<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _________________ to ______________
Commission file number 0-20333
NOCOPI TECHNOLOGIES, INC.
(Exact name of small business issuer as
specified in its charter)
MARYLAND 87-0406496
--------------------------------- ------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
537 Apple Street, West Conshohocken, PA 19428
--------------------------------------------------------------------------------
(Address of principal executive offices)
(610) 834-9600
--------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 ___
State the number of shares outstanding of each of the issuer's classes
of common equity, as of November 1, 2000: Common stock, par value $.01 per share
33,817,332 shares.
Transitional Small Business Disclosure Format (check one): Yes ___ No _X_
<PAGE>
NOCOPI TECHNOLOGIES, INC.
INDEX
Part I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Statements of Operations 1
Three Months and Nine Months Ended
September 30, 2000 and September 30, 1999
Balance Sheet 2
September 30, 2000
Statements of Cash Flows 3
Nine Months Ended September 30, 2000
and September 30, 1999
Notes to Financial Statements 4-5
Item 2. Management's Discussion and Analysis 6-11
of Financial Condition and Results of Operations
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
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
LICENSES, ROYALTIES AND FEES $223,900 $289,500 $665,000 $1,091,000
PRODUCT AND OTHER SALES 58,400 52,800 306,700 302,900
------------ ------------ ------------ ------------
282,300 342,300 971,700 1,393,900
COST OF SALES
LICENSES, ROYALTIES AND FEES 82,600 89,700 241,100 293,800
PRODUCT AND OTHER SALES 37,900 49,500 254,500 255,200
------------ ------------ ------------ ------------
120,500 139,200 495,600 549,000
------------ ------------ ------------ ------------
GROSS PROFIT 161,800 203,100 476,100 844,900
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT 58,700 50,600 154,800 176,100
SALES AND MARKETING 52,300 146,500 156,600 529,900
GENERAL AND ADMINISTRATIVE 145,800 127,500 404,600 663,000
------------ ------------ ------------ ------------
256,800 324,600 716,000 1,369,000
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (95,000) (121,500) (239,900) (524,100)
OTHER INCOME (EXPENSES)
INTEREST INCOME 4,100 11,500 16,300 35,400
INTEREST AND BANK CHARGES (1,000) (3,900) (5,600) (11,300)
EQUITY IN NET INCOME (LOSS) OF
UNCONSOLIDATED AFFILIATE 30,900 4,200 35,000 (2,100)
------------ ------------ ------------ ------------
34,000 11,800 45,700 22,000
------------ ------------ ------------ ------------
NET LOSS ($61,000) ($109,700) ($194,200) ($502,100)
============ ============ ============ ============
BASIC AND DILUTED LOSS PER
COMMON SHARE ($.00) ($.00) ($.01) ($.01)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 33,817,332 33,743,999 33,817,332 33,657,332
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
1
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NOCOPI TECHNOLOGIES, INC.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30
2000
------------
ASSETS
<S> <C>
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 271,000
ACCOUNTS RECEIVABLE LESS ALLOWANCE 87,700
PREPAID AND OTHER 49,700
------------
TOTAL CURRENT ASSETS 408,400
FIXED ASSETS
LEASEHOLD IMPROVEMENTS 39,500
FURNITURE, FIXTURES AND EQUIPMENT 476,200
------------
515,700
LESS: ACCUMULATED DEPRECIATION 464,500
------------
51,200
OTHER ASSETS
INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATE 301,100
------------
TOTAL ASSETS $ 760,700
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 81,800
ACCRUED EXPENSES 301,300
ACCRUED SEVERANCE 59,900
DEFERRED REVENUE 142,800
------------
TOTAL CURRENT LIABILITIES 585,800
STOCKHOLDERS' EQUITY
COMMON STOCK, $.01 PAR VALUE
AUTHORIZED - 75,000,000 SHARES
ISSUED AND OUTSTANDING - 33,817,332 SHARES 338,200
PAID-IN CAPITAL 10,434,600
ACCUMULATED OTHER COMPREHENSIVE LOSS (68,600)
ACCUMULATED DEFICIT (10,529,300)
------------
174,900
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 760,700
============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
2
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NOCOPI TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
2000 1999
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
NET LOSS ($ 194,200) ($ 502,100)
ADJUSTMENTS TO RECONCILE NET LOSS TO
CASH FROM OPERATING ACTIVITIES
DEPRECIATION 41,400 46,800
AMORTIZATION -- 49,400
EQUITY IN NET (INCOME) LOSS OF UNCONSOLIDATED AFFILIATE (35,000) 2,100
STOCK AND STOCK OPTION COMPENSATION -- 23,500
----------- -----------
(187,800) (380,300)
DECREASE IN ASSETS
ACCOUNTS RECEIVABLE 20,900 43,800
PREPAID AND OTHER 64,200 21,100
INCREASE (DECREASE) IN LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (198,100) (19,800)
DEFERRED REVENUE (39,100) 28,100
----------- -----------
(152,100) 73,200
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (339,900) (307,100)
INVESTING ACTIVITIES
ADDITIONS TO FIXED ASSETS (14,700) (17,500)
ADDITIONS TO PATENTS -- (36,600)
ADVANCES (TO) FROM AFFILIATE, NET 600 (17,300)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (14,100) (71,400)
FINANCING ACTIVITIES
REPAYMENT OF NOTES (125,000) --
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (125,000) --
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (479,000) (378,500)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 750,000 1,372,900
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 271,000 $ 994,400
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
NOCOPI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. FINANCIAL STATEMENTS
The accompanying unaudited condensed financial statements have
been prepared by Nocopi Technologies, Inc. (the Company).
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 1999 Annual Report. Certain
financial information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although
the Company believes that the accompanying disclosures are
adequate to make the information presented not misleading. The
Notes to Financial Statements included in the 1999 Annual
Report should be read in conjunction with the accompanying
interim financial statements. The interim operating results
for the nine months ended September 30, 2000 may not be
necessarily indicative of the operating results expected for
the full year.
NOTE 2. COMPREHENSIVE INCOME (LOSS)
In accordance with SFAS No. 130, Reporting Comprehensive
Income, comprehensive loss is as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30
2000 1999
---------------------------------
<S> <C> <C>
Net loss ($ 61,000) ($109,700)
Currency translation adjustment (17,600) 4,900
--------- ---------
Comprehensive loss ($ 78,600) ($104,800)
========= =========
Nine Months Ended
September 30
2000 1999
---------------------------------
Net loss ($194,200) ($502,100)
Currency translation adjustment (29,100) (13,200)
--------- ---------
Comprehensive loss ($223,300) ($515,300)
========= =========
</TABLE>
4
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NOTE 3. GOING CONCERN
Since its inception, the Company has incurred significant losses
and, as of September 30, 2000, had accumulated losses of
$10,529,300. For the years ended December 31, 1999 and 1998, the
Company's net losses were $1,262,600 and $548,800, respectively.
The Company had a negative working capital of $177,400 at
September 30, 2000, and experienced negative cash flow of
$479,000 and $138,600, respectively, for the nine-month and
three-month periods ended September 30, 2000. If the Company
continues to experience negative cash flow at current levels and
is unable to significantly increase its cash balances through a
sale of assets or otherwise, it will be forced to cease
operations due to a lack of cash at an undetermined point during
the first quarter of 2001.
The Company is currently pursuing negotiations relating to a
transaction to raise cash through the sale of certain assets. If
successful, the transaction may generate cash sufficient to fund
a year or more of operations at current levels of revenues and
expense, during which the Company may seek to improve its cash
flow by increasing revenues from traditional sources of business
and/or to engage in a strategic transaction designed to maximize
shareholder value, such as a sale of the Company's business or
assets, a merger or a strategic alliance. However, there are no
assurances that the Company will be able to enter into an
agreement for such a transaction or that, if it does, the
Company will be able to consummate the contemplated transaction
before it is forced to cease operations. There also are no
assurances that, even if the Company is able to enter into an
agreement and consummate the contemplated transaction, it will
thereafter be able to improve its cash flow to a level
sustaining the Company or that it will be able to identify or
consummate a strategic transaction.
5
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ITEM 2.
NOCOPI TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
The following Management's Discussion and Analysis of Results of Operations
and Financial Condition should be read in conjunction with our audited Financial
Statements and Notes thereto for the year ended December 31, 1999 included in
our Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission.
The information in this discussion contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors, which may cause our actual results, performance or achievements
or industry results to be materially different from any future results,
performance or achievements expressed or implied by these forward-looking
statements. Such factors include those described in "Risk Factors." The
forward-looking statements included in this report may prove to be inaccurate.
In light of the significant uncertainties inherent in these forward-looking
statements, you should not consider this information to be a guarantee by us or
any other person that our objectives and plans will be achieved. 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.
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, such as pressure sensitive labels, and equipment used to support
the application of the Company's technologies, such as ink-jet printing systems.
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 or production 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
6
<PAGE>
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 customer's product development delays, engineering changes,
changes in product marketing strategies and the like. In addition, certain
customers have, from time to time, sought to renegotiate certain provisions of
their license agreements and, when the Company agrees to revise terms, revenues
from the customer may be affected. The addition of a substantial new customer or
the loss of a substantial existing customer may also have a substantial effect
on the Company's total revenue, revenue mix and operating results.
Revenues for the third quarter of 2000 were $282,300 compared to $342,300
in the third quarter of 1999, an 18% decline. The entire decline in revenues is
attributable to a decline in licenses, royalties and fees which declined by
$65,600 in the third quarter of 2000 to $223,900 from $289,500 in the third
quarter of 1999. The reduction in licenses, royalties and fees is due primarily
to the termination or non-renewal of license arrangements with six licensees,
including the Company's largest customer, during the second half of 1999 offset
in part by the addition of five new licensees. Partially offsetting the decline
in license fees, product sales of $58,400 in the third quarter of 2000 increased
from $52,800 in the third quarter of 1999 due to higher levels of ink and paper
sales.
For the first nine months of 2000, revenues were $971,700, 30% lower than
revenues of $1,393,900 in the first nine months of 1999. The decline of $422,200
in the first nine months of 2000, compared to the first nine months of 1999, is
attributable virtually in its entirety to a $426,000 reduction in licenses
royalties and fees caused by the same factors described above. Product and other
sales of $306,700 for the first nine months of 2000 modestly exceeded the first
nine months 1999 sales of $302,900. In each period, the Company sold and
installed an ink-jet printing system.
The Company's gross profit declined to $161,800 in the third quarter of
2000 or 57% of revenues from $203,100 or 59% of revenues in the third quarter of
1999. Licenses, royalties and fees carry a substantially higher gross profit
than product sales, which generally consist of manufactured products which may
incorporate the Company's technologies or equipment used to support the
application of its technologies. These items are generally purchased from
third-party vendors and resold to the end-user or licensee and carry a
significantly lower gross profit margin than licenses, royalties and fees. The
lower gross profit and the decline in gross profit as a percentage of revenues
in the third quarter of 2000 compared to the third quarter of 1999 results
principally from both the absolute decrease in revenues represented by licenses,
royalties and fees and the resulting change in revenue mix. The primary
components of cost of sales related to licenses, royalties and fees, such as
production labor and rent, are substantially fixed. The variable component of
these costs of sales, primarily ink and chemicals, is a small percentage of the
total cost and of the related revenues. As these revenues decline, the gross
profit is negatively impacted, both in absolute dollars and as a percentage of
revenues. The gross profit related to product and other sales improved in the
third quarter of 2000 compared to the third quarter of 1999 as a result of
changes in the mix of products sold.
For the first nine months of 2000, the gross profit declined to $476,100,
or 49% of revenues, from $844,900 or 61% of revenues in the first nine months of
7
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1999. The above mentioned factors related to the third quarter gross margin
affected the first nine months as well. The product and other sales gross profit
improved slightly in the first nine months of 2000 compared to the comparable
1999 period due to changes in the mix of products sold.
Research and development expenses were $58,700 and $154,800 in the third
quarter and first nine months of 2000, respectfully, compared to $50,600 and
$176,100 in the comparable periods of 1999. The third quarter 2000 increase
reflects a licensee's refusal to acknowledge its obligation to reimburse the
Company for approximately $23,800 in research and development expenses incurred
by the Company in support of the licensee's use of the Company's laboratory
personnel and facilities. The year-to-year reduction is due primarily to lower
compensation expense resulting from staff reductions in early 2000 and lower
travel expenses in the first nine months of 2000 compared to the same period of
1999 offset in part by the licensee's failure to provide reimbursement to the
Company.
Sales and marketing expenses declined to $52,300 in the third quarter of
2000 from $146,500 in the third quarter of 1999. For the first nine months of
2000, sales and marketing expenses were $156,600 compared to $529,900 in the
first nine months of 1999. The reductions both for the third quarter and first
nine months are due primarily to staff reductions occurring in the second half
of 1999 as well as lower commissions, travel and sales promotion expenses in the
third quarter and first nine months of 2000 compared to the same 1999 periods.
General and administrative expenses increased to $145,800 in the third
quarter of 2000 from $127,500 in the third quarter of 1999. The increase
resulted primarily from a corporate public and investor relations program
implemented in July 2000. General and administrative expenses declined by
$258,400 in the first nine months of 2000 to $404,600 from $663,000 in the first
nine months of 1999. The first nine months 1999 general and administrative
expenses included a $150,000 charge to severance expense resulting from the
resignation of the Company's President and Chief Executive Officer in February
1999. The position of President and Chief Executive Officer has been vacant
since February 1999. This, along with other staff reductions made during the
second half of 1999 and a lower level of professional fees offset in part by the
third quarter 2000 engagement of a corporate public relations firm were the
principal factors contributing to the significant reduction in general and
administrative expenses in the first nine months of 2000 compared to the same
period of 1999.
Other income (expense) includes interest on the $125,000 Series B 9%
Subordinated Convertible Promissory Notes which were repaid on March 31, 2000.
The decline in interest income in the third quarter and first nine months of
2000 compared to the same periods of 1999 relates to lower levels of cash
invested as cash was utilized during 1999 and the first nine months of 2000 to
fund operations and repay the Series B Notes.
Equity in net income (loss) of unconsolidated affiliate represents the
proportionate share in the net income or loss of Euro-Nocopi, S.A. attributable
to the Company's approximate 18% ownership share of Euro-Nocopi, S.A. The third
quarter and first nine months 2000 equity in net income of unconsolidated
affiliate reflects a significant improvement in Euro-Nocopi's revenues and
operating results in the third quarter of 2000 compared to the previous year and
previous quarters of 2000.
8
<PAGE>
The net loss declined to $61,000 in the third quarter of 2000 from $109,700
in the third quarter of 1999 and to $194,200 in the first nine months of 2000
from $502,100 in the first nine months of 1999. The reduction in the third
quarter net loss from the prior year period resulted primarily from the
reductions in expenses associated with staff reductions described above,
substantially offset by the reductions in revenue and gross profit as the
Company's business has contracted and the failure of a licensee to reimburse
approximately $23,800 in research and development expense. The year-to-year
reduction in net loss from the first nine months of 1999 to the first nine
months of 2000 resulted from the same factors, and from the non-recurrence of
the severance expense associated with the departure of the Company's President
and Chief Executive Officer during the first quarter of 1999. As a result of the
Company's adverse liquidity situation, positions in production, research, sales
and administration have not been filled following the departure of certain
employees and consultants.
Plan of Operation, Liquidity and Capital Resources
The Company's cash and cash equivalents declined to $271,000 at September
30, 2000 from $750,000 at December 31, 1999. The cash was used primarily to make
severance payments of $205,100 in accordance with an agreement negotiated in
February 2000 and to repay the Company's $125,000 principal amount Series B
Subordinated Notes on March 31, 2000. Additionally, cash in the amount of
$140,900 was used to fund ongoing operations over the nine-month period.
The loss of a number of customers during 1998 and 1999 including, in 1999,
the Company's largest customer, has had a material adverse effect on the
Company's results of operations and upon its liquidity and capital resources.
The Company believes that the conditions arising from these circumstances raise
substantial doubts about the Company's ability to continue as a going concern.
Since its inception, the Company has incurred significant losses and, as of
September 30, 2000, had accumulated losses of $10,529,300. For the years ended
December 31, 1999 and 1998, the Company's net losses were $1,262,600 and
$548,800, respectively. The Company had a negative working capital of $177,400
at September 30, 2000, and experienced negative cash flow of $479,000 and
$138,600, respectively, for the nine-month and three-month periods ended
September 30, 2000. If the Company continues to experience negative cash flow at
current levels and is unable to significantly increase its cash balances through
a sale of assets or otherwise, it will be forced to cease operations due to a
lack of cash at an undetermined point during the first quarter of 2001.
The Company is currently pursuing negotiations relating to a transaction
to raise cash through the sale of certain assets. If successful, the transaction
may generate cash sufficient to fund a year or more of operations at current
levels of revenues and expense, during which the Company may seek to improve its
cash flow by increasing revenues from traditional sources of business and/or to
engage in a strategic transaction designed to maximize shareholder value, such
as a sale of the Company's business or assets, a merger or a strategic alliance.
However, there are no assurances that the Company will be able to enter into an
agreement for such a transaction or that, if it does, the Company will be able
to consummate the contemplated transaction before it is forced to cease
operations. There also are no assurances that, even if the Company is able to
enter into an agreement and consummate the contemplated transaction, it will
thereafter be able to improve its cash flow to a level sustaining the Company or
that it will be able to identify or consummate a strategic transaction.
9
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Risk Factors
The Company's operating results and stock price are dependent upon a number
of factors, some of which are beyond the Company's control. These include:
Potential Inability to Continue in Operations. The Company had a negative
working capital of $177,400 at September 30, 2000, and experienced negative cash
flow of $479,000 and $138,600, respectively, for the nine-month and three-month
periods ended September 30, 2000. Management does not believe the Company can
significantly improve its negative cash flow in the near future. If the Company
continues to experience negative cash flow at current levels and is unable to
significantly increase its cash balances through a sale of assets or otherwise,
it will be forced to cease operations due to a lack of cash at an undetermined
point during the first quarter of 2001. It is uncertain whether the Company's
assets will retain any value if the Company ceases operations.
The Company is currently pursuing negotiations relating to a transaction
to raise cash through the sale of certain assets. If successful, the transaction
may generate cash sufficient to fund a year or more of operations at current
levels of revenues and expense, during which the Company may seek to improve its
cash flow by increasing revenues from traditional sources of business and/or to
engage in a strategic transaction designed to maximize shareholder value, such
as a sale of the Company's business or assets, a merger or a strategic alliance.
However, there are no assurances that the Company will be able to enter into an
agreement for such a transaction or that, if it does, the Company will be able
to consummate the contemplated transaction before it is forced to cease
operations.
Possible Inability to Develop New Business. Even if the Company is able to
raise cash through the sale of certain assets it is currently negotiating or
otherwise, it must quickly improve its operating cash flow. Because the Company
has already significantly reduced its operating expenses, Management believes
that any significant improvement in the Company's cash flow must result from
increases in its revenues from traditional sources and from new revenue sources.
The Company's ability to develop new revenues may depend on the extent of both
its marketing activities and its research and development activities. The
Company has reduced staffing in both areas in order to reduce operating
expenses, and there are no assurances that the resources the Company can devote
to marketing and to research and development will be sufficient to increase the
Company's revenues to levels resulting in positive cash flow.
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 of 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,
10
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the success of the Company's licensees and strategic 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.
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 do securities analysts and traders
extensively follow it. 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.
Intellectual Property. The Company relies on a combination of protections
provided under applicable international patent, trademark and trade secret laws.
It also relies on confidentiality, 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 assurances that the Company will be able to protect the basis of its
technologies from discovery by unauthorized third parties or to preclude
unauthorized persons from conducting activities which infringe on the Company's
rights. In either event, the Company's customer and licensee relationships could
be adversely affected.
11
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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 27 - Financial Data Schedule
(b). No Current Reports on Form 8-K have been filed by the
Registrant during the quarter ended September 30, 2000.
12
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SIGNATURES
Pursuant to the requirement 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 14, 2000 /s/ MICHAEL A FEINSTEIN, M.D.
-----------------------------
Michael A Feinstein, M.D.
Chairman of the Board
DATE: November 14, 2000 /s/ RUDOLPH A. LUTTERSCHMIDT
----------------------------
Rudolph A. Lutterschmidt
Vice President & Chief Financial Officer
13
