Nocopi Reports 2021 Revenue of $1.95M, Operating Cash Flow of $0.51M, Net Income of $0.05M and Year-End Cash Position of $1.85M


KING OF PRUSSIA, Pa., March 30, 2022 (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 fourth quarter and year ended December 31, 2021 (Q4 ’21 and FY 2021). Nocopi’s SEC filings are available here.

2021 Summary

  • Total revenue declined approximately 27% to $1.95M as global supply chain disruptions, including port congestion and container shortages, affected purchases of ink by Asia-based printers, primarily in the second half of the year.
  • Revenue from licenses and royalties increased nearly 9% to $809,900 driven by a key client in the toy and entertainment sector.
  • Cash increased to $1.85M at year-end 2021 versus $1.36M at year-end 2020, driven by license and royalty-related cash flows reaching historical highs and strong receivable collections.
  • Working capital increased to $3.20M at year-end 2021 from $2.80M at year-end 2020
  • Cash flow from operations decreased 27% to $512,700 in 2021, primarily due to the decline in annual revenue and the impact of legal expenses incurred Q4’ 21.
  • Book value improved modestly to $3.51M at year-end 2021 compared to $3.45M at year-end 2020, despite a decline in revenue and profitability

Nocopi Chairman and CEO Michael Feinstein, M.D., commented, “Nocopi achieved nearly 9% growth in our license and royalty segment in 2021 as consumer sell-through of products featuring our ink technologies began to rebound from a COVID-19 plagued year in 2020. We are very pleased with the constant growth of royalty payments received over the last several years from an important toy and entertainment customer and have every expectation that this pace of related cash flow will continue.

“However, ink sales to customers in Asia declined sharply in the second half of 2021, driven by a sharp increase in shipping costs, increasing raw material costs and persistent supply chain challenges that disrupted our major licensees’ printing and distribution operations. These fundamental challenges continue to impact our major licensees and make it difficult to predict when they will be able to return to more normal production activity. Despite these near term challenges, strong retail demand continues to exist for entertainment and toy products featuring our ink technologies and resulted in the year-over year improvement in royalty revenue.

“Amidst this challenging environment, the Nocopi team continued to perform well in the areas we are able to control, such as expense management and working capital management. We were pleased to deliver profitable full year operations despite revenue headwinds, as we benefited from historically high licensing revenues. Our performance reflects the strength of our hybrid business model which balances specialty ink sales with performance-based royalty income that allows us to participate in the retail success of products developed around our specialty ink technologies.

“While we wait for industry conditions to normalize, we continue to explore new product initiatives and develop new ink formulations in collaboration with our partners. We are excited by a range of opportunities in development that we believe can make meaningful contributions to our long term growth. These include several new products as well as a range of new geographies that our partners are planning to enter once the overall business environment stabilizes. Our team is also considering a license agreement based on Nocopi ink technologies with a new customer based in the United States that is an established operator in the children’s toy and entertainment market. This new agreement if and when completed will further diversify and expand our set of brand name customers.

"We believe Nocopi remains well positioned to meet growing demand for our ink technologies in the years to come. We believe our existing plant and production team could support a doubling or tripling of ink production from 2020 levels. We have been successful in managing price volatility and inflation in certain commodities utilized in our formulations, by expanding our sourcing functions and by increasing our investment in certain raw materials to ensure our ability to produce and deliver customer orders promptly. Nonetheless, the price and availability of key inputs for our specialty ink technologies remain an area of risk for our company going forward. We are actively managing these factors in order to mitigate their impact on our business.

“Nocopi remains highly focused on long term growth and cash flow. This orientation is reflected in the triple digit rise of working capital to nearly $3.2M at year end 2021, from $810,000 at the end of 2018, including the growth in cash to $1.85M from just $400,000 during the same period. We are very proud of the years of hard work it has taken to get to this point and look to build on our success in coming years. Amidst a backdrop of global political, economic and financial uncertainty, we believe maintaining a strong balance sheet with significant liquidity is the most prudent strategy for the company, as it positions us to weather future challenges while also putting us in an opportunistic position to pursue business opportunities that we identify.”  

Q4 ‘21 Results
Q4 ’21 revenues decreased 32% to $514,100 reflecting a 41% decrease in product and other sales, principally due to lower specialty ink shipments to licensed printers that operate in the entertainment and toy product market. The licenses and royalties segment was mixed in Q4’21 as said revenue related to children’s activity books in North America exceeded $200,000 while revenue from customers outside North America declined by more than 50% reflecting more restrictive overseas operating environments and reduced levels of retail consumption patterns. Revenue from document and product authentication customers however, declined 45% to $36,100 as supply chain disruptions and the Omicron and other variants curbed their operations. Royalty revenue in the 2021 and 2020 fourth quarter periods does not reflect quarterly guaranteed royalty payments of $100,000 received by Nocopi pursuant to a four-year license extension with a major partner that went into effect July 1, 2019. These payments are reflected in the Company’s balance sheet and statement of cash flows but are not recorded as revenue.

Gross profit decreased to $333,400, or 65% of revenues in Q4 ’21, from $519,000, or 69% of revenues in Q4 ’20, principally due to lower Q4'21 revenue, though aided by a greater contribution from licenses and royalties which carry a higher gross margin than ink sales.

Q4’21 operating expenses increased to $454,800 from $287,900 in Q4’20, principally reflecting an approximately $190,000 increase in legal expense in Q4’21, offset in part by lower sales commissions.

Principally reflecting lower gross profit and higher legal expenses, Nocopi’s net income declined to a loss of $109,000, in Q4’21, compared to net income of $221,900, in Q4’20.

FY 2021 Results
Revenue declined by approximately 27% to $1,951,900 in 2021 compared to $2,658,700 in 2020, principally due to a decrease in product sales as discussed above. Product sales decreased as percentage of revenue to 58% versus 72% in 2020, and license and royalty revenue increased to 42% of 2021 revenue versus 28% in 2020.

Sales of security ink to Nocopi’s licensees in the retail receipt and document fraud market decreased by approximately $12,900 in 2021 compared to 2020 due primarily to reduced demand related to COVID-19 closures of retail outlets that commenced in 2020 and continued in 2021.  

Gross profit decreased to $1,213,800, or approximately 62% of revenues, in 2021 from $1,535,000, or approximately 58% of revenues, in 2020. The lower gross profit in 2021 compared to 2020 results primarily from lower gross revenues from product and other sales offset in part by higher licenses, royalties and fees in 2021 compared 2020 and also aided by an approximately 40% decline in the cost of certain raw materials that were temporarily eased in 2021.

Nocopi’s net income declined to $49,400 in 2021 compared to $508,400 in 2020, as sales of ink to licensed printers in the entertainment and toy products market declined by approximately $751,500 in 2021 as compared to 2020. 2021 net income was also impacted by legal expenses of approximately $190,000 in Q4’21.

Cash flow from operations decreased 27% to $512,700 in 2021 compared to the prior year primarily due to the decline in annual revenue and the impact of legal expenses incurred Q4’ 21. Nocopi made certain investments in plant operations at the head office beginning in mid 2019 that includes the purchase of new ink production equipment and hiring an ink production operations team member to support expected future growth as reflected by Capex spending of $31,600, $38,600 and $73,400 in 2021, 2020 and 2019, respectively.   Nocopi has no long-term debt.

Nocopi's federal and state net operating loss carryforwards (“NOL’s) were approximately $1.17M and $2.64M, respectively, at the close of FY 2021.

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 or nnup@catalyst-ir.com

Nocopi Technologies, Inc.
Balance Sheets

  December 31 
  2021  2020 
Assets      
Current assets      
Cash $1,846,700  $1,362,800 
Accounts receivable less $12,000 allowance for doubtful accounts  970,800   1,280,800 
Inventory  422,700   324,800 
Prepaid and other  160,000   97,800 
Total current assets  3,400,200   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  134,200   104,300 
   88,300   87,200 
Other assets        
Long-term receivables  185,000   559,500 
Operating lease right of use – building  115,800   160,300 
   300,800   719,800 
Total assets $3,789,300  $3,873,200 
         
Liabilities and Stockholders’ Equity        
Current liabilities        
Accounts payable $3,700  $5,700 
Accrued expenses  151,500   178,600 
Income taxes     36,300 
Operating lease liability – current  47,500   44,500 
Total current liabilities  202,700   265,100 
         
Other liabilities        
Accrued expenses, non-current  13,000   39,200 
Operating lease liability – non-current  68,300   115,800 
   81,300   155,000 
         
Commitments and contingencies        
         
Stockholders’ equity        
Series A preferred stock, $1.00 par value        
Authorized – 300,000 shares        
Issued and outstanding – none      
Common stock, $0.01 par value        
Authorized – 75,000,000 shares        
Issued and outstanding – 2021 - 67,495,055 shares; 2020 - 67,353,690 shares  675,000   673,500 
Paid-in capital  12,577,100   12,575,800 
Accumulated deficit  (9,746,800)  (9,796,200)
   3,505,300   3,453,100 
Total liabilities and stockholders’ equity $3,789,300  $3,873,200 

Nocopi Technologies, Inc.
Statements of Cash Flows

  Years ended December 31 
  2021  2020 
Operating Activities      
Net income $49,400  $508,400 
Adjustments to reconcile net income to net cash provided by operating activities        
Depreciation and amortization  30,500   21,500 
Bad debt expense     7,000 
Deferred income taxes     (47,400)
Other assets  419,000   439,200 
Other liabilities  (70,700)  (69,500)
Common stock issued for services      
   428,200   859,200 
(Increase) decrease in assets        
Accounts receivable  310,000   64,500 
Inventory  (97,900)  (196,900)
Prepaid and other  (62,200)  37,200 
Decrease in liabilities        
Accounts payable and accrued expenses  (29,100)  (45,500)
Income taxes  (36,300)  (16,100)
   84,500   (156,800)
Net cash provided by operating activities  512,700   702,400 
         
Investing Activities        
Additions to fixed assets  (31,600)  (38,600)
Net cash used in investing activities  (31,600)  (38,600)
         
Financing Activities        
Exercise of warrants  2,800   11,000 
Net cash provided by financing activities  2,800   11,000 
Increase in cash  483,900   674,800 
         
Cash        
Beginning of year  1,362,800   688,000 
End of year $1,846,700  $1,362,800 
         
         
Cash paid for taxes $38,000  $45,500 
         
Supplemental Disclosure of Non-Cash Investing and Financing Activities        
Accumulated depreciation and amortization $600  $123,800 
Furniture, fixtures and equipment $(600) $(123,800)
Convertible debentures $  $97,900 
Accrued expenses $  $46,100 
Common stock $  $(57,600)
Paid-in capital $  $(86,400)

Nocopi Technologies, Inc.
Statements of Comprehensive Income

. Quarter ended December 31 Year ended December 31
  2021  2020  2021  2020 
Revenues        
Licenses, royalties and fees $257,000  $319,000  $809,900  $744,000 
Product and other sales  257,100   437,300   1,142,000   1,914,700 
   514,100   756,300   1,951,900   2,658,700 
             
Cost of revenues            
Licenses, royalties and fees  43,100   53,600   168,000   223,800 
Product and other sales  137,600   183,700   570,100   899,900 
   180,700   237,300   738,100   1,123,700 
Gross profit  333,400   519,000   1,213,800   1,535,000 
             
Operating expenses            
Research and development  47,200   49,800   181,500   173,500 
Sales and marketing  73,700   95,500   287,700   356,400 
General and administrative  333,900   142,600   719,400   526,100 
   454,800   287,900   1,188,600   1,056,000 
Net income from operations  (121,400)  231,100   25,200   479,000 
             
Other income (expenses)            
Interest income  5,500   5,900   20,700   18,200 
Interest expense and bank charges  (500)  (1,000)  (2,200)  (6,900)
   5,000   4,900   18,500   11,300 
Net income before income taxes  (116,400)  236,000   43,700   490,300 
Income taxes  (7,400)  14,100   (5,700)  (18,100 
Net income $(109,000) $221,900  $49,400  $508,400 
             
Net income per common share            
Basic $0.00  $0.00  $0.00  $0.01 
Diluted $0.00  $0.00  $0.00  $0.01 
             
Weighted average common shares outstanding            
Basic  67,495,055   67,353,690   67,436,153   64,052,777 
Diluted  67,495,055   67,478,044   67,436,153   64,172,276