KING OF PRUSSIA, Pa., Nov. 13, 2020 (GLOBE NEWSWIRE) -- Nocopi Technologies, Inc. (OTC Pink: NNUP), a developer of specialty reactive inks used in entertainment, toy and educational products as well as in document and product authentication technologies to combat fraud, today announced results for its third quarter ended September 30, 2020 (Q3’20). Nocopi’s SEC filings are available here, https://bit.ly/35gTldx

Nocopi Chairman and CEO Michael Feinstein, commented, “Nocopi achieved another quarter of double digit revenue growth driven principally by growing demand for our specialty ink technologies used in toy and entertainment products. Specialty ink sales reached the second highest level in recent periods during the third quarter as our entertainment customers ramped production activity in anticipation of the holiday selling season. We are optimistic that this expanded production activity will support strong holiday sales levels that would contribute to future royalty income for Nocopi. That leading indicator combined with recent team efforts on new products which are variants of our ink technology plus expanded distribution channels led by existing partners sets Nocopi up for success in the next year.”

“COVID-related factors continued to negatively impact overall consumer spending at physical stores during the third quarter, however this trend was offset somewhat by solid increases in online sales activity. The net effect was a lower level of product sell-through that caused a lower level of revenues from licenses, royalties and fees in Q3’20 versus the year ago period.

“Similarly, we continued to experience weakness in our smaller anticounterfeiting and anti-product diversion applications for our specialty ink technologies, principally due to COVID-19-related plant closures and budget and procurement freezes. We are optimistic that these markets will return to more normal levels of activity as we progress into FY 2021.

“Nocopi’s Q3’20 cash collections were strong, with the company closing the quarter with $2.5M in working capital, including $1.4M of cash and $1.0M in accounts receivable. This compares favorably with Q4’19 working capital of $1.8M, including $0.7M of cash, and $1.4M of accounts receivable and Q2’20 working capital of $2.1M, including $1.1M in cash and $1.1M in accounts receivable. Our financial position puts Nocopi in a very strong position to manage our business over the foreseeable future and the ability to weather future unforeseen circumstances whether those be unique to COVID-19 or other economic factors. Given that access to capital is both challenging and expensive for microcap companies, we feel it is essential that we proceed carefully in developing a prudent capital allocation strategy.”

Q3 Highlights

  • Revenues rose 18% to $755,000, driven by a 34% increase in specialty ink product sales.
  • Revenue from licenses, royalties and fees declined 19% to $153,300, and were pressured by a slight decrease in earned royalties from our major licensees in the entertainment and toy industries compared to Q3 ‘19 due to the closure of some retail locations where their products are sold.
  • Gross profit of $425,500 was relatively unchanged though gross margin declined to 56% from 67% compared to Q3 ’19 on increased product and shipping costs and a lower percentage of higher-margin royalty income within Nocopi’s revenue mix.
  • Net income decreased to $163,100 from $206,800 in Q3’19, due to higher salary and consulting expenses and lower gross margin.
  • Working capital, including $1.5M of cash, increased to $2.5M at 9/30/20 compared to working capital of $1.8M at year-end 2019.
  • Book value increased to $3.2M at 9/30/20 compared to $2.8M at year-end 2019.

Q3’20 Results
Q3’20 revenues rose 18% to $754,800 reflecting a 34% increase in product and other sales, principally due to higher specialty ink shipments to the entertainment and toy product market, offset by a 19% decline in licenses, royalties and fees, due primarily to the Covid-19 related reduction in sell-through of entertainment products using Nocopi technologies as well as temporary disruptions of customer activity in security applications also resulting from the pandemic. Royalty revenue in the Q3’20 and Q3’19 periods do not reflect the receipt of quarterly guaranteed royalty payments of $100,000 received by Nocopi pursuant to a four-year license extension that went into effect July 1, 2019. The payments are reflected in the Company’s balance sheet and statement of cash flows but are not recorded as revenue.

Gross profit decreased to $425,500, or 56% of revenues in Q3’20, from $429,500, or 67% of revenues in Q3 ’19, principally due to higher raw material costs and shipping expense related to the COVID-19 pandemic, as well as a smaller relative contribution from higher-margin royalty revenue. However, the Company’s gross margin improved sequentially to 56% in Q3 ’20 compared to 51% in Q2 ’20 due to a change in the mix toward higher margin products in the quarter.

Q3’20 operating expenses increased to $255,400 from $210,400 in Q3’19, reflecting increased operational and administrative expense including higher salaries and professional fees. In late 2019, Nocopi expanded its ink production operations and staffing to support expected future growth.

Reflecting lower gross profit and higher operating expenses Nocopi’s net income declined to $163,100, or $0.002 per diluted share, in Q3’20, compared to $206,800, or $0.003 per diluted share, in Q3’19.

Nocopi’s cash flow from operations increased to $768,500 in the first nine months of 2020 compared to $399,400 in the year-ago period.

About Nocopi Technologies (www.nocopi.com)
Nocopi develops and markets specialty reactive inks for unique, mess-free applications in the entertainment, toy and educational product markets. Nocopi also develops and markets document and product authentication technologies designed to combat fraudulent document reproduction, product counterfeiting and/or unauthorized product diversion. Nocopi derives revenue from technology licensing agreements as well as from the sale of its proprietary inks and other products to licensees and/or their licensed printers. Nocopi’s products and systems include trade secrets as well as patented technologies.

Safe Harbor for Forward-Looking Statements
This release may contain projections and other "forward-looking statements" relating to Nocopi’s business, that are often identified by the use of "believes," "expects" or similar expressions. Forward-looking statements involve a number of estimates, assumptions, risks and uncertainties that may cause actual results to differ materially from those anticipated. Forward-looking statements may address uncertainties regarding customer preferences or demand for products incorporating Nocopi technology that underlie the company’s revenue expectations, the company’s ability to develop new products and new product applications, the financial condition of customers and the timeliness of their payments, the impact of fluctuations in currencies, global trade and shipping markets, etc. Actual results could differ from those projected due to numerous factors and uncertainties, and Nocopi can give no assurance that such statements will prove to be correct nor that Nocopi’s actual results of ‎operations, financial condition and performance will not differ materially from those reflected or implied by its forward-‎looking statements. Investors should refer to the risk factors outlined in Nocopi’s Form 10-K, 10-Q and other SEC reports available at www.sec.gov/edgar. Forward-looking statements are made as of the date of this news release; Nocopi assumes no obligation to update these statements.

Twitter – Investors: @NNUP_IR

Investor & Media Contacts
Chris Eddy or David Collins
Catalyst IR
212-924-9800 or nnup@catalyst-ir.com


Nocopi Technologies, Inc.
Statements of Operations
(unaudited)

  Three Months ended
September 30,
  Nine Months ended
September 30,
 
  2020  2019  2020  2019 
             
Revenues            
Licenses, royalties and fees $153,300  $189,400  $425,000  $571,900 
Product and other sales  601,500   448,100   1,477,400   991,100 
   754,800   637,500   1,902,400   1,563,000 
                 
Cost of revenues                
Licenses, royalties and fees  61,900   41,400   170,200   98,200 
Product and other sales  267,400   166,600   716,200   380,300 
   329,300   208,000   886,400   478,500 
Gross profit  425,500   429,500   1,016,000   1,084,500 
                 
Operating expenses                
Research and development  40,700   45,200   123,700   122,600 
Sales and marketing  90,900   81,000   260,900   224,200 
General and administrative  123,800   84,200   383,500   265,200 
   255,400   210,400   768,100   612,000 
Net income from operations  170,100   219,100   247,900   472,500 
                 
Other income (expenses)                
Interest income  4,200   4,600   12,300   7,200 
Interest expense and bank charges  (1,300)  (2,600)  (5,900)  (8,000)
   2,900   2,000   6,400   (800)
Net income before income taxes  173,000   221,100   254,300   471,700 
Income taxes  9,900   14,300   (32,200)  30,600 
Net income $163,100  $206,800  $286,500  $441,100 
                 
Basic and diluted net income per common share $.00  $.00  $.00  $.01 
                 
Weighted average common shares outstanding                
Basic  66,768,023   59,614,698   62,952,473   58,949,377 
Diluted  66,893,250   59,990,371   63,069,652   59,322,141 
                 

Nocopi Technologies, Inc.
Balance Sheets

  September 30,  December 31, 
  2020  2019 
  (unaudited)  (audited) 
Assets 
Current assets      
Cash $1,428,900  $688,000 
Accounts receivable less $5,000 allowance for doubtful accounts  1,023,000   1,352,300 
Inventory  286,600   127,900 
Prepaid and other  21,200   135,000 
Total current assets  2,759,700   2,303,200 
         
Fixed assets        
Leasehold improvements  27,800   24,200 
Furniture, fixtures and equipment  163,700   252,500 
   191,500   276,700 
Less: accumulated depreciation and amortization  98,100   206,600 
   93,400   70,100 
Other assets        
Long-term receivables  671,100   957,000 
Operating lease right of use - building  171,000   202,000 
   842,100   1,159,000 
Total assets $3,695,200  $3,532,300 
  
Liabilities and Stockholders' Equity 
         
Current liabilities        
Convertible debentures $  $97,900 
Accounts payable  58,300   44,300 
Accrued expenses  165,500   231,600 
Income taxes  22,200   52,400 
Operating lease liability, current  43,800   41,700 
Total current liabilities  289,800   467,900 
         
Other liabilities        
Accrued expenses, non-current  47,000   67,000 
Deferred income taxes     47,400 
Operating lease liability, non-current  127,200   160,300 
   174,200   274,700 
         
Stockholders' equity        
Common stock, $0.01 par value        
Authorized – 75,000,000 shares        
Issued and outstanding        
2020 – 67,353,690 shares; 2019 – 61,044,698 shares  673,500   610,400 
Paid-in capital  12,575,800   12,483,900 
Accumulated deficit  (10,018,100)  (10,304,600)
Total stockholders' equity  3,231,200   2,789,700 
Total liabilities and stockholders' equity $3,695,200  $3,532,300