AP NEWS
Press release content from Globe Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Nocopi Reports Q3 and 9-Month Net Income of $207,000 & $441,100, Reflecting Growing Demand for Specialty Reactive Inks for Toys and Educational Products

November 13, 2019

KING OF PRUSSIA, Pa., Nov. 13, 2019 (GLOBE NEWSWIRE) -- Nocopi Technologies, Inc. (OTC Pink: NNUP), a developer of specialty reactive inks used in entertainment, toy and educational products as well as document and product authentication technologies to combat fraud, today announced results for its third quarter and nine months ended September 30, 2019. Nocopi also announced it has applied to up-list its common stock to OTC Markets’ OTCQB exchange later this month.

Nocopi Technologies, Inc. Financial Highlights Income Statement Q3′19 Q2′19 Q1′19 Q4′18 Q3’18 Revenue $637,500 $516,100 $409,400 $481,200 $561,400 Net Income $206,800 $148,900 $85,400 $111,000 $1,100 Weighted Ave. Shares 60M 59M 59M 59M 59M Balance Sheet Q3′19 Q2′19 Q1′19 Q4′18 Q3’18 Cash $798,000 $506,500 $544,000 $400,800 $286,300 Total Current Assets $1,874,600 $1,562,400 $1,369,600 $1,156,900 $1,060,400 Working Capital $1,454,600 $1,132,800 $893,500 $810,500 $628,200 Book Value $2,450,500 $2,201,000 $2,052,100 $1,966,700 $1,855,700 Book Value Per Share $0.041 $0.037 $0.035 $0.033 $0.031

Highlights

-- Q3’19 revenues rose 14% vs. Q3’18, driven primarily by higher ink shipments for a major customer in the entertainment and toy products segment. Revenues in this segment totaled approximately $555,900 (or 87% of total revenues) in Q3’19, with the balance of revenues coming from retail receipt and the document fraud market. -- Q3’19 gross profit rose 11% to $429,500 vs. Q3’18, reflecting higher revenue and a slightly lower gross margin of 67.4% vs. 69.2% in Q3’18, due to growth in ink sales which carry a somewhat lower margin than royalties and license fees. -- Net income improved to $206,800 in Q3’19 vs. Q3’18 net income of $1,100, which included a tax provision of $199,300 due to limitations placed on income tax net operating loss deductions by the Commonwealth of Pennsylvania. -- Cash rose to $798,000 at the end of Q3’19, along with accounts receivable and inventories which increased to $834,500 and $161,000, respectively, reflecting growth in customer demand. -- Results for the first nine months of 2018 reflected the benefit of revenue of $1,521,700 recorded in Q2 2018 for the present value of guaranteed minimum royalty payments under a four-year license extension with the Company’s largest customer. Pursuant to the license extension, which commenced in July 2019, Nocopi is entitled to receive quarterly cash payments of $100,000. Excluding revenue from the license extension guarantee in 2018, Nocopi would have recorded revenue of approximately $1,339,000 in the first nine months of 2018. Nocopi’s reported revenue of $1,563,000 for the first nine months of 2019 reflects a year-over-year increase of 17% versus adjusted revenue in the comparable 2018 period.

Nocopi Chairman and CEO Michael Feinstein commented, “We are very excited with the growing pace of our business and the opportunities we see to build on our success with current customers as well as our plans for new business development. Nocopi reactive inks enable exciting capabilities that have applications across a broad range of consumer products as well as in product security. We have built the business over the past few years with a small but focused team with keen attention to managing overhead and other costs. We now look to reinvest a small portion of our profits in efforts to further expand our business and capabilities, while maintaining our cost disciplines to maximize our cash flow. We believe the outlook for Nocopi is very exciting, that the Company represents a unique and very attractive investment opportunity and there are many avenues we look to pursue to drive continued improvements in our financial performance.

“We spent the past few years working to put Nocopi on a path of consistent profitability, growth and cash generation and a solid financial foundation. During this period we maintained our regular SEC reporting but otherwise kept a very low profile, focusing our resources on the business. Having achieved what we believe is sustainable profitability, solid cash generation and growth, we believe it now makes sense to invest some of our resources in a proactive investor outreach effort.

“Today’s press release, our first in many years, represents the start of regular quarterly communications which we will supplement as warranted by developments in our business. We have applied to up-list our shares on the OTCQB market, an important step in building visibility and greater liquidity for our stockholders. We have also retained a veteran investor relations team at NYC-based Catalyst IR, to help us in building awareness for our business, solutions, financial performance and attractive valuation. We plan to invest some time and resources in getting out to meet with new investors and to attend conferences going forward. Please contact the Catalyst team if you would like to schedule a meeting or call or if you have any questions or would like to be added to our email news distribution.”

Q3 ResultsQ3’19 revenues rose 14% to $637,500, reflecting an 8% or $14,200 increase revenues from licenses, royalties and fees and a 16% or $61,900 increase in product and other sales, principally specialty inks. The improvement in licenses, royalties and fees principally reflected higher royalties from five licensees which more than offset a $100,000 reduction in guaranteed licensing revenue related to a four year license extension with Nocopi’s largest customer, the present value of which was recorded as revenue of $1,521,700 in Q2’18. Pursuant to minimum guaranteed payments of the extension, which commenced in July 2019, Nocopi is entitled to receive quarterly cash payments of $100,000 over the next four years. The first of these payments was received during Q3’19.

The increase in Q3’19 product and other sales was due primarily to higher ink shipments for the entertainment and toy product market, offset in part by lower ink shipments for the retail receipt and document fraud market.

Gross profit increased to $429,500 in Q3’19, or approximately 67% of revenues, from $388,400 in Q3’18, or approximately 69% of revenues. The Q3’19 decrease in gross margin principally reflects the increase in product and other sales, as a percentage of revenue, compared to licenses, royalties and fees which typically carry a higher gross profit margin than products, which includes specialty inks. Q3’19 gross margin from licenses, royalties and fees was approximately 78% versus 80% in Q3’18. Q3’19 gross margin from product and other sales was approximately 63% versus 64% in Q3’18.

Sales and marketing expenses in Q3’19 increased to $81,000 versus $74,600 in Q3’18, principally due to higher commission expenses on higher revenues. General and administrative expenses increased to $84,200 in Q3’19 from $73,400 in Q3’18, due primarily to higher employment and public company expenses.

Q3’19 net income improved to $206,800 compared to $1,100 in Q3’18, reflecting higher gross profit and the absence of a large provision for Pennsylvania income taxes in Q3’19 compared to Q3’18. The Company’s large Q3’18 tax provision was driven by a change in PA tax law that placed limitations on net operating loss deductions and impacted royalty income generated by the large license extension.

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 ContactsWilliam Jones, David Collins or Chris EddyCatalyst IR212-924-9800 or nnup@catalyst-ir.com

Nocopi Technologies, Inc. Statements of Operations (unaudited) Three Months ended Nine Months ended September 30, September 30, 2019 2018 2019 2018 Revenues Present value of guaranteed royalty payments over 4 years from amended/expanded licensing $ n/a $ n/a $ n/a $ 1,521,700 agreement with a major customer (a) Licenses, royalties and fees 189,400 $ 175,200 $ 571,900 $ 484,000 Total licenses, royalties and fees 189,400 175,200 $ 571,900 $ 2,005,700 Product and other sales 448,100 386,200 991,100 854,800 ---------- - - ---------- - - ---------- - - ---------- 637,500 561,400 1,563,000 2,860,500 Cost of revenues Licenses, royalties and fees 41,400 35,100 98,200 84,300 Product and other sales 166,600 137,900 380,300 323,500 ---------- - - ---------- - - ---------- - - ---------- 208,000 173,000 478,500 407,800 Gross profit 429,500 388,400 1,084,500 2,452,700 Operating expenses Research and development 45,200 38,100 122,600 111,300 Sales and marketing 81,000 74,600 224,200 313,200 General and administrative 84,200 73,400 265,200 277,600 ---------- - - ---------- - - ---------- - - ---------- 210,400 186,100 612,000 702,100 Net income from operations 219,100 202,300 472,500 1,750,600 Other income (expenses) Interest income 4,600 700 7,200 1,400 Interest expense and bank charges (2,600 ) (2,600 ) (8,000 ) (8,300 ) ---------- - - ---------- - - ---------- - - ---------- - 2,000 (1,900 ) (800 ) (6,900 ) Net income before income taxes 221,100 200,400 471,700 1,743,700 Income taxes 14,300 199,300 30,600 199,300 ---------- - - ---------- - - ---------- - - ---------- Net income $ 206,800 $ 1,100 $ 441,100 $ 1,544,400 Basic and diluted net income per common share $ 0.00 $ 0.00 $ 0.01 $ 0.03 Weighted average common shares outstanding Basic 59,614,698 58,616,716 58,949,377 58,616,716 Diluted 59,990,371 59,012,626 59,322,141 58,977,284 (a) License extension was executed in Q2′18 and commenced in July 2019. Nocopi is entitled to quarterly cash payments of $100,000 over four years; the first payment was received in Q3′19.

Nocopi Technologies, Inc. Balance Sheets September 30, December 31, 2019 2018 (unaudited) (audited) Assets Current assets Cash $ 798,000 $ 400,800 Accounts receivable less $5,000 allowance for doubtful accounts 834,500 579,000 Inventory 161,000 133,500 Prepaid and other 81,100 43,600 - ----------- - ----------- Total current assets 1,874,600 1,156,900 - ----------- - ----------- Fixed assets Leasehold improvements 19,700 19,700 Furniture, fixtures and equipment 185,800 185,400 - ----------- - ----------- 205,500 205,100 Less: accumulated depreciation and amortization 198,700 197,600 - ----------- - ----------- 6,800 7,500 - ----------- - ----------- Other assets Long-term receivables 1,070,700 1,352,200 Operating lease right of use – building 212,000 – - ----------- - ----------- 1,282,700 1,352,200 - ----------- - ----------- Total assets $ 3,164,100 $ 2,516,600 - ----------- - ----------- Liabilities and Stockholders’ Equity Current liabilities Convertible debentures $ 97,900 $ 128,300 Accounts payable 41,400 16,500 Accrued expenses 202,200 163,000 Income taxes 37,500 38,600 Operating lease liability, current 41,000 – - ----------- - ----------- Total current liabilities 420,000 346,400 - ----------- - ----------- Other liabilities Accrued expenses, non-current 75,000 94,700 Deferred income taxes 47,600 108,800 Operating lease liability, non-current 171,000 – - ----------- - ----------- 293,600 203,500 - ----------- - ----------- Stockholders’ equity Common stock, $0.01 par value Authorized – 75,000,000 shares Issued and outstanding 603,300 586,200 2019 – 60,324,698 shares; 2018 – 58,616,716 shares Paid-in capital 12,465,600 12,440,000 Accumulated deficit (10,618,400 ) (11,059,500 ) - ----------- - ----------- Total stockholders’ equity 2,450,500 1,966,700 - ----------- - ----------- Total liabilities and stockholders’ equity $ 3,164,100 $ 2,516,600 - ----------- - -----------

Nocopi Technologies, Inc. Statements of Cash Flows (unaudited) Nine Months ended September 30, 2019 2018 Operating Activities Net income $ 441,100 $ 1,544,400 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization 2,900 5,300 Deferred income taxes (61,200 ) 106,000 Other assets 69,500 (1,423,800 ) Other liabilities 192,300 99,600 Cumulative effect of accounting change – 96,100 644,600 427,600 Increase in assets Accounts receivable (255,500 ) (308,000 ) Inventory (27,500 ) (20,100 ) Prepaid and other (37,500 ) (8,000 ) Increase (decrease) in liabilities Accounts payable and accrued expenses 76,400 (159,000 ) Income taxes (1,100 ) 93,300 Deferred revenue – (99,400 ) (245,200 ) (501,200 ) Net cash provided by (used in) operating activities 399,400 (73,600 ) Investment Activities Additions to fixed assets (2,200 ) (500 ) Net cash used in investing activities (2,200 ) (500 ) Increase (decrease) in cash 397,200 (74,100 ) Cash at beginning of year 400,800 360,400 Cash at end of period $ 798,000 $ 286,300 Supplemental Disclosure of Non-Cash Investing and Financing Activities Operating lease right of use – building $ 241,100 $ – Operating lease liability $ (241,100 ) $ – Accumulated depreciation and amortization $ 1,800 $ – Furniture, fixtures and equipment $ (1,800 ) $ – Convertible debentures $ 30,400 $ – Accrued expenses $ 12,300 $ – Common stock $ (17,100 ) $ – Paid-in capital $ (25,600 ) $ –