-----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, KHp45Mv7cgZYoeMShocWTLjj4QuR0/OL3lR9JXvH/IdlE+y7McBpD7t5ovZsuydF 12zvcDYQ/b5Ay5p766i34g== 0000950115-96-001641.txt : 19961118 0000950115-96-001641.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950115-96-001641 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96664372 BUSINESS ADDRESS: STREET 1: 230 SUGARTOWN RD STREET 2: STE 100 CITY: WAYNE STATE: PA ZIP: 19087 BUSINESS PHONE: 6106872000 MAIL ADDRESS: STREET 1: NOCOPI TECHNOLOGIES INC STREET 2: 230 SUGARTOWN RD STE 100 CITY: WAYNE STATE: PA ZIP: 19087 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 SEPTEMBER 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 ----------------------- ------------------- COMMON STOCK, PAR VALUE AT NOVEMBER 1, 1996 $.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 NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 CONSOLIDATED BALANCE SHEETS 2 SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 CONSOLIDATED STATEMENTS OF CASH FLOWS 3 NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5 - 6 PART II. OTHER INFORMATION 7 SIGNATURES 8 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Nocopi Technologies, Inc. Consolidated Statements of Operations (unaudited)
Three Months ended Nine Months ended September 30 September 30 1996 1995 1996 1995 -------- -------- ---------- ---------- Revenues $951,200 $782,100 $2,762,900 $2,178,400 Cost of sales 346,900 71,400 779,400 260,800 --------- --------- ---------- ---------- Gross profit 604,300 710,700 1,983,500 1,917,600 Operating expenses Research and development 199,700 214,500 596,400 605,400 Sales and marketing 386,400 334,900 1,109,800 1,158,600 General and administrative 286,800 263,600 808,100 732,800 --------- --------- ---------- ---------- 872,900 813,000 2,514,300 2,496,800 --------- --------- ---------- ---------- Loss from operations (268,600) (102,300) (530,800) (579,200) Other income (expenses) Amortization (6,300) (6,800) (19,000) (22,300) Interest income 27,000 48,900 92,100 123,400 Interest and bank charges (17,500) (18,400) (52,300) (59,900) Ownership interest of others in consolidated entity 102,000 56,400 301,200 286,200 --------- --------- ---------- ---------- 105,200 80,100 322,000 327,400 --------- --------- ---------- ---------- Net loss ($163,400) ($ 22,200) ($ 208,800) ($ 251,800) ========= ========= ========== ========== Loss per common share* ($ .01) ($ .00) ($ .01) ($ .02) Average common shares outstanding* 14,080,654 14,015,918 14,063,257 13,995,134
- ---------- *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)
September 30 December 31 1996 1995 ----------- ----------- Assets Current assets Cash and temporary cash investments $ 2,633,500 $ 2,982,100 Accounts receivable less allowance 644,700 667,700 Inventory 8,000 22,200 Prepaid and other 87,000 93,900 ----------- ----------- Total current assets 3,373,200 3,765,900 Fixed assets Leasehold improvements 43,300 55,300 Furniture, fixtures and equipment 424,800 381,100 ----------- ----------- 468,100 436,400 Less: accumulated depreciation 277,100 231,600 ----------- ----------- 191,000 204,800 Other assets Patents, net of accumulated amortization 427,800 419,800 Debt issue costs, net of accumulated amortization 38,000 56,900 Other 15,100 17,800 ----------- ----------- 480,900 494,500 ----------- ----------- Total assets $ 4,045,100 $ 4,465,200 =========== =========== Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 589,200 $ 398,100 Accrued expenses 179,300 258,700 Accrued commissions 136,900 182,500 Deferred revenue 276,600 280,100 ----------- ----------- Total current liabilities 1,182,000 1,119,400 Long-term notes payable 950,000 950,000 Ownership interest of others in consolidated entity 1,521,900 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 76,600 177,800 Accumulated deficit (7,477,200) (7,268,400) ----------- ----------- 391,200 572,700 ----------- ----------- Total liabilities and shareholders' equity $ 4,045,100 $ 4,465,200 =========== ===========
See notes to consolidated financial statements. 2 Nocopi Technologies, Inc. Consolidated Statements of Cash Flows (unaudited)
Nine Months ended September 30 1996 1995 ----------- ----------- Operating Activities Net loss ($ 208,800) ($ 251,800) Adjustments to reconcile net loss to cash from operating activities Depreciation 64,600 51,600 Amortization 58,500 60,900 Allowance for doubtful accounts 12,400 7,200 Ownership interest of others in consolidated entity (301,200) (286,200) Other 4,700 ----------- ----------- (374,500) (413,600) Changes in working capital Accounts receivable 6,600 157,400 Inventory 14,200 4,400 Prepaid and other 4,700 (26,000) Accounts payable and accrued expenses 75,600 240,500 Deferred revenue (1,000) 174,300 ----------- ----------- 100,100 550,600 ----------- ----------- Cash provided (used) by operating activities (274,400) 137,000 Investing Activities Additions to fixed assets (51,400) (33,600) Additions to patents (44,900) (95,000) ----------- ----------- Cash used by investing activities (96,300) (128,600) 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 (106,400) 197,300 ----------- ----------- Increase (decrease) in cash and temporary cash investments (348,600) 212,200 Cash and temporary cash investments - beginning of period 2,982,100 3,137,600 ----------- ----------- Cash and temporary cash investments - end of period $ 2,633,500 $ 3,349,800 =========== ===========
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 third quarter of 1996 were $951,200 compared to $782,100 in the third quarter of 1995, an increase of 22%. For the first nine months of 1996 revenues increased 27% to $2,762,900 from $2,178,400 in the first nine months of 1995. The increase is attributable to revenues from licensees and end-user customers signed in late 1995 and the first nine months of 1996 as well as increased revenues from those signed earlier. Revenues derived from the production of pressure sensitive security labels under a license agreement signed in 1995 increased in the third quarter of 1996. The Company recorded its initial revenues from production of these labels in the second quarter. 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 declined to $604,300 or 64% of revenues from $710,700 or 91% of revenues in the third quarter of 1995. For the first nine months of 1996, the gross profit was $1,983,500 or 72% of revenues compared to $1,917,600 or 88% of revenues for the first nine months of 1995. The decline in gross profit both in absolute dollars and as a percentage of revenues is due in part to the inclusion in revenues of certain manufactured products which carry higher direct costs than licensing and royalty revenues and the modification of an exclusive licensing arrangement which will negatively impact the Company's third and fourth quarter 1996 revenues from that licensee compared to the same quarters of 1995. Research and development expenses were $199,700 in the third quarter of 1996 compared to $214,500 in the third quarter of 1995. For the first nine months of 1996, research and development expenses of $596,400 in the first nine months of 1996 approximated the $605,400 incurred in the first nine months of 1995. Sales and marketing expenses increased in the third quarter of 1996 to $386,400 from $334,900 in the third quarter of 1995. The increase is attributable in part to the addition of sales staff both in the U.S. and Europe to market certain newly developed technologies which the Company believes to be best handled by its sales persons as compared to licensees. For the first nine months of 1996, sales and marketing expenses declined to $1,109,800 from $1,158,900 in the same period of 1995. General and administrative expenses increased to $286,800 in the third quarter of 1996 from $263,600 in the third quarter of 1995 and to $808,100 in the first nine months of 1996 from $732,800 in the first nine months of 1995. The increases result from legal costs associated with the Company's patent activities and expenses incurred by Euro-Nocopi. 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 third quarter and first nine months 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 was $163,400 for the third quarter of 1996 compared to $22,200 in the third quarter of 1995. For the first nine months of 1996, the consolidated net loss was $208,800 compared to $251,800 in the first nine months of 1995. The decline in the third quarter is attributable primarily to lower licensing revenues and lower gross profit resulting from the change in revenue mix. Liquidity and Capital Resources The Company's consolidated cash and temporary cash investment position decreased to $2,633,500 at September 30, 1996 from $2,982,100 at December 31, 1995. Included in the September 30, 1996 balance is $1,779,800 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 in cash held by Euro-Nocopi S.A. during the first nine months is principally attributable to funds required to support Euro-Nocopi S.A.'s operations. The Company's domestic cash position decreased to $853,700 at September 30, 1996 from $907,100 at December 31, 1995. The decrease results primarily from payments related to the acquisition of ink production equipment in late 1995, incentive compensation paid for the achievement of the 1995 U.S. business plan and funds required to support domestic operations partially offset by proceeds of stock option exercises in the first half of 1996. The Company believes that it has sufficient working capital and available credit to support its consolidated operations over the next twelve months. 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 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 September 30, 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: November 12, 1996 /s/ Norman A. Gardner ---------------------------------------- Norman A. Gardner President & Chief Executive Officer DATE: November 12, 1996 /s/ Rudolph A. Lutterschmidt ---------------------------------------- Rudolph A. Lutterschmidt Vice President & Chief Financial Officer 8 EX-11 2 COMPUTATION OF LOSS PER COMMON SHARE NOCOPI TECHNOLOGIES, INC. COMPUTATION OF LOSS PER COMMON SHARE EXHIBIT 11
Three Months ended September 30 Nine Months ended September 30 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Primary Net loss applicable to common shares ($163,400) ($22,200) ($208,800) ($251,800) ========== ========== ========== ========== Weighted average common shares outstanding 14,080,654 14,015,918 14,063,257 13,995,134 Dilutive shares - based on the treasury stock method using the average market price (1) 20,094 51,867 57,615 72,537 ---------- ---------- ---------- ---------- 14,100,748 14,067,785 14,120,872 14,067,671 ========== ========== ========== ========== Per share amount applicable to net loss ($ .01) ($ .00) ($ .01) ($ .02) Three Months ended September 30 Nine Months ended September 30 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Fully diluted Net loss ($163,400) ($22,200) ($208,800) ($251,800) Add interest on Series B notes 16,700 17,700 49,900 57,800 Deduct ownership interest of others in consolidated entity (102,000) (56,400) (301,200) (286,200) ---------- ---------- ---------- ---------- Net loss applicable to common shares ($248,700) ($60,900) ($460,100) ($480,200) ========== ========== ========== ========== Weighted average common shares outstanding 14,080,654 14,015,918 14,063,257 13,984,743 Dilutive shares - based on the treasury stock method using the greater of the period-end market price or the average market price (2) 1,312,800 1,393,269 1,350,321 1,380,753 ---------- ---------- ---------- ---------- 15,393,454 15,409,187 15,413,578 15,365,496 ========== ========== ========== ========== Per share amount applicable to net loss ($ .02) ($ .00) ($ .03) ($ .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 1 9-MOS DEC-31-1996 SEP-30-1996 2,633,500 0 678,000 33,300 8,000 3,373,200 468,100 277,100 4,045,100 182,000 950,000 0 0 140,800 250,400 4,045,100 2,763,400 2,763,400 779,900 779,900 0 12,600 52,300 (208,800) 0 (208,800) 0 0 0 (208,800) (.01) (0.03)
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