Specialty Reactive Ink Developer Nocopi Technologies Q1 Revenue Rose 27% to $0.5M, Net Income Decreased to $52,600 and Cash Rose $0.5M to $1.2M
King of Prussia, PA, May 14, 2020 – 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 first quarter ended March 31, 2020 (Q1’20). Nocopi will soon publish a current Investor Presentation on the company website that may be viewed here, https://nocopi.com/investors-financial/
- Revenue rose 27% to $520,300, driven by 62% increase in product sales
- Gross profit decreased 8% to $269,000 on increased product and shipping costs
- Net income decreased to $52,600 from $85,400 in Q1’19, largely due to higher operating expenses
- Net cash from operating activities rose to $524,900 from $143,200 in Q1’19
- Cash Increased $0.5M to $1.2M
- Book value rose over $0.7M to $2.8M in the last year
Q1’20 revenue rose 27% to $520,300 reflecting a 62% increase in product and other sales, principally due to higher specialty ink shipments for licensees in the entertainment and toy product market, offset by a 14% decline in licenses, royalties and fees. Sales of security inks within the document fraud market remained relatively stable year over year.
Gross profit decreased to $269,000 or 52% of revenues in Q1’20 from $293,900 or 72% of revenues in Q1 ’19, reflecting lower gross margins in both revenue segments as well as an increase in product and other sales, as a percentage of revenue, as this segment carries lower profit margins than licenses, royalties and fees.
Gross margin in Q1 ’20 was also pressured by higher costs related to Nocopi’s production facility expansion in 2019, higher raw material costs and increased shipping expense largely due to the business impact of the COVID-19 pandemic.
Q1 ’20 sales and marketing expenses increased to $84,000 versus $68,900 in Q1 ’19, principally due to commissions on higher revenues. General and administrative expenses increased to $139,700 in Q1 ’20 from $94,100 in Q1 ’19, due to higher salary expenses, professional fees, patent acquisition expenses and public company expenses as Nocopi works to expand its investment community visibility.
Reflecting lower gross profit, higher operating expenses and $47,400 of accrued Pennsylvania income taxes that are not payable, Nocopi’s net income declined to $52,600 in Q1’20 vs. $85,400 in Q1’19. Net cash from operating activities increased to $524,900 in Q1’20 from $143,200 in Q1’19, principally due to significantly higher accounts receivable collections in the recent period.
Nocopi Chairman and CEO Michael Feinstein commented, “Nocopi delivered a solid performance in the first quarter, typically our softest quarter each year, despite increasing business challenges posed by the onset of the Coronavirus pandemic. We did experience a roughly six-week period of disruption in our business during the first quarter, as China-based printing operations were suspended. Fortunately, these operations came back online very quickly after their shutdown with solid purchase orders for our specialty inks, and orders remain strong at the current time.
“While production demand is encouraging, we do not yet have sufficient data on sales trends for products utilizing our ink technologies. Such sales are a key driver in per-unit royalties earned by Nocopi on products featuring our technologies. Travel and social restrictions across the US and our other markets have substantially curtailed walk-in traffic at retail outlets where Nocopi ink-powered products are sold. Our licensees however, have robust online distribution channels that have remained active, helping to offset the impact of retail store closures. Ultimately, we believe Nocopi products on both the toy and security products side continue to offer tremendous value, and we are confident these proprietary solutions will prove resilient despite current health and economic challenges.
“Nocopi is on solid financial footing, having ended the first quarter with $1.2M in cash and just $100K in convertible notes payable. Our cash growth reflects strong Q1 receivables collections, enabling us to reduce our accounts receivable to under $900K from $1.35M at year-end 2019. This financial base offers us flexibility to act opportunistically or to be patient and exercise caution as economic conditions warrant over the coming quarters. While we may face some revenue challenges and business development delays, as a result of the virus impact, we are confident in the financial strength of our major customers as well as the proven demand for, and attractive price points of, products featuring our reactive ink technologies.”
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.
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