Stockholders’ Deficit | (770,444 | ) | (578,096 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 2,573,378 | $ | 2,793,731 | ||||
| PEN INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2017 | 2016 | |||||||
| (unaudited) | (unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (351,508 | ) | $ | (456,528 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Change in inventory obsolescence reserve | 50,390 | 34,184 | ||||||
| Bad debt expense | - | 12,034 | ||||||
| Depreciation and amortization expense | 97,646 | 136,598 | ||||||
| Amortization of deferred lease incentives | 5,346 | 9,623 | ||||||
| Gain on sale of property and equipment, net | (527 | ) | (21,866 | ) | ||||
| Gain on settlement of accounts payable | - | (33,511 | ) | |||||
| Gain on settlement of accrued salary | - | (36,973 | ) | |||||
| Loss on disposal of property and equipment | 124,729 | - | ||||||
| Stock-based compensation | 140,160 | 151,856 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | (96,461 | ) | 452,113 | |||||
| Accounts receivable - related party | (3,752 | ) | (28,352 | ) | ||||
| Inventory | (148,393 | ) | (212,461 | ) | ||||
| Prepaid expenses and other assets | (5,481 | ) | 76,634 | |||||
| Accounts payable | 545,714 | 41,557 | ||||||
| Accounts payable - related parties | (32,000 | ) | 14,823 | |||||
| Accrued expenses | (112,462 | ) | 70,420 | |||||
| Deferred revenue | 70,180 | (21,692 | ) | |||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 283,581 | 188,459 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Proceeds from sales of property and equipment | 87,000 | 21,866 | ||||||
| Purchases of property, plant and equipment | - | (4,000 | ) | |||||
| NET CASH PROVIDED BY INVESTING ACTIVITIES | 87,000 | 17,866 | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from bank lines of credit | 4,964,067 | 5,193,000 | ||||||
| Repayment of bank lines of credit | (5,383,241 | ) | (5,522,951 | ) | ||||
| Repayment of bank loans | (56,138 | ) | (55,785 | ) | ||||
| Proceeds from sale of common stock | - | 50,000 | ||||||
| Payment of issuance costs related to sale of common stock | - | (2,000 | ) | |||||
| Repayment of loan to third party | (10,470 | ) | (4,394 | ) | ||||
| NET CASH USED IN FINANCING ACTIVITIES | (485,782 | ) | (342,130 | ) | ||||
| NET DECREASE IN CASH | (115,201 | ) | (135,805 | ) | ||||
| CASH, beginning of period | 189,128 | 262,519 | ||||||
| CASH, end of period | $ | 73,927 | $ | 126,714 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for interest | ||||||||
| Interest | $ | 55,554 | $ | 82,270 | ||||
| Income taxes | $ | - | $ | - | ||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH | ||||||||
| INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Reclassification of accrued salary to notes payable - long-term | $ | 17,425 | $ | 51,239 | ||||
| Accrued director fees settled with common stock | $ | 19,000 | $ | - | ||||
| | ||||||||