-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JqQMmACgNCU6GZGsrxbV/cf5v0YxfHYkfB6R7N8kaWJTaUfsADHq1WA5guGKg54p Wl+d7F8vl8jjUCt6yvJhig== 0000950115-96-000635.txt : 19960703 0000950115-96-000635.hdr.sgml : 19960703 ACCESSION NUMBER: 0000950115-96-000635 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOCOPI TECHNOLOGIES INC/MD/ CENTRAL INDEX KEY: 0000888981 STANDARD INDUSTRIAL CLASSIFICATION: 8900 IRS NUMBER: 870406496 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20333 FILM NUMBER: 96562907 BUSINESS ADDRESS: STREET 1: 130 WEST LANCASTER AVE STREET 2: STE 103 CITY: WAYNE STATE: PA ZIP: 19087 BUSINESS PHONE: 6106872000 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For Quarter Ended March 31, 1996 Commission File No. 0-20333 NOCOPI TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) MARYLAND 87-0406496 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 130 W. Lancaster Avenue, Suite 103, Wayne, PA 19087 (Address of principal executive offices) Registrant's telephone number, including area code: 610-687-2000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES _X_ NO___ Number of shares of common stock outstanding: Shares outstanding Title of each class at May 1, 1996 Common stock, par value 70,220,829 $.002 per share NOCOPI TECHNOLOGIES, INC. INDEX Part I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Statements of Operations 1 Three Months Ended March 31, 1996 and March 31, 1995 Consolidated Balance Sheets 2 March 31, 1996 and December 31, 1995 Consolidated Statements of Cash Flows 3 Three Months Ended March 31, 1996 and March 31, 1995 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis 5 - 6 of Financial Condition and Results of Operations Part II. OTHER INFORMATION 7 Signatures 8 PART 1 -- FINANCIAL INFORMATION Item 1. Financial Statements Nocopi Technologies, Inc. Consolidated Statements of Operations (unaudited) Three Months ended March 31 1996 1995 ---- ---- Revenues $ 875,500 $ 653,200 Cost of sales 170,200 96,700 ------------ ------------ Gross profit 705,300 556,500 Operating expenses Research and development 205,000 184,500 Sales and marketing 371,900 439,700 General and administrative 239,600 220,900 ------------ ------------ 816,500 845,100 ------------ ------------ Loss from operations (111,200) (288,600) Other income (expenses) Amortization (6,300) (8,600) Interest income 37,100 29,800 Interest and bank charges (17,500) (22,600) Ownership interest of others in consolidated entity 87,100 121,200 ------------ ------------ 100,400 119,800 ------------ ------------ Net loss ($ 10,800) ($ 168,800) ============ ============ Loss per common share ($ .00) ($ .00) Average common shares outstanding 70,220,829 69,800,758 See notes to consolidated financial statements. 1 Nocopi Technologies, Inc. Consolidated Balance Sheets (unaudited)
March 31 December 31 1996 1995 -------- ----------- Assets Current assets Cash and temporary cash investments $ 2,835,800 $ 2,982,100 Receivables less allowances 511,500 667,700 Inventory 7,700 22,200 Prepaid and other 104,100 93,900 ----------- ----------- Total current assets 3,459,100 3,765,900 Fixed assets Leasehold improvements 55,300 55,300 Furniture, fixtures and equipment 394,900 381,100 ----------- ----------- 450,200 436,400 Less: accumulated depreciation 252,500 231,600 ----------- ----------- 197,700 204,800 Other assets Patents, net of accumulated amortization 414,200 419,800 Debt issue costs, net of accumulated amortization 50,600 56,900 Other 16,900 17,800 ----------- ----------- 481,700 494,500 ----------- ----------- Total assets $ 4,138,500 $ 4,465,200 =========== =========== Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 214,900 $ 398,100 Accrued expenses 210,700 258,700 Accrued commissions 153,700 182,500 Deferred revenue 375,300 280,100 ----------- ----------- Total current liabilities 954,600 1,119,400 Long-term notes payable 950,000 950,000 Ownership interest of others in consolidated entity 1,736,000 1,823,100 Shareholders' equity Common stock, $.002 par value Authorized - 90,000,000 shares Issued and outstanding 70,220,829 shares 140,400 140,400 Paid-in capital 7,522,900 7,522,900 Currency translation adjustment 113,800 177,800 Accumulated deficit (7,279,200) (7,268,400) ----------- ----------- 497,900 572,700 ----------- ----------- Total liabilities and shareholders' equity $ 4,138,500 $ 4,465,200 =========== ===========
See notes to consolidated financial statements. 2 Nocopi Technologies, Inc. Consolidated Statements of Cash Flows (unaudited) Three Months ended March 31 1996 1995 ---- ---- Operating Activities Net loss ($ 10,800) ($ 168,800) Adjustments to reconcile net loss to cash from operating activities Depreciation 20,200 16,700 Amortization 19,500 21,400 Allowance for doubtful accounts 3,000 2,400 Ownership interest of others in consolidated entity (87,100) (121,200) Other 3,900 ----------- ----------- (55,200) (245,600) Changes in working capital Accounts receivable 150,900 187,500 Inventory 14,500 1,900 Prepaid and other (10,600) 6,700 Accounts payable and accrued expenses (256,700) 92,900 Deferred revenue 96,100 (17,000) ----------- ----------- (5,800) 272,000 ----------- ----------- Cash provided (used) by operating activities (61,000) 26,400 Investing Activities Additions to fixed assets (14,100) (6,600) Additions to patents (6,700) (11,900) ----------- ----------- Cash used by investing activities (20,800) (18,500) Effect of exchange rate changes on cash (64,500) 261,500 ----------- ----------- Increase (decrease) in cash and temporary cash investments (146,300) 269,400 Cash and temporary cash investments - beginning of period 2,982,100 3,137,600 ----------- ----------- Cash and temporary cash investments - end of period $ 2,835,800 $ 3,407,000 =========== =========== See notes to consolidated financial statements. 3 NOCOPI TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1. Financial Statements The accompanying interim financial statements have been prepared by the Company without audit. These statements include all adjustments (consisting only of normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting policies described in the summary of Accounting Policies included in the Company's 1995 Annual Report. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The Notes to Financial Statements included in the 1995 Annual Report should be read in conjunction with the accompanying interim financial statements. The interim operating results are not necessarily indicative of the operating results expected for the full year. Note 2. Accounting Changes Effective January 1, 1996, the Company adopted the provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed" (SFAS 121). SFAS 121 requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The adoption of SFAS 121 did not have a material effect on the Company's financial position. Effective January 1, 1996, the Company adopted the disclosure-only approach of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123 encourages employers to account for stock compensation awards based on their fair value on their date of grant. Entities may choose not to apply the new accounting method but instead, disclose in the notes to the financial statements the pro forma effects on net income and earnings per share as if the new method had been applied. 4 Item 2. NOCOPI TECHNOLOGIES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Revenues for the first quarter of 1996 increased 34% to $875,500 from $653,200 in the first quarter of 1995. The increase is attributable to revenue from licensees and end-user customers signed in the latter half of 1995 as well as increased revenues from those signed earlier. The continuing financial losses from product counterfeiting and product diversion experienced by domestic and international businesses and the ability to combat these losses using technologies such as those offered by the Company continue to provide the Company with opportunities to increase its revenue base. The Company's gross profit increased to $705,300 in the first quarter of 1996 compared to $556,500 in the first quarter of 1995 reflecting the increase in license and royalty revenues which carry a low level of direct costs. Research and development expenses increased to $205,000 in the first quarter of 1996 from $184,500 in the first quarter of 1995 resulting principally from a staff addition in late 1995. Sales and marketing expenses were $371,900 in the first quarter of 1996 compared to $439,700 in the first quarter of 1995. The decrease is attributable to lower staffing levels in the U.S. as well as modified compensation arrangements with certain sales employees and sales agents. The Company plans to increase its sales staff in future quarters to take advantage of newly developed technologies which the Company believes to be best marketed by its own sales persons as compared to licensees. General and administrative expenses increased to $239,600 in the first quarter of 1996 from $220,900 in the first quarter of 1995 primarily due to increased expenses incurred by Euro-Nocopi S.A. Other income (expenses) include interest on the Series B 7% Subordinated Convertible Promissory Notes issued in May 1993 and amortization of debt issue costs related to these Notes. The decrease in interest expense and debt amortization costs in the first quarter of 1996 reflects the conversion of some of these notes into common stock during 1995. Interest income includes interest on funds invested in the U.S. as well as the investment of funds raised in the 1994 Euro-Nocopi S.A. private placement. Ownership interest of others in consolidated entity represents the proportionate share in the loss of Euro-Nocopi S.A. attributable to the 82% ownership interest of the outside shareholders of the company. The consolidated net loss declined in the first quarter of 1996 to $10,800 from $168,800 in the first quarter of 1995. The improvement is primarily attributable to the U.S. revenue increases and reductions in domestic overhead expenses compared to the first quarter of 1995. 5 The Company's U.S. operations recorded an operating profit of $18,200 in the first quarter of 1996, its third consecutive quarter of profitability. Liquidity and Capital Resources The Company's consolidated cash and temporary cash investment position decreased to $2,835,800 at March 31, 1996 from $2,982,100 at December 31, 1995. Included in the March 31, 1996 balance is $1,989,900 held by Euro-Nocopi S.A. which is available only to fund Euro-Nocopi's operations. At December 31, 1995, the Euro-Nocopi cash balance was $2,075,000. The decrease during the quarter is principally attributable to funds required to support Euro-Nocopi's operations during the quarter. The Company's domestic cash position decreased to $845,900 at March 31, 1996 from $907,100 at December 31, 1995. The decrease results primarily from payments related to the acquisition of ink production equipment received in late 1995 and incentive compensation paid for the achievement of the 1995 U.S. business plan. The Company believes that it has sufficient working capital and available credit to support its consolidated operations. The Company's operations are subject to all of the risks inherent in a developing business enterprise. The likelihood of success must be considered in light of problems, difficulties, complications and delays frequently encountered in connection with an emerging business and the development of new technologies. 6 PART II - OTHER INFORMATION Item 1. Legal Proceedings Not Applicable Item 2. Changes in Securities Not Applicable Item 3. Defaults Upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders Not Applicable Item 5. Other Information Not Applicable Item 6. Exhibits and Reports on Form 8-K (a). Exhibit 11 - Computation of loss per common share. (b). No Current Reports on Form 8-K have been filed by the Registrant during the quarter ended March 31, 1996. 7 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NOCOPI TECHNOLOGIES, INC. DATE: May 13, 1996 /s/ Norman A. Gardner --------------------- Norman A. Gardner President and Chief Executive Officer DATE: May 13, 1996 /s/ Rudolph A. Lutterschmidt ---------------------------- Rudolph A. Lutterschmidt Vice President and Chief Financial Officer EX-11 2 COMPUTATION OF LOSS NOCOPI TECHNOLOGIES, INC. COMPUTATION OF LOSS PER COMMON SHARE EXHIBIT 11 Three Months ended March 31 1996 1995 ---- ---- Primary Net loss applicable to common shares ($ 10,800) ($ 168,800) ============ ============ Weighted average common shares outstanding 70,220,829 69,800,758 Dilutive shares - based on the treasury stock method using the average market price (1) 166,356 513,833 ------------ ------------ 70,387,185 70,314,591 ============ ============ Per share amount applicable to net loss ($.00) ($.00) Three Months ended March 31 1996 1995 ---- ---- Fully diluted Net loss ($ 10,800) ($ 168,800) Add interest on Series B notes 16,600 22,000 Deduct ownership interest of others in consolidated entity (87,100) (121,200) ------------ ------------ Net loss applicable to common shares ($ 81,300) ($ 268,000) ============ ============ Weighted average common shares outstanding 70,220,829 69,800,758 Dilutive shares - based on the treasury stock method using the greater of the period-end market price or the average market price (2) 6,629,886 7,102,363 ------------ ------------ 76,850,715 76,903,121 ============ ============ Per share amount applicable to net loss ($.00) ($.00) (1) represents shares resulting from stock options and warrants. (2) represents shares resulting from stock options, warrants and the assumed conversion of the convertible notes and Euro-Nocopi S.A. stock. 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NOCOPI TECHNOLOGIES, INC. DATE: May 13, 1996 /s/ Norman A. Gardner ---------------------------------------- Norman A. Gardner President and Chief Executive Officer DATE: May 13, 1996 /s/ Rudolph A. Lutterschmidt ---------------------------------------- Rudolph A. Lutterschmidt Vice President and Chief Financial Officer EX-27 3 FDS
5 1 U.S. 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 1 2,835,800 0 535,500 24,000 7,700 3,459,100 450,200 252,500 4,138,500 954,600 950,000 0 0 140,400 357,500 4,138,500 875,500 875,500 170,200 170,200 0 3,000 17,500 (10,800) 0 (10,800) 0 0 0 (10,800) 0 0
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