MIAMI, FL--(Marketwired - Mar 30, 2017) - PEN Inc. (
For the year ended December 31, 2016, PEN generated positive cash flow from operations and achieved a significant reduction in net loss.
Scott Rickert, PEN's President, Chairman and CEO, said: "We closed 2016 on a strong note, generating over $400,000 in operating cash flow for the year and significantly reducing net loss despite a decline in sales from our traditional health and safety products.
"I am impressed with the progress we have made in right-sizing operations and positioning the Company for future success. Our new leadership in Ohio, supported by a top-notch team, has been instrumental in putting us on the path to transforming a niche optical products business into PEN Brands -- a nanotechnology company focused on developing products in the areas of health, safety and sustainability for a broad range of retail and institutional customers.
"Looking ahead, we plan to further streamline our Ohio operations and reenergize sales and marketing as we rebrand several of our existing products into the market over the next twelve months. We remain confident that our environmentally-friendly surface protector has the potential to revolutionize the household cleaning products industry. I am excited about the opportunities for PEN in the year ahead, and believe that we have the products, technology and team in place to build a high-growth company that solves big problems in large addressable markets."
Fourth Quarter 2016 Financial Results
For the three months ended December 31, 2016, total revenues were $1,919,830 compared to revenues of $2,293,190 in the comparable period in 2015.
For the fourth quarter of 2016, overall gross profit amounted to $650,394, compared to $892,769 for the fourth quarter of 2015. Gross margin was 34%, compared to 39% in the year ago period. The decrease in gross margin was attributable lower gross margins from the Product and Contract services segments during the quarter.
Operating expenses totaled $794,507 in the fourth quarter of 2016, down 35% from $1,212,466 in the fourth quarter of 2015. The decrease was due to lower salaries, wages and related benefits, research and development expenses and selling and marketing expenses. Operating expenses for the fourth quarter of 2015 include a non-cash impairment charge of certain intangible assets acquired in the business combination totaling $188,051. There was no such expense in the fourth quarter of 2016.
Operating loss was $144,113 in the fourth quarter of 2016, compared to an operating loss of $319,697 in the fourth quarter of 2015.
Other income was $44,640 in the fourth quarter of 2016, compared to other expense of $24,470 in the fourth quarter of 2015. The increase was primarily related to rental income for subleased office space in Austin.
Net loss for the three months ended December 31, 2016 amounted to $99,473 or ($0.03) per basic and diluted share, as compared to a net loss of $344,167 or ($0.12) per basic and diluted share, for the three months ended December 31, 2015.
Basic and diluted earnings per share were based on 3,029,202 and 2,980,868 weighted average shares outstanding, respectively, for the three months ended December 31, 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.
PEN Brands' Health and Safety Products - Product Segment
Sales from PEN's Product segment for the fourth quarter of 2016 were $1,720,642, down 12% from $1,946,459 for the three months ended December 31, 2015.
Gross margin in the Product segment in the fourth quarter of 2016 was 40%, 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 fourth quarter of 2016 were $199,188 compared to $346,731 in the fourth quarter of 2015.
Gross margin from the Contract services segment in the fourth quarter of 2016 was negative 17%, compared to 4% in the year ago period.
Full Year Results
For the year ended December 31, 2016, total revenues were $8,115,657 down 16% from revenues of $9,685,072 in 2015. Gross profit was $2,805,687 in 2016, down 16% from gross profit of $3,340,939 in 2015. Gross margin was 35%, relatively unchanged from 2015. Net loss 2016 amounted to $556,001 or ($0.18) per basic and diluted share, as compared to net loss of $1,869,247, or ($0.63) per basic and diluted share, for 2015. Basic and diluted earnings per share were based on 3,012,460 and 2,974,847 weighted average shares outstanding, respectively, for years ended December 31, 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.
As of December 31, 2016, PEN held cash and cash equivalents of $189,128 as compared to $262,519 at December 31, 2015. As of December 31, 2016, PEN had a working capital deficit of $1,072,691 compared to a working capital deficit of $889,657 at December 31, 2015.
During 2016, PEN had positive cash flow from operations, generating $444,453 in cash flow from operations. The Company generated $19,586 in cash flow from investing activities in 2016, which was primarily related to the sale of property and equipment in Contract services segment. As of December 31, 2016, the Company had short-term debt of $1,070,137 compared to $1,363,128 as of December 31, 2015.
About PEN Inc.
PEN Inc. (
Safe Harbor Statement
This press release contains forward-looking statements that involve risks and uncertainties concerning our business, products, and financial results. Actual results may differ materially from the results predicted. More information about potential risk factors that could affect our business, products, and financial results are included in our annual report on Form 10-K for the fiscal year ended December 31, 2016, and in reports subsequently filed by us with the Securities and Exchange Commission ("SEC"). All documents are available through the SEC's Electronic Data Gathering Analysis and Retrieval System (EDGAR) at www.sec.gov or from our website listed above. We hereby disclaim any obligation to publicly update the information provided above, including forward-looking statements, to reflect subsequent events or circumstances.
|PEN INC. AND SUBSIDIARIES|
|CONSOLIDATED BALANCE SHEETS|
|December 31,||December 31,|
|Accounts receivable, net||722,845||1,100,352|
|Accounts receivable - related party||10,474||11,984|
|Prepaid expenses and other current assets||75,080||194,950|
|Total Current Assets||2,033,026||2,653,190|
|Property, plant and equipment, net||709,627||897,358|
|Total Other Assets||760,705||929,461|
|LIABILITIES AND STOCKHOLDERS' DEFICIT|
|Bank revolving line of credit||$||979,688||$||1,288,748|
|Current portion of notes payable||90,449||74,380|
|Accounts payable - related parties||52,887||27,064|
|Total Current Liabilities||3,105,717||3,542,847|
|Notes payable, net of current portion||266,110||312,139|
|Total Long-Term Liabilities||266,110||312,139|
|Commitments and Contingencies|
|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; 1,367,431 and 1,336,759 issued and outstanding at December 31, 2016 and 2015, respectively||136||134|
|Class B common stock: $0.0001 par value, 2,500,000 shares authorized; 1,402,104 and 1,395,678 issued and outstanding at December 31, 2016 and 2015, respectively||140||139|
|Class Z common stock: $0.0001 par value, 300,000 shares authorized; 262,631 shares issued and outstanding at December 31, 2016 and 2015||26||26|
|Additional paid-in capital||5,321,769||5,071,532|
|Total Stockholders' Deficit||(578,096||)||(272,335||)|
|Total Liabilities and Stockholders' Deficit||$||2,793,731||$||3,582,651|
|PEN INC. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|For the Three Months Ended||For the Years Ended|
|December 31,||December 31,|
|COST OF REVENUES:|
|Research and development services||232,986||333,837||1,097,891||1,782,627|
|Total Cost of Revenues||1,269,436||1,400,421||5,309,970||6,344,133|
|Selling and marketing expenses||42,755||65,574||220,029||280,173|
|Salaries, wages and related benefits||272,503||472,708||1,513,536||2,214,956|
|Research and development||53,868||124,055||290,402||744,346|
|General and administrative expenses||276,594||248,116||1,015,503||1,016,752|
|Total Operating Expenses||794,507||1,212,466||3,552,707||5,104,862|
|LOSS FROM OPERATIONS||(144,113||)||(319,697||)||(747,020||)||(1,763,923||)|
|OTHER INCOME (EXPENSES):|
|Other income, net||67,460||2,378||296,109||12,255|
|Total Other Income/(Expense)||44,640||(24,470||)||191,019||(105,324||)|
|NET LOSS PER COMMON SHARE:|
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:|
|PEN INC. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF CASH FLOWS|
|For Years Ended|
|CASH FLOWS FROM OPERATING ACTIVITIES|
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities:|
|Change in inventory obsolescence reserve||56,861||(35,652||)|
|Bad debt expense||12,021||641|
|Depreciation and amortization expense||182,986||252,899|
|Amortization of deferred lease incentives||12,830||(12,830||)|
|Change in value of stock appreciation rights||-||6,962|
|Change in value of equity credits||-||(11,024||)|
|Gain on sale of property and equipment||(23,586||)||-|
|Loss on disposal of property and equipment||8,745||-|
|Gain on settlement of accounts payable||(50,879||)||-|
|Gain on settlement of accrued salary||(36,973||)||-|
|Change in operating assets and liabilities:|
|Accounts receivable - related party||1,510||26,262|
|Prepaid expenses and other assets||100,895||14,867|
|Accounts payable - related parties||25,823||27,064|
|NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES||444,453||(804,208||)|
|CASH FLOWS FROM INVESTING ACTIVITIES|
|Proceeds from sales of property and equipment||23,586||-|
|Purchases of property and equipment||(4,000||)||(248,123||)|
|NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES||19,586||(248,123||)|
|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||6,815,000||8,156,000|
|Repayment of bank lines of credit||(7,319,231||)||(7,640,596||)|
|Proceeds from bank loan||-||371,901|
|Repayment of bank loans||(74,380||)||(37,190||)|
|Repayment of loan to third party||(6,819||)||-|
|NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES||(537,430||)||850,115|
|NET DECREASE IN CASH||(73,391||)||(202,216||)|
|CASH, beginning of period||262,519||464,735|
|CASH, end of period||$||189,128||$||262,519|
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION|
|Cash paid during the period for interest|
|SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:|
|Common stock issued for convertible notes and accrued interest||$||-||$||13,725|
|Common stock issued for accrued expenses||$||-||$||123,285|
|Reclassification of accrued salary to notes payable - long-term||$||51,239||$||51,808|