Continued Growth of Specialty Ink Sales for Toys and Entertainment Drives 18% Rise in Nocopi Q3 Revenue; Net Income of $163,100 Reflects Higher Production Costs and Overhead Expense

Continued Growth of Specialty Ink Sales for Toys and Entertainment Drives 18% Rise in Nocopi Q3 Revenue; Net Income of $163,100 Reflects Higher Production Costs and Overhead Expense




Continued Growth of Specialty Ink Sales for Toys and Entertainment Drives 18% Rise in Nocopi Q3 Revenue; Net Income of $163,100 Reflects Higher Production Costs and Overhead Expense

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