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