Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 09, 2019 | |
Entity Registrant Name | PEN INC. | |
Entity Central Index Key | 0000891417 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Ex Transition Period | false | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2018 | |
Class A Common Stock [Member] | ||
Entity Common Stock, Shares Outstanding | 4,375,576 | |
Class B Common Stock [Member] | ||
Entity Common Stock, Shares Outstanding | 0 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS: | ||
Cash | $ 158,879 | $ 138,296 |
Restricted cash | 85,000 | 95,003 |
Accounts receivable, net | 980,946 | 607,632 |
Accounts receivable - related party | 14,226 | |
Inventory | 1,020,636 | 733,979 |
Prepaid expenses and other current assets | 190,188 | 162,246 |
Total Current Assets | 2,435,649 | 1,751,382 |
Property, plant and equipment, net | 372,505 | 388,777 |
Other assets | 41,116 | 41,116 |
Total Assets | 2,849,270 | 2,181,275 |
CURRENT LIABILITIES: | ||
Accounts payable | 1,254,446 | 1,383,514 |
Accounts payable - related parties | 19,887 | 19,887 |
Accrued expenses and other current liabilities | 991,932 | 649,974 |
Customer deposits | 169,970 | |
Bank revolving line of credit | 1,114,247 | 563,218 |
Current portion of notes payable | 90,864 | 96,533 |
Advances from related parties | 140,000 | 115,000 |
Deferred revenue | 167,268 | 98,381 |
Total Current Liabilities | 3,778,644 | 3,096,477 |
Notes payable, net of current portion | 168,406 | 180,803 |
Total Liabilities | 3,947,050 | 3,277,280 |
Commitments and Contingencies (See Note 11) | ||
STOCKHOLDERS' DEFICIT: | ||
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; no shares issued and outstanding | ||
Additional paid-in capital | 5,509,667 | 5,490,925 |
Accumulated deficit | (6,607,755) | (6,587,237) |
Total Stockholders' Deficit | (1,097,780) | (1,096,005) |
Total Liabilities and Stockholders' Deficit | 2,849,270 | 2,181,275 |
Class A Common Stock [Member] | ||
STOCKHOLDERS' DEFICIT: | ||
Common stock value | 165 | 165 |
Class B Common Stock [Member] | ||
STOCKHOLDERS' DEFICIT: | ||
Common stock value | 143 | 142 |
Class Z Common Stock [Member] | ||
STOCKHOLDERS' DEFICIT: | ||
Common stock value |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2018 | Dec. 31, 2017 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Class A Common Stock [Member] | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 7,200,000 | 7,200,000 |
Common stock, shares issued | 1,657,765 | 1,653,322 |
Common stock, shares outstanding | 1,657,765 | 1,653,322 |
Class B Common Stock [Member] | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 2,500,000 | 2,500,000 |
Common stock, shares issued | 1,432,690 | 1,423,252 |
Common stock, shares outstanding | 1,432,690 | 1,423,252 |
Class Z Common Stock [Member] | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 300,000 | 300,000 |
Common stock, shares issued | 0 | 0 |
Common stock, shares outstanding | 0 | 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
REVENUES: | ||
Total Revenues | $ 1,443,525 | $ 2,216,350 |
COST OF REVENUES: | ||
Total Cost of Revenues | 1,106,259 | 1,283,033 |
GROSS PROFIT | 337,266 | 933,317 |
OPERATING EXPENSES: | ||
Selling and marketing expenses | 41,696 | 64,727 |
Salaries, wages and related benefits | 164,024 | 300,214 |
Research and development | 8,193 | 68,722 |
Professional fees | 172,438 | 214,254 |
General and administrative expenses | 147,309 | 215,986 |
Total Operating Expenses | 533,660 | 863,903 |
INCOME (LOSS) FROM OPERATIONS | (196,394) | 69,414 |
OTHER (EXPENSE) INCOME: | ||
Interest expense | (16,341) | (25,588) |
Other income, net | 192,217 | 50,586 |
Total Other (Expense) Income | 175,876 | 24,998 |
NET INCOME (LOSS) | $ (20,518) | $ 94,412 |
NET INCOME (LOSS) PER COMMON SHARE: | ||
Basic | $ (0.01) | $ 0.03 |
Diluted | $ (0.01) | $ 0.03 |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||
Basic | 3,081,355 | 3,034,659 |
Diluted | 3,081,355 | 3,034,659 |
Product [Member] | ||
REVENUES: | ||
Total Revenues | $ 1,142,575 | $ 1,996,489 |
COST OF REVENUES: | ||
Total Cost of Revenues | 804,687 | 1,035,835 |
Contract Services [Member] | ||
REVENUES: | ||
Total Revenues | 300,950 | 219,861 |
COST OF REVENUES: | ||
Total Cost of Revenues | $ 301,572 | $ 247,198 |
Consolidated Statements of Op_2
Consolidated Statements of Operations (Parenthetical) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
Sales revenue from related parties | $ 0 | $ 53,314 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 3 Months Ended | 12 Months Ended | |||||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net loss | $ (20,518) | $ 94,412 | $ 687,068 | $ (556,001) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Change in inventory obsolescence reserve | 9,766 | 27,204 | |||||
Depreciation and amortization expense | 16,272 | 37,814 | |||||
Amortization of deferred lease incentives | 1,782 | ||||||
Stock-based compensation | 8,744 | 51,310 | |||||
Change in operating assets and liabilities: | |||||||
Accounts receivable | (373,314) | (196,339) | |||||
Accounts receivable - related party | 14,226 | (21,921) | |||||
Inventory | (296,423) | (8,247) | |||||
Prepaid expenses and other assets | (27,942) | (39,134) | |||||
Accounts payable | (129,068) | 180,422 | |||||
Accounts payable - related parties | (11,000) | ||||||
Customer deposits | (169,970) | 34,885 | |||||
Accrued expenses | 351,957 | ||||||
Deferred revenue | 68,887 | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | (547,383) | 151,188 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Proceeds from sales of property and equipment | |||||||
Purchases of property, plant and equipment | |||||||
NET CASH PROVIDED BY INVESTING ACTIVITIES | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Proceeds from bank lines of credit | 1,157,600 | 1,774,000 | |||||
Repayment of bank lines of credit | (606,571) | (1,787,864) | |||||
Repayment of bank loans | (18,066) | (18,595) | |||||
Repayment of loan to third party | (2,455) | ||||||
Proceeds from advances from related parties | 25,000 | ||||||
NET CASH USED IN FINANCING ACTIVITIES | 557,963 | (34,914) | |||||
NET DECREASE IN CASH | 10,580 | 116,274 | |||||
CASH, beginning of year | 233,299 | 189,128 | 189,128 | ||||
CASH, end of period | 243,879 | 305,402 | 233,299 | 189,128 | |||
Cash paid during the period for interest | |||||||
Interest | 16,341 | 25,588 | |||||
Income taxes | |||||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||
Reclassification of accrued salary to notes payable - long-term | 17,425 | ||||||
Accrued director fees settled with common stock | 9,999 | ||||||
The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts shown in the consolidated statement of cash flows: | |||||||
Cash | $ 158,879 | $ 138,296 | $ 305,402 | ||||
Restricted cash | 85,000 | 95,003 | |||||
Total cash and restricted cash | $ 243,879 | $ 189,128 | $ 233,299 | $ 189,128 | $ 243,879 | $ 233,299 | $ 305,402 |
Organization and Basis of Prese
Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Organization and Basis of Presentation | NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION Organization PEN Inc. (“we”, “us”, “our”, “PEN” or the “Company”), a Delaware corporation, develops and sells a portfolio of nano-layer coatings, nano-based cleaners, and nano-composite products based on its proprietary technology, and performs nanotechnology product research and development generating revenues through performing contract services. Through our wholly-owned subsidiary, PEN Brands LLC, formerly known as Nanofilm, Ltd., we develop, manufacture and sell consumer and institutional products using nanotechnology to deliver unique performance attributes at the surfaces of a wide variety of substrates. These products are marketed internationally primarily to customers in the optical industry. On May 2, 2017, Nanofilm, Ltd. changed its name to PEN Brands LLC. Through our wholly-owned subsidiary, Applied Nanotech, Inc., we primarily perform design and development services for ourselves and for governmental and private customers. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information. Accordingly, they do not include all the information and disclosures required by US GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited consolidated financial statements of the Company as of March 31, 2018 and for the three months ended March 31, 2018 and 2017. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the operating results for the full year ending December 31, 2018 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures of the Company as of December 31, 2017 and for the year then ended, which were filed with the Securities and Exchange Commission on Form 10-K on June 15, 2018. Going Concern These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the consolidated financial statements filed with our Form 10-K on June 15, 2018, the Company had a net loss of $687,068 and $556,001 for the years ended December 31, 2017 and 2016. Additionally, the Company had a net loss of $20,518 for the three months ended March 31, 2018. Furthermore, the Company had an accumulated deficit, a stockholders’ deficit and a working capital deficit of $6,607,755, $1,097,780 and $1,342,995, respectively, at March 31, 2018. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. During 2017 and 2018, management took measures to reduce operating expenses. Although the Company has historically raised capital from sales of equity, there is no assurance that it will be able to continue to do so. These unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The Company’s consolidated financial statements include the financial statements of its wholly-owned subsidiaries, Applied Nanotech, Inc. and PEN Brands LLC. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates for the three months ended March 31, 2018 and 2017 include estimates for allowance for doubtful accounts on accounts receivable, the estimates for obsolete inventory, the estimates for cooperative advertising liability, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, estimates of current and deferred income taxes and deferred tax valuation allowances, the fair value of non-cash equity transactions, and the fair value of equity incentives. Fair Value of Financial Instruments and Fair Value Measurements The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. Level 2-Inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, loans and lines of credit, accounts payable, accrued expenses, and other payables approximate their fair market value based on the short-term maturity of these instruments. The Company analyzes all financial and non-financial instruments with features of both liabilities and equity under the Financial Accounting Standards Board (“FASB”) accounting standard for such instruments. Under this standard, financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company accounts for three instruments at fair value using level 3 valuation. At March 31, 2018 At December 31, 2017 Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Stock Appreciation Rights Plan A - - $ - - - $ - Equity Credits Issued - - $ - - - $ 2,278 A rollforward of the level 3 valuation of these three financial instruments is as follows: Stock Appreciation Rights Plan A Equity Credits Issued Balance at December 31, 2017 $ - $ 2,278 Change in fair value included in net loss - (2,278 ) Balance at March 31, 2018 $ - $ - ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments. Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date calculated from PEN Brands trial balance and money market accounts to be cash equivalents. Accounts Receivable The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as general and administrative expense. Inventory Inventory is stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method. At March 31, 2018 and December 31, 2017, inventory consisted of the following: March 31, 2018 December 31, 2017 Raw materials $ 836,594 $ 595,747 Work in process 54,546 - Finished goods 389,091 388,060 1,280,231 983,807 Less: reserve for obsolescence (259,595 ) (249,828 ) Inventory, net $ 1,020,636 $ 733,979 Effective January 1, 2017, the Company adopted FASB Accounting Standards Update (“ASU”) No. 2015-11, “Simplifying the Measurement of Inventory,” (“ASU 2015-11”) which requires an entity to measure most inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The adoption of this standard did not have a material impact on the Company’s unaudited consolidated financial statements. Property and Equipment Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives, which range from three to ten years. Leasehold improvements are depreciated over the shorter of the useful life or lease term including scheduled renewal terms. Maintenance and repairs are charged to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in other income or expense in the year of disposition. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. Impairment of Long-Lived Assets In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment charge for the three months ended March 31, 2018 and 2017. Revenue Recognition Pursuant to the guidance of ASC Topic 605 and ASU 2014-09, the Company recognizes sales when persuasive evidence of an arrangement exists, delivery has occurred or services have been provided, the purchase price is fixed or determinable and collectability is reasonably assured. Types of revenue: ● Net product sales by our subsidiary PEN Brands LLC. ● Reimbursements under agreements to perform contract services related to new products and product development for government agencies and others by our subsidiary, Applied Nanotech. We do not perform contracts that are contingent upon successful results. Larger projects are sometimes broken down in phases to allow the customer to determine at the end of each phase if they wish to move to the next phase. The agreements with federal government agencies generally provide that, upon completion of a technology development program, the funding agency is granted a royalty-free license to use any technology developed during the course of the program for its own purposes, but not any preexisting technology that we use in connection with the program. We retain all other rights to use, develop, and commercialize the technology. Agreements with nongovernmental entities generally give the funder rights to the technology developed under the contract. ● Product sales and other miscellaneous revenues from our subsidiary, Applied Nanotech such as the sale of conductive inks, graphene foils and thermal management materials. Revenue recognition criteria: ● Net product sales by our subsidiary PEN Brands LLC, are recognized when the product is shipped to the customer and title is transferred. ● Revenue from contract services performed is generally recognized based on what we have a right to invoice. ● Revenue from other product sales is recognized at the time the product shipped. The Company’s subsidiary Applied Nanotech’s primary business is contract services, not the sale of products. Product sales are generally insignificant in number and are generally limited to the sale of conductive inks, graphene foils, thermal management materials, samples, proofs of concepts, prototypes, or other items resulting from its contract services. ● Other miscellaneous revenue is recognized as deemed appropriate given the facts of the situation and is generally not material. Sales Incentives and Consideration Paid to Customers The Company historically accounted for certain promotional costs such as sales incentives and cooperative advertising as a reduction of sales. For the three months ended March 31, 2018 the Company recorded $21,041 as a reduction of sales related to sales incentives as compared to $38,618 for the prior period. Cost of Sales Cost of sales includes inventory costs, materials and supplies costs, internal labor and related benefits, subcontractor costs, depreciation, overhead and shipping and handling costs incurred. Shipping and Handling Costs Shipping and handling costs incurred relating to the purchase of inventory are included in inventory which is charged to cost of sales as product are sold. Shipping and handling costs incurred for product shipped to customers are included in cost of sales. For the three months ended March 31, 2018 and 2017 shipping and handling costs amounted to $33,325 and $44,557, respectively. Research and Development Research and development costs incurred in the development of the Company’s products and under other Company sponsored research and development projects are expensed as incurred. Costs such as direct labor, direct costs, and other allocated costs incurred to perform research and development service pursuant to government and private research projects are in included in cost of sales. Research and development costs incurred in the development of the Company’s products for the three months ended March 31, 2018 and 2017 were $8,193 and $68,722, respectively, and are included in operating expenses on the accompanying unaudited consolidated statements of operations. Advertising Costs The Company participates in various advertising programs. All costs related to advertising of the Company’s products are expensed in the period incurred. Advertising costs charged to operations for the three months ended March 31, 2018 and 2017 were $405 and $5,028, respectively, and are included in selling and marketing on the unaudited consolidated accompanying statements of operations. These costs are included in sales and marketing on the consolidated accompanying statements of operations. These advertising expenses do not include cooperative advertising and sales incentives which have been deducted from sales. Federal and State Income Taxes The Company accounts for income tax using the liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date. The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes On December 22, 2017, H.R. 1, known as the “Tax Cuts and Jobs Act” (the Act), was signed into law. The Act includes a number of changes in existing tax law impacting businesses including, among other things, a permanent change in the corporate income tax rate to a fixed rate of 21%. The new rate took effect on January 1, 2018. As a result, the Company revalued its deferred taxes at December 31, 2017. Stock-Based Compensation Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date. Loss Per Share of Common Stock ASC 260 “Earnings Per Share”, requires dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Basic net loss per common share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. As of March 31, 2018, and December 31, 2017, 37,778 contingently issuable common shares that are issuable based on certain market conditions (see Note 9) are not included in the potential dilutive shares in calculating the diluted EPS. Additionally, potentially dilutive common shares consist of common stock options and warrants (using the treasury stock method). These common stock equivalents may be dilutive in the future . March 31, 2018 December 31, 2017 Stock options 18,726 19,120 Stock warrants 712 712 Restricted Stock 37,778 37,778 Total 57,216 57,610 Additionally, there are an unknown quantity of common stock equivalents that result from a potential conversion of stock appreciation rights (See Note 9). Net loss per share for each class of common stock is as follows: Net (loss) income per common shares outstanding: Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 Class A common stock $ (0.01 ) $ (0.03 ) Class B common stock $ (0.01 ) $ (0.03 ) Class Z common stock $ - $ (0.03 ) Weighted average shares outstanding: Class A common stock 1,654,852 1,368,927 Class B common stock 1,426,503 1,403,101 Class Z common stock - 262,631 Total weighted average shares outstanding 3,081,355 3,034,659 Segment Reporting The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the Chairman and chief executive officer (“CEO”) of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company classified the reportable operating segments into (i) the development, manufacture and sale of consumer and institutional products using nanotechnology to deliver unique performance attributes at the surfaces of a wide variety of substrates (the “Product segment”) and (ii) nanotechnology design and development services for our future products and for government and private entities and sales of products developed for third parties (the “Contract services segment”). Recently Issued Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition (“ASC 605”) and most industry-specific guidance throughout ASC 605. The FASB has issued numerous updates that provide clarification on a number of specific issues as well as requiring additional disclosures. The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The guidance may be adopted through either retrospective application to all periods presented in the financial statements (full retrospective approach) or through a cumulative effect adjustment to retained earnings at the effective date (modified retrospective approach). The guidance was revised in July 2015 to be effective for public companies for annual and interim periods beginning on or after December 15, 2017. The Company adopted ASC 606 effective January 1, 2018 using the modified retrospective method. Implementing ASC 606 the Company concluded that no change was required in its accounting for any sources of revenue for the year ended December 3, 2017. On February 25, 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”) to amend the accounting guidance for leases. The accounting applied by a lessor is largely unchanged under ASU 2016-02. However, the standard requires lessees to recognize lease assets and lease liabilities for leases classified as operating leases on the balance sheet. Lessees will recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it will recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and early adoption is permitted. The Company is currently assessing the impact of the guidance on its consolidated financial statements and notes to its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09 (“ASU 2016-09”) to amend the accounting guidance for share-based payment accounting. The areas for simplification in ASU 2016-09 involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarity on the accounting for modifications of stock-based awards. ASU 2017-09 requires adoption on a prospective basis in the annual and interim periods beginning after December 15, 2017 for share-based payment awards modified on or after the adoption date. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated financial statements and related disclosures. In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815) - Accounting for Certain Financial Instruments with Down Round Features,” (“ASU 2017-11”). Equity-linked instruments, such as warrants and convertible instruments may contain down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings. Under ASU 2017-11, a down round feature will no longer require a freestanding equity-linked instrument (or embedded conversion option) to be classified as a liability that is remeasured at fair value through the income statement (i.e. marked-to-market). However, other features of the equity-linked instrument (or embedded conversion option) must still be evaluated to determine whether liability or equity classification is appropriate. Equity classified instruments are not marked-to-market. For earnings per share (“EPS”) reporting, the ASU requires companies to recognize the effect of the down round feature only when it is triggered by treating it as a dividend and as a reduction of income available to common shareholders in basic EPS. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in any interim period. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated financial statements. There are no other recently issued accounting standards that apply to us or that are expected to have a material impact on our results of operations, financial condition, or cash flows. Reclassifications Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements. |
Bank Loans and Lines of Revolvi
Bank Loans and Lines of Revolving Credit Facility | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Bank Loans and Lines of Revolving Credit Facility | NOTE 3 – BANK LOANS AND LINES OF REVOLVING CREDIT FACILITY In April 2014, our subsidiary, PEN Brands LLC entered into a $1,500,000 revolving credit line agreement (the “Revolving Note”) with Mackinac Commercial Credit, LLC (the “Lender”) with draws limited to a borrowing base as defined in the Revolving Note. The unpaid principal balance of this Revolving Note is payable on demand, is secured by all of PEN Brands LLC’s assets, and bears interest computed at a rate of interest (the “Effective Rate”) which is equal to 7.0% above the LIBOR Rate, as defined, payable monthly. PEN Brands LLC will pay to Lender a late charge of 5.0% of any monthly payment not received by Lender within 10 calendar days after its due date. The Company may, at any time or from time to time upon three business days’ written notice to Lender, prepay the Note in whole provided that if (i) Borrower prepays the Revolving Note in full and terminates the Revolving Note, or (ii) Lender terminates the Revolving Note after default, then Borrower will pay a termination premium equal to 2.0% of the maximum loan amount. On May 1, 2015, PEN Brands LLC and the Lender entered into an amendment to the Loan and Security Agreement extending the outside maturity date to April 4, 2016 and permitting advances against an expanded borrowing base. The borrowing base was increased by $450,000 through October 31, 2015, with this amount reducing by $7,500 monthly thereafter. In addition, PEN Inc., the parent company, guaranteed PEN Brands LLC’s obligations to the Lender. On April 4, 2016, the maturity date under the Loan & Security Agreement between PEN Brands LLC and the Lender was automatically extended for a one-year renewal term. Without the Lender’s consent, so long as the obligation remains outstanding, in addition to other covenants as defined in the Revolving Note, PEN Brands LLC shall not a) merge or consolidate with any other company, except for the combination that closed in August 2014 and shall not suffer a change of control; b) make any capital expenditures, as defined, materially affecting the business; c) declare or pay cash dividends upon any of its stock, or distribute any of its property, make any loans, make investments, redeem, retire or acquire any of its stock, d) become liable for the indebtedness of anyone else, as defined, and e) incur indebtedness, other than trade payables. On April 3, 2017, PEN Brands LLC and the Lender executed a second amendment to the Revolving Note that extended the maturity date to April 4, 2018, with a one-year renewal option. The second amendment also changed the interest rate to 3.0% above the Prime Rate, as reported in the Wall Street Journal. Under a subsequent amendment, the maturity date was changed to July 3, 2018. On October 17, 2017, pursuant to the terms of the Revolving Note, the gross proceeds of $85,000 in connection with the Asset Purchase agreement were applied to decrease the borrowing base of the Revolving Note. In connection with the sale of fixed assets, the Company amended the Revolving Note to establish a cash collateral account to be no less than $85,000. Pursuant to this amendment, the Company entered into a loan agreement with two Company directors in the aggregate principal amount of $85,000 in order to fund the cash collateral provision pursuant to the amended loan agreement. The loan bears no interest and is due when cash flow permits, or if earlier, upon the payment or refinancing of the loan from the Lender to PEN Brands. On March 30, 2018, PEN Brands and the lender entered into the fourth amendment that permits the borrower to request up to three advances of not more than $200,000 each supported by certain qualifying purchase orders. Each purchase order advance to be repaid in not less than 30 days. No subsequent request can be made until any prior purchase order advance has been repaid. Two of the Company’s officers and directors have personally guaranteed repayment of purchase order advances. The fourth amendment also changes the maturity date for the loan to July 3, 2018. That date becomes the date for an automatic one-year renewal unless either the lender or the borrower gives notice of non-renewal. Other terms and conditions of the agreement remain the same. On August 8, 2018, PEN Brands and the lender entered into the fifth amendment with an effective date of July 3, 2018. The fifth amendment renewed the agreement through July 3, 2019 and provides for an automatic one-year renewal at that time unless it is terminated by either party 60 days in advance. The fifth amendment also limits the amounts that PEN Brands can advance to its parent, and provides that advances based on eligible inventory will reduce monthly by $7,500 per month starting November 1, 2018. At March 31, 2018 and December 31, 2017, the Company had an outstanding balance of $1,114,247 and $563,218 respectively, which includes accrued interest of $6,130 and $14,797, respectively, in amounts outstanding under the Revolving Note with availability of up to $385,753 as of March 31, 2018, depending on the borrowing base at the time of the request for the advance. The weighted average interest rate during the three months ended March 31, 2018 and 2017 was approximately 7.53% and 6.8%, respectively. See Note 12 – Subsequent Events for details on the payment in full of the outstanding balance and the termination of the Revolving Note. |
Notes Payable
Notes Payable | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 4 – NOTES PAYABLE On February 10, 2015, Nanofilm entered into a promissory note (the “Equipment Note”) with KeyBank, N.A. (the “Bank”) to borrow up to $373,000. Nanofilm may obtain one or more advances not to exceed $373,000. The unpaid principal balance of this Equipment Note is payable in 60 equal monthly installments payments of principal and interest through June 10, 2020. The Equipment Note is secured by certain equipment, as defined in the Equipment Note, and bears interest computed at a rate of interest of 4.35% per annum based on a year of 360 days. At December 31, 2017, the principal amount due under the Equipment Note amounted to $179,399. As of March 31, 2018, $68,182 and $99,174, represent the current and non-current portion due under this note. In June and November 2015, in connection with a severance package offered to four employees, the Company entered into four promissory note agreements with the four employees which obligate the Company to pay these employees accrued and unpaid deferred salary in an aggregate amount of $51,808. The principal amounts due under these notes shall bear interest at the minimum rate of interest applicable under the internal revenue code (approximately 3.0% at December 31, 2017). All principal and interest payable under three of these notes aggregating $40,565 are due in 2025 and all principal and interest payable under one of these notes amounting to $15,578 are due in 2020. Accordingly, $51,808 is included in non-current notes payable. On May 31, 2016, in connection with a restatement of our agreement with a former research partner, we delivered a promissory note to repay amounts previously advanced to us and accrued. The initial principal amount was $51,239 bearing interest at 5% per annum. Installment payments include both principal and interest. After an initial payment of $2,000, the note requires payments of $1,000 for eleven months, payments of $2,000 for the following 12 months and monthly payments of $3,000 thereafter until paid in full. The principal balance due on December 31, 2017 was $28,351, all classified as a current liability. At March 31, 2018 the principal balance due was $22,682.05 all classified as a current liability. January 2017, the Company issued a promissory note in the principal amount of $17,425 to a departing employee representing the amount of his accrued and unpaid salary. The note does not bear interest and is due in January 2027, and is included in non-current notes payable. Future principal payments of notes payable are as follows: Year As of March 31, 2018 As of December 31, 2017 2018 $ 78,467 $ 96,533 2019 74,380 74,380 2020 51,540 51,540 2021 - - 2022 - - Thereafter 54,882 54,883 Total $ 259,270 $ 277,336 |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 5 – RELATED PARTY TRANSACTIONS Sales to Related Party During the three months ended March 31, 2018 and 2017, the Company engaged in certain sales transactions with a company which is a shareholder and related to a director of the Company. Sales to the related party totaled $0 and $53,314 for the three months ended March 31, 2018 and 2017, respectively. Accounts receivable from the related party totaled $0 at March 31, 2018 and $14,226 at December 31, 2017. As of May 23, 2017, that director no longer served on the Company’s Board and the shareholder was no longer an affiliate. Other A board member is a principal in DHJH Holdings LLC, the firm that provided the services of the Company’s chief financial officer from May 2016 through February 2017. The Company recognized $0 and $13,195 in fees and expenses during the three months ended March 31, 2018 and 2017, respectively. As of March 31, 2018, the Company included the following within accounts payable-related parties: $1,000 of director fees and $159,887 due to certain of the Company’s executives, and $323,868 in accrued payroll to certain of the Companies executives. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | NOTE 6 - STOCKHOLDERS’ EQUITY Description of Preferred and Common Stock On December 11, 2015, the Board of Directors of the Company approved a reverse stock split of the issued and outstanding shares of the Company’s common stock at the ratio of 1-for-180 (the “Reverse Stock Split”) and authorized an amendment of the Company’s Amended and Restated Certificate of Incorporation, as amended, to effect the Reverse Stock Split, to reduce the number of authorized shares of common stock, and to set a par value of $0.0001 per share after the Reverse Stock Split. On January 26, 2016, each one hundred eighty (180) shares of the Company’s (i) Class A Common Stock (“Class A common stock”), (iii) Class B Common Stock and (iii) Class Z Common Stock, then issued and outstanding were automatically combined into one (1) validly issued, fully paid and non-assessable share of Class A Common Stock, Class B Common Stock and Class Z Common Stock, respectively, without any further action by the Company or the holder. Additionally, the authorized number of shares of common stock were reduced to 10,000,000 comprised of 7,200,000 shares of Class A Common Stock, 2,500,000 shares of Class B Common Stock (“Class B common stock”), and 300,000 shares of Class Z Common Stock (“Class Z common stock”). The par value of each class of common stock remained the same at $0.0001 per common share. All share and per share data in the accompanying unaudited consolidated financial statements have been retroactively restated to reflect the effect of the Reverse Stock Split and authorized shares. The Company is also authorized to issue 20,000,000 shares of Preferred Stock, par value $0.0001 per share (“preferred stock”). Preferred Stock The preferred stock may be issued in one or more series. The Company’s board of directors are authorized to issue the shares of preferred stock in such series and to fix from time to time before issuance thereof the number of shares to be included in any such series and the designation, powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof, of such series. Common Stock – General The rights of each share of Class A common stock, each share of Class B common stock and each share of Class Z common stock are the same with respect to dividends, distributions and rights upon liquidation. Class A Common Stock Holders of the Class A common stock are entitled to one vote per share in the election of directors and other matters submitted to a vote of the stockholders. Class B Common Stock Conversion Rights Voting Rights Class Z Common Stock Conversion Rights Voting Rights Other Rights Issuances of Common Stock Common Stock Issued for Services On February 28, 2018, the Company issued an aggregate of 4,443 shares of Class A common stock and 2,962 shares of Class B common stock to the Company’s directors as compensation to them for service on its board. These shares were valued on that date at $1.35 per share based on the quoted price of the stock for a total value of $10,000. On that same day, the Company issued 6,746 shares of Class B common stock in satisfaction of the outstanding equity credits. Stock Options Stock options outstanding are to purchase Class A common stock. Stock option activities for the three months ended March 31, 2018 are summarized as follows: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding December 31, 2017 19,120 $ 29.38 3.21 Exercised - Expired (394 ) Outstanding March 31, 2018 18,726 $ 29.09 3.03 $ - Exercisable March 31, 2018 8,726 $ 59.21 2.69 $ - Contingently Issuable Class A Common Shares On August 27, 2014, the Company entered into a Restricted Stock Agreement with Dr. Zvi Yaniv, the former Chief Operating Officer and President, of Applied Nanotech, and a current employee of the Company granting Dr. Yaniv 37,778 shares of Class A common stock, subject to forfeiture. All these shares become vested and not subject to forfeiture on the earlier of a change of control of the Company, Dr. Yaniv’s death, or if more than 180 days after closing, the average trading price of the shares during a measurement period of ten consecutive trading days reaches certain price thresholds. At an $18.00 price, 5,554 shares vest, with additional tranches of 5,556 shares vesting if the price reaches $27.00, $36.00, $45.00 and $54.00. The last 10,000 shares vest at a $63.00 price threshold. Any shares that have not vested five years after the effective date will be forfeited. The Company also entered into a Piggyback Registration Rights Agreement that will allow Dr. Yaniv, subject to other customary terms and conditions, to register shares that are no longer subject to forfeiture if the Company is registering its shares. Pursuant to ASC 718-10 and related subsections, these shares were valued on the date of grant of August 27, 2014 at $13.12 per share for a total value of $495,720. The Company estimates the fair value of the awards with market conditions using a Binomial simulation, which utilizes several assumptions including the risk-free interest rate, the volatility of the Company’s stock and the exercise behavior of award recipients. The grant-date fair value of $495,720 of the awards will be recognized over the requisite service period of 3 years, which represents the derived service period for the stock grant as determined by the Binomial simulation method. For the three months ended March 31, 2018 and 2017, in connection with the amortization of the fair value of this stock grant, the Company recorded stock-based compensation of $0 and $41,310, respectively. At March 31, 2018, there is no unamortized stock-based compensation expense to be recognized in future periods. Conversion of Class Z Common Stock On May 23, 2017, Zeiss converted 262,631 shares of Class Z common stock into 262,631 shares of Class A common stock. Immediately thereafter, Zeiss sold 262,631 shares of Class A common stock to certain buyers which included the Company’s Chief Executive Officer for an aggregate of $100,000. In addition, pursuant to the certificate of incorporation, Zeiss’ Board representation automatically terminated and, as a result, Zeiss ceased to be a related party as of May 23, 2017. |
Concentrations
Concentrations | 3 Months Ended |
Mar. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
Concentrations | NOTE 7 – CONCENTRATIONS Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash deposits and investments in cash equivalent instruments. Lender Concentration The Company relies primarily on one lender under a $1,500,000 Revolving Note. Customer Concentrations Customer concentrations for the three months ended March 31, 2018 and 2017 are as follows: Revenues For the Three Months Ended March 31, 2018 2017 Customer A 30 % 34 % Customer B 15 % 13 % Total 45 % 47 % Accounts Receivable As of March 31, As of December 31, 2018 2017 Customer A 38 % 30 % Customer B 23 % 21 % Total 61 % 51 % *Less than 10% A reduction in sales from or loss of such customers would have a material adverse effect on our consolidated results of operations and financial condition. Geographic Concentrations of Sales For the three months ended March 31, 2018 and 2017, total sales in the United States represent approximately 96% and 82% of total consolidated revenues, respectively. No other geographical area accounting for more than 10% of total sales during the nine months ended March 31, 2018 and 2017. Vendor Concentrations Vendor concentrations for inventory purchases for the three months ended March 31, 2018 and 2017 are: For the Three Months Ended March 31, 2018 2017 Vendor A 23 % 33 % Vendor B 19 % 13 % Vendor C 15 % 13 % Vendor D 10 % * % Total 67 % 59 % *Less than 10% |
Equity Credits
Equity Credits | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Equity Credits | NOTE 8 – EQUITY CREDITS In 1997, PEN Brands LLC established The Equity Credit Incentive Program. This program enabled select employees the opportunity to purchase equity credits that increase in value based upon an increase in PEN Brands LLC’s revenue over a base year of 1996. Eligible credits can be redeemed after two years at the equity credit value for that year. Under certain circumstances, the equity credits are convertible into PEN Brands LLC equity on a one-for-one basis. During the three months ended March 31, 2018, the outstanding equity credits were redeemed for 6,746 shares of Class B stock were issued on account of the equity credits. Subsequently, on October 16, 2018, an additional 1,774 shares were issued to complete the redemption of the equity credits. At March 31, 2018, $0 was accrued and at December 31, 2017, $2,278 was accrued, representing the value associated with the equity credits outstanding. |
Stock Appreciation Plan
Stock Appreciation Plan | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Appreciation Plan | NOTE 9 – STOCK APPRECIATION PLAN From June 1, 1988, until December 31, 1997, when the plan was terminated, PEN Brands LLC had in place a Stock Appreciation Rights Plan A (the “Plan”), intended to provide employees, directors, members of a technical advisory board and certain independent contractors selected by the Board with equity-like participation in the growth of PEN Brands LLC. The maximum number of stock appreciation rights that could be granted by the Board was 1,000,000. There were 235,782 fully vested stock appreciation rights (“SARS”) outstanding under the terms of the Plan at March 31, 2018 and December 31, 2017. The SARS unit value is based on the book value of the Company as of the last fiscal year end multiplied by a SARS multiplier stipulated in the SARS plan. However, in the event of an initial public offering (“IPO”) of PEN Brands, the SARS are redeemable based on a value equal to offering price of the stock in an IPO times the total outstanding shares of the Company just subsequent to the completion of the IPO, multiplied by the SARS multiplier. The SARS multiplier is to be adjusted, as the Board determines, to reflect changes in the capitalization of PEN Brands LLC. Generally, the SARS are redeemable in cash, at their then fair value as computed pursuant to the Plan, in the event of termination of employment or business relationship, death, permanent and total disability, or sale of PEN Brands (as defined). Upon an IPO, SARS are to be redeemed by applying 70% of the redemption value to purchase common shares, with the remaining 30% being distributed in cash to the participant. The business combination completed in August 2014 did not qualify as an IPO under the Plan; however, a future underwritten registered offering may qualify. The accrued redemption value associated with the stock appreciation rights amounted to $54,538, at March 31, 2018 and December 31, 2017. If the Company completes an IPO, the value of SARS calculated based on the IPO formula may cause a material increase in the value of the liability. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Reporting | NOTE 10 – SEGMENT REPORTING The Company’s principal operating segments coincide with the types of products to be sold. The products from which revenues are derived are consistent with the reporting structure of the Company’s internal organization. The Company’s two reportable segments for the three months ended March 31, 2018 and 2017 were the Product segment and ii) the Contract services segment (formerly the research and development segment). The Company’s chief operating decision-maker has been identified as the Chairman and CEO, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Segment information is presented based upon the Company’s management organization structure as of March 31, 2018 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to the reportable segments disclosed. There are no inter-segment revenue transactions and, therefore, revenues are only to external customers. As the Company primarily generates its revenues from customers in the United States, no geographical segments are presented. Segment operating profit is determined based upon internal performance measures used by the chief operating decision-maker. The Company derives the segment results from its internal management reporting system. The accounting policies the Company uses to derive reportable segment results are the same as those used for external reporting purposes. Management measures the performance of each reportable segment based upon several metrics, including net revenues, gross profit and operating loss. Management uses these results to evaluate the performance of, and to assign resources to, each of the reportable segments. The Company manages certain operating expenses separately at the corporate level and does not allocate such expenses to the segments. Segment income from operations excludes interest income/expense and other income or expenses and income taxes according to how a particular reportable segment’s management is measured. Management does not consider impairment charges, and unallocated costs in measuring the performance of the reportable segments. Segment information available with respect to these reportable business segments for the three months ended March 31, 2018 and 2017 was as follows: Three Months Ended March 31, 2018 2017 Revenues: Product segment $ 1,142,575 $ 1,996,489 Contract services segment 300,950 219,861 Total segment and consolidated revenues $ 1,443,525 $ 2,216,350 Cost of revenues: Products $ 804,687 $ 1,035,835 Contract services segment 301,572 247,198 Total segment and consolidated cost of revenues $ 1,106,259 $ 1,283,033 Gross profit (loss): Product segment $ 337,888 $ 960,654 Contract services segment (622 ) (27,337 ) Total segment and consolidated gross profit $ 337,266 $ 933,317 Gross margin: Product segment 29.6 % 48.1 % Contract services segment -0.2 % -12.4 % Total gross margin 23.4 % 42.1 % Segment operating expenses: Product segment 321,154 561,306 Contract services segment 39,399 51,777 Total segment operating expenses 360,552 613,083 Income (loss) from operations: Product segment $ 16,734 $ 399,348 Contract services segment (40,021 ) (79,114 ) Total segment income (loss) (23,286 ) 320,234 Unallocated costs (173,108 ) (250,820 ) Total consolidated loss from operations $ (196,394 ) $ 69,414 Depreciation and amortization: Product segment $ 16,272 $ 32,733 Contract services segment - 5,081 Total segment depreciation and amortization 16,272 37,814 Unallocated depreciation - - Total consolidated depreciation and amortization $ 16,272 $ 37,814 Capital additions: Product segment $ - $ - Contract services segment - - Total segment capital additions - - Unallocated capital additions - - Total consolidated capital additions $ - $ - March 31, 2018 March 31, 2017 Segment total assets: Product segment $ 2,621,031 $ 2,892,214 Contract services segment 202,264 132,598 Corporate 29,975 85,816 Total consolidated total assets $ 2,849,270 $ 3,110,628 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 11 - COMMITMENTS AND CONTINGENCIES Stock Appreciation Rights If the Company completes an IPO, the value of stock appreciation rights calculated based on the IPO formula may cause a material increase in the value of the liability (See Note 9). Litigation The Company may be, from time to time, subject to various administrative, regulatory, and other legal proceedings arising in the ordinary course of business. Our policy is to accrue costs for contingent liabilities, including legal proceedings or unasserted claims that may result in legal proceedings, when a liability is probable and the amount can be reasonably estimated. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 12 - SUBSEQUENT EVENTS Sales of Common Stock and Derivate Equity Securities Grant of Registration Rights On October 15, 2018, we sold 590,847 shares of Class A common stock for a purchase price of $0.50 per share in a private placement for aggregate proceeds of $295,423. Purchasers were PEN Comeback, LLC and Scott & Jeanne Rickert. Ronald Berman, one of our directors, and his son, Tom Berman have reported that they each have 50% control of PEN Comeback. Immediately prior to this sale, Tom Berman was elected as our President and as President of PEN Brands that operates as our Products segment. Tom Berman was also elected to our board. On that day we also sold to PEN Comeback options to acquire up to an additional 550,847 shares at an option exercise price of $1.00 per share, exercisable at any time before June 30, 2019; and warrants to purchase up to 550,847 additional shares at a warrant exercise price of $1.50. The right to purchase warrant shares expires on the earlier of (1) 45 days after the day that our Class A common stock has been trading at or above 120% of the exercise price for a period of 90 days, or (2) four years from date of issue. We also sold additional “warrant options” to purchase warrants. For each share purchased under an option described above, the warrant options entitle PEN Comeback investor can purchase at a price of $0.03 per warrant a warrant to purchase an additional share at an exercise price of $2.00 per share. If purchased, these warrants will expire on the earlier of (1) 45 days after the day that Class A shares have been trading at or above 120% of the exercise price for a period of 90 days, or (2) four years from date of issue. Aggregate proceeds from the sales of the options, warrants and warrant options were $49,576. On October 15, 2018, we also entered into an agreement that granted to PEN Comeback one demand registration right that is exercisable if certain warrants issued to that investor result in proceeds to us of $1 million or more. If the demand is exercised, the investor can register common shares purchased, including common shares purchased directly or upon exercise of the options or warrants issued to the investor. On or about October 15, 2018 as part of the terms for the stock sale, the Rickerts and their family partnership exercised the right to convert Class B shares into Class A shares on a 1:1 basis resulting in the issuance of 1,436,052 shares of Class A common stock. The Rickerts also agreed to forgiveness of accrued salary owed to them and agreed to each receive a salary of $1,000 per month for 2018 and 2019. On January 31, 2019, we sold an additional 325,581 shares of Class A common stock in a private placement to PEN Comeback at a per share price of $0.40 for aggregate proceeds of $130,232. At the same time the investor bought warrants to purchase up to 325,581 additional shares at a warrant exercise price of $1.50. The right to purchase warrant shares expires on the earlier of (1) 45 days after the day that PEN shares have been trading at or above 120% of the exercise price for a period of 90 days, or (2) four years from date of issue. Aggregate proceeds from the sales of the warrants were $9,767. On March 22, 2019, we sold 232,558 shares of Class A common stock in a private placement to PEN Comeback at a per share price of $0.40 for aggregate proceeds of $93,023. At the same time the investor bought warrants to purchase up to 325,581 additional shares at a warrant exercise price of $1.50. The right to purchase warrant shares expires on the earlier of (1) 45 days after the day that PEN shares have been trading at or above 120% of the exercise price for a period of 90 days, or (2) four years from date of issue. Aggregate proceeds from the sales of the warrants were $6,977. On May10, 2019, we sold 523,266 shares of Class A common stock in a private placement to PEN Comeback at a per share price of $0.40 for aggregate proceeds of $209,302. At the same time the investor bought warrants to purchase up to 523,266 additional shares at a warrant exercise price of $1.50. The right to purchase warrant shares expires on the earlier of (1) 45 days after the day that PEN shares have been trading at or above 120% of the exercise price for a period of 90 days, or (2) four years from date of issue. Aggregate proceeds from the sales of the warrants were $15,698. Stock for Services On October 15, 2018, we issued an aggregate of 20,000 shares of Class A common stock to the Company’s directors as compensation to them for service on our board. These shares were valued on that date at $0.50 per share based on the price paid in the private placement for a total value of $10,000. On that date 1,774 shares of Class A common stock were issued to fully retire the last outstanding equity credits. On December 5, 2018, we issued an aggregate of 30,000 shares of Class A common stock to our directors as compensation to them for service on our Board. These shares were valued on that date at $0.40 per share based on the quoted price of the stock for a total value of $12,000. On April 3, 2019, we issued an aggregate of 18,180 shares of our Class A common stock to five of our directors as compensation to them for service on our Board. The shares were valued at $0.55 per share based on the quoted price of the stock for a total value of $10,000. On that date the Board also granted to our President an option to purchase up to 550,000 shares of our Class A common stock at a price of $0.55 per share. Under that option, the right to purchase 50,000 shares vested on the date of grant, the right to purchase up to 75,000 shares will vest on December 31, 2019, the right to purchase 100,000 shares will vest on June 30, 2020, and the right to purchase up to 125,000 shares will vest on December 31, 2020 and two tranches entitling him to purchase 100,000 shares will vest if he reaches the cap for cash payments under the bonus program in 2019 or 2020. All rights to purchase have a term of 5 years from date of vesting. On April 24, 2019, we issued an aggregate of 19,998 shares of Class A common stock to our directors as compensation to them for service on our Board. These shares were valued on that date at $0.60 per share based on the quoted price of the stock for a total value of $12,000. Settlement Agreement & Litigation On May 20, 2018, PEN Brands reached a settlement with a former employee in exchange for a full release. We accrued $80,000 related to this settlement as of December 31, 2017. On July 27, 2018 PEN Brands and its then President were named as defendants in a suit for breach of this agreement in the Court of Common Pleas in Cleveland, Ohio. On December 13, 2018 the case was resolved with a full release for a one-time payment of $24,000 and the case was dismissed with prejudice. Customer Concentration Delays in shipping customer orders continued in subsequent periods and in May two major customers indicated they would stop buying our products. These customers represented 45% of our revenue in the period ending March 31, 2018 and 39% of our revenue for 2017. We continued to fill open orders for these customers. Lease for Real Property On December 10, 2018, we entered into a five-year lease agreement for 3,742 square feet of space for the design facility in Austin, beginning January 2019 and ending February 29, 2024. Monthly lease payments start at $3,472 per month, increasing 3% each year for a total of approximately $238,440 over the term of the lease. Lender Pay-Off On January 31, 2019, PEN Brands paid $172,101 to its secured lender, MBank. This payment, and the application of $85,000 in cash collateral held by MBank paid in full the outstanding principal balance, accrued interest and fees due to the lender. The parties also terminated the revolving credit line agreement and note originally executed in April 2014 that was renewed in August 2018. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The Company’s consolidated financial statements include the financial statements of its wholly-owned subsidiaries, Applied Nanotech, Inc. and PEN Brands LLC. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates for the three months ended March 31, 2018 and 2017 include estimates for allowance for doubtful accounts on accounts receivable, the estimates for obsolete inventory, the estimates for cooperative advertising liability, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, estimates of current and deferred income taxes and deferred tax valuation allowances, the fair value of non-cash equity transactions, and the fair value of equity incentives. |
Fair Value of Financial Instruments and Fair Value Measurements | Fair Value of Financial Instruments and Fair Value Measurements The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. Level 2-Inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, loans and lines of credit, accounts payable, accrued expenses, and other payables approximate their fair market value based on the short-term maturity of these instruments. The Company analyzes all financial and non-financial instruments with features of both liabilities and equity under the Financial Accounting Standards Board (“FASB”) accounting standard for such instruments. Under this standard, financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company accounts for three instruments at fair value using level 3 valuation. At March 31, 2018 At December 31, 2017 Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Stock Appreciation Rights Plan A - - $ - - - $ - Equity Credits Issued - - $ - - - $ 2,278 A rollforward of the level 3 valuation of these three financial instruments is as follows: Stock Appreciation Rights Plan A Equity Credits Issued Balance at December 31, 2017 $ - $ 2,278 Change in fair value included in net loss - (2,278 ) Balance at March 31, 2018 $ - $ - ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments. |
Cash and Cash Equivalents | Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date calculated from PEN Brands trial balance and money market accounts to be cash equivalents. |
Accounts Receivable | Accounts Receivable The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as general and administrative expense. |
Inventory | Inventory Inventory is stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method. At March 31, 2018 and December 31, 2017, inventory consisted of the following: March 31, 2018 December 31, 2017 Raw materials $ 836,594 $ 595,747 Work in process 54,546 - Finished goods 389,091 388,060 1,280,231 983,807 Less: reserve for obsolescence (259,595 ) (249,828 ) Inventory, net $ 1,020,636 $ 733,979 Effective January 1, 2017, the Company adopted FASB Accounting Standards Update (“ASU”) No. 2015-11, “Simplifying the Measurement of Inventory,” (“ASU 2015-11”) which requires an entity to measure most inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The adoption of this standard did not have a material impact on the Company’s unaudited consolidated financial statements. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives, which range from three to ten years. Leasehold improvements are depreciated over the shorter of the useful life or lease term including scheduled renewal terms. Maintenance and repairs are charged to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in other income or expense in the year of disposition. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment charge for the three months ended March 31, 2018 and 2017. |
Revenue Recognition | Revenue Recognition Pursuant to the guidance of ASC Topic 605 and ASU 2014-09, the Company recognizes sales when persuasive evidence of an arrangement exists, delivery has occurred or services have been provided, the purchase price is fixed or determinable and collectability is reasonably assured. Types of revenue: ● Net product sales by our subsidiary PEN Brands LLC. ● Reimbursements under agreements to perform contract services related to new products and product development for government agencies and others by our subsidiary, Applied Nanotech. We do not perform contracts that are contingent upon successful results. Larger projects are sometimes broken down in phases to allow the customer to determine at the end of each phase if they wish to move to the next phase. The agreements with federal government agencies generally provide that, upon completion of a technology development program, the funding agency is granted a royalty-free license to use any technology developed during the course of the program for its own purposes, but not any preexisting technology that we use in connection with the program. We retain all other rights to use, develop, and commercialize the technology. Agreements with nongovernmental entities generally give the funder rights to the technology developed under the contract. ● Product sales and other miscellaneous revenues from our subsidiary, Applied Nanotech such as the sale of conductive inks, graphene foils and thermal management materials. Revenue recognition criteria: ● Net product sales by our subsidiary PEN Brands LLC, are recognized when the product is shipped to the customer and title is transferred. ● Revenue from contract services performed is generally recognized based on what we have a right to invoice. ● Revenue from other product sales is recognized at the time the product shipped. The Company’s subsidiary Applied Nanotech’s primary business is contract services, not the sale of products. Product sales are generally insignificant in number and are generally limited to the sale of conductive inks, graphene foils, thermal management materials, samples, proofs of concepts, prototypes, or other items resulting from its contract services. ● Other miscellaneous revenue is recognized as deemed appropriate given the facts of the situation and is generally not material. |
Sales Incentives and Consideration Paid to Customers | Sales Incentives and Consideration Paid to Customers The Company historically accounted for certain promotional costs such as sales incentives and cooperative advertising as a reduction of sales. For the three months ended March 31, 2018 the Company recorded $21,041 as a reduction of sales related to sales incentives as compared to $38,618 for the prior period. |
Cost of Sales | Cost of Sales Cost of sales includes inventory costs, materials and supplies costs, internal labor and related benefits, subcontractor costs, depreciation, overhead and shipping and handling costs incurred. |
Shipping and Handling Costs | Shipping and Handling Costs Shipping and handling costs incurred relating to the purchase of inventory are included in inventory which is charged to cost of sales as product are sold. Shipping and handling costs incurred for product shipped to customers are included in cost of sales. For the three months ended March 31, 2018 and 2017 shipping and handling costs amounted to $33,325 and $44,557, respectively. |
Research and Development | Research and Development Research and development costs incurred in the development of the Company’s products and under other Company sponsored research and development projects are expensed as incurred. Costs such as direct labor, direct costs, and other allocated costs incurred to perform research and development service pursuant to government and private research projects are in included in cost of sales. Research and development costs incurred in the development of the Company’s products for the three months ended March 31, 2018 and 2017 were $8,193 and $68,722, respectively, and are included in operating expenses on the accompanying unaudited consolidated statements of operations. |
Advertising Costs | Advertising Costs The Company participates in various advertising programs. All costs related to advertising of the Company’s products are expensed in the period incurred. Advertising costs charged to operations for the three months ended March 31, 2018 and 2017 were $405 and $5,028, respectively, and are included in selling and marketing on the unaudited consolidated accompanying statements of operations. These costs are included in sales and marketing on the consolidated accompanying statements of operations. These advertising expenses do not include cooperative advertising and sales incentives which have been deducted from sales. |
Federal and State Income Taxes | Federal and State Income Taxes The Company accounts for income tax using the liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date. The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes On December 22, 2017, H.R. 1, known as the “Tax Cuts and Jobs Act” (the Act), was signed into law. The Act includes a number of changes in existing tax law impacting businesses including, among other things, a permanent change in the corporate income tax rate to a fixed rate of 21%. The new rate took effect on January 1, 2018. As a result, the Company revalued its deferred taxes at December 31, 2017. |
Stock-based Compensation | Stock-Based Compensation Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date. |
Loss Per Share of Common Stock | Loss Per Share of Common Stock ASC 260 “Earnings Per Share”, requires dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Basic net loss per common share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. As of March 31, 2018, and December 31, 2017, 37,778 contingently issuable common shares that are issuable based on certain market conditions (see Note 9) are not included in the potential dilutive shares in calculating the diluted EPS. Additionally, potentially dilutive common shares consist of common stock options and warrants (using the treasury stock method). These common stock equivalents may be dilutive in the future . March 31, 2018 December 31, 2017 Stock options 18,726 19,120 Stock warrants 712 712 Restricted Stock 37,778 37,778 Total 57,216 57,610 Additionally, there are an unknown quantity of common stock equivalents that result from a potential conversion of stock appreciation rights (See Note 9). Net loss per share for each class of common stock is as follows: Net (loss) income per common shares outstanding: Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 Class A common stock $ (0.01 ) $ (0.03 ) Class B common stock $ (0.01 ) $ (0.03 ) Class Z common stock $ - $ (0.03 ) Weighted average shares outstanding: Class A common stock 1,654,852 1,368,927 Class B common stock 1,426,503 1,403,101 Class Z common stock - 262,631 Total weighted average shares outstanding 3,081,355 3,034,659 |
Segment Reporting | Segment Reporting The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the Chairman and chief executive officer (“CEO”) of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company classified the reportable operating segments into (i) the development, manufacture and sale of consumer and institutional products using nanotechnology to deliver unique performance attributes at the surfaces of a wide variety of substrates (the “Product segment”) and (ii) nanotechnology design and development services for our future products and for government and private entities and sales of products developed for third parties (the “Contract services segment”). |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition (“ASC 605”) and most industry-specific guidance throughout ASC 605. The FASB has issued numerous updates that provide clarification on a number of specific issues as well as requiring additional disclosures. The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The guidance may be adopted through either retrospective application to all periods presented in the financial statements (full retrospective approach) or through a cumulative effect adjustment to retained earnings at the effective date (modified retrospective approach). The guidance was revised in July 2015 to be effective for public companies for annual and interim periods beginning on or after December 15, 2017. The Company adopted ASC 606 effective January 1, 2018 using the modified retrospective method. Implementing ASC 606 the Company concluded that no change was required in its accounting for any sources of revenue for the year ended December 3, 2017. On February 25, 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”) to amend the accounting guidance for leases. The accounting applied by a lessor is largely unchanged under ASU 2016-02. However, the standard requires lessees to recognize lease assets and lease liabilities for leases classified as operating leases on the balance sheet. Lessees will recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it will recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and early adoption is permitted. The Company is currently assessing the impact of the guidance on its consolidated financial statements and notes to its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09 (“ASU 2016-09”) to amend the accounting guidance for share-based payment accounting. The areas for simplification in ASU 2016-09 involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarity on the accounting for modifications of stock-based awards. ASU 2017-09 requires adoption on a prospective basis in the annual and interim periods beginning after December 15, 2017 for share-based payment awards modified on or after the adoption date. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated financial statements and related disclosures. In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815) - Accounting for Certain Financial Instruments with Down Round Features,” (“ASU 2017-11”). Equity-linked instruments, such as warrants and convertible instruments may contain down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings. Under ASU 2017-11, a down round feature will no longer require a freestanding equity-linked instrument (or embedded conversion option) to be classified as a liability that is remeasured at fair value through the income statement (i.e. marked-to-market). However, other features of the equity-linked instrument (or embedded conversion option) must still be evaluated to determine whether liability or equity classification is appropriate. Equity classified instruments are not marked-to-market. For earnings per share (“EPS”) reporting, the ASU requires companies to recognize the effect of the down round feature only when it is triggered by treating it as a dividend and as a reduction of income available to common shareholders in basic EPS. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in any interim period. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated financial statements. There are no other recently issued accounting standards that apply to us or that are expected to have a material impact on our results of operations, financial condition, or cash flows. |
Reclassifications | Reclassifications Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of Reconciliation of Fair Value of Level 3 Valuation of Financial Instruments | The Company accounts for three instruments at fair value using level 3 valuation. At March 31, 2018 At December 31, 2017 Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Stock Appreciation Rights Plan A - - $ - - - $ - Equity Credits Issued - - $ - - - $ 2,278 |
Schedule of Reconciliation of Fair Value of Asset Liabilities Measured Recurring Basis | A rollforward of the level 3 valuation of these three financial instruments is as follows: Stock Appreciation Rights Plan A Equity Credits Issued Balance at December 31, 2017 $ - $ 2,278 Change in fair value included in net loss - (2,278 ) Balance at March 31, 2018 $ - $ - |
Schedule of Inventory | Inventory is stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method. At March 31, 2018 and December 31, 2017, inventory consisted of the following: March 31, 2018 December 31, 2017 Raw materials $ 836,594 $ 595,747 Work in process 54,546 - Finished goods 389,091 388,060 1,280,231 983,807 Less: reserve for obsolescence (259,595 ) (249,828 ) Inventory, net $ 1,020,636 $ 733,979 |
Schedule of Anti-dilutive Per Share Information | Potentially dilutive common shares were excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following: March 31, 2018 December 31, 2017 Stock options 18,726 19,120 Stock warrants 712 712 Restricted Stock 37,778 37,778 Total 57,216 57,610 |
Schedule of Reconciliation of Basic and Diluted Net Income Loss | Net loss per share for each class of common stock is as follows: Net (loss) income per common shares outstanding: Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 Class A common stock $ (0.01 ) $ (0.03 ) Class B common stock $ (0.01 ) $ (0.03 ) Class Z common stock $ - $ (0.03 ) Weighted average shares outstanding: Class A common stock 1,654,852 1,368,927 Class B common stock 1,426,503 1,403,101 Class Z common stock - 262,631 Total weighted average shares outstanding 3,081,355 3,034,659 |
Notes Payable (Tables)
Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Future Payments of Notes Payable | Future principal payments of notes payable are as follows: Year As of March 31, 2018 As of December 31, 2017 2018 $ 78,467 $ 96,533 2019 74,380 74,380 2020 51,540 51,540 2021 - - 2022 - - Thereafter 54,882 54,883 Total $ 259,270 $ 277,336 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Schedule of Stock Option Plan Activity | Stock options outstanding are to purchase Class A common stock. Stock option activities for the three months ended March 31, 2018 are summarized as follows: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding December 31, 2017 19,120 $ 29.38 3.21 Exercised - Expired (394 ) Outstanding March 31, 2018 18,726 $ 29.09 3.03 $ - Exercisable March 31, 2018 8,726 $ 59.21 2.69 $ - |
Concentrations (Tables)
Concentrations (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Schedule of Concentration Risk, Customer | Customer concentrations for the three months ended March 31, 2018 and 2017 are as follows: Revenues For the Three Months Ended March 31, 2018 2017 Customer A 30 % 34 % Customer B 15 % 13 % Total 45 % 47 % Accounts Receivable As of March 31, As of December 31, 2018 2017 Customer A 38 % 30 % Customer B 23 % 21 % Total 61 % 51 % *Less than 10% |
Vendor Concentrations [Member] | |
Schedule of Concentration Risk, Customer | Vendor concentrations for inventory purchases for the three months ended March 31, 2018 and 2017 are: For the Three Months Ended March 31, 2018 2017 Vendor A 23 % 33 % Vendor B 19 % 13 % Vendor C 15 % 13 % Vendor D 10 % * % Total 67 % 59 % *Less than 10% |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Information Available with Respect to Reportable Business Segments | Segment information available with respect to these reportable business segments for the three months ended March 31, 2018 and 2017 was as follows: Three Months Ended March 31, 2018 2017 Revenues: Product segment $ 1,142,575 $ 1,996,489 Contract services segment 300,950 219,861 Total segment and consolidated revenues $ 1,443,525 $ 2,216,350 Cost of revenues: Products $ 804,687 $ 1,035,835 Contract services segment 301,572 247,198 Total segment and consolidated cost of revenues $ 1,106,259 $ 1,283,033 Gross profit (loss): Product segment $ 337,888 $ 960,654 Contract services segment (622 ) (27,337 ) Total segment and consolidated gross profit $ 337,266 $ 933,317 Gross margin: Product segment 29.6 % 48.1 % Contract services segment -0.2 % -12.4 % Total gross margin 23.4 % 42.1 % Segment operating expenses: Product segment 321,154 561,306 Contract services segment 39,399 51,777 Total segment operating expenses 360,552 613,083 Income (loss) from operations: Product segment $ 16,734 $ 399,348 Contract services segment (40,021 ) (79,114 ) Total segment income (loss) (23,286 ) 320,234 Unallocated costs (173,108 ) (250,820 ) Total consolidated loss from operations $ (196,394 ) $ 69,414 Depreciation and amortization: Product segment $ 16,272 $ 32,733 Contract services segment - 5,081 Total segment depreciation and amortization 16,272 37,814 Unallocated depreciation - - Total consolidated depreciation and amortization $ 16,272 $ 37,814 Capital additions: Product segment $ - $ - Contract services segment - - Total segment capital additions - - Unallocated capital additions - - Total consolidated capital additions $ - $ - March 31, 2018 March 31, 2017 Segment total assets: Product segment $ 2,621,031 $ 2,892,214 Contract services segment 202,264 132,598 Corporate 29,975 85,816 Total consolidated total assets $ 2,849,270 $ 3,110,628 |
Organization and Basis of Pre_2
Organization and Basis of Presentation (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||||
Net loss | $ (20,518) | $ 94,412 | $ 687,068 | $ (556,001) |
Accumulated deficit | (6,607,755) | (6,587,237) | ||
Stockholders' deficit | (1,097,780) | $ (1,096,005) | ||
Working capital deficit | $ 1,342,995 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2017 | |
Sales incentives and cooperative advertising reduction of sales | $ 21,041 | $ 38,618 | ||
Research and development expense | 8,193 | $ 68,722 | ||
Advertising expense | $ 405 | 5,028 | ||
Corporate income tax rate | 21.00% | |||
Contingently issuable common stock shares | 37,778 | 37,778 | ||
Shipping and Handling [Member] | ||||
Shipping and handling costs | $ 33,325 | $ 44,557 | ||
Minimum [Member] | ||||
Estimated useful lives for property and equipment | 3 years | |||
Maximum [Member] | ||||
Estimated useful lives for property and equipment | 10 years |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Reconciliation of Fair Value of Level 3 Valuation of Financial Instruments (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Level 1 [Member] | ||
Stock Appreciation Rights Plan A | ||
Equity Credits Issued | ||
Level 2 [Member] | ||
Stock Appreciation Rights Plan A | ||
Equity Credits Issued | ||
Level 3 [Member] | ||
Stock Appreciation Rights Plan A | ||
Equity Credits Issued | $ 2,278 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Schedule of Reconciliation of Fair Value of Asset Liabilities Measured Recurring Basis (Details) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Stock Appreciation Rights Plan A [Member] | |
Balance | |
Change in fair value included in net loss | |
Balance | |
Equity Credits Issued [Member] | |
Balance | 2,278 |
Change in fair value included in net loss | (2,278) |
Balance |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Schedule of Inventory (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Accounting Policies [Abstract] | ||
Raw materials | $ 836,594 | $ 595,747 |
Work in process | 54,546 | |
Finished goods | 389,091 | 388,060 |
Inventory, gross | 1,280,231 | 983,807 |
Less: reserve for obsolescence | (259,595) | (249,828) |
Inventory, net | $ 1,020,636 | $ 733,979 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Schedule of Anti-dilutive Per Share Information (Details) - shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Total stock options | 57,216 | 57,610 |
Restricted Stock [Member] | ||
Total stock options | 37,778 | 37,778 |
Stock Options [Member] | ||
Total stock options | 18,726 | 19,120 |
Stock Warrants [Member] | ||
Total stock options | 712 | 712 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Schedule of Reconciliation of Basic and Diluted Net Income Loss (Details) - $ / shares | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Total weighted average shares outstanding | 3,081,355 | 3,034,659 |
Class A Common Stock [Member] | ||
Net (loss) income per common shares outstanding | $ (0.01) | $ (0.03) |
Total weighted average shares outstanding | 1,654,852 | 1,368,927 |
Class B Common Stock [Member] | ||
Net (loss) income per common shares outstanding | $ (0.01) | $ (0.03) |
Total weighted average shares outstanding | 1,426,503 | 1,403,101 |
Class Z Common Stock [Member] | ||
Net (loss) income per common shares outstanding | $ (0.03) | |
Total weighted average shares outstanding | 262,631 |
Bank Loans and Lines of Revol_2
Bank Loans and Lines of Revolving Credit Facility (Details Narrative) - USD ($) | Oct. 17, 2017 | Apr. 03, 2017 | Oct. 31, 2015 | May 01, 2015 | Apr. 30, 2014 | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 30, 2018 | Mar. 31, 2017 |
Revolving credit facility | $ 1,114,247 | $ 563,218 | |||||||
Line of credit balance outstanding | 1,114,247 | 563,218 | |||||||
Accrued interest | $ 6,130 | $ 14,797 | |||||||
Long term debt weighted average interest rate | 7.53% | 6.80% | |||||||
PEN Brands LLC [Member] | |||||||||
Percentage of effective interest rate | 3.00% | ||||||||
Debt maturity date | Apr. 4, 2018 | ||||||||
Asset Purchase Agreement [Member] | Revolving Note [Member] | |||||||||
Proceeds from debt | $ 85,000 | ||||||||
Asset Purchase Agreement [Member] | Revolving Note [Member] | Minimum [Member] | |||||||||
Cash collateral account | 85,000 | ||||||||
Loan Agreement [Member] | Two Directors [Member] | |||||||||
Principal amount | $ 85,000 | ||||||||
Amendment to Loan and Security Agreement [Member] | Maximum [Member] | |||||||||
Borrower to request up to three advances | $ 200,000 | ||||||||
Fifth Amendment [Member] | August 8, 2018 [Member] | |||||||||
Monthly reduction in advances based on eligible inventory | $ 7,500 | ||||||||
Mackinac Commercial Credit, LLC [Member] | Loan and Security Agreement [Member] | |||||||||
Debt maturity date | Apr. 4, 2016 | ||||||||
Increase in borrowing base amount | $ 450,000 | ||||||||
Borrowing periodic payment | $ 7,500 | ||||||||
Revolving Credit Line Agreement [Member] | Maximum [Member] | |||||||||
Available borrowing capacity | $ 385,753 | ||||||||
Revolving Credit Line Agreement [Member] | Mackinac Commercial Credit, LLC [Member] | |||||||||
Revolving credit facility | $ 1,500,000 | ||||||||
Percentage of effective interest rate | 7.00% | ||||||||
Percentage of late charge of any monthly payment not received | 5.00% | ||||||||
Percentage of termination premium equal to maximum loan amount | 2.00% |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | May 31, 2016 | Feb. 10, 2015 | Jan. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Nov. 30, 2015 | Jun. 30, 2015 |
Current portion of notes payable | $ 90,864 | $ 96,533 | ||||||
Notes payable, net of current portion | 168,406 | 180,803 | ||||||
Reclassification of accrued salary to notes payable - long-term | $ 17,425 | |||||||
Departing Employee [Member] | ||||||||
Proceeds from notes payable | $ 17,425 | |||||||
Debt instruments interest rate | 0.00% | |||||||
Debt maturity year | due in January 2027 | |||||||
Equipment Note [Member] | ||||||||
Current portion of notes payable | 68,182 | |||||||
Notes payable, net of current portion | 99,174 | |||||||
Promissory Note [Member] | Former Research Partner [Member] | ||||||||
Debt instruments interest rate | 5.00% | |||||||
Principal amount | $ 51,239 | |||||||
Current portion of notes payable | $ 22,682 | 28,351 | ||||||
Debt principal and interest payable amount | $ 2,000 | |||||||
Debt Instrument, Payment Terms | Installment payments include both principal and interest. After an initial payment of $2,000, the note requires payments of $1,000 for eleven months, payments of $2,000 for the following 12 months and monthly payments of $3,000 thereafter until paid in full. | |||||||
Promissory Note [Member] | Former Research Partner [Member] | Eleven Months Payment [Member] | ||||||||
Debt principal and interest payable amount | $ 1,000 | |||||||
Promissory Note [Member] | Former Research Partner [Member] | Twelve Months Payment [Member] | ||||||||
Debt principal and interest payable amount | 2,000 | |||||||
Promissory Note [Member] | Former Research Partner [Member] | Installment Thereafter [Member] | ||||||||
Debt principal and interest payable amount | $ 3,000 | |||||||
Nanofilm Ltd [Member] | Equipment Note [Member] | ||||||||
Proceeds from notes payable | $ 373,000 | |||||||
Advances not to exceed | $ 373,000 | |||||||
Debt installments equal monthly payments | Equipment Note is payable in 60 equal monthly installments payments | |||||||
Debt installments payments ending date | Jun. 10, 2020 | |||||||
Debt instruments interest rate | 4.35% | |||||||
Principal amount | $ 179,399 | |||||||
Four Employees [Member] | June and November 2015 [Member] | Three Promissory Note [Member] | ||||||||
Debt maturity year | 2025 | |||||||
Debt principal and interest payable amount | $ 40,565 | |||||||
Four Employees [Member] | Four Promissory Note Agreements [Member] | ||||||||
Accrued and unpaid deferred salary | $ 51,808 | $ 51,808 | ||||||
Four Employees [Member] | Four Promissory Note Agreements [Member] | June and November 2015 [Member] | Minimum [Member] | ||||||||
Debt instruments interest rate | 3.00% | |||||||
Four Employees [Member] | One Promissory Note Agreements [Member] | June and November 2015 [Member] | ||||||||
Debt maturity year | 2020 | |||||||
Debt principal and interest payable amount | $ 15,578 | |||||||
Reclassification of accrued salary to notes payable - long-term | $ 51,808 |
Notes Payable - Schedule of Fut
Notes Payable - Schedule of Future Payments of Notes Payable (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Debt Disclosure [Abstract] | ||
2018 | $ 78,467 | $ 96,533 |
2019 | 74,380 | 74,380 |
2020 | 51,540 | 51,540 |
2021 | ||
2022 | ||
Thereafter | 54,882 | 54,883 |
Future payments of notes payable Total | $ 259,270 | $ 277,336 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Sales to the related party | $ 0 | $ 53,314 | |
Accounts receivable - related party | 0 | $ 14,226 | |
Fees and expenses to board member | 0 | $ 13,195 | |
Payment to related party | 140,000 | $ 115,000 | |
Director [Member] | |||
Payment to related party | 1,000 | ||
Executives [Member] | |||
Payment to related party | 159,887 | ||
Accrued payroll | $ 323,868 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | Feb. 28, 2018 | May 23, 2017 | Dec. 11, 2015 | Aug. 27, 2014 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Jan. 26, 2016 |
Reverse stock split | ratio of 1-for-180 | |||||||
Common stock, par value | $ 0.0001 | |||||||
Common stock description | On January 26, 2016, each one hundred eighty (180) shares of the Company's (i) Class A Common Stock ("Class A common stock"), (iii) Class B Common Stock and (iii) Class Z Common Stock, then issued and outstanding were automatically combined into one (1) validly issued, fully paid and non-assessable share of Class A Common Stock, Class B Common Stock and Class Z Common Stock, respectively, without any further action by the Company or the holder. | |||||||
Excess stock shares authorized | 10,000,000 | |||||||
Preferred stock, shares authorized | 20,000,000 | 20,000,000 | 20,000,000 | |||||
Preferred stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||
Common stock conversion basis description | The rights of each share of Class A common stock, each share of Class B common stock and each share of Class Z common stock are the same with respect to dividends, distributions and rights upon liquidation. | |||||||
Share based compensation amount | $ 0 | $ 41,310 | ||||||
Dr Zvi Yaniv [Member] | ||||||||
Number of restricted shares issued | 37,778 | |||||||
Shares granted price per share | $ 13.12 | |||||||
Expected vested exercise price description | All these shares become vested and not subject to forfeiture on the earlier of a change of control of the Company, Dr. Yaniv's death, or if more than 180 days after closing, the average trading price of the shares during a measurement period of ten consecutive trading days reaches certain price thresholds. At an $18.00 price, 5,554 shares vest, with additional tranches of 5,556 shares vesting if the price reaches $27.00, $36.00, $45.00 and $54.00. The last 10,000 shares vest at a $63.00 price threshold. | |||||||
Shares vesting period | 5 years | |||||||
Fair value of shares recognized | $ 495,720 | |||||||
Stock option services period | 3 years | |||||||
Chief Executive Officer [Member] | ||||||||
Number of shares sold, value | $ 100,000 | |||||||
Number of shares sold, shares | 262,631 | |||||||
Class A Common Stock [Member] | ||||||||
Common stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||
Common stock, shares authorized | 7,200,000 | 7,200,000 | 7,200,000 | |||||
Common stock voting rights | Holders of the Class A common stock are entitled to one vote per share in the election of directors and other matters submitted to a vote of the stockholders. | |||||||
Number of shares converted | 262,631 | |||||||
Class A Common Stock [Member] | Directors [Member] | ||||||||
Number of stock shares issued for service | 4,443 | |||||||
Class B Common Stock [Member] | ||||||||
Common stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||
Common stock, shares authorized | 2,500,000 | 2,500,000 | 2,500,000 | |||||
Common stock conversion basis description | Shares of Class B common stock can be converted, one-for-one, into shares of Class A common stock at any time at the option of the holder. | |||||||
Common stock voting rights | Holders of PEN Class B common stock are entitled to 100 votes per share in the election of directors and other matters submitted to a vote of the stockholders. | |||||||
Class B Common Stock [Member] | Directors [Member] | ||||||||
Number of stock shares issued for service | 2,962 | |||||||
Number of common stock issued during period, shares | 6,746 | |||||||
Class Z Common Stock [Member] | ||||||||
Common stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||
Common stock, shares authorized | 300,000 | 300,000 | 300,000 | |||||
Class Z Common Stock [Member] | ||||||||
Common stock conversion basis description | Conversion Rights. Shares of Class Z common stock can be converted, one-for-one, into shares of Class A common stock at any time at the option of the holder. | |||||||
Common stock voting rights | Holders of PEN Class Z common stock do not vote in the election of directors or otherwise, but they do have the right to designate a director to the PEN Board, have anti-dilution rights described below and have consent rights with respect to certain amendments to PEN's certificate of incorporation. | |||||||
Number of shares converted | 262,631 | |||||||
Class A And B Common Stock [Member] | Directors [Member] | ||||||||
Shares issued price per share | $ 1.35 | |||||||
Number of stock shares issued for service, value | $ 10,000 |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of Stock Option Plan Activity (Details) - Stock Option [Member] | 3 Months Ended |
Mar. 31, 2018USD ($)$ / sharesshares | |
Number of Options Outstanding, Beginning balance | shares | 19,120 |
Number of Options, Exercised | shares | |
Number of Options, Expired | shares | (394) |
Number of Options, Outstanding, Ending balance | shares | 18,726 |
Number of Options, Exercisable Ending balance | shares | 8,726 |
Weighted-Average Exercise Price, Outstanding, Beginning balance | $ / shares | $ 29.38 |
Weighted-Average Exercise Price, Exercised | $ / shares | |
Weighted-Average Exercise Price, Expired | $ / shares | |
Weighted-Average Exercise Price, Outstanding, Ending balance | $ / shares | 29.09 |
Weighted-Average Exercise Price, Exercisable Ending balance | $ / shares | $ 59.21 |
Weighted-Average Remaining Contractual Terms (Years), Outstanding beginning | 3 years 2 months 16 days |
Weighted-Average Remaining Contractual Terms (Years), Outstanding ending | 3 years 11 days |
Weighted-Average Remaining Contractual Terms (Years), Exercisable | 2 years 8 months 9 days |
Aggregate Intrinsic Value, Share Outstanding | $ | |
Aggregate Intrinsic Value, Share Exercisable | $ |
Concentrations (Details Narrati
Concentrations (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Percentage of sales | 10.00% | 10.00% |
United States [Member] | Sales Revenue, Net [Member] | ||
Percentage of sales | 96.00% | 82.00% |
Other Geographical Area [Member] | Sales Revenue, Net [Member] | Minimum [Member] | ||
Percentage of sales | 10.00% | 10.00% |
One Lender [Member] | ||
Revolving note value | $ 1,500,000 |
Concentrations - Schedule of Co
Concentrations - Schedule of Concentration Risk, Customer (Details) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | ||
Percentage of revenues | 10.00% | 10.00% | ||
Vendor Concentrations [Member] | ||||
Percentage of revenues | 67.00% | 59.00% | ||
Revenues [Member] | ||||
Percentage of revenues | 45.00% | 47.00% | ||
Accounts Receivable [Member] | ||||
Percentage of revenues | 61.00% | 51.00% | ||
Customer A [Member] | Revenues [Member] | ||||
Percentage of revenues | 30.00% | 34.00% | ||
Customer A [Member] | Accounts Receivable [Member] | ||||
Percentage of revenues | 38.00% | 30.00% | ||
Customer B [Member] | Revenues [Member] | ||||
Percentage of revenues | 15.00% | 13.00% | ||
Customer B [Member] | Accounts Receivable [Member] | ||||
Percentage of revenues | 23.00% | 21.00% | ||
Vendor A [Member] | Vendor Concentrations [Member] | ||||
Percentage of revenues | 23.00% | 33.00% | ||
Vendor B [Member] | Vendor Concentrations [Member] | ||||
Percentage of revenues | 19.00% | 13.00% | ||
Vendor C [Member] | Vendor Concentrations [Member] | ||||
Percentage of revenues | 15.00% | 13.00% | ||
Vendor D [Member] | Vendor Concentrations [Member] | ||||
Percentage of revenues | 10.00% | 0.00% | [1] | |
[1] | Less than 10% |
Concentrations - Schedule of _2
Concentrations - Schedule of Concentration Risk, Customer (Details) (Parenthetical) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Risks and Uncertainties [Abstract] | ||
Concentration risk, percentage | 10.00% | 10.00% |
Equity Credits (Details Narrati
Equity Credits (Details Narrative) - Class B Common Stock [Member] - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Number of equity credits shares issued and outstanding | 6,746 | |
Accrued expenses | $ 0 | $ 2,278 |
October 16, 2018 [Member] | ||
Number of equity credits shares issued and outstanding | 1,774 |
Stock Appreciation Plan (Detail
Stock Appreciation Plan (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Vested stock outstanding | 235,782 | 235,782 |
Accrued redemption value associated with stock appreciation rights amount | $ 54,538 | $ 54,538 |
Stock Appreciation Rights (SARs) [Member] | ||
Maximum number of stock appreciation granted by board | 1,000,000 | |
Percentage of redemption value to purchase common shares | 70.00% | |
Percentage of remaining distributed in cash to participant | 30.00% |
Segment Reporting (Details Narr
Segment Reporting (Details Narrative) - ReportableSegments | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Segment Reporting [Abstract] | ||
Number of reportable segments | 2 | 2 |
Segment Reporting - Segment Inf
Segment Reporting - Segment Information Available with Respect to Reportable Business Segments (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Total segment and consolidated revenues | $ 1,443,525 | $ 2,216,350 | |
Total segment and consolidated gross profit (loss) | 337,266 | 933,317 | |
Total segment operating expenses | 533,660 | 863,903 | |
Total consolidated loss from operations | (196,394) | 69,414 | |
Total consolidated total assets | 372,505 | $ 388,777 | |
Product Segment [Member] | |||
Total segment and consolidated revenues | 1,142,575 | 1,996,489 | |
Total segment and consolidated cost of revenues | 804,687 | 1,035,835 | |
Total segment and consolidated gross profit (loss) | $ 337,888 | $ 960,654 | |
Total segment and consolidated gross margin | 29.60% | 48.10% | |
Total segment operating expenses | $ 321,154 | $ 561,306 | |
Total segment income (loss) | 16,734 | 399,348 | |
Total segment depreciation and amortization | 16,272 | 32,733 | |
Total segment capital additions | |||
Total consolidated total assets | 2,621,031 | 2,892,214 | |
Contract Services Segment [Member] | |||
Total segment and consolidated revenues | 300,950 | 219,861 | |
Total segment and consolidated cost of revenues | 301,572 | 247,198 | |
Total segment and consolidated gross profit (loss) | $ (622) | $ (27,337) | |
Total segment and consolidated gross margin | (0.20%) | (12.40%) | |
Total segment operating expenses | $ 39,399 | $ 51,777 | |
Total segment income (loss) | (40,021) | (79,114) | |
Total segment depreciation and amortization | 5,081 | ||
Total segment capital additions | |||
Total consolidated total assets | 202,264 | 132,598 | |
Total Segment [Member] | |||
Total segment and consolidated revenues | 1,443,525 | 2,216,350 | |
Total segment and consolidated cost of revenues | 1,106,259 | 1,283,033 | |
Total segment and consolidated gross profit (loss) | $ 337,266 | $ 933,317 | |
Total segment and consolidated gross margin | 23.40% | 42.10% | |
Total segment operating expenses | $ 360,552 | $ 613,083 | |
Total segment income (loss) | (23,286) | 320,234 | |
Unallocated cost | (173,108) | (250,820) | |
Total consolidated loss from operations | (196,394) | 69,414 | |
Total segment depreciation and amortization | 16,272 | 37,814 | |
Unallocated depreciation | |||
Total consolidated depreciation and amortization | 16,272 | 37,814 | |
Total segment capital additions | |||
Unallocated capital additions | |||
Total consolidated capital additions | |||
Total consolidated total assets | 2,849,270 | 3,110,628 | |
Corporate [Member] | |||
Total consolidated total assets | $ 29,975 | $ 85,816 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | May 10, 2019USD ($)$ / sharesshares | Apr. 24, 2019USD ($)$ / sharesshares | Apr. 03, 2019USD ($)$ / sharesshares | Mar. 22, 2019USD ($)$ / sharesshares | Jan. 31, 2019USD ($)$ / sharesshares | Dec. 13, 2018USD ($) | Dec. 10, 2018USD ($)ft² | Dec. 05, 2018USD ($)$ / sharesshares | Oct. 15, 2018USD ($)$ / sharesshares | Feb. 28, 2018shares | Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($) |
Common stock conversion basis, description | The rights of each share of Class A common stock, each share of Class B common stock and each share of Class Z common stock are the same with respect to dividends, distributions and rights upon liquidation. | ||||||||||||
Accrued amount related to settlement | $ | $ 80,000 | ||||||||||||
Concentration risk, percentage | 10.00% | 10.00% | |||||||||||
Repayment of credit | $ | $ 606,571 | $ 1,787,864 | |||||||||||
Two Customers [Member] | Sales Revenue, Net [Member] | |||||||||||||
Concentration risk, percentage | 45.00% | 39.00% | |||||||||||
Class A Common Stock [Member] | Directors [Member] | |||||||||||||
Number of shares issued for services | shares | 4,443 | ||||||||||||
Subsequent Event [Member] | |||||||||||||
Warrants description | warrants issued to that investor result in proceeds to us of $1 million or more | ||||||||||||
Proceeds from issuance of warrants | $ | $ 1,000,000 | ||||||||||||
Litigation settlement amount | $ | $ 24,000 | ||||||||||||
Operating lease, term | 5 years | ||||||||||||
Total square feet of office space | ft² | 3,742 | ||||||||||||
Lease expiration start date | Jan. 31, 2019 | ||||||||||||
Lease expiration end date | Feb. 29, 2024 | ||||||||||||
Monthly lease payments | $ | $ 3,472 | ||||||||||||
Lease increase in percentage per year for monthly payments | 3.00% | ||||||||||||
Total term of lease | $ | $ 238,440 | ||||||||||||
Subsequent Event [Member] | One Investor [Member] | Warrant [Member] | |||||||||||||
Warrants issued to purchase the additional shares | shares | 523,266 | 325,581 | 325,581 | ||||||||||
Warrant exercise price | $ / shares | $ 1.50 | $ 1.50 | $ 1.50 | ||||||||||
Warrant term | 45 days | 45 days | 45 days | ||||||||||
Percentage of exercise price of options | 120.00% | 120.00% | 120.00% | ||||||||||
Exercise of options, description | (1) 45 days after the day that PEN shares have been trading at or above 120% of the exercise price for a period of 90 days, or (2) four years from date of issue. | (1) 45 days after the day that PEN shares have been trading at or above 120% of the exercise price for a period of 90 days, or (2) four years from date of issue. | (1) 45 days after the day that PEN shares have been trading at or above 120% of the exercise price for a period of 90 days, or (2) four years from date of issue. | ||||||||||
Aggregate proceeds from sale of options | $ | $ 15,698 | $ 6,977 | $ 9,767 | ||||||||||
Subsequent Event [Member] | MBank [Member] | Revolving Credit Line Agreement [Member] | |||||||||||||
Repayment of credit | $ | 172,101 | ||||||||||||
Repayment of cash collateral including outstanding balances | $ | $ 85,000 | ||||||||||||
Subsequent Event [Member] | Option Two [Member] | One Investor [Member] | Warrant [Member] | |||||||||||||
Warrant term | 4 years | 4 years | 4 years | ||||||||||
Subsequent Event [Member] | Warrant Options [Member] | |||||||||||||
Exercise price of option | $ / shares | $ 0.03 | ||||||||||||
Warrant exercise price | $ / shares | $ 2 | ||||||||||||
Warrant term | 45 days | ||||||||||||
Percentage of exercise price of options | 120.00% | ||||||||||||
Exercise of options, description | (1) 45 days after the day that Class A shares have been trading at or above 120% of the exercise price for a period of 90 days, or (2) four years from date of issue | ||||||||||||
Subsequent Event [Member] | Warrant Options Two [Member] | |||||||||||||
Warrant term | 90 days | ||||||||||||
Subsequent Event [Member] | Stock Options, Warrants and Warrant Options [Member] | |||||||||||||
Aggregate proceeds from sale of options | $ | $ 49,576 | ||||||||||||
Subsequent Event [Member] | Right to Purchase [Member] | |||||||||||||
Number of shares, vested | shares | 50,000 | ||||||||||||
Vesting period, term | 5 years | ||||||||||||
Subsequent Event [Member] | Right to Purchase [Member] | December 31, 2019 [Member] | |||||||||||||
Number of shares, vested | shares | 75,000 | ||||||||||||
Subsequent Event [Member] | Right to Purchase [Member] | June 30, 2020 [Member] | |||||||||||||
Number of shares, vested | shares | 100,000 | ||||||||||||
Subsequent Event [Member] | Right to Purchase [Member] | December 31, 2020 [Member] | |||||||||||||
Number of shares, vested | shares | 125,000 | ||||||||||||
Subsequent Event [Member] | Right to Purchase [Member] | Bonus Program in 2019 or 2020 [Member] | |||||||||||||
Number of shares, vested | shares | 100,000 | ||||||||||||
Subsequent Event [Member] | Class A Common Stock [Member] | |||||||||||||
Number of stock options exercised | shares | 550,847 | ||||||||||||
Exercise price of option | $ / shares | $ 1 | ||||||||||||
Expiration date for exercise of options | Jun. 30, 2019 | ||||||||||||
Warrants issued to purchase the additional shares | shares | 550,847 | ||||||||||||
Warrant exercise price | $ / shares | $ 1.50 | ||||||||||||
Warrant term | 45 days | ||||||||||||
Percentage of exercise price of options | 120.00% | ||||||||||||
Exercise of options, description | (1) 45 days after the day that our Class A common stock has been trading at or above 120% of the exercise price for a period of 90 days, or (2) four years from date of issue. | ||||||||||||
Stock issued on conversion of securities | shares | 1,436,052 | ||||||||||||
Common stock conversion basis, description | On or about October 15, 2018 we also issued 1,436,052 shares of Class A common stock when all the holders of the outstanding Class B common stock exercised their right to convert Class B shares into Class A shares on a 1:1 basis. | ||||||||||||
Registration rights, description | On October 15, 2018, we also entered into an agreement that granted to PEN Comeback one demand registration right that is exercisable if certain warrants issued to that investor result in proceeds to us of $1 million or more. | ||||||||||||
Subsequent Event [Member] | Class A Common Stock [Member] | Jeanne Rickert [Member] | |||||||||||||
Accrued salary per month for 2018 and 2019 | $ | $ 1,000 | ||||||||||||
Subsequent Event [Member] | Class A Common Stock [Member] | Directors [Member] | |||||||||||||
Shares price per share | $ / shares | $ 0.60 | $ 0.40 | |||||||||||
Number of shares issued, value | $ | $ 12,000 | ||||||||||||
Number of shares issued for services | shares | 19,998 | 30,000 | |||||||||||
Number of shares issued for services, value | $ | $ 12,000 | ||||||||||||
Subsequent Event [Member] | Class A Common Stock [Member] | Five Directors [Member] | |||||||||||||
Shares price per share | $ / shares | $ 0.55 | ||||||||||||
Number of shares issued for services | shares | 18,180 | ||||||||||||
Number of shares issued for services, value | $ | $ 10,000 | ||||||||||||
Subsequent Event [Member] | Class A Common Stock [Member] | Option Two [Member] | |||||||||||||
Warrant term | 90 days | ||||||||||||
Subsequent Event [Member] | Class A Common Stock [Member] | Option to Purchase [Member] | President [Member] | |||||||||||||
Shares price per share | $ / shares | $ 0.55 | ||||||||||||
Number of shares issued for services | shares | 550,000 | ||||||||||||
Subsequent Event [Member] | Private Placement [Member] | Class A Common Stock [Member] | |||||||||||||
Number of shares issued | shares | 523,266 | 232,558 | 325,581 | 590,847 | |||||||||
Shares price per share | $ / shares | $ 0.40 | $ 0.40 | $ 0.40 | $ 0.50 | |||||||||
Number of shares issued, value | $ | $ 209,302 | $ 93,023 | $ 130,232 | $ 295,423 | |||||||||
Ownership description | Ronald Berman, one of our directors, and his son, Tom Berman have reported that they each have 50% control of PEN Comeback. | ||||||||||||
Subsequent Event [Member] | Private Placement [Member] | Class A Common Stock [Member] | Directors [Member] | |||||||||||||
Shares price per share | $ / shares | $ 0.50 | ||||||||||||
Number of shares issued for services | shares | 20,000 | ||||||||||||
Number of shares issued for services, value | $ | $ 10,000 | ||||||||||||
Shares issued for retirement of outstanding equity credits | shares | 1,774 |