-----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, DHDySOaHwcYdqAimM3QbO0ykQ7HDS3Sha+KiIuRRS6X9mO3NbZw4ZR4+HTORHefM cu5r5iEQyErtuMWyBjj8gw== 0000950115-96-001097.txt : 19960814 0000950115-96-001097.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950115-96-001097 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOCOPI TECHNOLOGIES INC/MD/ CENTRAL INDEX KEY: 0000888981 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SERVICES, NEC [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: 96610010 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 June 30, 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.) 230 Sugartown Road, Suite 100, 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: Title of each class Shares outstanding ----------------------- at August 1, 1996 Common stock, par value ------------------ $.01 per share 14,080,654 NOCOPI TECHNOLOGIES, INC. INDEX Part I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Statements of Operations 1 Three Months and Six Months Ended June 30, 1996 and June 30, 1995 Consolidated Balance Sheets 2 June 30, 1996 and December 31, 1995 Consolidated Statements of Cash Flows 3 Six Months Ended June 30, 1996 and June 30, 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 - 8 Signatures 9 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Nocopi Technologies, Inc. Consolidated Statements of Operations (unaudited)
Three Months ended June 30 Six Months ended June 30 1996 1995 1996 1995 -------- -------- ---------- ---------- Revenues $936,200 $743,100 $1,811,700 $1,396,300 Cost of sales 262,300 92,700 432,500 189,400 -------- -------- -------- --------- Gross profit 673,900 650,400 1,379,200 1,206,900 Operating expenses Research and development 191,700 206,400 396,700 390,900 Sales and marketing 351,500 384,000 723,400 823,700 General and administrative 281,700 248,300 521,300 469,200 -------- -------- -------- --------- 824,900 838,700 1,641,400 1,683,800 -------- -------- -------- --------- Loss from operations (151,000) (188,300) (262,200) (476,900) Other income (expenses) Amortization (6,400) (6,900) (12,700) (15,500) Interest income 28,000 44,700 65,100 74,500 Interest and bank charges (17,300) (18,900) (34,800) (41,500) Ownership interest of others in consolidated entity 112,100 108,600 199,200 229,800 -------- -------- -------- --------- 116,400 127,500 216,800 247,300 -------- -------- -------- --------- Net loss ($34,600) ($60,800) ($45,400) ($229,600) ======== ======== ======== ========= Loss per common share* ($.00) ($.00) ($.00) ($.02) Average common shares outstanding* 14,064,951 14,009,334 14,054,558 13,984,743
- ---------------------- * Restated to reflect one-for-five reverse stock split effective July 15, 1996. See notes to consolidated financial statements. 1 Nocopi Technologies, Inc. Consolidated Balance Sheets (unaudited)
June 30 December 31 1996 1995 ----------- ----------- Assets Current assets Cash and temporary cash investments $ 2,870,000 $ 2,982,100 Accounts receivable less allowance 586,600 667,700 Inventory 28,800 22,200 Prepaid and other 97,800 93,900 ----------- ----------- Total current assets 3,583,200 3,765,900 Fixed assets Leasehold improvements 56,800 55,300 Furniture, fixtures and equipment 416,200 381,100 ----------- ----------- 473,000 436,400 Less: accumulated depreciation 274,100 231,600 ----------- ----------- 198,900 204,800 Other assets Patents, net of accumulated amortization 419,200 419,800 Debt issue costs, net of accumulated amortization 44,200 56,900 Other 16,100 17,800 ----------- ----------- 479,500 494,500 ----------- ----------- Total assets $ 4,261,600 $ 4,465,200 =========== =========== Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 491,500 $ 398,100 Accrued expenses 142,900 258,700 Accrued commissions 117,500 182,500 Deferred revenue 374,600 280,100 ----------- ----------- Total current liabilities 1,126,500 1,119,400 Long--term notes payable 950,000 950,000 Ownership interest of others in consolidated entity 1,623,900 1,823,100 Shareholders' equity Common stock, $.01 par value Authorized - 50,000,000 shares Issued and outstanding 1996 - 14,080,654; 1995 - 14,044,166 shares 140,800 140,400 Paid-in capital 7,651,000 7,522,900 Currency translation adjustment 83,200 177,800 Accumulated deficit (7,313,800) (7,268,400) ----------- ----------- 561,200 572,700 ----------- ----------- Total liabilities and shareholders' equity $ 4,261,600 $ 4,465,200 =========== ===========
See notes to consolidated financial statements. 2 Nocopi Technologies, Inc. Consolidated Statements of Cash Flows (unaudited)
Six Months ended June 30 1996 1995 ----------- ----------- Operating Activities Net loss ($ 45,400) ($ 229,600) Adjustments to reconcile net loss to cash from operating activities Depreciation 42,900 34,200 Amortization 39,000 41,200 Allowance for doubtful accounts 7,400 4,800 Ownership interest of others in consolidated entity (199,200) (229,800) Other 4,700 ----------- ----------- (155,300) (374,500) Changes in working capital Accounts receivable 69,600 153,800 Inventory (6,600) 3,500 Prepaid and other (5,900) (300) Accounts payable and accrued expenses (78,600) 157,900 Deferred revenue 95,700 67,200 ----------- ----------- 74,200 382,100 ----------- ----------- Cash provided (used) by operating activities (81,100) 7,600 Investing Activities Additions to fixed assets (37,500) (24,100) Additions to patents (24,000) (67,100) ----------- ----------- Cash used by investing activities (61,500) (91,200) Financing Activities Exercise of stock options 128,500 6,500 ----------- ----------- Cash provided by financing activities 128,500 6,500 Effect of exchange rate changes on cash (98,000) 226,200 ----------- ----------- Increase (decrease) in cash and temporary cash investments (112,100) 149,100 Cash and temporary cash investments - beginning of period 2,982,100 3,137,600 ----------- ----------- Cash and temporary cash investments - end of period $ 2,870,000 $ 3,286,700 =========== ===========
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. Reverse Stock Split The Company, on July 15, 1996, amended its Articles of Incorporation to effect a one-for-five reverse split of its common stock, to increase the par value of its common stock from $.002 to $.01 and to decrease the number of shares of common stock authorized under its Articles of Incorporation from 90,000,000 to 50,000,000. All applicable share and per share data have been adjusted for the reverse stock split. Note 3. 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 second quarter of 1996 were $936,200 compared to $743,100 in the second quarter of 1995, an increase of 26%. The first half revenues of $1,811,700 represent a 30% increase from $1,396,300 in the first half of 1995. The increase is attributable to revenues from licensees and end-user customers signed in the latter half of 1995 and the first half of 1996 as well as increased revenues from those signed earlier. Included in second quarter 1996 revenues are revenues derived from initial production of pressure sensitive security labels under a license agreement signed in late 1995. The continuing financial losses from product counterfeiting and product diversion experienced by domestic and international business 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 $673,900 or 72% of revenues in the second quarter of 1996 from $650,400 or 88% of revenues in the second quarter of 1995. For the first six months of 1996 the gross profit was $1,379,200 or 76% of revenues compared to $1,206,900 or 86% of revenues in the first half of 1995. The decline in gross profit as a percentage of revenues is attributable in part to the inclusion in the 1996 second quarter revenues of certain manufactured products which carry higher direct costs than licensing and royalty revenues. Research and development expenses of $191,700 in the second quarter of 1996 were slightly below the second quarter 1995 expenses of $206,400. The first half 1996 research and development expenses of $396,700 approximated the $390,900 incurred in the first half of 1995. Sales and marketing expenses were $351,500 in the second quarter of 1996 compared to $384,000 in the second quarter of 1995. For the first six months of 1996 sales and marketing expenses declined to $723,400 from $823,700 in the first half 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. Late in the second quarter the Company increased its sales staff to take advantage of newly developed technologies which the Company believes to be best handled by its sales persons as compared to licensees. The Company also plans to increase its sales promotion activities in the second half of the year. General and administrative expenses increased to $281,700 in the second quarter of 1996 from $248,300 in the second quarter of 1995 and to $521,300 in the first half of 1996 from $469,200 in the first half of 1995. The increases are the result of expenses incurred by Euro-Nocopi S.A. 5 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 second quarter and first half 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 remaining from those raised in the 1994 Euro-Nocopi S.A. private placement. Ownership interest of others in consolidated entity represents the proportionate share in the assets and profits or losses of Euro-Nocopi S.A. attributable to the 82% ownership interest of the outside shareholders of that company. The consolidated net loss declined in the second quarter of 1996 to $34,600 from $60,800 in the second quarter of 1995. For the first six months of 1996, the consolidated net loss declined to $45,400 from $229,600 in the first half of 1995. The Company's U.S. operations, with an operating profit of $2,300 in the second quarter of 1996, recorded its fourth consecutive quarterly operating profit. Liquidity and Capital Resources The Company's consolidated cash and temporary cash investment position decreased to $2,870,000 at June 30, 1996 from $2,982,100 at December 31, 1995. Included in the June 30, 1996 balance is $1,900,100 held by Euro-Nocopi S.A. which is available only to fund Euro-Nocopi's operations. At December 31, 1995, the Euro-Nocopi S.A. cash balance was $2,075,000. The decrease during the first half is principally attributable to funds required to support Euro-Nocopi S.A.'s operations. The Company's domestic cash position increased to $969,900 at June 30, 1996 from $907,100 at December 31, 1995. The increase results primarily from receivables collections and proceeds of stock option exercises in the first half of 1996 partially offset by payments related to the acquisition of ink production equipment 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, on July 15, 1996, amended its Articles of Incorporation to effect a one-for-five reverse split of its common stock, increased the par value of its common stock from $.002 to $.01 and decreased the number of shares of common stock authorized under its Articles of Incorporation from 90,000,000 to 50,000,000. 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 Effective July 15, 1996, Registrant's Articles of Incorporation were amended in order (a) to effect a one-for-five reverse split of Registrant's common stock, par value $.002 per share, (b) to increase the par value of Registrant's common stock from $.002 per share to $.01 per share, and (c) to decrease the number of shares of common stock authorized under Registrant's Articles of Incorporation from 90,000,000 to 50,000,000. The amendment of Registrant's Articles of Incorporation did not materially alter the voting and other rights of holders of Registrant's common stock, or any other class of registrant's securities. Item 3. Defaults Upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders The Registrant's 1996 Annual Meeting of Shareholders was held on June 10, 1996. At such meeting, Registrant's shareholders elected six (6) persons nominated by the Nominating Committee of the Board to serve as directors of Registrant, approved an Amendment to the Articles of Incorporation to provide for a Recapitalization of the Registrant including authorizing the Board of Directors, in its discretion, to effect a one-for-five reverse stock split, approved the adoption of the Registrant's 1996 Stock Option Plan, and ratified the selection of Coopers & Lybrand L.L.P. as Registrant's independent public accountants. 7 The following table shows the votes cast for and against each person nominated to serve as a director, as well as all abstentions, authority withheld and broker non-votes: Votes Against or Broker Name of authority Non- Nominee Votes For withheld Abstentions Votes - ----------------- ---------- --------- ----------- ------ Ray B. Mundt 65,842,324 1,382,680 -0- -0- Norman A. Gardner 65,840,424 1,384,580 -0- -0- Dr. A. Gundjian 65,839,424 1,385,580 -0- -0- Joel A. Pinsky 65,690,624 1,534,380 -0- -0- William F. Drake 65,519,483 1,705,521 -0- -0- Edward N. Patrone 65,230,953 1,994,051 -0- -0- The voting on the proposal to approve an Amendment to the Articles of Incorporation providing for a Recapitalization, including authorizing the Board of Directors, in its discretion, to effect a one-for-five reverse stock split was as follows: 64,783,026 For; 289,519 Against; 187,950 Abstentions; and 1,964,509 Broker Non-Votes. The voting on the proposal to approve the adoption of the Registrant's 1996 Stock Option Plan was as follows: 60,271,803 For; 2,624,036 Against; 656,595 Abstentions; and 3,672,570 Broker Non-Votes. The voting on the proposal to ratify the selection of Coopers & Lybrand L.L.P. as Registrant's independent public accountants was as follows: 67,023,499 For; 108,840 Against; 92,665 Abstentions; and -0- Broker Non-Votes. 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 June 30, 1996. 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: August 12, 1996 /s/ Norman A. Gardner ---------------------------------------- Norman A. Gardner President & Chief Executive Officer DATE: August 12, 1996 /s/ Rudolph A. Lutterschmidt ---------------------------------------- Rudolph A. Lutterschmidt Vice President & Chief Financial Officer EX-11 2 COMPUTATION OF LOSS PER COMMON SHARE NOCOPI TECHNOLOGIES, INC. COMPUTATION OF LOSS PER COMMON SHARE EXHIBIT 11
Three Months ended June 30 Six Months ended June 30 1996 1995 1996 1995 ---- ---- ---- ---- Primary Net loss applicable to common shares ($34,600) ($60,800) ($45,400) ($229,600) ========== ========== ========== ========== Weighted average common shares outstanding 14,064,951 14,009,334 14,054,558 13,984,743 Dilutive shares - based on the treasury stock method using the average market price (1) 119,481 62,930 76,376 82,868 ---------- ---------- ---------- ---------- 14,184,432 14,072,264 14,130,934 14,067,611 ========== ========== ========== ========== Per share amount applicable to net loss ($.00) ($.00) ($.00) ($.02) Three Months ended June 30 Six Months ended June 30 1996 1995 1996 1995 ---- ---- ---- ---- Fully diluted Net loss ($34,600) ($60,800) ($45,400) ($229,600) Add interest on Series B notes 16,600 18,100 33,200 40,100 Deduct ownership interest of others in consolidated entity (112,100) (108,600) (199,200) (229,800) ---------- ---------- ---------- ---------- Net loss applicable to common shares ($130,100) ($151,300) ($211,400) ($419,300) ========== ========== ========== ========== Weighted average common shares outstanding 14,064,951 14,009,334 14,054,558 13,984,743 Dilutive shares - based on the treasury stock method using the greater of the period-end market price or the average market price (2) 1,412,187 1,373,493 1,369,082 1,397,003 ---------- ---------- ---------- ---------- 15,477,138 15,382,827 15,423,640 15,381,746 ========== ========== ========== ========== Per share amount applicable to net loss ($.01) ($.01) ($.01) ($.03)
- ------------------------ (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. EX-27 3 FDS
5 6-MOS DEC-31-1996 JUN-30-1996 2,870,000 0 614,900 28,300 28,800 3,583,200 473,000 274,100 4,261,600 1,126,500 950,000 0 0 140,800 420,400 4,261,600 1,811,700 1,811,700 432,500 432,400 0 7,600 34,800 (45,400) 0 (45,400) 0 0 0 (45,400) 0 (0.01)
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