Nocopi’s Q3 Cash Position Improved 12% from June 2021 to $2.1M Despite Drop in Product Revenue Related to Customer Supply Chain Challenges, Names New Independent Director

Rhea-AI Summary

Nocopi Technologies (OTC Pink: NNUP) reported Q3’21 results, showing a 59% drop in revenue to $312,500 due to decreased specialty ink shipments, offset by a 45% increase in license and royalty income to $222,500. Gross profit fell 51% to $209,200, but gross margin improved to 67%. Operating expenses reduced by 12%, and net income decreased to $1,100. Cash from operations declined to $228,200, though year-to-date cash increased by 4% to $802,600. Supply chain issues impacted production orders, but management remains optimistic about future growth.

Positive

• License and royalty revenue increased 45% to $222,500.
• Gross margin improved from 56% to 67% despite lower product sales.
• Operating expenses reduced by 12%, reflecting managed costs.
• Cash position increased to $2.1M in Q3'21, a rise from $1.9M in Q2'21.

Negative

• Q3’21 revenue decreased 59% to $312,500 due to lower specialty ink orders.
• Gross profit declined 51% to $209,200, impacted by significant decreases in product sales.
• Net income fell to $1,100 from $163,100 in Q3’20.
• Consumer demand remains strong, but supply chain disruptions continue to affect production.

KING OF PRUSSIA, Pa., Nov. 12, 2021 (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 and nine months ended September 30, 2021 (Q3’21 & 9M’21). Nocopi’s SEC filings are available here.

Q3’21 Results

Q3’21 revenue declined 59% to $312,500 reflecting a decrease in product and other sales, principally due to specialty ink shipments for licensees in the entertainment and toy product market. In contrast, license and royalty revenue rose 45% to $222,500 reflecting growth in royalty income from toy and entertainment market customers. Revenue from security market customers was relatively unchanged at approximately $55,500 in Q3’21, as growth in this market continues to be negatively affected by the COVID-19 pandemic, but increased sequentially each of the last two quarters in 2021. The security market represented approximately 18% of Q3’21 revenue.

Gross profit declined 51% to $209,200 in Q3’21 from $425,500 in Q3’20, reflecting an approximately $500,000 decline in product sales. Q3’21 gross margin rose to 67% from 56% in Q3’20, due to a greater contribution from higher margin license and royalty revenue in the period.

Q3’21 operating expenses declined 12% to $222,900 from $255,400 in Q3’20, reflecting ongoing expense management and lower commission expense due to lower revenue.

Reflecting a decrease in gross profit, Nocopi’s net income decreased to $1,100, or $0.00 per diluted share, in Q3’21, compared to $163,100, or $0.00 per diluted share, in Q3’20, reflecting an income tax cash gain of $10,200 taken in Q3’21 as the Company’s 2020 tax year obligations were less than initially expensed. Net cash from operations decreased to $228,200 in Q3’21, compared to $372,800 in Q3’20 reflecting the aforementioned decrease in specialty ink shipments the last two quarters. Net cash from operations for the nine months ended September 30, 2021 increased 4% to $802,600, despite a 40% decline in operating income, as cash collections remained strong and contributed to an over $400,000 increase in working capital since the start of 2021.

Nocopi’s Q3’21 results were significantly impacted by a decrease in orders for its specialty ink technologies as major licensees deferred production activity in response to substantial challenges, delays and higher costs they are experiencing in both printing and producing products in Asia and then shipping to the U.S. and other global markets. Consumer demand for the products marketed by Nocopi’s licensees continues to be strong and growing.

Highlights

• Nocopi reported breakeven operations in Q3’21 despite a 59% decrease in revenue to $312,500, due to lower specialty ink sales offset in part by a 45% increase in revenues from licenses, royalties and fees. Revenues for 9M’21 were $1,437,800 versus 9M’20 revenues of $1,902,400.
• Nocopi appointed independent director Joe Raymond to its Board of Directors, increasing the board to four members, three of whom are independent. 
• Q3’21 cash rose $0.2M to $2.1M vs. $1.9M in Q2'21 and $1.4M at year-end 2020.

Nocopi Chairman and CEO Michael Feinstein commented, “Persistent global supply chain disruptions, shipping delays and higher costs being faced by our licensees have resulted in a drop in their production of new products, translating into a decline in our specialty ink orders during the third quarter. While we are confident that these issues will be resolved, and believe our business will return to historical demand patterns and growth, it is too early to try to predict the scope or timing of such a rebound.

Importantly, over the past few years we have placed our company on a very solid financial footing, growing working capital to $3.2M from $43,300 at September 30, 2017, just four years ago, and have forged strong, long-term relationships with key customers. Our long-term strategic plan remains focused on cash generation and the conservative stewardship of the Company’s capital – both in terms of disciplined cost management and our capital allocation plans. Despite near-term business uncertainties, our sound financial position enables Nocopi to weather these challenges while also positioning us to pursue opportunistic stockholder value creation opportunities that may unfold in this disrupted environment. As such we feel very well positioned to resume our growth as new product opportunities and expanded licensee geographies take hold.

Importantly, our hybrid business model – which combines product sales with royalty payments – has enabled Nocopi to grow our cash position by $1.5M since the close of 2019, and to deliver breakeven results and positive cash flow in the third quarter. Our major licensees in the entertainment and toy space continue to be quite optimistic regarding the longer-term outlook for products featuring our specialty ink technologies, a confidence we share given the longer-term growth trends.

Nocopi has recently named Joe Raymond as our third independent Director. Joe brings business and capital markets experience to guide and support our corporate strategy and growth objectives. Joe is a talented investment analyst specializing in small-cap and microcap securities and shares our belief in Nocopi’s long term outlook.”

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
nnup@catalyst-ir.com

Nocopi Technologies, Inc.
Statements of Comprehensive Income
(unaudited)

	Three Months ended September 30,								Nine Months ended September 30,
	2021				2020				2021				2020
Revenues
Licenses, royalties and fees	$	222,500			$	153,300			$	552,900			$	425,000
Product and other sales		90,000				601,500				884,900				1,477,400
		312,500				754,800				1,437,800				1,902,400
Cost of revenues
Licenses, royalties and fees		28,300				61,900				124,900				170,200
Product and other sales		75,000				267,400				432,500				716,200
		103,300				329,300				557,400				886,400
Gross profit		209,200				425,500				880,400				1,016,000
Operating expenses
Research and development		44,000				40,700				134,300				123,700
Sales and marketing		56,600				90,900				214,000				260,900
General and administrative		122,300				123,800				385,500				383,500
		222,900				255,400				733,800				768,100
Net income (loss) from operations		(13,700	)			170,100				146,600				247,900
Other income (expenses)
Interest income		5,100				4,200				15,200				12,300
Interest expense and bank charges		(500	)			(1,300	)			(1,700	)			(5,900	)
		4,600				2,900				13,500				6,400
Net income (loss) before income taxes		(9,100	)			173,000				160,100				254,300
Income taxes		(10,200	)			9,900				1,700				(32,200	)
Net income	$	1,100			$	163,100			$	158,400			$	286,500
Basic and diluted net income per common share	$	.00			$	.00			$	.00			$	.00
Weighted average common shares outstanding
Basic		67,495,055				66,768,023				67,416,519				62,952,473
Diluted		67,495,055				66,893,250				67,416,519				63,069,652

Nocopi Technologies, Inc.
Balance Sheets

	September 30,				December 31,
	2021				2020
	(unaudited)
Assets
Current assets
Cash	$	2,136,600			$	1,362,800
Accounts receivable less $5,000 allowance for doubtful accounts		668,400				1,280,800
Inventory		480,400				324,800
Prepaid and other		130,700				97,800
Total current assets		3,416,100				3,066,200
Fixed assets
Leasehold improvements		58,400				27,800
Furniture, fixtures and equipment		164,100				163,700
		222,500				191,500
Less: accumulated depreciation and amortization		125,300				104,300
		97,200				87,200
Other assets
Long-term receivables		278,100				559,500
Operating lease right of use - building		127,200				160,300
		405,300				719,800
Total assets	$	3,918,600			$	3,873,200
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	14,200			$	5,700
Accrued expenses		143,400				178,600
Income taxes		–				36,300
Operating lease liability, current		46,700				44,500
Total current liabilities		204,300				265,100
Other liabilities
Accrued expenses, non-current		19,500				39,200
Operating lease liability, non-current		80,500				115,800
		100,000				155,000
Stockholders' equity
Common stock, $0.01 par value
Authorized – 75,000,000 shares
Issued and outstanding
2021 – 67,495,055; 2020 – 67,353,690 shares		675,000				673,500
Paid-in capital		12,577,100				12,575,800
Accumulated deficit		(9,637,800	)			(9,796,200	)
Total stockholders' equity		3614,300				3,453,100
Total liabilities and stockholders' equity	$	3,918,600			$	3,873,200

FAQ

What were Nocopi Technologies' Q3 2021 revenue figures?

Nocopi's Q3 2021 revenue declined 59% to $312,500.

How did Nocopi's license and royalty revenue perform in Q3 2021?

License and royalty revenue increased by 45% to $222,500 in Q3 2021.

What is the current cash position of Nocopi Technologies as of Q3 2021?

As of Q3 2021, Nocopi's cash position rose to $2.1M.

What impact did supply chain issues have on Nocopi Technologies' Q3 2021 results?

Supply chain disruptions led to decreased production orders and lower specialty ink sales.

What was Nocopi Technologies' net income in Q3 2021?

Nocopi's net income in Q3 2021 decreased to $1,100.