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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, 1997 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
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(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 November 1, 1997
------------------- -------------------
Common stock, par value 14,080,654
$.01 per share
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<PAGE>
NOCOPI TECHNOLOGIES, INC.
-------------------------
INDEX
-----
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements PAGE
----
Statements of Operations
Three Months and Nine Months Ended
September 30, 1997 and September 30, 1996 1
Balance Sheets
September 30, 1997 and December 31, 1996 2
Statements of Cash Flows
Nine Months Ended September 30, 1997 and
September 30, 1996 3
Notes to Financial Statements 4 - 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6 - 11
Part II. OTHER INFORMATION 12
Signatures 13
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Nocopi Technologies, Inc.
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
September 30 September 30
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Licenses, royalties and fees $503,500 $698,800 $1,786,800 $2,309,800
Product and other sales 60,500 252,400 842,800 453,100
---------- ---------- ---------- ----------
564,000 951,200 2,629,600 2,762,900
Cost of sales
Licenses, royalties and fees 96,400 98,400 517,000 370,100
Product and other sales 59,800 248,500 831,400 409,300
---------- ---------- ---------- ----------
156,200 346,900 1,348,400 779,400
---------- ---------- ---------- ----------
Gross profit 407,800 604,300 1,281,200 1,983,500
Operating expenses
Research and development 125,500 199,700 467,500 596,400
Sales and marketing 171,800 386,400 652,400 1,109,800
General and administrative 235,000 286,800 754,400 808,100
---------- ---------- ---------- ----------
532,300 872,900 1,874,300 2,514,300
---------- ---------- ---------- ----------
Loss from operations (124,500) (268,600) (593,100) (530,800)
Other income (expenses)
Amortization (6,300) (6,300) (19,000) (19,000)
Interest income 4,300 27,000 25,400 92,100
Interest and bank charges (18,000) (17,500) (53,800) (52,300)
Ownership interest of others in
loss of consolidated entity 102,000 95,800 301,200
---------- ---------- ---------- ----------
(20,000) 105,200 48,400 322,000
---------- ---------- ---------- ----------
Net loss ($144,500) ($163,400) ($544,700) ($208,800)
========== ========== ========== ==========
Loss per common share
($.01) ($.01) ($.04) ($.01)
Average common shares
outstanding 14,080,654 14,080,654 14,080,654 14,063,257
</TABLE>
See notes to financial statements.
1
<PAGE>
Nocopi Technologies, Inc.
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
------------ -----------
Assets
<S> <C> <C>
Current assets
Cash and cash equivalents $407,700 $2,229,200
Accounts receivable less allowance 330,700 513,400
Inventory 2,100 5,100
Prepaid and other 73,700 105,300
---------- ----------
Total current assets 814,200 2,853,000
Fixed assets
Leasehold improvements 45,600 43,200
Furniture, fixtures and equipment 418,500 435,000
---------- ----------
464,100 478,200
Less: accumulated depreciation 348,100 296,600
---------- ----------
116,000 181,600
Other assets
Patents, net of accumulated amortization 482,500 452,000
Debt issue costs, net of accumulated amortization 12,600 31,600
Other 11,500 14,300
---------- ----------
506,600 497,900
---------- ----------
Total assets $1,436,800 $3,532,500
========== ==========
Liabilities and Shareholders' Equity (Deficit)
Current liabilities
Current debt obligations $950,000
Accounts payable 191,700 $539,800
Accrued expenses 277,500 139,900
Accrued commissions 145,400 118,100
Deferred revenue 131,400 164,200
---------- ----------
Total current liabilities 1,696,000 962,000
Long-term notes payable 950,000
Accumulated share of loss of deconsolidated affiliate
in excess of cost 170,400
Ownership interest of others in consolidated entity 1,448,300
Shareholders' equity (deficit)
Common stock, $.01 par value
Authorized - 50,000,000 shares
Issued and outstanding
14,080,654 shares 140,800 140,800
Paid-in capital 7,651,000 7,651,000
Currency translation adjustment 57,100
Accumulated deficit (8,221,400) (7,676,700)
---------- ----------
(429,600) 172,200
---------- ----------
Total liabilities and shareholders' equity (deficit) $1,436,800 $3,532,500
========== ==========
</TABLE>
See notes to financial statements.
2
<PAGE>
Nocopi Technologies, Inc.
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months ended September 30
1997 1996
---------- ---------
<S> <C> <C>
Operating Activities
Net loss ($544,700) ($208,800)
Adjustments to reconcile net loss to
cash from operating activities
Depreciation 67,600 64,600
Amortization 62,300 58,500
Allowance for doubtful accounts 17,300 12,400
Ownership interest of others in loss
of consolidated entity (95,800) (301,200)
---------- ---------
(493,300) (374,500)
Changes in working capital
Accounts receivable (26,300) 6,600
Inventory 3,000 14,200
Prepaid and other (7,300) 4,700
Accounts payable and accrued expenses 254,000 75,600
Deferred revenue 50,700 (1,000)
---------- ---------
274,100 100,100
---------- ---------
Cash used by operating activities (219,200) (274,400)
Investing Activities
Additions to fixed assets (11,100) (51,400)
Additions to patents (71,000) (44,900)
Deconsolidation of affiliate (1,419,100)
---------- ---------
Cash used by investing activities (1,501,200) (96,300)
Financing Activities
Exercise of stock options 128,500
---------- ---------
Cash provided by financing activities 128,500
Effect of exchange rate changes on cash (101,100) (106,400)
---------- ---------
Decrease in cash and cash equivalents (1,821,500) (348,600)
Cash and cash equivalents - beginning of period 2,229,200 2,982,100
---------- ---------
Cash and cash equivalents - end of period $407,700 $2,633,500
========== ==========
</TABLE>
See notes to financial statements.
3
<PAGE>
NOCOPI TECHNOLOGIES, INC.
NOTES TO 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, except as described in Note 2,
using the accounting policies described in the summary of Accounting
Policies included in the Company's 1996 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 1996 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. Basis of Presentation
Prior to April 1, 1997, the financial statements included the accounts
of the Company and Euro-Nocopi S.A. (Euro), the European affiliate of
the Company, on a consolidated basis. Consolidation was appropriate due
to the operational and financial control the Company exercised over
Euro. Additionally, the Company held approximately an 18% interest in
Euro and warrants permitting it to increase its interest in Euro to 55%.
During the second quarter of 1997, the Company ceased to exercise
effective control over Euro. The cessation of effective control resulted
from a dispute which arose in April 1997 between the Company and Euro
under the license agreement between the Company and Euro concerning
Euro's contention that it was entitled to a share of certain minimum
royalties under a worldwide agreement with a manufacturer who
distributes products incorporating the Company's technologies. In an
agreement negotiated during the second quarter of 1997 and concluded in
July 1997, the Company agreed to credit Euro $154,500 as Euro's share of
previously collected minimum royalties, the $154,500 to be applied to
license fee payments due the Company by Euro through the first quarter
of 1998.
4
<PAGE>
The Company also agreed to pay Euro 35% of future guaranteed royalties
from this manufacturer. The $154,500 settlement was charged to cost of
sales and was included in the results of operations for the six months
ended June 30, 1997. The Company also agreed to modify its warrant by
extending its term through December 2001 but making it exercisable
beginning the earlier of 1) January 1, 2001; 2) in the event of a sale
of all or part of Euro; or 3) in the event of a public listing of Euro's
shares on a stock market. In addition, the Company agreed to defer to
January 1, 2001 its right to acquire, under certain conditions, all
remaining shares of Euro for shares of the Company. This call right
expires December 31, 2001.
Additionally, the licensing agreement between the two companies was
amended relative to the negotiation of future worldwide licensing
contracts and the five directors of Euro who were also Nocopi directors
resigned from Euro's Board. As the Company ceased to exercise effective
control and the financial information for Euro's second and third
quarter was not made available to the Company, the Company ceased
consolidating as of April 1, 1997 and did not apply the equity method of
accounting for the six months ended September 30, 1997. The Company's
18% share of Euro's accumulated loss from inception through March 1997
in excess of the Company's investment, totaling $170,400, has been
recorded as a deferred credit on the balance sheet.
Note 3. Recently Issued Accounting Standards
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128 "Earnings per share."
This Statement establishes standards for computing and presenting
earnings per share (EPS) and applies to entities with publicly held
common stock or potential common stock. This Statement is effective for
financial statements issued for periods ending after December 15, 1997
(earlier application is not permitted). This Statement requires
restatement of all prior-period EPS data presented. The Company is
currently evaluating the impact, if any, adoption of SFAS No. 128 will
have on its financial statements.
5
<PAGE>
Item 2.
NOCOPI TECHNOLOGIES, INC.
-------------------------
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Basis of Presentation
Prior to April 1, 1997, the financial statements included the accounts
of the Company and Euro-Nocopi S.A. (Euro), the European affiliate of the
Company, on a consolidated basis. Consolidation was appropriate due to the
operational and financial control the Company exercised over Euro. Additionally,
the Company held approximately an 18% interest in Euro and warrants permitting
it to increase its interest in Euro to 55%. During the second quarter of 1997,
the Company ceased to exercise effective control over Euro. The cessation of
effective control resulted from a dispute which arose in April 1997 between the
Company and Euro under the license agreement between the Company and Euro
concerning Euro's contention that it was entitled to a share of certain minimum
royalties under a worldwide agreement with a manufacturer who distributes
products incorporating the Company's technologies. In an agreement negotiated
during the second quarter of 1997 and concluded in July 1997, the Company agreed
to credit Euro $154,500 as Euro's share of previously collected minimum
royalties, the $154,500 to be applied to license fee payments due the Company by
Euro through the first quarter of 1998. The Company also agreed to pay Euro 35%
of future guaranteed royalties from this manufacturer. The $154,500 settlement
has been charged to cost of sales and was included in the results of operations
for the six months ended June 30, 1997. The Company also agreed to modify its
warrant by extending its term through December 2001 but making it exercisable
beginning the earlier of 1) January 1, 2001; 2) in the event of a sale of all or
part of Euro; or 3) in the event of a public listing of Euro's shares on a stock
market. In addition, the Company agreed to defer to January 1, 2001 its right to
acquire, under certain conditions, all remaining shares of Euro for shares of
the Company. This call right expires December 31, 2001.
Additionally, the licensing agreement between the two companies was
amended relative to the negotiation of future worldwide licensing contracts and
the five directors of Euro who were also Nocopi directors resigned from Euro's
Board. As the Company ceased to exercise effective control and the financial
information for Euro's second and third quarter was not made available to the
Company, the Company ceased consolidating as of April 1, 1997 and did not apply
the equity method of accounting for the six months ended September 30, 1997. The
Company's 18% share of Euro's accumulated loss from inception through March 1997
in excess of the Company's investment, totaling $170,400, has been recorded as a
deferred credit on the balance sheet.
6
<PAGE>
Results of Operations
The Company's revenues are derived from royalties paid by licensees of
the Company's technologies, fees for the provision of technical services to
licensees and from the direct sale of products incorporating the Company's
technologies, principally pressure sensitive labels. Royalties consist of
guaranteed minimum royalties payable by the Company's licensees in certain cases
and additional royalties which typically vary with the licensee's sales of
products incorporating the licensed technology. Service fee and sales revenues
vary directly with the number of units of service or product provided.
Because the Company has a relatively high level of fixed costs, its
operating results are substantially dependent on revenue levels. Because
revenues derived from licenses and royalties carry a much higher gross profit
margin than other revenues, operating results are also substantially affected by
changes in revenue mix.
Both the absolute amounts of the Company's revenues and the mix among
the various sources of revenue are subject to substantial fluctuation. The
Company has a relatively small number of substantial customers rather than a
large number of small customers. Accordingly, changes in the revenue received
from a significant customer can have a substantial effect on the Company's total
revenue and on its revenue mix and overall financial performance. Such changes
may result from a customers product development delays, engineering changes,
changes in product marketing strategies and the like. In addition, as certain
customers have developed experience with the Company's technologies, they have
sought to renegotiate certain provisions of their license agreements and, when
the Company agrees to revise terms, revenues from the customer may be affected.
Revenues for the third quarter of 1997 were $564,000 compared to
$951,200 in the third quarter of 1996, a decrease of $387,200. The decline is
attributable to a reduction of product sales of approximately $200,000,
principally pressure sensitive labels, in the third quarter of 1997 compared to
the third quarter of 1996 as well as lower licenses, royalties and fees, in part
due to the change in accounting for Euro, whose revenues are not consolidated in
the third quarter of 1997. The Company's third quarter 1996 results included
revenues of $80,000 attributable to Euro. In addition, domestic licenses,
royalties and fees declined by approximately $100,000 due to lower minimum
license fees due under renegotiated contracts with 3M Corporation and
Georgia-Pacific offset in part by increased license fees and royalties from new
and existing end-user customers.
Revenues for the first nine months of 1997 were $2,629,600 compared to
$2,762,900 in the first nine months of 1996, a decrease of 5%. The decrease is
attributable to the exclusion of Euro's revenues for periods subsequent to March
31, 1997, an approximate reduction of $450,000 in domestic licenses, royalties
7
<PAGE>
and fees principally attributable to lower guaranteed license fees from 3M and
Georgia-Pacific offset in part by increased sales of products, primarily
security labels during the second quarter of 1997. The Company's results for the
six months ended September 30, 1996 included revenues of $180,000 attributable
to Euro.
The Company's gross profit declined to $407,800 or 72% of revenues in
the third quarter of 1997 compared to $604,300 or 64% or revenues in the third
quarter of 1996. The decline in the third quarter in absolute dollars is
attributable to lower domestic licenses, royalties and fees of approximately
$100,000 and the change in accounting for Euro whose revenues and costs were not
included with those of the Company in the third quarter of 1997. The higher
gross profit as a percentage of revenues in the third quarter of 1997 is due
primarily to the change in revenue mix in favor of licenses, royalties and fees
as product sales declined during to the third quarter of 1997 compared to the
third quarter of 1996. Revenues derived from licenses, royalties and fees carry
a substantially higher gross margin than those derived from product and other
sales.
For the first nine months of 1997, the gross profit declined to
$1,281,200 or 49% of revenues from $1,983,500 or 72% of revenues in the first
nine months of 1996. The decline in gross profit, both in absolute dollars and
as a percentage of revenues is due to three factors: 1). Lower licenses,
royalties and fees resulting from the exclusion of Euro's revenues in periods
subsequent to March 31, 1997 as well as lower domestic licenses, royalties and
fees; 2). Higher levels of product sales during the first six months of 1997
whose profit margins are significantly lower than those realized on licenses,
royalties and fees; and 3). The Company recorded one-time charge to cost of
sales totaling $154,500 in the first half of 1997 in connection with the
settlement of its dispute with Euro.
Research and development expenses declined to $125,500 in the third
quarter of 1997 from $199,700 in the third quarter of 1996 and to $467,500 in
the first nine months of 1997 from $596,400 in the first nine months of 1996.
The reduction in both the third quarter and first nine months of 1997 results
from the exclusion of Euro's costs from the statement of operations in periods
subsequent to March 31, 1997 and the expansion in the third quarter of 1997 of a
cost containment program implemented earlier in the year.
Sales and marketing expenses declined to $171,800 in the third quarter
of 1997 from $386,400 in the third quarter of 1996. For the first nine months of
1997, sales and marketing expenses were $652,400 compared to $1,109,800 in the
first nine months of 1996. Euro's sales and marketing expenses for the third
quarter and first nine months of 1996 were $127,600 and $402,200, respectively.
The exclusion of Euro's expenses from the consolidated statement of operations
from periods subsequent to March 31, 1997 is the principal reason for the
decline in sales and marketing expenses compared to the third quarter and nine
months of the prior year. Additionally, the Company's domestic sales and
marketing expenses declined in the third quarter and first nine months of 1997
8
<PAGE>
as a result of fewer sales personnel, lower commissions and lower discretionary
sales promotion expenses as the Company sought to conserve cash.
General and administrative expenses declined to $235,000 in the third
quarter of 1997 from $286,800 in the third quarter of 1996. For the first nine
months of 1997, general and administrative expenses were $754,400 compared to
$808,100 in the first nine months of 1996. The decline for the third quarter and
first nine months is due primarily to the exclusion of the general and
administrative expenses associated with Euro in periods subsequent to March 31,
1997 offset in part by higher legal and professional expenses and costs
associated with the Company's international patent activities. The Company also
incurred legal expenses in the second quarter of 1997 related to the
restructuring of its ownership and license arrangements with Euro.
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 the Notes. Interest income includes interest on
funds invested in the U.S. as well as the investment of funds held by Euro
during the periods that its accounts were included in the Company's financial
statements.
Ownership interest of others in loss of consolidated entity represents
the proportionate share in the loss of Euro attributable to the 82% ownership
interest of the outside shareholders of that company.
The net loss decreased in the third quarter of 1997 to $144,500 from
$163,400 in the third quarter of 1996. For the first nine months of 1997, the
net loss was $544,700 compared to $208,800 in the first nine months of 1996. The
Company's share of Euro's loss for the third quarter and first nine months of
1996 was $21,600 and $63,900, respectively.
Liquidity and Capital Resources
The Company's cash and cash equivalents decreased to $407,700 at
September 30, 1997. The Company's consolidated cash and cash equivalent position
at December 31, 1996 was $2,229,200 of which $1,641,200 was held by Euro and
$588,000 was held by the Company. The amount held by Euro was available
primarily to fund Euro's operations. Because the financial statements of the
Company can no longer be consolidated with those of Euro, the cash position
declined by the $1,641,200 held by Euro-Nocopi at December 31, 1996. The
Company's domestic cash position declined to $407,700 at September 30, 1997 from
$588,000 at December 31, 1996. The cash was used primarily to fund operations
over the nine month period.
9
<PAGE>
In early November 1997, the Company completed initial closings under an
offering of up to 10,666,667 investment units in Europe, each consisting of two
shares of common stock and one five-year stock purchase warrant, at an initial
price of $.30 per unit. A total of 9,066,674 units were sold. Proceeds of the
initial closings totaled $2,720,000 ($2,502,000 net of placement fees) and
increased the Company's cash position to approximately $2.8 million at November
12, 1997. There can be no assurances that the Company will be successful in
completing the sale of the full 10,666,667 investment units in the on-going
offering.
Current debt obligations represent the reclassification of the Company's
$950,000 Series B 7% Subordinated Convertible Promissory Notes due March 31,
1998 into current liabilities.
Until August 1997, the Company had a line of credit with a bank for up
to $1 million secured by a pledge of securities, including equity securities,
made by certain directors. The line of credit was cancelled in August 1997 and
the collateral returned to the pledgors of the collateral. During the time that
the line of credit was in effect, there had been no funds drawn against it by
the Company.
The Company does not currently plan any significant capital investment
in the foreseeable future.
The Company's believes that it has sufficient working capital to support
its operations and debt service requirements over the next twelve months.
The foregoing contains forward looking information within the meaning of
the Private Securities Litigation Act of 1995. Such forward looking statements
involve certain risks and uncertainties including the particular factors
described in this Management Discussion and Analysis. In each case actual
results may differ materially from such forward looking statements. The Company
does not undertake to publicly update or revise its forward looking statements
even if experience or future changes make it clear that any projected results
(expressed or implied) will not be realized.
Other Factors That May Affect Future Growth and Stock Price
The Company's operating results and stock price are adversely affected
by the Company's current liquidity previously discussed and, in addition, are
dependent upon a number of factors, some of which are beyond the Company's
control. These include:
Uneven Pattern of Quarterly and Annual Operating Results. The Company's
revenues, which are derived primarily from licensing and royalties, are
difficult to forecast due to the long sales cycle for the Company's
technologies, the potential for customer delay or deferral of implementation of
the Company's technologies, the size and timing of inception of individual
license agreements, the success of the Company's licensees and strategic
10
<PAGE>
partners in exploiting the market for the licensed products, modifications of
customer budgets, and uneven patterns of royalty revenue and product orders. As
the Company's revenue base is not substantial, delays in finalizing license
contracts, implementing the technology to initiate the revenue stream and
customer ordering decisions can have a material adverse effect on the Company's
quarterly and annual revenue expectations and, as the Company's operating
expenses are substantially fixed, income expectations will be subject to a
similar adverse outcome.
New Business Opportunities. The Company, with limited research and development
resources, is compelled to develop new technologies, which it believes will
enhance and expand its position in the anti-counterfeiting and anti-diversion
marketplace it serves. There can be no assurance that the resources expended in
this effort will generate significant revenues for the Company.
Intellectual Property. The Company relies on a combination of protections
provided under applicable international patent, trademark and trade secret laws.
It also relies on confidentially, non-analysis and licensing agreements to
establish and protect its rights in its proprietary technologies. While the
Company actively attempts to protect these rights, the Company's technologies
could possibly be compromised through reverse engineering or other means. There
can be no assurance that the Company will be able to protect the basis of its
technologies from discovery by unauthorized third parties, thus adversely
affecting its customer and licensee relationships.
Volatility of Stock Price. The market price for the Company's common stock has
historically experienced significant fluctuations and may continue to do so. The
Company has, since its inception, operated at a loss and has not produced
revenue levels traditionally associated with publicly traded companies. The
Company's common stock is not listed on a national or regional securities
exchange and, consequently, the Company receives limited publicity regarding its
business achievements and prospects nor is it extensively followed by securities
analysts and traders. The market price may be affected by announcements of new
relationships or modifications to existing relationships. The stock prices of
many developing public companies, particularly those with small capitalizations
have experienced wide fluctuations not necessarily related to operating
performance. Such fluctuations may adversely affect the market price of the
Company's common stock.
11
<PAGE>
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). Exhibit 27 - Financial Data Schedule
(c). The Registrant filed the following Current Report on Form 8-K
during the quarter ended September 30, 1997.
August 25, 1997 - Change in Registrant's Certifying
Accountant.
12
<PAGE>
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 13, 1997 /s/ Richard A. Check
--------------------
Richard A. Check
President & Chief Executive Officer
DATE: November 13, 1997 /s/ Rudolph A. Lutterschmidt
----------------------------
Rudolph A. Lutterschmidt
Vice President & Chief Financial Officer
13
<PAGE>
NOCOPI TECHNOLOGIES, INC.
COMPUTATION OF LOSS PER COMMON SHARE
EXHIBIT 11
<TABLE>
<CAPTION>
Three Months ended September 30 Nine Months ended September 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary
Net loss applicable to common shares ($144,500) ($163,400) ($544,700) ($208,800)
============ ============ ============ ============
Weighted average common shares
outstanding 14,080,654 14,080,654 14,080,654 14,063,257
Dilutive shares - based on the
treasury stock method using the
average market price (1) 20,094 103 57,615
------------ ------------ ------------ ------------
14,080,654 14,100,748 14,080,757 14,120,872
============ ============ ============ ============
Per share amount applicable to
net loss ($.01) ($.01) ($.04) ($.01)
Three Months ended September 30 Nine Months ended September 30
1997 1996 1997 1996
---- ---- ---- ----
Fully diluted
Net loss ($144,500) ($163,400) ($544,700) ($208,800)
Add interest on Series B notes 16,700 16,700 49,900 49,900
Deduct ownership interest of
others in consolidated entity (102,000) (95,800) (301,200)
------------ ------------ ------------ ------------
Net loss applicable to common shares ($127,800) ($248,700) ($590,600) ($460,100)
============ ============ ============ ============
Weighted average common shares
outstanding 14,080,654 14,080,654 14,080,654 14,063,257
Dilutive shares - based on the
treasury stock method using the
greater of the period-end market
price or the average market price (2) 1,292,706 1,312,800 1,292,809 1,350,321
------------ ------------ ------------ ------------
15,373,360 15,393,454 15,373,463 15,413,578
============ ============ ============ ============
Per share amount applicable to
net loss ($.01) ($.02) ($.04) ($.03)
</TABLE>
- ----------
(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.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 407,700
<SECURITIES> 0
<RECEIVABLES> 376,800
<ALLOWANCES> 46,100
<INVENTORY> 2,100
<CURRENT-ASSETS> 814,200
<PP&E> 464,100
<DEPRECIATION> 348,100
<TOTAL-ASSETS> 1,436,800
<CURRENT-LIABILITIES> 1,696,000
<BONDS> 0
0
0
<COMMON> 140,800
<OTHER-SE> (570,400)
<TOTAL-LIABILITY-AND-EQUITY> 1,436,800
<SALES> 2,629,600
<TOTAL-REVENUES> 2,629,600
<CGS> 1,348,400
<TOTAL-COSTS> 1,348,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 17,300
<INTEREST-EXPENSE> 53,800
<INCOME-PRETAX> (544,700)
<INCOME-TAX> 0
<INCOME-CONTINUING> (544,700)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (544,700)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
